Fathom Holdings, the parent company of cloud-based brokerage Fathom Realty, began trading on the Nasdaq Capital Market on Friday with 3.43 million shares of common stock available for $10 each. If all shares are sold, Fathom will raise $34 million — more than doubling its initial goal of $14 million.
“We’ve been blessed with tremendous success and see a very bright future for our company,” Fathom Founder and CEO Josh Harley said in a 20-minute video presentation published on IPO information platform RetailRoadshow. “When I started this company in 2010, I saw a shift from broker-centric companies to agents who are able to operate autonomously thanks to advancements in technology and, of course, the access to data.”
“With investment from the IPO, we plan to continue to focus on growing our agent count and revenue, improve our offering to agents to help them become more productive, as well as find ways to attract more buyers and sellers,” he added.
Harley said IPO funds will be used to upgrade Fathom’s proprietary transaction management platform IntelliAgent, fuel the expansion into mortgage and title services, launch a consumer-facing platform to generate and sell leads, offer paid marketing and transaction management services for Fathom agents, and acquire smaller brokerages.
“In other words, we want to find more ways to monetize our agents and transactions to maximize our revenue,” he explained.
Fathom Realty currently operates in 24 states with 4,258 agents across 75 markets. The company operates on a fee-based model where agents pay $450 per transaction for the first 12 transactions in a year. After that, agents pay a fee of just $99 per transaction and a yearly $500 transaction fee.
As of December 31, 2019, Fathom agents completed 17,866 transactions, generating $109 million in revenue — a $32 million increase from 2018. At the same time, the company’s loss from operations ballooned from $1.5 million to $3.9 million, resulting in a gross profit of $5.94 million in 2019.
Fathom Realty ranked 39th in sales volume of all brokerages on the Swanepoel Mega 1000 in 2019, moving up from 61 the previous year. The brokerage also moved up from 38th to 20th on the 2020 Real Trends 500 list.
Looking forward, Harley said Fathom is poised to expand into all 50 states and Canada; however, the movement into new markets will be determined by the presence of a “strong leader” who can lead the agent base in that state.
“We learned a long time ago that leadership matters,” he said. “A small market with a strong leader can actually grow faster than a large market with a weak leader.”
Regarding profitability, Harley said Fathom has the ability to reach profitability at 9,000 transactions per quarter — which means they’ll need to double their yearly transaction volume to 36,000.
“One of the operational benefits of our model is the ability to breakeven at a much lower transaction number than our competition,” he said in reference to eXp Realty. “At 9,000 transactions per quarter, we could hit an adjusted EBITDA breakeven point while still growing revenue at over 50 percent.”
“Our technology and our operational efficiency is where our power is,” he added. “Last year, we spent $1.4 million and grew our agent base by 47 percent. We spent $900,000 last year as part of our going public.”
“Now imagine how much more we could’ve grown if we were able to reinvest that $900,000 into recruiting instead,” he concluded. “We have an incredible growth opportunity and the only thing holding us back is access to capital.”