Q4 2021 Fathom Holdings Inc Earnings Call
Good day and welcome to the Fathom Holdings fourth quarter and year end 2021 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
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Please note that this event is being recorded.
I'd now like to turn the conference over to Roger at Pinedale with pound out Wilkinson. Please go ahead Sir.
Thank you operator, and welcome everyone to Saddam Holdings, 2021 fourth quarter and year end conference call I'm, Roger Palmdale with Pinedale Wilkinson Fathoms Investor Relations firm and this is my pleasure shortly to introduce the company's founder and Chief Executive Officer, Josh Harley and fathoms.
Didn't and Chief Financial Officer, Marco fishing, all before I turn things over to Josh I wanted to remind all listeners that today's call may include forward looking statements.
And the meaning of the private Securities Litigation Reform Act of 1995.
Such forward looking statements are subject to numerous conditions, many of which are beyond the company's control, including those set forth in the risk factors section of the company's IPO registration statement. Its latest Form 10-K , and other company filings made with the SEC copies of which are.
Available on the SEC's website at Www Dot FCC Dot Gov. As a result of those forward looking statements actual results could differ materially fathom undertakes no obligation.
To update any forward looking statements after todays call.
As required by law.
Please also note that during this call we will be discussing adjusted EBITDA, which is a non-GAAP financial measure as defined by SEC regulation G. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure is included in today's press release.
Which is now posted on fathoms website and with that it is my pleasure to turn things over to Josh Harley Josh.
Thank you Roger of course, thank you to everyone who is on todays call. Our entire team really appreciate your support and your faith in US before we review the significant progress Fathom has made since our last call I want to thank our agents and employees for their ongoing hard work not just toward our vision, but also helping us grow well.
Generating value for all of our stakeholders I also will say, thank you to our fathoms family for their unwavering dedication to creating a culture built on service and more specifically serving in placing others first I cannot begin to express how important that is and the role. It's played in our success one of the things I Love.
That's what I hear our agents say that they saw 1000 for the commission, but they stay for the culture.
That fact played a significant role and why do we have one of the lowest agent attrition rates among residential real estate brokerages.
On a true representation of whether fathom agents are happy hour low age attrition rate is the best indicator I'm extremely proud that our average monthly attrition rate across all of 2021 was only one 5% health of the industry average.
After quarter and year after year, our results continue to demonstrate the power of our truly disruptive business model and I'm proud to be here sharing our significant growth, we're winning through innovation and by delivering real long term value to our agents employees clients and of course our shareholders.
For the fourth quarter year over year revenue grew by 79% our agent count grew by over 48% and our transactions grew by over 43% importantly for the third quarter in a row, our real estate business was adjusted EBITDA profitable I don't believe that any other.
Publicly traded residential real estate brokerage can make that claim not either 30000 transactions per quarter.
We're continuing to invest capital to enhance our foundation for sustained long term growth of our new business lines. Those investment dollars are quickly, becoming a smaller percentage of our ongoing expenses. We believe that fathom is on track to continue our strong revenue agent in transaction growth and with the strategic and thoughtful.
<unk>, we're making each of our business lines. We look forward to also demonstrating strong solid profitability in the near future.
There are still some who do not fully understand who we are yet but with time I believe that more investors will come to understand our business and value us accordingly.
If you really dig into our story, you'll realize that not only has fathom agenda generated impressive performance every year for over a decade.
We still have an extraordinary run way ahead of US a lot of companies sacrifice profitability for growth, but I'm proud to say that we do not have to operate that way. We believe that we can achieve strong profits over time, while continuing to grow our business at high rates, our cash position is strong and we plan to continue to focus on it.
Treating the positive operational cash flow Marco our president and CFO does a great job pressing the preferred deal no button, keeping our spending in check as we march toward profitability. Our steadfast discipline allows us to be good stewards of the money with which you can trust us.
We believe that fathom is on track to continue our impressive growth rate for the foreseeable future. While also achieving profitability quickly and we look forward to proving it. The question is how do we get there.
Since going public we've substantially increased our revenue continued to expansion of our agent network maintained strong agent retention entered new geographic markets and completed strategic acquisitions designed to further solidify our market position.
