Fathom Holdings Inc., the M&A-hungry parent for cloud-based realty brokerage Fathom RealtyIt achieved supercharged growth for 2021. It still has some work to do before it can turn a profit, but executives don’t seem to be in a hurry.
The company’s quarterly earnings report was released Tuesday. It revealed a $12.5million GAAP net loss for 2021. This despite growing revenue 87%, to $330.2million.
Fathom, a flat-fee absolutist, lost $1.3 million in 2020
Call with investorsTuesday evening, Josh Harley, CEO of the firm, stated that they are looking to achieve profitability in a very short time.
Many companies sacrifice profitability for growth. But Harley stated on the call that he is proud to say that growth strategies will help to attract more investors and real-estate agents over time. We believe we can both generate strong profits over time and grow our business at high levels.
The firm is working to create a similar real estate search portal to that of Zillow, reported that its losses were due to investments in future growth and operational and overhead costs associated with acquired companies, incremental cost due to transitioning into a public company, as well as increases in non-cash stock compensation expense, and non-cash amortization on acquired intangible assets.
Fathom acquired six companies in 2021. Naberly Solutions, a cloud-based tech business that adds CRM and website functionality to Georgia real estate brokerage Red Barn Real Estate; Idaho-based brokerage Idahobased brokerage Epic RealtyThe Woodhouse Group; hyperlocal data platform and tech platform LiveBy; E4:9 Holdings, a residential lender of mortgages.
The fourth quarter saw Fathoms general and administration expenses rise to $9.1million, which represents 9.5% of the quarter’s total revenue. This is an increase of $3.6 million from a year ago. Fathom executives said they expect general and administrative expenses to continue to rise going forward due to acquisitions and costs related to scaling and integrating the Company’s business lines. However, the firm stated that they expect these expenses to decrease over the long term as revenue grows.
Despite these challenges, Harley and Fathom’s president and CFO Marco Fregenal expressed optimism about the firms rising transaction and agent count. The fourth quarter saw 10,800 transactions by Fathom Realty agents, a 43% increase year-over-year. The number of brokerage agents grew 48% to 8,100 agents.
The brokerage raised its agent fees in January to reflect inflation and growing expenses. It increased its annual agent fee 20% – $600 per annum and the transaction fee 11% – $500 for the first 12 transactions. Harley stated that they have not experienced any increase in attrition or received any resistance from agents.
As the housing inventory continues to shrink, making it more difficult for agents to complete transactions and earn commissions. Harley believes that Fathoms Flat Fee model will help the brokerage to attract more agents, resulting in an increase in the number of transactions closed.
Many of our competitors may feel the effects of falling home prices on their profitability. They take a percentage share on every transaction but Fathom would not have that. Harley said. No matter if an agent earns $10,000 or $8,000, we still get the same transaction fees. This should allow us to compete with traditional commission models in real estate.
Fregenal and Harley also pointed out Fathoms growth in the mortgage, technology, and title insurance industries as sources of future profitability. Although Fathoms title company is licensed in 29 states, Harley noted that its Q4 earnings were equal to its earnings for 2020.
Frenegal stated to investors that the overall attach rate of all Fathoms’ ancillary services was 5-6% and that they plan to increase it to 10% within the next 12-18months. Harley stated that this increase, along with an increase in agent count, will result in an increase in revenue.
Harley stated on the call that agents bring more transactions to our agents as they grow. This increases our opportunities to capture title, mortgage and insurance revenue.
Harley stated that Fathom plans to expand to all 50 US states and Canada in the future (it currently operates 36 states and Washington, D.C.). The firm also aims to generate revenue of between $425 million-$435 million by 2022.
Harley said that Fathom has an obvious, visible runway with huge growth potential. We believe that our model is well-positioned to win, regardless of what the market may bring.