In a definitive move, eXp World Holdings, Inc. (NASDAQ:EXPI), a Delaware-based real estate services firm with annual revenue of $4.46 billion, has agreed to a $34 million settlement to resolve a national class action lawsuit, as disclosed in a recent 8-K filing with the Securities and Exchange Commission.
According to InvestingPro data, the company maintains a strong balance sheet with more cash than debt, suggesting its ability to handle the settlement costs. The lawsuit, initiated by 1925 Hooper LLC and others, had been pending in the United States District Court for the Northern District of Georgia.
The settlement, reached on December 9, 2024, aims to put to rest allegations against eXp World Holdings and its subsidiaries, including eXp Realty, LLC, and various California-based entities. The agreement stipulates that eXp World Holdings will pay half of the settlement amount within 30 business days following preliminary court approval, expected in the first or second quarter of 2024. The remaining 50% is due by the one-year anniversary of the initial payment.
As part of the settlement, eXp World Holdings has also committed to making specific changes in its business practices. These modifications include reinforcing policies that allow agents to make or accept offers of compensation independently and ensuring that agents disclose to clients that commissions are negotiable and not fixed by law.
Furthermore, eXp will require agents to disclose the listing broker’s offer of compensation to buyers and prohibit the sorting of listings by compensation offers unless requested by a client.
The settlement agreement, which is still subject to court approval, is not to be construed as an admission of liability or validation of any claims. The company has emphasized that the measures taken are not concessions of any legal point but rather a move to resolve the dispute amicably.
This settlement is expected to result in a pre-tax charge of $34 million for eXp World Holdings, impacting the company’s financial statements. While the company’s current ratio of 1.4 indicates sufficient liquidity to meet short-term obligations, the settlement comes at a time when the company faces profitability challenges. However, the company maintains that the adjustments to its business practices align with its long-standing policies and are designed to support the industry’s best practices.
Investors and market watchers should note that the final outcome is contingent upon court approvals, and the terms outlined in the settlement could be subject to change. Looking ahead, InvestingPro analysts project the company will return to profitability this year, with a strong free cash flow yield of 12%. For deeper insights into EXPI’s financial health and growth prospects, including 18 additional ProTips and comprehensive valuation metrics, investors can access the full Pro Research Report on InvestingPro’s platform.
In other recent news, eXp World Holdings has made headlines with its financial results and strategic moves.
The company reported a slight growth in revenue to $1.231 billion in Q3 2024, a 2% year-over-year increase. The adjusted EBITDA also rose by 15%, reaching $23.9 million. However, the company faced a GAAP net loss of $8.5 million due to an $18 million contingency provision for an ongoing antitrust lawsuit.
In a significant development, eXp sold key assets from its Virbela software platform to Virbela LLC, a company owned by eXp’s former Co-Founder and President Alex Howland and Co-Founder and Vice President, Engineering, Erik Hill. Additionally, the Board of Directors approved a Ninth Amendment to the company’s stock repurchase plan, adjusting the monthly repurchase amounts through the end of 2025.
Despite challenges in the U.S. real estate market, eXp experienced a significant 63% growth in its international sector’s revenue and plans to expand into Turkey, Peru, and Egypt in early 2025. The company also launched homehunter.global and acquired LUXVT to enhance its luxury market offerings. Despite a 4% decrease in agent count, eXp remains optimistic about future growth opportunities in the real estate market.
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