AGNT, Inc.: Form 10-Q for the period ended Mar 31, 2026

The following discussion should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and consolidated financial statements and related notes appearing in our 2025 Annual Report. This MD&A contains forward-looking statements. See the Cautionary Note Regarding Forward-Looking Statements at the beginning of this Quarterly Report for important information regarding such statements, including risks and uncertainties that could cause actual results to differ materially from those expressed or implied. We undertake no obligation to publicly update or revise any forward-looking statements except as may be required by law.

All dollar amounts are in USD thousands except share amounts and per share data and as otherwise noted.

OVERVIEW

The Company operates a diversified portfolio of service-based businesses whose operations benefit substantially from utilizing our enabling technology platform. A substantial portion of our revenue is derived from commissions received by our residential real estate brokerages which provide a full suite of brokerage and adjacent services (such as mortgage, title, and content creation) to our real estate agents and brokers. Our real estate agents and brokers affiliate their real estate licenses with us and operate their businesses utilizing our cloud-based technology platform to enhance their real estate businesses and optimize efficiencies. On May 6, 2026, we expanded our portfolio through the acquisition of NextHome, representing our initial entry into the franchised real estate brokerage model. Through NextHome, we now also serve independent real estate professionals and brokerages who operate under the NextHome franchise system, broadening the range of affiliation models through which agents and brokers can access our ecosystem of services and support. Our enabling and innovative technology platform is a robust suite of cloud-based applications and software services tailored for our real estate agents, brokers, and professionals and targets business operations such as customer relationship management, marketing, client services, and brokerage functionalities. We succeed when our real estate professionals succeed, and we remain focused on being the most agent-centric business on the planet – built by agents, built for agents.

MARKET CONDITIONS AND INDUSTRY TRENDS

Our performance is closely tied to housing market activity, which is influenced by economic conditions such as employment, consumer confidence, mortgage availability, interest rates, and the balance of supply and demand. Periods of economic growth and lower interest rates generally support higher home sales activity, while rising rates, affordability constraints, increased unemployment, or broader economic slowdowns may reduce transaction volumes and pricing. Regulatory developments, geopolitical events, and shifts in consumer sentiment can also affect housing demand.

In the first quarter of 2026, U.S. home sales declined 1% compared to the first quarter of 2025, and home sales prices increased 1.4%, according to the National Association of Realtors (“NAR”). Inventory levels remain constrained, at 4.1 months of supply, consistent with inventory levels in March 2025. These conditions may continue to limit transaction volumes in the near term.

Despite these challenges, we believe the Company is positioned for growth with a strong base of agents, an efficient cloud-based operating model, and low fixed costs. This structure allows us to adapt quickly to market changes while supporting long-term productivity and retention.

Legal & Regulatory Environment

See Part II, Item 1 of this Quarterly Report for a discussion of the current legal environment and how such environment could potentially impact our business, results of operations, cash flows or financial condition.

KEY BUSINESS METRICS

Management uses our results of operations, financial condition, cash flows, and key business metrics related to our business and industry to evaluate our performance and make strategic decisions.

The following table outlines the key business metrics that we periodically review to track the Company’s performance:

(1) Consolidated adjusted EBITDA is a non-U.S. GAAP financial measure. For a definition, reconciliation to net income (loss), and discussion of why management believes this measure is useful, see “Non-U.S. GAAP Financial Measures”.

Agent net promoter score (“aNPS”)

The Company utilizes aNPS as a key metric to measure agent satisfaction. We believe an aNPS above 50 is indicative of excellent agent satisfaction. For the three months ended March 31, 2026, our aNPS was 67, compared to 78 for the same period in 2025. We remain committed to our agent-centric model by enhancing productivity and maintaining high levels of engagement across our global networks.

Agent count

We believe our ability to attract and retain a diverse and professional agent base is a key driver of our long-term success. While our total agent count has experienced recent declines amidst a challenging macroeconomic environment, we remain deeply focused on the retention and support of our agents and teams across all levels of production. The scale of our agent base remains subject to factors beyond our control, including elevated mortgage rates, suppressed transaction volumes, and evolving industry practices. Despite these headwinds, we continue to prioritize a comprehensive value proposition that supports agent productivity, operational efficiency, and long-term professional growth for our entire network.