That's a lot to accomplish in less than a year and a house, but it demonstrates our focus on <unk>.
Midnight and our ability to get things done.
With the addition of our own in house mortgage title and insurance companies along with additional SaaS offerings. We now have the potential to dramatically increase our revenue and importantly, our profitability per transaction.
I want to reiterate that these companies are not joint ventures, we fully own them that means that we're not giving up any of the revenue and profitability generated by these businesses and it means that we've got greater control to set a high bar for our quality of service that matters a lot it matters to our clients it matters to our agents and it should.
Or do you because that's how we believe that we can achieve a greater attach rate for these growing businesses.
As I mentioned earlier, we grew agent count by over 48% year over year, we believe that a big part of that is because fathom continues to prefer to have one of the most attractive agent Commission plans and one of the most complete offerings in the industry. When it comes to providing the greatest value to agents, we believe that fathom wins.
Hands down.
Focus is not just on adding more agents, but also helping those agents become more productive.
Close more sales and ultimately earn more money. We believe that we are accomplishing that by providing more training and more technology to help our agents get in front of more buyers and sellers.
As well, we're helping agents reduced the amount of time required to manage the transaction process, giving them, even more time to network himself.
To prove that point based on our based on our internal data agents, who joined fathom increase their sales by an average of nearly 49%. After four years in fact, many of our agents report doubling their sales after the first year with that and.
In addition, as we grow our agent base and familiarize our agents with our newly acquired brands. We are inherently growing our referral opportunities not just for our realty business, but for all brands.
One of the beautiful things about our incredible agent growth is that our cost to acquire one agent during the period remained at approximately $985, making our breakeven on each agent less than the $1100. We earn on their first sale.
I also want to point out that the average lifetime value of an agent is currently over $21000 on just the real estate side of the business.
The ratio of that lifetime value to our cost of agent acquisition is over 21 X and that does not take into account. The revenue we're generating from our mortgage title insurance companies or potential revenue from the leap that we can generate from our agents.
Fathom is in a unique position to potentially grow even faster at a time when the real estate market is turbulent I.
I truly believe fathom could benefit from a down housing market and that we have the potential to accelerate our growth in 2021, turning a headwind for most real estate companies into a tailwind for us. Moreover, fathom could prove to be a hedge against other real estate brokerages, whose revenue transactions and agent count could.
Suffer from these headwinds.
I want to spend just a minute on this point because I think it's very important.
While most analysts do not predict the housing bubble. They do believe that the industry could see fewer homes sold in 2022 as compared with 2021 due to <unk>.
Rising home prices rising interest rates and a shortage of inventory. While this is not good for the majority of real estate companies Fathom offers real estate agents, who joined fathom from other brokerages the ability to net more income than they did in 2021, even if they sell fewer homes and that's important that could result in more <unk>.
Agents, joining fathom if they begin to feel the squeeze in other words fathom could further accelerate our growth while other brokerages struggle.
There are only two ways for real estate agent to ultimately net more income increase their revenue by closing more sales, which is hard to do in a down market or decrease their expenses. We believe that we can help agents do both the.
The vast majority of real estate agents the largest expense is not their marketing its the splits they pay the brokerage with the with many paying over $30000 per year.
Real estate Theres, an adage that suggests it splits only matter in the absence of value. However, what if all things were equal with fathom and agent can get all of the technology training resources and support they are used to getting it one of the legacy brands.
Yet save an average of $12000 or more per year and commission splits paid to the brokerage in essence, an agent could close 20% fewer homes and yet earn more income and they did the year before with a potential market shift looming fathom could be highly attractive to agents.
Fathom could also see greater market share per agent over time as our agents increased their total income on itself with more income per sale fathom agents have more money available to invest in marketing during their businesses when agents with legacy brands are struggling to earn a real living due to fewer sales of lower income.
That may create a need to pull back on their marketing spend in order to pay their bills fathom Athens could potentially invest more in their marketing and their peers, helping increase their market share and establish market share overall.
In fact, we're already seeing some of that benefit through our career site, which saw a 181% increase in unique visitors in 2021 compared with 2020, we believe that is a strong indicator of future growth.
