Q3 2024 Fathom Holdings Inc Earnings Call
Unknown Attendee, Marco Fregenal
David A. Yeah. Yeah. Mm hmm. Mhm. Mhm.
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Good afternoon, and welcome to Fathom Holding's third quarter 'twenty 'twenty four conference call joining us today are the company's CEO, Mark all searching out and C. F O Joanne sat before I turn the call over to management I want to remind listeners that today's call may include forward looking statements with.
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 outlined in the risk factors section of the company's Form 10-K for the year ended December 31st 2023, and other company filings made with the SEC copies of which are available on.
The Sec's website at Www Dot S E C dot Gov as a result of those forward looking statements actual results could differ materially.
Fathom undertakes no obligation to update any forward looking statements after today's call except as required by law. Please also note that during this call. We will discuss adjusted Eby I T D a or non G. A a P financial measure as defined by S. E C regulation G H.
Speaker Change: Conciliation of this non G. A a P financial measure to the most directly comparable G. A a P. Measure is included in today's press release, which is now posted on fathoms website with that I'll turn the call over to Fathom, President and CEO, Michael Fresno, Sir you May proceed.
Thank you operator, good afternoon, everyone and welcome to Fathom Holdings third quarter 'twenty 'twenty four conference call.
Speaker Change: Diving into our results and new developments I want to express my deepest gratitude to the fathom family.
Speaker Change: You have shown unwavering commitment and resilience in a year filled with considerable challenges.
Speaker Change: Ark by fluctuating mortgage rates.
Speaker Change: In buyer behavior economic pressures law suits and no rules that have changed the industry.
Speaker Change: Exceptional efforts have propelled us forward building, a strong foundation that positions us for even greater success in 2025.
Speaker Change: Our teams adaptability and spirit has set us apart despite as lower housing market shaped by persistent affordability issues tighter lending standards and I highly competitor's landscape.
Speaker Change: We haven't simply weather these conditions, we have levers them as opportunities to refine our strategies.
Speaker Change: New growth avenues and evaluate our standard.
Speaker Change: Your dedication to executing critical initiatives and maintaining high levels of service has been the cornerstone of our progress together, we have not only adapted to market changes, but we positioned fathom to capture growth and conditions improve.
Speaker Change: Setting the stage for sustained long term success.
Speaker Change: Before we review our third quarter results, let's discuss a significant development of the acquisition of my home group.
Speaker Change: As discussed in prior quarters, one of our goals is to return agent growth of 25% plus annually. My home group is the path Ah Resona based brokerage ranked 27th in the nation by transaction volume. This acquisition makes a significant step in expanding our national foot.
Speaker Change: Brent and threatening our breaths understate, our rezoning is rapidly growing real estate market.
Speaker Change: With over 2200 agents joining us Mike from my home group.
Speaker Change: The Fathom family has grown to approximately 14500 agents nationwide.
Speaker Change: Bleeding over 12000 transactions annually My home group has built a strong reputation in Phoenix and so roundly markets.
Speaker Change: Given their established and highly respected local brand and reputation we have retained their buy home group name.
Speaker Change: The founders Jeremy clothing, Mark Hutchens will continue to lead their talented team.
Speaker Change: Founded in 2000 and Fi My home group has consistently been recognized for growth and innovation, appearing on the ink 5000 list of the fastest growing companies for seven consecutive years. They have fostered a collaborative growth oriented culture that aligns closely with fathoms values.
Empowering agents to expand our networks brightened their brands and advance their careers.
Speaker Change: For competitive reasons, we will not discuss why we paid for the acquisition, but I will share that the cash portion of the purchase price had a minimal impact on our balance sheet.
Speaker Change: A result of strong economy high quality of life and population growth makes it one of the fastest growing housing markets in the U S. Presenting exceptional potential for this acquisition. This move will also enables cross selling opportunities for fathom is mortgage and title services enhancing track.
Speaker Change: Action experiences from my home groups clients, which we believe will drive additional revenue across our service platforms.
Speaker Change: Together, we believe will build on our southwest expansion develop a robust network of agents and work towards sustainable nationwide growth.
