Q1 2024 Fathom Holdings Inc Earnings Call
Operator: Good day, and welcome to the Fathom Holdings First Quarter 2024 Earnings Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Alex Kovtun with Gateway Group. Please go ahead.
Good day, you walk into the stadium holdings first quarter 'twenty 'twenty four earnings conference call. Please.
Operator: Please note this event is being recorded.
Operator: Now I'd like to turn the conference over to Alex Kovtun with Gateway Great. Please go ahead.
Alex Kovtun: Great, thank you operator and welcome everyone to the Fathom Holdings First Quarter 2024 conference call. I'm Alex Kovtun with Gateway Group, Fathom's investor relations firm.
Alex Kovtun: Great. Thank you operator.
Alex Kovtun: One other holdings first quarter 2024 conference call.
Alex Kovtun: Let's cut somewhat gateway group fathoms Investor relations firm.
Alex Kovtun: Before I turn things over to the Fathom management team, I would like to remind listeners that today's call may include forward-looking statements within 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 Form 10-K for the year ended December 31st, 2023, and other company filings made with the SEC, copies of which are available on the SEC's website at www.sec.gov.
Alex Kovtun: Before I turn things over to the fab the management team I would like to remind listeners that today's call may include forward looking statements within the meaning of the private Securities Litigation Reform Act of 975.
Alex Kovtun: As a result of those forward-looking statements, actual results could differ materially. Fathom undertakes no obligation to update any forward-looking statements after today's call, except 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 Fathom's website. With that, I'll turn the call over to Fathom's president and CEO, Marco Fregenal. Marco said:
Alex Kovtun: 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 Form 10-K for the year ended December 31, 2023, and other company filings made with the SEC copies of which are available on the Sec's website at.
Marco Fregenal: Www Dot S E C dot Gov.
Marco Fregenal: As a result of these as a result of those forward looking statements actual results could differ materially.
Alex Kovtun: Undertakes no obligation to update any forward looking statements after today's call except as required by law. Please.
Alex Kovtun: Please also note that during this call we will be discussing adjusted EBITDA, which is a non-GAAP financial measure as defined by S. T SEC regulation G.
Marco Fregenal: A reconciliation of these 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.
Marco Fregenal: With that I'll turn the call over to <unk>, President and CEO, Mark Ruelle fragile Marco.
Marco Fregenal: Thank you, Alex. Good afternoon, and a warm welcome to everyone joining us for our first quarter of 2024 earnings call. I want to extend my heartfelt gratitude to each one of you for your incredible hard work and dedication, especially in the face of such trying circumstances. Despite the challenging market conditions, our teams have remained steadfast in carrying out the essential work needed to propel us toward our goals for 2024. During our previous earnings call, I outlined four key goals for 2020.
Marco Fregenal: Thank you Alex good afternoon, and a warm welcome to everyone joining us for our first quarter of 'twenty 'twenty four earnings call.
Marco Fregenal: I want to extend my heartfelt gratitude to each one of you put your incredible hard work and dedication, especially in the face of such trying circumstances.
Marco Fregenal: By the challenging market conditions. Our teams have remained steadfast in carrying out the essential work needed to propel us towards our goals for 2024.
Marco Fregenal: These included enhancing our balance sheet, achieving positive EBITDA and operational cash flow, reinstating agent growth at an annual rate of 20-25% while prioritizing high quality agents, and launching additional initiatives to further support our agents in growing their business. I am pleased to update you on our progress and announce the successful completion of our first goal, enhancing our balance sheet. The sale of the Agri-Insurance Agency is a significant milestone in bolstering our financial position.
Marco Fregenal: During our previous earnings call I outlined four key goals for 2024.
Marco Fregenal: These included enhancing our balance sheet, achieving positive EBITDA and operational cash flow.
Marco Fregenal: Reinstating agent growth to an annual rate of 20% to 25%, while prioritizing high quality agents and launching additional initiatives to further support our agents and growing their businesses.
Marco Fregenal: I am pleased to update you.
Marco Fregenal: Yeah.
Marco Fregenal: I'll now on our progress and announced that the successful completion of our first golf enhancing our balance sheet.
Marco Fregenal: The sale of Bagley insurance agency is a significant milestone in bolstering our financial position.
Marco Fregenal: This strategic move enhances our financial stability and positions us well to advance our age and growth strategy for the remainder of the year. The capital infusion from this transaction equips us with the essential resources to confidently tackle any potential challenges. Additionally, I am delighted to share that we will continue collaborating with Nathan Dagley and his team to ensure a similar service for our real estate clients. Fathom Realty agents can expect no disruption in their current working relationship with DAG.
Marco Fregenal: This is strategic bolt enhances our financial stability and positions us well to advance our agent growth strategy for the remainder of the year.
Marco Fregenal: The capital infusion from this transaction what starts with the essential resources to confidently tackle any potential challenges. Additionally, I am delighted to share that we will continue.
Marco Fregenal: Continue collaborating when that Nathan directly any scheme to ensure a seamless service to our real estate client.
Marco Fregenal: Bathroom real cheese agents can expect no disruption in their current working relationship with that.
Marco Fregenal: In Q1, we also made progress towards achieving profitability. We saw a meaningful increase in gross profit margin, rising about 160 basis points to 10.3% in Q1 of 2024 from 8.7% in Q1 of 2023. We anticipate this positive trend to continue in the upcoming quarters as we increase revenues from our ancillary businesses, for which we have greater gross profit margins. Furthermore, in Q1, we made strides in achieving our goal of positive operational cash flow by reducing our operational cash burn to $974,000 from approximately $4 million in Q4 of 2023.
Marco Fregenal: In Q1, we also made progress towards achieving profitability, we saw a meaningful increase in gross profit margin rising about 160 basis points to 10, 3% in Q1 of 'twenty 'twenty four from eight 7% in Q1 of 2023.
Marco Fregenal: We anticipate this positive trend to continue in the upcoming quarters as we increase revenues from iron ciliary businesses, which we have greater gross profit margins.
Marco Fregenal: Furthermore, in Q1, we made strides in achieving our goal of positive operational cash flow by reducing our operational cash burn two $974000 from approximately $40 million in Q4 of 2023.
Marco Fregenal: Fathom's total revenue decreased 9% for the 2024 first quarter to $70.5 million from $77.5 million for the 2023 first quarter. Fathom completed 7,703 real estate transactions for the first quarter of 2024, a decrease of 9.7% compared to 8,532 transactions for the first quarter of 2023. Real estate transactions decreased primarily due to the continuation of high interest rates, especially in the last few weeks of the quarter.
Marco Fregenal: Adams total revenue decreased 9% for the 'twenty 'twenty four first quarter to $70 5 million from 77.5 million for 2023 first quarter.
Marco Fregenal: Adam completed 7703 real estate transactions for the first quarter of 2024, a decrease of 91, 7% compared to 8532 transactions for the first quarter 2023.
Marco Fregenal: Real estate transactions decreased primarily due to the continuation of high interest rate, especially in the last few weeks of the quarter.
Marco Fregenal: Our dedication to expanding market share from legacy brokerage firms throughout the year remained unwavering. Notably, we achieved a 13% year-over-year growth in our agent network. Traditionally, Q1 poses challenges for agent growth across real estate brokerages, with many low-producing agents exiting the industry.