Going back to shifting markets. It is important to note that if home prices fall many of our competitors may see a strain on their profitability because they take a percentage split on every transaction.
But that would not be the case for fathom.
We earn the same transaction fee from the age regardless it wasn't the agent earns a 10000 or commission for an $8000 of commission. We believe this should allow us to continue to capture market share from real estate companies with all the traditional commission models as our agent base grows those ages generally been more bring.
More transactions with them and as we add more transactions, we have more opportunities to capture mortgage title and insurance revenue.
Fathoms ability to attract an ever increasing number of real estate agents by providing them with greater income potential along with technology training and support they need to grow their business is even more evident today, especially during these unprecedented and changing times.
Now as I mentioned earlier, our results for Q4 and all of 2021 were outstanding clearly Fathom is moving in a very positive direction, attracting higher present agents and selling more homes in higher priced markets, which could significantly benefit our mortgage title and insurance companies as well as the leads business that we're building.
Gautam Realty recently grew its geographic reach with the addition of New Hampshire and Montana.
And as I'm sure you saw from recent press release, we also expanded our Utah presence through the acquisition I Pro royalties 435 agents were now licensed in 36 States and D. C with plans to open several more markets in the coming months ultimately our long term plans are expanding to all 50 states and eventually.
Uh huh.
Now one more thing I should point out is the announcement, we made in December about raising our fees for fathom agents, which took effect in January of this year. The annual fee for agents was raised by 20% from $500 $600 per year and the transaction fees were raised 11% from $450 to $500 for the first 12 <unk>.
Fleet transactions.
We're happy to report that these increases did not negatively affect our agent retention or growth rate since implementing this change most likely because our average agents are still saving around $12000 or more as compared to traditional brands.
So I wanted to talk about our intelligent next any advantage that our platform creates the obvious advantage bring that it allows families to reduce cost per agent overtime, while improving operational efficiencies our technology platform allows us to significantly reduce our reliance on third party technology providers in fact.
As of this month, we're officially using all fathom built technology for our Realty operation, which includes agent in brokerage websites CRM transaction management personnel management and more.
Outside of financial reporting systems, and social media products, there isn't much else that were using outside of intelligent for our royalty business intelligence gives us the power to control the full lifecycle of the home buyer and seller, gaining a greater understanding of our data and how to use it to further improve our offerings, while ultimately generating leads.
For our agents plus we can now identify potential clients for our mortgage insurance in tower companies long before they're under contract as they raise their hands requesting more information.
That's our SaaS company live buyer is also making some incredible headway with a recent launch of live by local we now provide tech <unk> data to more than 750 companies across the country with over 100000 agents touching our product.
Our mortgage operation encompass lending is currently licensed and across 41 States and D. C. We've made significant investments in our mortgage operation and are already seeing a very positive return on that investment in the form of improved attach rate and market share as you saw we recently announced the acquisition of cornerstone.
<unk> financial out of Washington D C market.
Stone brought a unique marketing approach to encompass lending, which we plan to roll out across the country and each of the markets, where our company has a foothold.
Our title company bears title is growing exceptionally as well.
And I could not be more proud of our team's effort. Various his life is now in 29 states and we're seeing impressive improvements in our tax rate every single month in fact, our Q4 title revenue alone was as high as what they generated by what was generated by Paris and all of 2020 prior to the acquisition.
Industry wide online organization was up 547% in 2022, I'm, sorry, 2021 2021 numbers for this online trend or not out yet the industry is seeing that trend continue. It is important to note that this trend benefits or title model as more acres to accept this new virtual or remote remote norm.
Our insurance company Dagley insurance is currently licensed in 47 States and D. C and we are gaining traction with fathom agents every single month, one Porsche Pistic to note is that over 43% of the insurance quotes we sent out in 2021 were converted into policies, we believe that over time.
Our insurance operation could help us improve our revenue and profitability during the seasonally slower winter months and help us after the cyclical nature of the real estate industry.
Total personal lines grew by over 17, 5% in the fourth quarter year over year and total premiums grew by over 16%, but keep in mind, we did not acquire Dagley insurance until April 2021, So we feel very good about our progress so far.
