AGNT, Inc.: Form 10-Q for the period ended Jun 30, 2025

The following discussion should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2025 (the “Quarterly Report”) and consolidated financial statements and related notes appearing in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”). Management’s Discussion and Analysis of Financial Conditions and Results of Operations (“MD&A”) contain forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements. See “Cautionary Note Regarding Forward Looking Statements” in this Quarterly Report, Part I, Item 1A Risk Factors of the 2024 Annual Report, and Part II, Item 1A Risk Factors in this Quarterly Report for a discussion of certain risks, uncertainties and assumptions associated with these statements.

This MD&A is divided into the following sections:

• Overview
• Market Conditions and Industry Trends
• Key Business Metrics
• Results of Operations
• Business Segment Disclosures
• Non-U.S. GAAP Financial Measures
• Liquidity and Capital Resources
• Critical Accounting Policies and Estimates

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

OVERVIEW

eXp World Holdings, Inc. (the “Company,” “eXp” or “we”) was incorporated in Delaware on July 30, 2008 and launched the first cloud-based real estate brokerage offering agent-centric commission structure, revenue sharing, and agent equity opportunities in 2009. Today, 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. Our enabling and innovative technology platform is a robust suite of cloud-based applications and software services tailored for our real estate agents and brokers 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.

While we do not consider acquisitions a critical element of our ongoing business, we seek opportunities to expand and enhance our portfolio of solutions and believe we are well-positioned to capture additional revenues from such solutions.

Strategy

Our strategy is to grow organically in North America and certain international markets by increasing our independent agent and broker network. Through our cloud-based operations and technology platform, we strive to achieve customer-focused efficiencies that allow us to increase market share and attain strong returns as we scale our business within the markets in which we operate. By building partnerships and strategically deploying capital, we seek to grow the business and enter attractive verticals and adjacent markets.

The Company’s primary emphasis is on achieving operational excellence for our real estate agents, which we monitor using the agent net promoter score (“aNPS”). We remain focused on investing in technology and people who are key to the continued growth of the Company. Our sustainable revenue share plan (the “Revenue Share Plan”), whereby we pay real estate professionals affiliated with the Company a portion of the Company’s brokerages’ commission for their contribution to Company growth continues to be critical to attracting and retaining our most productive agents. The supplementary income distributed to the sponsor under the Revenue Share Plan is exclusively derived from the Company's portion of the transaction commission and is not earned on transactions for which the Company does not receive a commission (e.g., when a Front-Line Qualifying Agent has capped and earns 100% of commission on its closed transactions). The Revenue Share Plan does not impact or reduce the commission earned by the agent on the transaction. The Company’s costs incurred under the Revenue Share Plan are included as commissions and other agent-related costs in the consolidated statements of comprehensive income.

The Revenue Share Plan is integral to our growth strategy, fostering a collaborative brokerage that aligns with our core values of sustainability and collaborative success. Regular evaluations are conducted to ensure the plan’s continued alignment with the Company’s overarching objectives and for regulatory compliance.

MARKET CONDITIONS AND INDUSTRY TRENDS

Our business is dependent on the levels of home sales transactions and prices, which can vary based on economic conditions within the markets in which we operate. Changes in these conditions can have a positive or negative impact on our business. The economic conditions influencing housing markets primarily include economic growth, interest rates, unemployment, consumer confidence, mortgage availability and supply and demand.

In periods of economic growth, rising consumer confidence and lower interest rates, demand typically increases resulting in higher home sales transactions and home sales prices. Conversely, in periods of economic recession, declining consumer confidence and higher interest rates, demand typically decreases, resulting in lower home sales transactions and home sale prices. Additionally, regulations imposed by local, state and federal government agencies and geopolitical instability can also negatively impact the housing markets in which we operate.

Over the last several quarters, several macroeconomic conditions have been contributing to the slowdown in the U.S. residential real estate market, which directly impacts our business and financial results. These conditions include, but are not limited to rising inflation, continued higher than average mortgage interest rates, volatility in the U.S. equity markets, changes in trade policy, including the imposition of new tariffs, and responses to such tariffs, and continued political unrest around the world.