The number of agents increased in the first three months of 2026, compared to the same period in 2025. We remain committed to retaining our agents in the U.S., Canada, and internationally through the execution of our growth strategies and the end-to-end suite of services we offer our agents.

Real estate sales transactions and volume

Real estate sales transactions are based on the side (buyer or seller) of each real estate transaction and are recorded when our agents and brokers represent buyers or sellers in the purchase or sale, respectively, of a home. The number of real estate transactions is a key driver of our revenue and profitability. Transaction volume represents the total sales value for all transactions and is influenced by several market factors, including, but not limited to, the pricing and quality of our services and market conditions that affect home sales, such as macroeconomic factors, economic growth, or contraction, local inventory levels, mortgage interest rates, and seasonality.

Our real estate sales transactions and volume typically fluctuate with changes in the market’s existing home sales transactions as reported by NAR; however, company-specific initiatives influence the transaction volume and productivity of our agents. For the three months ended March 31, 2026, compared to the same period in 2025, our real estate sales transactions increased 2.2%. For the three months ended March 31, 2026, compared to the same period in 2025, transaction volume increased 5.5%. The improvements in transactions and volume are due to increased agent productivity and increased home sale prices.

Other real estate transactions

Other real estate transactions are recorded for leases, rentals and referrals that are undertaken by our agents and brokers. The increase in other real estate transactions for the three months ended March 31, 2026 compared to the same period in 2025.

Real estate per transaction cost

Real estate per transaction cost is measured as selling, general and administrative, sales and marketing and technology and development expenses resulting from our services that directly support our agents and brokers, divided by total transactions (real estate sales and other). Real estate per transaction cost decreased (5)% for the three months ended March 31, 2026, compared to the same period in 2025, primarily due to operational efficiency gains from higher transaction units and reduced personnel expenses, employee stock compensation, and marketing expenses.

Revenues

Revenues represent the commission revenue earned by the Company for closed brokerage real estate transactions. The Company’s revenues increased 5% for the three months ended March 31, 2026, compared to same period in 2025, primarily due to higher home sales prices in North America, increased international production, and improved productivity in North America for the first quarter of 2026.

Gross profit

Gross profit in the first quarter of 2026 was $75.3 million compared to $76.1 million in the first quarter of 2025. Gross profit decreased in 2026 due to increased agent commissions, productivity awards, and other agent-related costs due to sales commission capping and lower fees from the reduced number of agents.

Operating Income (Loss)

Operating loss in the first quarter of 2026 was ($8.8) million compared to ($10.4) million in the first quarter of 2025. The decrease in the operating loss in 2026 reflects actions taken to reduce operating costs in the second half of 2025, partially offset by increased legal expenses in connection with the Company’s ongoing efforts to resolve legacy litigation matters, including the NAR settlement and other claims.

Consolidated Adjusted EBITDA

Management reviews consolidated adjusted EBITDA, which is a non-U.S. GAAP financial measure, to understand and evaluate our core operating performance. For the three months ended March 31, 2026, consolidated adjusted EBITDA increased by $1.9 million, compared to the same period in 2025. The increase in consolidated adjusted EBITDA reflects an improvement in operating results related to actions taken to reduce operating costs in 2025, which offset increased agent capping and lower agent fees.

RESULTS OF OPERATIONS

The following table reflects the results of each of our operations during the three months ended March 31, 2026 and 2025:

Commissions and Other Agent-Related Costs

For the three months ended March 31, 2026 and 2025, commissions and other agent-related costs increased primarily due to increased sales commissions capping and lower agent fees from the lower number of agents. Commissions and other agent-related costs include sales commissions, revenue share and stock-based compensation paid to our agents.

General and Administrative Expenses

For the three months ended March 31, 2026, general and administrative expenses decreased compared to the same period in 2025, due to decreased employee-related expenses, partially offset by increased litigation expenses. General and administrative expenses include costs related to wages, employee stock-based compensation, and other general overhead expenses.

