Prepared remarks
Good afternoon, and welcome to eXp World Holdings Second Quarter 2025 Earnings Fireside chat via live stream and our Metaverse on the web frame. My name is Denise Garcia, and I manage Investor Relations for eXp World Holdings. Today, we will begin our earnings fireside chat with remarks from Leo Pareja, CEO of eXp Realty; Wendy Forsythe, CMO of eXp Realty; Felix Bravo, Managing Director, International; Jesse Hill, Chief Financial Officer of eXp World Holdings; and Glenn Sanford, Founder, Chairman and CEO of eXp World Holdings. Following our prepared remarks, we will open the call to a Q&A session with our speakers. Let's begin with a review of the forward-looking statements. There will be a number of forward-looking statements made today that should be considered in conjunction with the cautionary statements contained in the company's SEC filings. Forward-looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Please see our filings with the SEC, including our most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q for a discussion of specific risks that may affect our business, performance and financial condition. We assume no obligation to update or revise any forward-looking statements or information. As a reminder, today's call is being recorded, and a replay will also be made available on expworldholdings.com. Now for a few logistics, and we will get started. For those of you joining in frame today, welcome to our Metaverse on the web. To zoom in to a specific screen, you can click on that screen and then click zoom in. If the content on the screen disappears or you lose audio, simply refresh your page. While in Frame, if you need help, just use the help button on the bottom right to link with tech support. Should you wish to ask a question during our presentation, you can enter your questions by scanning the QR code presented on this screen with your mobile phone or go to slido.com and type in the event code, EXPI. From there, you can submit a question or vote up an existing question by giving a thumbs up for that question to be asked. This screen will remain up on the right-hand side of the stage. Now I'll turn the fireside chat over to our speakers before opening the call to questions. Leo, you may begin.
Thanks, Denise. I would like to start off by noting some positive trends amongst eXp agents in our base this quarter. This quarter marked our first quarter since Q2 of 2024 that we saw sequential quarter-over-quarter growth in our agent count. This is a great indication that our strategies and programs we've created to attract and retain agents are working. Not only have we been able to attract and retain great agents, we've created a stronger, more productive agent base during this market downturn. Sales transactions per agent are up 4% year-over-year. The number of icon agents is up 9% year-over-year, and we've had 22% fewer agents leave in Q2 this year versus last year. And we continue to shed our most unproductive agents. 57% of nonproductive agents that left eXp left the industry in Q2. Let's talk more about retention on this next slide. In the U.S., the majority of departing agents continue to be in the low-producing cohort, and we retain the highest, most productive agent cohorts, which are multiple times less likely to churn than low-producing agents. Our strategy to attract teams is working and helping drive the increase in agent productivity. Nearly half at 41% of new agents at eXp were members of teams in the second quarter. Agents on teams are 79% more productive than individual agents. Increased agent retention, a trend we began to see in Q1 of this year, is what has helped drive our quarter-over-quarter agent growth in the U.S. And we had 31% fewer agents leave eXp versus a year ago, a quarter in the U.S. I'd like to highlight some of the notable teams that helped us get there on the next slide. Starting with Shane and Clint Neil from the Neil team in San Antonio, a top 3 Keller Williams team for 2024 in both units and GCI, where they operate across all niches of residential real estate, including Luxury and Land & Ranch, which Wendy will discuss in a moment. We also welcomed the Muve team in Edmonton, Alberta, Canada. The Muve team marked a historic moment for us at eXp as they were our first official co-sponsored team in Canada. As mentioned, our strategy to attract agents and teams with innovative programs is working, and Wendy will also provide an update on the co-sponsorship program in her remarks. The ERS group in Omaha, Nebraska is a great example of the flexibility of the eXp platform, enabling entrepreneurs to realize their vision. ERS is building a platform to connect homeowners and tenants with every service they need in the real estate ecosystem on eXp's cloud-based model that offers the perfect foundation to scale nationally while tapping into a network of forward-thinking agents and brokers. On the next slide, we joined the Kumler Group from Scottsdale, Arizona. Scott and his team joined us in Arizona under the leadership of Joshua Smith, his long-time mentor. And as part of eXp, he now gets to benefit from Mike Sirard and other folks that he partnered with, formerly coming from My Home Group. In Long Beach, California, we welcomed Costanza Genoese Zerbi and associates who came to eXp to increase their production and were attracted to the strong infrastructure, all the tools and autonomy we give them to scale their business. Some of you may recognize YouTube star, Kyler Ferris, who is coming back. He was formerly with us several years ago, where he went independent to grow his brand and just realized that the value proposition was too great not to be affiliated with us. He was also one of our first folks to take advantage of the co-sponsorship program that officially launched May 1 and has been wildly successful. On that note, I'll turn it over to Wendy Forsythe, our Chief Marketing Officer, to share more details about that program and others driving our success. Wendy?