While the current environment is challenging, the Company continues to believe it is well positioned to strengthen its competitive position over the long term. Our robust agent support infrastructure continues to drive engagement, retention and productivity. Additionally, we continue to offer agents a low-cost, high-engagement model, which affords agents and brokers increased income and equity ownership opportunities while offering a scalable solution to brokerage owners who want to survive and thrive during market fluctuations. We have an efficient operating model with lower fixed costs driven by our cloud-based model, with no brick-and-mortar locations.

National Housing Inventory

During the second quarter of 2025, the continued higher mortgage rates and higher home prices have contributed to a rise in inventory levels, as measured in months of supply. According to National Association of Realtors (“NAR”), inventory of existing homes for sale in the U.S. was 1.5 million as of June 2025 (preliminary) compared to 1.3 million at the end of June 2024. This represents 4.7 months of inventory in 2025 compared to 4.0 months of inventory in the prior year period.

Mortgage Interest Rates

While mortgage rates continue to be higher than historic averages and negatively impact the demand for homebuying, mortgage rates during the second quarter of 2025 declined slightly from the prior year period. Based on Freddie Mac data, the average rate for a 30-year, conventional, fixed rate mortgage was 6.77% in June 2025 compared to 6.86% in June 2024.

Housing Affordability Index

According to NAR, the composite housing affordability index increased slightly to 97.2 for May 2025 (preliminary) from 92.3 for May 2024. When the index is above 100, it indicates that a family earning the median income has sufficient income to purchase a median-priced home, assuming a 20% down payment and ability to qualify for a mortgage.

Existing Home Sales Transactions and Prices

According to NAR, existing home sale transactions were flat at an annual rate of 3.93 million in June 2025 (preliminary) consistent with 3.93 million in June 2024.

According to NAR, the nationwide existing home median sales price for June 2025 (preliminary) was $435,300 compared to $426,900 in June 2024, an increase of 2.0%.

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) Adjusted EBITDA is not a measurement of our financial performance under generally accepted accounting principles in the U.S. (“U.S. GAAP”) and should not be considered as an alternative to net (loss) income from continuing operations, operating (loss) income, or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations and a discussion of why we believe Adjusted EBITDA provides useful information to investors, see “Non-U.S. GAAP Financial Measures”.

Revenues and Adjusted EBITDA are key financial measures, and we review these measures to evaluate and drive our core operating performance.

Agent net promoter score (aNPS)

aNPS is a scale-based measure of customer satisfaction and an aNPS above 50 is considered excellent. aNPS plays a crucial role in attracting and retaining agents and teams, especially during a period marked by continued market challenges and higher mortgage rates. Despite the challenging market conditions, the Company’s aNPS was 77 and 78 for the three months and six months ended June 30, 2025, respectively, compared to 76 and 75 for the same periods of 2024, respectively. We remain focused on empowering our agents, increasing their productivity, and maintaining strong engagement through our agent-centric initiatives.

Additionally, in response to industry changes as a result of U.S. antitrust lawsuits, the Company led the industry by introducing new listing agreements and buyer representation forms for its agents and the industry. These programs and efforts underscore our commitment to fostering agent success by lowering barriers, increasing earning opportunities, and creating a collaborative, growth-oriented environment. By continually evolving to meet the needs of our agents and employees, the Company remains well-positioned to continue to drive growth.

Agent count

One of our key strengths is attracting real estate agents and broker professionals that contribute to our growth. The rate of growth of our agent and broker base is difficult to predict and is subject to many factors outside of our control, including actions taken by our competitors and macroeconomic factors affecting the real estate industry in general including interest rates, declining transaction volume in the U.S., and industry practice changes.

The number of agents declined (5)% in the first six months of 2025, compared to the same period of 2024, as we continue to off board less productive agents. However, we are committed to retaining our most productive agents in the U.S. and Canada 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 and six months ended June 30, 2025, compared to the same periods of 2024, our real estate sales transactions decreased (1.7)% and (1.9%), respectively. For the three months and six months ended June 30, 2025, compared to the same periods of 2024, transaction volume increased 1% and 2%, respectively, due to increased home sale prices, which offset our decline in transaction volumes.