As you know our mortgage title and insurance operations were all added through strategic acquisitions, and we're working diligently to integrate each business fully to ensure strong attach rates. We also made several strategic real estate brokerage acquisitions in a very short time period.
We expect that any future acquisitions, we consider will primarily be focused around opening new real estate markets or expanding our footprint in smaller markets. Our current markets to hit critical mass faster.
Each acquisition, we pursue is expected to be immediately accretive to our business as we continue on our path to profitability. We intend to continue growing quickly and while acquisitions are not a primary growth strategy, we will use acquisition strategically as opportunities arise.
A final point and then I'll turn it over to Marco over the last three quarters, our real estate business was adjusted EBITDA positive, which we believe demonstrates that we're on the right path.
We have strategically built an end to end integrated real estate brokerage service company.
Offering residential real estate brokerage mortgage title insurance and SaaS services, we continue to enhance our underlying proprietary technology. In addition to expanding our SaaS offerings and in 'twenty 'twenty. Two we will continue to focus on strengthening our infrastructure and business integration as we seek to expand our footprint and our family of breath.
Both organically and via acquisitions, our focus has been and will continue to be to execute on our long term vision of being among the top three residential real estate brands in the country.
On our last call we shared that assuming we reach between 100000 to 110000 transactions per year. We believe that we can generate adjusted EBITDA exceeding $40 million, while we're not prepared to provide a timeline for this transaction milestone we do feel confident we can continue to maintain the strong.
Long agent and transaction growth, we've demonstrated consistently for over a decade.
Now as you can tell we believe the fathom has a great future and we're incredibly excited and proud with that I will turn the call over Marco Marco its all yours.
Thank you Josh I'll start with a detailed review of our fourth quarter results and will finish with an updated increasing guidance.
Fourth quarter revenues grew 79% year over year to $95 5 million compared with $53 4 million for last year's fourth quarter. The increase resulted from growth in real estate transactions. The average revenue per real estate transactions and revenue contributions from our newly acquired businesses.
GAAP net loss for the quarter was $3 6 million or a loss of 24 cents per share compared with a loss of $1 3 million or a loss of nine cents per share for the 2024th quarter.
The year over year change in GAAP net loss resulted principally from investments in future growth operational and overhead costs related to acquired companies incremental costs due to transitioning to being a public company and to increases in noncash stock compensation expense, the noncash amortization of acquired intangible assets.
Adjusted EBITDA loss, a non-GAAP measure was 2 million versus an adjusted EBITDA loss of 850000 for the fourth quarter of 2020.
Our real estate segment continues to be adjusted EBITDA positive.
Into 2020 , one fourth quarter, G&A increased vault and an absolute basis as well as a percentage of revenue G&A was $9 1 million in Q4, or nine 5% of revenue compared with $3 6 million or six 8% of revenue for the same period a year ago.
The increase in G&A was primarily attributed to recently completed acquisitions and to increases in noncash stock compensation expenses. It.
It is anticipated that G&A expense will increase to it and then absolutely dollar basis going forward driven by acquisition cost related to scaling generating and integrating the companies business lines G&A as a percentage of revenue is expected to decline over the long term as revenue increases.
Expenses related to marketing activities were 524000 versus 383000 for last year's fourth quarter, mostly driven by an increase in marketing activities related to new market openings.
Now I'll spend some time reviewing our business units results.
Our real estate Division continued to perform extremely well we finished the quarter with 8100 agents a 14% increase from the same period last year, we closed almost 10800 real estate transactions for the quarter, a 44% decrease from last year's fourth quarter adjusted EBITDA in our real estate Division was 126.
Building on the adjusted EBITDA profit, we have generated since Q2 of 2021.
Our mortgage business generated revenues of $2 7 million in 2021 fourth quarter slightly higher than what we had generated in Q3, the adjusted EBITDA loss in the business of approximately 154000 and slightly higher than Q3 of 2021.
Moving to our technology segment revenues in 2021 to four quarter totaled $743000, which represents an increase of nine 4% over Q3 of 2021 adjusted EBITDA for the quarter was a loss of 225000.
Our insurance entitled businesses also continued to grow with combined revenues just shy of $2 5 million for the quarter.
