8-K: Fathom Holdings Reports 24% Revenue Increase for Q4 2024, Eyes EBITDA Positive in Q2 2025

Fathom Holdings reports a 24% year-over-year revenue increase for Q4 2024 but faces ongoing market challenges and one-time expenses.

Summary

• Fathom Holdings Inc. reported its financial results for the fourth quarter and full year ended December 31, 2024.
• The company's total revenue grew by approximately 24% for the fourth quarter of 2024, reaching $91.7 million compared to $74.1 million in the fourth quarter of 2023.
• Brokerage revenue increased by 26.3% to $87.7 million, mortgage revenue increased 11.1% to $2 million, title revenue increased 92% to $1.3 million, and technology revenue increased by 38% to $1.1 million.
• Gross profit for Q4 2024 increased by 25% to $6.7 million from $5.3 million in Q4 of 2023.
• Fathom real estate transactions in the 2024 fourth quarter increased by 22% to 9,903 transactions.
• The real estate agent network grew 21% to approximately 14,300 agent licenses at the end of 2024.
• GAAP net loss for the fourth quarter was $6.2 million, or $0.29 per share, compared to a loss of $8.4 million, or $0.50 per share, for the 2023 fourth quarter.
• Adjusted EBITDA loss totaled $2.9 million in the fourth quarter of 2024, similar to the $2.9 million loss in the same period of 2023.
• For the full year 2024, total revenue decreased by 3% to $335 million from $345 million in 2023.
• GAAP net loss for 2024 was $21.6 million, or a loss of $1.07 per share, compared to a loss of $24.0 million, or a loss of $1.47 per share, for 2023.
• Adjusted EBITDA loss was $5.7 million in 2024, compared to an Adjusted EBITDA loss of $4.1 million for 2023.
• The company expects 2025 to remain challenging but anticipates reaching EBITDA positive in Q2 2025, driven by the acquisition of My Home Group and cost reductions.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While there's revenue growth, profitability remains a concern, and the company acknowledges ongoing market challenges. The outlook is cautiously optimistic.

Positives

• Fathom achieved a 24% year-over-year revenue increase in Q4 2024.
• Brokerage, mortgage, title, and technology revenues all increased in Q4 2024.
• The company's real estate agent network experienced a 21% growth.
• General and Administrative expense decreased to 9.2% of revenue, compared with 13.6% of revenue for the fourth quarter of 2023.
• The company anticipates reaching EBITDA positive in Q2 2025.
• GAAP net loss decreased from $8.4 million to $6.2 million for the fourth quarter.

Negatives

• The company experienced an Adjusted EBITDA loss of $2.9 million in Q4 2024.
• GAAP net loss for the fourth quarter was $6.2 million.
• Full year 2024 total revenue decreased by 3% to $335 million.
• Adjusted EBITDA loss was $5.7 million in 2024.
• Fathom completed approximately 37,000 real estate transactions in full year 2024, a 2.2% decrease relative to the prior year.

Risks

• The company faces ongoing challenges in the residential real estate market.
• Unexpected rises in interest rates negatively impacted net loss and Adjusted EBITDA loss.
• The company expects 2025 to remain challenging for the real estate industry.
• The company's ability to generate positive operational cash flow is a risk.
• Ongoing and future litigation poses a risk to the company.

Future Outlook

The company expects 2025 to remain challenging for the real estate industry but anticipates reaching EBITDA positive in Q2 2025, driven by increased revenues from the acquisition of My Home Group and smaller brokerage walkovers, as well as anticipated cost reductions of over $2 million on an annualized basis. The company aims to return to its historical 25% annual revenue growth, supported by anticipated higher gross profit from ancillary services, targeted recruitment, and ongoing innovation across its brokerage model, mortgage offerings, and title services.

Management Comments

• While Fathom achieved a 24% year-over-year revenue increase and saw core business gross profit rise by an encouraging 59%, the fourth quarter reflected ongoing challenges in the residential real estate market, said Marco Fregenal, CEO of Fathom Holdings.
• Persistent headwinds, particularly the unexpected rise in interest rates in Q4 following the Fed rate reduction, along with one-time expenses of $1.3 million, negatively impacted both net loss and Adjusted EBITDA loss.
• We expect 2025 to remain challenging for the real estate industry; however, we see meaningful improvement ahead and are encouraged about our prospects of reaching EBITDA positive in Q2 of 2025, driven by increased revenues from our acquisition of My Home Group and smaller brokerage walkovers, as well as anticipated cost reductions of over $2 million on an annualized basis, Fregenal continued.
• We aim to return to our historical 25% annual revenue growth, supported by anticipated higher gross profit from ancillary services, targeted recruitment, and ongoing innovation across our brokerage model, mortgage offerings, and title services.
• Our mission remains steadfast: to build a best-in-class, technology-driven platform that empowers agents, streamlines transactions, and delivers long-term value for our shareholders.

Industry Context

The report reflects the broader challenges faced by the real estate industry, including fluctuating interest rates and market uncertainty, while also highlighting the company's efforts to adapt and grow through acquisitions and innovative service offerings.

Comparison to Industry Standards

• It is difficult to compare Fathom directly to industry standards without knowing the specific segments and geographic focus of comparable companies.
• However, companies like eXp Realty and Compass are also focused on technology-driven real estate brokerage models.
• eXp Realty has shown significant agent growth and revenue increases in recent years, while Compass has faced challenges in achieving profitability.
• Fathom's focus on ancillary services like mortgage and title is similar to strategies employed by Realogy (now Anywhere Real Estate) and other large brokerage firms to diversify revenue streams.

Legal Proceedings

• Fathom Realty reached a nationwide settlement related to claims asserted in Burnett v. The National Association of Realtors., et al.
• 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 October 1, 2025, and $1.95 million on or before October 1, 2026.

Related Party Transactions

• In September 2024, the Company issued senior secured convertible promissory notes in aggregate principal amount of $5 million to an existing shareholder, who owns more than 5% of Fathom's common stock, and the chairman of the Company's Board of Directors.
• On March 10, 2025, the Company entered into a securities purchase agreement with certain investors, including Board members Scott Flanders and Stephen Murray, to sell an aggregate of 4,338,003 shares of common stock for gross proceeds of approximately $3 million (the Offering).

Stakeholder Impact

• Shareholders may be concerned about the continued net losses and Adjusted EBITDA losses.
• Agents may be attracted by the company's technology-driven platform and innovative commission plans.
• Employees may be affected by the company's cost reduction efforts.
• Customers may benefit from the company's integrated real estate services platform.

Next Steps

• Management plans to reassess and potentially reinstate guidance expectations in the second quarter of 2025.
• The Offering is expected to close on March 14, 2025, subject to customary closing conditions.

Key Dates