10-K: Fathom Holdings Reports Fiscal Year 2024 Results, Navigates Housing Market Downturn

Fathom Holdings reports a decrease in revenue for fiscal year 2024 amid challenging housing market conditions, while focusing on strategic acquisitions and cost management.

Summary

• Fathom Holdings Inc. reported its financial results for the fiscal year ended December 31, 2024.
• The company experienced a decrease in revenue, with gross commission income declining by 3.3% to $314.7 million due to a decrease in transaction volume.
• The number of real estate transactions decreased by 3.0% to approximately 37,000 transactions.
• Despite the decrease in transaction volume, the average revenue per transaction increased by 2.1% to $8,712.
• Other service revenue increased by 3.1% to $20.4 million, driven by growth in mortgage loans and title service transaction volume.
• The company reported a net loss of $21.6 million for the year ended December 31, 2024.
• Fathom's agent network grew by 21% to approximately 14,300 agent licenses as of December 31, 2024.
• The company completed the acquisition of My Home Group (MHG) on November 1, 2024, expanding its presence in Arizona and Washington.
• Fathom is focused on achieving positive total company Adjusted EBITDA for the full year 2025.
• The company is managing its business towards longer-term profitability despite adverse macroeconomic factors.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While there are positive aspects such as agent network growth and strategic acquisitions, the overall tone is cautious due to the reported net loss and challenging market conditions. The company's focus on achieving positive Adjusted EBITDA in 2025 suggests a proactive approach to addressing the challenges.

Positives

• Other service revenue increased by 3.1% to $20.4 million, driven by growth in mortgage loans and title service transaction volume.
• Fathom's agent network grew by 21% to approximately 14,300 agent licenses as of December 31, 2024.
• The company completed the acquisition of My Home Group (MHG) on November 1, 2024, expanding its presence in Arizona and Washington.
• Average revenue per transaction increased by 2.1% to $8,712.

Negatives

• Gross commission income decreased by 3.3% to $314.7 million due to a decrease in transaction volume.
• The number of real estate transactions decreased by 3.0% to approximately 37,000 transactions.
• The company reported a net loss of $21.6 million for the year ended December 31, 2024.

Risks

• The residential real estate market is cyclical and affected by macroeconomic conditions beyond the company's control, such as interest rates, inflation, and unemployment.
• The company faces competition from other real estate brokerages and companies employing disruptive technologies.
• Failure to maintain compliance with laws and regulations could negatively impact the company's brand and revenue.
• Cybersecurity incidents and data breaches could disrupt business operations and result in the loss of sensitive information.
• The company's mortgage business might be unable to sell its originated loans, exposing it to adverse market conditions.
• The company might identify material weaknesses in the future that might cause it to fail to meet its reporting obligations or result in material misstatements of its financial statements.

Future Outlook

Fathom is focused on achieving positive total company Adjusted EBITDA for the full year 2025 and managing its business towards longer-term profitability despite adverse macroeconomic factors.

Management Comments

• The Company believes that it continues to be well positioned for growth in all of its businesses in the current economic climate.
• We have a strong base of agent support, which should drive organic market share growth, retention and productivity.
• We have an efficient operating model with lower fixed costs driven by our cloud-based model, with minimum brick-and-mortar locations.
• We continue to believe that we are positioned to leverage our low-cost, high-engagement model, affording agents and brokers increased income and ownership opportunities while offering a scalable solution to brokerage owners looking to prosper in a series of fluctuations in economic activity.

Industry Context

The report acknowledges the negative impacts of recent economic uncertainty and increased interest rates on the U.S. real estate market, noting a contraction trend beginning in the second quarter of 2022. It also mentions the NAR settlement and its potential impact on the industry.

Comparison to Industry Standards

• The report mentions that the existing home sales market declined 6.2% in 2023 and an additional 0.7% in 2024, which is the lowest the market has been since 1995, according to the NAR.
• The NAR anticipates transactions to increase by 9% in 2025, from 4.06 million existing home sales to 4.5 million existing home sales.
• The report notes that the nationwide average sales price for existing homes in December 2024 was $404,400, up 6% from $382,600 in December 2023.

Management Changes

Corporate Governance

Legal Proceedings

• Fathom Realty, LLC is a defendant in a purported class action in the United States District Court for the Eastern District of Texas Sherman Division.
• A second purported class action complaint was filed on December 14, 2023, by plaintiffs Julie Martin, Mark Adams and Adelaida Matta in the same court, naming us as a defendant along with others, many of whom are also named in the first lawsuit.
• A third purported class action complaint was filed on April 11, 2024, by plaintiffs Shauntell Burton, Benny D. Cheatham, Robert Douglass, Douglas Fender, and Dana Fender in the United States District Court for the District of South Carolina.
• A fourth purported class action was filed on September 26, 2024, on behalf of buyers of residential property nationwide, and with an Illinois-specific sub-class, against Fathom Realty, LLC and other real estate brokers.
• My Home Group (MHG), which the Company acquired on November 1, 2024, is a defendant in four active lawsuits: one in the United States District Court for the District of Arizona, filed in January 2024; and three separate matters in Superior Court of Maricopa County, Arizona, filed in September 2024, January 2023 and April 2022.

Related Party Transactions

• In September 2024, the Company sold and issued senior secured convertible promissory notes in aggregate principal amount of $5.0 million to an existing shareholder and the chairman of the Company's Board of Directors in a private placement.
• In September 2024, IntelliAgent, a wholly owned subsidiary of the Company, purchased Hometown Heroes, LLC from Joshua Harley, the founder and former Chief Executive Officer of the Company.
• The Company leases office space from entities affiliated with certain of its employees.
• Included in marketing expense for each of the years ended December 31, 2024 and 2023 was approximately $0.5 million and $0.4 million, respectively, from related parties in exchange for the Company receiving marketing services.
• In March 2025, the Company completed a $3.0 million offering of common stock, which resulted in the issuance and sale by the Company of 832,639 shares of common stock to members of its Board of Directors.

Stakeholder Impact

• Shareholders: The company's performance impacts shareholder value, and the report provides insights into the company's financial health and future prospects.
• Employees and Agents: The company's ability to attract and retain agents is crucial to its success, and the report discusses the company's value proposition for agents.
• Customers: The company's services impact home buyers and sellers, and the report discusses the company's focus on customer service.
• Creditors: The company's ability to meet its debt obligations is important to creditors, and the report discusses the company's liquidity and capital resources.

Next Steps

• The company intends to continue to monitor ongoing and similar antitrust litigation against its competitors.
• The Company will continue to monitor ongoing and similar antitrust litigation against our competitors, however, as our agent compensation model fully supports commission negotiation, we do not expect to have to change our compensation model in a manner that would adversely affect our financial condition and results of operations.

Key Dates

Keywords

real estate, brokerage, mortgage, agents, revenue, acquisition, Fathom Holdings, financial results, transaction volume, commissions