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The Millionacres Hour: Interview with Glenn Sanford, CEO of eXp World Holdings

If you've been following eXp World Holdings (NASDAQ: EXPI), you know they've had an incredible run in recent months.

In 2020, agents and brokers on the eXp Realty platform increased 63% in 2020 to 41,313. And the hot real estate market has also benefitted eXp. In 2020, residential transaction sides closed increased 113% and residential transaction volume closed increased 123%. The company has also grown internationally adding five locations in 2020: France, Portugal, Mexico, India, and South Africa. It also launched eXp Commercial with expansion into 29 U.S. states in 2020.

The company is known for the Virbela platform, a virtual world that allows agents to interact as avatars. It also acquired Showcase IDX, a real estate search technology company and Success Enterprises, a leading personal development media brand. How do these acquisitions fit into the overall brand and how does the company plan to sustain its incredible growth? For this and more, we turned to Glenn Sanford, CEO of eXp World Holdings.

In this interview, he shares his vision for the company, his take on the future of real estate, and how eXp's virtual platform works. This program ran on Motley Fool Live, March 16, 2021.

Transcript

Deidre Woollard: [MUSIC] Welcome Fools. Yes, we have Glenn Sanford here with us from eXp World Holdings, which we're very excited about. Glenn is the founder of eXp. He founded it in 2009 and launched with just 25 agents. Rapid growth since then. As of December, eXp has expanded to over 40,000 agents. It's now growing internationally. eXp is also really interesting because it operates for Bella, which is a completely virtual world where the agents and brokers interact, and eXp also recently purchased Success Magazine which we'll talk about. Welcome Glenn, how're you?

Glenn Sanford: Good Deidre. Hey Tim. Great to be here.

Tim Beyers: Great to have you, thanks so much, Glenn.

Deidre Woollard: Well, to start off with Glenn, your agent growth is so impressive. I know you grew agents by 63 percent in 2020 alone, and I was really curious about that because I've noticed in the real estate community, eXp agents are really active in recruiting other agents. I know you have a bit of a system there, so I was wondering if you could talk about that.

Glenn Sanford: Yes, we eXp, we did start in 2009. We started this in 100 percent virtual real estate brokerage. Since then we've now referred to ourselves as a Cloud-based real estate Brokerage, but back then, nobody was going entirely Cloud-based or virtual. In 2009, everybody's going to physical offices, Century 21, Global Banker, RE/MAX, Keller Williams, What Have You. For us, we said the agents are going to be willing to untether from their offices to go virtual, what would be the set of benefits that they would need to actually do that? We looked at the fast-growing real estate brokerage, prior to that was a company Keller Williams, and they'd built what they referred to as a seven-level profit share plan so that they would actually share profits from agents in offices if the offices are profitable the agents that had recruited those agents. We looked at them, we looked at other models that are out there in the financial services space like Prime Eric, and others. This model of actually allowing your sales force to actually grow your distribution or agent base just made a ton of sense. It's actually one of the reasons why I was at Keller Williams for 3 years myself personally. We built this revenue share engine that would allow agents to get benefits from other agents that joined us. Then we also provided equity benefits, and that's actually why we became a public company, to begin with, but equity benefits from different activities including, attracting other agents to eXp platform, so they can actually get onetime benefit in stock for any productive agent they bring to eXp. This allows us to grow our sales and marketing force, not just for consumers, but also for actually bringing other agents on the platform. We do have, as noted, some of the most enthusiastic, but also some of the most highly productive agents and brokers in the US and now going international.

Deidre Woollard: Is that one of the reasons that you had a stock split? Was it because you have so much stock going to agents and brokers?

Glenn Sanford: It is. One of the awards that we do is, the first transaction agent does each year, they get $200 worth of equity. You think about $200 worth of equity, well, if the stocks, $10, they are going to get 20 shares of stock. When we declared that they get their stock split, that time we were $77 a share, so you think about you're only going to get two shares and change from that first activity, and we felt that doing the stock split, would give agents more shares, and make it more tangible, and more real for them just in terms of the quantity of shares. It also makes it easier to do the distribution internally. We saw the stock obviously gone a bit of a run, and now we'll see about maybe we'll see if we can get shareholders to give us authorization to increase shares, because in the future we may need to do it again just to achieve the same result.

Tim Beyers: I wanted to stay on this for one second Glenn, because it's interesting that you've described this. Am I hearing you right? That you think about this as a profit sharing or an equity sharing plan with the agents here? If you're going to be an investor in eXp, we should expect that there's going to be some dilution here because as you grow, you are going to hire a lot more agents, and a lot of that equity is going to flow to those agents. Is that fair? Am I hearing you right?

Glenn Sanford: Yeah, I mean, historically, that's the way the model worked when we first became a public company with about 47 million shares outstanding, and so we're now at 70 million in change, so you think about that dilution overtime. But what we have done since 2019 when we started to buyback stock, and we become more aggressive in our stock buybacks because we actually want future equity issuances to agents to actually be dilution neutral for shareholders. That's actually one of our goals is to actually buyback, add up at the award date, the number of shares that we're going to give to agents three years from now based on when we actually issued those to agents. We've been buying stock back last year. We did take a pause during the initial parts of COVID because we know how bad COVID was going to affect the economy. Then we've picked back up the stock buyback. I think by June 3, we started the stock buyback again. That's really designed to neutralize future dilution.

