– Fathom's Real Estate Agent Network Grew 12%
to ~12,224 Agent Licenses; Aiming to Return to 30% Agent Growth in
Coming Quarters
CARY,
N.C., Aug. 12, 2024 /PRNewswire/
-- Fathom Holdings Inc. (Nasdaq: FTHM) ("Fathom"
or the "Company"), a national, technology-driven, end-to-end
real estate services platform integrating residential
brokerage, mortgage, title, and SaaS offerings for brokerages and
agents, today reported financial results for the second quarter and
the first six months of 2024.
![Fathom's New Agent Plans Fathom's New Agent Plans](https://mma.prnewswire.com/media/2480256/Fathom_New_Agent_Plans.jpg)
"In the last few months, we have made significant progress
toward achieving our goals for this year," said Fathom Holdings CEO
Marco Fregenal. "First, we
achieved overall positive Adjusted EBITDA for the quarter, and more
importantly, our real estate, mortgage, and title brands achieved
positive Adjusted EBITDA. Second, we recently launched what we
believe to be the most innovative revenue share program in the
industry. Our mission has always been to empower Fathom agents to
earn and retain more of their hard-earned money. Our new revenue
share plans are a natural extension of this commitment. By offering
two revenue share options—either through a split or a flat fee
model—we provide agents with the flexibility to choose the best fit
for their businesses. These additional income streams ensure our
agents have the tools and opportunities to thrive in any market
condition. Looking ahead, our focus remains on growth initiatives
and exploring additional opportunities to attract high-quality
agents, teams, and brokerages. Supported by a compelling value
proposition and a robust pipeline of opportunities, our goal is to
return to 30% agent growth in the coming quarters."
Second Quarter 2024 Financial Results
Fathom's real estate agent network grew 12% to approximately
12,224 agent licenses at June 30,
2024 from approximately 10,930 agent licenses at
June 30, 2023.
Fathom completed approximately 10,137 transactions for the
second quarter of 2024, a decrease of approximately 8% compared to
the second quarter of 2023. Real estate transactions decreased
primarily due to the continuation of high mortgage interest rates
in the second quarter of 2024. Fathom is addressing this decline by
continuing its strategic recruiting efforts, powered by its
recently announced new revenue share models and its service
commitment to its agents.
Total revenue for the second quarter of 2024 decreased 11% to
$89.2 million, compared to
$100.1 million in the second quarter
of 2023. The decrease in total revenue was due to a 12% decrease in
brokerage revenue resulting primarily from fewer transactions and
an increase in lease transactions compared to sale transactions.
Offsetting the decline in total revenue was an 11% increase in
other service revenue, driven by improved performance from Fathom's
mortgage and title businesses, offset by the absence of the
Company's insurance business, which was sold on May 3, 2024.
Segment revenue for the 2024 second quarter, compared with
the 2023 second quarter was as follows:
|
Three months
ended
June 30,
|
($ in
millions)
|
2024
|
|
2023
|
|
UNAUDITED
|
Real Estate
Brokerage
|
$
83.1
|
|
$
94.7
|
Mortgage
|
3.7
|
|
2.0
|
Technology
|
1.1
|
|
0.8
|
Corporate and other
services (a)
|
1.3
|
|
2.6
|
Total
revenue
|
$
89.2
|
|
$
100.1
|
|
|
(a)
|
Transactions between
segments are eliminated in consolidation. Such amounts are
eliminated through the Corporate and other services
line.
|
Our brokerage business gross profit percentage remained
relatively constant at 6% for the second quarter of 2024 compared
to the second quarter of 2023. Excluding our insurance business,
the gross profit percentage in our ancillary businesses dipped
slightly to 53% in the second quarter of 2024 from 57% in the
second quarter of 2023 primarily related to ramp-up costs
associated with expanding our mortgage and title businesses. Our
overall gross profit percentage, excluding our insurance business
improved to 9% in the second quarter of 2024, up from 8% in the
second quarter of 2023.
GAAP net loss for the second quarter of 2024 totaled
$1.3 million, or $0.07 per share, an improvement compared with a
loss of $4.3 million, or $0.27 per share, for the second quarter of 2023.
The significant reduction in net loss was primarily due to the gain
generated from the sale of the Company's insurance business and
improved net operating results, partially offset by an increase in
non-operating expenses.
Adjusted EBITDA*, a non-GAAP measure, for the second quarter of
2024 totaled $0.2 million, compared
to $0.5 million in the second quarter
of 2023. The second quarter of 2024 marked the Company's first
positive Adjusted EBITDA* quarter since the second quarter of
2023.
