• Total Revenue: $89.2 million, a decrease of 10.9% from $100.1 million in Q2 2023.
• Adjusted EBITDA: $189,000, compared to $500,000 in Q2 2023.
• Gross Profit Margin: 9.5%.
• Cash Position: $10.4 million at the end of Q2.
• Real Estate Transactions: 10,137, a decrease of 7.9% from Q2 2023.
• Agent Network Growth: 12% increase to approximately 12,224 agent licenses.
• Mortgage Revenue: Increased by 82% to $3.7 million from $2 million in Q2 2023.
• Verus Title Revenue: $1.1 million, a 10% increase from Q2 2023.
• Net Loss: $1.3 million or $0.07 per share, improved from a net loss of $4.3 million or $0.27 per share in Q2 2023.
• Sale of Insurance Business: Added $7.8 million to the balance sheet at closing, with an additional $7 million to be received over 24 months.

• Warning! GuruFocus has detected 6 Warning Signs with FTHM.

Release Date: August 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fathom Holdings Inc (NASDAQ:FTHM) introduced two new agent commission plans, Fathom Max and Fathom Share, designed to boost agent recruitment and retention.
• The company achieved positive adjusted EBITDA of $180,000 for the quarter, marking a significant milestone.
• Fathom Holdings Inc (NASDAQ:FTHM) reported impressive growth in its mortgage business, with revenues increasing by 82% year-over-year.
• The Verus Title business saw a 67% increase in revenue over the prior quarter, achieving positive adjusted EBITDA.
• The company successfully enhanced its balance sheet with the sale of Dagley Insurance, adding $7.8 million in cash at closing and an additional $7 million over the next 24 months.

Negative Points

• Total revenue for the quarter decreased by 10.9% compared to the same period last year.
• The company experienced a 7.9% decrease in transaction volume year-over-year.
• Gross profit for the quarter decreased by approximately 8.6% due to the impact of selling the company's insurance business.
• Fathom Holdings Inc (NASDAQ:FTHM) reported a GAAP net loss of $1.3 million for the quarter, although this was an improvement from the previous year.
• The company withheld guidance for the third quarter of 2024 due to the uncertain impact of the new revenue share models.

Q & A Highlights

Q: What degree of a housing recovery is needed for Fathom Holdings to achieve positive free cash flow? A: Marco Fregenal, President and CEO, stated that the company is not relying on a housing recovery to achieve positive cash flow. Instead, they are focusing on increasing the number of agents through new revenue share programs. The goal is to grow the agent network, which will drive transaction growth and improve cash flow and EBITDA.

Q: Can you explain the motivation behind the new Fathom Share plan and its expected impact? A: Marco Fregenal explained that the Fathom Share plan was introduced in response to feedback from agents and small brokerages interested in a revenue share program. The plan offers flexibility and choice, allowing agents to switch between models annually. The expectation is that this will attract more agents, particularly those from traditional split models, and drive growth back to 30% agent growth.

Q: How do the new agent commission plans impact gross profit margins? A: Marco Fregenal noted that the new plans are expected to attract more agents and higher-producing agents, which will increase transactions per agent and improve gross profit margins. The combination of more agents and a percentage joining the 12% program will enhance gross profit margins and EBITDA over time.

Q: What is Fathom Holdings doing to navigate industry changes related to the NAR settlement? A: Marco Fregenal stated that Fathom is working on creating its own buyer agreements and training agents to comply with new rules. The company is collaborating with state brokers and legal teams to ensure adherence to MLS and Board regulations, acknowledging that there are still many moving parts to address.

Q: What is the expected timeline for the impact of the new revenue share models on margins? A: Marco Fregenal indicated that significant changes in gross profit margins and EBITDA are not expected in the next two quarters due to the time it takes for new agents to close transactions. The impact of the new plans is anticipated to be more evident starting in Q1 of next year, with margins potentially reaching the mid-teens over the next year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.