Tim Beyers: I may come back to that Deidre, because I think there's some interesting stuff there, but before we go too far, I feel, could we maybe get back to the virtual model? Because again, you are a virtual agent model, talk to us a little bit about this. How has it been an advantage for you, and conversely, what are the limits? Let's talk about both of those.

Glenn Sanford: Yeah, so one misconception that a lot of people have, is that eXp being a Cloud-based residential real estate brokerage, that the consumer, and agent engagement is different, which is actually not the case. Agents are working with buyers and sellers just like they always have. They work from their home office, we also provide all of our agents with a Regus, I think it's called Blue Card, so they can go into any regions in the country, and use their physical offices if they want to. So they've got that as a benefit. We also have some agents that actually lease their office space, because they run a large team, and they qualify as a broker. But being virtual for us means that we've got no overhead to expand to new markets, that would be typical of most brokerages. The reason why franchises exist, whether it be RE/MAX, Keller Williams, Global Banker, or anybody else, is because the bricks-and-mortar pieces prohibitive for expansion. The only company that's tried to do it large scale like Compass, and they went and bought a bunch of brokerages and they've raised over a billion dollars because it's expensive to put bricks-and-mortar all over the country. We said, hey, with technology nowadays you look at your phone and you've got high-speed internet in this phone that dwarfs anything that existed even in 2009. You can connect these things. We use a virtual world for work platform that we bought in 2018, which is called Virbela. We've been working in a virtual world that allows us to have all of the meaningful collisions that you have in a physical office, but we're actually doing it in a virtual 3D setting with our back-office, accounting, HR, training, masterminds. Literally, if you walked in there right now, there are probably 800 people on-campus doing different activities on our virtual campus that's all sort of back-office and training-related activities.

Deidre Woollard: Well, let's talk a little bit about Virbela because I have attended a conference on campus before, a real estate conference, and I noticed that eXp recently inked a deal with Douglas Stewart Company for virtual classrooms. Is that part of what you're seeing as the future of Virbela? Does it go beyond eXp, or what do you really see as the future of it going forward?

Glenn Sanford: It does, yeah. Definitely goes beyond eXp. When we bought Virbela, we were over 50 percent of the revenues of Virbela. A couple of reasons why we bought Virbela is one, being that relied on a technology platform and being over 50 percent of the revenues, we didn't have as much control over their product road map as we thought we needed because it was such an enabling technology for us. But we did continue to sell the platform to other customers that were coming along. It wasn't huge from 2018-2019. Then COVID hit, and then all of a sudden people just came bidding a path through our door, "Hey, we love what you've done for eXp. We'd like to get this for an event or we want to get it for our office, or we want to try this out." We got, I think, big mining company like Rio Tinto's using it and we've got a lot of companies that are now using it at some capacity because it does allow for you to run an engaged organization and not get Zoom fatigue. Zoom fatigue is real and so if you're going to work virtually, how are you going to work together if you're going to preserve the mental stability of everybody looking at a camera? Virbela really solves for that and that's why we were using a virtual world, to begin with, because you can actually be engaged in a virtual world and you don't feel like it's overly taxing just mentally, compared to the current standard technology being Zoom.

Tim Beyers: I would love and I know this might be a silly question, Glenn, but I want to imagine, maybe you could put our investors, our members, into your shoes for a second here and talk like, what is something that you do daily in Virbela so we can get a picture for how that works. Is it just like meetings with the avatars? Maybe go a little deeper if you don't mind.

Glenn Sanford: I go into the office, and when I say the office, I go into the virtual world every day, typically around 8:30 in the morning. Right now I've been working with the Success Magazine team which we recently bought. I've been going in and I've been doing trainings for people who are looking at productivity and sort of up-leveling, and they are thinking, I'll jump from there into a boardroom where we'll talk about strategy, what we're working on next. People come from each of their virtual offices, they'll walk as an avatar into the office, they'll take a seat, somebody will share something on the screen, and somebody will start to ask some questions and we'll just start working together and then we'll bounce out to other meetings. When I say bounce out, we're not quitting the program, we're just walking to another part of the campus and we're having either one-on-one, two-on-one, different breakouts. This is taking place over really three different campuses. For us, we've got the eXp World, which is really eXp Realty at all of the international operations that eXp has, but if I want to walk in the accounting office, or I want to walk in the legal office, or I want to just hang out in my own office and just see if anybody wants to walk in the office, they see me sitting there, in my office, in a chair, and they'll come in, I'll hear this little beep and go, "Hey, Glenn, got a question for you," and I'll go, ''Hey, what's up, Ted?'' We'll start talking about stuff and then I'll say, "I see Jeff's here," and I'll ping him and he'll come walking into the meeting and we'll have a conversation and we'll come up with some solution. That's a pretty typical use case. I'll spend, on average, maybe three hours a day in the virtual world. Even in the virtual world, I can be available through a lot of other mediums, but when we actually want to have meetings and actually works on strategy, we do that in the virtual world. We pop a Trello board, we throw up on a wall, we organized our thoughts, we are all working in real-time and we're looking at each other as avatars, and it feels like we're actually there. Actually, I haven't even seen my CFO in person for over a year in real life, just because of COVID, and yet we're working every day shoulder-to-shoulder, highly aligned, purposes not diluted at all because we're not in the same physical space, but because of the way we work, we're getting stuff done, building a great culture, and it's pretty amazing.

