Fathom Offsets Transaction Decline With Agent Recruitment and Expense Reduction

Fathom Holdings, parent company of Fathom Realty, released its earnings report for the first quarter of 2023 on May 10, 2023. In keeping with overall real estate market trends and other large brokerage brands, Fathom reported a year-over-year decline in revenue. However, Fathom experienced a lower-than-average decline in transaction number and expanded its agent head count.

Fathom’s agent count as of March 31, 2023 was 10,628—an 18% increase from the 9,006 agent count a year earlier. How many transactions did these agents complete? During Q1 2023, Fathom recorded 8,532 transactions. This constitutes an 8.4% decline from the previous quarter (Fathom completed 9,250 transactions in Q4 2022) and a 15% decline year-over-year (Fathom completed 10,087 in Q1 2022). However, according to the National Association of REALTORS®, overall market decline in Q1 2023 was 25%.

In accordance with steady decline in completed transactions, total revenue for Fathom declined 14% in Q1 2023—with the company reporting revenue of $77.5 million. This is a 7.6% decline from $83.4 million in Q1 2022 and a 14% decline from $90.1 million year-over-year. Approximately 95% ($73,170,000) of Fathom’s revenue was generated by real estate brokerages compared to smaller gains by the company’s other services such as mortgage and technology.

“We continue to focus on our balance sheet given the dynamic real estate market conditions and recently completed a convertible note private placement to provide additional operating liquidity and flexibility as we execute on our goal of getting to breakeven,” stated Fathom President and CFO Marco Fregenal. “We remain focused on disciplined expense management and are positioned for profitable growth ahead where we can start to show the operating leverage in our businesses.”

Fathom also managed a slight year-over-year reduction of some losses. In Q1 2023, their Generally Accepted Accounting Principles (GAAP) came out to $5.7 million (or $0.36 per share) compared to a $6 million loss ($0.37 per share) in Q1 2022. The company’s General and Administrative expenses (G&A) were $9.6 million in Q1 2023, a 10.4% drop from $10.6 million the previous year. The report points to this as an impressive number due to simultaneous revenue decline.

Fathom’s Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) came out to a $1.4 million loss in Q1 2023. However, this is a 33% decline year-over-year; the company reported a $2.1 million loss in Q1 2022. Fathom CEO Josh Harley forecasts an Adjusted EBITDA breakeven in the second quarter this year and positive cash flow by the third.

“Our strong results this quarter continue to demonstrate the power of our truly disruptive business model and how we’re able to succeed irrespective of the market environment,” said Harley. “Even amidst the backdrop of a challenging residential real estate market, we continue to provide a compelling value proposition through innovation and an industry-leading commission model that continues to be resilient in this environment. In fact, March brought us our strongest growth through agent referrals in our company’s history. We are encouraged by some recent signs of stabilization across our markets along with the moderation in interest rates during the quarter.”

The full earnings report can be read here.