Q2 2024 Fathom Holdings Inc Earnings Call

August 12, 2024

Speaker Change: Good afternoon everyone and welcome to the Fathom Holdings second quarter 2024 earnings conference call.

Speaker Change: All participants will be in a listen-only mode. Should you need assistance, please email a conference specialist by pressing the star key followed by zero.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two.

Operator: All participants will be in a listen-only mode. If you need assistance, please email a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star and then 1. To withdraw your questions, you may press star and 2. Please also note that today's event is being recorded. At this time, I'd like to turn the floor over to Matt Glover of Gateway Group.

Operator: At this time, I'd like to turn the floor over to Matt Glover with Gateway. Please go ahead.

Speaker Change: Please also note today's event is being recorded.

Speaker Change: At this time, I'd like to turn the floor over to Matt Glover with Gateway Group. Please go ahead, sir.

Matt Glover: Thank you, Jamie. And welcome to the Fathom Holdings second quarter 2024 conference call. I'm Matt Glover with Gateway Group, Fathom's investor relations firm. Before I turn the call over to management, I want 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 31, 2023, and other company filings made with the SEC, copies of which are available on the SEC's website at www.sec.gov. As a result of those four risk factors, actual results could differ materially. Fathom undertakes no obligation to update any four linking statements after today's call, except as required by law.

Speaker Change: Thank You Jamie and welcome to the Fathom Holdings second quarter 2024 conference call. I'm Matt Glover with Gateway Group, Fathom's investor relations firm.

Speaker Change: Before I turn the call over to management, I want to remind listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker Change: 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.

Speaker Change: 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 www.sec.gov.

Matt Glover: As a result of those foregoing statements, actual results could differ materially. Fathom undertakes no obligation to update any such foregoing statements after today's call, except as required by law. Please also note that during the call, we'll 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 now turn the call over to Fathom's President and CEO, Marco Fregenal. Marco?

Speaker Change: As a result of those four licking statements, actual results could differ materially. Fathom undertakes no obligation to update any four licking statements after today's call except as required by law.

Matt Glover: Please also note that during the call, we'll 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 now turn the call over to Fathom's President and CEO, Marco Fregenal.

Speaker Change: Please also note that during the 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.

Speaker Change: With that, I'll now turn the call over to Fathom's President and CEO, Marco Fregenal. Marco?

Marco Fregenal: Thank you, Matt. And thank you everyone for joining us for our Q2 earnings call. Before we review our Q2 results and our exciting new development, I want to express my heartfelt gratitude to the Fathom team. Your unwavering commitment and exceptional efforts have been remarkable, particularly in these challenging market conditions. Each of you has been instrumental in driving us towards our 2024 objectives and building a solid foundation for even greater success in 2025.

Marco Fregenal: Thank you, Matt. And thank you, everyone, for joining us on our Q2 earnings call. Before we review our Q2 results and our exciting new developments, I want to express my heartfelt gratitude to Fathom. Your unwavering commitment and exceptional efforts have been remarkable, particularly in this challenging market. Each of you has been instrumental in driving us towards our 2024 objectives and building a solid foundation for even greater success in 2025. Despite the hurdles the real estate market presented this year, our team's resilience and adaptability have been outstanding.

Marco Fregenal: Thank you, Matt, and thank you, everyone, for joining us for our Q2 earnings call. Before we review our Q2 results and our exciting new developments, I want to express my heartfelt gratitude to the Fathom team.

Marco Fregenal: Your unwavering commitment and exceptional efforts have been remarkable, particularly in these challenging market conditions.

Speaker Change: Each of you has been instrumental in driving us towards our 2024 objectives and building a solid foundation for even greater success in 2025.

Marco Fregenal: Despite the hurdles the real estate market presented this year, our team's resilience and adaptability have been outstanding. We haven't just weathered the storm, but, as you saw from last week's announcement, continue to innovate and push forward. Their tireless dedication to execute while maintaining our high standards for service has been one of the cornerstones of our progress.

Speaker Change: Despite the hurdles the real estate market presented this year, our team's resilience and adaptability have been outstanding. We haven't just weathered the storm, but as you saw from last week's announcement, continue to innovate and push forward.

Marco Fregenal: We haven't just weathered the storm, but as you saw from last week's announcement, we continue to innovate and push forward. Their tireless dedication to execution while maintaining our high standards for service has been one of the cornerstones of our progress.

Speaker Change: Their tireless dedication to execute while maintaining our high standards for service have been one of the cornerstones of our progress.

Marco Fregenal: Today, we're not just sharing our quarterly results; we are also sharing the transformative evolution in Fathom's business model. We're embarking on a journey that we believe will redefine our industry position with the potential to create unprecedented growth and success opportunities. Last week, Fathom Realty unveiled two new commission plans, Fathom Max and Fathom Share.

Speaker Change: Today, we are not just sharing our quarterly results, we are also sharing the transformative evolution in FADM's business model.

Speaker Change: We're embarking on a journey that we believe will redefine our industry position with the potential of creating unprecedented growth and success opportunities.

Speaker Change: Last week, FADM Realty unveiled two new aging commission plans, FADM-X and FADM-Share.

Marco Fregenal: These two new plans feature an innovative and reimagined revenue share program. This program is designed to boost agent recruitment and further improve retention while accelerating sustainable growth and long-term profitability for the company. Our industry has witnessed impressive growth for a small handful of companies who are offering a revenue share model. However, each of these companies' models are all very similar in nature.

Speaker Change: These two new plans feature an innovative and reimagined revenue share program. This program is designed to boost agent recruitment and further improve retention while accelerating sustainable growth and long-term profitability for the company.

Speaker Change: Our industry has witnessed an impressive growth for a small handful of companies who are offering a revenue share model.

Marco Fregenal: As we listen closely to what agents are looking for, we took what we believe is the most innovative approach to this revenue share concept as we merit it to our industry-low commission plan. As Fathom, our mission has always been to provide agents with the greatest value. One way to do this is by empowering agents to earn and retain more of their hard-earned money. Our new revenue share plans are a natural extension of this commitment.

Marco Fregenal: As we listen closely to what agents are looking for, we took what we believe is the most innovative approach to this revenue share concept as we married it to our industry-low commission plan. At Fathom, our mission has always been to provide agents with the greatest value. One way to do this is by empowering agents to earn and retain more of their hard-earned money. Our new revenue share plans are a natural extension of this commitment. Our new plants combine the best of both worlds.

Speaker Change: Each of these companies' models are all very similar in nature. As we listened closely to what agents are looking for, we took what we believe is the most innovative approach to this revenue-share concept as we married it to our industry-low commission plans.

FADM: As FADM, our mission has always been to provide agents with the greatest value. One way to do this is by empowering agents to earn and retain more of their hard-earned money. Our new Revenue Shared Plans are a natural extension of this commitment.

Marco Fregenal: Our new plans combine the best of both worlds. The Fathom X plan offers a highly competitive $465 flat fee with a $9,000 annual retainer, which not only attracts agents with affordability but also improves our gross profit margin potential compared to our legacy flat-feet plan.

Marco Fregenal: The Fathom X plan offers a highly competitive $465 flat fee fee with a $9,000 annual cap. This not only attracts agents with affordability but also improves our gross profit margin potential compared to our legacy flat-feet plan. For new recruits seeking even greater earnings potentials, our Fathom share plans feature an industry-low traditional commission split of only 12% with a $12,000 annual cap and a revenue share opportunity that offers twice the revenue share potential over the max plan and higher first level percentages than any of our peers.

FADM: Our new plans combine the best of both worlds. The FASAMAX plan offers a highly competitive $465 flat-fee fee with a $9,000 annual cap.

FADM: This not only attracts agents with affordability, but also improves our gross profit margin potential compared to our legacy flat-feet plan.

Marco Fregenal: For new agents seeking even greater earnings potentials, our Fathom share plans feature an industry-low traditional commission split of only 12% with a $12,000 annual cap and a revenue share opportunity that offers twice the revenue share potential over the max plan and higher first level percentages than any of our competitors. In simpler terms, our agents have the potential to significantly increase their earnings on their own transactions while also building passive income through a highly competitive revenue model share. What sets our two new models apart from the rest of the industry is their flexibility and inclusivity.

FADM: For new seeking even greater earnings potentials, our Fathom Share plans feature an industry low traditional commission split of only 12% with a $12,000 annual cap.

FADM: and a revenue share opportunity that offers twice the revenue share potential over the max plan and higher first level percentages than any of our peers.

Marco Fregenal: In simpler terms, our agents have the potential to significantly increase their earnings on their own transactions while also building passive income through a highly competitive revenue share. What sets our two new models apart from the rest of the industry are their flexibility and inclusivity. Starting last week, all of our agents can participate in our Revenue Shared Program. Regardless of their plan, they choose to participate.

FADM: In simpler terms, our agents have the potential to significantly increase their earnings on their own transactions while also building passive income through a highly competitive revenue model share.

FADM: What sets our two new models apart from the rest of the industry are their flexibility and inclusivity.

Marco Fregenal: Starting last week, all of our agents can participate in our revenue share program. Regardless of their plan, they This program offers tiered benefits based on the number of agents referred, allowing our agents to unlock additional revenue share as their network grows within Fathom. Our founder, Josh Harley, envisioned transforming the industry through radical innovation and fostering a culture of caring for our aging population.

FADM: Starting last week, all of our agents can participate in a revenue-shared program, regardless of their plan they choose.

Marco Fregenal: This program offers tiered benefits based on the number of agents referred, allowing our agents to unlock additional revenue share as their network grows within Fathom. Our founder, Josh Harley, envisioned transforming the industry through radical innovation and fostering a culture of caring for our agents. We believe these new revenue share programs embody this vision. By offering our agents flexibility, choice, and a higher income potential, we believe we grow our business while also empowering our real estate professionals to thrive in their careers. The strategic move positions Fathom at the forefront of industry trends, setting the stage for sustainable growth and increased market share. We are not just adapting to the future of real estate. We're actively shaping it.

FADM: This program offers tiered benefits based on the number of agents referred, allowing our agents to unlock additional revenue share as their network grows within Fathom.

Josh Harley: Our founder, Josh Harley, envisioned transforming the industry through radical innovation and fostering a culture of caring for our agents. We believe these new revenue share programs embody this vision.

Marco Fregenal: We believe these new revenue share programs embody this vision. By offering our agents flexibility, choice, and a higher income potential, we believe we grow our business while also empowering our real estate professionals to thrive in their careers. The strategic move positions Fathom at the forefront of industry trends, setting the stage for sustainable growth and increased market share. We are not just adapting to the future of real estate; we are actively shaping it. As we do so, we create a win-win scenario where our agent's success directly contributes to Fathom's success, and vice versa.

Josh Harley: By offering our agents flexibility, choice, and a higher income potential, we believe we grow our business while also empowering our real estate professionals to thrive in their careers.

Speaker Change: The strategic move positions Fathom at the forefront of industry trend, setting the stage for sustainable growth and increased market share.

Speaker Change: We are not just adapting to the future of real estate, we are actively shaping it. As we do so, we create a win-win scenario where our agent's success directly contributes to Fathom's success and vice versa.

Marco Fregenal: As we do so, we create a win-win scenario where our agent's success directly contributes to Fathom's success and vice versa. We believe that this dual approach is the future of real estate. Our new aging commission plan directly addresses two of our key 24 2024 objectives, launching additional initiatives to further support our agents in growing their businesses and restating agent growth to at least 30% while prioritizing high-quality professionals. As you may recall, in March, we introduced four strategic goals for 2024.

Marco Fregenal: We believe that this dual approach is the future of real estate. Our new aging commission plan directly addresses two of our key 2024 objectives, launching additional initiatives to further support our agents in growing their businesses and restating agent growth to at least 30% while prioritizing high-quality professionals. As you may recall, in March, we introduced four strategic goals for 2024.

Speaker Change: We believe that this dual approach is the future of real estate.

Speaker Change: Our new agent commission plan directly addresses two of our key 2024 objectives. Launching additional initiatives to further support our agents in growing their businesses and restating agent growth to at least 30% while prioritizing high quality professionals.

Speaker Change: As you may recall, in March, we introduced four strategic goals for 2024.

Marco Fregenal: Beyond the two agent folks objectives, we're also committed to enhancing our balance sheet and achieving positive EBITDA and operational cash flow. These new agent plans are not just about growth. They're about smart, sustainable growth that aligns with our financial objectives to strengthen Statham's position in the market. We successfully enhanced our balance sheet in May through the sale of Bagley Insurance. We added $7.0 million to our balance sheet at closing and would add another $7 million over the next 24 months. We ended Q2 with $10.4 million in cash, giving us confidence in our financial position.

Marco Fregenal: Beyond the two agent goals, we're also committed to enhancing our balance sheet and achieving positive EBITDA and operational cash flow. These new agent plans are not just about growth; they're about smart, sustainable growth that aligns with our financial objectives to strengthen Statham's position in the market. We successfully enhanced our balance sheet in May through the sale of Bagley Insurance. The sale added $7.0 million to our balance sheet at closing and would add another $7 million over the next 24 months. We ended Q2 with $10.4 million in cash, giving us confidence in our financial position.

Speaker Change: Beyond the two agent folks' objectives, we are also committed to enhancing our balance sheet and achieving positive EBITDA in operational cash flow.

Speaker Change: These new agent plans are not just about growth, they are about smart, sustainable growth that align with our financial objectives to strengthen Statham's position in the market.

Speaker Change: We successfully enhanced our balance sheet in May through the sale of Bagley Insurance.

Speaker Change: The sale added $7.0 million to our balance sheet at closing and would add another $7 million over the next 24 months. We ended Q2 with $10.4 million in cash, giving us the confidence in our financial position.

Marco Fregenal: In parallel with our strategic initiatives, I'm pleased to report that we continue to make significant strides towards our profitability. This quarter, we generated $180,000 in adjusted EBITDA, a notable achievement driven by solid gross profit margins of 9.5%. More importantly, our real estate, mortgage, and title decisions all reached positive adjusted EBITDA this quarter. Total revenue for the quarter was $89.2 million, a decrease of 10.9% from $100.1 million in Q2 of 2023. Adjusted EBITDA and non-GAAP measure for the second quarter of 2024 total $189,000 compared to $500,000 in the second quarter of 2023.

Marco Fregenal: In parallel with our strategic initiatives, I'm pleased to report that we continue to make significant strides towards our profitability. This quarter, we generated $180,000 in adjusted EBITDA, a notable achievement driven by solid gross profit margins of 9.5%. More importantly, our real estate, mortgage, and title decisions all reached positive adjusted EBITDA this quarter. Total revenue for the quarter was $89.2 million, a decrease of 10.9% from $100.1 million in Q2 of 2023. Adjusted EBITDA at an on-gap measure for the second quarter of 2024 was $189,000 compared to $500,000 in the second quarter of 2023.

Speaker Change: In parallel with our strategic initiatives, I am pleased to report that we continue to make significant strides towards our profitability goal.