Tim Beyers: I feel like you got a hashtag that 2020 there; 2020 life, Glenn. But yeah, that makes sense. Glenn, your 2020 results were amazing. The growth was ridiculous, but I would love to know, what were maybe the one or two drivers here? We do know, for example, residential real estate is still a bananas market. It's completely amazing. The level of inventory it's not there, demand is through the roof. What was it that drove eXp in 2020? Can you give us a little color on that?

Glenn Sanford: One thing that's huge is we grew our agent base 60 something percent in 2020, year-over-year, which percentage-wise was actually slower than we've grown in previous years. It was actually a slower growth rate, but just we were growing on a fairly large number of agents already. We started at 25,000 agents, we ended up at 41,000 agents over the year. It was an incredible growth year and those agents were all bringing production with them. Then of course, then you got Q3 and Q4 and interest rates are historically low. I don't even think after the Great Depression, interest rates were this low. You've got just this incredible amount of demand, and then you've got people wanting to move somewhere where they actually want to live because they've got to work in their house and because of COVID. There are just so many things that played in our favor. But even if you look at even Q1, we talked about the numbers in our last press releases. We've added over 7,000 agents so far in 2021. We've got these potential 9,000-plus agents just in Q1, which again would be unprecedented growth from an agent perspective, but the backdrop of the housing market plus our robust agent growth. You have those two things together and you just get some massive numbers that come out of it.

Tim Beyers: One of the things I noticed for reading your 10-K, you recently published your 10-K. Up until this point, like 2020 most years you ran at an operating loss. Then in the last year, it looked like the major area of structural gains was in general and administrative costs. General and administrative costs were a little bit less. That's like salaries for your newer employees, salaries for agents. You're very clear on this in the 10-K. It seems to me what's happening, and you tell me if I'm reading this right, that you're saving a little bit of cash by being able to bring in agents, entice them with this really interesting equity plan. You don't have to put out a lot of cash right upfront. You can grow your agent headcount. Then they're going to get the benefits if you grow together, they are going to get the benefits on the equity side. The unit economics like the equity gives you a little bit of unit economic gain here. Is that the way this model is working right now? Am I thinking about it right?

Glenn Sanford: Well, we made some changes in late 2019 and early 2020, we made a couple of systemic changes to the model. Our agents are on 80-20 split, as you probably are aware, 20 percent of that comes to eXp up until the agents paid $16,000 in for the year. Our model had overheated on what we referred to as revenue share model. We were paying out 60, 70 percent of all the dollars coming in on the 20 percent, we were paying that out through our revenue share model. That's the recruiting engine that keeps things going and we're like, we can't sustain this. The system is going to break down, so we went to our agents just said, hey, this isn't going to work, but what we will commit to, is will commit to paying out 50 percent of the 20 percent in the form of revenue share now and into the foreseeable future. We're just going to adjust the numbers. We're always paying off 50 percent. Our margins picked up from that perspective what we retained. The second thing we did I think starting in January 2020, we reduced the amount of discount agents got on equity from what we originally was a 20 percent discount. When we created the program initially it was on restricted stock, and we were on the OTC and it was fairly liquid, to now we're trading on Nasdaq. We can issue the shares as free trading. We didn't need to have as much of a Delta just to be able to provide agents a benefit. We reduced the discount from 20-10 percent. Both of those then definitely improved our expenses, which ultimately translated into profitable from Q4 of 2019, and the real estate, our models shouldn't ever, like the actual core real estate brokerage as a unit, shouldn't show a single loss ever going forward. It should just continue to grow and expand because now we've got the numbers really nailed, and now it's about technology improvement. Can we automate more of the real estate transaction process? Can we leverage with fewer headcount and actually create a better experience for agents and one of the things that we can do. Those are the types of investments that we're making on the core real estate brokers. But now we've got the model dialed in. It's just going to continue to do really well.

Tim Beyers: I'm going to kick it the Deidre here on a second, but just to reiterate what I heard here. This is a more equitable model. The revenue payout now stays at 50 percent here. You can guarantee that 50 percent for the agent. That creates some economic gains for you as you grow and you scale, the company gets some benefits as the agents get some benefits. Then you reduced the discount on the equity plan.

Glenn Sanford: Correct. Yeah, it's true.

Tim Beyers: Got it.