Marco Fregenal: Our dedication to expanding market share from legacy brokerage firms throughout the year remained unwavering, notably we achieved a 13% year over year growth in our agent network traditionally Q1 poses challenges for agent growth across the Wednesday brokerages with many low producing agents exited the industry. Despite this is fran.
Marco Fregenal: Despite this trend, Fathom persevered, and our members reflect a positive growth strategy going forward. During our last earnings call, I mentioned implementing programs to refine our agent recruitment to high-performance agents. The reintroduction of producer perks, a tailored program to attract high-performance agents, is yielding promising early results in Q1 and continuing to early Q2.
Marco Fregenal: Fathom persevere and our members reflect positive growth strategy going forward.
Marco Fregenal: So we are less earnings call I mentioned implementing programs to refine our agent recruitment to high performing agents the reintroduction of producer parks a tailored to attract high performance agents is yielding promising early results in Q1 and continuing into early Q2.
Marco Fregenal: Our sustained efforts in agent referrals, strategic walkovers, and the diligent work of our dedicated local managers and recruiting teams have driven our growth. Ultimately, we aim to restore our annual agent growth to about 20-25% and are encouraged by the progress this quarter towards achieving that goal. It is worth emphasizing that we believe the industry will see significant M&A activity in the next few quarters and years, and brokerage consolidation will be prevalent in 2024 and 2025.
Marco Fregenal: Our sustained efforts in agent referrals strategic work all versus and the diligent work of our dedicated local managers and recruiting teams have driven our growth ultimately we aim to restore our annual agent growth to about 20% to 25%.
Marco Fregenal: But the progress this quarter towards achieving that goal.
Marco Fregenal: It is worth emphasizing that we believe the industry will see significant M&A activity in the next few quarters.
Marco Fregenal: Yes, and the brokers consolidation will be prevalent in 2024 and 2025, we are focused on pursuing opportunities that immediately enhance our business contributed positively to EBITDA.
Marco Fregenal: We are focused on pursuing opportunities that immediately enhance our business, contribute positively to EBITDA, and offer the greatest potential for long-term success and sustainability. We will remain opportunistic with our capital deployment in pursuing this opportunity. Despite the challenges facing the mortgage business in 2023, Encompass Lending Group's revenue surged by 55% from $1.5 million in Q1 of 2023 to $2.3 million in the most recent quarter. This growth is a testament to the dedication and strategic initiatives implemented by our team in the past quarter. Recognizing the increase in demand within the Latino segment, we launched a dedicated division within Encompass Lending, aligning it closely with our Latino division at Fathom.
Marco Fregenal: And offer the greatest potential for long term success and sustainability, we will remain opportunistic with our capital deployment in personal windows opportunity now, let's move on to the ancillary businesses.
Marco Fregenal: Despite the challenges facing the mortgage business in 2023 encompass lending groups revenue surged by 55% from $1 5 million in Q1 of 2023 to $2 3 million in the most recent quarter.
Marco Fregenal: This growth is a testament to the dedication and strategic initiatives implemented by our team in the past quarters.
Marco Fregenal: Recognizing the increasing demand within the Latino segment, we launched a dedicated division within encompass lending aligning closely with our Latino division that fathom.
Marco Fregenal: The early outcomes of this collaboration have been very positive. We are forming our commitment to serving diverse communities. Building on our commitment to support local heroes, we expanded the Hometown Heroes program with over 700 agents now authorized to promote it in partnership with Encompass Lending. The program's early success underscores its value, and we're eager to further its reach. In the first quarter of 2024, Windows saw a 114% increase in file starts compared to the same period last year, demonstrating significantly strong momentum for ELG.
Marco Fregenal: The early outcomes of this collaboration has been very positive we are affirming our commitment to serving diverse community.
Marco Fregenal: Building on our commitment to support local heroes, we expanded their hometown heroes program with over 700 agents not authorized to promote its partnership with encompass lending team.
Marco Fregenal: The programs early success underscores its value and we're eager to partner its reach.
Marco Fregenal: The first quarter of 'twenty 'twenty four when does that 814% increase in pilot starts compared to the same period last year thinking that we need strong momentum for the L. G.
Marco Fregenal: These promising results fuel our optimism for sustained success and growth in the mortgage business going forward. Additionally, I am pleased to share that April marked a historic milestone for ELG, with the highest number of monthly calls in our company's history. Given this momentum, we anticipate Encompass Linden will achieve positive EBITDA in the second quarter of this year. While Q4 posed challenges for Veristytle, Q1 ushered in much-needed growth. Veristytle's revenue surged by 9.5% to $652,000, an increase from $595,000 in Q1 of 2023.
Marco Fregenal: These promising results for you our optimism for sustained success and growth in the mortgage business going forward.
Marco Fregenal: I am pleased to share that April marked a historic milestone for EOG with the highest number of monthly calls in our company's history. Given this momentum we anticipate encompass Linda will achieve positive EBITDA in the second quarter of this year.
Marco Fregenal: While Q4 pose challenges for various titled Q1, Usher and much needed growth <unk> revenue surged by nine 5% to 652000 and an increase from 595000 in Q1 of 2023.
Marco Fregenal: On March 12, we announced the establishment of our first Veristyto joint venture, Veristyto Elite, and its initial results have exceeded expectations. This strategic collaboration is poised to elevate Asian productivity and bolster all stockholders' profitability. It represents the first of many such planned joint ventures nationwide, reflecting our commitment to forge an impactful partnership with the local agents to enhance the tax rate and overall performance. We're also optimistic about various title prospects for achieving positive EBITDA in Q2 based on the performance of the first quarter.
Marco Fregenal: On March 12, we announced the establishment of our first various vital joint venture <unk> and its initial results have exceeded expectation.
Marco Fregenal: This is strategic collaboration is poised to elevate agent productivity and bolster all stockholders profitability.
Marco Fregenal: It represents the first of many such planned joint ventures nationwide, reflecting our commitment to forge an impactful partnership with a local agents do we have to attach rates and overall performance.
Marco Fregenal: We're also optimistic about their status prospects for achieving positive EBITDA in Q2 based on the performance of the first quarter, our title business as positive trajectory underscores our focus on strategic growth initiatives and continue to optimize our and ciliary businesses for profitability in the current environment.
Marco Fregenal: Our title business's positive trajectory underscores our focus on strategic growth initiatives and continues to optimize our ancillary businesses for profitability in the current environment. Now, looking ahead, our primary emphasis will be attracting top-tier agents, teams, and brokerages by leveraging our compelling agent value proposition tailored to the current market conditions. With a robust pipeline of opportunities, we look forward to returning to 20 to 25% annual Asian growth in the second half of 2024.
Marco Fregenal: Now looking ahead, our primary emphasis will be attracting top tier agents teams and brokerages, leveraging our compelling value proposition tell it to the current market conditions.
Marco Fregenal: With a robust pipeline of opportunities, we look forward to returning to the 20% to 25% and annual Asian growth in the second half of 2024.
Marco Fregenal: At Fathom Realty, we pride ourselves on being a premier destination for agents. We offer an unmatched value proposition that empowers them to maximize their earnings. Our industry-leading flat fee commission split underscores our commitment to agent success in the long term. Our overreaching objective remains clear, establishing Fathom Realty as one of the top five brands in every market to serve while continuing to expand our footprint nationwide with the goal of reaching all 50 states by the end of this year.
Marco Fregenal: Rather in Realty, we pride ourselves on being a premier destination for agents, we offer an unmatched value proposition that empowers them to maximize their earnings.
