North Carolina-based Fathom Realty, which like many other low-fee tech-centric brokerages saw unprecedented growth during the pandemic, is zeroing in on agent growth and its ancillary services as the company continues to see revenue and transactions drop.
“Turnover is higher than expected. We are losing more agents like everyone else, especially non-producing agents,” said Fathom CEO Marco Fregenal, who took the reins last November when former CEO and company founder Josh Harley stepped down. “One of the goals for this year is to come back to our historical 25% to 30% agent growth.”
In a March 14 earnings release, Fathom’s top-line numbers continued to slide, as the company saw revenue fall $9.3 million or 11.2% in Q4 2023, coming in at $74.1 million. Transactions sank 11%, numbering 8,290.
Year-over-year was the same story, with a 14.7% decrease in transactions from 2022 to 2023, and a 16.4% drop in revenue, with the company pulling in $345.2 million. Brokerage segment revenue overall fell 12.8% in Q4, even as the company took several cost-cutting steps and increased fees.
But as the overall number of active real estate agents has shrunk, the company still managed to grow its agent count both in Q4 and for the full year, adding 1,425 agents for the year, higher by 13.7%.
Ancillary services grew 19.1% in revenue, the company said, which Fregenal emphasized in a conference call following the earnings release.
“Early indicators for 2024 are promising, suggesting the initiatives implemented in Q4 are starting to yield positive results,” he said. “Notably, we are witnessing a substantial increase in file starts for our mortgage and title businesses. This positive trend aligns with our strategic objectives and reinforces our belief in our ancillary businesses long-term viability.”
And taking on the potential changes in the industry brought on by class-action commission lawsuits—at least one of which has named Fathom as a defendant—Fregenal saw his company as ready to capitalize.
In response to an investor question, Fregenal said Fathom was “definitely offensive” rather than defensive in the current market, planning increased spending on marketing and recruiting.
“We feel very good about our position to be aggressive,” he said. “We feel very excited about the growth of (ancillary businesses), and then combine that with our brokerage business and insurance and technology, it’s beginning to put together the recipe for a very successful 2024.”
Fregenal admitted that there would likely still be a “cash burn” in Q1 of this year, but said the company aimed to be “operational cash flow positive” by Q2.
Notably, though, Fathom declined to give specific guidance or long-term revenue targets, citing “continued uncertainty of the timing of anticipated interest rate cuts and other macroeconomic factors.”
At the same time, the company did not back down from lofty goals, saying that it believed it could close upward of 100,000 transactions per year (without offering a timeline for that objective), which would represent a roughly 150% increase from 2023.