Actually higher than Q3 of 2021 adjusted EBITDA profit for these businesses was 54000 compared to 13000 in Q3 of 2021.
As I mentioned last quarter, we do plan to provide a separate breakout for our title business starting in Q1 of 2022.
Even with the normal seasonal industry downturn in the winter months, our fourth quarter results were excellent and we remain very excited for the future. We extended we ended the year with strong cash position of 37, 8 million, which gave us plenty of runaway in which to execute our strategy.
Now, let's discuss the attach rate.
For bolt encompass lending their side and we rolled out several markets with the late summer of 2021. After six short months, we are seeing attach rates in the range of 5% to 6%.
We look at the continuing increase in bio starts from fathom agents for both ferrous and encompass for Q1 2022, and we believe that we will exceed the 10% attach rates within 12 to 18 months are various and encompass opening any individual market.
I'll finish with our guidance for the first quarter of 2022 as well as our increased guidance for the full year.
We're updating this guidance based on the positive trends would continue to see pad those business.
The court for the first quarter 2022, we expect revenues in the range of $77 million to $78 million and adjusted EBITDA loss in the range of 3.2 to $3 3 million for.
For the full year 2022, we now expect revenues in the range of 425 to 435 million and adjusted EBITDA in the range of a loss of 500000 to a profit of 500000.
As a reminder guidance is forward looking which as Roger noted at the beginning of the call is subject to certain risks and uncertainties.
Before I turn the call back to Josh I would like to say, how proud I am of our team and while we have accomplished in 2021.
I do believe that when we look back at 'twenty 'twenty. One we have said that they will see that this past year was a significant year in fathoms history.
Besides expanding our revenue streams, we have built as a foundation to reach our goals for positive adjusted EBITDA and continued significant growth in the years ahead.
I believe that our team's vision and passion will allow us to continue to revolutionize the residential real estate industry.
Now I'll give the mic back to Josh So we can take your questions.
Thank you Marco we believe fathom it has a clear visible and long runway with tremendous growth perspectives prospects.
We no matter what the market holds we believe that our model is positioned to win we've been working hard to deliver on our promise to grow fathom and accelerated yet sustainable fashion for long term. So thank you again for your trust and being part of our founding families. Operator, we're now ready to open the call to questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time in your question that's been addressed and we would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question will come from Darren <unk> with Roth Capital Partners. Please go ahead.
Hey, guys. Good afternoon. Thanks for taking my questions. A few if I may 1st can you give us a general sense on ancillary services.
How much of that came from.
Agents versus non fathom maintenance.
Hey, Dan Great question it varies from business to business in our title business is about 50% coming from fathom.
Mortgage business is about one third coming from fathom.
And the same on the insurance. So if you remember there is title we purchased over a year ago right. So that companies are more advanced in the attach rate, but that's why it's about 50%. The other two companies that about one third coming from Fathom, we think that over time.
We'll exceed that 50% Mark.
And by the way.
To add some more color to that and that is we don't necessarily want fathom to ever represent 100% of business to us we want to always represent a 50% to 60% or so of the business that means that we're getting not just stopping business, but business outside of fathom business from other real estate brokerages, which is why we didn't name it you know.
Lending or fathom title or fathom, whatever we want to make sure that we can service all the real estate agents across other companies.
The more we provide great service, but more wherever the more revenue we can generate outside of just the attach rate we can capture.
Great. Thanks for that on the agents added outside of M&A can.
Can you just speak to how they skew whether that's from traditional brick and mortar or.
Online or more.
Competitors and it goes up.
Yeah sure. So what we typically see is that you know most of the agents that joined our company are coming from more of the the big name brand companies without putting names out there, but we typically see you know a lot of the larger publicly traded with a traditional brick and traditional brick and mortar and traditional splits.
A very large percentage percentage from there we've got a lot of agents also from some of the more virtual companies as well.
And then it's really the mom and Pops that kind of comes secondary so we tend to we tend to attract a lot of the companies from some of the biggest brands.
When you think about prop tech do you think about companies that are there mostly.
Not just online but for generating leads for their agents.
