Fathom Holdings Reports Fourth Quarter and Full Year 2023 Results
- Fathom's real estate agent network grew by 13.7% to 11,795 agent licenses in Q4 2023.
- Total revenue decreased by 11.2% to $74.1 million in Q4 2023.
- Adjusted EBITDA loss improved to $2.9 million in Q4 2023 compared to $5.9 million in Q4 2022.
- CEO Marco Fregenal highlights growth strategy and cost optimization for profitable growth in 2024.
- None.
Insights
The recent financial results from Fathom Holdings Inc. indicate a mixed performance amidst a challenging real estate market. The company's growth in agent licenses, up 13.7%, outpaces the industry's decline, suggesting effective recruitment and retention strategies. However, the overall decrease in transactions and total revenue, with a 11.2% dip year-over-year, reflects the broader market's downturn influenced by rising interest rates and home prices.
What catches the eye is the increased revenue in ancillary services, particularly the mortgage business, which grew by 19.1%. This diversification into mortgage services could be a strategic hedge against the volatility in real estate brokerage. The reduction in GAAP net loss by $1.5 million and the decrease in General and Administrative expenses by 6.3% reflect the company's cost-saving measures. However, the increase in stock compensation costs and interest and income tax expenses could be areas of concern for cash flow moving forward.
Adjusted EBITDA, while still negative, has shown improvement, which could be indicative of a more efficient operational model. Investors might view the commitment to achieving positive Adjusted EBITDA as a positive signal, but it is essential to monitor subsequent quarters to confirm a sustainable trend.
Fathom's strategic positioning within the real estate services industry, especially its investment in technology and ancillary services, is noteworthy. The company's resilience in transaction volume compared to the industry average suggests a competitive edge. However, it is vital to consider the broader economic context, with interest rates likely to continue influencing homebuyer behavior and the real estate market.
The company's focus on optimizing its cost structure could be a response to these macroeconomic pressures. It is also interesting to note that despite the revenue decrease in its primary brokerage service, the growth in ancillary services like mortgage suggests a pivot towards more stable revenue streams. The long-term success of this strategy will depend on the company's ability to maintain its service quality and competitive agent value proposition, which seems robust at the moment.
Investors should also consider the potential long-term benefits of the company's SaaS offerings for brokerages and agents, as these could lead to recurring revenue and increased market penetration. The balance between immediate cost savings and continued investment in growth areas will be critical for the company's future performance.
The real estate sector is highly sensitive to economic cycles and Fathom's performance must be assessed in light of the prevailing economic conditions, such as interest rate hikes and housing market dynamics. The company's ability to grow its agent network in a declining market is commendable and could be attributed to its value proposition and strategic growth initiatives.
However, the reduced transaction volume and revenue reflect the broader economic headwinds facing the industry. The emphasis on achieving positive Adjusted EBITDA is a prudent financial goal, but the path to this objective will be influenced by external economic factors, including monetary policy and consumer confidence.
Analysing the company's financial health requires a nuanced understanding of these external pressures and the company's internal strategies to mitigate them. The improved Adjusted EBITDA loss is a positive indicator, but continuous evaluation of the company's performance against the backdrop of economic trends is necessary for a comprehensive assessment.
– Company Targets Achieving and Remaining Adjusted EBITDA Positive Moving Forward –
"Throughout the year we remained focused on our growth strategy and took meaningful steps to better position Fathom for profitable growth in 2024," said Fathom CEO Marco Fregenal. "While the residential real estate industry remains challenging, we firmly believe that our future remains bright and by continuing to grow our agent base and optimize our cost structure, we are positioning Fathom for continued success as the industry rebounds. We believe we'll continue to attract high quality agent teams and brokerages going forward as our agent value proposition remains compelling in the current environment and our pipeline of opportunities remains robust. We're also seeing the benefits from the cost-reduction measures we've implemented and the new agent commission structure we announced last year, giving us increased confidence in our growth strategy and path to profitability."
