Fathom Holdings at Planet MicroCap: Real Estate Tech Evolution

On Wednesday, 23 April 2025, Fathom Holdings (NASDAQ:FTHM) presented at the Planet MicroCap Showcase: VEGAS 2025, outlining its strategic transition from a traditional real estate company to a technology-driven platform. CEO Marco Fraginal highlighted the company’s growth amidst industry challenges, including a significant drop in transactions due to fluctuating interest rates. Despite these hurdles, Fathom reported a notable rebound in Q4, with increases in revenue, transactions, and agent numbers.

Key Takeaways

• Fathom’s Q4 revenue grew by 24%, signaling a return to growth.
• The company’s innovative Elevate program is expected to significantly boost profit margins.
• Fathom’s direct cost per transaction is $264, well below the industry average.
• The acquisition of My Home Group adds 2,200 agents, enhancing Fathom’s market presence.
• Fathom anticipates reaching adjusted EBITDA positive in Q2 2025.

Financial Results

• Revenue: Q4 revenue increased by 24% year-over-year.
• Gross Profit: Saw a 59% increase in Q4, with Elevate’s profit margins projected to be four to five times greater than traditional real estate operations.
• Transactions and Agents: Transactions and agent numbers grew by 22% and 21% respectively in Q4.
• EBITDA: Expected to achieve adjusted EBITDA positive in Q2, with a 60-65% flow to the bottom line for each additional dollar of gross profit.
• Direct Cost: Fathom’s direct cost per transaction is $264, significantly lower than the industry average of $1,200-$1,800.
• Mortgage and Title: These sectors experienced a 5,148% growth in Q4, with gross profit margins of 30% and over 60% respectively.

Operational Updates

• Agent Growth: Driven by organic marketing, agent referrals, and strategic acquisitions.
• Technology: Fathom’s IntelliAgent platform supports the entire transaction lifecycle, offering on-demand support and training.
• Elevate Program: Provides comprehensive agent support, including lead generation and transaction coordination, for a 20% commission split.
• Acquisition: The $3.5 million acquisition of My Home Group is expected to generate $1.2 million in EBITDA this year.

Future Outlook

• Market Conditions: Anticipated growth of 5-10% annually over the next 3-4 years.
• Elevate Expansion: Plans to add 2,000-3,000 agents to the program within 18 months.
• Financial Projections: Positive adjusted EBITDA expected in Q2, with no need for additional cash.
• Acquisition Strategy: Continued focus on acquiring companies to enhance growth.

Q&A Highlights

• Buyer Side Compensation: Changes have not significantly impacted the market.
• Office Space: Virtual closings have increased, reducing the need for physical office visits.
• Interest Rates: Past high rates are unlikely to return, with a balanced market expected to drive steady growth.

For more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - Planet MicroCap Showcase: VEGAS 2025:

Marco Fraginal, Fathom Holdings: We have Marco Fraginal from Fathom Holdings at 09:00. Good morning. Okay. I think we can get started. Right?

So okay. Let’s go. So, so Fathom Holdings is in a sense, we are a real estate company. We have to act like a real estate company, but the reality, we are a platform. We really are a technology platform.

So when I joined the company twelve years ago, the thought process was that the real estate industry really made no sense, the way it works and the way it operates. And in a sense, real estate agents are independent contracts or really running a small business. And so the idea was to create a platform that would actually change the way real estate agents work and actually improve the productivity and and do a lot of the work that so that what we create in terms of intel agents. So we we do behave like and act like a real estate company, but the reality is we’re really more like a platform. So the last few years in this industry, as you can imagine, have been very difficult with the change in interest rates.

The interest rates significantly affected this industry. And the last two years, transactions have decreased significantly, right, about 40 to 50%. So that impacted the industry. Having said that, q four for us was a turning point. You know, prior to the significant changes in the interest rate, this company was growing around 30 to 40% a year.

Interest rates came in. That significant change really caused havoc in the industry. We were pretty much down for the first year and then flat, and we’ll go over that. But again, q four of last year was an inflection point for us where we began to increasing again. So we grew revenue by 24% in q four year over year.

We grew transactions by 22% and agent grow by 21%, and we made a significant acquisition. So what I’m trying to demonstrate to you is that again, I think the industry has bottomed out. There’ll be some increase this year. But for us, as a company, q four is the the return to, to growth. We are almost in every state in the country.