Other real estate transactions

Other real estate transactions are recorded for leases, rentals and referrals that are undertaken by our agents and brokers. The decrease in other real estate transactions for the three months and six months ended June 30, 2025 compared to the same periods of 2024 reflects the challenging market conditions.

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 increased 27% and 20% for the three and six months ended June 30, 2025, respectively, compared to the same periods of 2024, primarily due to increased personnel and technology costs, as well as the lower number of real estate transactions in 2025.

Revenues

Revenues represent the commission revenue earned by the Company for closed brokerage real estate transactions. The Company’s revenues increased 1% for both the three and six months ended June 30, 2025, compared to same periods of 2024, primarily due to higher home sales prices in North America and increased international production, which more than offset decreased real estate transactions in North American Realty.

Operating (Loss) Income

Operating loss in the second quarter of 2025 was ($2.4) million compared to operating income of $18.5 million in the second quarter of 2024. Operating loss for the six months ended June 30, 2025 was ($12.8) million compared to operating income of $0.4 million in the first six months of 2024. Operating income in the first six months of 2024 included the litigation contingency accrual of $16 million. The operating loss in the first six months of 2025 reflects increased agent commissions and other agent-related costs due to sales commissions capping and lower fees from lower number of agents, and higher operating costs related to personnel, litigation and technology costs.

Adjusted EBITDA

Management reviews Adjusted EBITDA, which is a non-U.S. GAAP financial measure, to understand and evaluate our core operating performance. Adjusted EBITDA, for the three months ended June 30, 2025 was $11.2 million compared to $32.8 million for the three months ended June 30, 2024. Adjusted EBITDA, for the six months ended June 30, 2025 was $13.4 million compared to $43.9 million for the same period of 2024. The decrease in Adjusted EBITDA in 2025 reflects increased agent commissions and other agent-related costs, and higher operating costs.

RESULTS OF OPERATIONS

The following table reflects the results of each of our operations during the three and six months ended June 30, 2025 and 2024:

(In thousands, except share amounts and per share data)

(1) Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net (loss) income from continuing operations, operating (loss) income or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations and a discussion of why we believe Adjusted EBITDA provides useful information to investors, see “Non-U.S. GAAP Financial Measures.”

The following tables and discussion reflect the changes in the results of each of our income statement line items between the three months and six months ended June 30, 2025 and 2024:

For both the three months and six months ended June 30, 2025 and 2024 total revenues increased 1% as a result of increased home sales prices and increased Canadian and international transactions, which more than offset a decline in real estate transactions in the U.S. during such periods.

For both the three months and six months ended June 30, 2025 and 2024 commissions and other agent-related costs increased 2% primarily due to increased sales commissions capping as well as 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.

For the three months and six months ended June 30, 2025, general and administrative expenses increased 21% and 14%, respectively, compared to the same periods of 2024, due to increased employee-related and litigation expenses. General and administrative expenses include costs related to wages, employee stock-based compensation, and other general overhead expenses.

Costs Associated with Organizational Changes

During the quarter, the Company incurred approximately $6.0 million in expenses related to strategic investments and severance to streamline operations. These actions are part of broader efforts to align the Company's cost structure with current revenue trends. In parallel, we continue to encourage employees to drive efficiency by integrating artificial intelligence (“AI”) tools to enhance workforce productivity.

For the three months and six months ended June 30, 2025, technology and development expenses increased 22% and 18%, respectively, compared to the same periods of 2024, 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.

For the three months and six months ended June 30, 2025, sales and marketing expenses decreased (6)% and (8)%, respectively, compared to the same periods of 2024 due to decreased advertising in the U.S. and Canada residential real estate market.

For the three months and six months ended June 30, 2025, total other (income) expense, net decreased (60)% and (35)%, respectively, primarily due to decreased interest income when compared to 2024. Total other (income) expense, net includes interest income earned on cash and cash equivalents, and (earnings) losses related to equity investments.

The Company’s provision for income tax expense (benefit) amounted to $0.5 million and 8.1 million for the three months ended June 30, 2025 and 2024, respectively, which represented effective tax rates of (25.7%) and 40.9%, respectively. The provision for income tax expense was primarily attributable to deductible stock-based compensation shortfalls, research and development credit and non-deductible executive compensation.