Speaker Change: This quarter we generated $180,000 in adjusted EBITDA, a notable achievement driven by solid gross profit margins of 9.5%. More importantly, our real estate, mortgage, and title decisions all reached positive adjusted EBITDA this quarter.

Speaker Change: Total revenue for the quarter was $89.2 million, a decrease of 10.9% from $100.1 million in Q2 of 2023.

Speaker Change: Adjusted EBITDA and non-GAAP measures for the second quarter of 2024 total $189,000 compared to $500,000 in the second quarter of 2023.

Marco Fregenal: Fathom completed approximately 10,137 transactions for the quarter, a decrease of approximately 7.9% compared to second quarter 2023. Fathom Green State Asian Network grew 12% to approximately 12,224 Asian licenses as of June 30, 2024 from approximately 10,930 on June 30, 2023. We believe these results, coupled with our new commission plan and revenue-sharing program, position us for sustainable growth and increased profitability. We are not just focused on top-line growth; we are building a more robust, efficient, and profitable operation that we believe can deliver long-term value to our shareholders, agents, and clients.

Marco Fregenal: Fathom completed approximately 10,137 transactions for the quarter, a decrease of approximately 7.9% compared to second quarter 2023. Fathom through the State Asian Network grew 12% to approximately 12,224 Asian licenses as of June 30, 2024 from approximately 10,930 on June 30, 2023. We believe these results couple with our new commission plan and revenue sharing program position as well as sustainable growth and increased profitability. We are not just focused on top-line growth. We are building a more robust, efficient, and profitable operation that we believe can deliver long-term value to our shareholders, agents, and clients. As we move forward, we remain committed to prudent financial management while understanding the need and wisdom to invest in areas that will drive our future success.

Speaker Change: Fathom completed approximately 10,137 transactions for the quarter, a decrease of approximately 7.9% compared to second quarter 2023.

Speaker Change: Badger Brewers State Asia Network grew 12% to approximately 12,224 Asia licenses as of June 30, 2024, from approximately 10,930 on June 30, 2023.

Speaker Change: We believe these results couple with our new commission plan and revenue sharing program position as well sustainable growth and increased profitability.

Speaker Change: We are not just focused on top-line growth, we are building a more robust, efficient and profitable operation that we believe can deliver long-term value to our shareholders, agents and clients.

Marco Fregenal: As we move forward, we remain committed to prudent financial management while understanding the need and wisdom of continuing to invest in areas that will drive our future success. Our team's ability to execute on multiple fronts, growing our agent base, improving our profit margins, and managing our cash flow speaks to the strength of our leadership team, our business model, and the dedication of our entire organization. Let me briefly comment on our ancillary businesses, and then Joanne will provide more financial details.

Speaker Change: As we move forward, we remain committed to prudent financial management while understanding the need and wisdom in continuing to invest in areas that will drive our future success.

Marco Fregenal: Our team's ability to execute on multiple fronts, growing our agent base, improving our profit margins, and managing our cash flow speaks to the strength of our leadership team, our business model, and the dedication of our entire organization. Let me briefly comment on our ancillary businesses, and then Joanne will provide more financial details. We have seen impressive growth in our mortgage business, with revenues increasing by 82% or $1.7 million from $2 million in Q2 of last year to $3.7 million in Q2 of this year.

Speaker Change: Our team's ability to execute on multiple fronts, growing our agent base, improving our profit margins, and managing our cash flow speaks to the strength of our leadership team, our business model, and the dedication of our entire organization.

Speaker Change: Let me briefly comment on our ancillary businesses and then Joanne will provide more financial details.

Marco Fregenal: We have seen impressive growth in our mortgage business, with revenues increasing by 82% or $1.7 million from $2 million in Q2 of last year to $3.7 million in Q2 of this year. This growth is a direct result of the strategic initiatives our team has implemented over the past quarter. Recognizing the growing demand for the Latino segment, we launched a dedicated division within Encompass Lending, working in close alignment with our Latino division at Fathom.

Joanne: We have seen an impressive growth in our mortgage business with revenues increasing by 82 percent or $1.7 million from $2 million in Q2 of last year to $3.7 million in Q2 of this year.

Marco Fregenal: This growth is a direct result of the strategic initiatives our team has implemented over the past quarter. Recognizing the growing demand for the Latino segment, we launched a dedicated division within Encompass Lending, working in close alignment with our Latino division at Fathom. The results of this collaboration have been exceptionally positive, reinforcing our commitment to serving diverse communities. We have also continued to expand our Homestar Views program, building our commitment to support local veterans and first responders.

Joanne: This growth is a direct result of the strategic initiatives our team has implemented over the past quarter.

Joanne: Recognizing the growing demand of the Latino segment, we launched a dedicated division within Encompass Lending, working in close alignment with our Latino division at Fathom. The results of this collaboration have been exceptionally positive, reinforcing our commitment to serving diverse communities.

Marco Fregenal: The results of this collaboration have been exceptionally positive, reinforcing our commitment to serving diverse communities. We have also continued to expand our Hometown Heroes program, building our commitment to support local veterans, first responders, and people in need.

Joanne: We have also continued to expand our Hometown US program, building our commitment to support local veterans, first responders, and teachers.

Marco Fregenal: In particular, I'm particularly pleased to share that Q2 marked a significant milestone for encompass lending as it achieved positive EBITDA. This accomplishment not only validates our strategic direction but also contributes to our overall growth of improving profitability across all our business segments. These developments in our mortgage division exemplify our commitment to diversifying our revenue streams and enhancing our value proposition to both agents and clients. As we continue to innovate and expand our offerings, we're confident in our ability to capture a larger share of the mortgage market and drive synergies across our integrated real estate services platform.

Marco Fregenal: And I'm particularly pleased to share the Q2 market's significant milestone for encompassed lending, as it achieved positive EBITDA. This accomplishment not only validates our strategic direction but also contributes to our overall goal of improving profitability across all our business sectors. These developments in our mortgage division exemplify our commitment to diversifying our revenue streams and enhancing our value proposition to both agents and clients. As we continue to innovate and expand our offerings, we're confident in our ability to capture a larger share of the mortgage market and drive synergies across our integrated real estate services platform.

Joanne: I'm particularly pleased to share that Q2 marked a significant milestone for Encompass Landing.

Speaker Change: as it achieved positive EBITDA. This accomplishment not only validates our strategic direction, but also contributes to our overall growth of improving profitability across all our business segments.

Speaker Change: These developments in our mortgage division exemplify our commitment to diversifying our revenue streams and enhancing our value proposition to both agents and clients.

Speaker Change: As we continue to innovate and expand our offerings, we're confident in our ability to capture a larger share of the mortgage market and drive synergies across our integrated real estate services platform.

Marco Fregenal: I'm also pleased to report that we continue to make improvements to our bearish title business in Q2. Revenues reached $1.1 million, which is an increase of 10% from Q2 of 2023. But our second quarter results represent a 67% increase over the prior quarter, which is encouraging. More importantly, Veris Tidal generated $108,000 in adjusted EBITDA.

Speaker Change: I'm also pleased to report that we continue to make improvements to our various title business in Q2.

Speaker Change: Revenues reached $1.1 million, which is an increase of 10% from Q2 of 2023. But our second quarter results represent a 67% increase over the prior quarter, which is encouraging.

Speaker Change: More importantly, Veris Title generated $108,000 in adjusted EBITDA. This performance is a clear indication that our strategic growth initiatives are paying off and we are successfully optimizing our ancillary business for profitability.

Marco Fregenal: This performance is a clear indication that our strategic growth initiatives are paying off, and we are successfully optimizing our ancillary business for profitability. We have also seen an impressive increase in file start, and Joanne will detail that in a few minutes. Let me spend a few minutes discussing the overall market trend. The second quarter of 2024 saw significant swings in mortgage interest rates. However, more recently, we have seen mortgage rates decrease to about 6.5%.

Marco Fregenal: This performance is a clear indication that our strategic growth initiatives are paying off, and we are successfully optimizing our ancillary business for profitability. We have also seen an impressive increase in file start, and Joanne will detail that in a few minutes. Let me spend a few minutes discussing the overall market trend; second quarter 2024 has seen significant swings in the mortgage interest rate. However, more recently, we have seen mortgage rates decrease to about 6.5%.

Speaker Change: We have also seen an impressive increase in file start and Joanne will detail those in a few minutes.

Joanne: Let me spend a few minutes to discuss the overall market trend.

Speaker Change: The second quarter of 2024 has seen significant swings in the mortgage interest rate. However, more recently, we have seen mortgage rates decrease to about 6.5%. We believe these improvements in rates could translate to some buyers coming back to the market.

Marco Fregenal: We believe these improvements in rates could translate to some buyers coming back to the market. We have also seen a small shift in power from sellers to buyers. In recent months, over 20% of all listings have seen a price reduction, and in some states like Texas, Florida, and Colorado, stays on the market have increased by over 15%, while median home prices have decreased by 3 to 5%. Ultimately, the combination of lower home prices and lower mortgage interest rates should have a positive effect on the number of homes sold due to lower mortgage payments.

Marco Fregenal: We believe this improvement rate could translate to some buyers coming back to the market. We have also seen a small shift in the power from sellers to buyers. In recent months, over 20% of all listeners have seen a price reduction, and in some states like Texas, Florida, and Colorado, stays on the market have increased by over 15%, while median home prices decreased by 3 to 5%. Ultimately, the combination of lower home prices and lower mortgage interest rates should have a positive effect on the number of homes sold due to lower mortgage payments.

Speaker Change: We have also seen a small shift in the power from sellers to buyers.

Speaker Change: In recent months, over 20% of all listeners have seen a price reduction, and in some states like Texas, Florida, and Colorado, stays on market have increased by over 15%, while median home prices decreased by 3-5%.

Speaker Change: Ultimately, the combination of lower home prices and lower mortgage interest rates should have a positive effect in the number of homes sold due to lower mortgage payments.

Marco Fregenal: We have also started seeing some early effects from the settlement of the commission's lawsuit and the rules that were imposed. At Fathom, we are committed to helping our agents, and we have already begun to implement training classes and seminars to ensure that all our agents adhere to the new rules. Now, before I turn the call to Joanne, let me make one final point regarding our new plan. Since announcing the new agent commission plan, the response has been exceptionally positive.

Speaker Change: We have also started seeing some early effects from the settlement of the commission's lawsuit and the rules that were imposed. At FADM, we are committed to helping our agents and we have already began to implement training classes and seminars to ensure that all our agents adhere to the new rules.

Speaker Change: Before I turn the call to Joanne, let me make one final point regarding our new plan.

Speaker Change: Since announcing the new agent commission plan, the response has been exceptionally positive. We have heard from agents, as well as non-Fathom agents, teams, and small brokerages that have demonstrated interest in our new offering.

Marco Fregenal: We have heard from agents, as well as non-Fathom agents, teams, and small brokers that have demonstrated interest in our new offer. We feel strongly that new commission plans with revenue sharing will lead us to pass our agent growth back to 30 percent or even higher. We also believe it will take a few quarters for us to see the full benefit of our new plans as agents learn how to discuss the program and we work through the early conversations on more walkovers from all small brokerages and teams. With that, I would like to pass the call over to Joanne, our Senior Vice President of Finance, so she can discuss our financial results in more detail. Joanne?

Marco Fregenal: We have heard from agents, as well as non-Fathom agents, teams, and small brokers that have demonstrated interest in our new office. We feel strongly that new commission plans with revenue sharing will lead us regarding to pass our agent growth back to 30% or even higher. But we also believe it will take a few quarters for us to get the full benefit of our new plan as agents learn how to discuss the program, and we work through the early conversations on more walkovers from all small brokerages. With that, I would like to pass the call over to Joanne, our Senior Vice President of Finance, so she can discuss our financial results in more detail.

Speaker Change: We feel strongly their new commission plans with revenue sharing will lead us regarding to pass our Asian growth back to 30% or even higher.

Speaker Change: We also believe it will take a few quarters for us to see the full benefit of our new plan as agents learn how to discuss the program and we work through the early conversations on more walkovers from all small brokerages and teams.

Speaker Change: With that, I would like to pass the call over to Joanne, our Senior Vice President of Finance, so she can discuss our financial results in more detail. Joanne?

Joanne Zach: Thank you, Marco. I will start with a general overview of our results for the second quarter of 2024 and will then provide a more detailed review by segment. Total revenue for the second quarter of 2024 decreased 11% to $89.2 million, compared to $100.1 million in the second quarter of 2023. The decrease in total revenue was due to a 12% decrease in brokerage revenue, resulting primarily from fewer transactions and an increase in lease transactions compared to sale transactions.

Joanne Zach: I will start with a general overview of our results for the second quarter of 2024 and will then provide a more detailed review by segment. Total revenue for the second quarter of 2024 decreased 11% to $89.2 million compared to $100.1 million in the second quarter of 2023. The decrease in total revenue was due to a 12% decrease in brokerage revenue resulting primarily from fewer transactions and an increase in lease transactions compared to sale transactions.

Joanne: Thank you, Marco. I will start with a general overview of our results for the second quarter of 2024 and will then provide a more detailed review by segment.

Joanne Zach: Offsetting the decline in total revenue was an 11% increase in other service revenue, driven by improved performance from Fathom's mortgage and title businesses, offset by the absence of the company's insurance business, which was sold on May 3, 2024. Overall gross profit for the 2024 second quarter decreased approximately 8.6% to $8.5 million from $9.3 million for the 2023 second quarter. This decrease was primarily attributable to the impact of selling the company's insurance business.

Joanne: Total revenue for the second quarter of 2024 decreased 11% to $89.2 million compared to $100.1 million in the second quarter of 2023.

Joanne: The decrease in total revenue was due to a 12% decrease in brokerage revenue resulting primarily from fewer transactions and an increase in lease transactions compared to sale transactions.

Joanne Zach: Offsetting the decline in total revenue was an 11% increase in other service revenue, driven by improved performance from Fathom's mortgage and title businesses, offset by the absence of the company's insurance business, which was sold on May 3, 2024. Overall, gross profit for the 2024 second quarter decreased approximately 8.6% to $8.5 million from $9.3 million for the 2023 second quarter. This decrease was primarily attributable to the impact of selling the company's insurance business.

Joanne: Offsetting the decline in total revenue was an 11% increase in other service revenue, driven by improved performance from Fathom's mortgage and title businesses, offset by the absence of the company's insurance business, which was sold on May 3, 2024.

Joanne: Overall, gross profit for the 2024 second quarter decreased approximately 8.6% to $8.5 million from $9.3 million for the 2023 second quarter. This decrease was primarily attributable to the impact of selling the company's insurance business.

Joanne Zach: However, our overall growth profit percentage, excluding our insurance business, improved to 9% in the second quarter of 2024, up from 8% in the second quarter of 2023, primarily as a result of higher contributions from our mortgage and title businesses. However, our brokerage business gross profit percentage remained relatively constant at 6% for the second quarter of 2024 compared to the second quarter of 2023. Excluding our insurance business, the gross profit percentage in our ancillary businesses dipped slightly to 53% in the second quarter of 2024 from 57% in the second quarter of 2023, primarily related to ramp-up costs associated with the expansion of these businesses.