Glenn Sanford: All of that and then everything else pencils, I think 2019, I think we went from issuing a fixed number of shares for each award to actually a dollar number of shares. That changed the model a bit too. Because when the stock was up and we're issuing a fixed number of shares that showed a big expense. Then we changed it to a dollar amount and that also worked in the company's favor because with the amount of enthusiasm around the stock, higher-price actually increased the expenses even though it was still the same benefit that we promised agents to begin with.

Tim Beyers: Got it. That makes sense. Moving onto the next question here, Glenn, we saw that you linked a deal with Douglas Stewart company for virtual classrooms. Tell us a little bit more about this. Maybe let's go a little bit deeper into how Virbela, represents some optionality for you as a company. Would love to hear just a little bit more about how you see this growing as a contributing piece of your business.

Glenn Sanford: Yeah, I know for sure. Well, obviously in order to be in business with Douglas Stewart, they've done some pretty interesting things in the space. Keep in mind that 2020 was such a unique year for us. Prior to COVID hitting, Virbela was really just our enabling technology for eXp. We had some other customers that were using it. But then when COVID hit, everybody was looking for, how do we work with our teams? How do we create education and other things? Whether it'd be Douglas Stewart or PwC or Deloitte, we have so many people that are working with us in some capacity to try to get us out there because we saw a real need for education, for organizations. For us, it's great to get into these organizations and having somebody so credible take us in there. Still early days, we don't know exactly how this is all going to work. Even with talented marketing partners, it's still a different type of platform. Even educators still have a hard time trying getting their head around because they're looking forward to going back to the classroom, and anything that so it can band-aid that gap, and Zoom has been that band-aid. To some extent, that's where they are leaning towards. But it's great to have marketing partners that can maybe break down that because once we do know like university laws. We've got some great proponents there that love our platform. When it gets adopted by like maybe the larger university. But then you get the other people that are involved and they're like, we don't quite get it. But the teachers they are using it like, this is the best thing I've got engaging my students. They are actually in the games, they are actually doing stuff. It's just a different type of platform than just sitting looking at a Zoom screen, and we'll just see how it goes. Even this year, we would go for the end of the year. We're still early stages. We still don't know exactly how this is all going to play out because we've got people now starting to do events. I just went to in real life event for the first time ever and 2,000 people attended. We're going to see a back-off of COVID-impacting stops. Towards the end of the year, we're going to continue investing because, for eXp, it makes sense. All of our companies work in this virtual world. We're like, why would not every company want to do what we did? It makes so much sense. But, we're not every other company so.

Tim Beyers: Sure. That completely makes sense.

Deidre Woollard: Glenn, I want to ask you about Success magazine because I feel like, for a lot of people looking at that, it might seem an interesting choice for real estate brokerage. I was wondering if you could tell us why you bought it and where you plan to take it.

Glenn Sanford: One, it's similar to Virbela in that we were actually the single largest customer of Success magazine because I actually chose to send the magazine to all of our agents with a rap of eXp Realty with some information to all of our agents, every issue. The reason why that made sense is, as a virtual organization, it gave us something physical that lead agents know that we care about their personal development. For us, we think about personal development being foundational to sales, of course, foundational to any profession but sales, it's more recognized that sales as a personal development that you monetize through your production. When the previous owner was looking at to some extent winding down and retiring a bit, he offered a task because we were the largest customer, and the price was right. We bought it for eight million dollars taking success.com as a domain. In my opinion, that's a huge domain, it has been around for 125 years. It gives us a competitive moat for eXp Realty because now we have a training and personal development company that's probably the most recognized in the world of personal development as an eXp-owned enterprise. Now we get to play with some people in the personal development space that now, maybe lean into eXp Realty in a different way than they would if we were just paying them as a third-party. Now, Tony Robbins could be on the cover. All the sharks have been on the cover. Everybody knows what it is. Now, they know about me and eXp, and now they wanted to play in different ways with us because of this other asset; they're going, "Okay." I was just with a gentleman named Grant Cardone all weekend, and he was on the cover last year in January, February before we owned it. Now he's like going, "I can lean into this. I can help in this way." It's just this really interesting thing to be attached to eXp Realty that just lends itself and creates a competitive moat that I didn't even think I was going to be an owner of it prior to September last year because it wasn't being offered to us, but when it was offered, I was like, "Sure. Let's take it on. Let's see what happens," because I think it's going to make a big impact in attraction and recruiting of agents, just having that as part of our ecosystem.

Deidre Woollard: Interesting, do you see any synergies between Success Magazine and Virbela, or are they separate universes for you?

Glenn Sanford: I think so. When we think about events, training, and where you're going to do that, Success Magazine has a pretty good base of business leaders and owners that could benefit from seeing the Success platform or with the Virbela platform. Even some of the other things like inside of Virbela is another platform called framevr.io. If you haven't checked that out, it's a fully web-enabled virtual world that you can actually go in and set up a little virtual office in, right now for free. It's completely free on the web, but it's all Oculus-ready. That's what lent itself to conversations with the Facebook Oculus team and how they maybe want to do stuff with that. It lends itself to training and all kinds of other things. Success, Virbela, it has some unique ways to overlap, and we haven't figured out how it's going to fully overlap yet, but we think there's definitely some interesting overlaps.