Marco Fregenal: Our industry, leading Blackfeet Commission split underscores our commitment to agents' success in the long term.
Marco Fregenal: Our overreaching objective remains clear establishing fathom Realty has one of the top five brands in every market to serve while continuing to expand our footprint nationwide with the goal of reaching all 50 states by the end of this year.
Marco Fregenal: In the coming months, we'll roll out various marketing initiatives and technological enhancements to deliver added value to our agents. These efforts should enhance productivity and contribute to our agents' overall success. Now, before I pass the call to Joanne, I'd like to touch on industry law. While numerous companies have reached settlements since the start of the year, we are currently engaged in active discussions and therefore unable to disclose any specifics at this time.
Marco Fregenal: In the coming months, we will rollout various marketing initiatives and technology enhancements to deliver added value to our agents.
Marco Fregenal: At first she would enhance productivity and contribute to our agents overall success.
Marco Fregenal: Now before I pass the call to Joanne I'd like to touch on the industry lawsuits.
Marco Fregenal: Numerous companies have reached settlement since the start of the year. We are currently engaged in active discussions and therefore unable to disclose any specifics at this time.
Marco Fregenal: Nevertheless, we're eager to resolve this matter swiftly to alleviate investor concerns regarding the potential impact on our business. Our priority is to continue focusing on the future, which you are generally enthusiastic about. With that, I would like to pass the call to Joanne Zach, our Senior Vice President of Finance, so she can discuss our financial results in more detail. Joanne? Thank you, Dillon.
Joanne: Nevertheless, we're eager to resolve these matters swiftly to alleviate investor concerns regarding the potential impact on our business.
Joanne Zach: Our priority is to continue focusing on the future, which are generally new until she asked about with that I would like to pass the call to John Zak, Our senior Vice President of finance. So she can discuss our financial results in more detail Joanne.
Joanne Zach: Thanks, Marco. I will start with a general overview of our first quarter 2024 results and will then provide a more detailed review by segment. First quarter total revenue was $71 million, a 9% decline year over year, compared to $78 million for last year's first quarter. This net decline included a 10.6% decrease in brokerage revenue, partially offset by a 17.1% increase in Fathom's ancillary services revenue, which was particularly attributable to Fathom's mortgage business.
Joanne Zach: Thanks Marco.
Joanne Zach: I will start with a general overview of our first quarter 2024 results and will then provide a more detailed review that by segment.
Joanne Zach: First quarter total revenue was 71, million% to 9% decline year over year compared to 78 million for last year's first quarter.
Joanne Zach: This net decline included a 10, 6% decrease in brokerage revenue, partially offset by a 17, 1% increase in fathoms ancillary services revenue, which was particularly attributable to thousands mortgage business.
Joanne Zach: Despite the decrease in total revenue, gross profit for the 2024 first quarter increased approximately 7% to $7.2 million from $6.8 million for the 2023 first quarter. Gross margin increased approximately 160 basis points for the 2024 first quarter to 10.3%, compared to 8.7% for the 2023 first quarter. This increase in margin was largely due to our reset of agent fee caps and to an increase in certain agent fees implemented on January 1 of this year. Technology and development expenses were approximately $2 million for the first quarter of 2024, compared with $1.6 million for the first quarter of 2023.
Joanne Zach: Despite the decrease in total revenue gross profit for the 2020 for first quarter increased approximately 7% to $7 2 million from $6 8 million for the 2023 first quarter.
Joanne Zach: Gross margin increased approximately 160 basis points for the 'twenty 'twenty four first quarter to 10, 3% compared to eight 7% for the 2023 first quarter. This increase in margin was largely due to our reset of agent fee caps and to an increase in certain agencies.
Joanne Zach: Implemented on January one of this year.
Joanne Zach: Technology and development expenses were approximately $2 million for the 2024 first quarter compared with $1 6 million for the first quarter of 2023.
Joanne Zach: The approximate 0.4 million increase was primarily due to expansion of our technological operations, higher data and outside service costs, and to an approximate 0.1 million increase in non-cash amortization of costs incurred related to the development of our technology platform. General and administrative expense totaled $9.6 million for the 2024 first quarter, or 13.6% of revenue, compared with $9.3 million, or 12% of revenue, for the first quarter of 2023. The dollar increase was primarily due to costs incurred to enhance our offshore services team and regional leadership, partially offset by a reduction in insurance costs.
Joanne Zach: The approximate <unk> 4 million increase was primarily due to the expansion of our technological operations higher data and outside service costs and to an approximate $1 million increase in noncash amortization of cost incurred related to the development of our technology platform.
Joanne Zach: General and administrative expense totaled $9 6 million for the 'twenty 'twenty four first quarter or 13, 6% of revenue compared with $9 3 million or 12% of revenue for the first quarter of 2023.
Joanne Zach: The dollar increase was primarily due to cost incurred to enhance our offshore services team and regional leadership, partially offset by a reduction in insurance costs.
Joanne Zach: Marketing expenses were $0.6 million for the first quarter of 2024, compared to $0.7 million in the first quarter of 2023. The 16% decrease in marketing expenses was primarily related to leveraging internal resources and optimizing our advertising expenditure.
Joanne Zach: Marketing expenses were <unk> 6 million for the first quarter 'twenty four compared to <unk> 7 million in the first quarter 2023.
Joanne Zach: 16% decrease in marketing expenses was primarily related to leveraging internal resources and to optimizing our advertising expenditure.
Joanne Zach: Gap's net loss for the first quarter of 2024 was $5.9 million, or a loss of $0.31 per share, compared with a net loss of $5.7 million, or a loss of $0.36 per share, for the first quarter of 2023. Our net loss was slightly higher due to strategic activities noted above and to a net increase in interest expense primarily related to our note payable financing which occurred in Q2 of 2023, partially offset by our increase in gross margins.
Joanne Zach: GAAP net loss for the first quarter 2024, with $5 9 million or a loss of 31 cents per share compared with a net loss of $5 7 million or a loss of 36 cents per share for the 2023 first quarter.
Joanne Zach: Net loss was slightly higher due to strategic activities noted above and to a net increase in interest expense primarily related to our note payable financing which occurred in Q2 of 2023, partially offset by our increase in gross margin.
Joanne Zach: Adjusted EBITDA loss, a non-GAAP measure, was $1.5 million in the 2024 first quarter, which was relatively constant versus adjusted EBITDA loss of $1.4 million for the first quarter of 2023. We, the Fathom team, are very focused on continuing our improved margins and strategic discretionary spend in order to achieve and maintain positive adjustability for DAS. Now I'll spend some time reviewing our business segment results in more detail. Revenue for the real estate division was approximately $65.4 million in the first quarter, compared to $73.2 million for the same period last year, which represents a 10.7% decline, primarily attributable to a 9.7% decrease in transaction volume. We saw 7,703 real estate transactions during the three-month period ending March 31, 2024, compared to 8,532 transactions during the three months ended March 31, 2023. Our transaction volume decreased primarily due to higher interest rates.
Joanne Zach: Adjusted EBITDA loss, a non-GAAP measure was $1 5 million in the 2024 first quarter, which was relatively constant.
Joanne Zach: Adjusted EBITDA loss of $1 4 million for the first quarter in 2023.
Joanne Zach: We the fathom team are very focused on continuing our improved margins and strategic discretionary spend in order to achieve and maintain positive adjusted EBITDA.