Joanne Zach: However, our overall growth profit percentage, excluding our insurance business, improved to 9% in the second quarter of 2024, up from 8% in the second quarter of 2023, primarily as a result of higher contributions from our mortgage and title businesses. However, our brokerage business gross profit percentage remained relatively constant at 6% for the second quarter of 2024 compared to the second quarter of 2023. Excluding our insurance business, gross profit percentage in our ancillary businesses dipped slightly to 53% in the second quarter of 2024 from 57% in the second quarter of 2023, primarily related to ramp-up costs associated with the expansion of these businesses. However, technology and development expenses remain relatively constant at approximately $1.9 million for the second quarter of 2024 and 2023.

Joanne: However, our overall gross profit percentage, excluding our insurance business, improved to 9% in the second quarter of 2024, up from 8% in the second quarter of 2023, primarily as a result of higher contributions from our mortgage and title businesses.

Joanne: Our brokerage business gross profit percentage remained relatively constant at 6% for the second quarter of 2024 compared to the second quarter of 2023.

Joanne: excluding our insurance business.

Joanne: Gross profit percentage in our ancillary businesses dipped slightly to 53% in the second quarter of 2024 from 57% in the second quarter of 2023, primarily related to ramp up costs associated with expansion of these businesses.

Joanne Zach: Technology and development expenses remain relatively constant at approximately $1.9 million for the second quarter of 2024 and 2023. These costs will continue and likely increase over time as we mindfully increase our spend to enhance our technology platform to drive revenue growth.

Joanne: Technology and development expenses remain relatively constant at approximately $1.9 million for the second quarter of 2024 and 2023.

Joanne Zach: These costs will continue and likely increase over time as we mindfully increase our spend to enhance our technology platform to drive revenue growth. General and administrative expense totaled $8.9 million for the second quarter of 2024, or 10% of revenue, compared with $9.9 million, or 9.9% of revenue, for the second quarter of 2023. This $1 million decrease was primarily due to the absence of costs associated with our insurance business, in addition to other cost reductions such as business insurance.

Joanne: These costs will continue and likely increase over time as we mindfully increase our spend to enhance our technology platform to drive revenue growth.

Joanne Zach: General and administrative expense totaled $8.9 million for the second quarter of 2024, or 10% of revenue, compared with $9.9 million, or 9.9% of revenue, for the second quarter of 2023. This $1 million decrease was primarily due to the absence of costs associated with our insurance business, in addition to other cost reductions such as business insurance. Marketing activities expense was $0.75 million for the second quarter of 2024, compared to $0.9 million in the second quarter of 2023. The 18% decrease in marketing expenses was primarily related to leveraging internal resources and optimizing advertising expenditure.

Joanne: General and administrative expense totals $8.9 million for the second quarter of 2024 or 10% of revenue compared with $9.9 million or 9.9% of revenue for the second quarter of 2023.

Joanne: This $1 million decrease was primarily due to the absence of costs associated with our insurance business, in addition to other cost reductions such as business insurance.

Joanne Zach: Marketing activities expense was $0.75 million for the second quarter of 2024, compared to $0.9 million in the second quarter of 2023. The 18% decrease in marketing expenses was primarily related to leveraging internal resources and optimizing advertising expenditure. Gap's net loss for the second quarter of 2024 totaled $1.3 million or $0.7 per share, an improvement compared with a net loss of $4.3 million or $0.27 per share for the second quarter of 20

Joanne: Marketing Activities Expense was $0.75 million for the second quarter of 2024 compared to $0.9 million in the second quarter of 2023.

Joanne: The 18% decrease in marketing expenses was primarily related to leveraging internal resources and optimizing advertising expenditure.

Joanne Zach: Gap's net loss for the second quarter of 2024 totaled $1.3 million or $0.7 cents per share, an improvement compared with a net loss of $4.3 million or $0.27 cents per share for the second quarter of 2023. The significant reduction in net loss was primarily due to the gain generated from the sale of the company's insurance business and improved net operating results, partially offset by an increase in non-operating expense. Adjusted EBITDA, a non-GAAP measure, for the second quarter of 2024 totaled a positive $0.2 million, compared to $0.5 million in the second quarter of 2023. The second quarter of 2024 marked the company's first positive adjusted EBITDA quarter since the second quarter of 2023. Now, I'll spend some time reviewing our business segment results in more detail.

Joanne: Gap net loss for the second quarter of 2024 totaled $1.3 million or $0.7 per share, an improvement compared with a net loss of $4.3 million or $0.27 per share for the second quarter of 2023.

Joanne Zach: The significant reduction in net loss was primarily due to the gain generated from the sale of the company's insurance business and improved net operating results, partially offset by an increase in non-operating expenses. Adjusted EBITDA, a non-GAAP measure, for the second quarter of 2024 totaled a positive $0.2 million, compared to $0.5 million in the second quarter of 2023. The second quarter of 2024 marked the company's first positive adjusted EBITDA quarter since the second quarter of 2023.

Joanne: The significant reduction in net loss was primarily due to the gain generated from the sale of the company's insurance business and improved net operating results, partially offset by an increase in non-operating expenses.

Joanne: Adjusted EBITDA, a non-gap measure, for the second quarter of 2024 totals a positive $0.2 million, compared to $0.5 million in the second quarter of 2023.

Joanne: The second quarter of 2024 marked the company's first positive adjusted EBITDA quarter since the second quarter of 2023.

Joanne Zach: Now I'll spend some time reviewing our business segment results in more detail. Revenue for the real estate division was approximately $83.1 million in the second quarter of 2024, compared to $100.1 million for the same period last year, which represents a 12% decline, primarily attributable to an 8% decrease in transaction volume. As Marco noted, we completed 10,137 real estate transactions during the three months ended June 30th, 2024, compared to 11,010 transactions during the three months ended June 30th, 2023. Our transaction volume decreased primarily due to the continuation of high mortgage interest rates in the second quarter of 2024.

Joanne: Now I'll spend some time reviewing our business segment results in more detail.

Joanne Zach: Revenue for the real estate division was approximately $83.1 million in the second quarter of 2024, compared to $100.1 million for the same period last year, which represents a 12% decline, primarily attributable to an 8% decrease in transaction volume. As Marco noted, we completed 10,137 real estate transactions during the three months ended June 30, 2024, compared to 11,010 transactions during the three months ended June 30, 2023. Our transaction volume decreased primarily due to the continuation of high mortgage interest rates in the second quarter of 2024.

Joanne: Revenue for the Real Estate Division was approximately $83.1 million in the second quarter of 2024, compared to $100.1 million for the same period last year, which represents a 12% decline, primarily attributable to an 8% decrease in transaction volume.

Joanne: As Marco noted, we completed 10,137 real estate transactions during the three months ended June 30, 2024, compared to 11,010 transactions during the three months ended June 30, 2023.

Marco Fregenal: Our transaction volume decreased primarily due to the continuation of high mortgage interest rates.

Joanne Zach: During the three months ended June 30th, 2024, average revenue per transaction was $8,200, a 5% decrease compared to $8,593 during the three months ended June 30th, 2023, primarily due to an increase in lease transactions compared to sale transactions and a slight decrease in commission percentage. Fathom is addressing these declines by continuing its strategic recruiting efforts powered by its recently announced new revenue share models and its service commitment to its agents. Gross profit margin for our real estate division remained relatively constant at 6.1% in the second quarter of 2024 compared to the second quarter of 2023.

Marco Fregenal: in the second quarter, 24.

Marco Fregenal: During the three months ended June 30, 2024, average revenue per transaction was $8,200, a 5% decrease compared to $8,593 during the three months ended June 30, 2023.

Speaker Change: primarily due to an increase in lease transactions compared to sale transactions and a slight decrease in commission percentage.

Speaker Change: Fathom is addressing these declines by continuing its strategic recruiting efforts powered by its recently announced new revenue share models and its service commitment to its agents.

Joanne Zach: Gross profit margin for our real estate division remained relatively constant at 6.1% in the second quarter of 2024 compared to the second quarter of 2023. Adjusted EBITDA income in the real estate division was approximately $1.5 million in the second quarter of 2024, a decrease of approximately $1.1 million compared to adjusted EBITDA income of $2.6 million in the second quarter of 2023. This was due to a decrease in transaction revenue in the second quarter of 2024 and to the commencement of internal charges of approximately $350,000 from our technology vision to Fathom Realty for transaction management and CRM services provided.

Speaker Change: Gross profit margin for our real estate division remained relatively constant at 6.1% in the second quarter of 2024 compared to the second quarter in 2023.

Joanne Zach: Adjusted EBITDA income in the real estate division was approximately $1.5 million in the second quarter of 2024, a decrease of approximately $1.1 million compared to adjusted EBITDA income of $2.6 million in the second quarter of 2023.

Speaker Change: Adjusted EBITDA income in the real estate division was approximately $1.5 million in the second quarter of 2024, a decrease of approximately $1.1 million compared to adjusted EBITDA income of $2.6 million in the second quarter of 2023.

Joanne Zach: This was due to a decrease in transaction revenue in the second quarter of 2024 and to the commencement of internal charges of approximately $350,000 from our technology vision to Fathom Realty for transaction management and CRM services provided. We are pleased about the significant improvement made in our mortgage business. Mortgage revenue grew 85% to approximately $3.7 million in Q2 2024 compared to $2 million in Q2 2023. This revenue growth was primarily driven by a strategic increase in our loan officer base, which almost doubled from the prior year. Q2 2024 file start loan volume was up 72% compared to Q2 2023. Mortgage adjusted EBITDA for Q2 2024 was a positive $0.02 million compared to an adjusted EBITDA loss of $0.2 million in Q2 2023.

Speaker Change: This was due to the decrease in transaction revenue in the second quarter of 2024 and to the commencement of internal charges of approximately $350,000 from our technology vision to Fathom Realty for transaction management and CRM services provided.

Joanne Zach: We are pleased about the significant improvement made in our mortgage business. Mortgage revenue grew 85% to approximately $3.7 million in Q2 2024 compared to $2 million in Q2 2023. This revenue growth was primarily driven by a strategic increase in our loan officer base, which almost doubled from the prior year. Q2 2024 file start loan volume was up 72% compared to Q2 2023. Mortgage-adjusted EBITDA for Q2 2024 was a positive $0.02 million, compared to an adjusted EBITDA loss of $0.2 million in Q2 2023.

Speaker Change: We are pleased about the significant improvement made in our mortgage business. Mortgage revenue grew 85% to approximately $3.7 million in Q2 2024 compared to $2 million in Q2 2023.

Speaker Change: This revenue growth was primarily driven by a strategic increase in our loan officer base, which has almost doubled from the prior year. Q2 2024 file start loan volume was up 72% compared to Q2 2023.

Speaker Change: Mortgage adjusted EBITDA for Q2 2024 was a positive .02 million compared to an adjusted EBITDA loss of .2 million in Q2 2023.

Joanne Zach: DIA, our insurance business, was sold in May 2024 for approximately $15 million in cash, with $7.8 million received at closing and $7 million recorded as other receivables due over the subsequent 24 months, significantly bolstering our balance sheet. Barrett's title had revenues of $1.1 million for the second quarter of 2024, compared to $1 million for the second quarter of 2023, an increase of 10%. Ferris Title's Adjusted EBITDA for the second quarter of 2024 was $108,000, compared to a negative $25,000 for the second quarter of 2023.

Speaker Change: DIA, our insurance business, was sold in May 2024 for approximately $15 million in cash, with $7.8 million received at closing and $7 million recorded as other receivables due over the subsequent 24 months, significantly bolstering our balance sheet.

Speaker Change: Barrett's title had revenues of $1.1 million for the second quarter of 2024 compared to $1 million for the second quarter of 2023, an increase of 10 percent.

Speaker Change: Ferris Title's Adjusted EBITDA for the second quarter of 2024 was $108,000 compared to a negative $25,000 for the second quarter of 2023.

Joanne Zach: We are pleased by the membership growth in our new Texas joint venture, which began in April 2024. Overall, VAERS Title Open Orders are currently approximately 60% higher than they were at the end of last quarter. We are also happy to say that Salt Lake City, Utah-based LW Traveling Title is now part of VERIS Title.

Joanne Zach: We are pleased by the membership growth in our new Texas joint venture, which began in April 2024. Overall, VAERS Title's open orders are currently approximately 60% higher than they were at the end of last quarter. We are also happy to say that Salt Lake City, Utah-based LW Traveling Title is now part of their title. Traveling Title is a strategic addition to our geographic presence in Utah, Colorado, and Virginia.

Speaker Change: We are pleased by the membership growth in our new Texas Joint Venture, which began in April 2024. Overall, VAERS Title's open orders are currently approximately 60% higher than they were at the end of last quarter.

Speaker Change: We are also happy to say that Salt Lake City, Utah-based LW Traveling Title is now part of VERIS Title. Traveling Title is a strategic addition to our geographic presence in Utah, Colorado, and Virginia.

Joanne Zach: Traveling Title is a strategic addition to our geographic presence in Utah, Colorado, and Virginia. Moving to our technology segment, third-party revenues will remain consistent in the second quarter of 2024 compared to the same period in 2023.

Joanne Zach: Moving to our technology segment, third-party revenues remain consistent in the second quarter of 2024 compared to the same period in 2023. Adjusted EBITDA improved primarily attributable to approximately $350,000 in internal charges to Fathom Realty for transaction management and CRM services. We are continuously making enhancements to our technology platform to better serve our agents and drive revenues, with our new revenue share functionality being a prime example. Our Live By team has significantly increased its footprint across the country, working with over 300 MLSs and touching 320,000 agents at the end of this second quarter. Live By Power has more than 5.9 million community pages, with over 145,000 neighborhood reports created.

Speaker Change: Moving to our technology segment.

Speaker Change: Third-party revenues remain consistent in the second quarter of 2024 compared to the same period in 2023. Adjusted EBITDA improved primarily attributable to approximately $350,000 in internal charges to Fathom Realty for transaction management and CRM services.

Joanne Zach: Adjusted EBITDA improved, primarily attributable to approximately $350,000 in internal charges to Fathom Realty for transaction management and CRM services. We are continuously making enhancements to our technology platform to better serve our agents and drive revenues, with our new revenue share functionality being a prime example. Our Live By team has significantly increased its footprint across the country, working with over 300 MLSs and touching 320,000 agents at the end of this second quarter. LiveFi powers more than 5.9 million community pages with over 145,000 neighborhood reports created.

Speaker Change: We are continuously making enhancements to our technology platform to better serve our agents and drive revenues, with our new revenue share functionality being a prime example.

Speaker Change: Our Live By team has significantly increased its footprint across the country, working with over 300 MLSs and touching 320,000 agents at the end of this second quarter.

Speaker Change: LiveFi powers more than 5.9 million community pages with over 145,000 neighborhood reports created.