First Six Months of 2024 Financial Results
Real estate transactions declined approximately 11%
year-over-year to 17,446 transactions in the first half of 2024.
The decline in real estate transactions was primarily due to the
continuation of high interest rates in the first half of 2024.
Fathom is addressing the decline by continuing its strategic
recruiting efforts, powered by its recently announced new revenue
share models and its service commitment to its agents.
Total revenue for the first six months of 2024 decreased 11% to
$159.7 million, compared to
$177.6 million for the first six
months of 2023. The decrease in total revenue was due to an 11%
decrease in brokerage revenue resulting primarily from fewer
transactions and an increase in lease transactions compared to sale
transactions. The decline in total revenue was partially offset by
a 14% increase in Fathom's other service revenue, particularly
attributable to Fathom's mortgage business, offset by the absence
of approximately two months of revenues from the Company's
insurance business, which was sold on May 3,
2024.
Segment revenue for the 2024 first six months, compared with the
2023 first six months was as follows:
|
Six months
ended
June 30,
|
($ in
millions)
|
2024
|
|
2023
|
|
UNAUDITED
|
Real Estate
Brokerage
|
$
148.5
|
|
$
167.8
|
Mortgage
|
5.9
|
|
3.5
|
Technology
|
2.2
|
|
1.5
|
Corporate and other
services (a)
|
3.1
|
|
4.8
|
Total
revenue
|
$
159.7
|
|
$
177.6
|
|
|
(a)
|
Transactions between
segments are eliminated in consolidation. Such amounts are
eliminated through the Corporate and other services
line.
|
Gross profit percentages for the first six months of 2024
compared to the same period in 2023 were similar to the
quarter-to-date comparisons, excluding the Company's insurance
business, which was sold in May 2024.
Fathom's brokerage gross profit remained relatively constant at 6%,
while its ancillary businesses' gross profit percentage decreased
slightly to 52% from 55%. The Company's overall gross profit
percentage improved to 9% from 8%.
GAAP net loss for the first six months of 2024 totaled
$7.2 million or $0.37 per share, compared with a loss of
$10.0 million, or $0.63 per share, for the first six months of
2023. The significant reduction in net loss was primarily due to
the gain generated from the sale of the Company's insurance
business and improved net operating results, partially offset by an
increase in non-operating expenses.
Adjusted EBITDA* loss, a non-GAAP measure, was $1.3 million in the first six months of 2024,
compared with an Adjusted EBITDA* loss of approximately
$0.9 million for the first six months
of 2023. The Adjusted EBITDA* loss for the first six months of 2024
was primarily attributable to the lower total contribution from the
Company's brokerage business due to fewer closed transactions,
partially offset by growth in the Company's mortgage business.
*Fathom provides Adjusted EBITDA, a non-GAAP financial
measure, because it offers additional information for monitoring
the Company's cash flow performance. A table providing a
reconciliation of Adjusted EBITDA to its most comparable GAAP
measure, as well as an explanation of, and important disclosures
about, this non-GAAP measure, is included in the tables at the end
of this press release.
Q2 2024 and Recent Highlights
- In August 2024, the Company
introduced two innovative agent commission plans, Fathom Max and
Fathom Share, complementing its existing plan and showcasing Fathom
Realty's reimagined revenue share program. The strategic initiative
is designed to enhance agent recruitment and retention, drive
accelerated and sustainable growth, and boost long-term
profitability for the Company, while reinforcing Fathom's
commitment to providing flexible, attractive options for real
estate professionals.
- In May 2024, the Company
strengthened its financial position by selling its wholly owned
subsidiary, Dagley Insurance Agency, for approximately $15.0 million in cash, with $7.8 million received at closing, significantly
bolstering its balance sheet.
- In April 2024, Fathom Realty
launched Verus Title Elite, a strategic joint venture partnering
with top-producing agents and teams across Texas. The initiative is expected to drive
increased revenue and profitability for both Verus Title and Fathom
Realty, further strengthening the Company's market position in the
title services sector.
Financial Outlook
In light of the recent introduction of two new revenue share
models and their yet-to-be-determined impact on future revenues and
Adjusted EBITDA, the Company has elected to withhold guidance for
the third quarter ending September 30,
2024. Management plans to reassess and potentially reinstate
guidance expectations in the fourth quarter of 2024, allowing time
to evaluate the performance of these new models.
Conference Call
Fathom management will hold a conference call at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) today (August 12, 2024) to discuss these financial
results.
U.S. dial-in: 1-833-685-0908
International dial-in: 1-412-317-5742
Please call the conference telephone number five minutes prior
to the start time. An operator will register your name and
organization.