Thanks, Leo. In Q2, we saw three significant program launches to add value to our ever-growing value stack: the launch of our CRM of Choice program, the launch of our co-sponsor program, and the launch of eXp Land & Ranch. Let me share some of the details of each of these programs. I'll start with our co-sponsor program. The launch of the co-sponsor program allows the power of two here at eXp, sparking growth and collaboration and bringing attraction to a whole new level. This program has been mapped with great success. Since launching the program, we have seen co-sponsors happen across 22 countries globally, showing the great collaboration amongst our agents in countries all over the globe. The next program we launched this quarter was our CRM of choice. CRM is the backbone of agents' businesses, and it is a very personal part of what powers an agent's business. We are now giving our agents the opportunity to choose between one of three CRMs for their business. Agents have received this choice very positively and are now able to select either Boldtrail, Cloze, or Lofty to power their CRM in their business. This has been a real game changer for our agents as they make the selection and power their CRMs with this tool that fits their needs in their business every single day. The last program we launched this quarter in our toolbox for our agents has been the long-awaited launch of our eXp Land & Ranch program. Land & Ranch is an important niche market in our business, and our eXp agents have received the launch of Land & Ranch very positively. In fact, since our launch in April, we've had over 100 agents join the Land & Ranch division, and we have a long list already waiting to join. So Land & Ranch agents, welcome. We are so happy that you are ready and able to support Land & Ranch consumers across the country. Moving along to programs that we launched earlier in the year. In fact, the program was launched last year, but we're just finishing our full second quarter of Canva. Our eXp agents, you guys are Canva power users, ending our second full quarter of Canva, and it is amazing the usage of Canva. You published over 500,000 designs at the end of Q2 2025, a 5x increase in design usage, going from just under 2 designs per user to almost 9 designs per user. You are designing faster, decreasing your time to create a design from 24 minutes down to 9 minutes. The power of brand is such an important component in driving all of our businesses, and Canva is such an important tool in creating that brand. We're certainly seeing that adoption from all of our eXp agents, and Canva is at the center of that adoption. So kudos to all of you for your adoption and implementation of Canva as an important part of our toolbox. One of the things that is at the center of our culture is in-person events. During Q2, we executed several key in-person events. One of the ones that is really just such a treat is our regional rallies, which are events that we put on in conjunction and in partnership with our agents. These events are actually agent-led events. Our agent-led regional rallies were phenomenal this year. We had over 4,000 agents attend these events across the country in 19 different locations, and we received really high marks. So thank you to all of our agent organizers for these events and everyone who came out and attended these events. It was phenomenal to see the energy and the excitement and the connection and all of the learning and sharing that happened at these events across the country. In addition to our regional rallies, we also had 2 of the 3 major eXpCon events happen in Q2, the first of which happened in April, eXpCon in Montreal, Canada. A tremendous event that had eXp agents not only from Canada but from across the globe in attendance, was larger than our eXpCon Canada event in 2024. So it was great to see growth at our events, which received very high marks for culture, education, and all of the things that we want to have happen at these events. So thank you to everyone who attended that event. The second of our eXpCon events that happened this quarter was our eXpCon event in Barcelona. This international event doubled in size year-over-year, with over 550 eXp agents from over 18 different countries in attendance, and the event was just phenomenal. It happened just in June, and we received tremendous feedback on this event. It truly showed us the amazing collaboration. The thing that I think we all took away from this event is that real estate is truly happening globally. As eXp, we are collaborating on a global stage, so it really was an exciting event to be a part of. I think that we all share in the sentiment that we came away from this event, those who attended and even those that didn't attend, really energized about the opportunities that we have globally, and we're so excited about that. That tees us up perfectly to hand the stage over to Felix Bravo to talk to us about all the things that are happening at eXp International. So, Felix, over to you.