Joanne Zach: We continue to keenly focus on our balance sheet, given the dynamic real estate market conditions. We ended the quarter with an unrestricted cash position of approximately $10.4 million, which combined with the $7 million in cash to be received between now and early May 2025, significantly strengthens our balance sheet as compared to our financial outlook. In light of the recent introduction of two new revenue share models and their yet-to-be determined impact on future revenues in adjusted EBITDA, the company has elected to withhold guidance for the third quarter ending September 30, 2024.

Joanne Zach: We continue to keenly focus on our balance sheet, given the dynamic real estate market conditions. We ended the quarter with an unrestricted cash position of approximately $10.4 million, which combined with the $7 million in cash to be received between now and early May 2025, significantly strengthens our balance sheet as compared to our financial outlook. In light of the recent introduction of two new revenue share models and their yet-to-be-determined impact on future revenues in adjusted EBITDA, the company has elected to withhold guidance for the third quarter ending September 30, 2024.

Speaker Change: We continue to keenly focus on our balance sheet, given the dynamic real estate market conditions.

Unknown Attendee: for Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance please? You know what confidence special is by pressing the star key followed by zero.

Speaker Change: We ended the quarter with an unrestricted cash position of approximately $10.4 million, which combined with the $7 million in cash to be received between now and early May 2025, significantly strengthens our balance sheet.

Unknown Attendee: After today's presentation, it will be an opportunity to ask questions. To ask a question you may press star and then one, to withdraw your questions you may press star and two. You also know today's event is being recorded.

Speaker Change: regarding our financial outlook.

Speaker Change: In light of the recent introduction of two new revenue share models and their yet-to-be determined impact on future revenues in adjusted EBITDA, the company has elected to withhold guidance for the third quarter ending September 30, 2024.

Matt Glover: At this time, I'd like to turn the floor over to Matt Glover with Gateway Group. Please go ahead, sir.

Joanne Zach: Management plans to reassess and potentially reinstate guidance expectations in the fourth quarter of 2024, allowing time to evaluate the performance of these new models. With that, I will turn the call back over to Marco for closing remarks. Thank you, Joanne.

Speaker Change: Management plans to reassess and potentially reinstate guidance expectations in the fourth quarter of 2024, allowing time to evaluate the performance of these new models.

Matt Glover: Thank you, Jamie, and welcome to the Fathom Holdings second quarter, 2024 Conference Call. I'm Matt Glover with Gateway Group Fathom's Investor Relations firm. Before I turn the call over to management, I want to remind listeners that today's call may be, may include forward-looking statements within the meeting of the Private Security's litigation reform act of 1995. Such forward-looking statements are subject to numerous conditions, many which are beyond the company's control, including those set forth in the risk factors section of the company's Form 10K for the year-end of December 31st, 2023, and other company filings made with the SEC copies of which are available on the SEC's website at www.scc.gov.

Matt Glover: As a result of those forward-looking statements, actual results differ materially. Fathom undertakes a new obligation to update any forward-looking statements after today's call, except as required by law. Please also note that during the call, we'll be discussing Adjusted EBITDA, which is a non-gap financial measure as defined by SEC regulation G.

Speaker Change: With that, I will turn the call back over to Marco for closing remarks.

Marco Fregenal: Thank you, Joanne. We believe we're embarking on a journey that will redefine our industry position with the potential to create unprecedented growth and success opportunities. Our focus has been and will continue to be on providing the greatest value to our agents and team members. I want to thank all our team members for their hard work and commitment this past few months, especially the team members that worked tirelessly implementing our two new agent plans. Our future is bright, and we're looking forward to the challenges ahead. With that, we'll take your questions now.

Marco Fregenal: We believe we're embarking on a journey that will redefine our industry, with the potential to create unprecedented growth and success opportunities. Our focus has been and will continue to be on providing the greatest value to our agents and team members. I want to thank all our team members for their hard work and commitment this past few months, especially the team members that worked tirelessly implementing our two new agent plans. Our future is bright, and we're looking forward to the challenges ahead.

Marco Fregenal: Thank you, Joanne. We believe we are embarking on a journey that will redefine our industry position, with the potential of creating unprecedented growth and success opportunities.

Speaker Change: Our focus has been and will continue to be on providing the greatest value to our agents and team members.

Speaker Change: I want to thank all our team members for their hard work and commitment this past few months, especially the team members that worked tirelessly implementing our two new agent plans. Our future is bright and we're looking forward to the challenges ahead. With that, we'll take your questions now.

Marco Fregenal: With that, we'll take your questions. Ladies and gentlemen, once again, in order to join the question queue, you may press star and one. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.

Operator: Ladies and gentlemen, once again, in order to join the question queue, you may press star and one. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is the star and then one to join the question queue. Our first question today comes from... John Campbell, and Tom Stevens. Please go ahead with your question.

Speaker Change: Ladies and gentlemen, once again, in order to join the question queue, you may press star and one.

Matt Glover: A reconciliation of this non-gap financial measure to the most directly comparable gap measure is included in today's press release, which is now posted on Fathom's website.

Speaker Change: To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.

Operator: Once again, that is the star and then one to join the question. Our first question today comes from... John Campbell, Thomas Stevens, please go ahead with your question. Hey guys, good afternoon. Good afternoon, John.

Marco Fregenal: With that, I'll now turn the call over to Fathom's president and CEO, Marco Freginal. Marco? Thank you, Matt, and thank you everyone for joining us for our Q2 earnings call.

Speaker Change: Once again, that is star and then 1 to join the question queue.

Speaker Change: Our first question today comes from John Campbell from Stevens. Please go ahead with your question.

Marco Fregenal: Before we review our Q2 results and our exciting new developments, I want to express my heartfelt gratitude to the Fathom team. Your unwavering commitment and exceptional efforts have been remarkable, particularly in these challenging market conditions. Each of you has been instrumental in driving us towards our 2024 objectives and building a solid foundation for even greater success in 2025. Despite the hurdles the real estate market presented this year, our team's resilience and adaptability have been outstanding.

John Campbell: Good afternoon, John. I hope all's well.

John Campbell: Hope all's well. Hey, likewise, Marco. Okay, let's just start on maybe the first half of the year performance. So it looks like revenue is down 18 million or so versus the first half of last year, obviously got higher interest expense as well. But you've been able to hold that cash burn rate, pretty similar rate as last year. But Marco, I know you aren't banking on a housing recovery.

John Campbell: Hey guys, good afternoon.

Marco Fregenal: And there's clearly a lot of moving parts to consider here. You know, you've got mortgage businesses doing really, really well. But as best as you can see, just kind of looking out what degree of a housing recovery, again, just kind of holding all else equal, do you think you might need to see to get back to positive free cash flow? Well, actually, as I mentioned to you earlier, I think a few months ago, we were building our plan without having the impact of a recovery, right? We don't know when the recovery is going to be.

Marco Fregenal: Hey, likewise, Marco. Okay, let's just start on maybe the first half of the year performance. So it looks like revenues are down $18 million or so versus the first half of last year. Obviously, you've got higher interest expense as well. You've been able to hold that cash burn rate at a pretty similar rate as last year. But Marco, I know you aren't banking on a housing recovery. And there's clearly a lot of moving parts to consider here.

Speaker Change: Good afternoon, John. Hope all's well.

Marco Fregenal: Okay, likewise, Marco.

Speaker Change: Okay, let's just start on maybe the first half of the year performance. So it looks like revenue is down $18 million or so versus the first half of last year. Obviously, you've got higher interest expense as well.

Speaker Change: You've been able to hold that cash burn rate to a pretty similar rate as last year, but Marco, I know you aren't banking on a housing recovery, and there's clearly a lot of moving parts to consider here. You've got mortgage businesses doing really, really well. But as best as you can see, just kind of looking out, what degree of a housing recovery, again, just kind of holding all else equal, do you think you might need to see to get back to positive free cash flow?

Marco Fregenal: You've got mortgage businesses doing really, really well. But as best as you can see, just kind of looking out what degree of a housing recovery, again, just kind of holding all else equal, do you think you might need to see to get back to positive free cash flow? Marco Fregenal, Thomas White, Dillon Heslin, Wyatt Swanson, Joshua Harley, Marco Fregenal, Alex Kovtun, Joanne Zach, Fat

Marco Fregenal: We haven't just weathered the storm, but as you saw from last week's announcement, continue to innovate and push forward. Their tireless dedication to execute or maintaining our high standards for service have been one of the cornerstones of our progress.

Marco Fregenal: Well, actually, as I mentioned to you earlier, I think a few months ago, we were building our plan without having the impact of a recovery, right? We don't know when the recovery is going to be.

Marco Fregenal: Well, actually, as I mentioned to you earlier, I think a few months back, we are building our plan without having an impact of a recovery, right?

Marco Fregenal: Today, we're just not sharing our quarterly results. We are also sharing the transformative evolution in Tathom's business model. We're embarking on a journey that we believe will redefine our industry position with the potential of creating unprecedented growth and success opportunities. Last week, Tathom really unveiled two new Aging Commission plans. Tathom acts and Tathom shares. These two new plans feature an innovative and reimagined revenue share program. This program is designed to boost Aging recruitment and further improve retention where accelerating sustainable growth and long-term profitability for the company.

Marco Fregenal: I do see some improvements. When you start seeing an equilibrium coming back to buyers, from sellers, I think that's the beginning of perhaps an improvement in the housing market. I think one of the things we have to be cautious about is that when buyers believe that interest rates are going to decrease, they may withhold buying a house because they're waiting for the interest rates to come down, right?

Marco Fregenal: I do see some improvement. When you start seeing an equilibrium coming back to buyers, right, from sellers, I think that's the beginning of, perhaps, an improvement in the housing market. I think one of the things we have to be cautious about is when buyers believe that interest rates are going to decrease, they may withhold buying a house because they're waiting for the interest rate to come down, right? And so that's part of one of the things we have to be cautious about when interest rates are going to decrease or people feel like they are going to decrease.

Marco Fregenal: We don't know when the recovery is going to be. I do see some improvements. When you start seeing an equilibrium coming back to buyers, right, from sellers, I think that's the beginning of perhaps an improvement in the housing market.

Marco Fregenal: I think one of the things you have to be cautious is that when buyers believe that interest rates are going to decrease.

Marco Fregenal: And so that's part of one of the things we have to be cautious about when interest rates are going to decrease or people feel like they're going to decrease. But going back to your question, you know, we believe that we'll get back to a positive cash flow and a significant adjusted bid-out by really increasing the number of agents, right? So, that's our growth, and that's why we implemented these two new revenue-share programs. As you know, it's very unique because we're the only company, certainly a national public company, that actually has two different programs, right, a flat-fee revenue-share program and a traditional split revenue-share program. So, for us,

Marco Fregenal: They may withhold buying a house because they're waiting for the interest rate to come down, right?

Marco Fregenal: And so that's part of one of the things we have to be cautious when interest rates are going to decrease or people feel like they're going to decrease. But going back to your question.

Marco Fregenal: But going back to your question, you know, we believe that we'll get back to a positive cash flow and a significant adjusted bid by really increasing the number of agents, right? I think that's our growth, and that's why we implemented these two new revenue share programs. And as you know, it's very unique because we're the only company, certainly a national public company, that actually has two different programs, right? A flat fee revenue share program and a traditional split revenue share program.

Marco Fregenal: Our industry has witnessed an impressive growth for small handful of companies who are offering a revenue share model. Each of these companies' models are all very similar in nature. As we listened closely to what agents are looking for, we took what we believe is the most innovative approach to this revenue share concept as we married it to our industry low commission plans. Fathom, our mission has always been to provide agents with the greatest value.

Marco Fregenal: You know, we believe that we'll get back to a positive cash flow.

Speaker Change: and significant adjustment by really increasing the number of agents. I think that's our growth and that's why we implemented these two new revenue share programs. As you know, it's very unique because we're the only company, certainly national public company, that actually has two different programs, a flat fee revenue share program

Marco Fregenal: So for us, when the market comes back, we'll definitely see some upside, but we are really focused on building our agent network to continue to grow the number of agents. We're also focused on recruiting the right kind of agents. I think, as I mentioned earlier, I think in the second half of last year, we took our eye off the ball in terms of the focus of the kinds of agents. And if you look at the decrease in transactions quarter by quarter, you see that we continue to improve and better that, you know, that decrease.

Marco Fregenal: One way to do this is by imparting agents to earn and retain more of their hard-earned money. Our new revenue share plans are a natural extension of this commitment. Our new plans combine the best of both worlds. The Fathom X plan offers a highly-competitive $465 flex B.C, with a $9,000 annual cap. This not only attracts agents with their affordability, but also improves the growth proper market potential compared to our legacy flat feet plans.

Marco Fregenal: When the market comes back, we'll definitely see some upside, but we are really focused on building our agent network to continue to grow the number of agents. We're also focused on recruiting the right kind of agents. I think, as I mentioned earlier, I think in the second half of last year, we took our eye off the ball in terms of the focus of the kinds of agents. And if you look at the decrease in transactions quarter over quarter, you see that we continue to improve and better that.

Speaker Change: in a traditional split revenue share program. So, for us.

Speaker Change: If when the market comes back, we'll definitely see some upside.

Speaker Change: But we are really focused on building our agent network.

Speaker Change: to continue to grow the number of agents.

Speaker Change: We're also focused on recruiting the right kind of agents. I think, as I mentioned earlier, I think at the second half of last year, we took our eye off the ball in terms of the focus of the kinds of agents.

Speaker Change: And if you look at the decrease in transactions quarter over quarter, you see that we continue to improve and better that decrease.

Marco Fregenal: And so we think that by Q3 and Q4, we will get back to positive numbers in terms of transaction growth, but that is really primarily a result of additional agents joining our company as opposed to counting on an improvement in the industry or in the real estate market. I think that's going to come more next year.

Marco Fregenal: And so we think that by Q3 and Q4, we will get back to positive numbers in terms of transaction growth. But that is really primarily a result of additional agents joining our company, as opposed to counting on an improvement in the industry or in the real estate market. I think that's going to come more next year.

Marco Fregenal: For new seeking evigrator earnings potentials, our Fathom share plans features an industry low traditional commission split of only 12% with a $12,000 annual cap. And a revenue share opportunity that offers twice the revenue share potential over the max plan and higher first level percentages than any of our peers. In simpler terms, our agents have the potential to significantly increase their earnings on their own transactions while also building passive income to a highly competitive revenue model share.

Speaker Change: And so, we think that by Q3 and Q4, we will get back to positive numbers in terms of transaction growth. But that is really primarily...

Speaker Change: being as a result of additional agents joining our company as opposed to counting on an improvement in the industry in the real estate market. I think that's going to come more next year and I think so for us it's really focused on the agent growth.

Marco Fregenal: And I think for us, it's really focused on the agents. Okay, that's helpful. And then on Fathom Share, I mean, obviously, that's, as you mentioned, bringing in a little bit more of a traditional splits model to, you know, you guys have always been the, you know, the hallmark of the model has always been the flat fee model. So I'm curious about maybe the conversations or, I don't know if it was focus groups or surveys or whatever you guys did to arrive at that decision, maybe take That's a great question.