A live audio webcast of the conference call will be available in
listen-only mode simultaneously and available via the investor
relations section of the Company's website
at www.FathomInc.com.
A telephone replay of the call will be available through
August 19, 2024.
U.S. replay dial-in: 1-877-344-7529
International replay dial-in: 1-412-317-0088
Replay ID: 6483169
About Fathom Holdings Inc.
Fathom Holdings Inc. is a national, technology-driven, real
estate services platform integrating residential brokerage,
mortgage, title, and SaaS offerings to brokerages and agents by
leveraging its proprietary cloud-based software, intelliAgent. The
Company's brands include Fathom Realty, Encompass Lending,
intelliAgent, LiveBy, Real Results, Verus Title, and Cornerstone.
For more information, visit www.FathomInc.com.
Cautionary Note Concerning Forward-Looking
Statements
This press release contains "forward-looking
statements" that involve risks and uncertainties which we expect
will or may occur in the future and may impact our business,
financial condition and results of operations. Forward-looking
statements are subject to numerous conditions, many of which are
beyond the control of the Company, including: risks associated with
general economic conditions, including rising interest rates; its
ability to generate positive operational cash flow; risks
associated with the Company's ability to continue achieving
significant growth; its ability to continue its growth trajectory
while achieving profitability over time; risks related to ongoing
and future litigation; and other risks as set forth in the Risk
Factors section of the Company's most recent Form 10-K as filed
with the SEC and supplemented from time to time in other Company
filings made with the SEC. Copies of Fathom's Form 10-K and other
SEC filings are available on the SEC's website, www.sec.gov. The
Company undertakes no obligation to update these statements for
revisions or changes after the date of this release, except as
required by law.
Investor Contact:
Matt Glover
Gateway Group, Inc.
949-574-3860
FTHM@gateway-grp.com
FATHOM HOLDINGS
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(in thousands, except
share data)
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June 30,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
Gross commission
income
|
$
83,125
|
|
$
94,633
|
|
$
148,510
|
|
$
167,803
|
Other service
revenue
|
6,082
|
|
5,456
|
|
11,200
|
|
9,827
|
Total
revenue
|
89,207
|
|
100,089
|
|
159,710
|
|
177,630
|
Operating
expenses
|
|
|
|
|
|
|
|
Commission and other
agent-related costs
|
78,045
|
|
88,892
|
|
139,212
|
|
158,064
|
Operations and
support
|
2,676
|
|
1,904
|
|
4,785
|
|
3,518
|
Technology and
development
|
1,906
|
|
1,875
|
|
3,856
|
|
3,453
|
General and
administrative
|
8,904
|
|
9,908
|
|
18,506
|
|
19,219
|
Marketing
|
759
|
|
927
|
|
1,359
|
|
1,644
|
Depreciation and
amortization
|
546
|
|
820
|
|
1,274
|
|
1,515
|
Total operating
expenses
|
92,836
|
|
104,326
|
|
168,992
|
|
187,413
|
Gain on sale of
business
|
(2,958)
|
|
—
|
|
(2,958)
|
|
—
|
Loss from
operations
|
(671)
|
|
(4,237)
|
|
(6,324)
|
|
(9,783)
|
Other expense (income),
net
|
|
|
|
|
|
|
|
Interest expense,
net
|
109
|
|
79
|
|
214
|
|
63
|
Other nonoperating
expense
|
520
|
|
4
|
|
672
|
|
163
|
Other expense,
net
|
629
|
|
83
|
|
886
|
|
226
|
Loss before income
taxes
|
(1,300)
|
|
(4,320)
|
|
(7,210)
|
|
(10,009)
|
Income tax expense
(benefit)
|
(6)
|
|
25
|
|
11
|
|
37
|
Net loss
|
$
(1,294)
|
|
$
(4,345)
|
|
$
(7,221)
|
|
$
(10,046)
|
Net loss per
share:
|
|
|
|
|
|
|
|
Basic
|
$
(0.07)
|
|
$
(0.27)
|
|
$
(0.37)
|
|
$
(0.63)
|
Diluted
|
$
(0.07)
|
|
$
(0.27)
|
|
$
(0.37)
|
|
$
(0.63)
|
Weighted average common
shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
19,763,055
|
|
16,023,981
|
|
19,470,764
|
|
16,017,560
|
Diluted
|
19,763,055
|
|
16,023,981
|
|
19,470,764
|
|
16,017,560
|
|
The accompanying notes
are an integral part of the condensed consolidated financial
statements.