Technology and Development Expenses

For the three months ended March 31, 2026, technology and development expenses increased compared to the same period in 2025, primarily due to increased technology expenses related to agent support. These expenses include employee-related costs and other expenses for the maintenance and development of the technology used by both our agents and our employees.

Sales and Marketing Expenses

For the three months ended March 31, 2026, sales and marketing expenses decreased compared to the same period in 2025 due to efficiencies gained from our CRM of choice program in the U.S. and Canada residential real estate market.

Other (Income) Expense, Net

For the three months ended March 31, 2026, total other (income) expense, net decreased primarily due to decreased interest income when compared to the same period in 2025. Total other (income) expense, net includes interest income earned on cash and cash equivalents, and (earnings) losses related to equity investments.

Income Tax (Benefit) Expense

The Company’s provision for income taxes was a benefit of $(3.6) million and an expense of $1.7 million for the three months ended March 31, 2026 and 2025, respectively. The benefit for the three months ended March 31, 2026 was primarily driven by the pre-tax loss for the quarter, partially offset by stock-based compensation shortfalls and non-deductible executive compensation.

BUSINESS SEGMENT DISCLOSURES

See Note 7 – Segment Information to the unaudited condensed consolidated financial statements for additional information regarding our business segments. The following table reflects the results of each of our reportable segments during the three months ended March 31, 2026 and 2025:

(1) Segment adjusted EBITDA is a non-U.S. GAAP financial measure. Management evaluates segment performance based on revenue, segment adjusted EBITDA, and operating income (loss). For a definition, reconciliation to net income (loss), and discussion of why management believes this measure is useful, see “Non-U.S. GAAP Financial Measures”.

North American Realty revenue increased 5% in the first quarter of 2026 compared to the same period in 2025, primarily due to an increase in agent productivity and home sale prices in the U.S. and partially offset by lower transactions in Canada. North American Realty adjusted EBITDA as well as operating income (loss) improved in the first quarter of 2026 compared to the same period 2025 due to increased revenues, and lower operating costs, which offset increased commissions and other agent-related costs as a result of increased capping and lower agent fees.

International Realty revenue increased 27% in the first quarter of 2026 compared to the same period in 2025, primarily due to increased real estate transactions driven by increased productivity in previously launched markets, as well as the strategic launch of several new markets during 2025. International Realty adjusted EBITDA and operating income (loss) decreased by 50% and 57%, respectively, in the first quarter of 2026 compared to the same period in 2025 primarily due to higher costs of entering new countries and increased costs to support the continued growth.

Other Affiliated Services revenue increased 4% in the first quarter of 2026 compared to the same period in 2025, due to increased SUCCESS® Magazine revenues. Other Affiliated Services adjusted EBITDA and operating loss improved in the first quarter of 2026 compared to the same period in 2025 due to increased revenues and lower costs.

Corporate expenses and other contain the costs incurred to operate the Company.

NON-U.S. GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use consolidated adjusted EBITDA and segment adjusted EBITDA, non-U.S. GAAP financial measures, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors' overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP.

We define consolidated adjusted EBITDA as net income, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, stock-based compensation expense, stock option expense, and other items not core to the operating activities of the Company. Segment adjusted EBITDA is defined consistently, excluding depreciation and amortization, interest expense, income taxes, stock compensation expense, stock option expense, and other non-core items. We believe these measures provide useful information about our financial performance, help identify underlying trends that could otherwise be masked by excluded expenses, and allow for greater transparency with respect to key metrics used by management for financial and operational decision-making. In particular, we believe the exclusion of stock and stock option expenses provides a useful supplemental measure in evaluating the performance of our underlying operations.

Consolidated adjusted EBITDA and segment adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. Limitations of these measures compared to net income include:

• Consolidated adjusted EBITDA and segment adjusted EBITDA exclude stock-based compensation expenses related to our agent growth incentive program and stock option expense, which have been and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy; and
• Consolidated adjusted EBITDA and segment adjusted EBITDA exclude certain recurring, non-cash charges such as depreciation of fixed assets, amortization of intangible assets and impairment charges related to these long-lived assets and, although these are non-cash charges, the assets being depreciated, amortized, or impaired may have to be replaced in the future.

