How are energy investors positioned?
Fathom Holdings (NASDAQ: FTHM) reported its financial results for the fourth quarter of 2024, revealing a wider-than-expected loss per share and a revenue beat. The company posted an EPS of -$0.29, missing the forecast of -$0.14. However, revenue reached $91.7 million, surpassing expectations of $81.99 million. Following the announcement, Fathom’s stock rose 4.49% in after-hours trading, closing at $0.787. With a market capitalization of just $16.97 million and trading at 0.36 times book value, InvestingPro analysis suggests the stock is currently undervalued.
[Discover 18 additional exclusive insights for FTHM on InvestingPro, including detailed valuation metrics and growth potential indicators.]
Key Takeaways
- Fathom Holdings reported a larger-than-expected EPS loss of -$0.29.
- Revenue for Q4 2024 was $91.7 million, beating forecasts by 15%.
- The stock price increased by 4.49% in after-hours trading.
- The company targets EBITDA profitability by Q2 2025.
- Agent count increased by 21% to 14,300 licenses.
Company Performance
Fathom Holdings demonstrated resilience in Q4 2024 despite a challenging market environment. The company reported a 24% year-over-year increase in revenue, reaching $91.7 million. This growth was driven by an increase in real estate transactions and a strategic focus on expanding its agent network. However, the full-year revenue for 2024 showed a slight decline of 3% compared to 2023, reflecting broader market challenges. The company maintains a healthy current ratio of 1.55, though InvestingPro data indicates rapid cash burn remains a concern.
Financial Highlights
- Revenue: $91.7 million, up 24% YoY
- EPS: -$0.29, improved from -$0.50 YoY, but below expectations
- Gross Profit: $6.7 million, up 25% YoY
- Adjusted EBITDA Loss: $2.9 million, unchanged YoY
Earnings vs. Forecast
Fathom Holdings’ EPS of -$0.29 fell short of the forecasted -$0.14, marking a significant miss. The revenue, however, exceeded expectations by approximately $9.18 million, indicating strong operational performance despite the earnings miss. This revenue surprise suggests effective execution in expanding transaction volumes and agent recruitment.
Market Reaction
Following the earnings release, Fathom’s stock price rose by 4.49% in after-hours trading, reaching $0.787. This positive reaction highlights investor confidence in the company’s revenue growth and strategic initiatives. The stock’s performance contrasts with its 52-week low of $0.698, indicating a potential recovery trajectory. With a beta of 1.96, investors should note the stock’s high volatility compared to the broader market. InvestingPro analysis indicates the stock is currently in oversold territory, suggesting a potential turning point.
[Access comprehensive valuation models and 1,400+ detailed Pro Research Reports with an InvestingPro subscription.]
Outlook & Guidance
Fathom Holdings is optimistic about achieving EBITDA profitability by Q2 2025. The company plans to focus on revenue growth through acquisitions, increasing gross profit from ancillary services, and managing expenses. The guidance for future quarters suggests a gradual improvement in EPS, with expectations of reaching breakeven by FY2025.Q2.
Executive Commentary
CEO Marco Prejnal expressed confidence in the company’s strategic direction, stating, "We believe 2025 will be a breakout year for Fathom." He emphasized the importance of the company’s low cost per transaction and expanding ancillary services as key drivers for future growth.
Risks and Challenges
- Macroeconomic pressures, including fluctuating mortgage rates, could impact transaction volumes.
- Agent retention remains a challenge as the company expands its network.
- Competitive pressures in the real estate market may affect margins.
Q&A
During the earnings call, analysts inquired about the company’s new agent recruitment programs and the potential impact on transaction volumes. Executives also addressed concerns regarding agent retention and highlighted strategic initiatives to enhance mortgage and title service adoption.
Full transcript - Fathom Holdings Inc (FTHM) Q4 2024:
Conference Operator: Greetings. Welcome to the Fathom Holdings Inc. Fourth Quarter twenty twenty four Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Please note this conference is being recorded. I will now turn the conference over to your host, Paul Kuntz. You may begin.
