Hi, everyone. Welcome to the VirBELA Open Campus. Thank you for joining us for today’s question-and-answer session with eXp World Holdings leadership on the results of our Second Quarter 2020. Joining us today are CEO, Glenn Sanford; our CFO, Jeff Whiteside; John Campbell, Managing Director, Stephens; and our special guest, Executive Vice President of International Growth, Michael Valdes. Today we’re going to have a Q&A session, which will be hosted and led by John Campbell. And then at the end, we will likely have some time for some open question and answers from the audience. You’re welcome also to submit questions to our Slido session with the #expi. I’d like to direct your attention to the left screen that has our statement of regarding forward-looking statements. Anything that we state today regarding forward-looking information is made as of this date and we undertake no obligation to update those statements going forward. And with that I’d like to welcome or turn it over to John Campbell, who’ll be your host for the first part of question and answers. John?

Yes. Thanks, RJ. So, yes, absolute pleasure to be here today. It’s interesting to be able to see the world and VirBELA hosted World and it’s been a pleasure watching the performance of late. I think you guys have now beat the top line expectations, I think, 10 straight quarters by about 10% on average. So, really good results. Obviously, the stock price has reacted positively of late. But I was talking to investors that day, I just think if you look at the stock chart over the last couple of months, it’s just misleading. It looks like the stock has really run. It might have kind of already played out. But if you look at the performance you guys have put up, if you look at other companies out there, like a Redfin, Redfin has done well. You’ve got investor appetite for U.S. housing because things are picking up. You’ve got investor appetite even more around anything that’s kind of housing tech disruptive, right? And so, I think you guys fit the mold obviously for both of those. And when I was talking to this investor, we were just running a little bit of math. If you take the Redfin valuation, right, if you take Redfin and you back out the RedfinNow or the iBuying revenue, which kind of get apples to apples to you guys, if you put that same multiple on the EXPI revenue, it’s a $125 stock. So, I’m sure everybody up here on stage and everybody in the audience would love to see that, but I just think that shows you the magnitude of kind of what – any kind of tech angle kind of being included in your story can actually get you from Wall Street. And you guys doing the Showcase IDX acquisition and some of the other themes, I think it’s pretty interesting at this point. But enough about that. I just – again, it’s a pleasure to be here. And Glenn and Jeff, I wanted to run through a couple of different things, but just kind of starting on housing, best as you guys can see it, kind of how are trends through July and the early stages of August? Are you still seeing that kind of really – kind of big bounce in housing and then anything you can call out kind of on the price appreciation side?

Yes. Thanks, John, for being here as well. Obviously, we had – given the backdrop – a really strong quarter. Made some pivots early – actually late in Q1 just in terms of rightsizing and that sort of put us in a good position to really show the power of the eXp model in terms of sort of the way that we’ve always sort of looked at it from a sort of a net-net profitability perspective. But when we look at July, August, July was really strong for us. August is looking really strong for us. We’re continuing to see a lot of momentum, whether it be pent-up demand or what have you. Obviously, with our agent growth, continuing to grow at a net 1,000 plus agents a month. And our agents are active local entrepreneurs on the ground, working with buyers and sellers. They’re continuing to drum up that business. And so, for us, we are continuing to see lots of positive trends continuing to go in the market.

And, John, just to add to that, looking back at the second quarter, we – Glenn and I were talking at the beginning of March and we’re like, whoa, I mean, this could be ugly. And what actually happened was we saw people pause and that kind of reflected in our May numbers. And so, May was down significantly. It wasn’t down. It was still up year-over-year. But from a growth standpoint, we did 73% growth in Q1. So, May was up, but it wasn’t up a lot. And then, it picked up again in June. One comment I’d make right off the bat is, I mean, the resiliency of our agents and the company has just been phenomenal. It really is. And after we figured out what was going on for a little while in March, everybody started talking about how we were built for this. We’re going to grow through this. And at the end of the day, we did. So, it was a great result in a really tough quarter.

Yes, absolutely. And so, looking out from here, the inventory side is clearly still challenged. I would think as prices keep picking up, as we kind of get out of, to some extent, some of the pandemic pressure, the inventory probably built again. But we’ll see. But on the buyer side, the demand has just been substantial. So, as best as you guys can see, what do you think is driving that? Clearly, lower rates, affordability helps. But how much of an impact has the pandemic been where people feel like they have to get out of the situation, have to move, any kind of rough sense for the impact from that as well?

Yes. I think the reality is most buyers are payment buyers. So, the reality is those low interest rates definitely drive the ability to make a move. But the other piece of it is, if you can live anywhere, would you live where you’re living now and with everybody sort of moving toward this idea, at least for the foreseeable future, that if you can do remote work, you’re going to be able to do that. And, of course, you’ve got a lot of companies announcing, whether it be Twitter, Zillow, Google just announced they’re fully remote till at least mid-next year and. And so, this idea of being able to live somewhere where you have freedom and the ability to sort of move around is definitely a real backdrop. And so, you’d just have a lot of people trying to get to where they ultimately would like to live because they now are given permission to work from anywhere. So, we’re definitely seeing that. And of course, if people have the ability, they’re taking advantage of it. And I think that’s driving a large amount of demand. But I think the other piece of it is, is that I think that that demand doesn’t really go away in the short run, for sure, because I think we’re making a fundamental shift in the way that people do think about where they work and where they live. So, I think there is a – there’s certainly a short-term impact where people just want to get out of the big cities, but then there is the longer-term implications of what does the housing market look like with remote work being more the norm.