|
FATHOM HOLDINGS
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands, except
share data)
|
|
|
June 30,
2024
|
|
December 31,
2023
|
|
(UNAUDITED)
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
10,439
|
|
$
7,399
|
Restricted
cash
|
341
|
|
141
|
Accounts
receivable
|
3,919
|
|
3,352
|
Other receivable -
current
|
4,000
|
|
—
|
Mortgage loans held for
sale, at fair value
|
10,371
|
|
8,602
|
Prepaid and other
current assets
|
4,854
|
|
3,700
|
Total current
assets
|
33,924
|
|
23,194
|
Property and equipment,
net
|
2,015
|
|
2,340
|
Lease right of use
assets
|
4,470
|
|
4,150
|
Intangible assets,
net
|
17,419
|
|
23,909
|
Goodwill
|
19,344
|
|
25,607
|
Other receivable -
long-term
|
3,000
|
|
—
|
Other assets
|
48
|
|
58
|
Total assets
|
$
80,220
|
|
$
79,258
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
4,866
|
|
$
3,396
|
Accrued and other
current liabilities
|
2,639
|
|
2,681
|
Warehouse lines of
credit
|
10,085
|
|
8,355
|
Lease liability -
current portion
|
1,199
|
|
1,504
|
Long-term debt -
current portion
|
3,497
|
|
416
|
Total current
liabilities
|
22,286
|
|
16,352
|
Lease liability, net of
current portion
|
4,363
|
|
3,824
|
Long-term debt, net of
current portion
|
91
|
|
3,467
|
Other long-term
liabilities
|
344
|
|
381
|
Total
liabilities
|
27,084
|
|
24,024
|
Commitments and
contingencies (Note 17)
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock (no par
value, shares authorized, 100,000,000; shares issued and
outstanding,
21,007,879 and
20,671,515 as of June 30, 2024 and December 31, 2023,
respectively)
|
-
|
|
-
|
Additional paid-in
capital
|
131,943
|
|
126,820
|
Accumulated
deficit
|
(78,807)
|
|
(71,586)
|
Total stockholders'
equity
|
53,136
|
|
55,234
|
Total liabilities and
stockholders' equity
|
$
80,220
|
|
$
79,258
|
|
The accompanying notes
are an integral part of the condensed consolidated financial
statements.
|
FATHOM HOLDINGS
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in
thousands)
|
|
|
Six Months
Ended June 30,
|
|
2024
|
|
2023
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
Net loss
|
$
(7,221)
|
|
$
(10,046)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation and
amortization
|
2,799
|
|
2,867
|
Gain on sale of
business
|
(2,958)
|
|
—
|
Non-cash lease
expense
|
920
|
|
720
|
Deferred financing
cost amortization
|
—
|
|
21
|
Gain on sale of
mortgages
|
(3,153)
|
|
(1,882)
|
Stock-based
compensation
|
5,151
|
|
6,005
|
Deferred income
taxes
|
(37)
|
|
8
|
Change in
operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(658)
|
|
(1,252)
|
Prepaid and
other current assets
|
(1,222)
|
|
111
|
Other
assets
|
10
|
|
(6)
|
Accounts
payable
|
1,642
|
|
1,359
|
Accrued and
other current liabilities
|
308
|
|
369
|
Operating lease
liabilities
|
(1,005)
|
|
(800)
|
Mortgage loans
held for sale originations
|
(131,460)
|
|
(85,461)
|
Proceeds from
sale and principal payments on mortgage loans held for
sale
|
132,843
|
|
83,250
|
Net cash used in
operating activities
|
(4,041)
|
|
(4,737)
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
Purchase of property
and equipment
|
(12)
|
|
(10)
|
Purchase of intangible
assets
|
(1,193)
|
|
(899)
|
Proceeds from sale of
business
|
7,435
|
|
—
|
Amounts paid for
business and asset acquisitions, net of cash acquired
|
(130)
|
|
—
|
Net cash provided by
(used in) investing activities
|
6,100
|
|
(909)
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
Principal payments on
debt
|
(295)
|
|
(491)
|
Borrowings from
warehouse lines of credit
|
127,913
|
|
69,920
|
Repayment on warehouse
lines of credit
|
(126,184)
|
|
(66,008)
|
Deferred acquisition
consideration payments
|
(225)
|
|
(284)
|
Proceeds from note
payable, net $200 in loan costs
|
—
|
|
3,300
|
Payment of offering
cost in connection with issuance of common stock in connection with
public offering
|
(28)
|
|
—
|
Net cash provided by
financing activities
|
1,181
|
|
6,437
|
Net increase in cash,
cash equivalents, and restricted cash
|
3,240
|
|
791
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
7,540
|
|
8,380
|
Cash, cash equivalents,
and restricted cash at end of period
|
$
10,780
|
|
$
9,171
|
|
|
|
|
Supplemental
disclosure of cash and non-cash transactions:
|
|
|
|
Cash paid for
interest
|
$
199
|
|
$
21
|
Other receivables
related to sale of business
|
$
7,000
|
|
$
—
|
Right of use assets
obtained in exchange for new lease liabilities
|
$
1,572
|
|
$
144
|
Reconciliation of cash
and restricted cash:
|
|
|
|
Cash and cash
equivalents
|
$
10,439
|
|
$
9,099
|
Restricted
cash
|
341
|
|
78
|
Total cash, cash
equivalents, and restricted cash shown in statement of cash
flows
|
$
10,780
|
|
$
9,177
|
|
The accompanying notes
are an integral part of the condensed consolidated financial
statements.