Speaker Change: Many reasons, let Jeremy and Mark joined the Fathom family, such as our shared values revenue share capabilities technology, and the opportunity to integrate and ciliary services into their operation.
Speaker Change: Going forward. We believe this acquisition will add approximately 100 million in annual revenues in 2025 and significant EBITDA for our company.
Speaker Change: Strategic acquisitions like my home group would you expand our geographic footprint and provide cross selling opportunities will continue to play an essential role in our company grow our objective is to integrate partners will use.
Speaker Change: <unk> substantial transaction and revenue growth as they join fathom platform, while adding positive EBITDA.
Speaker Change: Total revenue for third quarter was $83 7 million a decrease of about 10% from $93 5 million in Q3 of 2023.
Speaker Change: Why are comparing the quarters without revenue from Dagley insurance agents. The decrease in revenue was about 9%.
Speaker Change: Adjusted EBITDA and non-GAAP measure for the third quarter of 2024 total loss of one 4 million compared to a loss of 250000 in the third quarter of 2023.
Speaker Change: Completing approximately 9331 transactions in the third quarter, a decrease of approximately nine 5% compared to the third quarter of 2023.
Speaker Change: Patterns of estate agent network grew by nine 3% to approximately 12393 age of licenses as of September 30 of 2024 from approximately 11333 on September 30 of 2023 of course after the quarter, we added an additional 22.
Speaker Change: Third agents from my home group, bringing fathoms total base agent base to over 14500.
Speaker Change: During Q3, we made strategic decision to invest in sales and marketing to promote our New Commission plans fathom acts and fathom share, which we introduced in Q2 of 2024 that can we invest in additional employee talent to help with their acquisition on my home groups. Finally, the swing in interest rates during the last one.
Speaker Change: Month of the quarter significantly negatively impact our real estate transactions and mortgage profitability.
Speaker Change: Transaction volume has improved through October and we have closed a similar number of transactions in October of this year compared to October of 2023. This is due to the improved quality of our recruiting agents this year.
Speaker Change: Moreover, adding my home group should significantly increase real estate transactions in Q4, increasing revenue and EBITDA starting in Q1 of 2025.
Speaker Change: This past quarter Fathom Realty opened operations in New York with the Lifeway expanding to all 50 states by the end of 2025 Fathom Realty is now in 43 States and Washington D C.
Speaker Change: With renewed energy and focus our agent growth moving forward, thanks to a stronger balance sheet and even more attractive commission plans and revenue share. We're excited about how this could positively impact our revenue and EBITDA growth in 2025.
Speaker Change: I would like to turn to our and ciliary businesses, which offer significant cross selling opportunities for our agents and drive incremental growth and margin expansion for fathom, our mortgage division encompass lending maintained its strong growth trajectory in the third quarter of 2024 with revenues rising by 50.
Speaker Change: 2% year over year from $1 9 million in Q3 of last year to $2 9 million. This year. This growth reflects the impact of our strategic initiatives implemented over recent quarters and reinforces the division's contribution to our overall performance and our focus on attach.
Speaker Change: Right in Q3 mortgage file starts rose by approximately 6% compared to last year's period, demonstrating the strong momentum within our mortgage division and fueling our optimism for sustained growth in the coming quarters in the third quarter. Adjusted EBITDA was a loss of 319000 compared to a loss of 200.
Speaker Change: 19000 in the same quarter last year looking ahead into 2025, which you'll see our mortgage business increased as we leverage growth in transactions from my home group acquisition.
Speaker Change: Now, let's turn to our title Division.
Speaker Change: Saw notable growth in the third quarter various title generated $1 5 million of revenue compared to 834000 in Q3 of last year. This represents a 71% increasing revenue, reflecting steady momentum in this segment and reinforcing our value and our ongoing investment.
Speaker Change: And ciliary services adjusted EBITDA this quarter was $93000 loss compared to $23000 loss in the same theory last year, we've continued to make investments and changes in various steidel to prepare the company for anticipated growth in 2020 five.