The Company’s provision for income tax expense (benefit) amounted to $2.1 million and $4.8 million for the six months ended June 30, 2025 and 2024, which represent effective tax rates of (19.1%) and 174.3%, respectively. The effective tax rate differs from our statutory rates in both periods primarily due to foreign and domestic mix of earnings, and stock-based compensation.

On July 4, 2025, after quarter-end, the One Big Beautiful Bill Act (“OBBBA”) was enacted into U.S. law. The Company is evaluating its impact, including potential changes to deferred tax assets and liabilities and the effective tax rate. The financial effect of OBBBA cannot be made at this time. In accordance with ASC 740, any potential impact resulting from the evaluation, will be reflected in the third quarter of 2025.

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 and six months ended June 30, 2025 and 2024:

(1) Adjusted Segment EBITDA and Adjusted EBITDA are not measurements of our financial performance under U.S. GAAP and should not be considered as alternatives to net (loss) income from continuing operations, operating (loss) income, or any other measures derived in accordance with U.S. GAAP. For a reconciliation of Adjusted Segment EBITDA and Adjusted EBITDA to (loss) income before income taxes and net (loss) income from continuing operations, respectively, see “Non-U.S. GAAP Financial Measures.” Management evaluates the operating results of each of its reportable segments based upon revenues and Adjusted Segment EBITDA. Adjusted Segment EBITDA is defined by us as consolidated (loss) income before income taxes plus depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, stock option expense, and other (income) expense, net. Adjusted EBITDA is defined by us as net (loss) income from continuing operations, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, stock option expense and other items that are not core to the operating activities of the Company. The Company’s presentation of Adjusted Segment EBITDA and Adjusted EBITDA may not be comparable to similar measures used by other companies.

The following table reflects the changes in the revenues and adjusted EBITDA for each of our reportable segments during the three months and six months ended June 30, 2025 and 2024:

(1) Adjusted Segment EBITDA and Adjusted EBITDA are not measurements of our financial performance under U.S. GAAP and should not be considered as alternatives to net (loss) income from continuing operations, operating (loss) income, or any other measures derived in accordance with U.S. GAAP. For a reconciliation of Adjusted Segment EBITDA and Adjusted EBITDA to (loss) income before income taxes and net (loss) income from continuing operations, respectively, see “Non-U.S. GAAP Financial Measures.” Management evaluates the operating results of each of its reportable segments based upon revenues and Adjusted Segment EBITDA. Adjusted Segment EBITDA is defined by us as consolidated (loss) income before income taxes plus depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, stock option expense, and other (income) expense, net. Adjusted EBITDA is defined by us as net (loss) income from continuing operations, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, stock option expense and other items that are not core to the operating activities of the Company. The Company’s presentation of Adjusted Segment EBITDA and Adjusted EBITDA may not be comparable to similar measures used by other companies.

North American Realty revenues were flat in the second quarter and first six months of 2025 compared to the same periods in 2024 primarily due to slightly lower sales volumes in the United States, partially offset by increased sales volume in Canada and increased home sales prices in the U.S., despite the challenging market in the U.S. residential real estate markets. Adjusted North American Realty EBITDA decreased (49)% and (51)% in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024, due to increased commissions and other agent-related costs and increased operating costs.

International Realty revenues increased 59% and 78% in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024 primarily due to increased real estate transactions driven by improved agent production in previously launched markets. Adjusted International EBITDA loss increased by (62)% and improved 4% in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024. The increased loss in the second quarter of 2025 is due to increased start-up costs related to entering new markets. The improvement in Adjusted EBITDA in the first six months of 2025 is due to increased revenues and improved business efficiencies in markets already entered.

Other Affiliated Services revenues decreased (52)% and (53)% in the second quarter and the first six months of 2025, compared to the same periods of 2024, due to lower SUCCESS® Magazine revenues. Adjusted Other Affiliated Services EBITDA decreased (132)% and (113)% due to increased costs.