And, John, I’d also add that, in our particular case, the agent growth rate of 54% year-over-year is a lot different than other companies. So, our volume is going to go up based on the growth rate. And we’ve also seen, over the first quarter, Q1 to Q2, our retention rate has also gone up. So, that’s very favorable for our volume as we look forward into the year.

Yes, absolutely. It sounds like you buy into the kind of the fervor around the urban sprawl, if you will, and kind of moving out of the city center. And so, it sounds like that’s – you’re thinking that’s somewhat of a sustainable trend. And I guess as people can work remote, you don’t have to worry as much about the commute. So, that’s encouraging. Before we get off kind of the broader housing market, any kind of markets that you’d call out as being particularly strong or markets that have been weak that might be balancing? It seems like a lot of the stats we see, the West Coast was pretty challenged, but it sounds like the sequential move of late has been really good. So, any kind of call-outs across the U.S.?

Not really. The reality is that we’re kind of seeing pretty – other than when there was the lockdown and then real estate wasn’t considered an essential service for a bit of time, those really put a crimp on the ability to move. But given that real estate sort of fills a different need in people’s minds, we are seeing this take place across all markets. The thing I’m – the one thing I am concerned about, and this is just me, thinking about what happens to is – is there a spiral as people move out of the city and as those tax dollars move out of the city, does that create even more of a need for people to move out of the city? I think there could be some sort of a fact that just continues to iterate there. Not because of people wanting to move fundamentally, but because the cities may, in fact, be less desirable just because with the restaurants closing, with people having moved out, with businesses potentially having to shut down, and then that does also mean that in more suburban areas and rural areas, you’re going to see all those things pick up. So, I think you’re going to see that with the exodus – that exodus might predict or have more exodus follow-on just as a result of what takes place in those local markets.

Yes. That makes a lot of sense. So, just kind of moving on, shifting gears over to the core business. Obviously, the Asian growth has just been phenomenal despite the pandemic. I guess that’s the benefit of being – of having your virtual world. You can still do a lot of the recruiting despite some lockdown orders. But if you could talk about kind of the strength of the agent growth in this quarter, kind of what came from the U.S., what was international? And then, I think you said about – on average, you guys are doing about a 1,000 new agents a month. Is that pretty smooth or is that – can that be lumpy from month to month. Just any kind of call-outs there.

Yes, it’s not very lumpy at all. We made some adjustments back in 2018 that created a little bit of a slowdown. We had to work through a little bit of that just to normalize a little bit of the way that we’re working with agent fees. And 2019, we made some other adjustments. But other than some hiccups really mid-2017, 2018, it’s been really, really smooth, really, really predictable. In fact, what we’ve seen here of late is that – and I think it’s because of the way that we’re set up as an organization – we’re seeing higher retention, less attrition on the model and that’s because people don’t have to worry about whether eXp is going to be – have their doors open next month, no matter where they’re at in the country. So, they’re feeling good about staying here where I think there is a little bit of risk in what’s going to happen to my local bricks and mortar base brokerage. So, we’re continuing to see the agent value proposition. The way we’ve approached things like agent compensation, revenue share, equity, all of those resonating really well and obviously, with what’s been going on even recently. What we’ve seen in the past is that when we’ve seen the stock move up, we’ve also seen that being somewhat of a predictor of agents joining us because a lot of agents pay attention to the equity side of the equation, which is not something that’s available at most other brokerages.

And, John, in June, we actually had our second largest net month of agents joining the company. And just to add to Glenn’s comment too, what we are seeing, we’re seeing some very successful producers join the company because they want – they want continuous business, continuous brokerage support. And so, that’s been favorable for us also.

Yes. That’s a really good point. And that kind of draws in a question that I think is worth addressing. The quarter was fantastic. I don’t think there’s really much we can poke holes out of. One of the things some people have asked about is, if you look at – one of your important metrics being kind of agent productivity. So, if you look at the number of transactions by the number of agents you have, I think that’s clearly going to be influenced by the end market, right? By COVID and kind of the impact from the pandemic. But also – and the reason I ask the question about how smooth those Asian adds are, if you add a lot toward the end of the quarter, that’s clearly going to influence that number, right, because you would end the quarter with higher agents, but they’ve only been there a month, right? It sounds like that June was a little bit of a pop. But if you guys can walk through kind of the moving parts around transactions rate and why that was down? I think it was down 21% and kind of what drove that.