Fourth Quarter 2023 Financial Results
Fathom's real estate agent network grew
For the overall industry, real estate transactions in the 2023 fourth quarter declined by
Fathom's total revenue decreased 11.2 % for the 2023 fourth quarter to
Segment revenue for the 2023 fourth quarter compared with the 2022 fourth quarter was as follows:
Revenue | ||||
Three months ended | ||||
(Revenue $ in millions) | 2023 | 2022 | ||
UNAUDITED | ||||
Real Estate Brokerage | $ 69.4 | $ 79.5 | ||
Mortgage | 1.8 | 1.3 | ||
Technology | 0.8 | 0.7 | ||
Corporate and other services (a) | 2.1 | 1.9 | ||
Total revenue | $ 74.1 | $ 83.4 | ||
(a) | Transactions between segments are eliminated in consolidation. Such amounts are eliminated through the Corporate and other services line. |
GAAP net loss for the 2023 fourth quarter was
General and Administrative expense totaled
Driven by many of the factors discussed above, Adjusted EBITDA loss, a non-GAAP measure, improved to
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.
Full Year 2023 Financial Results
Fathom's real estate agent network grew
Fathom completed approximately 38,139 real estate transactions in full year 2023, a
Total revenue for 2023 decreased by
Segment revenue for the 2023 full year, compared with the 2022 full year was as follows:
Revenue | ||||
Year Ended | ||||
(Revenue $ in millions) | 2023 | 2022 | ||
Real Estate Brokerage | $ 325.4 | $ 390.6 | ||
Mortgage | 7.2 | 9.6 | ||
Technology | 3.2 | 2.7 | ||
Corporate and other services (a) | 9.4 | 10.0 | ||
Total revenue | $ 345.2 | $ 412.9 | ||
(a) | Transactions between segments are eliminated in consolidation. Such amounts are eliminated through the Corporate and other services line. |
GAAP net loss for the full 2023 year was
General and Administrative expense totaled
Adjusted EBITDA loss was
Cash and cash equivalents at December 31, 2023 decreased to
2023 Highlights
- In 2023, our agents paid
$550 $500 $150 $99 - Fathom Realty expanded its operations in
California through the addition of Advance 1 McKeever Realty. Advance 1 McKeever Realty is an award-winning real estate brokerage with approximately 70 agents that provides a full range of services for buyers and sellers inStockton, California . - Fathom Realty further expanded in
California through the addition of Divine Properties Group, an exceptional brokerage firm with 17 agents inSan Francisco . - Fathom Realty expanded its operations in
Louisiana through the addition of Team Adkins Real Estate, a leading brokerage team inBaton Rouge with 13 agents. - Fathom Realty expanded its operations in
Massachusetts through the addition of Council Realty, a prominent name in Pioneer Valley with 22 agents. - Fathom appointed highly experienced real estate industry executive Steve Murray to the Company's board of directors.
- Fathom appointed independent director Scott Flanders as Chair of the Board of Directors.
- In November 2023, CFO Marco Fregenal succeeded Joshua Harley as CEO and will retain the CFO title until a new CFO is appointed.
- In April 2023, Fathom completed a
$3.5 million $3.3 million - In December 2023, the Company, completed an offering of common stock, which resulted in the issuance and sale by the Company of 2,450,000 shares of common stock, at a public offering price of
$2.00 $4.9 million $4.2 million
Q1 2024 and Recent Highlights
- Fathom Realty expanded into
Rhode Island . - Commencing January 1, 2024, the annual fee charged on an agent's first transaction of each anniversary year increased from
$600 $700 $600,000 $200 $600,000 $999,999 $250 $500,000 $1,000,000
Guidance/Long-Term Targets
Due to the continued uncertainty of the timing of anticipated interest rate cuts and other macroeconomic factors, such as changes in inflation and its impact on homebuyers, the Company will not be providing guidance at this time.
As previously noted, the Company remains focused on achieving positive Adjusted EBITDA for the full year 2024.
Without giving a timeline for reaching this target, the Company reiterated that it believes it can generate Adjusted EBITDA exceeding
Conference Call
Fathom management will hold a conference call at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) today to discuss its financial results for the fourth quarter and full year ended December 31, 2023.
Call Date: Thursday, March 14, 2024
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
International dial-in: 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 March 21, 2024.
International replay dial-in: 412-317-0088
Replay ID: 5634674
About Fathom Holdings Inc.