We one of the things that makes us unique is that we’re also a mortgage company and a and a title company. We try to take advantage of those transactions. And what makes our business unique in terms of mortgage and title is that roughly 50% of our business in mortgage and title come from Fathom agents. So we don’t spend a lot of money in advertising like a lot of mortgage and title companies do because we’re getting that business as an add on. As I as I mentioned earlier, the the last two years have been incredibly difficult for this industry.

Having said that, we’re beginning to see the light at the end of the tunnel. I think if you look at March numbers, the transactions I think went up 7%. And, NAR, the National Association of Realtors is predicting somewhat of an increase this year. So we think this this year, the industry will grow number of transactions by about 7% and then, another 10% next year. So as as as I mentioned early, last year has been difficult, but, we’re beginning to see, the industry recovering.

In terms of the company, you know, we believe that we offer a complete solution to agents, and and we offer a great deal of value, in terms of the value that we offer, in terms of technology, in terms of services. And what we try to do is really offer the complete solution for agents. So it’s similar to a company like Shopify, for example. If you think about a real estate agent, real estate agent is running his or her own business, and, you know, and they are looking for products service that can help run their business. And that’s what Shopify does.

And so our idea of Fathom when we initially Yated was to create a company similar to Shopify that continues to create products and services, and I will illustrate some of these, in the next few slides. A couple of things that make us unique. We are a virtual company. We actually have very few offices and so we don’t have the expenditure, that the legacy brands have. As you drive around the neighborhood, you see different office spaces from different brokerages.

We don’t have that. You know, we work in a a virtual environment. And the other thing about that’s unique about us is that we own our entire technology platform. So we built a product called IntelliAgent which is, a product that really runs the entire life cycle of a transaction. It is similar to an ERP system, if you will.

So when we start creating technology, unlike most of our competitors that create technology for the consumer, we create a technology for the agents because the agent is our customer. So we want to facilitate the process and help those agents grow their business. In terms of our value, again, we offer the complete solution. Not only we talk about the best splits, and I’ll get into a little bit of what the splits mean, how agents are compensated. But in terms of technology, we offer leads and and, of course, training and support and all that.

So even though we are a platform, we offer everything that the typical real estate company offers. In some cases, we offer a great deal more. So let’s talk about the splits which is one of the key differentiators. So most agents that work for traditional real estate or legacy companies, they pay their brokers a percentage or we call a split of their commission. So, for example, that could vary away from 15% as high as 50% of their revenue depending on where they work and how many years and how much business they do.

What’s unique about Fathom is that in our, Fathom, Max plan is that we charge a flat fee of $500. And so and that’s roughly the average transaction for us is roughly around 360, 3 hundred and 70 thousand. It’s roughly around five or 6%. So you can see the difference in savings from 6% all the way to 15 to 50%. Historically, this company that has been our model, the % commission, which is basically tells the agent, look, you’re paying 30% somewhere else.

Come to Fathom, you’re gonna pay five or 6%. And primarily, you’re going to get everything you get somewhere else. Right? And so that has been the value and and and we have grown significantly from that. What we just announced about, three weeks ago is Elevate.

So Elevate is the total opposite of that. Right? So Elevate is come to Fathom, you’re gonna pay the same 20% that you’re paying somewhere else, but we’re going to run the business for you. We’re going to do all the activities that agents honestly should not be doing because they’re salespeople. The real estate industry is very unique.

It asks salespeople to do all kinds of activities that typical salespeople don’t do. And so what Elevate is that. Elevate is, in a sense, Shopify. In a sense is we do all the, the work in which agents really should not be doing. So for example, we do all the lead generation for them.

We have an ISA team that calls on those leads for them. We do all the social media. We do the transaction coordination, all the paperwork, all the scheduling. So we take all that work from them, right, and we charge the 20% which typically they’re paying in other brokerages. We launched this three weeks ago.

And in three weeks, already signed up a 20 agents. The difference about this is that the gross profit on this activity, on this model is over 460% greater than the gross profit in our regular traditional model. And the EBITDA is five to six times greater. K? So two different models.

Right? One model is we tell agents come and join us. You’re gonna pay very little and you’re gonna get basically what you’re getting somewhere else. The other model is come and join Fathom. We’re gonna charge you the same or in some case a little less, but we’re gonna help you run your business.