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
(In
thousands)
|
|
|
Three Months
Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Net loss
|
$
(1,294)
|
|
$
(4,345)
|
|
$
(7,221)
|
|
$
(10,046)
|
Gain on sale of
business
|
(2,958)
|
|
-
|
|
(2,958)
|
|
-
|
Stock based
compensation
|
2,499
|
|
3,185
|
|
5,151
|
|
6,005
|
Depreciation and
amortization
|
1,319
|
|
1,510
|
|
2,799
|
|
2,867
|
Other expense,
net
|
629
|
|
83
|
|
886
|
|
226
|
Income tax expense
(benefit)
|
(6)
|
|
25
|
|
11
|
|
37
|
Adjusted
EBITDA
|
$
189
|
|
$
458
|
|
$
(1,332)
|
|
$
(911)
|
Note about Non-GAAP Financial Measures
To supplement Fathom's consolidated financial statements, which
are prepared and presented in accordance with GAAP, the Company
uses Adjusted EBITDA, a non-GAAP financial measure, to understand
and evaluate our core operating performance. This non-GAAP
financial measure, which may be different than similarly titled
measures used by other companies, is presented to enhance
investors' overall understanding of our financial performance and
should not be considered a substitute for, or superior to, the
financial information prepared and presented in accordance with
GAAP.
Fathom defines the non-GAAP financial measure of Adjusted EBITDA
as net income (loss), excluding other income and expense, income
taxes, depreciation and amortization, share-based compensation
expense, and transaction-related cost.
Fathom believes that Adjusted EBITDA provides useful information
about the Company's financial performance, enhances the overall
understanding of its past performance and future prospects, and
allows for greater transparency with respect to a key metric used
by Fathom's management for financial and operational
decision-making. Fathom believes that Adjusted EBITDA helps
identify underlying trends in its business that otherwise could be
masked by the effect of the expenses that the Company excludes in
Adjusted EBITDA. In particular, Fathom believes the exclusion of
share-based compensation expense and transaction-related costs
associated with the Company's acquisition activity, provides a
useful supplemental measure in evaluating the performance of its
operations and provides better transparency into its results of
operations. Adjusted EBITDA also excludes other income and expense,
net which primarily includes nonrecurring items, such as, minor
legal settlement claims, severance costs, professional fees related
to investigating potential financing opportunities, if
applicable.
Fathom is presenting the non-GAAP measure of Adjusted EBITDA to
assist investors in seeing its financial performance through the
eyes of management, and because the Company believes this measure
provides an additional tool for investors to use in comparing
Fathom's core financial performance over multiple periods with
other companies in its industry.
Adjusted EBITDA should not be considered in isolation from, or
as a substitute for, financial information prepared in accordance
with GAAP. There are a number of limitations related to the use of
Adjusted EBITDA compared to net income (loss), the closest
comparable GAAP measure. Some of these limitations are that:
- Adjusted EBITDA excludes share-based compensation expense
related to restricted stock and restricted stock unit awards and
stock options, which have been, and will continue to be for the
foreseeable future, significant recurring expenses in Fathom's
business and an important part of its compensation strategy;
- Adjusted EBITDA excludes transaction-related costs primarily
consisting of professional fees and any other costs incurred
directly related to acquisition activity, which is an ongoing part
of Fathom's growth strategy and therefore likely to occur; and
- Adjusted EBITDA excludes certain recurring, non-cash charges
such as depreciation and amortization of property and equipment and
capitalized software, and acquisition related intangible asset
costs, however, the assets being depreciated and amortized may have
to be replaced in the future.
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SOURCE Fathom Holdings Inc.