Yes, the reality is – as we go back to April, May, even a little bit of the early June, the reality is that there was a lot of slowdown because people didn’t know which way things were going. So, it really was less to do with agent productivity, but just consumers sort of putting the brakes on their decisions, which obviously they loosened up their pocketbooks to purchase homes toward the end of May, June and now July/August. Looking really, really strong. So, that definitely impacted agent productivity. The other piece, and this is something that we’ve had to sort of, I guess, battle with from a market perception, is that because we do have so many new agents joining us during the quarter, during the year, it’s sometimes hard to see our true agent productivity inside of that mix. And so, our agents are – we’ve got some of the most productive agents. We’ve got some of the top teams in the country that are here with us. We’ve got a robust training platform headed up by a gentleman named Kirtus Dixon. And just a number of people on the education front to help agents be more productive. And then, we’ve got so many mentors, whether they’re part of our mentor community or their productive agents, that are helping grow the company and that are helping our agents, again, be more productive because we really created an alignment around how all of this sort of fits together. So, we’ve got a lot of training coming from so many different parts of the business that agents are becoming, I think, more productive faster in eXp than they are in a lot of other models.

And, John, to Glenn’s point, the agent growth was 54%. Productivity did go down and we saw that pretty much hit us in May. But at the same time, we saw our average sale price go up about 4%, commission went up 5%, volume up 26% and GCI up 33%. So, I think a lot of the productivity just had to do with that pause in the economy that was reflected in the May numbers. But as we look out into Q3 and Q4, we see that coming back.

Yes, absolutely. And just thinking about your agents, I don’t know if it’s anecdotal or what, but how are you – how do you see agents respond to the pandemic? What kind of creativity were you seeing out there? And then, is there any kind of lingering impact? I would imagine, a lot of your competitors, more traditional guys, are probably going to reconsider the whole concept of office space. So, they might look a lot more like you guys in the future. But any kind of call-outs around the pandemic and kind of how that’s affecting you guys?

Yes. So, initially, it was pretty nerve racking, obviously, in March, April, May in terms of just understanding what might be going on. And that was agents, that was us as a leadership team. It was our directors. It was a lot of folks that were pretty nervous as to what was taking place. But at the same time, our agents, they’re micro entrepreneurs. And fortunately, because of the support network that eXp has, we were able to lean in on education, we opened up our education curriculum, not just to eXp, but to literally agents from the industry. So, we used that as both a productivity tool, but also an agent attraction tool. And so, we leaned in on education, mentorship. But then, agents then took it on themselves to figure out how to be creative in their local markets, whether it be how do we approach taking photos of homes. We have agents – and I’ve talked to a number of them who literally didn’t actually go to the home to actually list the home because whether the seller was concerned, needed to sell the home and so they literally had the seller take photos and arrange a lot of the types of things that they would normally have done in-person. And so, we both saw lots and lots of creativity and we have lots of lots of sharing around what those creative approaches were, and that gave other agents both the awareness and the permission to go and approach the business a little bit differently than they might have had they not had this support network.

And, John, I would add, I’m relatively new to the business, but I was absolutely blown away by how strong the agent leadership, the leadership teams, the agents themselves – and just like, right away, within about 5 days when this all started to hit, it was coming out like we’re built for this. We’re going to get this, we’re going to grow through this and the attitude and the confidence was unbelievable. It still is.

Yes. That’s great to hear. Yes. So, before you move – I definitely want to talk about international and maybe even the commercial opportunity. But as you guys think about just overall agent count, and this is obviously outside the U.S., just total agent count, any sense for kind of near-term, medium term, maybe long-term goals? Glenn, I remember talking to you back in early 2018 and you were pretty jazzed up about the 20,000 agent mark. And I remember thinking it was possible, but that would be pretty tough. So, here you guys sit at 32,000 agents. So, you guys have done a phenomenal job. Just any kind of sense for the type of momentum you think you can continue on with and what the maybe longer-term aspirational goal is?

Yes. So, first comment is, we are in so much better a position than we were when we first started talking. Back probably 2017, 2018, we’re going through high growth really from about early 2015 on. We went into the super high growth mode actually end of 2015, early 2016. I think February 29, 2016, we had 1,000 agents. And so, you think about 2016, 2017, 2018, 2019, 2020, that just was just rocket ship growth. And a lot of our systems were breaking in real-time back during the high growth phase. So, now, we’ve got a really good handle on systems infrastructure, people, how to scale domestically and, of course, Mike will talk a little bit about internationally. But when we started to look at the fact that we now actually do have an infrastructure that scales, I think that now it’s not a matter of if, it’s really now a matter of how many agents will this appeal to because we can, in fact, onboard them, help them be successful, help them get into production, help them increase their production, and then provide the support that’s necessary. So, when we look at that, then we think about what could we grow to. And the numbers are pretty large. We now start to think about in the multi hundreds of thousands of agents just in the U.S. alone, we think, that eXp will appeal to over time and that may take 5, 10 years to get into the multi-hundred thousand range. But we think that 100,000, I think, is almost fait accompli in the next few years. But we’re now starting to think about what does it look like if we could onboard and actually have a company that has just domestically 200,000, 300,000 agents in the next 10 years. And then internationally. I’ll let Michael talk to that, but it’s a huge opportunity to go even that large or larger internationally.