Marco Fregenal: Okay, that's helpful. And then on Fathom Share, I mean, obviously, that's, as you mentioned, bringing in a little bit more of a traditional splits model to, you know, you guys have always been, the hallmark of the model has always been the flat fee model. So I'm curious about maybe the conversations, or I don't know if it was focus groups or surveys or whatever you guys did to arrive at that decision. Maybe you could take us through that process of how you assessed it.

Speaker Change: Okay, that's helpful. And then on FathomShare, I mean, obviously that's, as you mentioned, bringing in a little bit more of a traditional splits model to, you know, you guys have always been, you know, the hallmark of the model has always been the flat fee model. So I'm curious about...

Marco Fregenal: What sets our two new models apart from the rest of the industry are their flexibility and inclusivity. Starting last week, all of our agents can participate in a revenue share program. Regardless of their plan, they choose. This program offers tier-benefit space on a number of agents we prefer, allowing our agents to unlock additional revenue share as their network grows within Fathom.

Speaker Change: Maybe the conversations or I don't know if it was if it was focus groups or surveys or whatever you guys did to arrive at that decision Maybe take us through that process of how you how you assessed it and what you expect to accomplish

Marco Fregenal: That's it. Well, it's a great question. Look, we are a 100% commission company, and we think the future of the industry is 100%. Even as we implement these two new programs, we believe that a significant majority of the agents joining are going to be in the Fathom X plan, not the Fathom Share. We think the Fathom Share will probably be around 20 to 30% of our agents joining. What we found over the last six months, as we spoke with small brokerages, teams, and high-producing agents, is that a percentage of those individuals were very interested in some sort of revenue share program. We also were limited in terms of acquiring or walkovers with small brokerages that were 85-15 or 80-20 split, and now we've become a very attractive home for them.

Marco Fregenal: Look, we are a 100% commission company, and we think the future of the industry is. Even as we implement these two new programs, we believe that a significant majority of the agents joining are going to be in the Fathom X plan, not the Fathom Share. We think that the Fathom Share will probably be around 20 to 30% of our agents joining. What we found over the last six months as we spoke with small brokerages, teams, and high-producing agents is that a percentage of those individuals were very interested in some sort of revenue share program. We also weren't limited in terms of acquiring or walkovers with small brokerages that were, you know, an 85-15 or an 80-20 split.

Speaker Change: That's a great question, we are a 100% commission company and we think the future of the industry is 100% commission.

Marco Fregenal: Our founder, Josh Harley, envisioned transforming the industry through radical innovation and fostering a culture of caring for our agents. We believe these new revenue share programs embody division by offering our agents flexibility, choice, and higher income potential. We believe we grow our business while also empowering our real estate professionals to thrive in their careers. The strategic move positions Fathom at the forefront of industry trends set in the stage for sustainable growth and increased market share.

Speaker Change: Even as we implement these two new programs, we believe that a significant majority of the agents joining are going to be in the Fathom X plan, not the Fathom Share. We think the Fathom Share will probably be around 20-30% of our agents joining.

Speaker Change: What we found over the last six months or so

Speaker Change: as we spoke with small brokerages, teams, high producing agents, is that a percentage of those individuals were very interested in some sort of revenue share program.

Marco Fregenal: We are not just adapting to the future of real estate, we are actively shaping it. As we do so, we create a win-win scenario where our agents success directly contributes to Fathom's success and vice versa. We believe that this dual approach is the future of real estate. Our new Aging Commission plans directly addresses two of our key 2024 objectives, launching additional initiatives to further support our agents in growing their businesses and restating agent growth to at least 30% while prioritizing high quality professionals.

Speaker Change: We also weren't limited in terms of

Marco Fregenal: And now we've become a very attractive home, And so it was really a combination of just listening to some of our agents and listening to small brokerages and teams that were really interested in the Revenue Shared Program. So we believe that we have a very, we're creating a very innovative program that actually is based on a 100% commercial model but offers the ability of our agents to have a choice. The other thing that makes our program very unique is that agents are able to change from one to the other model once a year.

Speaker Change: acquiring or walkovers with small brokerages that were, you know, an 85-15 or an 80-20 split, and now we've become a very attractive home for them.

Marco Fregenal: It was really a combination of just listening to some of our agents and listening to small brokerages and teams that were really interested in the Revenue Shared Program. We believe that we're creating a very innovative program that actually is based on a 100% commercial model but offers the ability of our agents to have a choice. The other thing that makes our program very unique is that agents are able to change from one to the other model once a year.

Speaker Change: And so it was really a combination of just listening to some of our agents.

Speaker Change: and listening to small brokerages and teams that were really interested in the Revenue Shared Program. So, we believe that we're creating a very innovative program that actually is based on a 100% commercial model, but offers the ability of our agents to have a choice.

Marco Fregenal: As you may recall in March, we introduced four strategic goals for 2024. Beyond the two agent folks objectives, we are also committed to enhance our balance sheet and achieving positive EBEDOT and operational cash flow. These new agent plans are not just about growth. They are about smart, sustainable growth that align with our financial objectives to strengthen Fathom's position in the market. We successfully enhance our balance sheet in May through the sale of baggling insurance.

Speaker Change: I think the other thing that makes our program very unique is that agents are able to once a year change from one to the other model.

Marco Fregenal: An agent that joins Fathom in one program, and they think about leaving because another company offers a different program; now we offer both programs within the same company. That's one of the comments that we heard from a lot of agents, having the flexibility. We implemented that as part of our program, and we believe that we have created something that's very unique. Since we announced this test, we've had a significant response from non-Fathom agents, teams, small brokerages, actually some brokers up to 3,000 agents that have demonstrated a significant interest in having conversations with us about perhaps joining us down the line.

Marco Fregenal: An agent that joins Fathom in one program and may think about leaving because another company offers a different program; now we offer both programs within the same company. That's one of the comments that we heard from a lot of agents: having flexibility. We implemented that as part of our program, and we believe that we have created something that's very unique and something that, you know, since we announced this test when, we've had a significant response from non-Fathom agents, teams, small brokerages, actually some brokers up to 3,000 agents that have demonstrated a significant interest in having conversations with us about perhaps joining us down the line. We think that the response immediately after our announcement has been incredibly positive.

Speaker Change: And so an agent that joins Fathom in one program and they think about leaving because another company offers a different program, now we offer both programs within the same company.

Speaker Change: And that's one of the comments that we've heard from a lot of agents is that having the flexibility. So we implemented that as part of our program and we believe that we have created something that's very unique and something that, you know, look, since we announced this past Wednesday,

Marco Fregenal: The sale added $7.00 million to our balance sheet at closing and would add another $7 million of the next 24 months. We ended Q2 with $10.40 million in cash given us the confidence in our financial position. In parallel with our strategic initiatives, I'm pleased to report that we continue to make significant strides towards our profitability goal. The squatter we generated $188,000 in adjusted EBITAT and notable achievement driven by solid growth profit margins of 9.5%.

Speaker Change: We've had a significant response from non-Fathom agents, teams, small brokerages.

Speaker Change: Actually, some brokers up to 3,000 agents.

Speaker Change: They have demonstrated a significant interest in having conversations with us about perhaps joining us down the line. So we think that the response

Marco Fregenal: So we think that the response immediately after our announcement has been incredibly positive, and we think that this is going to manifest itself in getting Fathom back to 30% agent growth. So I think that those are the main reasons why we decided to create this hybrid model. Okay, that's helpful.

Marco Fregenal: We think that this is going to manifest itself in getting Fathom back to 30% agent growth. I think those are the main reasons why we decided to create this hybrid model. Okay, that's helpful.

Speaker Change: immediately after our announcement has been incredibly positive and we think that this is going to manifest itself in getting the FADM back to 30% agent growth. So I think that those are the main reasons why we decided to create this hybrid model.

Marco Fregenal: More importantly, our real estate, mortgage and title decisions all reach positive adjusted EBITAT the squatter. The total revenue for the quarter was $89.2 million, a decrease of 10.9% from $100.1 million in Q2 of 2023. Adjusted EBITAT and NGAP measure for the quarter of second quarter of 2024 total $189,000 compared to $500,000 in the second quarter of 2023. Badam completed approximately $10,137 transactions for the quarter, a decrease of approximately $7.9% compared to second quarter of 2023.

Marco Fregenal: Okay, that's helpful. Thank you, guys.

Speaker Change: Okay, that's helpful. Thank you guys.

Raj Sharma: Our next question comes from Raj Sharma from B Reilly. Please go ahead with your question.

John Campbell: Thank you, guys. Thank you. Our next question comes from Raj Sharma from B Reilly. Please go ahead with your question. Hi, thank you for taking my questions. Again, I want to follow up with the last caller.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Raj Sharma from B Reilly. Please go ahead with your question.

Raj Sharma: Hi, thank you for taking my questions. Again, I want to follow up with the last caller.

Raj Sharma: Hi, thank you for taking my questions. Again, I want to follow up the last caller.

Marco Fregenal: You know, the motivation behind switching the plans, and if you could lay out how, you know, I see how there's an option now in the max and the share between flat and revenue share. How does that make your gross profits higher? Is that simply from attracting more agents, or?

Raj Sharma: You know, the motivation behind switching the plans, and if you could lay out how, you know, I see how there's an option now in the max and the share between flat and the revenue share. How does that make your gross profits higher? Is that simply from attracting more agents, or? It's a combination of attracting more agents, and higher-producing agents as well, which certainly will help the number of transactions per agent.

Raj Sharma: You know, the motivation behind switching the plans and

Raj Sharma: If you could lay out how, you know, I see how there's an option now in the max and the share between flat and the revenue share. How does that make your gross profits higher?

Marco Fregenal: Badam grew state agent network grew 12% to approximately $12,224,000 as of June of 30, 2024, from approximately $10,930 on June 30, 2023. We believe this results coupled with our new commission plan and revenue sharing program position as well sustainable growth and increased profitability. We are not just focused on top line growth, we are building a more robust, efficient and profitable operation that we believe can deliver long-term value to our shareholders, agents and clients.

Speaker Change: Is that simply from attracting more agents, or?

Marco Fregenal: Hey Rajiv, it's great to hear from you. Great question. It's a combination of attracting more agents, higher-producing agents as well, which certainly will help the number of transactions per agent. It's also a combination that we believe, and we're estimating right now based on conversations that 20 to 30% of our agents, new agents joining, will join the company in the 12% program. So when you combine a percentage of agents joining the 12% program, as well as a higher number of agents joining the company, we'll be able to increase our gross profit margins.

Speaker Change: It's a, hey Roger, it's great to hear from you, great question.

Speaker Change: It's a combination of attracting more agents, higher producing agents as well.

Speaker Change: which certainly will help the number of transactions per agent. It's also a combination that, you know, we believe, we're estimating right now, based on conversations, that 20 to 30% of our agents, new agents joining, will join the company in the 12% program.

Marco Fregenal: It's also a combination that we believe, we're estimating right now, based on conversations, that 20 to 30% of our agents, new agents joining, will join the company in the 12% program. So when you combine a percentage of agents joining the 12% program, as well as a higher number of agents joining the company, we'll be able to increase our gross profit margins. As you recall, Fathom is in a position where we are right at that inflection point, don't we?

Speaker Change: So when you combine a percentage of agents joining the 12% program

Marco Fregenal: As we move forward, we remain committed to prudent financial management while understanding the need and wisdom in continuing to invest in areas that will drive our future success. Our team's ability to execute on multiple fronts grown our agent base, improving our profit margins and managing our cash flow speaks to the strength of our leadership team, our business model and the dedication of our entire organization.

Speaker Change: As well as a higher number of agents joining the company, we'll be able to increase our group's profit margins.

Marco Fregenal: As you recall, Fathom is in a position where we are right at that inflection point, right? A significant percentage of our gross profit dollars will also go to the bottom line in EBITDA. And so by increasing the number of agents coming in, we'll also have a higher level of transactions per agent. It's going to have a significant effect on our gross profit margin, as well as our EBITDA going forward. And given the response we've had since we announced this past Wednesday, I think within a few quarters, we'll be able to demonstrate that.

Speaker Change: As you recall,

Speaker Change: You know, FADM is in a position where we are right at that inflection point, right? That a significant percentage of our gross profit dollars will also follow to the bottom line in EBITDA.

Marco Fregenal: That a significant percentage of our gross profit dollars will also follow to the bottom line in EBITDA. And so, by increasing the number of agents coming in, we'll also have a higher level of transactions per agent. It's going to have a significant effect on our gross profit margin, as well as our EBITDA going forward. And given the response we've had since we announced this past Wednesday, I think within a few quarters, we'll be able to demonstrate it. Thank you. And then what are the levels one through five?

Speaker Change: And so by increasing the number of agents coming in, we'll also have a higher level of transactions per agent.

Marco Fregenal: Let me briefly comment on our auxiliary businesses and then we will provide more financial details. We have seen an impressive growth in our mortgage business with revenues increasing by 82% or 1.7 million from 2 million in Q2 of last year to 3.7 million in Q2 of this year. This growth is the direct result of the strategic initiatives our team has implemented over the past quarter. Recognizing the growing demand of Latino segment, we launch a dedicated division with an encompassed lending, working in close alignment or Latino division at power. The results of this collaboration have been exceptionally positive, reinforcing our commitment to serving diverse communities. We have also continued to expand our home target program, building our commitment to support local veterans, first responders and teachers.

Speaker Change: It's going to have a significant effect in our gross profit margin as well as our EBITDA going forward. And given the response we've had since we announced this past Wednesday, I think within a few quarters we'll be able to demonstrate that.

Marco Fregenal: Thank you. And then what are the levels one through five? What are the cutoffs and transactions?

Speaker Change: Thank you. And then what are the, you know, the levels one through five? What were the cutoffs and transactions?

Marco Fregenal: What were the cutoffs and transactions? It's five levels in terms of, on both programs, it's five levels, which means that we go five levels in terms of agents recruiting. It's not so much in terms of transactions, right?

Marco Fregenal: It is five levels in terms of both programs, which means we go to five levels in terms of agents recruiting. It is not so much in terms of transactions.

Speaker Change: It's not so much, I mean, it's five levels in terms of, on both programs, it's five levels, right?

Speaker Change: which means that we go five levels in terms of agents recruiting.

Marco Fregenal: In a sense, if I recruit you, and you recruit somebody else, and somebody else recruits the fourth level, in our programs, we felt that five levels was the appropriate number in order to do that. If you look at the price release, you can see that the Fathom share plan offers a significantly higher level of revenue share. The first level is 35%, and then 25% compared to 10% of the Fathom X plan. We agreed and decided that after doing some research and speaking with teams and agents who are doing other revenue share companies, we had numerous conversations with agents that are members of other companies, as well as teams and small brokerages. We felt that five levels was the appropriate number for us, so that is what we decided.

