It was a busy three months for Fathom Holdings.
Despite continued housing market challenges, company officials seemed generally optimistic about its growth trajectory following several critical developments in the third quarter, including reaching a settlement agreement in the commission lawsuits.
“We’re pleased to report a quarter marked by continued progress and strategic advancements, even as the housing market continues to face challenges,” said Fathom CEO Marco Fregenal in a statement accompanying the company’s Q3 earnings report on November 7.
Fathom reported a 10% decline in revenue in Q3, with earnings dropping to $83.7 million last quarter compared to $93.5 million in the same period the previous year. The company attributed the earnings drop to an 11% decrease in brokerage revenue driven by fewer transactions.
Subsidiary Fathom Realty tallied 9,331 transactions in Q3, down 9% from the third quarter last year, as the company—and the industry at large—continued to wrestle with higher home prices and uncertainty surrounding mortgage rates.
A 44% increase in revenue from ancillary businesses helped to offset the company’s total revenue dip, as Fathom touted improved performance from its mortgage and title businesses.
“We remain committed to advancing our strategic priorities, returning our company to 25% annual agent growth and optimizing profitability and cash flow,” Fregenal said during the earnings call.
Despite the overall decline in earnings, Fregenal lauded recent developments that he thinks will improve Fathom’s financial trajectory and market footprint heading into 2025, including its recent acquisition of My Home Group.
Fathom announced earlier this month that it would absorb the Arizona-based brokerage and its 2,200 agents as part of ongoing growth plans.
“This acquisition makes a significant step in expanding our national footprint and is strengthening our presence in Arizona’s rapidly growing real estate market,” Fregenal said.
Fathom’s overall growth in the last quarter was a point of pride for the company during its conference call. Its real estate agent network grew 9% to approximately 12,383 agent licenses at the end of September compared to 11,333 agent licenses at the same point last year.
Fregenal indicated that the My Home Group deal raised Fathom’s agent count to 14,500.
At the same time, he highlighted the impact that its newly introduced agent commission plans have had on the company’s agent recruitment goals.
Fathom introduced two agent commission plans, Fathom Max and Fathom Share, in August to complement its existing strategy. The addition, Fathom said, is to “enhance agent recruitment and retention, drive accelerated and sustainable growth, and boost long-term profitability” for the company.
Fregenal expects the acquisition to add approximately $100 million in annual revenues in 2025.
“Strategic acquisitions like My Home Group, which expand our geographic footprint and provide cross-selling opportunities, will continue to play an essential role in our company growth,” Fregenal said.
After trumpeting the company’s growth, Fregenal addressed Fathom Realty’s settlement in the seller-filed commission lawsuits.
The tech-focused, full-service brokerage agreed to pay $2.95 million over the next two years in a deal announced in September.
As part of the settlement, Fathom Realty will pay $500,000 into a settlement fund within five days after the settlement is formally approved by the court, $500,000 on or before Oct. 1, 2025, and $1.95 million on or before Oct. 1, 2026.
Fregenal had remained tight-lipped about settlement discussions during the company’s second quarter earnings report but offered some insight into the final settlement on Thursday’s conference call.
“Our decision to settle reflects our commitment to our agents and their clients,” he said. “Fathom Realty has built on the principle of delivering the highest level of support to our agents, and we see the settlement as the most responsible path forward.”
Fregenal stated that the settlement would “enable our agents to focus fully on their clients without the distraction of prolonging litigation.”
According to Fathom, the total amount to be paid in the settlement is included in operating expenses in the company’s condensed consolidated statements of operations for the three and nine months ended Sept. 30, 2024.