Paul Kuntz, Investor Relations, Fathom Holdings: Thank you, and good afternoon. Welcome to Savant Holdings’ fourth quarter and full year twenty twenty four conference call. Joining us today is the company’s CEO, Marco Prejnal. Before I turn the call over to management, I want to remind listeners that today’s call may include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements are subject to numerous conditions, many of which are beyond the company’s control, including those outlined in the Risk Factors section of the company’s Form 10 K and other company filings made with the SEC, copies of which are available at the SEC’s website at www.sec.gov.
As a result of those forward looking statements, actual results could differ materially. Fathom undertakes no obligation to update any forward looking statements after today’s call, except as required by law. Please also note that during this call, we will discuss adjusted EBITDA, a non GAAP financial measure as defined by SEC Regulation G. A reconciliation of this non GAAP financial measure to the most directly comparable GAAP measure is included in today’s press release, which is now posted on Fathom’s website. With that, I will now turn the call over to Fathom’s CEO, Marco Freshenol.
Please proceed.
Marco Prejnal, CEO/Interim CFO, Fathom Holdings: Thank you, Paul. Good afternoon, everyone, and welcome to Fathom Holdings’ fourth quarter twenty twenty four conference call. Thank you for joining us today. Before I go into the details of our performance, I want to acknowledge the remarkable commitment, adaptability and resilience of our entire Fathom team, our agents, staff and leadership team. This past year has challenged us all of us with the high mortgage rates, fits in buyer behavior, regulatory changes and of course ongoing litigation.
The broader market headwinds have certainly made it difficult for this year for last year. However, I want to stress that we remain confident about our future. We believe 2025 will be a breakout year for Faethm and that we have laid out strong foundation to help us push through the market volatility. Let me start by reviewing our fourth quarter results for 2024. Our total revenue grew approximately 24%, reaching $91,700,000 up from $74,100,000 in Q4 of twenty twenty three.
Gross profit increased by 25%, growing from $5,300,000 in Q4 twenty twenty three to $6,700,000 this quarter. Excluding Dagley Insurance, which we sold in May of twenty twenty four, gross profit rose 59% from $4,200,000 to $6,700,000 GAAP net loss for twenty twenty four fourth quarter was 6,200,000 or $0.29 per share compared with a loss of $8,400,000 or $0.5 per share for the twenty twenty three fourth quarter. While we’re pleased with the revenue gross profit growth, our EBITDA loss is not where we would like it to be. Adjusted EBITDA loss and non GAAP measure came in at $2,900,000 for the fourth quarter of twenty twenty four, matching the loss of $2,900,000 from the same period in 2023. Rising mortgage rates in the last quarter of twenty twenty four, combined with an approximately $1,300,000 1 time expenses kept us from moving into positive EBITDA territory.
Despite these challenges, we remain dedicated to achieving sustainable positive adjusted EBITDA potentially as early as the second quarter of twenty twenty five. Agent count increased by 21% from approximately 11,795 to approximately 14,300 agent licenses at year end and transaction growth by 22% from 08/2014 to 09/1200 indicated our agent network still generating solid activity. Turning to the broader real estate market, we have noticed a slight decline in mortgage rates from their unexpected spike late last year. If rates stabilize or continue to drop, we think it will provide a tailwind as we move into the spring buying season. In some markets, transactions in the first two months of twenty twenty five are running at about 3% below comparable periods in 2024.
While we anticipate rate change declines, we may help close the gap. Price reductions on listings have ticked up slightly, about 33 of listings in March have had a price drop compared to 30% last year. Actual home sale prices overall still see modest gains of 2% to 3% year over year in some regions, however, prices are flat, which may help with affordability. Inventory has increased about 30% compared to a year ago, signaling a shift toward a more balanced or even buyer friendly market in some areas. According to NARF’s Chief Economist, if rates hold lower, the industry could see transactions in the second half of the year outpaced last year by as much as 9%.
In this competitive market, Fathom stands out having one of the lowest direct cost per transaction at just $264 per transaction, while many of our peers averaged $1,200 to $1,800 per transaction. This advantage enable us to stay lean, offer our agents compelling value proposition and continue investing in technology, training and support. Looking ahead to 2025, we see three primary avenues for reaching EBITDA profitability. First, increased revenue from acquisitions. In November 2024, we acquired My Home Group, which will bring us about $110,000,000 revenue in 2025.