We don't get a whole lot of those agents, we do get those agents and I'll I'll actually named.
Redfin for example would be a great example of that kind of prop tech great organization, we don't get a lot of their agents. They do a great job at feeding their agents with leads we do get some of their agents, but that type of company. Most most companies don't get a lot from but all the rest of the half the traditional split models typically where most of our agents come from and again most of the larger brand.
And the small mom and Pops.
Great and then just last one for me Mark maybe you could talk on the gross margins you saw in the quarter.
What was the gross margin.
Excuse me real estate business versus the other components.
Sure there in the real estate business about 4% now keep in mind, yet as you know that because the way our cap works and we have still a significant percentage of our agents. There January to December I. This was probably the last year. This is going to happen and if you look at the margins from Q1, all the way through Q4 they do.
<unk> right because they have more agents are there in the $99 per transaction why we'd probably this is probably the last year. They went to see a see a decrease I think next year I'm sorry last year 2022, I think we're going to see more of even as a larger percentage of our agents have cap years throughout the year. So.
They are they're not going to all be finishing on December 31st so that on the on the on the ciliary services.
You've probably seen our margins of 75% to 80%.
Great. Thank you congrats.
Thank you.
Our next question will come from Tom White with D. A Davidson. Please go ahead.
Oh, great. Thanks, guys and nice end to the year a couple if I could maybe just a I. Appreciate the color you guys gave on kind of the current attach rates for encompass embarrassed and come out of the target can you, maybe just give a little bit more color on like how specifically you can improve attach rates is it you know.
Is it certain best practices when dealing with agents is it sort of financial incentives like how do you how do you get from kind of five to six to 10 plus.
It's actually all of the above.
Part of it let me let me start with for example on the mortgage side a lot of our competitors. They tend to go to the joint venture route first of all which means you don't get to control the quality and to the agents. It's important on top of that a lot of them not all of them, but a lot of them go the route of call Center.
And so when you've got a call center you don't necessarily have a go to person. So we tried to do is we will actually go to our agents in each market and say hey, we're getting ready to launch mortgage in this market.
Who is your favorite loan officer, who do you like to work with who provide great service. So we now we already know there is a catch rate coming into that and then we'll go to those loan officers say, hey, we'd love to hear your we'd love to bring into the family.
Are you going to encompass and so by doing that number. One you are you automatically have an attach rate coming in because they already have business from a few father maintenance.
On top of that.
You've got the quality of service so as other fathom agents use them and it's not a call center.
They use them they've got great quality of service, that's who they want to to refer their clients too because if you refer your client is someone that provides really poor service. It doesn't just hurt the deal.
You'd think that who cares appeals over anyways, but if you really think about ongoing referral business. So that the better you service your client the better the people you recommend serve your clients the more likely that client is to refer more business to you in the future and so those relationships, having local people local relationships matter the other part.
The other reason that local relationships matters, because you tend to want to send business to people you like and so if you guys are out there having no grabbing coffee together grabbing drinks for you'll happy hours together building a friendship.
Much more likely to want to see that that person that person's business itself. So that's another piece of it so those I think play a portal.
Another important role of the fact that we do and took a buyer's agents you know through while we can't directly incentivize them to send business over we do incentivize them by making them shareholders now.
Now, we don't give them huge number per transaction and it is what it is but what happens you start to shift the mindset for the agents from Justin agents to an actual shareholder stakeholder in the company and they want to see the company succeed right. It's their company too.
So hopefully that that will incentivize them to continue sending different silver.
There's other ways to any of the leads that we generate the once it leaves the regenerate and gift tour agents. We've got those leads I I hate to use and use that term, but these homebuyers for example that we're working with one of them before the agents you can receive that that lead and so where we're nurturing that homebuyer the potential homebuyer finding out their prequalified yet.
Do they have insurance getting them prequalified about the same time, we're saying the motor to the agents to start looking for homes, because they shouldn't be looking for homes, if they're not already prequalified. So the leads that we generate for the agents, we're not we're not beholden and hoping and praying the agents tend to send our mortgage company that leader how can that lead we've got greater control.
We'll over where that lead goes to even before the agents get their hands on it.