Joanne Zach: Now I'll spend some time reviewing our business segment results in more detail.
Joanne Zach: However, the negative impact of rising interest rates on transaction volume was lessened due to the 13 percent expansion in our agent base. During the three months ended March 31, 2024, average revenue per transaction was $8,488, a 1% decrease compared to $8,576 during the three months ended March 31, 2023, primarily attributable to a small decrease in commission percentages. Gross profit margin for our real estate division increased to 6.5% in the 2024 first quarter compared to 5.5% in the 2023 first quarter.
Joanne Zach: Revenue for the real estate division with approximately $65 4 million in the first quarter compared to $73 2 million for the same period last year, which represents a 10, 7% decline primarily attributable to a nine 7% decrease in transaction volume.
Joanne Zach: We saw 7703 real estate transactions during the three.
Joanne Zach: 31, 'twenty 'twenty four.
Joanne Zach: Fair to 8532 transactions during the three months ended March 31 2023.
Joanne Zach: Our transaction volume decreased primarily due to higher interest rates. However.
Joanne Zach: However, the negative impact of rising interest rates on transaction volume was lessened due to the 13% expansion in our agent base.
Joanne Zach: During the three months ended March 31, 2020 for average revenue per transaction was $8488, a 1% decrease compared to $8576. During the three months ended March 31, 2023, primarily attributable to a small decrease in commission percentages.
Joanne Zach: Gross profit margin for our real estate division increased to six 5% in the 2024 first quarter compared to five 5% in the 2023 first quarter. This increase in margin was largely due to our brokerage transaction fee cap resetting at the beginning of the here 200.
Joanne Zach: This increase in margin was largely due to our brokerage transaction fee cap resetting at the beginning of the year to $150 on each of the first 15 of an agent's brokerage transactions, in addition to our increasing our agent's annual fee from $600 to $700 and implementing our new high-value property fee commencing January 1, 2024.
Joanne Zach: $50 on each of the first 15 of an agent's brokerage transactions and.
Joanne Zach: In addition to our increasing our agents and you will see some 600 to $700 and implementing our new high valued property fee commencing January one 'twenty 'twenty four.
Joanne Zach: Adjusted EBITDA.
Joanne Zach: Adjusted EBITDA in the real estate division was approximately $0.8 million in Q1 of 2024, a decrease of $0.5 million compared to adjusted EBITDA of $1.3 million in Q1 of 2023. This was largely due to the commencement of internal charges from our technology division, Fathom Realty, for transaction management and CRM services provided. We are very excited about the significant improvement made in our mortgage business. Mortgage revenue grew to $2.3 million in Q1 2024 compared to $1.5 million in Q1 2023. This revenue growth was essentially driven by a strategic increase in our loan officer base. Our base of principal loan officers has increased to 55, up from 34 in the previous year.
Joanne Zach: And the real estate Division was approximately 0.8 million in Q1 of 2024.
Joanne Zach: Decrease of <unk> 5 million compared to adjusted EBITDA of $1 3 million in Q1 of 'twenty three.
Joanne Zach: This was largely due to the commencement of internal charges from our technology Division the Fathom Realty for transaction management and CRM services provided.
Joanne Zach: We are very excited about the significant improvements made in our mortgage business.
Joanne Zach: Mortgage revenue grew to $2 3 million in Q1, 2024 compared to $1 5 million in Q1 of 2023.
Joanne Zach: This revenue growth was essentially driven by a strategic increase in our loan officer base. Our base of principal loan officers has increased to 55 up from 34 in the previous year Q1, 'twenty 'twenty four file start loan volume was up 114% compared to Q1 2023.
Joanne Zach: Q1 2024 file start loan volume was up 114% compared to Q1 2023. Mortgage adjusted EBITDA for Q1 2024 improved to a loss of $0.5 million compared to an adjusted EBITDA loss of $0.6 million for the same period last year. DIA, our insurance business, generated revenues of $1.4 million for the 2024 first quarter compared to $1.6 million for the same quarter in 2023. DAA had positive adjusted EBITDA of $0.1 million for the 2024 first quarter, down from $0.4 million for the 2023 first quarter, primarily due to a decline in bonuses received from insurance carry.
Joanne Zach: Mortgage adjusted EBITDA for Q1, 'twenty four improved to a loss of <unk> 5 million compared to an adjusted EBITDA loss of <unk> 6 million for the same period last year.
Speaker Change: Yeah, Hey, our insurance business.
Joanne Zach: Generated revenues of $1 4 million for the 2024 first quarter compared to $1 6 million for the same quarter in 2023.
Joanne Zach: TIAA had positive adjusted EBITDA of <unk> 1 million for the 2024, our first quarter down from $24 million for the 2023 first quarter, primarily due to a decline in bonuses received from insurance carriers.
Joanne Zach: As we have previously shared, we sold our DIA business on May 3rd for approximately $8 million in upfront cash and an additional $7 million over the next 24 months. Our Q2 P&L will reflect an approximate $2.2 million gain from this disposition. This transaction provides us with the cash to fuel our growth strategy. We're very appreciative of the DIA team and all they have done for Fathom.
Joanne Zach: As we have previously shared.
Joanne Zach: We sold our D. I a business on may 3rd for approximately 8 million in upfront cash and an additional $7 million over the next 24 months.
Joanne Zach: Our Q2, P&L will reflect an approximate $2 2 million gain from this disposition does.
Joanne Zach: Transaction provides us with the cash to fuel our growth strategy, we're very appreciative of the D. I a team and all they have done for fathom and we look forward to our continued collaboration to further elevate the insurance offerings and services available to our fathom Realty agents and clients.
Joanne Zach: And we look forward to our continued collaboration to further elevate the insurance offerings and services available to our Fathom Realty agents and clients. Various titles had revenues of $0.7 million for Q1 2024 compared to $0.6 million for Q1 2023, an increase of 9.3%. Various titles adjusted EBITDA for the 2024 first quarter with a negative 0.2 million compared to a negative 0.3 million for Q1'23. New open orders in Q1 tilted more to higher-margin states, which bodes well for revenue potential in the near future.
Joanne Zach: There is title had revenues of <unk> 7 million for Q1 2024 compared to <unk> 6 million for Q1 2023, an increase of nine 3%.
Joanne Zach: Theres titles adjusted EBITDA for the 'twenty 'twenty four first quarter was a negative <unk> 2 million compared to a negative <unk> 3 million for Q1 'twenty three.
Joanne Zach: New open orders in Q1 posted more to higher margin states, which bodes well for revenue potential in the near future.
Joanne Zach: We anticipate that our new Texas Joint Venture, which commenced business in early Q2-24, and similar future joint ventures with our top-producing real estate agents will also add meaningful revenues and adjusted EBITDA for our title business. Moving to our technology segment, revenues increased to $1.1 million in Q1 2024, inclusive of approximately $300,000 in internal charges to Fathom Realty for transaction management and CRM services. We are continuously building enhancements to our technology platform to better serve our agents and drive revenue.
Joanne Zach: We anticipate that our new Texas joint venture, which can most business in early Q2, 'twenty four and similar future joint ventures with our top producing real estate agents will also add meaningful revenues and adjusted EBITDA for our title business.
Joanne Zach: Moving to our technology segment.
Joanne Zach: <unk> increased to $1 1 million in Q1 2024 inclusive of approximately 300000 in internal charges to fathom reality for transaction management and CRM services.
