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Fathom Realty’s growing agent count helped insulate the company from the impact of declining home sales during the first quarter, but the company expects to remain in the red until third quarter of this year.
Parent company Fathom Holdings Inc. reported a $5.7 million first quarter loss Wednesday, as revenue fell 14 percent from a year ago, to $77.5 million. That’s an improvement from the $9.9 million Q4 2022 loss the company reported in March, and a $6 million Q1 2022 loss.
Fathom’s agent network continued to grow in Q1, albeit at a slower pace than in recent quarters. With 10,628 agents on board as of March 31, Fathom grew by 258 agents in the first three months of the year and agent count was up 18 percent from a year ago. Fathom reported 33 percent annual growth in agent count during Q3 2022, and 28 percent growth in Q4.
Growth in agent count has helped Fathom weather the slowdown in the real estate business overall. The company noted that while Fathom saw Q1 transactions decline 15 percent from a year ago, to 8,532, that was a smaller drop than the 25 percent decline for the industry as a whole.
“March brought us our strongest growth through agent referrals in our company’s history,” Fathom CEO Josh Harley said in a statement. “We are encouraged by some recent signs of stabilization across our markets along with the moderation in interest rates during the quarter.”
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved by $700,000, for an adjusted EBITDA loss of $1.4 million.
Harley said Fathom has “a long and positive runway ahead” and Q1 results “give us confidence in reaching total company adjusted EBITDA breakeven in the second quarter of 2023 and generating positive cash flow in the third quarter of 2023.”
Positive cash flow would mean more money is coming in than the company is spending. Last month, Fathom disclosed that it had borrowed $3.5 million from an existing investor at a minimum interest rate of 8 percent on a senior secured convertible promissory note that matures in two years. As of March 31, Fathom reported having $6.72 million in cash and cash equivalents on hand, down 19 percent from $8.32 million at the end of the year.
Once Fathom hits 100,000 to 110,000 transactions a year, the company projects it will generate more than $40 million a year in adjusted EBITDA — without giving a timeline for hitting that target.
Fathom expects to generate $88 million to $90 million in revenue in Q2, with adjusted EBITDA between zero and $200,000 — breakeven.
Shares in Fathom Holdings, which in the last year have traded for as little as $3.25 and as much as $11.85 over the last 12 months, closed at $5.75 Thursday before earnings were announced.
Fathom Holdings’ goal is to build an end-to-end real estate services platform integrating services from brands including Fathom Realty, Dagley Insurance, Encompass Lending, intelliAgent, LiveBy, Real Results, Verus Title and Cornerstone. Verus Title expanded its operations into Utah during the second quarter, the company said.
Fathom Holdings revenue by source: Q1 2022 versus Q1 2023
But real estate brokerage services are still far and away Fathom’s main source of income, accounting for 94 percent of the company’s revenue in Q1, followed by title insurance (2.8 percent), mortgage (1.9 percent) and technology (1 percent).
Mortgage revenue fell more steeply than Fathom’s other segments, dropping 49 percent to $1.5 million. Technology was the only Fathom segment to post year-over-year growth (17 percent), but the $756,000 in revenue it generated made only a small contribution to the company’s bottom line.
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