Deidre Woollard: Well, let's talk about an acquisition that's a little more real estate-related which is Showcase IDX. Can you explain to people what IDX is? Also, a lot of people are thinking real estate agent websites are maybe over. Do you see IDX as the future?

Glenn Sanford: Well, every agent needs their own website that has properties on it. They have their own database. They want to be able to have consumers come to their own website that's powered by data from the MLS and the brokerage. For an agent, they need that, and it's fairly commoditized, so there's a lot of companies that provide that solution. But why we bought Showcase IDX is because they actually know how to build not just agent-based websites, but they actually know how to build a national portal for us. They know how to bring in all these data from all these disparate MLS. There's 800 different multiple listing services around the United States. If we go and do it one-by-one and we build out the ecosystem, it's going to take a long time to get all of these agreements in place, get all this data normalized, build up our own team, build our own portal. These guys have already been doing it for a long time for agents, so they can just aggregate this and start to build out our national portal play that would compete against the likes of Zillow, Redfin, realtor.com, and others because they've already been doing it for 10-15 years for agents and small brokerages. They've been doing this, and now they're going to do it for us on a national scale.

Deidre Woollard: Well, let's talk about that for a second. You mentioned Zillow, Redfin, CoStar's bought Homesnap, so they're making moves in that space. How important do you think it is for eXp to have that national portal and what energy are you putting towards growing it?

Glenn Sanford: I think it's important. I don't know how we're going to truly measure the impact in the short run. I ran six of the top real estate websites in the country back prior to eXp. This was Seattle, Portland, Las Vegas, Nashville, Bellingham, Washington, where else? Anyway, a lot of these I've built, we were ranked number 1, number 2, or number 3 on Google organically. We almost always ranked above Zillow and realtor.com which were dominant at the time. But what we recognize is that competing in the search engine game was going to be really expensive, and I really wasn't excited to go raise a bunch of money and get beat up by the VCs and all the other stuff that goes along with that. But I also knew that the comp model could attract a lot of agents where we can potentially come full circle at some point and actually get back into that game, and then now starts to generate leads for agents and eXp, just organically from the amount of agents that we've generated, eXp Realty has a fair bit of traffic already coming through the website. The Showcase IDX team came in, they launched exprealty.com back in January this year, and they're coming to me going, "I had no idea you guys have this much traffic coming through your website." All of a sudden, they're seeing all this traffic, all these leads coming through, and now we can actually iterate and create a consumer experience that might have some unique bells and whistles that will make us one of the top 3 or 4 websites in the country that searched for real estate. Whether CoStar buys Homesnap, which by the way, wasn't generating that many leads in aggregate prior to them buying it. It was an interesting play but is ironic because, well, we had looked at our stats and we generate more leads for our agents through a fairly basic website for our agents than Homesnap generated for all of NAR. It's an interesting play. It'll be interesting to see how they play that out because I think having 48,000 going on whatever number of agents we get to, getting all that attention on our site, we think there is a consumer play that makes a difference over time.

Deidre Woollard: In terms of leads, are those free to agents, or do you have a system for how you distribute leads?

Glenn Sanford: With Showcase having jumped in, we're generating leads prior through another platform third-party, and it wasn't being monetized at all. We didn't even really know that many of the stats that we're going through that platform. But now that we have it, we have the opportunity to create referral-based income. We're not looking at generating a whole bunch of referral-based income because a large number of these people are coming in because of eXp agents. We will make sure we cover our costs and create a little bit of a profit center, so we can pay for our IDX team and all of the improvements that we want to build into it. We think the longer-term financial benefit from the portal alone is when we can integrate mortgage into that platform where consumers can get pre-approved for loans, and we can start to think about preconditioning consumers towards mortgage operations that benefits eXp as a whole. We think that will then lend itself to more agent behavior and referring our in-house mortgage company as well. We think about that as being really where we've truly monetized the platform where we can add mortgage, title and escrow, homeowners insurance, and anything that surrounds the home, and being able to do that with our own web presence.

Deidre Woollard: That seems to be the goal for a lot of companies right now, is that idea of creating the complete transaction; mortgage, title, escrow. Is that part of eXp's goal right now as well?

Glenn Sanford: It is. I think the challenge is not if you put a mortgage button on your website, you're going to get mortgage leads. There's a lot more that goes into it. I think even Zillow struggles to get that much consumer traffic through their mortgage piece, even though they got consumers coming through their website, I know they monetize it a bit. It is interesting trying to figure out how do you create the consumer behavior on that in a way that aligns with them and aligns with what we're trying to do. We're still trying to crack the code on it, but I think there are ways that we can crack the code that is going to be different than anybody else. Running as one single brokerage in all 50 states, nobody else has ever done that in the history of real estate. We cover more geography than Redfin, than Compass, than any other large brokerage. As we build out some of these different relationships, we think that everybody else is doing it at the franchise level, and they're doing it for a single office, and there might be five or six owners of different offices of that same brand in a community. We can do it as one company in any community in any state all over the country. That's got to have economies of scale and marketing benefits that we've yet to actualize, but we know they're there.