Joanne Zach: We are continuously building enhancements to our technology platform to better serve our agents and drive revenues.
Joanne Zach: In regards to our balance sheet, we continue to keenly focus on our balance sheet given the dynamic real estate market condition. We ended the quarter with approximately $6 million of cash on hand, which combined with the cash from our sale of BIA. As noted, that was $8 million in cash received up front and $7 million in cash to be received over the next 24 months. We are strongly positioned to implement our growth strategy and to achieve and maintain positive adjusted EBITDA.
Joanne Zach: In regards to our balance sheet, we continue to keenly focus on our balance sheet, given the dynamic real estate market conditions.
Joanne Zach: We ended the quarter with approximately $6 million of cash on hand.
Joanne Zach: Which combined with the cash from our sale of D. I E. As noted that was $8 million in cash received upfront and 7 million in cash to be received over the next 24 months. We are strongly positioned to implement our growth strategy and to achieve and maintain positive adjusted EBITDA.
Joanne Zach: Now for our guidance for the second quarter of 2024. For the second quarter of 2024, Fathom expects total revenue in the range of $86 million to $89 million and adjusted EBITDA in the range of $0.2 million to $0.5 million. With that, I will turn the call back over to Marco for closing remarks.
Speaker Change: Now for our guidance for the second quarter of 2024.
Joanne Zach: The second quarter of 2020 for Fathom expects total revenue in the range of 86 million to $89 million.
Joanne Zach: Adjusted EBITDA in the range of 0.2 million two 5 million.
Marco Fregenal: With that I'll turn the call back over to Mark <unk> for closing remarks.
Marco Fregenal: Thank you, Joanne. We remain focused on execution, and we're taking the necessary steps to better position Fathom in the current environment and in preparation for the second half of this year. I want to thank the entire team at Fathom for its hard work as we navigate this market and continue to serve our clients. With that operator, let's open the call to questions.
Marco Fregenal: Thank you Joanne will remain focused on execution and we're taking the necessary steps to better position fathom in the current environment.
Marco Fregenal: In preparation for the second half of this year I wanted to thank the entire team at fathom on its hard work as we navigate this market and continue to serve our clients with that operator, let's open the call for questions.
Marco Fregenal: Yeah.
Speaker Change: Thank you.
Operator: To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. Your first question comes from John Campbell with Stephens.
Marco Fregenal: To ask a question you May Press Star then one on your Touchtone phone.
Operator: If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Operator: Your first question comes from John Campbell with Stephens. Please.
John Robert Campbell: Please go ahead.
John Robert Campbell: Hey guys, good afternoon.
John Robert Campbell: Hey, guys good afternoon.
Marco Fregenal: Hey John, how are you? Hi, I'm well. I'm well, thank you. Thanks for taking our questions. A couple here.
John Robert Campbell: Hey, John how are you Hello, Hi, I'm, well I'm well. Thank you. Thanks for taking our questions. A couple here on my first one maybe if we could touch on badly before.
Marco Fregenal: On the first one, maybe we could touch on DAGLI, the full-year impact on the P&L, what you're expecting, and then maybe you could parse out the impact on the 2Q guidance. Sure. For the P&L for the remaining of the year, it will be, you know, compared to last year, it will be a reduction of about 1.3, 1.4 million in EBITDA compared to last year because we do have Q1 in our numbers, right?
Marco Fregenal: Full year impact on the P&L, what you're expecting and then maybe if you could parse out the impact on the <unk> guidance.
Marco Fregenal: Yeah.
Marco Fregenal: Sure.
Marco Fregenal: The the P&L for the remaining of the year. It would be you know compared to last you'll be a reduction of about 1.31 40 million EBITDA compared to two last year, because we do have the Q1 into our numbers right and then and in terms of in terms of revenue it would be about.
Marco Fregenal: And then, and in terms of revenue, it would have been about a $3 to $40 million impact on our top line revenue. In terms of our guidance, our guidance does not include DIA because we say it's no longer part of their business. So if we did have DIA, it would have an extra about $400,000 in EBITDA, something like that. And so that would be the impact on EBITDA in Q2. So as we're guiding between $200,000 and $500,000, we feel that even without including DIA, as we had previously discussed, we feel very positive about achieving positive EBITDA for Q2.
Marco Fregenal: Our $30 million to $40 million impact.
Marco Fregenal: In terms of our topline revenue.
Marco Fregenal: Okay in terms of our in terms of our guidance for our guidance does include are not you know, it's not included including D. I ate right because we say, it's no longer part of their business.
Marco Fregenal: So if we did have a if we did have the I E. It would have an extra about $400000 and you did that something like that and so that would be the impact on EBITDA in Q2, So as we guided between 200 and 500000.
Marco Fregenal: We do that even with the not including D. I a as we had previously discussed we feel very positive about our achieving positive EBITDA for Q2.
Marco Fregenal: Okay, that's helpful. And then on gross margin... I guess I'm doing the math wrong here, but I'm showing a 13.2% gross margin. I think you guys had mentioned 10.3%, and I think in the press release, it was also 10.3%. Do I have that wrong?
Speaker Change: Okay. That's helpful and then on gross margin.
Marco Fregenal: I might I guess I'm doing the math wrong here, but I'm I'm showing a 13, 2% gross margin I think you guys had I think you'd mentioned.
Marco Fregenal: 10.3, and I think in the press release. It was also a 10.3 am I doing.
Marco Fregenal: Do I have that wrong. So it yeah. So when you look at gross margin you have to redo a removed two clos.
Marco Fregenal: Figure out you have to remove the commission and other agent related costs and then the operation and support operations in support of the Red Cross when you add those two costs are and then you subtract from top up from total revenue then you get to the group's gross margin.
Marco Fregenal: So when you add those two costs and then subtract them from total revenue, then you have
Marco Fregenal: Okay, okay, we've been doing this, just the commission cost. Okay, that makes sense. The operational support costs are the direct costs for all the other ancillary... Okay, I think you've got some competitors out there who tend to just do the commission-related call. So that makes sense. Yeah, I would say that we're trying to be more transparent.
Speaker Change: Okay. Okay.
Marco Fregenal: Been doing this the commission cost okay that makes sense, yeah, yeah, yeah, yeah, yeah, yeah that the operational the operation support costs or the direct cost for the all the other ancillary businesses.
Marco Fregenal: I think you've got some competitors out there who tend to just do the commission related costs. So.
Marco Fregenal: That makes sense, yeah, I would say that we're trying to be more transparent [laughter], yeah, I totally get that.
Marco Fregenal: Yeah, I totally get that. Okay, so help us out on the trajectory of gross margins here. I know you've got the fee increases that obviously came January 1, but maybe if you could parse out the impact in the quarter and then kind of broadly how you expect things to play out the rest of the year.
Marco Fregenal: Okay. So help us out on the trajectory of gross margins here I know you've got the fee increases that are obviously came January one maybe if you could parse out the impact in the quarter and then kind of broadly how you expect things to play out the rest of the year yes.
Marco Fregenal: So, the impact of the additional fees is about $300,000 or so in additional revenue for the quarter. We do expect that gross profit margins will increase for the rest of the year, primarily due to several things. One is that the ancillary business will continue to grow, and they have a higher gross profit dollar per transaction, so that's number one. In Q1, we still had transactions that closed with the old annual fee because of the way the annual fee is calculated, and so as we get into Q2, we're going to have a much higher number of transactions that will close with additional high-value fees, as well as an additional extra $100 for the annual fee.