And, John, just before Michael goes, we’ve really added some great talent to the company to scale. So, the people we’ve brought on over the last year or so from a leadership perspective have built global businesses and have scaled at this kind of level. So, great existing team and we’ve added some great leaders to the company to be able to scale, and that’s kind of what’s happening right now and we’re handling it very well.

Yes, absolutely. So, feels like a success – kind of a get success, for sure. So, yes, on the international side, if you guys want to bring Michael up, if you want to run through kind of what you guys have in store. Absolutely. Thank you, John. So, while we were all sitting here, actually, we went live with our press release announcing the five countries that we intend to open between now and the end of this calendar year, which includes South Africa, Mexico, Portugal, France and India. So, it’s really very exciting. We picked these countries particularly because we were looking at what our current footprint is with Canada, the United Kingdom and Australia, and really wanted to have an overall picture, what would be strategic for us. And it’s been really interesting. And John, I’ve been taking notes with some of your questions. But when we were talking about the agent growth and reasons around the pandemic, we have to remember that its’ a global pandemic. And as we’ve been telling the eXp story around the world, we have been getting incredible amount of interest as people are understanding our technology and business model. So, it is incredibly exciting to see what our growth will be globally from here on in.

Maybe, Michael, a little bit of your background for people that might not know you?

Yes, absolutely. Thank you, Jeff. So, I was Senior Vice President of Realogy for the last 15 years, overseeing all of our international presence for those six brands that Realogy represented, which were Sotheby’s International Realty, Coldwell Banker, Century 21, ERA, Better Homes & Gardens and Corcoran. And so, collectively, I was overseeing 113 countries for Realogy and that was collectively roughly about 300,000 agents. And so, that was the background that I brought over to eXp. And when Glenn and Jason and Jeff and I were talking and sitting and trying to see what this model would look like and translate to on a very global scale, it was a very exciting conversation. And everything that we have gotten has been so incredibly positive as far as initial feedback – and we’re very excited about the numbers that Glenn just alluded to. I think that we’re going to see some fantastic growth just in these five countries that we’ve just announced as of half an hour ago.

Yes, that’s really good. Encouraging stuff for you guys. I want to touch on – I don’t know to what extent you can, but can you talk about kind of the addressable market for agents? Here in the U.S., it’s pretty clear cut, right? There is, I guess, a little over 1.4 million agents just in the NAR. I think there’s a good bit more than that if you think about overall agents. But any sense for kind of what it looks like international or maybe just to those five countries, if you can kind of frame it up?

Absolutely. You start looking at something where it’s even – India. India has about the same number of estate agents than we do here at NAR. They have over 1 million agents. This is, remember, a country with 1.3 billion people. Everything that we’re looking at, we were looking at very strategically for what we were looking at. AMPI is the NAR of Mexico. They have a very strong membership there. 126 million population in Mexico. Home prices have gone up 10% just this year alone. These are all strategic places that we were looking at. When we look at France, France has 67 million population. And France is actually one of those markets where even during the pent-up demand that we’re talking about, year-over-year, France has seen an 8% increase in some cities that are key cities, especially Paris and others in the south of France. So, for us, looking at this, these are incredible markets with incredible potential for us. So, when we’re looking at what the overall United States market is, those numbers are just incredible multiples of that. When you start looking at what the potential is with the core business of what we can do, based on what the five countries we selected thus far for this year, it really is incredible growth potential for us and for our brands. You have to remember that being an agent-centric model, when you’re coming into these markets in these areas, you have very entrepreneurial individuals who are just seeing an opportunity of what this is and being able to have some great desire to be a part of this and part of the story. And that’s what we’ve been seeing. We’ve been having conversations with very strategic influencers in each of these countries and we have a very strong potential and a strong demand for all the countries that we’ve been speaking about. And we’re very excited about what we’re going to be doing as we rollout each one of these.

Yes, absolutely. When you think about overseas, who are you taking agents from? Is it mostly homegrown stuff? I know that you’ve got obviously Realogy, you’ve got a couple of different larger kind of U.S.-based brokerages that are sprawling out international, but who do you typically compete against in those markets?

I would say that when you start presenting this model and you start looking at – for example, let’s take the United Kingdom as a model. You had the United Kingdom where – this was a model where a lot of people were not used to a model such as this where somebody is really empowering the agent to be the brand that then powers them through eXp with the tools and the global technology, et cetera. So, in a market like that, we have actually now grown very quickly. And it’s a market that had to adapt and adopt to what we were doing because most people were used to a small stipend and a very small percentage of the commission, somewhere between 5% and 10%. So, when we presented a much stronger model there, there was actually very strong adoption. And I think that, when you start looking at it, I strongly believe, even from the 15 years that I spent at another competitor, with some other brands, I’m looking at this as a very unique model, a model where it really does stand in its own class and it stands alone. And I think that as you start presenting this model in key markets, that is something that is – people are coming to us. People are coming to us and starting to hear about this through the grapevine. And we’re really just tackling a lot of different inquiries that are coming in, not only for these five countries, which I’m sure those phone calls will go up now that we’ve made it public, but there is a sense that, in my opinion, this is a very unique model that really does stand on its own merits.