K? We already have a waiting list on this and we think that within eighteen months we could add two to 3,008 at least two to 3,000 agents on this. The average transaction per agent, the average transactions per agent in this program is over 10, which is probably one of the highest. It’s probably the second highest in the industry as we continue to add agents. So again, this is about the continuation of development of our product and services.

First was to offer the agent at a lower cost. And the second is offer the agent the same cost but offer them a greater deal of value. So think of it as a concierge service. Come and join Fathom, and we’ll help you run your business for you. We have enormous economies of scale in technology, so we believe that this is the future of the industry.

If you look at the real estate industry for the last fifty years, there have been four or five different inflection points that really changed the industry from, ownership of brokerages to revenue share to the creation of teams, a mega team. So there’s about three or four different inflection points. We believe this is the future of the industry, that a significant percentage of agents are gonna want to do this. We mentioned technology. We actually own and built our own technology.

I’ve been in technology industry in software for for many, many years. And so when I joined the company twelve years ago, we began the process of rebuilding our own technology and and manage the entire life cycle of a transaction. Now why is that important? Well, it’s important for a few reasons. One, competitive advantage.

When we did not have our technology and we came up with new features in that, basically, the software provider would offer those to everyone. Second is the cost to run the business. We have the lowest cost in the industry per, direct cost per transaction. $264. So it cost us $264 to put a transaction through our system.

K? Most companies out there are paying $1,200, and we’ll talk them a little more in detail. So having our own technology is a significant differentiator. And as you can see, the technology does all kinds of things. Right?

We offer our agents the complete solution in terms of running their business for them from websites to, marketing, lead generation, transaction management. It helps run the business. We also offer them a variety of leads programs. I get asked the question I’ll ask so I I included the slide because always asking, can you generate leads for your agents? Absolutely, we do.

And that’s part of the Elevate program. We help our agents continue to increase their business. There are many that believe that virtual companies cannot offer, you know, comprehensive training and support. That’s actually incorrect. I believe that we probably offer better support because we’re built on on demand support and on demand training where agents can get those anytime they want.

So we built an entire platform to help agents become more successful, not only from support but for training as well. I mentioned earlier that we are a mortgage and title company as well. One of the great benefits about having mortgage and titles that we also make a lot more money from those as well. So our gross profit mortgage on mortgage is about 30% and title is, over 60%. When you’re looking at real estate, it’s only 7%.

Right? And so you can see the great advantage of having mortgage and title as well. Now, when we look at Elevate, the gross profit on Elevate is four to five times. So it’s around 30%, twenty five to 30%. So Elevate is significantly going to change our financials going forward.

Mortgage and title continue to grow faster than our regular business. We grew about 25, 20 six percent in q four overall. Mortgage and title grew over, 5148%. So we’ll continue to grow in our business much faster than mortgage and title, which is also much more profitable. So let’s talk about agent growth.

Even though we are a transaction business and we won transactions, we get transactions by agents. So continue to grow our agent base is certainly important. Our agent growth primarily comes from three different ways. First, organic growth. We actually market through, hundreds of thousands of agents, on a daily basis.

Second, agent referrals. We, incentivize our agents to refer other agents. About 50% of our growth comes from agent referrals. And then third, acquisitions. We just began somewhat a roll up strategy.

November first of last year, we acquired My Home Group, which is the twenty seventh largest company in the country. We are currently about number nine or 10 depending how you look at it, whether it’s transactions or revenue. And so we acquired My Home Group, 20, twenty seventh largest company, about, 2,200 agents. And I’ll talk a little bit more about, the dynamics of that. So when we look at an acquisition, we look for companies that are going to be highly accretive.

So we acquired this company just to give you a feel for how our methodology on acquisitions. We acquired this company about 3 and a half million dollars. It basically was breakeven last year. By implementing our technology, products, our services, this year we’ll do about $1,200,000 in EBITDA and next year we’ll do $2,000,000 in EBITDA. So our breakeven on that acquisition is roughly two years.

K? And there are there are dozens and dozens and dozens of companies out there that we can help become a lot more profitable by implementing our technology, our products, and our services. As I mentioned earlier, one of the great benefits of our technology and services is that we can run a transaction for $270. And they were running a transaction about 5 or $600. Right?