The following table presents a reconciliation of consolidated adjusted EBITDA to net income (loss), the most comparable U.S. GAAP financial measure, for each of the periods presented:

(1) This includes agent growth incentive stock-based compensation expense.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are our cash and cash equivalents on hand and cash flows generated from our business operations. Our ability to generate sufficient cash flow from operations or to access certain capital markets, including banks, is necessary to fund our operations and capital expenditures, repurchase our common stock, and meet obligations as they become due.

Currently, our primary use of cash on hand is to sustain and grow our business operations, including, but not limited to, making commission and revenue share payments to agents and brokers and cash outflows for operating expenses and dividend payments. In addition, the Company has no known material cash requirements as of March 31, 2026 relating to capital expenditures, commitments, or human capital (except as passthrough commissions to agents and brokers concurrent with settled real estate transactions). The Company intends to use available cash to pay the remaining $17 million antitrust litigation settlement amount.

We believe that our existing balances of cash and cash equivalents and cash flows expected to be generated from our operations will be sufficient to satisfy our operating requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including our level of investment in technology, our rate of growth into new markets, and cash used to repurchase shares of the Company’s common stock. Our capital requirements may be affected by factors which we cannot control such as the changes in the residential real estate market, interest rates, industry practice changes in light of the NAR settlement relating to the antitrust litigation, and other monetary and fiscal policy changes to the manner in which we currently operate. In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next twelve months.

Net Working Capital

Net working capital is calculated as the Company’s total current assets less its total current liabilities. The following table presents our net working capital as of March 31, 2026 and December 31, 2025:

As of March 31, 2026, net working capital increased by $12.2 million, compared to net working capital as of December 31, 2025 due to an increase in net accounts receivable, due to the timing of receivable collections, partially offset by an increase in accruals for customer deposits.

Cash Flows

The following table presents our cash flows for the three months ended March 31, 2026 and 2025:

For the three months ended March 31, 2026, net cash provided by operating activities decreased ($19.3) million compared to the same period in 2025. The decrease in cash provided by operating activities was primarily driven by lower agent equity compensation and changes in working capital. As of March 31, 2026, the Company has accrued the remaining $17.0 million installment of the antitrust litigation settlement, which it intends to pay from available cash on or before June 27, 2026.

For the three months ended March 31, 2026, net cash used in investing activities decreased due to lower cash used for investments in affiliates and other assets and purchases of property and equipment compared to the same period in 2025.

For the three months ended March 31, 2026, net cash flows used in financing activities decreased compared to the same period in 2025, due to no stock repurchases in the first quarter of 2026.

Acquisitions

Acquisitions have not been a material element of our ongoing business, but we continue to seek opportunities to expand and enhance our portfolio of solutions, access new revenue streams, or otherwise complement or accelerate the growth of our existing operations. We may fund acquisitions or investments in complementary businesses with various sources of capital, including existing cash balances and cash flow from operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the 2025 Annual Report, which provides a description of our critical accounting policies. There were no changes to critical accounting policies or estimates as reflected in our 2025 Annual Report. For additional information regarding our critical accounting policies and estimates, see the Critical Accounting Policies and Estimates section of Part II, Item 7 Management’s Discussion and Analysis of Financial Conditions and Results of Operations included in our 2025 Annual Report.

There have been no material changes in our exposures to market risk since December 31, 2025. For details on the Company’s market risks relating to interest rates and foreign currency exchange rates, see Part II, Item 7A Quantitative and Qualitative Disclosures About Market Risks in our 2025 Annual Report.

Evaluation of Disclosure Controls and Procedures

Management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

As of March 31, 2026, an evaluation was conducted by the Company under the supervision and with the participation of its management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2026.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The business, financial condition and operating results of the Company can be affected by a number of risks, whether currently known or unknown. For a discussion of our potential risks and uncertainties, please see Part I, Item 1A. Risk Factors of the 2025 Annual Report, which discussion is hereby incorporated by reference into Part II, Item 1A of this Quarterly Report. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price. Except for the modified risk factors related to legal compliance, new business lines, compensation plans, real estate professional attraction efforts, brokerage commission rate fluctuations, franchisee performance and arrangements, and the actions of independent real estate professionals set forth below, there have been no material changes to the Company’s risk factors as disclosed in the 2025 Annual Report.