So that helps improve the attach rate as well, but there is no. One single approach. It's a very holistic we look at every single thing. If we can if we can take each category and improving category by 2% and that kind of grew by 8%. This one by 6% overall it dramatically improves our attach rate across the board.
Okay. That's super helpful. Maybe just a follow up for Mercury on the guidance.
So the the calendar 2022 revenue outlook was raised is that you know is that.
Just kind of starting the year maybe with.
With more agents, because you're kind of outperformed maybe on agent attraction here. The last few months or is it because you know some of the new acquisitions, just any color you can give on them.
Kind of the moving pieces behind the guidance increase.
Yeah, I think it's several things I think one is that our recruiting are as we look you know getting some visibility into Q1 are we feel very good I think part of it is acquisition as well and I think part of it is there are you know as we look at <unk>. You know we have had strong five star.
In Q1, so I think when we look at all three of them. All three key elements of that could have a positive effect in our revenue, they're all looking and you know upwards now there's always the risk of the market tightening and it.
As interest rates rise. So we just took a look at all the positive trends, we're seeing versus the potential of a slow down and we still feel very confident about increasing our guidance for the year, but it's based on all those key factors.
Okay. That's great one last one for me and then maybe I'll jump back in the queue.
Josh you. Thank you for kind of walking through the reasons why you know your business is going to be kind of more resilient.
You know, if if transaction volume growth slows or declines.
The one thing you didn't kind of touch on I guess, maybe on what maybe means for like your M&A strategy like curious whether you know that's an environment, where you know there's going to be a lot of interesting targets for you guys or maybe you'd be less inclined to be acquisitive, just any color there would be a help.
But you actually where you raise a fantastic points.
I think right now even before.
During this last court last quarter last several quarters, we've had an increase and companies are reaching out to us, saying, hey loved the fathom story I I know you're going to be moving toward my my into my market I taught it compete with you.
I'd like to work with you and help grow the Fathom brand you know would you consider an acquisition right that that story happens over and over and over again.
Market like I say, you've got to kiss a lot of frogs before you find that prints and so we talked a lot of people for the few that we actually end up acquiring one of the things that we look at those we want to make sure. We've got you know talking to companies and going Oh, no there was not.
Not wasting our time, if a company doesn't have great leadership.
Have some kind of growth trajectory has a similar model that we have and then could also be immediately accretive to our business so with that point.
To your point as a lot of brokerage is struggle to generate them.
Or I guess attract more agents generate enough sales to close you know to make enough revenue to make enough profit to pay their bills. I think we're going to have an increase of those companies, calling us I didnt bring that up because to me. That's just a would be could be you know we do believe that's going to happen that's potential, but we're not ready.
To put our stamp on and say that is going to happen because we haven't seen that increase yet.
Whereas you know we have a very strong belief that you know our model is very attractive in downturns because I started in this industry during a downturn I started fathom during the last housing recession.
Big part of why we have such amazing early success was because a lot of agents, we're seeking opportunities to recoup the losses that they had coming out of 2007, and 2008 and 2009 right.
So that's why we feel so confident that we'll be able to see the same thing happened.
So hopefully that answers that question.
I appreciate it thanks guys.
Again, if you have a question. Please press Star then one our next question will come from array Cole with Cole capital. Please go ahead.
Good afternoon, gentlemen, thank you for doing the call and best of luck here in 2022.
A quick four part question you acquired a number of our brokerage real estate brokerage.
Firms here later in the year could you just kind of qualify quantify the revenue and gross margin dollars. You believe they will add to the business in the first quarter and then the second part is as you mentioned you raised prices for.
For your agents for starting in January approximately what's the revenue and gross margin dollar lift you'll be getting from that in the first quarter.
Yeah, we have not we have not gotten into details yet in terms of what the lift for the increase in transaction price part of it because we wanted to see what would be if there'll be any negative effect to it and we.
Haven't seen it so I think when we announced our Q1 results.
Then we will be we'll update our guidance for Q2 and for the full year are based on the what we see are the.
The positive effect that we'll see from from the increase in the transaction piece keep in mind also that part of the increase in transaction fees are also related to you know inflation.