Thanks, Wendy, and thank you to everyone joining us today. I'm excited to share the progress we've made on our international growth strategy so far in 2025 and also just to share a bit about what's to come. So let's dive right into it on the next slide. We've had a strong start to the year, successfully launching operations in three new countries. Peru and Turkey both opened up in Q1 and most recently, Ecuador launched in Q2. All three markets got off to record starts with our new country launch strategy. Peru onboarded over 100 agents in their first 14 days of opening. Ecuador onboarded over 100 agents before the actual launch event, and Turkey had over 30 agents just days after launch. More importantly than agent count, though, all three new markets delivered production and transactions in their first month of being open. With each new market, we're getting more efficient. We're learning to open faster, requiring fewer resources and operating with increasingly productive teams right out of the gate. Looking ahead, we're not slowing down. Our roadmap for the second half of 2025 includes planned entries into Egypt and Japan, which we had announced previously. We also recently announced that eXpCon International in Barcelona and our latest market, South Korea. These markets represent exciting opportunities for us to extend the eXp model globally and showcase the demand for an agent-centric model that focuses on agents building their business regardless of what size that may be. I'll share some additional highlights from Q2 on the next slide. The second quarter continued our strong momentum. We delivered 59% year-over-year revenue growth. This was driven by a 9% increase in agents globally, along with improved agent productivity. Over the last 12 months, we have doubled down on attracting productive agents throughout all of our international markets. We have a 2-year minimum experience requirement for agents to join. We are continuing to evolve our value proposition at local and international levels to give agents the tools they need to grow their business. Regardless of how regulated or informal a market may be, we continue to drive professionalism in our industry worldwide. Community building continues to be a priority for us. As Wendy said, we hosted some major events, one of them being eXpCon Barcelona just now in June, which saw a 175% increase in registrants year-over-year. But we also hosted the annual eXp U.K. Agent Conference in Birmingham, which brought our agents together to connect and grow. We had the opportunity to be there in person, and we got to celebrate our U.K. agents as eXp U.K. is now officially the #1 estate agency in the U.K. in terms of listings and sales. These events are a critical part of cultivating the strong agent culture that sets eXp apart. As we move into the second half of 2025, we remain fully on track with our international market expansion strategy. Our long-term goal is to grow our agent base to 50,000 agents across 50 countries by 2030. To get there, we're taking a tailored market-specific approach. We're focusing both on high-income regions and emerging markets while empowering our autonomous local teams that are aligned with our global vision. This approach ensures that we scale globally while adapting our model and value proposition at a local level. This has been a key differentiator for us that continues to deliver results. With that, I'll hand it over to Jesse, who will walk you through our second quarter financial highlights. Jesse?
