Fathom Holdings Reports Second Quarter 2023 Results

– Company Targets Remaining Adjusted EBITDA Positive Moving Forward–

CARY, N.C., Aug. 9, 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 second quarter ended June 30, 2023.

Q2 2023 and Recent Fathom Highlights

• Achieved total revenue of $100.1 million and GAAP net loss of $4.3 million during the second quarter.
• Achieved Adjusted EBITDA of $458,000 during the second quarter.
• Grew real estate agent network 14.3% to approximately 10,930 agent licenses at June 30, 2023, up from approximately 9,560 agent licenses at June 30, 2022, as compared to an industry decline of 1.5% (according to the National Association of REALTORS).
• Completed approximately 11,010 real estate transactions in the second quarter 2023, a 16.7% decrease relative to the second quarter 2022, as compared to an overall market decline of 18.6% (according to the National Association of REALTORS and the Census Bureau).
• Expanded presence in several states during the second quarter. Fathom Realty is operating in 37 states and the District of Columbia; Encompass Lending Group in 46 states and the District of Columbia; Dagley Insurance in 47 states and the District of Columbia; and Verus Title in 30 states and the District of Columbia.
• Appointed highly experienced real estate industry executive Steve Murray to the Company's board of directors.

"We've made significant progress this year in advancing our growth strategy while continuing to adapt and thrive in the rapidly evolving residential real estate industry," said Fathom CEO Joshua Harley. "During the second quarter, we achieved our goal of Adjusted EBITDA breakeven. We are proud of the tremendous progress we made in reducing our cash burn from over $5 million in Q4 of 2022 to less than $1 million in Q2 of 2023. We continue to be committed to maintaining positive Adjusted EBITDA going forward and ultimately achieving positive cash flow, although the latter may not be reached in Q3. We anticipate continued cash investments to fuel the growth of our mortgage division, agent recruiting, and potential acquisitions."

"Our balance sheet remains strong and now that we have achieved breakeven Adjusted EBITDA we can start to show the operating leverage in our businesses going forward," stated Fathom President and CFO Marco Fregenal. "During the second quarter, we continued to see the benefits from the cost-reduction measures we've implemented along with improved performance across all of our divisions, which we believe positions us for profitable growth ahead."

Second Quarter 2023 Financial Results

Fathom's real estate agent network grew 14.3% to approximately 10,930 agent licenses at June 30, 2023, up from approximately 9,560 agent licenses at June 30, 2022, compared to an industry decline of approximately 1.5%.

In spite of an overall industry decline of 18.6% in real estate transactions from the 2022 second quarter, Fathom only saw a decrease of 16.7%, completing approximately 11,010 transactions for the 2023 second quarter. Fathom's resilience is due in part to its sizable agent acquisition completed in Q1 of 2022 and to its continued strategic recruiting efforts.  Total revenue decreased 22% for the 2023 second quarter to $100.1 million, from $128.2 million for 2022's second quarter.

Segment revenue for the 2023 second quarter, compared with the 2022 second quarter was as follows:

GAAP net loss for the 2023 second quarter was $4.3 million, or $0.27 per share, compared with a loss of $5.7 million, or $0.35 per share, for the 2022 second quarter.

General and Administrative expense (G&A) totaled $10.2 million for the 2023 second quarter, or 10.1% of revenue, compared with $12.4 million or 9.6% of revenue for the second quarter of 2022.  Fathom began implementing its cost-reduction initiatives in the fourth quarter of 2022 and is committed to remaining Adjusted EBITDA positive moving forward.

Driven by many of the factors discussed above, Adjusted EBITDA, a non-GAAP measure, improved to $458 thousand compared with an Adjusted EBITDA loss of approximately $2.0 million for the 2022 second 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.

For the third quarter of 2023, Fathom expects total revenue in the range of $93 million – $95 million, and Adjusted EBITDA in the range of $200K –  $350K.

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 second quarter ended June 30, 2023.

Call Date: Wednesday, August 9, 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 August 16, 2023.

U.S. replay dial-in: 877-344-7529
International replay dial-in: 412-317-0088
Replay ID: 3963952

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, its ability to achieve cash flow breakeven in the third quarter of 2023, 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 operational 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

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 transaction-related cost.

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 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, minor legal settlement claims, severance costs, and professional fees related to investigating potential financing opportunities, if applicable.

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.

The following table presents a reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure, for the three months ended September 30, 2023:

SOURCE Fathom Realty