Fathom Holdings Inc. is a national, technology-driven, real estate services platform integrating residential brokerage, mortgage, title, insurance, and SaaS offerings to brokerages and agents by leveraging its proprietary cloud-based software, intelliAgent. The Company's brands include Fathom Realty, Dagley Insurance, 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; the Company's ability to generate positive operational cash flow; risks associated with the Company's ability to continue achieving significant growth; the Company's 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:
Alex Kovtun and Matt Glover
Gateway Group, Inc.
949-574-3860
FTHM@gateway-grp.com
FATHOM HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share data) | |||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
UNAUDITED | |||||||
Revenue | |||||||
Gross commission income | $ 69,355 | $ 79,540 | $ 325,405 | $ 390,615 | |||
Other service revenue | 4,717 | 3,897 | 19,821 | 22,349 | |||
Total revenue | 74,072 | 83,437 | 345,226 | 412,964 | |||
Operating expenses | |||||||
Commission and other agent-related costs | 66,261 | 77,009 | 308,094 | 372,246 | |||
Operations and support | 2,110 | 2,057 | 7,513 | 8,249 | |||
Technology and development | 2,040 | 1,565 | 7,609 | 7,715 | |||
General and administrative | 10,092 | 10,765 | 38,751 | 43,217 | |||
Marketing | 908 | 1,270 | 3,348 | 5,218 | |||
Depreciation and amortization | 758 | 859 | 3,164 | 3,096 | |||
Total operating expenses | 82,169 | 93,525 | 368,479 | 439,741 | |||
Loss from operations | (8,097) | (10,088) | (23,253) | (26,777) | |||
Other expense (income), net | |||||||
Interest expense (income), net | 94 | (15) | 245 | (11) | |||
Other nonoperating expense, net | 154 | 114 | 335 | 914 | |||
Other expense, net | 248 | 99 | 580 | 903 | |||
Loss before income taxes | (8,345) | (10,187) | (23,833) | (27,680) | |||
Income tax expense (benefit) | 94 | (239) | 148 | (54) | |||
Net loss | $ (8,439) | $ (9,948) | $ (23,981) | $ (27,626) | |||
Net loss per share: | |||||||
Basic | $ (0.50) | $ (0.63) | $ (1.47) | $ (1.73) | |||
Diluted | $ (0.50) | $ (0.63) | $ (1.47) | $ (1.73) | |||
Weighted average common shares outstanding: | |||||||
Basic | 16,946,525 | 15,845,111 | 16,265,993 | 16,001,367 | |||
Diluted | 16,946,525 | 15,845,111 | 16,265,993 | 16,001,367 | |||
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) | |||
December 31, | December 31, | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 7,399 | $ 8,320 | |
Restricted cash | 141 | 60 | |
Accounts receivable | 3,352 | 3,074 | |
Mortgage loans held for sale, at fair value | 8,602 | 3,694 | |
Prepaid and other current assets | 3,700 | 3,668 | |
Total current assets | 23,194 | 18,816 | |
Property and equipment, net | 2,340 | 2,945 | |
Lease right of use assets | 4,150 | 5,508 | |
Intangible assets, net | 23,909 | 27,259 | |
Goodwill | 25,607 | 25,607 | |
Other assets | 58 | 52 | |
Total assets | $ 79,258 | $ 80,187 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities: | |||
Accounts payable | $ 3,396 | $ 3,343 | |
Accrued and other current liabilities | 2,681 | 3,403 | |
Warehouse lines of credit | 8,355 | 3,580 | |
Lease liability - current portion | 1,504 | 1,609 | |
Long-term debt - current portion | 416 | 564 | |
Total current liabilities | 16,352 | 12,499 | |
Lease liability, net of current portion | 3,824 | 5,241 | |
Long-term debt, net of current portion | 3,467 | 129 | |
Other long-term liabilities | 381 | 297 | |
Total liabilities | 24,024 | 18,166 | |
Commitments and contingencies (Note 18) | |||
Stockholders' equity: | |||
Common stock (no par value, shares authorized, 100,000,000; shares issued and | - | - | |
Additional paid-in capital | 126,820 | 109,626 | |
Accumulated deficit | (71,586) | (47,605) | |
Total stockholders' equity | 55,234 | 62,021 | |
Total liabilities and stockholders' equity | $ 79,258 | $ 80,187 | |