Thank you, Felix. It's nice to see International continue to be on track with its long-term strategy. Now I'll walk us through our second quarter consolidated operational and financial highlights beginning on the next slide. Starting with revenue, we generated $1.3 billion in the second quarter in a continued tough macroeconomic environment. Real estate sales volume was up 1% year-over-year in the second quarter, driven by an increase in home sales prices and increased agent productivity, offset by a 2% year-over-year decrease in sales transactions. Agent count was 82,704, a 5% year-over-year decrease, but as Leo mentioned, a 1% quarter-over-quarter increase sequentially this year. We continue to see an increase in transactions per agent, which indicates that we are attracting and retaining highly productive agents. Our non-GAAP gross margin, comparable to other brokerages' gross margin, which excludes stock compensation and revenue share, was 12%, while our GAAP gross margin was 7.1%, down 40 basis points from Q2 of last year, predominantly as a result of more productive agents reaching their cap. Adjusted EBITDA of $11.2 million continues to be positive but down year-over-year, partially driven by the lower gross margin, and it was also impacted by strategic investments and decisions that we made in Q2 to streamline operations, including severance and other employee-related costs. We ended the quarter with $94.6 million in cash. This reflects our first payment of $17 million related to the $34 million antitrust litigation settlement, which we received preliminary approval on in May. We expect to make our second and final payment of $17 million in Q2 of 2026, subject to final court approval. On the next slide, I will highlight our financial results by segment for the quarter. The North America Realty segment continues to be the largest revenue and profit generator for the company. North America revenue was $1.3 billion for the quarter with adjusted EBITDA of $19.8 million. As I noted last quarter, we are showing operating loss or income by segment as this is one additional view that we utilize internally as a leadership team, and we wanted to include that to add additional transparency for our analysts and investors. North America operating income was $7.1 million, including impacts from the $5 million of strategic investments in severance to streamline operations. As I mentioned last quarter, we expect to have more efficient operations in the back half of 2025. International continues to scale with revenue growing 59% year-over-year, driven by an increase in productive agents and partially offset by some timing and impacts in the U.K. that I mentioned in Q1. Adjusted EBITDA loss increased primarily as a result of opening new markets and hosting two concurrent events, including eXpCon Barcelona that Felix mentioned in his remarks. Other affiliated services, which are primarily success, contributed modest revenue and adjusted EBITDA loss of $2.3 million. On the next slide, we will take a look at some of the investments we are making as a part of our capital allocation strategy. As we navigate the year, we remain focused on responsible capital stewardship, prioritizing both investment in the long-term strength of our business and returning value to our shareholders, many of whom are agents. As I mentioned earlier, we paid the first $17 million installment related to the $34 million NAR settlement this quarter. This temporarily brought our cash balance below our preferred threshold of $100 million. Excluding that payment, we target to maintain cash reserves around that level to preserve financial flexibility and readiness for strategic opportunities. Now let me walk you through our broader capital allocation philosophy and how we reinvest in the business to drive growth, productivity, and enhance long-term shareholder value. We're consistently making targeted investments to strengthen our core business and differentiate our value proposition. We previously launched a partnership with Canva to give agents powerful marketing tools. Wendy highlighted in her remarks the enthusiastic uptake of that platform, and it's one of several examples listed here of how we listen to our agents and deliver what they need to succeed. As a tech-forward company, we're enhancing our stack with leading platforms such as OpenAI, Slack, and Oracle, just to name a few. These aren't software subscriptions; they are strategic tools that deepen our productivity and scale. Continuing with AI and automation, and this is an area that we are especially bullish on. Our AI investments are designed to support both front-end productivity and back-end efficiency. A few examples would be building custom GPTs, which we've introduced at the local level to help both agents and staff boost their productivity through automation. Internally, we're leveraging AI applications such as Cursor, Windsurf, and Lovable to write approximately 50% of our code today. Our engineers are then able to adapt and integrate this code into our tools, speeding up the development while maintaining quality. Finally, the recently introduced co-sponsored program is now running at close to 100% automation, another great example of how we're scaling intelligently. Our clear focus here is to use AI to empower people, drive faster response times, better support, and ultimately, more sales and productivity. On the inorganic growth side, we're also making calculated investments in companies aligned with our mission, such as FyxerAI and Sisu to further strengthen our ecosystem and our agent capabilities. Finally, let's discuss returning capital to shareholders, which, of course, includes many of our agents. We do this via strategically buying back shares and also issuing a dividend. The dividend is a differentiator in our space. For example, agents earning stock awards are eligible to receive a dividend on that stock, which is a tremendous value add. In short, we have a disciplined and strategic capital allocation strategy, one that balances reinvesting for growth and innovation while returning capital to shareholders. We believe this approach positions us to create long-term shareholder value, support our agents, and maintain the financial strength that has always been a hallmark of eXp. With that, I'll turn over the call to Glenn, who will take us through his areas of focus at the World Holdings level before we open up the call to questions. Glenn?