We’re also exploring additional acquisitions and walkovers of smaller brokerages. Second is through a higher gross profit. Our mortgage title and other ancillary services have been growing faster than our real estate revenue, enhancing cross selling opportunities and strengthening our bottom line. And third is expense management through anticipated cost reductions of about $2,000,000 on an annualized basis. Now let me now shift to our focus on ancillary businesses where we have been increased our attach rate and driving higher year over year revenue and gross profit.
Our mortgage division, Encompass Lending Group, saw a revenue increase of 11.1% to $2,000,000 compared to $1,800,000 in Q4 of twenty twenty three. While late year mortgage rates spiked damping our initial expectations, we are confident in our roadmap for higher volume and better profitability going forward. In the fourth quarter, Encompass Lending reported EBITDA loss of $700,000 compared to an $800,000 loss in the same quarter last year. Now for our title division, Verus Title, revenue reached $1,300,000 up from $700,000 last year, an 80% increase. While adjusted EBITDA remains in a loss position in this business, we are seeing strong demand for our title services, especially as our agent network expands.
In the fourth quarter, Veracytel reported EBITDA loss of $300,000 or about 15% of related revenue compared to a $200,000 loss or almost 29% of related revenue in the same quarter last year. Now in the effort to improve agent growth and retention, we rolled out our new revenue share model in Q3 of twenty twenty four. To date, about 5% of our new agents have joined the share program. In addition, we plan to soon launch a new program specifically designed to help agents close more business with nearly 90% of all agents surveyed stating that they want more from their brokerage. We are confident this new program will have significant impact for agents looking to get more from their brokerages.
As many of you know, Rocket Mortgage recently announced that it’s acquiring Redfin, demonstrating once again that consolidation remains a central theme in this industry. We expect to see more deals on the horizon. On our side, in November, we acquired my home group, which was an important addition to the Fathom team. We do plan to continue to pursue strategic opportunities to help us grow and solidify our position in key markets. Before moving on, I want to address our CFO transition.
We recently announced the departure of Zohane Zach, who made important contributions to our organization and we certainly wish her all the best. As of now, I’ll be serving as CFO for the next few months, while our finance team continues its high level of performance under guidance of Vice President, Daniel Weidman. We anticipate beginning a formal search process soon. And in the meantime, we do expect we do not expect any disruption or negative impact on our day to day financial operations or strategic initiatives. Now let’s review our financial results.
Again, fourth quarter total revenue was $91,700,000 a 24% increase year over year compared to $74,100,000 for last year’s fourth quarter. The increase in revenue is primarily due to a 26% increase in brokers revenue as well as an increase in revenues from ancillary businesses. For the 2024 year, total revenue decreased by approximately 3% to $335,000,000 compared to $345,000,000 in the prior year. Overall revenue was lower in 2024 compared to 2023 due to lower transaction volumes attributed to high home prices, high mortgage rates that made 2024 the worst year for homes sales since 1995. Our total gross profit percentage for the fourth quarter of twenty twenty four excluding our sold insurance business increased to 7.2% compared to 5.4 for the twenty twenty three fourth quarter.
For the 2024 year, excluding our sold insurance business, gross profit percentage increased to 8% compared to 7% for 2023. Technology and development expenses were approximately $1,800,000 for the fourth quarter twenty twenty four compared to $1,700,000 for the fourth quarter of twenty twenty three. For the 2024 year, technology and development expenses increased to $6,600,000 compared to $6,300,000 for 2023. The approximately increase of $300,000 increase was primarily due to our continued investment in technology platforms, including the build out of our new revenue share program. General and administrative expenses totaled $8,400,000 for twenty twenty four fourth quarter compared to $10,000,000 for the fourth quarter in 2023.
For the full year 2024, general and administrative expenses decreased to $33,500,000 compared to $38,700,000 for 2023. The decrease is primarily due to the absence of costs related to the sale of our insurance segment business effective 05/03/2024 and cost cutting initiatives. Marketing activities expenses totaled $1,900,000 for the twenty twenty four fourth quarter compared with $900,000 for the fourth quarter of twenty twenty three. For the twenty twenty four year, marketing expenses increased to $5,800,000 compared to $3,300,000 for 2023. The increase is primarily due to increase in marketing investments for our ancillary businesses.