Speaker Change: So the impact of additional fees of about $300000 or so.
Marco Fregenal: Additional revenue for the quarter.
Marco Fregenal: We do expect our gross profit margins will increase for the rest of the year, primarily due to several things one.
Marco Fregenal: Is that the ancillary business will continue to grow and they you know they have a higher gross profit dollar per transaction. So that's number one second in Q1 that we still have transactions that close to the old annual fee because the way the annual piece calculated and so while we get into Q2, we're going to have.
Marco Fregenal: Have a much higher number of transactions that will close with the with additional high value fees as well as additional X $100 for the annual fees. So Q2 are a higher percent of such transactions will close with the additional fees and then of course as we close more business in mortgages.
Marco Fregenal: So, in Q2, a higher percentage of transactions will close with the additional fees, and then, of course, as we close more business in mortgage and title, it will also have a positive impact on gross margin. So, we do anticipate gross profit margins to increase from 10.3% going forward. Okay, that's great to hear. Thanks for the time, guys.
Marco Fregenal: Title. It will also have a positive impact in gross margins. So we do anticipate gross profit margins to increase from the 10, 3% going forward.
Speaker Change: Okay, that's great to hear thanks for the time guys.
Speaker Change: Thank you John.
Rajiv Sharma: The next question comes from Raj Sharma with Goo Riley. Please go ahead.
Marco Fregenal: Your next question comes from Raj Sharma with B Riley. Please go ahead.
Rajiv Sharma: Hi. Thank you for taking my questions. My first question, Marco, is about DAGLI.
Rajiv Sharma: Hi, Thank you for taking my questions. My My first question Michael is on Dagley.
Rajiv Sharma: I know you just address the EBITDA impact.
Rajiv Sharma: Hum just a bigger sort of question why sell it.
Rajiv Sharma: I understand that it's for a liquidity, but would that does that imply that other divisions or would it would be up for disposition as well.
Marco Fregenal: I know you just addressed the EBITDA impact, but just a bigger sort of question: why sell it? I understand that it's for liquidity, but does that imply that other divisions would be up for disposition as well? Hey Raj, thank you for your question.
Rajiv Sharma: Hey, Raj. Thank you for your question.
Marco Fregenal: Okay.
Marco Fregenal: Okay.
Marco Fregenal: Yeah.
Jaron F. Tahi: Your next question comes from Jaron F. Tahi with Ross MPM. Please go ahead. Wait. Can you guys hear me? We couldn't, Marco. You need to repeat what you said.
Marco Fregenal: Your next question comes from Sharon S. Takeda Rusty I am. Please go ahead can you guys hear me, we couldn't Michael you need to repeat what you said so I'm. So sorry, let me let me answer Roger's question first and then I'll take that question. So suraj. We just felt that the resources that were available to us with the seller.
Operator: We couldn't, Marco. You need to repeat what you said. So, I'm so sorry.
Marco Fregenal: Let me answer Rajiv's question first, and then I'll take Darren's question. So, Raj, we just felt that the resources that were available to us with the cell of DIA or DAGLI could be utilized in a way that would give a much higher return to our stockholders. And so we just felt that the capital could be much better used in that way. Second, our partnership with DAGLI continues, and our agents and clients are not going to experience any deterioration in terms of services.
Marco Fregenal: Where exactly they could be utilized in a way that would gave a much higher return for us who are stockholders and so we just felt that the capital could be much better implement it in that way second our partnership with <unk> continues and our agents and clients are not going to have any deterioration in terms of sorry.
Marco Fregenal: So, we just felt that it was the best combination of putting our assets in a way to give the best return possible to our stockholders and, at the same time, continue the level of service that we wanted to provide our clients.
Marco Fregenal: So we just thought it was that it was the best combination of putting our assets in a way to give them. The best return possible tours to our stockholders at the same time continue the the level of service that that we wanted to provide our clients. So we just felt that was the best way to do that.
Marco Fregenal: Can you please go ahead with your question, Darren?
Speaker Change: Please go ahead with your question Darrin, Yes.
Marco Fregenal: Okay.
Dillon Griffin Heslin: Hey, can you hear me? Yes, we can.
Darren: Hey can you hear me.
Speaker Change: Yes, we can.
Dillon Griffin Heslin: Hey, Dillon. How are you? Good. How are you?
Darren: Good how are you yeah I just wanted to ask about agent productivity I'm sure have the agents you've added so far this year based on what you might know about them are they tending to skew higher than sort of your more legacy base, meaning like are they more productive on a.
Dillon Griffin Heslin: Yeah. I just wanted to ask about agent productivity. Sure. Have the agents you've added so far this year, based on what you might know about them, are they tending to skew higher than sort of your more legacy-based agents, meaning like they are more productive on a like-for-like basis? Yeah, great question.
Dillon Griffin Heslin: Like for like agent basis.
Marco Fregenal: Great question, Dillon. So what happened is that sometime in the mid last year, we stopped our Producer Perks program, which is really focused on higher producing agents. We just felt like we had good momentum, and clearly, you know, that hurt us a little bit in the second half of last year with the kind of agents we started recruiting. So we reinstituted the Producer Perks program and a variety of other different programs in terms of really being focused on higher producing agents.
Speaker Change: Yeah, Great question, Bill and so what happened is sometime mid last year, we stop our producer Perks program, which is really focus on higher producing agents. We just felt like we had good momentum and clearly Ah that hurt us a little bit at the second half of last year.
Marco Fregenal: Kind of as we started recruiting so we reinstituted a producer perks program and a variety of other different programs in terms of really being focused on higher CPUC nature and the early signs for Q1 show us that we are absolutely a recruiting a higher percentage of producing agents, which by the way is what we did in the beginning of <unk>.
Marco Fregenal: And the early signs for Q1 show us that we are absolutely recruiting a higher percentage of producing agents, which, by the way, is what we did at the beginning of last year, right? So it is clear that our number of transactions has, you know, the lack of focus on higher producing agents has hurt us a little in Q1. But the reality is that the early results of the agents that bring it on board are higher-producing agents. And I think that by late Q2 and certainly by Q3, we're going to see higher productivity per agent based on the programs that we implemented.
Marco Fregenal: Yeah right. So it is clear there are a number of transactions has has you know that the lack of focus on high producers that have hurt us a little in Q1, but the reality is that the early results of the agents don't bring it on board or higher producing agents and I think that by late Q2, and certainly by Q3.
Marco Fregenal: We're going to see a higher a high productivity per agent based on the programs that we implemented.
Marco Fregenal: Great. Thank you. If I could ask a follow-up question just on the insurance. You mentioned in the press release and again today that you guys are still going to work with Dagley. Can you just sort of explain how that works, or is there just not a financial benefit to it anymore, but your agents still have the relationship?
Speaker Change: Great. Thank you if I could ask a follow up just on the insurance.
Marco Fregenal: You mentioned in the press release and again today that you guys are still going to work with Dagley can you just sort of explain.
Marco Fregenal: How how that works or is it is there just not a financial benefit to it anymore, but your agents still have the relationship.