Thanks, Jesse, and thanks, everyone, on stage today with me as well. We've got such an amazing leadership team, and we continue to build the most agent-centric real estate platform. We talk about being brokers, but really, it's a platform on the planet. Over the past 12 months, I've been primarily focused on helping the international team unblock and put things in place, and you'll probably even hear maybe even some of the Q&A on some of the countries that are literally in launch as we speak during this call and some of the things that are coming before the end of the year. So we've got a lot of good stuff happening. While I was involved with the international, and now, of course, Felix is leading the charge there, we really have a number of country-by-country playbooks in place. We launched, obviously, a number of new countries and supported them deeply. Now it is a virtuous flywheel of new countries opening, and we're super excited about that. There's a strong foundation in place. As a result, I'm shifting my focus over to another strategic platform, and that's one I've talked about on many past earnings calls, and that's SUCCESS Enterprises. As you know, SUCCESS is really the owner of the longest-running personal development brand that exists. It's the glue to the personal development industry. There's about a $50 billion per year industry, and it's growing rapidly, and we've had all of the major players in that space be a part of it. I'm super excited about that. We think about a lot of things. So I'm rejoining as Publisher and Managing Director of the enterprise. I'll be working on the whole ecosystem, but I'm going to be especially focused on what I'm passionate about, which is to bring an AI-driven reinvention to SUCCESS Plus. That's a community where we want that piece of SUCCESS Plus to be something where if you're interested in personal development, you'll want to have a SUCCESS Plus membership. We want to think of it almost in the context of Amazon Prime in that if you're interested in personal development, you'd be crazy not to have a SUCCESS Plus subscription and get access to all of the resources that we have there. We're talking about AI personalized coaching, courses, content, and digital libraries of both the classics and the magazines and lots of live Masterminds and other things. It’s a big industry. SUCCESS has played a significant role since its foundation 127 years ago. We're operating like a 127-year-old startup, with a lot of things going on in the back end. We've relaunched a SUCCESS FRAME space, similar to what we're doing here today in the auditorium, which is bringing the team together in a unique and engaging way. We’re excited about that, bringing a lot of the playbooks that we operated with in the formation of eXp and the repositioning of international last year and now doing that with SUCCESS. Over the next 90 days, I encourage you to jump into SUCCESS Plus, become a member. This is a shameless plug to help us generate a little more revenue. More importantly, observe the things that we're going to be doing over the next 90 days. There's a lot of cool stuff that we've already put into motion that we're going to be deploying in the SUCCESS Plus community. We'd love to support anybody who's an entrepreneur, solopreneur, interested in their career, or just becoming a better human being. For us, that’s really exciting, and I'm honored to be working on that over the next year or so. With that, let me turn it back over to Denise to facilitate our Q&A session. Thank you.
Sure. Thanks, Glenn. First, I'll kick it off with a question for you before we open up the call to questions from the audience and our analysts. Glenn, can you describe how agents specifically are leveraging success to grow their business?
Yes. Thanks, Denise, for the question. First, we bought the magazine almost 5 years ago, and we bought it because we were also the single biggest customer of SUCCESS magazine with our distribution of the magazine to all of our agents. That's because of our focus on personal development, sales skill training, and helping people with goal setting, etc. The magazine has represented that since the 1800s when it was first founded. We have built a lot of additional content and courses into SUCCESS Plus. All of our agents get it included with eXp, along with they continue to get the magazine and now a digital magazine. We've got one that's coming up, and I think our agents are going to get a lot of value from this next one. We have a lot of real estate content, and the team worked hard over the last couple of years to create a 16-module real estate training program by John. There's like 133 lessons in this. That's in addition to the amazing training we have inside eXp. This is a deep dive with one of the most recognized trainers in real estate that we worked with to build that entire value stack. We've got a lot of great stuff from prospecting to building your business, follow-up, sales meetings, coaching, training, and everything in between. We've launched our first GPT into that community. Actually, earlier today, we put an announcement out around some additional AI resources that are now part of that community. We’ve got several other projects launching in short order around that. You may have heard some music coming in. We're leveraging AI to build music directed at the personal development of human beings. Success begins with what you listen to, read, and pay attention to at the beginning of each and every day. It doesn’t matter where you're at in life. The more you focus on your purpose and mission, the less distracting all the other things that take place around you impact you. We want to help people focus on their true mission and purpose.