The Company faces significant risk to its brand and revenue if it fails to maintain compliance with the law and regulations of federal, state, county and foreign governmental authorities, or private associations and governing boards.

The Company operates in a heavily regulated industry subject to complex, federal, state, provincial and local laws and regulations within the markets in which the Company operates and third-party organizations’ regulations, policies and bylaws governing the real estate business.

In general, the laws, rules and regulations that apply to the Company’s business practices include, without limitation, RESPA, the federal Fair Housing Act of 1968, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), the Exchange Act and federal advertising and other laws, as well as comparable state statutes; rules of trade organizations such as NAR, local MLSs and state and local Association of Realtors; licensing requirements and related obligations that could arise from the Company’s business practices relating to the provision of services other than real estate brokerage services, including without limitation, its mortgage lending services; privacy regulations relating to the Company’s use of personal information collected from the registered users of its websites; laws relating to the use and publication of information through the internet; and state real estate brokerage and mortgage lending licensing requirements, as well as statutory due diligence, disclosure, record keeping and standard-of-care obligations relating to these licenses. Recent regulatory scrutiny regarding the classification of real estate agents as independent contractors, particularly at the state level, could lead to increased compliance costs, potential reclassification, or penalties, which could materially impact the Company’s owned brokerage operations.

Moreover, under U.S. franchise law, we are subject to federal regulations enforced by the FTC governing franchise offers and sales, as well as various regulations in states in which we operate, which may impose additional registration and disclosure requirements. Furthermore, our ability to terminate or refuse renewal/transfer of franchise agreements may be restricted by state-specific “franchise relationship” or “business opportunity” laws.

Entering into new business arrangements, joint ventures, or business lines may expose the Company to additional regulatory and compliance risks that could materially and adversely affect the Company’s business and financial condition.

The Company’s strategy includes pursuing new business initiatives, entering into joint ventures, and expanding into complementary business lines. These efforts often require the Company to navigate complex and evolving regulatory environments that may differ significantly from those governing the Company’s core operations. If the Company is unable to timely and effectively address these regulatory and compliance requirements, or if risks arise beyond the Company’s reasonable ability to mitigate, its business and financial condition may be materially and adversely affected.

For example, SUCCESS® Lending, the Company’s joint venture mortgage business launched in 2021, operates in the highly regulated mortgage lending industry, which involves stringent licensing requirements, state and federal oversight, and compliance with consumer protection laws. The mortgage lending business faces inherent risks, including but not limited to, operational challenges, legal and regulatory scrutiny, and unforeseen compliance costs.

These new business lines also require significant investments in infrastructure, personnel, and systems to ensure compliance. Failure to meet these obligations could result in legal or regulatory penalties, reputational damage, or the inability to scale these operations as planned. Moreover, the financial success of these ventures is uncertain given their limited operating histories, making it difficult to predict their long-term contribution to the Company’s overall financial performance.

Similarly, the Company’s franchise business, while currently immaterial to its overall operations, introduces a distinct regulatory layer. Under U.S. federal law, the Company is subject to regulations enforced by the Federal Trade Commission governing the offer and sale of franchises, including mandatory pre-sale disclosure obligations. Additionally, various states in which the Company operates impose their own registration and disclosure requirements that must be satisfied before franchise offers or sales may be made in those jurisdictions. Furthermore, certain states have enacted “franchise relationship” or “business opportunity” laws that may restrict the Company’s ability to terminate, refuse to renew, or withhold consent to the transfer of franchise agreements, regardless of the terms negotiated in those agreements. Failure to comply with applicable federal and state franchise laws could expose the Company to regulatory penalties, rescission claims by franchisees, or reputational harm, any of which could adversely affect the Company’s business and financial condition.

While the Company aims to mitigate these risks through robust compliance frameworks and strategic partnerships, no mitigation effort can fully eliminate all risk. Unanticipated challenges in these or other future ventures could materially and adversely affect the Company’s operations, reputation, and financial condition.