Speaker Change: Adding seasoned industry leaders Monica Schroeder, as president and Penelope vehicle as Chief operating officer various style further reinforces our commitment to various stylus growth Monica brings over 20 years of experience, including leadership in scaling a national title agency.
Speaker Change: Their expertise in technology and client focused solutions, a life perfectly with our mission of Eris style and we are confident of her leadership will drive new levels of operational excellence and expand reach.
Speaker Change: <unk> now they're Steidel C. O O has played an instrumental role in our growth across the northeast Midwest and the D. C Metro region with a strong legal background in over a decade of industry experience been helping bring as a strategic perspective that has already proven invaluable together moniker.
Speaker Change: L. A P are well positioned to leave there for its next phase of growth fostering innovation and advancing our service standards. The success, we're seeing our title Division demonstrates all fathoms integrator real estate services platform not only enhances the experience for agents and clients, but also expense.
Speaker Change: And Diversifies our revenue streams.
Speaker Change: By offering a cohesive suite of services would create multiple touch points to engage clients and reinforced agent satisfaction straightening our entire ecosystem.
Speaker Change: We are confident the various stylus performance in Q3, hustled without expanded leadership and market reach points to this division's potential.
Speaker Change: As we refine operations. They continue growing our strategy of building a fully integrated full service real estate platform is providing its value our business segments supported by strong leadership team contribute meaningfully to fathom financial health and growth trajectory is achieve them as exemplified the long term.
Tony: Tony just to create within our service offerings as we build sustained value for agents clients and shareholders.
Tony: At the beginning of the 'twenty 'twenty four we outlined several key objectives, including strengthening our balance sheet.
We strengthened our balance sheet in may by selling badly insurance agency, adding $8 million of cash immediately and another 7 million over the next 24 months as proceeds from the sale in September we completed a $5 million private placement of convertible note within an existing shareholder and our board.
Tony: Chairman, enabling us to fast track targeted acquisitions and agent work overs. This capital injection reflects strong shareholder confidence in our vision low flipped a low fee model and re imagine [noise] revenue share program, we ended Q3 with $13 $4 million.
Tony: Cash and given that our acquisition of my home group did not significantly impact our balance sheet, we feel very confident about our cash position going forward.
Tony: In August we launched our two dual revenue share Commission plan by the Macs and Fathom sure. These students glass were designed to boost agent recruitment and retention while fostering.
Tony: Sustainable growth and long term profitability.
Tony: That does Max plan offers any industry low 465 dollar transaction fee with a 9000 dollar annual cat why fathom share plan offers a highly competitive traditional commission split a bowling 12 per se what at $12000.
Tony: At both plans off of revenue share for our agents, we fathoms share plans revenue share opportunity being twice as lucrative as fathoms Mex play does model aligns well with our high Commission approach.
Tony: It adds a compelling income structure for agents seeking flexible and increase earnings potential.
Tony: Since the launch feedback from both current and prospective agents has been overwhelmingly positive why it has been less than three months since we launched the new plan, we have seen 95% of new agents, joining the fathom ex black and 5% joining the fathom share plan. However, we are seeing significant interest in their sharply from.
Tony: Top agents 19 leaders, who have historically been slower to move over to do.
Tony: Due to open transactions with their current brokerage we believe we will see increased participation in their share plan as we move into 2025.
Tony: One of the many aspects that make our commission model or attractive is the fact that flexibility for agents to choose between the two plants and the ability to change plans once per year as their business changes in any other brokerages, if an agent wants a better split there must leave the company for another lower price competitor.
Tony: Our new revenue share Commission plan addresses this issue, which we believe will help us improve agent retention going forward.
Tony: As discussed earlier the revenue share program was a pivotal to my home group acquisition I have personally spent the last few days with the my home teenagers and they are excited about the revenue share opportunities. They look forward to helping us grow in the Arizona market and across the country by referring other agents.
Tony: From their professional networks.
Tony: I'm most excited to share the fathom Realty recently achieved the highest satisfaction rating.
Tony: Among the top 40 real estate companies in the U S. According to a recent career that I have a survey with an impressive four seven rating on Glassdoor highlighted highlighting there is media. This accomplishment reflects our commitment to fostering a supportive and empowering environment for agents and employees.
