– Company Targets Adjusted EBITDA
Positive in First Quarter of 2024 –
CARY,
N.C., Nov. 8, 2023 /PRNewswire/ --
Fathom Holdings Inc. (Nasdaq: FTHM)
("Fathom" or the "Company"), a national, technology-driven,
end-to-end real estate services platform integrating residential
brokerage, mortgage, title, insurance, and SaaS offerings for
brokerages and agents, today reported financial results for the
third quarter ended September 30,
2023.
Q3 2023 and Recent Highlights
- Achieved total revenue of $93.5
million and GAAP net loss of $5.5
million during the third quarter.
- Fathom's real estate agent network grew 13% to approximately
11,333 agent licenses at September 30,
2023, up from approximately 9,991 agent licenses at
September 30, 2022, as compared to an
industry decline of 1.6% (according to the National Association of
REALTORS).
- Fathom completed approximately 10,303 real estate transactions
in the third quarter 2023, a 14.7% decrease relative to the third
quarter 2022, as compared to an overall market decline of over 20%
(according to the National Association of REALTORS and the Census
Bureau).
- Fathom Realty is operating in 37 states and the District of Columbia; Encompass Lending Group
in 41 states and the District of
Columbia; Dagley Insurance in 47 states and the District of Columbia; and Verus Title in 28
states and the District of
Columbia.
- Fathom Realty expanded its operations in Q4 in California through the addition of Advance 1
McKeever Realty. Advance 1 McKeever Realty is an award-winning real
estate brokerage with approximately 70 agents that provides a full
range of services for buyers and sellers in Stockton, California.
- Fathom Realty expanded its operations in Q4 in Louisiana through the addition of Team Adkins
Real Estate, a leading brokerage team in Baton Rouge with 13 agents.
- Fathom Realty expanded its operations in Q4 in Massachusetts through the addition of Council
Realty, a prominent name in Pioneer Valley with 22 agents.
"Our results this quarter continue to demonstrate Fathom's
ability to navigate challenging market conditions with a truly
disruptive business model that is resonating among agents," said
Fathom CEO Joshua Harley. "While the
residential real estate market remains challenging, we continue to
believe that our future remains bright and are positioning Fathom
for continued success once the industry rebounds. We're continuing
to grow our agent network and believe we'll continue to attract
high quality agent teams and brokerages going forward as our agent
value proposition remains compelling in the current environment and
our pipeline of opportunities remains strong. We believe that
Fathom is the most attractive home for agents long-term as we help
them ultimately earn more money with an industry-leading flat fee
commission split to agents. By further rightsizing the Company's
expenses, we've set a target to achieve operating cash flow
breakeven as early as Q2 of 2024 while remaining committed to
getting back to positive Adjusted EBITDA in Q1 2024 and going
forward."
"We remain focused on execution and are taking necessary steps
to better position Fathom in the current environment and once the
market recovers," stated Fathom President and CFO Marco Fregenal. "During the third quarter, we
continued to see the benefits from the cost-reduction measures
we've already implemented. We have continued to further
right-size the Company's expenses and implement management salary
reductions for a combined expected savings of approximately
$1.2 million per quarter. We believe
we are positioned for profitable growth ahead where we can start to
show the operating leverage in our businesses."
Third Quarter 2023 Financial Results
Fathom's real estate agent network grew 13% to approximately
11,333 agent licenses at September 30,
2023, up from approximately 9,991 agent licenses at
September 30, 2022, compared to an
industry decline of approximately 1.6%.
In spite of an overall industry decline of over 20% in real
estate transactions from the 2022 third quarter, Fathom only saw a
decrease of 14.7%, completing approximately 10,303 transactions for
the 2023 third quarter. Total revenue decreased 16% for the 2023
third quarter to $93.5 million, from
$111.3 million for 2022's third
quarter.