Corporate expenses and other contain the costs incurred to operate the corporate parent of eXp Realty.

NON-U.S. GAAP FINANCIAL MEASURES

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use Adjusted EBITDA, a non-U.S. GAAP financial measure, to understand and evaluate our core operating performance. This non-U.S. GAAP financial measure, which may be different than similarly titled measures used by other companies, is 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 the non-U.S. GAAP financial measure of consolidated Adjusted EBITDA to mean net (loss) income from continuing operations, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, stock option expense and other items not core to the operating activities of the Company. Adjusted Segment EBITDA is defined as consolidated (loss) income before income taxes plus depreciation, amortization and stock-based compensation expense, stock option expense, and other (income) expense, net. We believe that consolidated Adjusted EBITDA and Adjusted Segment EBITDA provides useful information about our financial performance, enhances the overall understanding of our past performance and future prospects and allows for greater transparency with respect to a key metric used by our management for financial and operational decision-making. We believe that Adjusted Segment EBITDA helps identify underlying trends in our business that otherwise could be masked by the effect of the expenses that we exclude in Adjusted Segment EBITDA. In particular, we believe the exclusion of stock-based compensation, provides a useful supplemental measure in evaluating the performance of our underlying operations and provides better transparency into our results of operations.

We are presenting the non-U.S. GAAP measure of Adjusted EBITDA to assist investors in seeing our financial performance through the eyes of management, and because we believe this measure provides an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of Adjusted EBITDA compared to net (loss) income from continuing operations, the closest comparable U.S. GAAP measure. Some of these limitations are that:

• Adjusted EBITDA excludes stock-based compensation expense 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
• Adjusted EBITDA excludes 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 Adjusted EBITDA to net (loss) income from continuing operations, 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. Our cash and cash equivalents balances and cash flows from operations have strengthened primarily due to transaction volume growth and improved cost leverage over the prior five years, attributable to the expansion of our independent agent and broker network and, to a lesser extent, increased average prices of home sales.

Currently, our primary use of cash on hand is to sustain and grow our business operations, including, but not limited to, commission and revenue share payments to agents and brokers and cash outflows for operating expenses and dividend payments. In addition, except for the $34 million antitrust litigation contingency accrual recorded for the year ended December 31, 2024 (of which $17 million was paid during the quarter ended June 30, 2025; see Note 11 – Commitments and Contingencies to the unaudited condensed consolidated financial statements for additional information regarding the antitrust litigation), the Company has no known material cash requirements as of June 30, 2025 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 June 30, 2025 and December 31, 2024:

For the six months ended June 30, 2025, net working capital remained flat, compared to December 31, 2024.

Cash Flows

The following table presents our cash flows for the six months ended June 30, 2025 and 2024:

For the six months ended June 30, 2025, net cash provided by operating activities decreased ($55.9) million compared to the same period in 2024. The decrease in cash provided by operating activities was primarily driven by the payment of the previously accrued litigation contingency of $17 million, lower operating results, lower agent stock-based compensation, and a decrease in customer deposits activity.

For the six months ended June 30, 2025, net cash used in investing activities increased due to cash used for investments in affiliates and other assets and purchases of property and equipment compared to the same period of 2024.

For the six months ended June 30, 2025 and 2024 net cash flows used in financing activities decreased $51.7 million compared to the same period in 2024, primarily driven by lower stock repurchases.

Acquisitions

While we do not consider acquisitions a critical element of our ongoing business, we 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. Acquisitions during the first six months of 2025 have not had a material impact on cash flow.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the 2024 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 2024 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 2024 Annual Report.

There have been no material changes in our exposures to market risk since December 31, 2024. 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 2024 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 (as the principal executive officer) and Chief Financial Officer (as our principal financial officer), to allow timely decisions regarding required disclosures.