Absolutely. One more from me. I don’t know if the team has more questions for you. But looking at this from the Wall Street angle and from the stock, how serious are you guys about this push? Have you built a full team around this? Are you guys – is this kind of somewhat of a stand up at this point? Or have you guys really put the capital toward this and have you been working on for it the last several months?

We have indeed been working on it, John. And that’s a really great question and thank you for that. We are actually setting up our eXp corporations in every country that we’ve mentioned. So, it will be that we will be a local company in each one of these. We have started hiring staff in each one of these countries as well. So, we will start rolling all of this out, but we have a complete infrastructure that we’re looking at. As we start announcing other things, we will be looking at regional teams, so that we can have some consolidation of back office and things of that nature. So, the more that we’re looking at, we can envision having, for example, an EMEA team, an APAC team, a CALA team, et cetera. So, that is the overall vision of what we’re doing. But there is absolutely the infrastructure in place for what this growth is. This is where 15 years of my experience is. We’re bringing it to eXp and it’s a much better mousetrap. It’s a much better model and it’s something that has been incredibly embraced internationally from everything that we’ve seen early on. So, really exciting times.

Do you guys have any more questions for Mike?

I don’t think so.

We work with them every day. I’ll give you an – this is an example of the company and the attitude and the confidence of the company. So, when Michael, we were talking about expanding international, a lot of people would be, no, you don’t want to do that now, everything is shut down. But we looked at this as a huge opportunity for the future and we feel it’s going to be a real material part of our company.

Absolutely. It seems like your model clearly kind of meshes well with the ability to kind of quickly scale international and have a presence, for sure.

And that’s actually – so let me add a point there. So, we’re going to be opening in these five countries this year. There is not one of our employees or U.S. agents, North American agents, that has stepped foot in the country for obvious reasons. So, the way we work and the model we have, we can scale quickly on this platform. And it’s the platform that’s allowing us to do that. And then, it’s the agent leadership that’s going to take us into all these countries and build this.

Absolutely. Okay. Let’s get a little bit into the P&L and the financials. I know this could be boring to some in the audience. But you guys made a lot of changes. Your gross margins – from an investors’ perspective, your revenue was clearly always there, but your gross margins were going the other way. And I think that largely acted as a somewhat of a lid on the stock and the multiple. And so, as you guys made some changes, I don’t know if you met somewhat of a disgruntled agent base that didn’t like some of the changes. But I think at the end of the day, it all comes out in the wash. And I think you’ve seen the stock price react, right? And so, you give up a little bit on how much of a discount you can get on your stock that’s issued and whatnot, but it clearly pays off multiple times in the stock So, some positive changes. Jeff, if you can, just maybe walk through some of those changes, what changed the trajectory of gross margin? How did it start to follow the revenue?

Yes. As we’ve talked about before, John, we have a commitment to our agents to share half the company dollar for revenue share to grow the company. And that kind of went the other way. It started last year. So, we got that back to that 15%. And our goal as a company has been to get to the 10% gross margin. And that’s one of the biggest factors. And we got that in place. That makes a lot of sense now. And I’d say the second thing – second big thing we’ve done and it kind of goes down to profitability more than gross margin is that, from an SG&A standpoint, for instance, we had as a percentage of revenue in Q2 of 2019, it was 9.1%. In 2020, it was 7.4%. On a year-to-date basis in 2020, it’s 8.6%. And it’s 10.6% in 2019. So, we get benefit from both the – just tweaking to get back to where we always want it to be, and that’s from Glenn’s vision, that’s where we needed to be. And as you know, we invest a lot into the growth of the company. So, getting to the 10% margin, controlling the costs – and I’ll tell you right now. It has benefited us from a net income, a GAAP net income basis. But at the same time, we’re starting to invest heavily again in the company, in the staff, in the teams and in growth. So, we’re not going to sacrifice any kind of growth in investment for profitability. But the way that we have the percentages right now, we can see that continuing into the future.

Another big one too, as I point it out every time, but we have zero debt on the balance sheet. And again, we had a very strong cash flow quarter and we expect that to continue. And at the same time, we are doing a stock buyback to offset dilution. And so, these – the real positive cash flow numbers that you’ve seen in the quarter also include a stock buyback. And so, I think getting – that 10% margin is where we want to be. That’s our goal. And we can see that and holding that going forward.