Segment revenue for the 2023 third quarter, compared with the
2022 third quarter was as follows:
|
Revenue
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Real Estate
Brokerage
|
$
88,247
|
|
$ 104,977
|
|
$ 256,050
|
|
$ 311,074
|
Mortgage
|
1,921
|
|
2,839
|
|
5,404
|
|
8,345
|
Technology
|
836
|
|
702
|
|
2,385
|
|
2,003
|
Corporate and other
services (a)
|
2,520
|
|
2,746
|
|
7,315
|
|
8,104
|
Total
revenue
|
$
93,524
|
|
$ 111,264
|
|
$ 271,154
|
|
$ 329,526
|
(a) Transactions
between segments are eliminated in consolidation. Such amounts are
eliminated through the Corporate and other services
line.
|
GAAP net loss for the 2023 third quarter was $5.5 million, or $0.34 per share, compared with a loss of
$6.0 million, or $0.38 per share, for the 2022 third quarter.
General and Administrative expense (G&A) totaled
$9.8 million for the 2023 third
quarter, compared with $11.5 million
for the third quarter of 2022. G&A as a percentage of
revenue remained relatively constant to the prior year at
approximately 10.5%. Fathom began implementing its cost-reduction
initiatives in the fourth quarter of 2022 and is committed to
achieving Adjusted EBITDA positive in Q1 2024 and going
forward.
Adjusted EBITDA loss, a non-GAAP measure, was $253 thousand compared with an Adjusted EBITDA
loss of approximately $2.3 million
for the 2022 third quarter.
Fathom provides Adjusted EBITDA, a non-GAAP financial
measure, because it offers additional information for monitoring
the Company's cash flow performance. A table providing a
reconciliation of Adjusted EBITDA to its most comparable GAAP
measure, as well as an explanation of, and important disclosures
about, this non-GAAP measure, is included in the tables at the end
of this press release.
Guidance/Long-Term Targets
Without giving a timeline for reaching this target, the Company
reiterated that it believes it can generate Adjusted EBITDA
exceeding $40.0 million per year at
100,000 to 110,000 transactions per year.
Given the continued uncertainty in the macro environment, the
Company will not be providing guidance for the fourth quarter
ending December 31, 2023 and will
revisit guidance expectations next quarter.
Conference Call
Fathom management will hold a conference call at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) today to discuss its
financial results for the third quarter ended September 30, 2023.
Call Date: Wednesday, November 8,
2023
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
U.S. dial-in: 833-685-0908
International dial-in: 412-317-5742
Please call the conference telephone number five minutes prior
to the start time. An operator will register your name and
organization.
A live audio webcast of the conference call will be available in
listen-only mode simultaneously and available via the investor
relations section of the Company's website at
www.FathomInc.com.
A telephone replay of the call will be available through
November 15, 2023.
U.S. replay dial-in: 877-344-7529
International replay dial-in: 412-317-0088
Replay ID: 7862010
About Fathom Holdings Inc.
Fathom Holdings Inc. is a national, technology-driven, real
estate services platform integrating residential brokerage,
mortgage, title, insurance, and SaaS offerings to brokerages and
agents by leveraging its proprietary cloud-based software,
intelliAgent. The Company's brands include Fathom Realty, Dagley
Insurance, Encompass Lending, intelliAgent, LiveBy, Real Results,
and Verus Title. For more information, visit www.FathomInc.com.
Cautionary Note Concerning Forward-Looking Statements
This press release contains "forward-looking statements,"
including, but not limited to, the Company's ability to
achieve operating cash flow breakeven in Q2 of 2024, its ability to
continue attracting agents and generating higher revenue, and its
ability to continue to reduce costs, among others. Forward-looking
statements are subject to numerous conditions, many of which are
beyond the control of the Company, including: risks associated with
general economic conditions, including rising interest rates; its
ability to generate positive operating cash flow; risks associated
with the Company's ability to continue achieving significant
growth; its ability to continue its growth trajectory while
achieving profitability over time; and other risks as set forth in
the Risk Factors section of the Company's most recent Form 10-K as
filed with the SEC and supplemented from time to time in other
Company filings made with the SEC. Copies of Fathom's Form 10-K and
other SEC filings are available on the SEC's website, www.sec.gov.