GAAP net loss for the fourth quarter of twenty twenty four totaled $6,200,000 or $0.29 per share compared with a loss of $8,300,000 or $0.5 per share for the fourth quarter of twenty twenty three. The decrease in net loss is primarily due to our cost savings efforts. GAAP net loss for the full twenty twenty four year was $21,600,000 or a loss of $1.07 per share compared with a GAAP net loss of $24,000,000 or a loss of $1.47 per share for the twenty twenty two year. The decrease is primarily due to the absence of costs related to the sale of insurance segment business effective 05/03/2024 and cost cutting initiatives. Adjusted EBITDA loss in non GAAP measure for Q4 twenty twenty four remain unchanged at 2,900,000 compared to Q4 twenty twenty three.
For the full year 2024, adjusted EBITDA loss was $5,700,000 compared to adjusted EBITDA loss of $4,100,000 for 2023 due to lower brokerage revenues, lower margins on mortgages and higher expenses. Now I’ll spend some time reviewing our business segment results in more detail. Brokerage, we closed approximately 9,903 real estate transactions during the fourth quarter, an increase of 22% compared to 8,114 transactions during the fourth quarter twenty twenty three. For the full year, we closed approximately 37,000 real estate transactions, about a 2.2% decrease relative to the prior year. We ended the fourth quarter with approximately 14,300 agent licenses, an increase of 21% compared to 11,795 agents at the end of the prior year.
Revenue for the real estate division is approximately $87,700,000 in the fourth quarter compared to $69,400,000 for the same period last year, which represents a 26% increase, primarily attributed to the addition of My Home Group. For the full year, revenue decreased by 3% to $315,000,000 compared to $325,000,000 in 2023. The decrease was due to a challenging real estate market with high home prices and high mortgage rates. Gross profit margin for our real estate division improved to 5.3% from 4.2% for the fourth quarter of twenty twenty four compared to the fourth quarter of twenty twenty three. For the full year, gross profit margin improved to 5.7% relative to 5.2% the prior year.
This increase in margin was largely due to our increase in our agents annual fee from $600 to $700 and implement our new high value property fee commencing in 01/01/2024. Adjusted EBITDA loss in the real estate division was approximately $44,000 loss in Q4 of twenty twenty four compared to adjusted EBITDA of $200,000 in Q4 twenty twenty three. For the full year, adjusted EBITDA income was $3,200,000 in 2024 compared to $5,600,000 for full year 2023. This was largely due to the decrease in transactions in the early part of 2024 to incremental charges from technology division of Fathom Realty and for transaction management and CRM services provided. Our mortgage business generated revenues of $2,000,000 in Q4 of twenty twenty four compared to $1,400,000 in Q4 of twenty twenty three.
Mortgage adjusted EBITDA for Q4 twenty twenty four was a loss of $7,700,000 compared to an adjusted EBITDA loss of $800,000 for the same period last year. For the 2024 year, revenue grew by 49.3% to $10,900,000 compared to $7,300,000 in the period prior. Adjusted EBITDA loss for 2024 improved to $1,500,000 compared to $1,900,000 adjusted EBITDA loss in 2023 due to continued strategic cost cutting measures. Now let’s turn to Veracyto. Veracyto had revenues of $1,300,000 for the fourth quarter of twenty twenty four compared to $700,000 for the fourth quarter of twenty twenty three, an increase of 86%.
The increase in revenue was driven by organic growth and walkovers. Vericite, our adjusted EBITDA for the twenty twenty four fourth quarter was a loss of $300,000 compared to an adjusted EBITDA loss of $200,000 for the fourth quarter twenty twenty three. For the full year 2024, revenue grew by 50% to $4,500,000 compared to $3,000,000 in the prior year. Adjusted EBITDA loss for the 2024 improved to $500,000 compared to $600,000 adjusted EBITDA loss in 2023. Moving to our Technology segment, third party revenues remain relative constant at $800,000 in Q4 for 2024 Q3 of ’20 ’20 ’3.
Adjusted EBITDA for the fourth quarter of $200,000 compared to an adjusted EBITDA loss of $500,000 for the fourth quarter of twenty twenty three. For the full 2024 year, revenue stayed relatively flat at $3,000,000 compared to 2023. We are increasingly building enhancements to our technology platform to better serve our agents and drive revenues. We continue to keenly focus on our balance sheet given the dynamic real estate market conditions. We ended the quarter with cash position of $7,100,000 which includes $4,900,000 net proceeds from a senior secured convertible promissory note issued November.