Yes, absolutely. Very, very cash generative model. That’s for sure. I think you guys doubled your cash position versus last year despite the buybacks, despite you sprinkled in some M&A and all that stuff. So, very good results. No doubt. And then, last one on gross margin. Its 10% kind of where you want it to get to? And then, you kind of – this is the range that we should expect over time or near term, maybe medium-term, is there a goal for gross margins? I know VirBELA continues to grow. That’s a really high margin business that will be additive for you guys. But any kind of sense for where we should expect gross margins over kind of near to medium term?

Yes. As we talk about the near term, most of the revenue is still coming from the realty business and our goal is to get to and maintain about a 10% gross margin, so that you can – that’s a number that you can pretty much model as we go forward, as long as the realty business – and then, down the road, it’s going to be a different business. As you know, the gross margins in the software businesses like VirBELA are a lot higher. And as that gets more material, that will change the mix. But at this point in time, 10% is what we’re shooting for and we feel good about that.

Yes. Okay. Makes sense. And then, you guys have some really interesting things that you’re investing in that – still pre-pressing at this point. You’ve got international, you’ve got commercial, you guys talked about the opportunity to build that out. You’ve got the Showcase IDX. You’ve got some [indiscernible] VirBELA. Clearly, really good market opportunity there. But outside of the stock-based compensation, outside of the stock options, how should we think about the kind of operating costs outside of cost of revenue, just the operating cost? How should we think about that kind of growing over the next couple of quarters?

So, I think that we did make some – we made some adjustments back at the beginning of the year to make sure that the company got through whatever crisis was going to happen. So, we did that. So, I would say that, a metric that we’re looking at is SG&A as a percentage of revenue. And as you can see, it’s 7.4% in the quarter. We expect that to go up, all right? In 2019 year-to-date, it was 10.6%. So it will probably be somewhere north of 9-percent-ish. But at the same time, we’re not going to sacrifice – we’re going to invest in the company and we’re going to support our agents and we’re going to grow this business because, as you’ve heard so far, we’ve got a huge runway for growth. So, we’re not – we’re going to invest and we’ve always invested ahead of the curve to make sure we can support our agents and we’re going to continue to do that. But a metric would be somewhere around 9% to 10% is what we’d be spending. And, overall, I think that – we’re not holding back at all in the investment.

Yes, makes sense. So, it stands right now, the revenue model for you guys is pretty simple. You add agents, agents do transactions, you get revenue. But you guys have launched a couple of ancillary services. And some of the competitors out there, it seems like that the attach rate, everything is starting to pick up, where consumers are starting to kind of do the full suite of services. What drove that decision for you guys? How is that faring? And how meaningful can that be over time?

I’ll jump in on that. For the last – actually last four months, really since mid-March, I was highly involved with the VirBELA team, getting them stood up and we’ll talk a little bit about that, I think, probably in a little bit. And certainly, we’ve scaled back. We see affiliate services to be probably the most meaningful expansion to gross margin as a company. And so, I’ve now been shifting some of my personal focus from the VirBELA side, which is now going really well, to working with the team on some of the affiliate services. And specifically, the one that I’m interested in the shorter run is on the title and escrow side because I think there’s a lot of value that we can provide consumers and agents in closing transactions and those types of things. So we think that that’s a big one. We also think that express offers is our effectively iBuyer platform. But in addition to being an iBuyer platform, which we have probably more institutional and/or buyers in markets than some of the big companies that – we’ll say the Zillows, the Opendoors and others. But the other side is we haven’t worked as much on the demand side of actually finding sellers to submit properties in there. But we’re in the process of ramping up that for two reasons. One, it’s a great lead generation tool for agents. And so, where we see companies like, let’s say, Zillow using the iBuyer as a lead gen tool to actually then sell leads to agents, we see it as an opportunity for agents to actually go and use it as a lead-gen tool to generate leads at a much lower cost to them individually than they could get through any other source. And so, we’ve got a gentleman named Darren James who has joined that team. He ran the number one team in Louisiana, one of the top 50 teams in the United States, really worked on the guaranteed sale offer programs over a number of years, worked with numerous people, helping people buy and sell homes very quickly through those models. And so, we’ve been adding talent there. But as those get going, they also have a flywheel that should increase things like mortgage, title and escrow, home warranty and other things, so that consumers can actually look at eXp as a one-stop shop for all things real estate. And so, we’re really again excited about that. And, of course, that plays into the Showcase acquisition that we just announced on Monday, the ability to also use a portal approach to actually then feature those types of additional services and then provide tools for agents to use them from a lead gen and lead conversion and helping their customers do what they want to do more efficiently, I think, is all going to play into attach rates and increasing margins.

Yes, that’s really helpful. And so, Glenn, you spent a lot of your time and kind of directed your attention to VirBELA. The co-founder in your press release this morning, I think he freaking nailed it when he said – he said, this is the moment in time that will forever alter how we approach connection in aspects of life moving forward and VirBELA is at the forefront. I think he – I think that was absolutely spot on. You guys also said that the growth for VirBELA was up, I think, 260% versus last quarter. So, lot of good traction there. Just talk to us about, obviously, how the pandemic is helping boost the value prop there and then talk to us about kind of the opportunity you see over the next several quarters to maybe even a couple of years out.