Marco Fregenal: And so, in a sense, if I recruit you, and you recruit somebody else, and somebody else recruits the fourth level, so in our programs, we felt that five levels was the appropriate number in order to do that. And if you look at the price release, you can see that the Fathom share plan offers a significantly higher level of revenue share, right? The first level is 35%, and then 25% compared to 10% on the Fathom X plan.

Speaker Change: It's not so much in terms of transaction, right? And so, in a sense, if I recruit you and you recruit somebody else and somebody else recruits the fourth. So, in our programs, we felt that five levels was the appropriate number.

Speaker Change: in order to do that. And if you look at the price release, you can see that the Fathom Share plan offers a significant higher level of revenue share, right? On the first level is 35%, and then 25% compared to 10% on the Fathom Max plan. So.

Marco Fregenal: In particular, you know, particularly pleased to share the Q2 mark a significant milestone for encompassed lending as it achieved positive EBITDA. If the cash accomplished accomplishment not only validates our strategic direction, but also contributes our overall growth of improving profitability across all our business banks. These developments in our mortgage division exemplify our commitment to diversifying our revenue streams and enhancing our value proposition to both agents and clients. As we continue to innovate and expand our offers, we're confident in our ability to capture our larger share of the mortgage market and drive synergies across our integrated real estate services platform.

Marco Fregenal: So we agreed, and we decided after doing some research and speaking with teams and agents who are doing other revenue share companies, we had numerous conversations with agents that are members of other companies, as well as teams and small brokerages. We felt like five levels was the appropriate number for us, and so that's what we decided. And then to the old, the older referral agent referral programs of Capital Life and Free for Life; are those still valid or not? That's a great question.

Speaker Change: What we agreed when we decided that after, you know, doing some research and...

Speaker Change: and speaking with teams and agents who are by the way in other revenue-shared companies. We have had numerous conversations with agents that are members of other companies.

Speaker Change: as well as teams and small brokerages. We felt like five levels was the appropriate number for us, and so that's what we decided to do.

Marco Fregenal: And then to the older agent referral programs of Capital Life and Free for Life; are those still valid or not?

Marco Fregenal: Those are going to be valid until December of. So any agent that reaches Cap for Life or Free for Life will be grandfathered, and then they will be Cap for Life or Free for Life forever. On January 1st, those two programs go away, and therefore, the Revenue Share Program becomes the new program. We are giving agents another five months in order to be able to reach Cap for Life and Free for Life.

Speaker Change: And then to the older agent referral programs of Capital Life, Free for Life, those are still valid or not valid?

Marco Fregenal: I'm also pleased to report that we continue to make improvements to our various title business in Q2, revenues reach 1.1 million, which is an increase of 10% from Q2 of 2023. But our second quarter results represent a 67% increase over the prior quarter, which is encouraging. More importantly, very style generator $108,000 in adjusted EBITDA. This performance is a clear indication that our strategic growth initiatives are paying off, and we are successfully optimizing our unceliary business for profitability. We have also seen impressive increase in file start and Joanne would detail those in a few minutes.

Marco Fregenal: Those are going to be valid until December of this year. Any agent that reaches cap for life or free for life will be grandfathered, and then they will be cap for life or free for life forever. On January 1st, those two programs go away, and therefore, the revenue share program becomes the new program. We are giving agents another five months in order to be able to reach cap for life and free for life. That was the appropriate thing to do.

Speaker Change: Those are going to be valid until December of this year.

Speaker Change: So any agent that reaches CAP for LIFE or Free for LIFE, they'll be grandfather, and then they will be CAP for LIFE or Free for LIFE forever. On January 1st, those two programs go away, and therefore the Revenue Share Program becomes the new program. We are giving agents another five months.

Marco Fregenal: We felt that it was the appropriate thing to do. And so all our agents still have the opportunity to reach Cap for Life and Free for Life until December 31st. After that, whatever position they are, if they've already reached either one, they're grandfathered for life.

Speaker Change: in order to be able to reach CAP for Life and Free for Life. We felt that was the appropriate thing to do. And so all our agents still have the opportunity to reach CAP for Life and Free for Life until December 31st. After that, whatever position they are, if they already reached either one, they're their grandfather for life.

Marco Fregenal: All our agents still have the opportunity to reach cap for life and free for life until December 31st. After that, whatever position they are in, if they have already reached either one, they are grandfathered for life. If not, then every agent can continue to earn revenue share. As of last week, agents that are already earning revenue share for any new agent that joins the company, regardless of which plan you are on. We feel that we are creating a significant enhancement in terms of how we work with our agents to refer other agents. I think some of our agents are going to take advantage of this and build some significant revenue streams for themselves.

Marco Fregenal: Let me spend a few minutes to discuss that over all market trends. The second quarter of 2024 has seen significant swings in the mortgage interest rate. However, more recently, we have seen mortgage rates decrease to about 6.5%. We believe this improvement rate could translate to some buyers coming back to the market. We have also seen a small shift in the power from sellers to buyers. In recent months, over 20% of all listed have seen a price reduction.

Marco Fregenal: If not, then every agent can continue to earn revenue share. As of last week, agents that are already earning revenue share for any new agent that joins the company, regardless of which plan you're at. And so we feel that we're creating a significant enhancement in terms of how we work with our agents to refer other agents. And I think some of our agents are going to take advantage of this and build some significant revenue streams for themselves and their families. Got it. And then my last question, Marco, is:

Speaker Change: If not, then every agent can continue to earn revenue share. As of last week,

Speaker Change: thank you.

Marco Fregenal: And in some states like Texas, Florida and Colorado, days on market have increased by over 15% while leading home prices decreased by 3 to 5%. Ultimately, the combination of lower home prices and lower mortgage interest rates should have a positive effect in the number of homes sold due to lower mortgage payments. We have also started seeing some early effects from the settlement of the commission's lawsuit and the rules that were imposed. At FADOM, we are committed to helping our agents and we have already began to implement training classes and seminars to ensure that all our agents adhere to the new rules.

Speaker Change: to refer all their agents and I think some of our agents are going to take advantage of this and build some significant revenue stream for themselves and their families.

Marco Fregenal: Got it. And then my last question, Marco, is:

Speaker Change: Got it. And then my last question, Marco, is...

Marco Fregenal: So you just indicated that you're looking for agent growth of 30% in the next several quarters. What gives you the confidence that you can get 30% growth? Is it acquisitions, is it walkovers, or is something changing in the market?

Speaker Change: You just indicated that you're looking for agent growth of 30% in the next several quarters. What gives you the confidence that you can get 30% growth? Is it acquisitions? Is it walkovers? Or is something changing in the market?

Marco Fregenal: or you need to market? Sure. Yeah, look, I our goal has always been, as we mentioned the last few quarters, to go back, you know, Fathom had 30% growth for many years. And so our goal is has been to get back to that 30% Asian, What gives us confidence that we can get back to that, you know, hopefully within two or three quarters, is that the number of discussions that we've had, our pipeline, in terms of agent growth, since we announced this, as I said, on Wednesday, we've had, you know, discussions with numerous organizations and teams, agents in other companies under Revenue Share Program, small brokerages, medium-sized brokerages, regular agents, and so we feel that, given this conversation and their existing pipeline, that within two to three quarters, we should be able to get back to 30% growth, and perhaps more, but that's what gives us confidence to be able to make that announcement.

Marco Fregenal: Sure. Yeah, look, our goal has always been, as we mentioned in the last few quarters, to go back, you know, Fathom had 30% growth for many years. And so our goal has been to get back to that 30% agenda. What gives us confidence that we can get back to that, you know, hopefully within two or three quarters, is that the number of discussions that we've had, our pipeline in terms of agent growth, since we announced this, as I said on Wednesday, we've had, you know, discussions with numerous organizations and teams, agents in other companies under the Revenue Share Program, small brokerages, medium-sized brokerages, regular agents.

Marco Fregenal: or you need market. Sure yeah look I our goal has always been as we mentioned the last few quarters to go back you know FADM had 30% growth for many years and so our goal is has been to get back to that 30% Asian growth.

Marco Fregenal: Now, before I turn to call to Joanne, let me make one final point regarding our new plan. Since announcing the new agent commission plans, the response has been exceptionally positive. We have heard from agents as well as non-FADOM agents, teams and small brokerages that have demonstrated interest in our new offering. We feel strongly that there are new commission plans with revenue sharing will lead us regarding to pass our agent growth back to 30% or even higher.

Speaker Change: Well, it gives us confidence that we can get back to that, you know, hopefully within two or three quarters.

Speaker Change: is that the number of discussions that we've had, our pipeline in terms of agent growth, since we announced this.

Joanne Zach: We also believe we will take a few quarters for us to see the full benefit of our new plan as agents learn how to discuss the program and we work through the early conversations of more walkovers from all small brokerages and teams. With that, I would like to pass the call over to Joanne, our CEO, Vice President of Finance, so she can discuss our financial results in more detail. Joanne. Thank you, Marco.

Speaker Change: As I said on Wednesday, we've had discussions with numerous organizations and teams, agents in other companies under the Revenue Share Program, small brokerages, medium-sized brokerages, regular agents.

Marco Fregenal: And so we feel that, given this conversation and the existing pipeline, that within two to three quarters, we should be able to get back to 30% growth and perhaps more. But that's what gives us confidence to be able to make that announcement. Alright, great. Thank you. Thank you for answering my questions. I'll take it offline.

Speaker Change: And so we feel that, given this conversation and the existing pipeline, that within two to three quarters, we should be able to get back to 30% growth and perhaps more. But that's what gives us confidence to be able to make that announcement.

Joanne Zach: I will start with a general overview of our results for the second quarter of 2024 and will then provide a more detailed review by segment. Total revenue for the second quarter of 2024 decreased 11% to 89.2 million compared to 100.1 million in the second quarter of 2023. The decrease in total revenue was due to a 12% decrease in brokerage revenue resulting primarily from fewer transactions and an increase in least transactions compared to sale transactions.

Raj Sharma: All right, great. Thank you. Thank you for answering my questions. I'll take it offline.

Speaker Change: Alright, great. Thank you. Thank you for answering my questions. I'll take it offline. Thank you.

Raj Sharma: Thank you, Raj. And our next question comes from Tom White from D.A. Davidson. Please go ahead with your question. Hey, this is Wyatt, Andrew, and Tom.

Tom White: And our next question comes from Tom White from D.A. Davidson. Please go ahead with your question.

Raj Sharma: Thank you, Raj.

Speaker Change: And our next question comes from Tom White from D.A. Davidson. Please go ahead with your question.

Wyatt Swanson: Hey, this is Wyatt, Andrew, and Tom. Thanks for taking our questions. I have one on industry changes related to the NAR settlement. Can you just talk about what Fathom is telling their agents in terms of how to navigate this as August 17 approaches? And do your best practices around things like buyer rep agreements differ in any meaningful ways than peers? Yeah.

Tom White: Thanks for taking our questions. I had one on industry changes related to the NAR settlement. Can you just talk about what Fathom is telling its agents in terms of how to navigate this as August 17 approaches? And do your best practices around things like buyer rep agreements differ in any meaningful ways from peers? Yeah.

Tom White: Hey, this is my entourage Tom. Thanks for taking our questions. I have one on industry changes related to the NAR settlement

Tom White: Can you just talk about what FATM is telling their agents in terms of how to navigate this as August 17th approaches? And does your best practices around things like buyer rep agreements differ in any meaningful ways than peers?

Joanne Zach: Offsetting the decline in total revenue was an 11% increase in other service revenue driven by improved performance from FADOM's mortgage and title businesses offset by the absence of the company's insurance business which was sold on May 3rd, 2024. Overall gross profits for the 2024 second quarter decreased to approximately 8.6% to 8.5 million from 9.3 million for the 2023 second quarter. This decrease was primarily attributable to the impact of selling the company's insurance business.

Marco Fregenal: Yeah, look, I think that there are still a lot of moving parts to all of this, right? I go back and I think about when the government changed from the HUD to the CD and implemented a total new form for closing transactions. And it took approximately three to six months to just work out all the kinks out of this, right?

Marco Fregenal: Look, I think that there are still a lot of moving parts to all of this. I go back and think about when, you may recall, the government changed from HUD to the CDC and implemented a total new form for closing transactions, and it took approximately three to six months to just work out all the kinks out of this, okay, out of that process. I think the same thing is going to happen here. I think there's going to be a lot of confusion.

Speaker Change: Yeah, look, I think that there are still a lot of moving parts to all of this, right? I go back and I think about when the government, you may recall this, when the government changed from the HUD to the CD.

Speaker Change: and implemented a totally new form for closing transactions.

Joanne Zach: However, our overall gross profit percentage, excluding our insurance business, improved to 9% in the second quarter of 2024 up from 8% in the second quarter of 2023, primarily as a result of higher contributions from our mortgage entitled businesses. Our brokerage business gross profit percentage remain relatively constant at 6% for the second quarter of 2024 compared to the second quarter of 2023. Excluding our insurance business, gross profit percentage in our incinerated businesses did slightly to 53% in the second quarter of 2024 from 57% in the second quarter of 2023, primarily related to ramp up costs associated with expansion of these businesses.

Speaker Change: And it took approximately three to six months to just work out all the kinks out of this, right? Out of that process. I think the same thing is going to happen here. I think there's a lot of confusion. I think that MLS is...

Marco Fregenal: Out of that process, I think the same thing is going to happen here. I think there's a lot of confusion.

Marco Fregenal: I think that MLSs are going to enforce this in a variety of different ways, and so in a sense, not only do we have to build our own set of rules, but then we have to look at every MLS and every board and see what they're going to enforce locally. And we're already seeing that different MLSs across the country and different boards are looking at things differently. Certainly, we're not going to be able to put the buyer side's commission on the website and the MLS.

Marco Fregenal: I think that MLSs are going to enforce this in a variety of different ways. And so, in a sense, not only do we have to build our own set of rules, but then we have to look at every MLS and every board and see what they're going to enforce locally. And we're already seeing that different MLSs across the country and different boards are looking at things differently. We're not going to be able to put the buyer side commission on the website and the MLS. That's a given.

Speaker Change: are going to enforce this in a variety of different ways. And so in a sense is, not only we have to build our own set of rules, but then we have to look at every MLS and every board and see what they're going to enforce locally.

Speaker Change: And we're already seeing that different MLSs across the country and different boards are looking at things differently.

Speaker Change: Certainly, we're not going to be able to put the buyer side commission on the website and the MLS. That's a given and Fathom is going to enforce that and we're working with our agents to do that. We are in discussions about...

Marco Fregenal: That's a given, and Fathom is going to enforce that, and we're already working with our agents to do that. We are in discussions about creating our own documents in terms of buyer's agreements, and we're already in the process of doing that, working with every state broker and every MLS and every board because everyone is going to be somewhat different. So I think it's a little early to speak specifically about the totality of all the things we're going to do.

Marco Fregenal: And Fathom is going to enforce that, and we're already working with our agents to do so. We are in discussions about creating our own documents, internal buyer agreements. And we're already in the process of doing that, working with every state broker and every MLS and every board because everyone is going to be somewhat different. I think it's a little early to speak specifically about the totality of all the things we're going to do.

