In what has been a challenging year for most residential real estate companies, with tight inventory and higher-than-hoped-for mortgage rates, it’s become common that quarterly earnings reports don’t highlight financial gains so much as they extol limited losses.
So it was for Fathom Holdings, which includes Fathom Realty, the 100% commission brokerage, during its earnings call on August 9. The national, technology-driven, end-to-end real estate services platform reported positive news for Q2 2023, at least compared to the past few much-worse quarters.
“We’ve made significant progress this year in advancing our growth strategy while continuing to adapt and thrive in the rapidly evolving residential real estate industry,” said Fathom CEO Joshua Harley. “During the second quarter, we achieved our goal of Adjusted EBITDA breakeven. We are proud of the tremendous progress we made in reducing our cash burn from over $5 million in Q4 2022 to less than $1 million in Q2 of 2023.
“We continue to be committed to maintaining positive Adjusted EBITDA going forward and ultimately achieving positive cash flow, although the latter may not be reached in Q3. We anticipate continued cash investments to fuel the growth of our mortgage division, agent recruiting and potential acquisitions.”
Total Fathom revenue decreased 22% for Q2 2023 to $100.1 million, from $128.2 million for Q2 2022. Fathom’s real estate agent network grew 14.3% to approximately 10,930 agent licenses at June 30, up from approximately 9,560 agent licenses at June 30, 2022, compared to an industry decline of approximately 1.5%.
With an overall industry decline of 18.6% in real estate transactions from Q2 2022, the Cary, North Carolina-based company only saw a decrease of 16.7%, completing approximately 11,010 transactions for the quarter. The company cited its sizable agent acquisition completed in Q1 2023 and its continued strategic recruiting efforts are reasons for agent gains.
“Our balance sheet remains strong, and now that we have achieved breakeven Adjusted EBITDA we can start to show the operating leverage in our businesses going forward,” stated Fathom President and CFO Marco Fregenal. “During the second quarter, we continued to see the benefits from the cost-reduction measures we’ve implemented along with improved performance across all of our divisions, which we believe positions us for profitable growth ahead.”
Harley affirmed his confidence in Fathom’s recuperative power as well.
“While the second quarter remains challenging for residentials and real estate overall, we are encouraged by some recent signs of stabilization across our markets,” he stressed. “Along with the moderation in interest rates during the quarter, consumers compete to adjust to higher mortgage rates, and while transactions across the industry were down, we remain encouraged by the trends we’re seeing across our markets, and we believe we’re well positioned to continue growing market share regardless of what happens to interest rates.
“I’m sure you’ve all seen the talking heads state that with so many homeowners currently enjoying historically low interest rates, they have no plans to move anytime soon. However, what people plan to do under ideal personal circumstances and what they actually do in the real world are rarely the same thing. The fact is that not everyone has the luxury of being rate sensitive. Life happens, people get married, they have a growing family and need more space, or sometimes they get divorced. People relocate for work or for family. There’s always a need, and when that need arises, we’ll be there.”
Fathom’s stock on August 9 was $6.58. The year’s high was $8.47 and year’s low $3.25.
Q2 2023 highlights
- Achieved total revenue of $100.1 million and GAAP net loss of $4.3 million during the second quarter.
- Achieved Adjusted EBITDA of $458,000 during the second quarter.
- Grew real estate agent network 14.3% to approximately 10,930 agent licenses at June 30, 2023, up from approximately 9,560 agent licenses at June 30, 2022, as compared to an industry decline of 1.5% (according to the National Association of REALTORSⓡ).
- Completed approximately 11,010 real estate transactions in the second quarter 2023, a 16.7% decrease relative to the second quarter 2022, as compared to an overall market decline of 18.6% (according to NAR and the Census Bureau).
- Expanded presence in several states during the second quarter. Fathom Realty is operating in 37 states and the District of Columbia; Encompass Lending Group in 46 states and the District of Columbia; Dagley Insurance in 47 states and the District of Columbia; and Verus Title in 30 states and the District of Columbia.
- Appointed real estate industry executive Steve Murray to the Company’s board of directors.