As of June 30, 2025, 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 (as our principal 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 June 30, 2025.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2025 that have materially affected, or are reasonably believed to be 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 2024 Annual 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 risk factors disclosed in Part I, Item 1A. of the 2024 Annual Report, which are hereby incorporated by reference into Part II, Item 1A of this Quarterly Report, the modified risk factor related to business and macroeconomic conditions, the modified risk factor related to changes in the real estate business as a result of legal actions or government investigations, the modified risk factor related to adverse outcomes of litigation in our industry could adversely impact our financial results, the modified risk factor related to Glenn Sanford’s and Penny Sanford’s stock ownership, and the modified risk factor related to our stock price volatility set forth below, there have been no material changes to the Company’s risk factors as disclosed in the 2024 Annual Report.

Risks Related to Our Industries

Our profitability is tied to the strength of the residential real estate market, which is subject to a number of general business and macroeconomic conditions beyond our control.

Our profitability is closely related to the strength of the residential real estate market, which is cyclical in nature and typically is affected by changes in national, state and local economic conditions, which are beyond our control. Macroeconomic conditions that could adversely impact the growth of the real estate market and have a material adverse effect on our business include, but are not limited to, economic slowdown or recession, increased unemployment, increased energy costs, reductions in the availability of credit or higher interest rates, increased costs of obtaining mortgages, an increase in foreclosure activity, inflation, disruptions in capital markets, significant volatility in U.S. and international equity markets, deterioration in global financial conditions, declines in the stock market, adverse tax policies or changes in other regulations, lower consumer confidence, lower wage and salary levels, war, terrorist attacks or other geopolitical and security issues, including Russia’s ongoing war with Ukraine, the conflict between Israel and Palestine and rising tensions between China and Taiwan as well as between China and the U.S., changes in trade policy including the imposition of new tariffs, and responses to such tariffs, that may indirectly affect the cost of homebuilding materials, consumer goods, or broader economic sentiment, natural disasters or adverse weather events, or the public perception that any of these events may occur.

In 2024 and 2025, the U.S. residential real estate market has been adversely affected by a combination of high interest rates, elevated mortgage costs, and declining affordability, which have led to a slowdown in buyer demand and caused homes to remain on the market longer. More recently, housing inventory has begun to accumulate in many regions, reflecting a mismatch between listing activity and qualified buyer interest. These conditions—combined with tighter monetary policy and consumer hesitation—have contributed to reduced transaction volumes, softer market liquidity, and lower agent productivity. In addition, evolving federal policy under the current administration, including “Buy American” and protectionist trade or immigration measures, could affect global supply chains, the cost of goods and labor, or foreign investment in real estate, each of which may influence housing demand or affordability.

Unfavorable general economic conditions, such as a recession or economic slowdown, in the U.S., Canada, or other markets we enter and operate within, could negatively affect the affordability of and consumer demand for, our services, which could have a material adverse effect on our business and profitability. In addition, international, federal and state governments, agencies and government-sponsored entities such as Fannie Mae, Freddie Mac and Ginnie Mae could take actions that result in unforeseen consequences to the real estate market or that otherwise could negatively impact our business. Moreover, continued global financial uncertainty and monetary tightening policies may weigh on consumer spending and homebuying activity, both of which are key drivers of agent productivity and company performance.

Risks Related to Our Real Estate Business

The real estate market may be severely impacted by industry changes as the result of certain class action lawsuits, settlements, or government investigations.

The real estate industry faces significant pressure from private lawsuits and investigations by the U.S. Department of Justice (the “DOJ”) into antitrust issues.

In April 2019, the NAR and certain brokerages and franchisors (including Realogy Holdings Corp., HomeServices of America, Inc. RE/MAX, and Keller Williams Realty, Inc.) were named as defendants in a class action complaint alleging a conspiracy to violate federal antitrust laws by, among other things, requiring residential property sellers in Missouri to pay inflated commission fees to buyer brokers (the “NAR Class Action”). On October 31, 2023, a jury found NAR and various of its co-defendants liable and awarded plaintiffs nearly $1.8 billion in damages (all defendants have since settled, which remain subject to ongoing appeals processes). Class action suits raising similar claims are already pending in this and other jurisdictions and the outcome of the NAR Class Action may result in additional such actions being filed. The Company was named as one of several defendants in similar class action suits but entered into a settlement agreement on December 9, 2024 to resolve all U.S. nationwide claims. See Note 11 – Commitments and Contingencies to the unaudited condensed consolidated financial statements.

