Stock Story -
Real estate technology company eXp World (NASDAQ:EXPI) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 5.1% year on year to $1.30 billion. It made a GAAP profit of $0.08 per share, improving from its profit of $0.06 per share in the same quarter last year.
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eXp World (EXPI) Q2 CY2024 Highlights:
- Revenue: $1.30 billion vs analyst estimates of $1.30 billion (in line)
- EPS: $0.08 vs analyst expectations of $0.08 (in line)
- Gross Margin (GAAP): 7.5%, down from 7.8% in the same quarter last year
- Free Cash Flow of $69.7 million, up 17.5% from the previous quarter
- Agents and Brokers: 87,111, down 1,137 year on year
- Market Capitalization: $2.20 billion
Real Estate ServicesTechnology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Luckily, eXp World's sales grew at an incredible 43.4% compounded annual growth rate over the last five years. This shows it expanded quickly, a useful starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. eXp World's recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.9% over the last two years.
eXp World also discloses its number of agents and brokers, which reached 87,111 in the latest quarter. Over the last two years, eXp World's agents and brokers averaged 9.1% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company's monetization has fallen.
This quarter, eXp World grew its revenue by 5.1% year on year, and its $1.30 billion of revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 5.5% over the next 12 months.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
eXp World has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.3%, lousy for a consumer discretionary business.
eXp World's free cash flow clocked in at $69.7 million in Q2, equivalent to a 5.4% margin. The company's cash profitability regressed as it was 2.4 percentage points lower than in the same quarter last year, but it's still above its two-year average. We wouldn't read too much into this quarter's decline because investment needs can be seasonal, leading to short-term swings. Long-term trends carry greater meaning.
Key Takeaways from eXp World's Q2 Results Revenue and EPS were both roughly in line, meaning this quarter didn't have many surprises. That can be a good thing, showing that eXp World is on track. The stock traded up 1.5% to $14.60 immediately after reporting.