The Company undertakes no obligation to update these statements for
revisions or changes after the date of this release, except as
required by law.
Investor Contact:
Alex
Kovtun and Matt Glover
Gateway Group, Inc.
949-574-3860
FTHM@gateway-grp.com
FATHOM HOLDINGS
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except
share data)
|
|
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenue
|
|
|
|
|
|
|
|
Gross commission
income
|
$
88,247
|
|
$ 104,977
|
|
$ 256,050
|
|
$ 311,074
|
Other service
revenue
|
5,277
|
|
6,287
|
|
15,104
|
|
18,452
|
Total
revenue
|
93,524
|
|
111,264
|
|
271,154
|
|
329,526
|
Operating
expenses
|
|
|
|
|
|
|
|
Commission and other
agent-related costs
|
83,770
|
|
99,448
|
|
241,834
|
|
295,237
|
Operations and
support
|
1,886
|
|
2,420
|
|
5,404
|
|
6,192
|
Technology and
development
|
1,760
|
|
1,456
|
|
4,674
|
|
3,931
|
General and
administrative
|
9,793
|
|
11,528
|
|
29,552
|
|
34,669
|
Marketing
|
796
|
|
1,457
|
|
2,439
|
|
3,948
|
Depreciation and
amortization
|
891
|
|
852
|
|
2,406
|
|
2,238
|
Total operating
expenses
|
98,896
|
|
117,161
|
|
286,309
|
|
346,215
|
Loss from
operations
|
(5,372)
|
|
(5,897)
|
|
(15,155)
|
|
(16,689)
|
Other expense (income),
net
|
|
|
|
|
|
|
|
Interest expense
(income), net
|
88
|
|
(11)
|
|
151
|
|
4
|
Other nonoperating
expense
|
18
|
|
126
|
|
181
|
|
800
|
Other expense (income),
net
|
106
|
|
115
|
|
332
|
|
804
|
Loss before income
taxes
|
(5,478)
|
|
(6,012)
|
|
(15,487)
|
|
(17,493)
|
Income tax
expense
|
18
|
|
—
|
|
55
|
|
185
|
Net loss
|
$
(5,496)
|
|
$
(6,012)
|
|
$ (15,542)
|
|
$ (17,678)
|
Net loss per
share:
|
|
|
|
|
|
|
|
Basic
|
$
(0.34)
|
|
$
(0.38)
|
|
$
(0.97)
|
|
$
(1.10)
|
Diluted
|
$
(0.34)
|
|
$
(0.38)
|
|
$
(0.97)
|
|
$
(1.10)
|
Weighted average common
shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
16,074,123
|
|
15,804,644
|
|
16,036,622
|
|
16,054,025
|
Diluted
|
16,074,123
|
|
15,804,644
|
|
16,036,622
|
|
16,054,025
|
FATHOM HOLDINGS
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except
share data)
|
|
|
September
30,
2023
|
|
December 31,
2022
|
ASSETS
|
(Unaudited)
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
6,616
|
|
$
8,320
|
Restricted
cash
|
146
|
|
60
|
Accounts
receivable
|
4,124
|
|
3,074
|
Mortgage loans held for
sale, at fair value
|
7,152
|
|
3,694
|
Prepaid and other
current assets
|
3,604
|
|
3,668
|
Total current
assets
|
21,642
|
|
18,816
|
Property and equipment,
net
|
2,460
|
|
2,945
|
Lease right of use
assets
|
4,392
|
|
5,508
|
Intangible assets,
net
|
24,637
|
|
27,259
|
Goodwill
|
25,607
|
|
25,607
|
Other assets
|
59
|
|
52
|
Total
assets
|
$
78,797
|
|
$
80,187
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
3,402
|
|
$
3,343
|
Accrued and other
current liabilities
|
3,034
|
|
3,403
|
Warehouse lines of
credit
|
6,890
|
|
3,580
|
Lease liability -
current portion
|
1,509
|
|
1,609
|
Long-term debt -
current portion
|
290
|
|
564
|
Total current
liabilities
|
15,125
|
|
12,499
|
Lease liability, net of
current portion
|
4,105
|
|
5,241
|
Long-term debt, net of
current portion
|
3,451
|
|
129
|
Other long-term
liabilities
|
312
|
|
297
|
Total
liabilities
|
22,993
|
|
18,166
|
Commitments and
contingencies (Note 18)
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock (no par
value, shares authorized, 100,000,000; shares issued and
outstanding, 18,174,473
and 17,468,562 as of September 30, 2023 and December 31, 2022,
respectively)
|
—
|
|
—
|
Additional paid-in
capital
|
118,951
|
|
109,626
|
Accumulated
deficit
|
(63,147)
|
|
(47,605)
|
Total stockholders'