Marco Fregenal: Yeah, the relationship will continue as we provide clients to them that they can help. It is part of the deal, the transaction, that we'll continue to do that. And we're certainly looking forward to doing it. The Dagley team, led by Nathan, has done a great job and continues to do a great job. Many of our clients and agents have saved a great deal of money on insurance, and so we're really excited about continuing that relationship. But basically, the relationship will continue from the perspective that we'll continue to stand up as a business and, therefore, give great value to our clients and to our agents. So we're very excited about that.
Marco Fregenal: Yeah. The the relationship will continue as we provide our clients to them that they can help it is not a it is part of the deal the transaction that will continue to do that and we're certainly looking forward to do it they're directly the bagley team led by Nathan has been a great dog dropping continue do a great job.
Marco Fregenal: Many many of our clients and agents have saved a great deal of money in insurance and so we're very excited about continuing our relationship but basically that relationship will continue from the perspective that will continue to send the business.
Marco Fregenal: And and therefore, giving great value to our to our clients into our agents. So we're very excited about that.
Dillon Griffin Heslin: Great, thanks for taking my questions. I'll pass.
Speaker Change: Great. Thanks for taking my questions I'll pass it on.
Operator: Once again, if you wish to ask a question, please press star 1 on your touch-tone phone. Your next question comes from Tom White with D.A. Davidson. Please go ahead.
Speaker Change: Once again, if you wish to ask a question. Please press star one on your Touchtone phone.
Operator: Your next question comes from Tom White with D. A Davidson. Please go ahead.
Wyatt J. Swanson: Hey, this is Wyatt speaking on behalf of Tom. Thanks for taking our questions. I have one on whether you could give some color on what you're seeing so far in 2Q related to agent productivity and just the overall market.
Thomas Cauthorn White: Hey, this is why on for Tom Thanks for taking our questions I had one on.
Wyatt: Whether you could give some color into what you're seeing so far into Q related to agent productivity and just the overall market.
Marco Fregenal: Thank you for your question. We gave guidance for Q2 and a significant change from our Q1 in terms of EBITDA, from a loss of about $1.5 million to guidance of positive between $200,000 and $500,000. We are seeing seasonality. We're certainly seeing seasonality coming back to the market, and so we anticipate a higher number of transactions closing, which will lead us to a positive EBITDA. Moreover, we're also seeing seasonality in our mortgage business and in our title business.
Wyatt J. Swanson: Sure.
Speaker Change: Uh Huh. Thank you for your question. So a couple of things. So you know we were where we gave guidance for Q2 are insignificant.
Marco Fregenal: And a significant change from where Q1 in terms of EBITDA right from from the loss of about $1 5 million to a guidance of positive between 200 and 500000. So we are we are we are seeing seasonality.
Marco Fregenal: We're certainly seeing seasonality coming back to the market.
Marco Fregenal: And so we anticipate a higher number of transaction closing, which would lead us to a positive EBITDA a.
Marco Fregenal: Moreover, we're also seeing the seasonality in our mortgage business and our in our title business. So this is all in the real estate side. So all three parts of our business. We anticipate all three of them to be positive EBITDA for Q2, which is an exciting time for US you know get in the Q1 results. We certainly look forward to being positive adjusted EBITDA.
Marco Fregenal: All three parts of our business, we anticipate all three of them to be positive EBITDA for Q2, which is an exciting time for us given the Q1 results. We certainly look forward to being positive adjusted EBITDA in terms of that. In terms of age and productivity, yes, we are seeing age and productivity picking up for two reasons. One is just seasonality.
Marco Fregenal: In terms of that in terms of agent productivity, Yes, we are seeing age of parties you're picking up in.
Marco Fregenal: Two reasons, one is just seasonality right Q2, and Q3 are higher.
Marco Fregenal: Transaction quarters. We're also seeing you know people clients and buyers really adjusting to what their interest rates. Our actual interest rates have come down. This morning, I believe to seven point online and so I think buyers are getting their heads around that that you know these are the interest rates and I have to buy a house and so they're there.
Marco Fregenal: Q2 and Q3 are higher transaction quarters. We're also seeing people, clients, and buyers really adjusting to what their interest rates have come down this morning, I believe to 7.09. I think buyers are getting their heads around that. These are the interest rates, and I have to buy a house.
Marco Fregenal: Is the level of a greater acceptance from buyers. It is still a tough market, but we are seeing a greater acceptance from buyers in terms of and that's why we see all three of our businesses.
Marco Fregenal: There is a level of greater acceptance from buyers. It is still a tough market, but we are seeing greater acceptance from buyers in terms of that. That's why we're seeing all three of our businesses going to have significant improvements in Q2. Productivity is going to increase, in part because of seasonality and, in part, because we are recruiting higher-productive agents in Q1 and going into Q2 as well.
Wyatt J. Swanson: Okay. That's really helpful. Thank you.
Wyatt J. Swanson: Youre going to have significant improvements in Q2.
Wyatt J. Swanson: So our productivity is going to increase in part because of the seasonality in part because we are a recruiting higher productive agents in Q1 and going into Q2 as well.
Speaker Change: Got it Okay. That's really helpful. Thank you and then I had one related to the various titled Joint venture could you just talk about how that's going I think you mentioned it in the prepared remarks, but just how that's been going so far yeah. So we announced the joint.
Marco Fregenal: And then I had one related to the Barrett's title joint venture. Could you just talk a bit about how that's going? I think you mentioned it in the prepared remarks, but just how it's been going so far. Yeah.
Marco Fregenal: So, we announced the joint venture in mid-Q1. The company started April 1st, and yes, we've been very pleased with the results thus far in terms of the number of agents interested and the number that joined the JV. We believe that the Texas JV is going to have a significant impact on EBITDA. This is why we have made a statement that we are going to look at doing many of these across the country. It is part of the partnership with our agents, and it helps our agents earn more income and helps Fathom earn more income, so we look forward to implementing more of these partnerships across the country.
Marco Fregenal: Joining venturing in mid Q1, the the company started April 1st and yes, we were very we've been very pleased with our results thus far.
Marco Fregenal: In terms of the number of agents interested in numbers that joined at the the J D.
Marco Fregenal: We believe that the Texas JV, he's going to have a significant impact our EBITDA.
Marco Fregenal: So this is why we haven't made a statement that we are going to look at doing you know many of these across the country right. It as part of the partnership with our agents and it helps our agents earn more income and helps fathom earn more income and so we look forward to implementing more of these partnerships across the country, but the early results of that.
Marco Fregenal: But the early results of the JV have been very, very promising, and that's why we made the statement that we are looking into doing other JVs across the country. I think by the end of the year, there will be several more JVs across different states for Ferris.
Marco Fregenal: You have been very very promising and a well in and that's why we made the statement that we are looking into doing other jv's across the country and I think by the end of the year there'll be several more jv's across different states for Paris.
Wyatt J. Swanson: Great. Okay. Thank you very much.
Speaker Change: Great. Okay. Thank you very much.
Marco Fregenal: Of course. You're welcome.
Speaker Change: Of course, you're welcome thank you.
Rajiv Sharma: The next question is a follow-up question from Raj Sharma with B. Reilly. Please go ahead.
Marco Fregenal: The next question is a follow up question from Raj Sharma with B Riley. Please go ahead.
Rajiv Sharma: Yeah, hi, thank you for putting me back online. Marco, I wanted to understand agent growth has been really hard, tough, and what are you expecting the next few, what could we expect in the next few quarters? Do you think there'll be acquisitions of small groups? and have the change it needs. Has that impacted agent growth at all?