So we basically cut that in half. I mentioned earlier $2.64 is our direct cost per transaction where the average in the industry is roughly 1,200 to 18 hundred depending how they run their business. You know, we are looking to grow our business not only from topside, but continue to increase the gross profit and profitability. It’s how we’re going to do that. An example is Elevate.

Right? Elevate is going to significantly increase our, gross profit and our profitability. We estimate that q two of this year will hit adjusted EBITDA positive. And once we hit adjusted EBITDA positive, we believe that for every additional dollar gross profit, 60% to 65% will flow to the bottom line. And so the company is at the inflection point where once we pass breakeven, adjusted EBITDA breakeven, we we should see a significant growth in terms of, EBITDA, as we continue to grow the business.

This is a historical chart in terms of our financials. You can see that prior to 2023, the company was growing 30% to 40%. Certainly in 2023 and 2024, we’re affected by interest rates. But again in q four of twenty twenty four, we hit that inflection point and began growing again. So we grew revenue by 24% in q four.

We grew gross profit by 59%, agents by 21%, and transactions by 22. The the point I’d like to highlight is that if you look at the growth in revenue, look at the growth in gross profit, you can see the gross profit growth was 59% versus revenue 24. But that means that the company is hitting that inflection point. The gross profit is growing faster than, than revenue is. Right?

The management team, these are the the the people that really run the business. You know, I have lots of other, key important players in the team. But the way I look at the business is that I have someone that runs real estate, is Samantha, who’s been in the industry for twenty years. And then John Gwyn runs the mortgage and title business for me, and he’s been in the industry for twenty five years and he ran a very large mortgage company. So I run mostly the technology and the other services.

So we try to run the business, in a very cohesive way. We are very lean. If you just look, for example, our entire corporate team is seven people. And so we do a great deal of offshoring. We have over a hundred employees, in Vietnam and, 50 in Brazil.

And so I’ve been offshoring since, you know, the thirty years ago. And, and so that’s one of the benefits we have in terms of running a business and how efficient they can be, in terms of cost efficient. Our board you know, we have a great board that really helps us run the business. I’ll highlight two individuals. Scott Flanders, has runs multiple public companies and high growth businesses.

And then Adam Rothstein just joined the the company. Also, great deal of experience in running, high growth businesses and, in public companies. So I feel pretty blessed about having individuals that understand, you know, what has gone the last two years, understand where we are in the cycle, and understand the the potential for, for this industry. So with that, I will stop and I’ll take any questions you may have. Yes, sir.

Yeah. It’s a great question. So in our in the EBITDA numbers that I already gave earlier, so when you look at the Elevate program, the Elevate the typical again, this is only about a 20 agents. Right? In about two and a half weeks.

So there’s there’s a enormous runaway. The Elevate program is only for agents that close a minimum four transactions a year. And so when you look at the addressable market, we’re talking about 450,000 agents across the country that do at least four transactions. The cost structure for that is already built into program. So when you look at the typical elevated agent that right now is averaging around 10 transactions per year, our EBITDA per transaction should be greater than a thousand dollars per transaction.

Right? And so that’s already built in into into the plan. Part of the the cost structure elevate is our technology which we already own, so there’s very limited. The other part of the cost is working with several partners in which we negotiated significant discounts for volume. And so those are fixed.

So the majority of our cost for Elevate are fixed cost in the sense that or fixed in a sense that they are direct related to a transaction, and they are variable in a sense they go directly with our growth. So there is no really fixed cost that we have to have so much already put in. Even if we close zero business, it’s all variable and direct in terms of the growth. And so we built a pretty good model that’s very, cash flow efficient. As a matter of fact, within the first three months of Elevate, we’ll be, cash flow positive.

It’s just from the program. So any

Unidentified speaker: other questions? Yes, sir. So

Marco Fraginal, Fathom Holdings: if you if you next time you drive around, go to see if you see a real estate office, go in there, and you’re going to see there’s nobody there. So the world has changed a great deal. The closings now are done is, almost virtual. In a sense, a lot of our title company, for example, will go directly to your house or your job to close on the transaction. You don’t have to go to an office to close a transaction anymore.