The accompanying notes are an integral part of the condensed consolidated financial statements. | |||
FATHOM HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) | ||||
Year Ended December 31, | ||||
2023 | 2022 | |||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net loss | $ (23,981) | $ (27,626) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||
Depreciation and amortization | 5,947 | 5,346 | ||
Non-cash lease expense | 1,663 | 1,856 | ||
Deferred financing cost amortization | 71 | — | ||
Gain on sale of mortgages | (3,696) | (3,819) | ||
Stock-based compensation | 12,994 | 9,131 | ||
Deferred income taxes | 84 | 297 | ||
Change in operating assets and liabilities: | ||||
Accounts receivable | (278) | 485 | ||
Prepaid and other current assets | (232) | (958) | ||
Other assets | 195 | 78 | ||
Accounts payable | 53 | (1,959) | ||
Accrued and other current liabilities | (353) | (1,081) | ||
Operating lease liabilities | (1,827) | (1,867) | ||
Mortgage loans held for sale | (154,480) | (246,327) | ||
Proceeds from sale and principal payments on mortgage loans held for sale | 153,268 | 259,861 | ||
Net cash used in operating activities | (10,572) | (6,583) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Purchase of property and equipment | (22) | (945) | ||
Amounts paid for business and asset acquisitions, net of cash acquired | (35) | (1,639) | ||
Purchase of intangible assets | (1,811) | (3,112) | ||
Other investing activities | — | (1,400) | ||
Net cash used in investing activities | (1,868) | (7,096) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Principal payments on debt | (718) | 924 | ||
Proceeds from debt | 4,036 | (1,307) | ||
Cash paid for debt issuance costs | (200) | — | ||
Other financing activities | (449) | — | ||
Borrowings from warehouse lines of credit | 150,265 | 210,433 | ||
Repayments on warehouses lines of credit | (145,489) | (219,867) | ||
Repurchase of common stock | — | (6,045) | ||
Proceeds from the issuance of common stock in connection with a public offering | 4,900 | — | ||
Payment of offering cost in connection with issuance of common stock in connection with public offering | (745) | — | ||
Net cash provided by (used in) financing activities | 11,600 | (15,862) | ||
Net decrease in cash, cash equivalents, and restricted cash | (840) | (29,541) | ||
Cash, cash equivalents, and restricted cash at beginning of period | 8,380 | 37,921 | ||
Cash, cash equivalents, and restricted cash at end of period | $ 7,540 | $ 8,380 | ||
Supplemental disclosure of cash and non-cash transactions: | ||||
Cash paid for interest | $ 188 | $ 4 | ||
Income taxes paid | 148 | 111 | ||
Amounts due to sellers | 80 | 1,100 | ||
Capitalized stock-based compensation | — | 220 | ||
Issuance of common stock for purchase of business | 45 | 6,168 | ||
Right of use assets obtained in exchange for new lease liabilities | 305 | 2,385 | ||
Reconciliation of cash and restricted cash: | ||||
Cash and cash equivalents | $ 7,399 | $ 8,320 | ||
Restricted cash | 141 | 60 | ||
Total cash, cash equivalents, and restricted cash shown in statement of cash flows | $ 7,540 | $ 8,380 | ||
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 | Year Ended December 31, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Net loss | $ (8,439) | $ (9,948) | $ (23,981) | $ (27,626) | |||
Depreciation and amortization | 1,482 | 1,507 | 5,947 | 5,346 | |||
Other expense, net | 248 | 99 | 580 | 903 | |||
Income tax expense (benefit) | 94 | (239) | 148 | (54) | |||
Stock based compensation | 3,668 | 2,661 | 12,994 | 9,131 | |||
Other non-cash items and transaction costs | 1 | - | 201 | 73 | |||
Adjusted EBITDA | $ (2,946) | $ (5,920) | $ (4,111) | $ (12,227) | |||
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, and other non-cash items representing reserves on certain agent fee collections.
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 Realty
FAQ
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