Fathom Realty has more agents, fewer Q1 sales than a year ago



Fathom Fregenal

CEO Marco Fregenal says the flat-fee brokerage is making progress toward achieving 2024 goals despite seasonality and broader industry challenges driving a $5.9 million Q1 net loss.

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Fathom Realty was able to trim its losses and grow to nearly 12,000 agents during the first quarter, even as the slowdown in the real estate market cut into transaction volume and revenue.

The flat-fee brokerage’s agent network has grown by 13 percent over the past year, to 11,986 agents as of March 31. But Q1 transaction volume was down by 10 percent, to 7,703, parent company Fathom Holdings Inc. reported Thursday.

Fewer transactions meant less revenue — despite some tweaks to the Cary, North-Carolina based brokerage’s fee structure. A 9 percent drop in Q1 revenue from a year ago, to $70.5 million, contributed to Fathom’s $5.9 million net loss for the quarter.

That’s an improvement from the $8.4 million Q4 2023 net loss Fathom reported in March, but was up from a $5.7 million net loss in Q1 2023.

“We made progress during the first quarter towards achieving our 2024 goals despite seasonality and broader industry challenges that continue to impact our results,” Fathom CEO Marco Fregenal said, in a statement.

Fregenal, who took over as CEO for founder Josh Harley when he stepped down for family reasons last fall, said gross margin increased to 10.3 percent, positioning Fathom to reaching positive operational cash flow and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).

Fathom’s adjusted EBITDA loss was $1.5 million, and the company expects to post positive EBITDA of $200,000 to $500,000 in the second quarter on projected revenue of $86 million to $89 million.

Shares in Fathom, which in the last year have traded for as little as $1.36 and as much as $8.20, moved up a penny to $1.47 in after hours trading following the release of earnings.

Last year, Fathom raised its agent transaction fees by 10 percent, to $550 for the first 15 completed transactions. After the first 15 transactions, agents currently pay $150, up from $99 before the increase.

A revised 2024 agent commission structure that took effect Jan. 1 adds a new high-value property fee on sales of properties valued at more than $600,000 and raises Fathom’s annual agent fee by $100, to $700.

On Monday, Fathom Holdings announced it had sold its insurance subsidiary, Dagley Insurance, back to founder Nathan Dagley for $15 million — $8 million at closing, with another $7 million in payments spread over the next 24 months.

Fregenal called the sale “a significant milestone in fortifying our financial position and supporting our agent growth strategy. The infusion of capital from this transaction equips us with vital resources to tackle potential challenges with confidence and deliver greater value for our shareholders through targeted growth initiatives and the exploration of additional opportunities within our core operations.”

Fathom Holdings generates more than 90 percent of its revenue through its real estate brokerage business but also provides mortgages, title insurance, insurance and technology for agents.

In April, Fathom launched a new joint venture, Verus Title Elite Texas LLC, with individual teams and top-producing Fathom agents throughout Texas. Fathom said it plans to have joint ventures in most of the 30 states where its Verus Title subsidiary operates by the end of 2025.

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