So that, most companies already offer that. And then when you’re looking for, for houses, typically, today that if you think about the the world how the world has changed, used to be long time ago that you go to an agent and say, I’m looking for these houses and they come back and tell you, okay, these are the houses that I see. Today, people when they call an agent, they already search on the Internet, and they already said these are the houses I wanna see. And so the world has really changed that individuals don’t wanna go to an office anymore. They wanna go see.

These are the houses I wanna go see. And then when it comes to the closing, again, for us, we actually do the closing virtually or we actually come to your office or come to your house for you to sign the document. So very few clients go to an office. Our home office, for example, in Cary, North Carolina, that’s where our home office is. We have about eight 700 agents in Raleigh.

We’ve been there four years. I don’t think I have ever seen a client come to the office. And so that has really changed in terms of how clients behave. And and so and I think that’s one of the challenge for the legacy brands is that they have all this office infrastructure and that they have to pay for, that we don’t have to pay for. And so it’s very rare that individual client wants to go to an office.

Yes, sir.

Unidentified speaker: Yep. Sure.

Marco Fraginal, Fathom Holdings: Sure. The question is how did the world change or how did Fathom’s affected by the change in the buyer side compensation? I think that’s what you mean. Right? Yeah.

Honestly, it hasn’t changed much. It really hasn’t and I know it sounds good, but it really hasn’t changed much. I think that and the reason part of sale is look what’s happening in the market now. So you go back two years, a house was sold in about three three minutes. Literally three minutes and and people buy a house sight unseen.

Today, we’re getting back to more a balanced market where it’s taking $60.90 days to buy to sell a house. And so if you are selling your house and it’s taking sixty to ninety days, are you going to lower, what you’re going to con contribute to the buyer side, Asian? Probably not. And so we’re not really seeing you know, some people anticipated that the buyer side’s commission are gonna decrease significantly. We haven’t seen that.

We really have not seen that. They’re still pretty much flat, especially because the market has transitioned to more a balanced market. And so honestly, it hasn’t really changed. Now I cannot say that we gained any competitive advantage of that and the reason is because the market hasn’t changed. If the market did change indeed, then we probably would have gained competitive advantage on that, but we really haven’t.

And that’s not such a bad thing given that, you know, if the market is still in a, you know, in a sense that the sellers are still contributing to to the buyer side. So we have not seen a change in that. It doesn’t mean it’s not gonna happen in the future. But I believe that once you, you know, you hit a balanced market, an equilibrium balance between buyers and sellers, and that it takes sixty, ninety, a hundred and twenty days to sell a house, which historically, if you take, you know, the last two years out of the equation, I don’t think that the market is going

Unidentified speaker: to change. Any other questions?

Marco Fraginal, Fathom Holdings: It will be the the next couple years are gonna be really interesting in in the real estate. The the market is gonna be coming. I get asked this question, are we ever going to see 7,000,000 transactions that we saw in, you know, 2022? And the reality is no. Right?

Those those interest rates, we’re never gonna see them again. And, it’s gonna take some time for people who have 2%. Like, my son has a two and a half percent mortgage. He told me the other day he’s never gonna sell his house. And I told him, of course, he will.

When you start having kids, you’re gonna need a bigger house. You’re gonna sell your house. So it’s just gonna take some time for that to evolve. And we’re gonna see a balanced market. And, you know, we’re probably gonna see markets growing at five to 10% a year for the next three, four years, which is a healthy thing.

What happened in ’22 and ’21 was not a good thing for the market. You really threw everything out of whack, and now we’re paying the price, you know, to get things back on on track again. Any other questions? Yes, sir. Yep.

I don’t think so. I think, you know, WeRage just did around for 3,000,000. We we feel pretty strong about, hitting adjusted EBITDA positive in in q two. And then remember that q two, basically, the market increases. The Elevate program is gonna be cash flow positive fairly quickly for us.

At this point, I do not anticipate us needing cash. The cash that we needed, we raised in in q two. And, certainly, you know, giving our stock price, it’s, highly dilutive for us. Right? And one of the things that makes Fathom interesting is that when you look at the founder, myself, and some board members, we own roughly 60% of the company.

Right? And so we we we feel the pain as well. Right? And so we are very careful about diluting our stockholders because, you know, we are as well. Right?

Yes, sir. I think we got one more. One more. Yes, sir.

Unidentified speaker: I’m sorry. Can you say I can’t

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