Yes. So, pre-COVID, we were working – we knew that there was a business in VirBELA. We were still looking forward, to some extent, market traction, but we knew it because of the amount of lift that VirBELA gave eXp Realty. The reality is that we run on an entirely different economic backdrop in eXp Realty and it’s because of the way that VirBELA fosters collaboration, engagement and, ultimately, has allowed us to scale very rapidly. So, we’ve always recognized that VirBELA for us was the secret and not-so-secret sauce to being able to create this collaborative environment that’s allowed us to scale. And so, we knew customers would gravitate toward it, but we were investing in it just as much to enhance the ability for eXp to expand as we were from a consumer perspective. Obviously, with COVID, we went from 20-odd employees to now over 100 employees on the VirBELA side because we have so many customers that are looking to – where does my team work if I have to be remote for a period of time with my team, where do they – how do they ultimately collaborate and work together. Zoom fatigue ultimately is real. And so, we’ve had multi-billion dollar companies, the mining company, Rio Tinto is a client of ours. We’ve got events companies, the largest – one of the largest events companies in the AR/VR space in France, Laval Virtual, an event firm, have been using our platform. Just recently, ASU, Arizona State University, just did a learning man on the VirBELA campus and got rave reviews and we’ve seen numerous universities and other educational institutions starting to step up and set up their own campuses and to be able to manage remote learning. We’ve got some of the largest consulting companies in the world that are advising their clients. Some of them being universities, some of them being major enterprises that this is, at a minimum, a contingency platform for them to run their business and, at best, it could literally change the economics. And we’ve had numerous customers that have literally given up their physical bricks and mortar footprint because they see the power of the VirBELA platform. And last, but not least, we announced a month ago or so, the partnership with HTC where they are pre-installing through the HTC, the VIVE suite, VirBELA on, I think, it’s over a 1 million business-ready HP laptops and HTC has their own HTC campus based on VirBELA where they’re effectively a reseller of the platform. So, with that is huge amount of growth. Unfortunately, in the short run, the numbers of VirBELA are relatively small, given the market opportunity because we think that, over time, VirBELA itself is a company that’s quite a bit different than eXp Realty, that ultimately has lots of runway and lots of potential.

And, John, just – as you know, we run our entire global operation on this platform. So, when people compare us to Zoom, Zoom is obviously a great tool for communication, but we run our entire international brokerage and other businesses on this platform. And I’d also say too that this is a rare – VirBELA is a rare situation where the product is actually way ahead of the market. So, in a lot of software companies that I’ve seen, is that the product is trying to catch up to what the customer wants. In our particular case, we have a rock solid product that we’ve been using as a company for years and growing our business, as you can see. And so, the product is really ahead of the marketplace. And now the market is catching up. So, exciting times for VirBELA for sure.

Yes, I would agree with all that for sure. So, the 20 employees to 100, that’s obviously a pretty meaningful jump in headcount there. Could you just maybe talk about kind of the type of employees you’re adding there? Is it product development? Is it mostly sales and marketing?

So, we’ve definitely scaled up the sales and marketing team, but not that – we didn’t really have a sales and marketing team of any significance pre-COVID. We definitely had people that were selling for the platform. But Alex Howland and Andrew Gomoll and then Campbell was basically our sales team. So, we had three people. We’ve now expanded the sales team to probably about 10 to 12 people, including some marketing folks, maybe 15 on the outside. So, most of the lift was in customer service, onboarding and then developers. And so, we’ve got Unity developers, lots of developers on that, and then we’ve also been incubating a direct Web-based platform called Frame VR. So, we’ve scaled up some of the engineers and other talent there under a gentleman Gabe Baker. And so, we’ve been investing in the platform heavily to be able to keep up with customer demand. We’ve been adding lots of features. So, more recently, we’ve added native screen share and webcams and other things right into the platform. We’re continuing to iterate on different visual models. Sheldon Brown, who is one of the original thought leaders around VirBELA, ran the Innovation Lab for UCST [indiscernible] probably go ahead and mute a couple of mics here, I think. We’ve got some mics going. So, anyway. So, it’s been really a really fast growing part of the business with lots and lots of different talent at all parts of the organization.

And we also – in 2019, John, we spent quite a bit of investment and time with Alex and Eric building the product. So, we actually, we spent that in 2019.

So, hopefully, that helps, John?

Yes, absolutely. I want to touch on one more. I just realize I’ve taken up almost all of your time here. We want to make sure we’re getting questions from Slido. I think RJ can be on that. But last question from me. Talk about Showcase IDX. Really interesting move by you guys. It’s clearly a strategic kind of chess move toward the consumer. So, tell us about what drove that decision and what the opportunity is with Showcase IDX.