Speaker Change: I am grateful to Fathom real P. C O O Samantha Jujo her team and are managing brokers, whose dedication to agents' success has made a positive impact companywide.
Speaker Change: This recognition is a testament to our agent first business model, which includes industry, leading compensation plans like fathom accident that I'm sure unparalleled training you know various technology and a collaborative culture that equips, our agents to succeed and deliver exceptional client service by.
Speaker Change: First thing in agents and satisfaction and professional grow we're creating a win win environment, where agents success directly contributes to fathom success, helping us build a brand.
Speaker Change: Turns out in the industry.
Speaker Change: I'd like to take a moment to discuss an important recent development for federal Realty and our ongoing focus on transparency and integrity in our business operations in September Fathom reached a nationwide settlement related to the brunet versus the National Association of Realtors scale, Although we believe the seven minute mile is immaterial.
Speaker Change: In GAAP terms, we thought it was important to disclose this information to ensure transparency with our investors and stakeholders.
Speaker Change: Part of this settlement Fathom Realty will contribute 500000 to a settlement fund and another 500000 by October one 2025 with the final payment of 1 million 950 by October one of 2026, we're confident in our ability to make these payments without impacting ongoing operations or are fine.
National Health.
Speaker Change: Our decision to saddle reflects our commitment to our agents and their client Fathom Realty has built on the principle delivering the highest level supports our agents and we see the settlement is the most responsible path forward.
Speaker Change: It will enable our agents to focus fully on their clients without distraction of prolonged litigation.
Speaker Change: To be clear. This settlement is not an admission of liability or acknowledgment of any claims against us. We maintained the fathom did not participate on any conspiracy to inflate commissions and given a flat fee model, we had no incentive to do so.
Speaker Change: Resolving this matter now allows us to avoid ongoing legal cost.
Speaker Change: And the time demand executive team, bringing us from continue growing our business and supporting our agents' success I was always our focus remains on delivering excellent service to our agents clients and customers were moving forward when even stronger dedication to empower our cloud our agents to ensuring that they have.
Speaker Change: Have the resources to excel.
Speaker Change: Before we turn to the financials I want to recognize and congratulate Joe and Zach on her well deserved promotion to Chief Financial Officer, Joanne has been a vital part of fathom team since joining as senior Vice President of finance in 2020 one.
And her impact on our financial strategy has been nothing short of exceptional with over 25 years of experience in finance Fannie in public and private sectors and industries ranging from life Sciences to manufacturing Dwayne brings a wealth of knowledge and leadership that are life perfectly with our vision.
Speaker Change: Our fathoms girl, having worked closely with Joanne over the past three years I have heard.
Speaker Change: Dedication strategic insights and commitment to advancing fathoms Gold's firsthand her.
Speaker Change: Contributions have not only enhanced our financial efficiency, but also position us to better navigate an ever evolving market as well going forward I'm confident that Joe and his leadership as CFO will straighten our financial framework and drive continued success Joanne. Thank you for all your hard work and partnership I could not be more three.
Speaker Change: Rail to see when there's no role with that I'll turn the call to Joanna.
Joanna: Thank you Marco for the kind words and the confidence you have placed in me and I'm truly honored and dedicate it to take on this role at Fathom.
Joanna: Working alongside Marco and the incredibly talented and committed fathom team I look forward to building on the solid foundation, we've created together to date.
Joanna: As we enhance our financial strategies and leverage our technology I'm excited to drive fathoms growth innovation and value creation for our clients agents partners employees and shareholders today.
Joanna: Today I'll walk you through our financial performance this quarter highlighting the key drivers that continue to propel us forward and share updates on the strategic priorities that are setting the stage for our future success.
Joanna: With that let's dive into our financial results.
Joanna: Third quarter total revenue was $83 7 million or.
Joanna: 10% decline year over year compared to $93 5 million for last year's third quarter. The decrease in total revenue was primarily due to an 11% decrease in brokerage revenue and to the absence of revenue from our insurance business, which we sold on May 3rd 2024.