That's great. The next question is for Leo. Leo, what are your thoughts on the U.S. real estate market?
Yes. For those tracking what I've said to the media and/or on other calls going into 2025, I was cautiously optimistic with hopefully a 10% bump in transaction counts. Obviously, we've revised that to really mirror Fannie and the other macro forecasting for the back half of the year. I think we'd all call it a win if we were flat year-over-year as a country from a transaction count with a plus or minus variable. Post the significant stimulus bill adding $5 trillion of long-term national debt, we can comfortably assume that the 10-year treasury is not coming down. We don't expect much at all for interest rates to ease. It points back to the strength of our model and our ability to adjust, whether we have to streamline and adjust up or down, and have a scaled variable revenue expense to match. At this point, we're continuing to focus on production, meaning attracting the most productive agents and also moving up even in the markets where we're not as well known. That didn’t make the slide because we literally announced it a couple of hours ago, but Brett Zubrinsky from Southern California, an independent boutique luxury powerhouse. For context, 90 members in his brokerage did $750 million in sales on 370 units for 2024, with an average price point of north of $2 million. That’s higher than just about every luxury brokerage out there focusing on luxury and more than 4x our sales. Yesterday, we announced Chris Heller, the home seller, formerly the CEO of Keller Williams, a staple of San Diego real estate, moved to our brokerage as well. He consistently does over 100 units at a high price point in the San Diego market. Even as we see other companies retracting in the speed at which people are joining them, we’re continuing to win in segments that I’ve mentioned. Independents, team leaders, mega team leaders, and solo producers continue to choose us. It’s a testament, as some of the teams I mentioned in my conversation earlier, that we’re having conversations with every single company. Not one of these leaders is picking us in a vacuum; they’re interviewing all of our competitive models and ultimately choosing us.
Great. Thanks, Leo. Moving to Wendy. Wendy, can you talk about how important eXp's in-person events are for attracting and retaining our agents?
Yes, absolutely. We talk all the time that we are in a relationship business in real estate. That relationship business is part of how we connect and build culture with one another, as much as it is how we do that with our clients and with our buyers and sellers. Our events are the backbone of our culture. Hosting and attending those events helps us connect with one another, building those relationships. We're seeing referrals happen, collaborations on ideas that each of you take back to your individual businesses, and many other ways that businesses grow because of the in-person connections that happen at these events. They are an important part of how our overall value proposition comes to life through these in-person connections. One interesting statistic we track is that we allow our eXp agents to bring guests to events. A great way for someone considering joining eXp to experience our culture is to attend one of our events as a guest. When we track that, in 2024, 68% of those who came as guests ended up joining us as agents. So bringing a guest to an eXp event is a tremendous attraction opportunity. For any of you listening who are thinking of our next event, our eXpCon event in Miami coming up in October is a great attraction opportunity.
Great. Thanks, Wendy. And one for Felix. Felix, what's your main focus managing international, outside of the business and financial metrics we usually see at earnings?