Yes. So, just a little historical context. As an agent pre-eXp, I built six different real estate teams around the country focused exclusively on Internet lead gen and we had ranked number one or number two organically on the search engines, Google at the time, Yahoo, Bing, across the board for city followed by the term real estate. So, Phoenix real estate, Las Vegas real estate, Nashville real estate, Portland, Bellingham, Washington. So, a number of different markets. And so, I come from really an Internet lead gen background. And when we pivoted to eXp Realty, we realize that that was going to take a lot of money to compete in that space and we weren’t prepared to go out and raise the money necessary. We wanted to create the brokerage platform first. But I always wanted to have a platform where we could actually do a lot of things we were doing through the – all the way through when we launched eXp and even for a little bit beyond where we could do that at scale nationwide. And so, one of our agents, who is also a shareholder in Showcase IDX, brought Showcase to us and showed us what they were up to. And it really matched what we were wanting to do. And it’s been something we’ve been looking for probably for two to three years, been looking for a platform. And then, with the leadership with Alan and Scott and the folks that are there at Showcase, we’re talking about some really like-minded people who are, who have been really on the SaaS side for brokerage, but internally they were – definitely wanted to build a lot of things that were a little bit different than just an agent product, but actually a more portal platform. And so, that drove us and brought us together. And so, we’re super excited because we think – it’s going to take a while. I mentioned on an Inman call a couple of a days ago. It’s going to take us probably the better part of a year-and-a-half to two years to build that out. But we know the secret sauce to get ranked, to generate leads and to convert those leads. And we don’t have to hire a lot of outside expertise to do that, now that we’ve got the team from Showcase to help us really stand that up and build out that part of the business.

Absolutely. Really exciting times. I appreciate all the time that you guys are giving me and all the insight you’ve delivered. But, RJ, is there any questions on Slido that you wanted to touch on.

Take the top one real quick, probably for Glenn. Do you foresee eXp continuing to invest in technology for distance events and learning and what’s the tech strategy as a company?

Yes, for sure. Absolutely. The reality is that, we’re investing heavily in VirBELA. We opened up to some extent the checkbook earlier this year to VirBELA and just said, whatever we need to do because the demand for distance education and learning is absolutely there. Where our bottleneck right now is finding the right talent to actually help us. It’s not the willingness to hire that talent. So, for us, it’s really about hiring the right talent as they show up. And if we’ve got the right talent in front of us, we’re going to add them to the team and, obviously, there is a cultural component, but the expertise of building the right type of systems, we’re totally investing in that direction. And that’s where our main focus is because we know that we’ve got a – we have a seven-year head start, but we don’t want to lose that head start because we’re not investing.

Great, thank you. We also have one question from the audience that has come through, I think. The hand that’s up, Glenn. Can you – that one.

Sure. Is that Alex?

Yes. Hey, can you guys hear me?

Yes, we can.

All right, great. So, mainly, two quick ones from me. On mortgage and title, can you maybe just help us understand on the timeline on those becoming meaningful contributors, obviously? Zillow and Redfin have talked a lot about those attach product – rates to grow pretty quickly for them. And then, maybe just a point of clarification on the quarter. Can you just update us on what the number – end of period number on international agents was? Thanks.

Okay. Yes. So, Michael, you want to touch on the international agent count at the end of the quarter?

Yes. I got that, Glenn.

You got it?

Yes, yes. So, at the end of the quarter, we had 1,135 international agents.

So, on the attach rates relative to mortgage, title and escrow and other services, one of the things that I was reflecting with the team on – even just this last week was the way that attach rates are done more traditionally and in traditional brokerage. You’ve got your title marketing reps, you’ve got your mortgage reps that literally visit with agents, sit down with them, talk about the benefits that they can bring to their customer, talk about how easy they’re making it for the agent to do, for their customer to do business with them and then help them through that whole process. And so, it’s a little bit of a build the awareness, some of it’s one on one conversations, some of it’s more group and marketing. But since all of our agents are, in fact, independent contractors – and this is a little bit of a contrast to, say, a company like Redfin where all their agents are employees. Our agents are independently making the decisions that are right for their customers. And so, to some extent, we have to do a really good job – well, we have to do a really good job of building a great product, so that our agents are actually willing to refer it because they want happy customers, they want repeat customers and they want the transactions to go as smoothly as possible, and they have to learn about that. So, as we think about attach rates, I think this is – when we get out there, a year or two, we should be in that 5% to 10% attach rate, but it does take time to build up the relationships, build up the credibility for those services and it’s not a sort of flip the switch and then agents will just automatically gravitate toward it because they’ve got already pre-existing relationships with mortgage, title and escrow and others in their local markets. And to some extent, they are not going to change until there is usually a little bit of pain where somebody dropped the ball, something didn’t go right and now they’re looking at alternatives. So, it’s building up that awareness and that credibility over time.

Great, thank you.

Thanks, Alex. Well, with that, we’ve come to the end of our time today. So, thank you so much to everyone for attending – this is the second one that we’ve done. This is the first time we’ve done it after our earnings result. Looking forward to feedback and looking forward to doing these in the future. Again, thank you to everyone that attended here today and for those that were listening to streaming online. And with that, that concludes our session for today.

All right. Thank you, RJ. Thank you, John, for coming. Appreciate it.