Inflation and increase in expenses right inflation is affecting all companies and all companies have to increase payroll tool to be able to you know not only attracting keep talent. So part of that is it goes towards that on the on the acquisition front. We just acquired <unk> in February it's alluded to earlier.
To be able to tell what the impact is going to be every time you do an acquisition. There's always some uncertainty on the acquisition as we do that we.
Both agents over and so again, when we announce Q to Q1 results, we'll be able to update our guidance for the full year and certainly for Q2 and be able to give everyone a greater visibility and very accurate numbers.
In terms of the impact for Q2.
And for <unk> for the full year. This is why partly we feel confident about the increase in guidance already.
For the full year that we just gave in part is because of some of these positive trends, we're seeing but I think we'll be able to give much greater visibility. Once we finished Q1 and beginning of Q2 and then when we report Q1.
In a few weeks.
Okay, and then just one follow on for 2022 to what degree have you improved or changed some of your own hiring practices for new agents. You know obviously you did a nice job in 2021 , but I'm just wondering what sort of additional.
Innovations are doing in 2020 to do allow you possibly to hire more agents than last year, and maybe even higher with them at a lower cost.
That's it.
Sure.
A fantastic question. So first of all you know a couple of things we've done not necessarily you know.
100 practices, but what we've done to continue to increase our hiring is number one we've improved our agent referral model, so that way when when agents refer other agents.
You know they they receive greater value for those referrals, because we want right now we've always had really strong agent referrals, but willing to take advantage of and really grow that because theres no greater referrals to your business, especially to our business and that's another agent referring on agent to our business and so I'm, taking the agents we already have.
Providing great service is important providing great value is important and then on top of that incentivizing them and essentially turning your 8000 agents into a recruiting force.
A group of Evangelists, who loved the company and when its share of the company. So.
I think part of it is making sure that we provide great value to the agent to be able to compete and grow and accelerate our growth rate from internal agent for us we continue to invest and hire more.
Salespeople essentially recruiters on our recruiting team to start bolting, if it can be bolstering that recruiting department and doing better job training them to improve the conversion ratio as well for the recruiting team I know, it's not exactly what you asked but I want to start there because one is not just how do you improve the hiring process, but how do you also accelerate the hiring.
So that's a big part of it.
And then once they just come in we've done a great job, we've got a formidable kind of fantastic internal staff that focus on serving agents and so we've got great support staff a great accounting team people that are just dedicated to answering questions whenever new agent joints, we we get them on boarded but then we also have low.
Managers, who followed with them make sure they have everything they need we also have some of our customer service team that reached out to them right away. He is there anything you need to introduce you to this program to that program have you have you set this up yet can help you get that set up.
And then several weeks down the road, we have a follow up call again to say Hey, it's been a couple of weeks now are you getting settled is everything you're missing. So we want to make sure that not only do a big do a better job at bringing more agents in but once they're in doing a much better job, making sure that they feel settled they feel good because we know that there's good feelings turn into.
Going back kind of full circle, turning into evangelism, telling other people about the organization.
And then the last thing of course is making sure that we continue to provide better technology continue to enhance that technology to provide more services as you know I'm not sure you probably saw we rolled out our Hispanic division.
So part of that is making sure that where we're developing our.
Tools in Spanish marketing and resources in Spanish so that our agents can better serve.
Panic community.
We also are getting ready to launch our R.
Our betters division, providing more tools and resources for our agents, who are veterans to be able to better service their clients who are veterans. So we're doing a lot to help empower our agents and.
And of course, we're also developing more training programs and platforms.
We launched Fathom Academy, so that way they've got more access to training. So continue to improve all aspects of our business to make sure that the agent has a better and better and better experience being without them.
Right. Thank you and best of luck. Thanks again.
Okay.
Again, if you have a question. Please press Star then one.
As there are no more questions. This concludes our question and answer session I would like to turn the conference back over to Josh Harley for any closing remarks.
Thank you operator of course, thank you to all of you for joining our call and for all the questions. We had we do appreciate your continued support we are extremely proud of all that we've accomplished and will continue to work diligently towards achieving our objective of adding greater value to our company for the benefit of all of our stakeholders. So with that have a wonderful week.
So again.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.