Speaker Change: creating our own documents into our buyer's agreement and we're ready in the process of doing that, working with every state broker and every MLS and every board because everyone is going to be somewhat different.

Joanne Zach: Technology and development expenses remain relatively constant at approximately 1.9 million for the second quarter of 2024 and 2023. These costs will continue and likely increase over time as we mindfully increase our spend to enhance our technology platform to drive revenue growth. General and administrative expense totals 8.9 million for the second quarter of 2024 or 10% of revenue compared with 9.9 million or 9.9% of revenue for the second quarter of 2023. This 1 million dollar decrease was primarily due to the absence of cost associated with our insurance business in addition to other cost reductions such as business insurance.

Speaker Change: So, I think it's a little early.

Abbey: to Abbey.

Marco Fregenal: We're already progressing with this. We have been working on this. Samantha Giugia, who is our COO for Fathom Realty, is working with our legal team and our state brokers in implementing this, and it's going to take a little while.

Marco Fregenal: We're already progressing with this. We have been working on this. Samantha Giugia, who is our COO for Fathom Realty, is working with our legal team and our state brokers and implementing this. And it's going to take a little while in order to work itself out. We certainly are adhering by the rules and our interpretation of the rules.

Abbey: speak specifically about the totality of all the things we're going to do. We're already progressing this. We have been working on this.

Samantha Giugia: Samantha Giugia, who is our CEO for Fathom Realty, is working with our legal team and our state brokers in implementing this.

Marco Fregenal: We certainly are adhering to the rules and our interpretation of the rules, and we're working with our agents to do that, but it is going to take a little bit of time for things to kind of work themselves out and to make sure that we can train our agents accordingly. Every company is going to do things a little differently. Some companies are creating their documents. Some companies are just using the new state documents or board documents, so we are working with our agents to make sure that we can train our agents accordingly.

Samantha Giugia: And it's going to take a little while in order to work itself out. We certainly are adhering by the rules.

Marco Fregenal: And we're working with our agents to do that. But it is going to take a little bit of time for it to kind of work itself out and for us to make sure that we can train our agents accordingly. And every company is going to do things a little differently. Some companies are creating their own documents. Some companies are just using the new state documents or board documents, so we are working with our team to try to find the best approach to this.

Samantha Giugia: and our interpretation of the rules and we're working with our agents to do that. But it is going to take a little bit of time.

Samantha Giugia: to kind of work itself out and to making sure that we can train our agents accordingly. And some of it, and every company is going to do things a little different. Some companies are creating their documents. Some companies are just using the new state documents or board documents.

Joanne Zach: Marketing activities expense was 0.75 million for the second quarter of 2024 compared to 0.9 million in the second quarter of 2023. The 18% decrease in marketing expenses was primarily related to leveraging internal resources and optimizing advertising expenditure. Gap met loss for the second quarter of 2024 totaled 1.3 million or 0.7 cents per share and improvement compared with the net loss of 4.3 million or 27 cents per share for the second quarter of 2023.

Marco Fregenal: We are trying to find the best approach to this. We are already working on our own documents, and we'll probably implement those rather quickly. But I think we still have some time to go before everyone fully comprehends the impact it's going to have on the industry. And so I caution everyone in terms of jumping to conclusions about how everything's going to change. I think there's a lot of moving parts still, and we're working through the process with our team.

Marco Fregenal: We are already working on our own documents, and we'll probably implement those rather quickly. But I think we still have some time to go before everyone fully comprehends the impact it's going to have on the industry. And so I caution everyone in terms of jumping to conclusions about how everything is going to change. I think there's a lot of moving parts still, and we're working through the process with our team.

Speaker Change: We are working with our team.

Speaker Change: to try to find the best approach to this. We are already working on our own documents.

Speaker Change: and we'll probably implement those.

Speaker Change: rather quickly.

Speaker Change: But I think we still have some time to go before everyone fully comprehends the impact it's going to have in the industry.

Speaker Change: So, I caution everyone in terms of jumping to conclusions about how everything is going to change. I think there's a lot of moving parts still and we're working through the process with our team.

Joanne Zach: The significant reduction in net loss was primarily due to the gain generated from the sale of the company's insurance business and improvement operating results. Partially offset by an increase in non-operating expenses. Adjust city bidat a non-gap measure for the second quarter of 2024 totaled a positive 0.2 million compared to 0.5 million in the second quarter of 2023. The second quarter of 2024 marked the company's first positive adjust city bidat quarter since the second quarter of 2023.

Marco Fregenal: That makes sense. Thank you. And then, do you have any update around a possible settlement regarding the industry lawsuit?

Tom White: Thank you. And then, do you have any update on a possible settlement regarding the industry lawsuit? As everyone can imagine, we are still in negotiations, and for that reason, I can't really disclose where we are in terms of that. But we look forward to announcing a settlement as quickly as possible. We think that we can reach that settlement with an amount that would be enough for us to survive and thrive, especially given some of the recent settlements and the size of those companies. And I think when you look at our company and our size, you're able to kind of figure out what that number is.

Speaker Change: That makes sense. Thank you. And then, do you have any update around a possible settlement regarding the industry lawsuit?

Marco Fregenal: Sure. As everyone can imagine, we are still in negotiations. And for that reason, I can't really disclose where we are in terms of that. But, you know, we look forward to announcing a settlement as quickly as possible. We think that we can reach that settlement with an amount that would be enough for us to survive and thrive, especially given some of the recent settlements and the size of those companies. And I think when you look at our company and our size, you're able to kind of figure out what that number is. So we look forward to announcing this soon. But given that we are still in discussions, I would rather just leave my comment at that.

Speaker Change: Sure. As everyone can imagine, we still are in negotiations.

Speaker Change: And for that reason, I can't really disclose where we are in terms of that. But, you know, we look forward to announcing a settlement as quickly as possible. We think that we can reach that settlement with an amount that would be reasonable.

Joanne Zach: Now spend some time reviewing our business segment results in more detail. Revenue for the real estate division was approximately 83.1 million in the second quarter of 2024 compared to 100.1 million for the same period last year which represents a 12% decline primarily attributable to an 8% decrease in transaction volume. As Marco noted we completed 10,137 real estate transactions during the three months ended June 30, 2024 compared to 11,10 transactions during the three months ended June 30, 2023.

Speaker Change: that we can survive and thrive.

Speaker Change: especially given some of the recent settlements and the size of those companies.

Speaker Change: And I think when you look at our company and our size, you're able to kind of figure out what that number is. So we look forward to announcing this soon, but given that we are in still discussions, I'd rather just leave my comment at that.

Marco Fregenal: So we look forward to announcing this soon. But given that we are still in discussions, I'd rather just leave my comment. Oh, understood. That makes complete sense.

Marco Fregenal: Oh, understood. That makes complete sense. And then I just have one final follow-up regarding the new revenue share models. I, I think I missed this, but could you just give some more color into the expected margin impact over the next several quarters for both gross margins and EBITDA margins?

Tom White: And then I just have one final follow-up regarding the new revenue share models. I think I missed this, but could you just give some more color on the expected margin impact over the next several quarters for both gross margins and EBITDA margins? Sure, I think it's going to take a little bit of time. We are already starting to onboard agents into the new models.

Speaker Change: Oh, understood. That makes complete sense. And then I just have one final follow-up regarding like the new revenue share models. I think I missed this, but could you just give some more color into like the expected margin impact over like the next several quarters for both gross margins and EBITDA margins?

Joanne Zach: Our transaction volume decreased primarily due to the continuation of high mortgage interest rates in the second quarter of 24. During the three months ended June 30th, 2024, average revenue per transaction was $8,200, a 5% decrease compared to $8,593 during the three months ended June 30th, 2023. Primarily due to an increase in lease transactions compared to sale transactions and a slight decrease in commission percentage. Fathom is addressing these declines by continuing its strategic recruiting efforts powered by its recently announced new revenue share models and its service commitment to exasions.

Marco Fregenal: Sure, I think it's going to take a little bit of time. You know, we are going to start onboarding agents in the new models. I think it's going to take a little bit of time for this to work itself out, right?

Speaker Change: Sure, I think it's going to take a little bit of time, you know, we're going to start onboarding agents into new models.

Tom White: I think it's going to take a little bit of time for this to work itself out, right? I think in the next, certainly in Q3, and perhaps in Q4, I don't think we're going to be seeing significant changes because, again, when you onboard an agent, it may take a few weeks, if not a month, for that agent to actually close their first transaction, right? And so there is a delay from onboarding an agent to the agent closing their first transaction and then having a positive effect in terms of gross profit margin, EBITDA.

Marco Fregenal: I think in the next, certainly in Q3 and perhaps in Q4, I don't think we're going to see significant changes because again, when you onboard an agent, it may take a few weeks, if not a month, for that agent to actually close their first transaction, right? And so, there is a delay from onboarding an agent to the agent closing their first transaction and then having a positive effect in terms of gross profit margin.

Speaker Change: I think it's going to take a little bit of time for this to work itself out, right? I think in the next, certainly in Q3 and perhaps in Q4, I don't think we're going to be seeing significant changes because again, when you onboard an agent, it may take a few weeks if not a month for that agent to actually close their first transaction, right? And so there's always a delay from onboarding an agent to the agent closing their first transaction and then to have a positive effect.

Joanne Zach: Rose profit margin for our real estate division remain relatively constant at 6.1% in the second quarter of 2024 compared to the second quarter in 2023. Adjusted EBITDA income in the real estate division with approximately 1.5 million in the second quarter of 2024, a decrease of approximately 1.1 million compared to adjusted EBITDA income of 2.6 million in the second quarter of 2023. This was due to the decrease in transaction revenue in the second quarter of 2024 and to the commencement of internal charges of approximately $350,000 for our technology vision.

Tom White: We do believe that over time, over the next year or so, we're going to see an increase in gross profit margins, not only because of the new models but also because of our continuing improvement in the mortgage business and our title business. We do think within a couple of years, we'll probably see margins in the mid-teens, but going back specifically to your question about the next two quarters, I would not anticipate a significant change in gross profit margins or EBITDA because I think it's a little too early for the new plans to have that kind of impact.

Marco Fregenal: We do believe that over time, over the next year or so, we're going to see an increase in gross profit margins, not only because of the new models but also because of our continued improvement in the mortgage business and our title business. We do think within a couple of years, we'll probably see margins in the mid-teens. But going back specifically to your question about the next two quarters, I would not anticipate a significant change in gross profit margins or EBITDA because I think it's a little too early for the new plan to have that kind of impact.

Speaker Change: in terms of gross profit margin, EBITDA. We do believe that over time.

Speaker Change: over the next year or so, we're going to see an increase in gross profit margins. Not only because of the new models, but also because of our continued improvement in the mortgage business and our title business.

Speaker Change: We do think within a couple of years we'll probably see margins in the mid-teens.

Speaker Change: But going back specifically to your question about the next two quarters, I would not anticipate a significant change in gross profit margins or EBITDA because I think it's a little too early for the new plan to have that kind of impact. I think that impact is going to be more, will be experienced more in Q1, starting Q1 of next year.

Marco Fregenal: I think that impact is going to be more, will be experienced more in Q1, starting Q1 of next year. That's where we believe that we'll have a higher impact on gross profit margins and EBITDA from the new plan. Okay, that makes sense.

Tom White: I think that impact is going to be more, will be experienced more in Q1, starting Q1 of next year. That's where we believe that we'll have a higher impact on gross profit margins and EBITDA from the new plan. Okay, that makes sense.

Joanne Zach: To further military for transaction management and CRN services provided. We are pleased about the significant improvement made in our mortgage business, mortgage revenue grew 85% to approximately 3.7 million in Q2 2024 compared to 2 million in Q2 2023. This revenue growth was primarily driven by a strategic increase in our loan officer base, which is almost double from the prior year. Q2 2024 file start loan volume was up 72% compared to Q2 2023.

Speaker Change: That's where we believe that we'll have a higher impact in gross profit margins and EBITDA from the new plan.

Marco Fregenal: Okay, that makes sense. Thanks, Marco. Thank you. And ladies and gentlemen, with that, we'll go.

Marco Fregenal: Thanks, Marco. Thank you. And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the call back over to Mr. Fregenal for his closing remarks. Mr. Fregenal, you may make closing remarks at this time. Thank you. I want to thank everyone for joining our call. We appreciate everyone's support and trust. As always, I am available to meet with you on a one-on-one basis, and I hope all of you have a great week. So, thank you for joining us. Ladies and gentlemen, with that, we'll be concluding today's conference call and presentation.

Speaker Change: Okay, that makes sense. Thanks, Marco.

Operator: And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the call back over to Mr. Fregenal for closing remarks. Thanks for watching, and don't forget to like, share, and subscribe to our channel. Mr. Fregenal, you may make your closing remarks at this time.

Speaker Change: Thank you.

Speaker Change: And ladies and gentlemen with that we'll be concluding today's question and answer session. I'd like to turn the call back over to Mr. Fregenal for closing remarks.

Speaker Change: A.C.C.C.C.C.C.C.C.C.C.C.C.C.C

Joanne Zach: Mortgage adjusted EBITDA for Q2 2024 was a positive 0.02 million compared to an adjusted EBITDA loss of 0.2 million in Q2 2023. DIA, our insurance business was sold in May 2024 for approximately $15 million in cash, with 7.8 million received at closing and 7 million recorded as other receivables due over the subsequent 24 months, significantly bolstering our balance sheet. Various titles have revenues of 1.1 million for the second quarter of 2024 compared to 1 million for the second quarter of 2023 and increase the 10%.

Speaker Change: Mr. Fregenal, you may make closing remarks at this time.

Marco Fregenal: Thank you. I want to thank everyone for joining us on our call. We appreciate everyone's support and trust. As always, I am available to meet with you on a one-on-one basis, and I hope all of you have a great week. So, thank you for joining us today.

Mr. Fregenal: Thank you. I wanna thank everyone for joining our call. We appreciate everyone's support and trust. As always, I am available to meet with you on a one-on-one basis, and I hope all of you have a great week. So thank you for joining us today.

Operator: Ladies and gentlemen, with that, we'll be concluding today's conference call and presentation. We do thank you for joining us. You may now disconnect your lines.

Speaker Change: Ladies and gentlemen with that we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

Joanne Zach: Various titles adjusted EBITDA for the second quarter of 2024 was $108,000 compared to a negative $25,000 for the second quarter of 2023. We are pleased by the membership growth in our new Texas joint venture, which began in April 2024. Overall, various titles open orders are currently approximately 60% higher than they were at the end of last quarter. We are also happy to say that Salt Lake City Utah based LWU traveling title is now part of various title. Traveling title is a strategic addition to our geographic presence in Utah, Colorado and Virginia.