The Company is, and may in the future be, blocked from or limited in providing its agent and franchise compensation plans in certain jurisdictions and may be required to modify its business model in those jurisdictions as a result.

The Company’s agent compensation plans represent a key lever in its strategy to attract and retain independent agents and brokers and are subject to various international, federal, state, territorial and local laws, rules and regulations which differ in each of the Company’s existing and future markets. As a result, the Company is, and may in the future be, blocked from or limited in providing each of its agent compensation plans in certain markets. In addition, these laws, rules and regulations are subject to judicial and agency interpretation, and it might be determined that the Company’s agent compensation plans are not permitted to be offered to independent contractors. In response to such limitations, the Company has, and may in the future be, required to modify its agent compensation practices in such markets.

Separately, to the extent the Company operates franchise businesses, state-specific “franchise relationship” or “business opportunity” laws introduce analogous constraints on operational flexibility at the jurisdictional level. These laws may restrict the Company’s ability to terminate, refuse to renew, or withhold consent to the transfer of franchise agreements in certain states, regardless of the terms set forth in those agreements or the Company’s broader business objectives in a given market. While the Company’s franchise operations are currently immaterial, the patchwork of state franchise relationship laws, which vary significantly in scope, applicability, and enforcement, creates compliance complexity that mirrors the jurisdictional variability the Company already navigates with respect to its agent compensation plans. As the Company’s franchise operations grow or extend into additional jurisdictions, this complexity may increase and could further constrain the Company’s ability to manage and exit franchise relationships on its preferred terms.

Failure to comply with applicable law, rules and regulations or failure to subsequently modify the Company’s business model in certain jurisdictions to effectively attract and retain agents and brokers could negatively affect the Company’s business, results of operations or financial condition. The costs attributable to developing compliant agent and franchise compensation plans can be significant and could adversely affect the Company’s financial condition.

The Company may be unable to attract, retain, and incentivize qualified real estate professionals.

The Company’s success depends significantly on its ability to attract, retain, and engage qualified real estate agents and brokers, who are the foundation of the Company’s revenue-generating activities. Competition for skilled agents and brokers is intense, as the Company faces pressure from other brokerages offering alternative compensation models, technology tools, or support services, as well as from technology companies seeking experienced professionals in software development and cloud-based solutions. If the Company fails to recruit and retain a strong network of agents and brokers, the Company’s competitive position, market share, and overall business performance could be adversely affected. Likewise, our franchisees could experience similar issues, which could result in a decrease in royalty fees received by us, negatively affect franchisees’ perception of our value proposition, limit our ability to expand our franchise network, or require us to offer more advantageous financial arrangements to attract and retain franchisees.

Industry and regulatory changes, including recent revisions to National Association of Realtors (“NAR”) policies and standards, buyer-broker compensation practices, and the recent settlement resolving nationwide antitrust litigation against NAR and major brokerages, may increase compliance burdens for agents, raise operating costs, and impact the perceived value of the profession. These developments could lead to higher attrition rates across the industry and at the Company, particularly among part-time agents or those with lower transaction volumes. Broader shifts in compensation structures, licensing requirements, or competitive dynamics could further complicate the Company’s ability to recruit and retain agents, and if a significant number of agents leave the profession or fail to maintain active licenses, the Company’s agent base and market presence could be materially diminished.

Further, the Company’s value proposition for agents and brokers, which includes allowing them to participate in the revenue of the Company, is not typical in the real estate industry. If agents and brokers do not understand or appreciate this unique model, including the Company’s revenue share program, equity incentives, and cloud-based platform, the Company may not be able to attract, retain, and incentivize agents effectively. In addition, volatility in the value of the Company’s stock or changes to the perceived value of its programs could negatively impact recruitment and retention.

If the Company is unable to attract, retain qualified agents and brokers, or to maintain their engagement with its model and programs, the Company’s business, financial condition, results of operations, and growth prospects could be materially and adversely affected.

Material decreases in the average brokerage commission rate, due to conditions beyond the Company’s control, could materially adversely affect its financial results.