Rajiv Sharma: Yeah, Hi, Thank you for putting me back online or Mark I wanted to understand the agent growth has been really hard tough and what are you expecting the next few what could could we expect in the next few quarters do you think they'd be acquisitions of small groups.
Rajiv Sharma: And.
Rajiv Sharma: And Harry with cheap fees.
Rajiv Sharma: Has that impacted agent growth at all.
Marco Fregenal: So, great question. What are the fees? Let's talk about the fees first. And when we implemented the fees, we knew that they would have a little bit of a negative impact. So, we did lose some agents because of the fees, and that would be a normal thing, and that happened in Q4, which had, you know, part of the negative impact in Q1 was related to losing some agents. Not many, but we lost some agents who were higher-producing agents.
Marco Fregenal: So great question, what they see so let's talk about the fees first with it and when we implemented the fees. We know that it would have a little bit of a negative impact. So we did lose some agents because of the of the seats and and that would be a normal thing and that happening in Q4, which had you know part of the negative.
Marco Fregenal: In fact in Q1 was related to losing some agents none of them any but we lost some agents will where higher producing agents and again, we anticipated a anticipated that.
Marco Fregenal: And again, we anticipated that. As we look at the market, and we made that statement, we are seeing an enormous amount of activity in the market in terms of age, small brokerages, teams, and including large brokers as well.
Marco Fregenal: As we look at the market.
Marco Fregenal: Made the statement we.
Marco Fregenal: We are seeing an enormous amount of activity in the market in terms of M&A.
Marco Fregenal: Small brokerages teams.
Marco Fregenal: And including large brokers as well so there is a great deal of activity in terms of that we do anticipate that Q2, I'm sorry, Q3, it will be Q3, and Q4 will be significant in terms of range of growth and that's our goal. If I you know we discussed that our goal is to return to you know 20% to 25%.
Marco Fregenal: So, there is a great deal of activity in terms of that. We do anticipate that Q2, sorry, Q3, it will be, Q3 and Q4, will be significant in terms of agent growth. And that's our goal. If I, you know, we discussed that, our goal is to return to, you know, 20 to 25% agent growth at least. And we believe that we will do that in Q2, sorry, in Q3, the second half of the year. And that's related to just the activity.
Marco Fregenal: Growth at least and we believe that we will do that in Q2, I'm, sorry, Q3 second half of the year and and that's related to just the activity now I wouldnt be very clear that we're going to be we're going to do this in a very intelligent way and when it is a very careful way.
Marco Fregenal: Now, I wanna be very clear that we're going to do this in a very intelligent way, and we're going to do this in a very careful way. And so, we're gonna be very opportunistic in how we do that, but we do believe that we'll have a number of walkovers, as well as some small M&A activity happening in the second half of the year. We will make sure that not only are these impactful in terms of EBITDA, but they'll certainly all be accretive, and we'll have a positive impact in terms of the profitability of the business. But Raj, there is a lot of activity, and we anticipate some of this taking place in the second half.
Marco Fregenal: And and so we're gonna be very opportunistic on how we do that but we do believe that we have as a number of work overs as well as some small M&A activity happening in the second half of the year, we will make sure that not only these are impactful in terms of EBITDA, they'll certainly won't be accretive.
Marco Fregenal: And Oh, we have a positive impact in terms of the profitability of the business, but Raj is there is a lot of activity and we anticipate some of this taking place in the second half of this year.
Rajiv Sharma: Great. Thank you. Thank you for the color.
Speaker Change: Great. Thank you. Thank you for the color just on the operating cash burn.
Marco Fregenal: Just on the operating cash. Burn. I understand now that you obviously have plenty of cash from the transaction, but you're positively, but what is that, you know, for the second quarter? Is there any guidance for the operating cash flow?
Speaker Change: I understand now you obviously have plenty.
Raj: Plenty of cash from the transaction, but your positive EBITDA. What does that are you know for the second quarter is there a guidance for the operating cash flow.
Marco Fregenal: No, not at this point. I mean, our operational cash burn in Q1 was about, I believe, $974,000, and with a negative EBITDA of about $1.5. So you can kind of deduct the difference in the other costs, right? We think that our EBITDA will be between $200,000 and $500,000. So we do anticipate some small cash burn in Q2, but we certainly are working hard to minimize that as much as possible. So your comment is accurate that we have plenty of cash now to run the business, but not only to run the business but to grow the business.
Speaker Change: No no not at this point I mean, we are operational cash burn in Q1 was about I believe 974000 <unk>.
Marco Fregenal: And with a negative EBITDA by 1.5. So you can you can kind of deduct that the difference in the other costs right. We think that our EBITDA will be in the 200 to 500000, So we do anticipate some.
Marco Fregenal: Some small cash burn in Q2, but we certainly are working hard to minimize that as much as possible. So so your comment is accurate that we have plenty of cash now to run their business well not only to run the business, but to grow the business and we're very excited about that we think again the second half of this year is going to be very meaningful to pack them in turn.
Marco Fregenal: And we're very excited about that. We think, again, the second half of this year is going to be very meaningful to Fathom in terms of not only growing the realty business but growing the mortgage and the title business as well. We talk about walkovers in the real estate business, but there are plenty of walkovers. And this is one of the reasons, by the way, why ELG has significantly increased its revenue, and we forecast positive EBITDA in Q2.
Marco Fregenal: Resolved not only growing the royalty business, but growing the mortgage in the title business well there also.
Marco Fregenal: We talk about work overs for the real estate business, but there are plenty of work overs for the mortgage business as well and for the title business and and and this is one of the reasons why the way Y E. O. G has significantly increased its a its revenue and and we forecast pause.
Marco Fregenal: EBITDA in Q2, it is because of the significant increase in loan officers right. Joanna pointed out we increased the number of loan officers into the business, which are leading to more business right and so we are looking at a market that has the potential for growth in terms of work overs are in all three facets of our.
Marco Fregenal: It is because of the significant increase in loan offices, right? As Joanne pointed out, we increased the number of loan offices in the business, which led to more business, right? And so we are looking at a market that has the potential for growth in terms of walkovers in all three facets of our business. And that's why we feel enthusiastic about it. Thank you.
Rajiv Sharma: Great. Thank you for answering my questions. I'll take it off. Thank you.
Rajiv Sharma: And and that's why we feel enthusiastic about the future.
Speaker Change: Great. Thank you for answering my questions I'll take it offline. Thanks.
Speaker Change: Thank you.
Operator: Once again, if you wish to ask a question, please press star 1 on your touchtone phone. We will just pause momentarily for any further questions to register. There are no further questions at this time. This does conclude our question and answer session. I would like to turn the conference back to Marco for any closing remarks.
Speaker Change: Once again, if you wish to ask a question. Please press star one on your touch time fine and we're just postponing tailing for any further questions to register.
Operator: Yeah.
Operator: Okay.
Operator: There are no further questions at this time. This does conclude our question and answer session I would like to turn the conference back to management for any closing remarks.
Operator: Yeah.
Marco Fregenal: Thank you for joining our call today and for your interest in Fathom. For those of you who are Fathom's shareholders, thank you for your trust in us. We'll continue to work hard and look forward to sharing future updates with you. Have a wonderful week. Thank you all.
Marco Fregenal: Thank you for joining our call today and for your interesting Fathom for those of you who are shareholders. Thank you for your trust in US we will continue to work hard and look forward to sharing future updates with you have a wonderful week. Thank you all.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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