Yes. Thanks, Denise. Our main focus internationally beyond those metrics has been to grow a base of productive agents and ensure they have everything they need, both at their local level and on a global scale, to be successful and grow their business. We've taken a look throughout the entire portfolio and implemented two-year minimum requirements to join internationally. We've also taken the stance of offboarding agents who are unproductive or not aligned with the business model. This has led to significant results and growth seen from bringing in top talent. Top talent continues to attract like-minded individuals. A real-time update I’m excited to share with you is that this week, we've officially onboarded our first cohort of agents in Japan, which is extremely exciting. These agents are live in the system and already have transactions flowing through just days after onboarding. It’s a testament to the strength of our model and our local leadership team and past country launches like Peru, Turkey, and Ecuador. These new markets have been our most successful launches because of the amount of transactions we’re accessing from day one and the productive agents joining. We are being intentional about our growth. It’s not just about growth for the sake of being the largest; it’s about the right growth and aligning with our mission and vision to create the most agent-centric real estate brokerage around the world.
Thanks, Felix. Jesse, the last question for you. Can you discuss what's impacting the second quarter gross margin and maybe where you see margins going longer term?
Yes. Thank you for the question, Denise. As Leo mentioned in his remarks, we saw a 4% year-over-year increase in sales transactions in the second quarter. When that happens, we have more productive agents, and the arithmetic suggests that more agents will cap. There's a couple of things here to unpack. First, this is core to our model, right? It's one of the original differentiators that Glenn brought to the space, the ability to cap, which is something we celebrate. It creates agent retention and stickiness because of this value proposition in our model that doesn't exist across the industry. While it brings down the margin percentage, it's actually something we welcome. As for the longer-term view, we do have affiliate programs, and Wendy spoke to several of them. They contribute modest revenue today, but we expect them to grow over time. When macroeconomics begin to improve and the overall real estate industry grows, we expect these programs to drive incremental margin over time. That's where we land with the impacts to capping on margin; something we expect and celebrate alongside our agents. We think about margin as we consider the different affiliate programs and things like that we can add over time.
Got it. Thanks, Jesse. Now I'll open the call up to questions. First, I'll start with our analysts joining us on the stage here. Tom White at D.A. Davidson. If you have a question, go ahead.
Questions and answers
A couple, if I could. I'm tempted to start on agent count just because it grew sequentially for the first time in a while. I actually wanted to ask about operating expenses. I think last quarter, you talked about some opportunities for efficiencies given the housing market backdrop. OpEx grew 20% in the quarter and ticked up quite a bit sequentially. Is there anything onetime in that second quarter OpEx number? Can you help us think or quantify what OpEx should look like over the next several quarters? I have a follow-up.
Sure. We did have some one-time expenses in Q2, and we call that out in the 10-Q. High-level, we incurred approximately $6 million in expenses related to strategic investments and some minor operations. These actions were part of a broader effort that we spoke about in Q1, continuing to execute in Q2 to realign the company's cost structure with the current macroeconomic environment where our revenues stand today. The remainder of that 20% was driven by some of the expenses we saw creeping up that we spoke to in Q1. Notably, we had one-time expenses of $6 million, and we do expect favorable operating expenses in the back half of the year, which you should see reflected in our unit economics.
Okay. With the $6 million, I don't see that added back to adjusted EBITDA. Is that correct?
That is correct.
Okay. Can you discuss whether meaningful gross margin or operating margin expansion is a goal of the management team? How significant of a priority is margin expansion now?
Sure, I have some thoughts on that. I'd ask Leo or Glenn to start off with their business perspective on opportunities there.
There has always been this question of margin percentage, and we prefer to focus on gross margin as an aggregate number because we think that’s the better number to focus on. Some of our agents cap, which pushes our margin percentage down even though our gross margins grow over time. We're seeing a lot of efficiencies related to transaction management internally. What doesn't show is some of the investments we're making to ensure we continue to be the most attractive real estate brokerage around. We’re still working on efficiencies and some of that will be evident in international. We’re investing significantly there. Leo, any other comments?
Yes, Tom. First, on your call-out about sequential growth quarter-over-quarter, that is the result of the effort, and you were correct; we scrambled to ensure we hadn't accidentally published anything. It’s the result of our investment in training, education, systems, and processes as we see the company as a total platform. The downturn we’re experiencing is not due to a financial crisis like 2008, where prices are coming down; instead, we’re in a downturn from a transactional standpoint. We’re seeing this as an opportunity to expand our value proposition while continuing to add top-performing teams. I believe this will lead to positive results in the future, but we are looking at how to capitalize on this moment and continue expanding our value proposition.