Tim Beyers: I want to ask a quick question, a quick follow-up question on that, Glenn. Then just Fools why don't you get your questions in? We already have a couple in the chat here. Right around 2:45 Eastern, we'll start answering some questions from members. But I want to see if I've got a grasp of this, Glenn. We talked about earlier the way that you've normalized and rationalized now, the compensation structure with agents so it's equitable for the agents and for the company so you can get some margin there. It sounds like a sustainable margin. Is the long-term growth strategy here like as an investor, the reason I want to invest in eXp is because you're going to continually add agents at a scale greater across the country than some of your competitors and you can do that profitably? Is that the investment thesis here, if I'm boiling it down?

Glenn Sanford: Yeah, pretty much. We're the fastest-growing real estate brokers in the history of residential real estate based on the agent side of things, and certainly, if you add the term organically growing it. Compass bought almost everybody that they've gotten their platform. People weren't beating a path of their door, let's join Compass. They went and bought everybody and that's why they raised the $1.2 billion. They lost whatever 200 and something million dollars last year because they're just buying brokerages and then doing whatever they do. But for an organic growth model, the reason why we also put our current agent count and round it to the thousand below, whatever that number is, we put that in every press release because agent count is so important. Lots of agent count, we went over 48,000, last week, I think it was. Every 1,000 agents, you're going to see the number go up on the boilerplate of every press release because, in our opinion, that's the single most important number that anybody is going to want to pay attention to it's, what's our agent count? Because everything else comes from productive agents.

Deidre Woollard: I have a question related to that. Right now I think the NAR numbers are 1.5 million agents, the highest it's ever been. Hot markets always bring everybody in. What happens in a down-market? Is that a concern for you? Do you feel like there's the chance to bring in other agents or do you feel that's something that you're naturally going to see the agent count rise and fall?

Glenn Sanford: We've never had a month where we've had fewer agents than we had the month before. We've continually grown our agent base. Even when COVID hit and there were people exiting initially in March and April and even May, nobody knew what the heck was going on. Some brokerages we're seeing attrition, but our agent base continued to grow even during those COVID months. The thing that I think about is our value proposition is so strong that even in a down-market, we should be profitable as a brokerage. We're not going to have to close our doors, we're not going to have to consolidate. We'll pick up market share even if we don't pick up agent count. If the agent count dropped by 20 percent across the industry, which it could, we think that we'll be significantly less affected and most likely we'll grow faster than the decline in the number of agents in the marketplace, even when agents churning off of our platform. For us, we think about this could be an opportunity to pick up market share so when we come out of whatever that trough is, we're just going to have more agents on the platform and we're going to be the best position to compete. Like the franchise system, just so you know, from my perspective. When the Internet showed up, probably by the mid-2000s, the franchise systems were basically dead. Because there was no way that a franchise system that requires bricks-and-mortar be put into local marketplaces can compete with the Internet. They just can't. For us, we just think about the fact that we can pivot, we can make changes, we can do anything that we need to do to compete in a down-market, just like we can do in an upmarket. I think we'd pick up market share even if we don't pick up agent count in a down-market.

Deidre Woollard: Fantastic. Thank you. I know you've been asked before about disruption in real estate. I think every real estate CEO gets asked that. But what are you seeing? Is there anything that any competitor is doing right now that you really admire or that you have your eye on?

Glenn Sanford: We're not in the traditional real estate space. In traditional real estate brokerage, there's not much innovation that's taking place. I'm not seeing Keller Williams, I'm not seeing RE/MAX, I'm not seeing any of the real deep brands. I'm not seeing anything out-of-home services, it's just Berkshire Hathaway. Nobody is doing anything. In my mind, I'm just going, okay, if you guys don't want to take advantage of what's going on in the marketplace then we'll just take all your agents. That's mentally what I think about. But what I see is you got the Open Doors, you got the Zillows, to some extent Redfin. They've got good metrics even though they're not growing as fast as we are, they're still attaching themselves to a unique part of consumer behavior that's going to grow over time. I think about those as being the companies to watch. The most significant one is obviously Zillow. Zillow is a take-no-prisoners company. For us, we think about the idea that we have to just because we don't know exactly what Zillow is going to do over time. We have to grow our agent base so that we are totally defensible against anything that Zillow might throw at us. On the Zillow platform, we actually have some of, if not the most productive agents on the Zillow platform that are Zillow flex agents and everything else. They are eXp agents. We've got the Kyle Whissels, the Veronica Figueroas, so many people that are the primary agents and they ain't leaving the eXp. There's no way that Zillow can do anything to displace those people. But what if Zillow made a move? Maybe they turned into a brokerage. What happens then? Can we create enough consumer behavior? Can we create enough stuff around us that if Zillow decided to take aim at the entire industry and tried to take every brokerage on that we've got the ability to pivot and go? That was nice. If Amazon decided to get residential real estate, I think that would be crazy. That could disrupt stuff. But I don't think they are thinking about residential real estate as their next play.