Defending against class action litigation is costly, may divert time and money away from our operations, and imposes a significant burden on management and employees. Also, the results of any such litigation or investigation cannot be predicted with certainty, and any negative outcome could result in payments of substantial monetary damages or fines, and/or undesirable changes to our operations or business practices, and accordingly, our business, financial condition, or results of operations could be materially and adversely affected.

On March 15, 2024, NAR entered a settlement agreement to resolve on a class wide basis the claims against NAR in the NAR Class Action. In addition to a monetary payment of $418 million, NAR agreed to change certain business practices, including changes to cooperative compensation and buyer agreements. The NAR settlement agreement: (1) prohibits NAR and REALTOR® MLSs from requiring that listing brokers or sellers make offers of compensation to buyer brokers or other buyer representatives; (2) prohibits NAR, REALTOR® MLSs and MLS participants from making an offer of compensation on the MLS; and (3) requires all REALTOR® MLS participants to enter into a written buyer agreement specifying compensation before taking a buyer on tour. The NAR settlement received preliminary court approval on April 23, 2024.

These revised NAR rules and practices have caused and may require additional changes to our business model, including changes to agent and broker compensation and how we meet home buyers. Without mandated commission sharing, for example, we may see the introduction of hourly or a la carte services. Or, if buyers now compensate brokers, they may be more likely to contact listing agents directly, which could drive down dual agent broker commissions. Home lending rules and norms do not currently allow buyers to include buyer’s agent compensation in the balance of a home loan, which may impair the ability of homebuyers to pay their agent fees when purchasing a home. The amended rules and regulations also require us to get a buyer agreement signed before we take a home buyer on a first tour. This requirement may dissuade buyers from hiring the Company, thereby reducing the fees we receive from our agents. These and other shifts in the model for agent and broker compensation could significantly change the brokerage landscape overall and may adversely affect our financial condition and results of operations.

In addition to the NAR Class Action and various similar private actions already pending, beginning in 2018, the DOJ began investigating NAR for violations of the federal antitrust laws. The DOJ and NAR appeared to reach a resolution in November 2020, resulting in the filing of a Complaint and Proposed Consent Judgment pursuant to which NAR agreed to adopt certain rule changes, such as increased disclosure of commission offers. The DOJ has since sought to continue its investigation of NAR, and on April 5, 2024, a federal appeals court decided that the DOJ could reopen its investigation. It is uncertain what effect, if any, the resumption of the DOJ’s investigation could have on the larger real estate industry, including any further settlement that may result therefrom.

More recently, litigation between other real estate industry participants has highlighted the risk of private litigation under the auspices of antitrust laws. For example, in July 2025, Compass, Inc. filed a lawsuit against Zillow Group, Inc. claiming that Zillow had engaged in anti-competitive conduct. The lawsuit included allegations that other industry participants, including the Company, had conspired with such anti-competitive conduct. Although the Company is not named as a defendant in that action, these types of lawsuits reflect the risk of both private litigation and regulatory action to challenge business practices in the residential real estate sector. Even when not directly targeted, we may face reputational, operational, or financial consequences as a result of broader industry litigation. We may be required to further adjust our business practices, increase legal spend, or defend against claims, any of which could materially and adversely affect our business, financial condition, or results of operations.

Risks Related to Legal and Regulatory Matters

Adverse outcomes in litigation and regulatory actions against other companies and agents in our industry could adversely impact our financial results.

Adverse outcomes in legal and regulatory actions against other companies, brokers, and agents in the residential and commercial real estate industry may adversely impact the financial condition of the Company and our real estate brokers and agents when

those matters relate to business practices shared by the Company, our real estate brokers and agents, or our industry at large. Such matters may include, without limitation, RESPA, TCPA and state consumer protection law, antitrust and anticompetition, and worker classification claims. Additionally, if plaintiffs or regulatory bodies are successful in such actions, this may increase the likelihood that similar claims are made against the Company and/or our real estate brokers and agents which claims could result in significant liability and be adverse to our financial results if we or our brokers and agents are unable to distinguish or defend our business practices.

