Fathom Holdings Inc. FORM 10-K December 31, 2024

Fathom Holdings Inc. Navigates Challenging Housing Market in 2024

Fathom Holdings Inc., a national real estate services company, faced a difficult operating environment in 2024 as the housing market contracted due to historically high interest rates and inflation. Despite these headwinds, the company remained focused on executing its strategy of providing technology-driven real estate services to agents and consumers.

Revenue and Profit Trends

For the year ended December 31, 2024, Fathom’s total revenue decreased by 2.9% to $335.2 million, compared to $345.2 million in 2023. This decline was primarily driven by a 3.3% drop in gross commission income, which fell from $325.4 million in 2023 to $314.7 million in 2024. The company attributed this decrease to a 3.0% decline in real estate transaction volume, as higher mortgage rates and home prices dampened consumer demand.

However, Fathom’s other service revenue, which includes mortgage lending, title insurance, and SaaS offerings, increased by 3.1% to $20.4 million in 2024. This growth was driven by organic expansion and cross-selling of the company’s ancillary services to its real estate brokerage clients.

Despite the revenue decline, Fathom was able to reduce its operating expenses by 2.7% to $358.6 million in 2024, down from $368.5 million in 2023. This was primarily due to a 3.2% decrease in commission and service costs, which track closely with revenue. The company also saw reductions in general and administrative expenses and depreciation and amortization, partially offset by a $3.5 million increase in litigation contingency expenses related to a settlement with the National Association of Realtors (NAR).

However, these cost savings were not enough to offset the revenue decline, and Fathom reported a net loss of $21.6 million for the year ended December 31, 2024, compared to a net loss of $24.0 million in 2023. The company’s adjusted EBITDA, a non-GAAP metric that excludes certain expenses, also declined from a loss of $4.1 million in 2023 to a loss of $5.7 million in 2024.

Strengths and Weaknesses

One of Fathom’s key strengths is its low-overhead, technology-driven business model, which allows the company to offer its real estate agents some of the best commission splits in the industry. This has helped the company attract and retain high-performing agents, with the number of agent licenses growing 21% to approximately 14,300 at the end of 2024.

Additionally, Fathom’s diversified service offerings, including mortgage lending, title insurance, and SaaS solutions, have provided some insulation from the downturn in the core real estate brokerage business. The company’s ability to cross-sell these ancillary services to its brokerage clients has helped offset the decline in commission-based revenue.

However, Fathom’s reliance on the residential real estate market is also a weakness, as the company is highly exposed to macroeconomic factors that impact housing demand, such as interest rates and inflation. The company’s net losses in 2024 and 2023 demonstrate the sensitivity of its business model to these external forces.

Additionally, the company’s ongoing litigation with the NAR and other industry participants poses a risk, as the outcome and potential impact on Fathom’s business model are uncertain. While the company believes its agent compensation model aligns with the industry changes, any significant disruption could have a negative effect on its financial performance.

Outlook and Future Prospects

Looking ahead, Fathom remains cautiously optimistic about its ability to navigate the challenging housing market. The company believes it is well-positioned to leverage its low-cost, high-engagement model to continue attracting and retaining agents, even in a slowing market.

Furthermore, Fathom expects that as inflation moderates and mortgage rates decline in 2025, housing demand will begin to recover. The National Association of Realtors (NAR) anticipates a 9% increase in existing home sales in 2025, from 4.06 million to 4.5 million.

To support its growth, Fathom has taken several steps to strengthen its financial position, including completing a $2.7 million registered direct offering of common stock in March 2025 and expecting to receive an additional $4.0 million from the sale of its insurance business. The company also has $7.1 million in cash and cash equivalents as of December 31, 2024, which management believes, along with its planned budget and growth initiatives, will provide sufficient funding for the company to continue as a going concern for at least the next year.

However, Fathom’s future capital requirements will depend on various factors, including the pace of its growth, any future acquisitions, and the continued impact of macroeconomic conditions on the housing market. The company may need to seek additional funding through equity or debt financing if market conditions deteriorate further, which could be dilutive to existing shareholders or come with unfavorable terms.

Overall, Fathom Holdings Inc. has demonstrated resilience in the face of a challenging housing market, leveraging its technology-driven business model and diversified service offerings to mitigate the impact of the downturn. While the company faces ongoing risks and uncertainties, its focus on attracting and retaining high-performing agents, expanding its ancillary services, and maintaining a strong financial position suggest that it is well-positioned to weather the current market conditions and capitalize on any future recovery in the housing sector.