Deidre Woollard: But there has always been a rumor about Amazon and real estate. I know the latest thing that I'm hearing is Walmart going into mortgages.

Glenn Sanford: They might, but for us, that wouldn't affect us that much. But I think that Walmart they've tried multiple times. I think West USA and Arizona was partnered with Costco for a while. Some different brokerages have tried to align with some of these other businesses. At the end of the day, it really didn't change behavior of consumers because consumers are actually more interested in working with agents they know, like, and trust than with a big box. What's the service level of a Walmart employee versus an agent that you've known for a number of years? Who are you going to use? Are you going to use the Walmart person or are you going to use the person that you've built a relationship with?

Tim Beyers: That's fair. Let's get into some questions here. These are from members. We got three. Go ahead Fools. If you've got questions for Glenn, go ahead and throw them into the Q&A so we can start asking questions here. We're going to start right at the top here, Glenn. No surprise because we have a lot of tech-interested members at The Motley Fool and Patrick says, "I'm really interested in the Virbela aspect of this business. I'm glad Deidre asked about it. Specifically, I read that talking specifically about eXp considering spinning it off because of its potential. What are the pros and cons of spinning it off?" First of all, Glenn, is that something you'd even entertain? Second of all, what are the pros and cons of spinning it off if you would entertain it?

Glenn Sanford: We actually looked at it last year. We looked at the potential of spinning it off. The thing that we found is that from a tax perspective, we have to own that asset and it has to be in its own operating LLC for a period of five years in order for it to not be credit tax consequent. Let's say we spun it off and we distributed it like shares as a second share, everybody would actually be taxed on that. But if we own it for more than five years, then we can spin it off and create no tax consequence. 2023 is when that time frame comes up. November 2023, I think is the date when our five years is up. We know the date. Certainly, if there is somebody that came to us with the right type of thing, we've talked to a number of folks that are very interested in the Virbela platform to be investors, specifically in that enterprise because that's where they could care less about residential real estate. But they love WebXR and virtual worlds. It's the most robust virtual world for a work platform that exists in the industry today and it's only because we were keeping it alive for our use when nobody was really excited about that stuff and then COVID hit and now everybody is excited about it.

Tim Beyers: That makes sense. Before I move onto the next question here, I wanted to probe a little bit further on that. How do you plan as part of your portfolio of eXp ideas and properties, which as Deidre mentioned now includes Success magazine, how do you put capital to work in Virbela? Is it completely distinct and it has a distinct team and they have a budget and they just manage that or you have a plan with the team and then you are injecting certain amounts of eXp capital to grow that? How is it working? How do you think about expanding it?

Glenn Sanford: We try as best we can to use management models that are more akin to Netflix and sort of a no rules rules approach to business. Virbela runs pretty autonomous to the rest of the organization. I'm chief strategy officer for Virbela but I'm definitely not active in the day-to-day because of all the other stuff that we're doing at eXp World Holdings. But we're looking at, are there pivots need to be remade? Are there some key hires that we should bring into Virbela to help monetize or maximize the opportunity there? But we've got close to 150 employees that just work for Virbela. That's 100 percent what they do. They're working underneath Alex Howland and the entire leadership team there. But we come in as we're asked by Virbela, to come in and help them with various things. If they want some ideas on marketing or direction or capital, or what have you, and we keep on funding inside the overall scheme of things. It's not huge, but we are putting money into Virbela every month to continue to invest in. But like Jeff Whiteside, our CFO and Chief Collaboration Officer and I talk quite a bit about what should we be looking at and how should we be thinking about Virbela, and then we'll go back to Virbela team and take those ideas and say, "Okay, here are some things that you guys got to hit KPI-wise." But most of them have to do with net promoter score. That's our biggest single decision-making tool. But we also want to make sure that the customer base is actually growing, otherwise, why have 150 employees?

Tim Beyers: Newby is asking, "I'm curious about how eXp focuses on ESG; environmental, societal, and governmental or governments' aspects to make sure the platform is a win-win for everybody involved in a real estate transaction, buyers, sellers, agents, etc." Can you give us your view on this idea of stakeholder capitalism? How do you think about it?

Glenn Sanford: Well, we're the most environmentally friendly real estate brokerage on the planet. We have no physical offices, so if you think about 48,000 agents for every 100 people, it creates a million pounds of CO2 a year by basically driving back and forth to an office, you multiply that by times 480, we have 480 million pounds of CO2 pollution that's not being created because we don't have any physical offices. If you think about just environmental capitalism, I mean, I can't think of another real estate brokerage that even remotely comes close to our model in terms of just overall sustainability to the planet. That's the first piece of it, when we think about things like our leadership team, we continue to find ways to put more women into positions of leadership. We've got one of the first, and I think you know, this was the case, but Fee Gentry, who's a black female, she's on our Board of Directors. She's also an agent with us. She's on our board on a Nasdaq listed company. When we added her to our board last year in 2020 and she was there ringing the bell at Nasdaq with us because we knew we were going to bring her on board later on the year and then, of course, all the George Floyd stuff and everything else happened and was just the same time she was being added to the board at the shareholders meeting that year. But when she was out of the board, people came out of the woodwork saying, "This is incredible. You're now being recognized on a board." For me, it was just like this is just what you do, I don't think this is that earth-shattering stuff that you need to do as a CEO, certainly, I'm a 50-year-old white male, so I'm like, you don't want to be leaving company in today's society. But it is what it is. But I'm trying to always figure out ways to promote those who are from an opportunity perspective, more opportunities, and I love that. That gets me going because I think those are just problems that are just fun to solve, not just that, the right thing to do, but they're actually interesting ways to think about solving businesses.