As an example, in the matter of Burnett v. National Association of Realtors (U.S. District Court for the Western District of Missouri), a federal jury found NAR and certain other brokerage defendants liable for $1.8 billion in damages; all defendants have since settled, subject to ongoing appeals processes, which include both monetary and non-monetary settlement terms. During 2024, the Company, along with other brokerage and non-brokerage defendants, have been named as defendants in putative class action lawsuits alleging similar fact patterns and antitrust violations. On December 9, 2024, the Company and certain of its subsidiaries entered into a Settlement Agreement (the “Settlement”) with plaintiffs in the U.S. antitrust lawsuit 1925 Hooper LLC, et al. v. The National Association of Realtors et. al., Case No. 1:23-cv-05392- SEG (United States District Court for the Northern District of Georgia, Atlanta Division), which was filed on November 22, 2023 against the Company and other US brokerage defendants (the “Hooper Action”). The Settlement resolves all claims set forth in the Hooper Action, as well as all similar claims on a nationwide basis against the Company (collectively, the “Claims”) and releases the Company, its subsidiaries and affiliates, and their independent contractor real estate agents in the United States from the Claims. By the terms of the Settlement, the Company agreed to make certain changes to its business practices and to pay a total settlement amount of $34.0 million. The Settlement received preliminary approval on May 23, 2025, but remains subject to final court approval and will become effective following an appeals process, if applicable. Both the NAR and the Company’s settlement terms may materially impact business practices within the industry which could adversely impact the Company’s business, results of operations, and financial condition.

Risks Related to Our Stock

Glenn Sanford, our Chairman and Chief Executive Officer, together with Penny Sanford, a significant stockholder, own a significant percentage of our stock. As a result, the trading price for our shares may be depressed and they can significantly influence actions that may be adverse to the interests of our other stockholders.

On March 4, 2025, each of Glenn Sanford and Penny Sanford filed a Schedule 13D with the Securities and Exchange Commission, which disclosed that they beneficially owned approximately 27.19% and 17.35% of our outstanding common stock as of January 31, 2025, respectively. This significant concentration of share ownership may adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in a company with two stockholders holding a significant number of our shares. Each of Mr. Sanford and Ms. Sanford can significantly influence all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets. In addition, due to his significant ownership stake and his service as our Chief Executive Officer and Chairman of our Board of Directors, Mr. Sanford significantly influences the management of our business and affairs. This concentration of ownership and influence could have the effect of delaying, deferring, or preventing a change in control, or impeding a merger or consolidation, takeover or other business combination that could be favorable to our other stockholders.

The stock price of our common stock has been and likely will continue to be volatile and may decline in value regardless of our performance.

The market price for our common stock could fluctuate significantly for various reasons, many of which are outside our control, including those described above and the following:

• our operating and financial performance and prospects;
• future sales of substantial amounts of our common stock in the public market, including but not limited to shares we may issue as consideration for acquisitions or investments;
• housing and mortgage finance markets;
• our quarterly or annual earnings or those of other companies in our industry;
• the public’s reaction to our press releases, other public announcements and filings with the SEC;
• changes in or cessation of recommendations or analysis of our prospects by securities analysts who track our common stock;
• market and industry perception of our success, or lack thereof, in pursuing our growth strategy;
• strategic actions by us or our competitors, such as acquisitions or restructurings;
• actual or potential changes in laws, regulations and regulatory interpretations;
• changes in interest rates;
• changes in demographics relating to housing such as household formation or other consumer preferences toward home ownership;
• changes in accounting standards, policies, guidance, interpretations or principles;
• arrival and departure of key personnel;
• the filing of and/or adverse resolution of new or pending litigation or regulatory proceedings against us; and
• changes in general market, economic and political conditions in the United States and global economies.

Recent instability in global capital markets and the volatility of U.S. and international stock exchanges—driven by inflationary pressures, geopolitical conflict, central bank policy shifts, and investor uncertainty—may contribute to elevated fluctuations in the price of our common stock.

In addition, the stock markets have experienced periods of high price and volume fluctuations that have affected and continue to affect the market prices of the equity securities of many companies, including technology companies and real estate brokerages. Such price fluctuations can be unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and harm our business.