Fathom Holdings Reveals New Plans Amid Q2 Revenue Decline

Fathom Holdings Inc. (FATH) Quarterly Update

Fathom Holdings Inc., a national real estate brokerage, reported a decline in total revenue for the second quarter of 2024. Despite this downturn, the company is optimistic about future growth, having launched two new commission plans—Fathom Max and Fathom Share—to improve agent recruitment and retention.

Although revenue fell, Fathom managed to achieve a positive adjusted EBITDA and recorded a 12% growth in its real estate agent network. The mortgage division saw impressive revenue growth, while the sale of its insurance business contributed $15 million in cash to its balance sheet.

Key Highlights:

• Fathom introduced the Fathom Max and Fathom Share commission plans to attract and retain real estate agents.
• Total revenue for Q2 2024 decreased by 10.9% to $89.2 million, while adjusted EBITDA was positive at $189,000.
• The real estate agent network expanded by 12%, reaching approximately 12,224 licensed agents.
• The mortgage business experienced an 85% revenue increase, totaling $3.7 million.
• The insurance business was sold for $15 million, which has bolstered Fathom’s financial position.
• The company plans to reassess its financial guidance in Q4 2024 due to the impact of new revenue-sharing models.

Outlook:

Fathom is focused on sustainable growth and enhanced profitability through its new commission structures and diversified services. The company aims for positive cash flow and an agent growth rate of 30% or higher, preparing for potential industry shifts irrespective of a housing market recovery.

Areas of Concern:

• Total revenue and gross profit both declined in Q2 2024, with decreases of 11% and 8.6%, respectively.
• Financial impacts from the new revenue-sharing models are expected to become more evident starting in Q1 of the following year.

Positive Developments:

• Decreasing mortgage rates have positively influenced home sales.
• The mortgage business saw substantial revenue growth.
• There has been a strong positive response to the new commission plans, with projections for agent growth of 30% in future quarters.
• The insurance business sale strengthened the company’s cash reserves.

Challenges:

• Brokerage revenue decreased, contributing to overall revenue declines.
• Anticipated changes in gross profit margins and EBITDA are not expected to show significant improvements in the next two quarters.

Q&A Insights:

CEO Marco Fregenal discussed the prioritization of agent growth over real estate market recovery and highlighted the need for adaptability in light of recent industry changes. The company is undergoing negotiations related to an industry lawsuit and expects to provide updates soon.

Closing Remarks:

Fathom Holdings is confident in its growth trajectory, reinforced by positive feedback on its new commission structures and a commitment to pioneering innovative strategies in the real estate market. The leadership team remains focused on solidifying its financial health while continuing to support its agents effectively.