There are many factors that contribute to average broker commission rates that are beyond the Company’s control. Factors that can contribute to a material decrease in brokerage commissions include changes in regulation, litigation (including pending litigation and industry practice changes described elsewhere in this Annual Report), the rise of certain competitive brokerage or non-traditional competitor models, an increase in the popularity of discount brokers and agents, increased adoption of flat fees, commission models with more competitive rates, rebates or lower commission rates on transactions, as well as other competitive factors. For example, the Company competes with other brokerages that may have reduced operating margins and access to capital resources permitting them to prioritize market share over profits, as well as the growing popularity of non-traditional platforms such as listing aggregators, which may put additional pressure on the Company’s commissions and related costs. The average broker commission rate for a real estate transaction is a key determinant of the Company’s profitability, and a material decrease in brokerage commission rates could have a material adverse effect on the Company’s business and profitability.

These risks extend to the Company’s franchise operations. Because royalties received from the Company’s franchisees are calculated as a percentage of the franchisee’s gross sales commissions, the Company’s royalty revenues are directly exposed to the same commission rate pressures that affect its own brokerage operations. Any decline in franchisees’ gross commission income, or in the percentage of commissions they are able to collect, would generally result in a corresponding decline in the Company’s royalty revenues. While the Company’s franchise operations are currently immaterial, such declines could nevertheless negatively affect current or prospective franchisees’ perception of the franchise’s value proposition, which in turn could limit the Company’s ability to expand its franchisee network or require it to offer more advantageous financial arrangements to attract and retain franchisees. To the extent the franchise business grows, this exposure could become more significant.

The Company's franchise business, while currently immaterial, exposes it to risks tied to franchisee performance and the terms of its franchise arrangements that could adversely affect its financial results.

Prior to May 6, 2026, the Company has no prior material history operating a franchise business, and its franchise operations are currently immaterial to its overall financial results. However, to the extent the franchise business grows, the Company's financial results will become increasingly influenced by the operational and financial performance of its franchisees. Because certain franchise royalties may be calculated as a percentage of franchisees' gross sales commissions, the Company's royalty revenues are directly exposed to the same commission rate pressures, regulatory changes, and broader economic conditions that affect its own brokerage operations. If industry trends weaken, or if one or more franchisees becomes less competitive, experiences financial distress, or elects to leave the franchise system, royalty revenues could decline, which could adversely affect the Company's revenues and profitability.

The franchise model also exposes the Company to risks related to franchisee liquidity, terminations, and non-renewals. The Company may from time to time need to increase bad debt reserves, record impairment charges related to any funding provided to franchisees, or contend with franchisees that fail to meet their payment obligations. Any of these developments could adversely affect the Company's franchise brand and financial results.

Actions of independent real estate professionals affiliated with the Company could materially and adversely affect the Company’s reputation and subject it to liability.

Actions of independent real estate professionals affiliated with the Company could materially and adversely affect the Company's reputation and subject it to liability.

The Company's operations rely on the performance of a large and geographically dispersed network of independent real estate professionals, including brokers, franchisees, and agents, over whom the Company has limited direct oversight and control. The conduct of these professionals, whether arising from the quality of services provided to customers, failures to comply with applicable laws and regulations, violations of industry standards or ethical obligations, unauthorized or improper representations to clients, fair housing violations, data privacy breaches, conflicts of interest, or other acts or omissions in the course of their professional activities, could expose the Company to reputational harm, regulatory scrutiny, and legal liability. These risks are heightened by the scale of the Company's network, the difficulty of monitoring conduct across a large independent contractor base, and the varying regulatory environments in which these professionals operate.

The Company has previously been subject to, and could continue to be subject to, public scrutiny as well as litigation and regulatory claims arising out of such professionals' performance of brokerage services or other conduct. Adverse determinations in any such matters could result in substantial financial penalties, damage awards, injunctive relief, or harm to the Company's brand and reputation. Furthermore, high-profile misconduct by any affiliated professional, even where the Company is not found directly liable, could negatively affect public perception of the Company and its ability to attract and retain agents, brokers, franchisees, and customers.