Deidre Woollard: Excellent. Thank you. We've got it. Our next question is from Max who says, "Glenn, I work as a loan officer at a local bank. On your note about someone not working with a large company like Walmart, won't that eventually become the same for you as you grow the craft beer problem as you lose that small company charm?"

Glenn Sanford: I think that is always a challenge, when you may think about whether you're using Walmart as an example. One time, Sam Walton had one place. That was a deal, and then he expanded and now Walmart is Walmart. He figured out that just-in-time inventory was a pretty powerful paradigm in his model. For us, we think about agent compensation as being the big driver for growing this model, and I want to stay involved as long as I possibly can in growing this model. I think about founder-led businesses that work as being something that does keep the original charm of business. We're going to grow this and I'm going to be doing this probably for the next 10 years in some capacity. I think that's an important component to culture and collaboration and community, and hopefully, we get some great people. I know we already have some great people that will continue to steward the company even after I'm no longer running the company and can keep our focus on, like I just had a conversation earlier today about how making decisions that are good for our agents, brokers, staff, and customers are the most important decisions that we can make. Yet you've got other companies that literally think about, if they 'weaponize' the word shareholders, meaning we need to reduce costs and we need to maximize margins and guess what, they have no customers. Did the shareholders win in that whole equation, or does taking care of your customer and employees actually help the shareholder win? I believe the latter is the way to run a company, and so I'm always taking care of my agents, my brokers, staff, and then ultimately the shareholders win because we made the right decisions for the right reasons.

Tim Beyers: I think we agree with you on that one. Randy, here's the last question in the chat here. "What's the difference between what Glenn just described and a Zoom meeting or conference, I did not understand the nuance?" You talked specifically about Virbela here. I wondered maybe the way we can frame this question is if somebody is your agents and they're outfitted to use Virbela, how big of an investment is that? Like we know Zoom just like, I got a computer, I got a camera, and that's all I need. What is the investment that's required to get started with Virbela for your agents?

Glenn Sanford: As long as they've got a macro PC, they can download their Virbela client to their computer, and then they just need a headset and a microphone to be able to walk into meetings and just see meetings taking place. If they've got a really crappy old computer with a really bad graphics card, it's not going to be a great experience for them. But nowadays, modern computers are pretty good at rendering 3D worlds and so it is a little bit more overhead in that, you have to actually learn how to use the platform. You have to actually learn how to navigate from room to room and to have random meet-up conversations with people. I think a lot of people are introverts when it comes to some of these technologies, so they'd rather sit in the background and just be observers, and so Zoom is in some respects better in that regard. But for those who are actually wanting to go in and have a conversation, grab somebody, ask them something, our platform is just so much more humane in the way that it's approached because you can literally walk up to me in the virtual world and start having a conversation with me. How often can you get to a large company CEO just as somebody who's attached to it in a virtual world? I talk to people every day, that are like going, "I can't believe I'm having a conversation with you," because it just makes me really accessible.

Tim Beyers: It does sound like serendipity, is one of the big difference here is. It's the difference between scheduling a call and having a serendipitous conversation which we used to have when we were in offices. Glenn, we're about out of time here. I really want to ask this question from MoontoMarstoPluto, first of all, because I love that name MoontoMarstoPluto. But I think it takes a little bit longer, I don't think we can ask you to go all the way through the customer journey in less than a minute. Let's ask this then before we handoff. What is something that we missed in this interview, or a company outside of real estate, I'll give you one of two choices: A company outside of real estate, you really deeply admire, or, something that we missed in this interview that we should have covered?

Glenn Sanford: Well, the easy one is the company I really admire, Netflix. Reed Hastings, the most recent part that he was involved in no rules rules. I keep on studying Netflix. We don't have any vacation policies. Our budget policy is acting eXp's best interest. We're just operating from a place of empowering people, actually do the right thing for the right reasons. That's our aspirational goal because we don't do that always, the right way and we're always trying to work toward that vision. But for us, we were very much about aligned autonomy and helping people live their best lives even as staff inside of the company.

Tim Beyers: All right. We're going to hand that off. That's Glenn Sanford, the CEO of the eXp World Holdings. Glenn, thank you so much. We really appreciate it.

Glenn Sanford: Thanks, Tim. Thanks, Deidre. I really appreciate it as well.

Deidre Woollard has no position in any of the stocks mentioned. The Motley Fool owns shares of eXp World Holdings. The Motley Fool has a disclosure policy.