Joanne Zach: Moving to our technology segment, third-party revenues remain consistent in the second quarter of 2024, compared to the same period in 2023. Adjusted EBITDA, improved, primarily attributable to approximately $350,000 in internal charges to Fathom Realty for transaction management and CRM services. We are continuously making enhancements to our technology platform to better serve our agents and drive revenues, with our new revenue share functionality being a prime example. Our Libby team has significantly increased its footprint across countries, working with over 300 mlusses and touching 320,000 agents at the end of the second quarter. Libby powers more than 5.9 million community pages with over 145,000 neighborhood reports created.

Joanne Zach: We continue to keenly focus on our balance sheet given the dynamic real estate market conditions. We ended the quarter with an unrestricted cash position of approximately 10.4 million, which combined with a 7 million in cash to be received between now and early May 2025 significantly strengthens our balance sheet.

Joanne Zach: Regarding our financial outlook, in light of the recent introduction of two new revenue share models and their yet-to-be determined impact on future revenues and adjusted EBITDA, the company has elected to withhold guidance for the third quarter ending September 30th, 2024. Management plans to reassess and potentially reinstate guidance expectations in the fourth quarter of 2024, allowing time to evaluate the performance of these new models.

Marco Fregenal: With that, I will turn the call back over to Marko for closing remarks. Thank you, Joy.

Marco Fregenal: We believe we're embarking on a journey that will redefine our industry position with a potential creating unprecedented growth and success opportunities. Our focus has been and will continue to be on providing the greatest value to our agents and team members. I want to thank all our team members for their hard work and commitment this past few months, especially the team members that work, currently, implementing our two new agent plans.

Unknown Attendee: Our future is bright and we're looking forward to the challenges ahead. With that, we'll take your questions now. Ladies and gentlemen, once again, in order to join the question key, you may press star and one, to withdraw your questions, you may press star and two. If you are using a speaker phone, we do ask the police to pick up the handset prior to pressing the key to ensure the best sound quality. Once again, that is star and then one to join the question key.

John Campbell: Our first question today comes from John Campbell, Tom Stevens. Please go ahead with your question. Hey guys, good afternoon. Good afternoon, John. Hope as well. Hey, likewise, Marco.

Marco Fregenal: Let's just start on maybe the first half of the year performance. It looks like revenues down 18 million or so for the first half of last year. Obviously, that higher interest experience as well. Even over the whole of that cash burn rate, pretty similar rate as last year, but Mark, I know you aren't banking on a housing recovery and there's clearly a lot of moving parts to consider here. You know, you've got mortgage businesses doing really, really well.

Marco Fregenal: But as best as you can see, just kind of looking out what degree of a housing recovery, again, just kind of holding all that cycle, do you think you might need to see to get back to positive recovery cash flow? Well, actually, as I mentioned to you earlier, I think a few months back, we are building our plan without having the impact of the recovery, right? We don't know when the recovery is going to be.

Marco Fregenal: I do see some improvements. When you start seeing an equilibrium coming back to buyers from sellers, I think that's the beginning of perhaps some improvement in the housing market. I think one of the things that has to be cautious is that when buyers believe that interfaiths are going to decrease, they may withhold buying a house because they're waiting for an interfaith to come down, right? And so that's part of one of the things we have to be cautious when interfaiths are going to decrease, so people feel are going to decrease.

Marco Fregenal: But going back to your question, we believe that we'll get back to a positive cash flow and significant adjusted bidout by really increasing the number of agents, right? I think that's our growth and that's why we implemented these two new revenue share programs. And as you know, it's very unique because we're the only company, certainly national public company that actually has two different programs, right? A flat fee revenue share program and a traditional split revenue share program.

Marco Fregenal: So for us, if when the market comes back, we'll definitely see some upside, but we are really focused on building our agent network to continue to grow a number of agents. We're also focused on recruiting the right kind of agents. I think, as I mentioned earlier, I think at the second half of last year, we took our eye off the ball in terms of the focus of the kinds of agents. And if you look at the decrease in transactions quarter to quarter, you see that we continue to improve and better that decrease.

Marco Fregenal: And so we think that by Q3 and Q4, we will get back to positive numbers in terms of transaction growth. But that is really primarily being as a result of additional agents joining our company as opposed to counting on an improvement in the industry and the risk they market. I think that's going to come more next year. And I think so for us, it's really focused on the agent growth. Okay.

Marco Fregenal: That's helpful. And then on Fathom's share, I mean, obviously, as you mentioned, bringing in a little bit more of a traditional split model. You guys have always been the hallmark of the model, it's always been the flat fee model. So I'm curious about maybe the conversations, or I don't know if it was if it was focus groups or surveys, or whatever you guys did to arrive at that decision, maybe take us through that process of how you assess it and what you expect to accomplish.

Marco Fregenal: That's a great question. Look, we are a hundred percent commission company and we think the future of the industry is a hundred percent commission. Even as we implement these two new programs, we believe that the significant majority of the agent joining are going to be in the Fathom X plan, not the Fathom share. We think the Fathom share probably be around 20 to 30 percent of our agents joining. What we found over the last six months or so, as we spoke with small brokerages, teams, high producing agents, is that percent of those individuals were very interested in some sort of Program.

Marco Fregenal: We also were limited in terms of acquiring or walkovers with small brokerages that were 85, 15 or 80, 20 split. And now we've become a very attractive home for them. And so it was really a combination of just listening to some of our agents and listening to small brokerages and teams that were really interested in the revenue shared program. So we believe that we have a very, we're creating a very innovative program that actually is based on a hundred percent commercial model, but offers the ability of our agents to have a choice.

Marco Fregenal: I think the other thing that makes our program very unique is that agents are able to once a year change from one to the other model. And so an agent that joins Fathom in one program and they think about leaving because another company offers a different program. Now we offer both programs within the same company. And that's one of the comments that we heard from a lot of agents is that having the flexibility.

Marco Fregenal: So we implemented that as part of our program and we believe that we created something that's very unique and something that, you know, look, since we announced this best Wednesday, we've had a significant response from non-Fathom agents, teams, small brokerages, actually some brokerage up to 3,000 agents that have demonstrated a significant interest in having conversations with us about perhaps joining us down the line. So we think that the response, you know, immediately after our announcement has been incredibly positive and we think that this is going to manifest itself in a, you know, getting the Fathom back to a 30 percent agent growth. So I think that those are the main reasons why we decided to create this hybrid model.

Unknown Attendee: Okay, that's helpful. Thank you guys. Thank you.

Marco Fregenal: Our next question comes from Raj Sharma from Be Riley. Please go ahead with your question. Hi, thank you for taking my questions. Again, I want to follow up the last caller. You know, the motivation behind switching the plans and if you could lay out how, you know, I see how there's an option now in the max and the share between flat and the revenue share. How does that make your growth profits higher?

Marco Fregenal: Is that simply from attracting more agents or it's a, hey Raj, it's great to hear from you. Great question. It's a combination of our attracting more agents, higher producing agents as well, which certainly will help the number transactions per agent. It's also a combination that, you know, we believe we're estimating right now based on conversations that 20 to 30 percent of our agents, new agents joining. We'll join the company, the 12 percent program.

Marco Fregenal: So when you combine a percentage of agents joining the 12 percent program, as well as a higher number of agents joining the company, we'll be able to increase our growth profit margins. As you recall, you know, we had them in a position where we are writing that inflection point, right, that a significant percentage of our growth profit dollars will also follow to the bottom line in EBITDA. And so by increasing the number of agents coming in, we'll also have a higher level of transactions per agent.

Marco Fregenal: It's going to have a significant effect in our growth profit margin as well as our EBITDA going forward. And given the response we had since we announced this past Wednesday, I think within a few quarters, we'll be able to demo.

Marco Fregenal: Thank you. And then, what are the, you know, the levels 1 through 5? What were the cut-offs and transactions? Well, it's not so much, I mean, it's five levels in terms of the, or both programs is five levels, right? Which means that we go five levels in terms of agents recruiting. It's not so much in terms of transaction, right? And so, in a sense, if I recruit you and you recruit somebody else and somebody else recuse the port.

Marco Fregenal: So in our programs, we felt that five levels was the appropriate number in order, in order to do that. And if you look at the press, at least you can see that the Fathom Share Plan offers a significant higher level of revenue share, right? On the first level is 35% and then 25% compared to 10% on the Fathom X1. So, what we agree when we decided that after, you know, doing some research and speaking with teams and, and, and, and agents who are by doing other revenue share companies, we, we have had numerous conversations with agents. There are members of other companies as well, teams and small brokerages. We felt like five levels was the appropriate number for us.

Marco Fregenal: And, and so that's what we decided to do. And then to the old, the old referral agent referral programs of capital life, free for life, those are still valid or not valid. That's a great question. Those are going to be valid until December of this year. So any agent that reaches capital life or free for life, they'll be grandfather and then they will be, you know, capital life or free for life forever.

Marco Fregenal: On January 1st, those two programs go away. And, and therefore the revenue share program becomes the new program. We are giving agents another five months in order to be able to reach capital life and free for life. We felt that was the appropriate thing to do. And so all our agents still have the opportunity to reach capital life and free for life until December 31st. After that, whatever position they are, if they're ready to reach either one, that their grandfather for life.

Marco Fregenal: If not, then every agent can continue to earn revenue share. As of last week, agents that are already earning revenue share for any agent that joins the company, regardless in which plan you're at. And so we feel that we're creating a significant enhancement in terms of how do we work with our agents to refer other agents. And I think some of our agents are going to take advantage of this and build some significant revenue stream for themselves and their families.

Marco Fregenal: Got it. And then my last question, Marko is, so you just indicated that you're looking for agent growth is 30% in the next several quarters. What gives you the confidence that you can get 30% growth? Is it, you know, acquisitions, is it walkovers or is something changing in the market? Or you need market. Sure. Yeah, look, I, our goal has always been, as we mentioned, the last few quarters to go back, you know, fact, I'm had 30% growth for many years.

Marco Fregenal: And so our goal is has been to get back to that 30% age, and Jim Grove. What gives us confidence that we can get back to that, you know, hopefully we can do with recorders, is that the number of discussions that we've had are a pipeline in terms of agent growth. Since we announced this, as I said on Wednesday, we've had, you know, discussions with numerous organizations and teams, agents in other companies under the revenue share program, more brokerages, medium sized brokerages, regular agents.

Marco Fregenal: And so we feel that giving this conversations and the existing pipeline that within two to three quarters, we should be able to get back to 30 percent growth and perhaps more. But that's what gives us confidence to be able to make that announcement.

Unknown Attendee: All right, great. Thank you. I'll take my, thank you for answering my questions. I'll take it offline. Thank you. Thank you, Rajiv.

Thomas White: And our next question comes from Tom White from DA Davidson. Please go ahead with your question. Hey, this is why I'm for Tom. Thanks for taking our questions. I had one on industry changes related to the NAR settlement. You just talk about what Fathom is telling their agents in terms of how to navigate this is August 17th approaches. And does your best practices around things like buyer refinements differ in any meaningful ways than peers?

Thomas White: Yeah, yeah. Look, I think that there are still a lot of moving parts to all of this, right? I go back and I think about when the gut, when you may recall this, when the government changed from the HUD to the CD and implemented a total new form for closing transactions. And it took approximately three to six months to just work out all the king fight of this, right? Out of that process.

Thomas White: I think the same thing is going to happen here. I think there's a lot of confusion. I think that MLSs are going to enforce this in a variety of different ways. And so in the sense is not only we have to build our own set of rules, but then we have to look at every MLS and every board and see where they're going to enforce locally. And we're already seeing that different MLSs across the country and different boards are looking at things differently.

Thomas White: Certainly, we're not going to be able to put the buyer side's commission on the website and the MLS. That's a given and Adam's going to enforce that and we're already working with our agents to do that. We are in discussions about creating our own documents into our buyer's agreements. And we're ready in the process of doing that, working with every state broker and every MLS and every board because everyone is going to be somewhat different.

Thomas White: So I think it's a little early to speak specifically about the totally of all the things we're going to do. We're ready progress in this. We have been working on this. Samantha Juju, here's our CEO for Madam Rio. She's working with our legal team and our state brokers and implementing this. And it's going to take a little while in order to work itself out. We certainly are adhering by the rules and our interpretation of the rules and we're working with our agents to do that.

Thomas White: But it is going to take a little bit of time to kind of work itself out and to making sure that we can train our agents accordingly. And every company is going to do things a little different. Some companies are creating their documents. Some companies are just using the new state documents or board documents. So we are working with our.., and our team to try to find the best approach to this.

Thomas White: We are already working on our own documents and we'll probably implement those rather quickly. But I think we still have some time to go before everyone fully comprehends the impact it's going to have in the industry. And so I caution everyone in terms of jumping to conclusions about how everything's going to change. I think there's a lot of moving parts still and we're working through the process with our team. That makes sense.

Thomas White: Thank you. And then do you have any update around a possible settlement regarding the industry lawsuit? Sure. As everyone can imagine, we still are in negotiations and for that reason, I can really disclose where we are in terms of that. But, you know, we look forward to announcing a settlement as quickly as possible. We think that we can reach that settlement with an amount that would be that we can survive and thrive, especially given some of the recent settlements and the size of those companies.

Thomas White: And I think when you look at our company and our size, you're able to kind of figure out what that number is. So we look forward to announcing the soon, but given that we are in still discussions, I rather just leave my comment at that. I don't understand that makes complete sense. And then I just have one final follow up regarding like the new revenue share models. I think I missed this, but could you just give some more color into the expected margin impact over like the next several quarters for both gross margins and even margins?

Thomas White: Sure. I think it's going to take a little bit of time. You know, we're going to start already to start onboarding agents into new models. I think it's going to take a little bit of time for this to work itself out, right? I think in the next certainly in Q3 and perhaps in Q4, I don't think we're going to be see significant changes because again, when one board an agent, he may take a few weeks.

Thomas White: If not a month for that agent, we actually close the first front back. And so there is a delay from onboarding an agent to the agent closing the first transaction and then to have a positive effect in terms of gross profit margin. We do believe that over time over the next year or so, we're going to see an increase in gross profit margins, not only because of the new models, but also because our continuing improvement in the mortgage business and our title business.

Thomas White: We do think within a couple of years, we'll probably see margins in the mid teens, but we're going back specifically to your question about the next two quarters. I would not anticipate a significant change in gross profit margins or EBITDA because I think it's a little too early for the new plans to have that kind of impact. I think that impact is going to be more will be experienced warning key one starting key one of next year. That's where we believe that we'll have a higher impact in gross profit margins and EBITDA from the new plan. That makes sense. Thanks, Margaret.

Unknown Attendee: Thank you, and ladies and gentlemen with that we will be concluding today's question and answer session.

Marco Fregenal: I'd like to turn the call back over to Mr. Freshenal for closing remarks.

Marco Fregenal: Mr. Freshenal you may make closing remarks at this time. Thank you. I want to thank everyone for joining our call. We appreciate everyone's support and trust. As always I am available to meet with you on a one-on-one basis and I hope all of you have a great week so thank you for joining us today.

Unknown Attendee: Ladies and gentlemen with that we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your line.

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