equity
|
55,804
|
|
62,021
|
Total liabilities and
stockholders' equity
|
$
78,797
|
|
$
80,187
|
FATHOM HOLDINGS
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in
thousands)
|
|
|
Nine Months Ended
September 30,
|
|
2023
|
|
2022
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
Net loss
|
$
(15,542)
|
|
$
(17,678)
|
Adjustments to
reconcile net loss to net cash (used in) provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
4,466
|
|
3,839
|
Non-cash lease
expense
|
1,291
|
|
1,565
|
Deferred financing
costs amortization
|
46
|
|
—
|
Other
non-cash
|
200
|
|
—
|
Gain on sale of
mortgages
|
(2,778)
|
|
(3,443)
|
Stock-based
compensation
|
9,325
|
|
6,470
|
Deferred income
taxes
|
14
|
|
—
|
Change in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
(1,050)
|
|
(672)
|
Derivative
assets
|
—
|
|
(241)
|
Prepaid and other
current assets
|
(136)
|
|
(2,182)
|
Other
assets
|
(7)
|
|
43
|
Accounts
payable
|
59
|
|
(382)
|
Accrued and other
current liabilities
|
(3)
|
|
(284)
|
Operating lease
liabilities
|
(1,412)
|
|
(1,540)
|
Mortgage loans held
for sale originations
|
(111,722)
|
|
(205,137)
|
Proceeds from sale and
principal payments on mortgage loans held for sale
|
111,043
|
|
213,172
|
Net cash used in
operating activities
|
(6,206)
|
|
(6,470)
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
Purchase of property
and equipment
|
(21)
|
|
(981)
|
Amounts paid for
business and asset acquisitions; net of cash acquired
|
—
|
|
(2,479)
|
Purchase of intangible
assets
|
(1,337)
|
|
(2,473)
|
Net cash used in
investing activities
|
(1,358)
|
|
(5,933)
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
Proceeds from
debt
|
3,768
|
|
554
|
Principal payments on
debt
|
(566)
|
|
(846)
|
Cash paid for debt
issuance costs
|
(200)
|
|
—
|
Borrowings from
warehouse lines of credit
|
108,398
|
|
177,581
|
Repayment on warehouse
lines of credit
|
(105,088)
|
|
(182,080)
|
Deferred acquisition
consideration payments
|
(366)
|
|
—
|
Repurchase of common
stock
|
—
|
|
(6,045)
|
Net cash provided by
(used in) financing activities
|
5,946
|
|
(10,836)
|
Net decrease in cash,
cash equivalents, and restricted cash
|
(1,618)
|
|
(23,239)
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
8,380
|
|
37,921
|
Cash, cash equivalents,
and restricted cash at end of period
|
$
6,762
|
|
$
14,682
|
|
|
|
|
Supplemental
disclosure of cash and non-cash transactions:
|
|
|
|
Cash paid for
interest
|
$
188
|
|
$
23
|
Income taxes
paid
|
50
|
|
111
|
Amounts due to
sellers
|
—
|
|
1,100
|
Capitalized stock-based
compensation
|
—
|
|
—
|
Right of use assets
obtained in exchange for new lease liabilities
|
175
|
|
2,219
|
Issuance of common
stock for purchase of business
|
—
|
|
6,168
|
Reconciliation of cash
and restricted cash:
|
|
|
|
Cash and cash
equivalents
|
$
6,616
|
|
$
14,543
|
Restricted
cash
|
146
|
|
139
|
Total cash, cash
equivalents, and restricted cash shown in statement of cash
flows
|
$
6,762
|
|
$
14,682
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
(in
thousands)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net loss
|
$
(5,496)
|
|
$
(6,012)
|
|
$ (15,542)
|
|
$ (17,678)
|
Other expense (income),
net
|
106
|
|
115
|
|
332
|
|
804
|
Income tax
expense
|
18
|
|
—
|
|
55
|
|
185
|
Depreciation and
amortization
|
1,599
|
|
1,436
|
|
4,466
|
|
3,839
|
Other non-cash items
and transaction costs
|
200
|
|
13
|
|
200
|
|
73
|
Stock based
compensation
|
3,320
|
|
2,123
|
|
9,325
|
|
6,470
|
Adjusted
EBITDA
|
$ (253)
|
|
$
(2,325)
|
|
$
(1,164)
|
|
$
(6,307)
|
Note about Non-GAAP Financial Measures
