FATHOM HOLDINGS INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

Financial Performance Overview

Fathom Holdings Inc., a leading real estate technology company, has reported its financial results for the three months ended March 31, 2025. The company saw strong growth in its core real estate brokerage business, with a 36% increase in gross commission income compared to the same period in 2024. This was driven by a 26.1% increase in transaction volume, as well as a 7.8% rise in average revenue per transaction.

However, the company’s other service revenue, which includes mortgage lending, title insurance, and SaaS offerings, decreased by 17% year-over-year. This was primarily due to the sale of the company’s insurance business in May 2024. Overall, Fathom’s total revenue increased by 32% to $93.1 million in the first quarter of 2025.

On the expense side, commission and service costs rose 34% in line with the increase in revenue. General and administrative expenses decreased by 4%, while marketing and technology and development expenses increased by 14% and 22% respectively, as the company continued to invest in growth. Depreciation and amortization expenses declined by 24% due to the sale of the insurance business.

The company reported a net loss of $5.6 million for the quarter, compared to a net loss of $5.9 million in the same period last year. However, the company’s adjusted EBITDA, a non-GAAP metric that excludes certain expenses, improved from a loss of $1.5 million to a loss of $1.5 million, indicating progress in the company’s profitability.

Segment Performance

Fathom operates three reportable segments: Real Estate Brokerage, Mortgage, and Technology.

The Real Estate Brokerage segment, which generates the majority of the company’s revenue, saw a 36% increase in gross commission income, driven by the strong growth in transaction volume and average revenue per transaction. This segment benefits from Fathom’s low-overhead business model, which allows the company to offer its agents the ability to keep a larger share of their commissions compared to traditional real estate firms.

The Mortgage segment, which provides residential loan origination and underwriting services, saw an increase in revenue from the growth in mortgage loans and title service transactions. However, the company’s insurance business, which was previously part of this segment, was sold in May 2024, contributing to the overall decrease in other service revenue.

The Technology segment, which includes the company’s SaaS solutions and the development of its intelliAgent platform, continued to invest in innovation to support the growth of the real estate brokerage business.

Liquidity and Capital Resources

As of March 31, 2025, Fathom had $8.2 million in cash and cash equivalents, including restricted cash, representing an increase of $0.8 million compared to the end of 2024. The company’s net working capital decreased from $5.6 million to $4.8 million during the same period.

The company anticipates that its existing cash and cash flows from operations, as well as the $7.4 million in proceeds received from the sale of its insurance business, will be sufficient to meet its operating requirements for at least the next 12 months. However, the company’s future capital requirements may be affected by factors such as acquisitions, technology investments, and the overall real estate market conditions, which could require additional funding through equity or debt financing.

Litigation Update

Fathom Realty, a wholly-owned subsidiary of Fathom Holdings, reached a nationwide settlement related to claims asserted in the Burnett v. The National Association of Realtors (NAR) lawsuit. As part of the settlement, Fathom Realty will pay a total of $2.95 million over the next two years and has agreed to adhere to the rule changes put forth by the NAR.

The company is also actively monitoring several other purported class-action lawsuits related to alleged antitrust violations in the real estate industry. If the NAR settlement is sustained on appeal, it is expected to resolve claims against Fathom related to these matters. The company is also defending a separate lawsuit filed by buyers of residential property nationwide, alleging a conspiracy to raise buyer broker commissions.

Outlook and Strategic Initiatives

Fathom’s strategic recruiting and acquisition strategy, supported by its new competitive revenue share program, have positioned the company for profitable growth in the future. The company believes its low-overhead business model, which leverages proprietary technology, will continue to attract more agents and higher-producing agents, who can keep a larger share of their commissions.

The company’s investment in technology, including the development of the intelliAgent platform and the LiveBy SaaS business, is expected to enhance its offerings and support the growth of the real estate brokerage segment. Additionally, the company’s mortgage and title services businesses provide complementary revenue streams and opportunities for cross-selling.

However, the ongoing litigation and the potential changes in real estate industry practices, such as the new rules established by the NAR, could have an impact on the company’s business model and operations. Fathom is closely monitoring these developments and is prepared to adapt its strategies as necessary to maintain its competitive position and profitability.

Overall, Fathom’s strong performance in the first quarter of 2025, coupled with its strategic initiatives and focus on agent support, positions the company for continued growth and success in the dynamic real estate technology landscape.