We did not purchase any shares in the fourth quarter under the stock repurchase plan. On 03/10/2025, the company entered into a 3,000,000 securities purchase agreement with certain investors, including two board members, Scott Flanders and Stephen Murray. The offer is expected to close on 03/14/2025, subject to customary closing conditions. Now we know this past quarter was challenging and while we were pleased by the increasing revenue and gross profit, we recognize that we have much work to do in the EBITDA front. However, we believe that we have a plan that laid out will help us achieve EBITDA by Q2 of this year.
Our strategy for Gold, our low cost per transaction, our expanding suite of ancillary services, our upcoming agent focused program and our continued focus on profitability should position us well in this ever evolving market. With that operator, we are ready to take questions.
Conference Operator: Thank you. At this time, we will be conducting a question and answer session. The first question is from Darren Aftahi with Roth Capital. Please proceed.
Darren Aftahi, Analyst, Roth Capital: Hi, Marco. How are you? Thanks for taking my questions. Just two, if I may. Can you talk a little bit about how MAX and shared commission plans have affected agent recruitment retention since they launched?
And then just any measurable improvement from agent satisfaction retention?
Marco Prejnal, CEO/Interim CFO, Fathom Holdings: Hey there, good to hear from you. Thank you for your questions. So it’s we’re about from Fathom, really if you think about Fathom X, every new agent is joining Fathom X, right, or in Fathom Share. So what we’re seeing is about 5% of our new agents joining Fathom Share and 95% of our agents joining Fathom X. So it’s a little early to tell the impact.
So Q4 didn’t really have much impact in revenue from those because as those agents didn’t join, typically very few closed transactions in Q4. They will start closing transactions in Q1. So we’ll begin to see the impact of the agent joining Fathom share in Q1 and of course even more in Q2 and Q3 as we go forward. In terms of retention, we are still seeing a little higher turnover, but 90% of our turnover is still on either zero production agents or agents that have very little production. So not unlike most of other companies in the market, I think everyone is seeing turnover a little higher.
But I think the turnover the higher turnover is specifically focused on either zero producing agents or low producing agents. And we continue to have about a 90% of agents leaving Fathom doing zero in one transaction. So that percent hasn’t changed, but definitely a higher number of low producing agents leaving the industry.
Darren Aftahi, Analyst, Roth Capital: That’s helpful. Thanks. And just one more if I could. Can you just talk about any strategic initiatives and programs that are being implemented or will be implemented in 2025 to kind of help accelerate adoption on mortgage and title? And then any are there any specific challenges outside of just broader market softness and interest rates that are kind of impacting adoption in that space?
Thanks.
Marco Prejnal, CEO/Interim CFO, Fathom Holdings: So we’ve seen our mortgage our ciliary business have really outperformed our real estate brokerage growth, right, both now mortgage not so much in Q4, but certainly for the year they have. And title, I believe again in Q4, we grew by 86%. So we believe that we’re going to continue to have a higher growth rate in terms of mortgage and title in 2025. We’re doing a lot of work. On one of the programs that we are running is called the ambassador program.
We’re already seeing some great results from that. We have a pilot program that it will soon be announced that we believe also have an increase in the rate of adoption in terms of mortgage and title, more specifically in title than mortgage. So we estimate that our growth rate next year in terms of mortgage growth and title growth is going to continue to outpace real estate brokers growth. And so and as you know, this is going to significantly positively affect gross profit and that’s one of the ways that we’re going to that we expect to achieve a dot positive in Q2. So those are the programs that we have implemented that are already running in 2024 and that’s why we’ve seen that increase, especially for Tosteiro.
And again, we’re going to continue to see that increase in 2025 and beyond. Thanks.
Conference Operator: We have no further questions in queue. I’d like to turn the floor back to management for any closing remarks.
Marco Prejnal, CEO/Interim CFO, Fathom Holdings: Thank you all of you for joining our call today. We appreciate your time. We look forward to continue to update you as our progress sent to 2025. And as always, I’m available for individual meetings. So I hope you guys have a great day and thank you for joining.
Conference Operator: This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.