To supplement Fathom's consolidated financial statements, which
are prepared and presented in accordance with GAAP, the Company
uses Adjusted EBITDA, a non-GAAP financial measure, to understand
and evaluate our core operating performance. This non-GAAP
financial measure, which may be different than similarly titled
measures used by other companies, is presented to enhance
investors' overall understanding of our financial performance and
should not be considered a substitute for, or superior to, the
financial information prepared and presented in accordance with
GAAP.
Fathom defines the non-GAAP financial measure of Adjusted EBITDA
as net income (loss), excluding other income and expense, income
taxes, depreciation and amortization, share-based compensation
expense, and other non-cash and transaction-related costs.
Fathom believes that Adjusted EBITDA provides useful information
about the Company's financial performance, enhances the overall
understanding of its past performance and future prospects, and
allows for greater transparency with respect to a key metric used
by Fathom's management for financial and operational
decision-making. Fathom believes that Adjusted EBITDA helps
identify underlying trends in its business that otherwise could be
masked by the effect of the expenses that the Company excludes in
Adjusted EBITDA. In particular, Fathom believes the exclusion of
share-based compensation expense related to restricted stock and
restricted stock unit awards and stock options, and
transaction-related costs associated with the Company's acquisition
activity, provides a useful supplemental measure in evaluating the
performance of its operations and provides better transparency into
its results of operations. Adjusted EBITDA also excludes other
income and expense, net which primarily includes nonrecurring
items, such as, gain on debt extinguishment and severance costs, if
applicable, and other non-cash items representing reserves on
certain agent fee collections.
Fathom is presenting the non-GAAP measure of Adjusted EBITDA to
assist investors in seeing its financial performance through the
eyes of management, and because the Company believes this measure
provides an additional tool for investors to use in comparing
Fathom's core financial performance over multiple periods with
other companies in its industry.
Adjusted EBITDA should not be considered in isolation from, or
as a substitute for, financial information prepared in accordance
with GAAP. There are a number of limitations related to the use of
Adjusted EBITDA compared to net income (loss), the closest
comparable GAAP measure. Some of these limitations are that:
- Adjusted EBITDA excludes share-based compensation expense
related to restricted stock and restricted stock unit awards and
stock options, which have been, and will continue to be for the
foreseeable future, significant recurring expenses in Fathom's
business and an important part of its compensation strategy;
- Adjusted EBITDA excludes transaction-related costs primarily
consisting of professional fees and any other costs incurred
directly related to acquisition activity, which is an ongoing part
of Fathom's growth strategy and therefore likely to occur; and
- Adjusted EBITDA excludes certain recurring, non-cash charges
such as depreciation and amortization of property and equipment and
capitalized software, and acquisition related intangible asset
costs, however, the assets being depreciated and amortized may have
to be replaced in the future.
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SOURCE Fathom Realty