Great, I appreciate that. Can you update us on how you view your stock as part of that value proposition for retaining or attracting agents? How important is it for the stock to increase through that lens?
Glenn, do you want to take that one? Or should I?
Sure, I’ll take it. We know it plays a role, but it's not the primary reason agents join us. Most agents remain for the full basket of services, recognizing that stock prices will fluctuate. We have a good percentage of our agents participating in the stock comp plan even when the stock was down. They view the long game as the right way to play. While we still have no plans to remove the stock component, it has matured to the point where eXp stands on its own merits. We have no plans to remove it; it continues to help align agents with us as a management team and the values that shareholders look for.
And Matt Filek at William Blair, you're also joining us on stage. If you have a question, you can go ahead.
Thank you, Denise. This is Matt Filek on for Stephen Sheldon. On the international front, you've launched in Japan, and you're aiming for 50,000 international agents by 2030. Given that, can you remind us of the current international agent count and your expected cadence for adding those new agents over the next 5 years as you work towards that target?
Yes, I’m happy to answer that. We are looking at growth through a lens of productivity among agents. When assessing different markets, we found that our new country playbook effectively scales with different regulations and conditions. Our model can adapt to serve agents locally when partnered with strong leadership with an emphasis on health productivity. As of right now, international is approximately at 5,000 agents, and we continue to grow. Over the next 5 years, we will remain focused on our mission of improving our business through adding productive agents while scaling in countries with strong leadership and demand, as we have done over the past 12 months.
Is there a certain number for international agent count that you think would allow international as a whole to be profitable?
When we look at our growth target of 50 countries by 2030, we don't expect international to show net profitability for at least 2-3 years. We do have internal returns on several markets. The U.K. has publicly filed financials; you can track some of our countries and see where they sit. We have countries turning the corner. We will continue to invest in growth until we find we can no longer invest, which will lead to profitability in that segment. As we identify more green shoot opportunities, we’ll keep investing even if they don't show immediate net income. We see the gross revenue and gross profit continuing to rise.
That's helpful, Glenn. Lastly, a quick follow-up for Jesse. I appreciate the added detail on the GAAP gross margins in Q2. Should we expect GAAP gross margins to stay in the low 7% range in the second half of the year as these productive agents continue to cap?
While we generally don't provide forward guidance, I think that's a safe bet. We track somewhat to the industry, and that is the direction Fannie is currently forecasting for the back half of the year. We expect to trend at a similar pattern.
We received a few questions from the audience. One was on the gross margin, which we've already addressed. There were a couple of other questions. Glenn, could you confirm what the cost is of a subscription to SUCCESS? And Wendy, what’s the cost of joining Land & Ranch?
Yes. We are bringing back magazine subscriptions. There was a decision last year to remove it and make it just a SUCCESS Plus benefit. We see data indicating that individuals enjoy subscribing to physical magazines, creating a slightly growing segment. We believe personal development fits that narrative well. The magazine subscription will be around $20 a year. SUCCESS Plus is $25 per month, which includes an active community where I get involved directly. My goal is to grow that community to 50,000 members over time, targeting a $12 million run rate business with a solid gross margin. We're still identifying how to drive that growth, and we think with new AI tools and eXp experience, there’s a significant opportunity for viral growth as we figure out how to drive that through our trusted brand.
Absolutely. The Land & Ranch program has various joining options, which you can find at landandranch.exprealty.com. Generally, it ranges between $2,000 and $2,500, which includes certification and training on how to get started. There are sometimes specials available, but generally, you're looking at that price range to get started.
Great. Thank you. That concludes our question portion of the call. Thank you, everyone, for joining. Please stay connected by visiting us at expworldholdings.com for the latest updates on eXp news, results, and events. Additionally, you'll find a recording of this call and our latest investor presentation on the Investors section of the site. This concludes the second quarter 2025 earnings fireside chat.