Joanna: Offsetting the decline in total revenue was a $1 6 million or 44% increase in revenue from our ancillary businesses as well as the positive impact from our newly implemented high value property fee.
Joanna: Despite the decrease in total revenue our total gross profit percentage for the 2024 third quarter, excluding our sold insurance business increased to 9% from 7% for the 2023 third quarter.
Joanna: Technology and development expenses were approximately.
Joanna: For the 2020 for third quarter compared to $1 7 million for the third quarter of 2023.
Joanna: The approximate.
Point 3 million increase was primarily due to our continued investment in our technology platforms, including the build out for our new revenue share program Jenny.
Joanna: General and administrative expense totaled $8 7 million for the 2020 for third quarter compared to $9 8 million for the third quarter of 2023.
Joanna: Increase was primarily due to the absence of costs attributable to the sale of our insurance segment business.
Joanna: Effective may three 2024.
Joanna: Marketing activity expense stayed consistent at approximately <unk> 8 million for both the third quarter of 2024 in the third quarter of 2023.
Joanna: GAAP net loss for the third quarter of 2024 totaled $8 1 million or a loss of <unk> 40 per share compared to a loss of $5 5 million or a loss of 34 cents per share for the third quarter of 2023.
Joanna: The increase in net loss was primarily due to recognizing the $3 $5 million settlement contingency and related fee legal fee expense.
Joanna: Adjusted EBITDA loss, a non-GAAP measure for the third quarter of 2024 totaled a loss of $1 4 million compared to a loss of <unk> 3 million in the third quarter of 2023.
Joanna: The decline in adjusted EBITDA, primarily due to a decrease in brokerage revenue and increased costs and growing our ancillary businesses.
Joanna: Now I'll spend time, reviewing our business segment results in more detail.
Joanna: Revenue for the real estate Division was approximately $78 6 million in the third quarter compared to $88 2 million for the same period last year, which represents an 11% decline primarily attributable to a 9% decrease in transaction volume.
Joanna: There were 9331 real estate transactions during the three months ended September 30 to 24 compared to 10303 transactions. During the three months ended September 32023.
Joanna: Real estate transactions decreased due to the continuation.
Joanna: Of higher home prices and uncertainty surrounding mortgage interest rates.
Speaker Change: Fathom is resolved to address this decline and return to meaningful growth by continuing our strategic recruiting efforts.
Speaker Change: Powered by its most recently announced new revenue share models and our service commitment to its agents.
Speaker Change: Gross profit margin for our real estate division improved to five 7% from five 1% for the third quarter of 24 compared to the third quarter of 'twenty three.
Speaker Change: The increase in margin was largely due to our increasing our agents Andy Murphy from 600 to $700 and to implementing our new high value property fee commencing January one 2024.
Speaker Change: Hmm.
Speaker Change: Adjusted EBITDA income and the real estate Division was approximately <unk> 8 million in Q3 of 2024 a decrease.
Speaker Change: Of <unk> 8 million compared to adjusted EBITDA of $1 6 million in Q3 of 2023. This is largely due to the decrease in transactions in 2024 and to the commencement of internal charges from our technology Division to Fathom reality for transaction management and CRM services provided.
Speaker Change: We are very excited about the significant improvement made in our mortgage businesses revenue.
Speaker Change: Revenue grew to $2 9 million in Q3, 2024 compared to $1 9 million in Q3 of 2023. This revenue growth was essentially driven by a strategic increase increase in our loan officer base.
Speaker Change: Mortgage adjusted EBITDA loss for Q3, 2024 of <unk> 3 million was relatively consistent with Q3 of 2023 due to our strategic investments and planned future growth.
Speaker Change: Okay.
Speaker Change: Theres title had revenues of $1 4 million for the third quarter of 2024 compared to <unk> 8 million for the third quarter of 2023, an increase of 71% the.
Speaker Change: The increase in revenue was driven by organic growth and work overs. Various titles adjusted EBITDA for the 2020 for third quarter was a loss of $1 million versus closer to breakeven for Q3 2023.
Speaker Change: This is again due to our strategic investments and planned future growth.
Speaker Change: Various title heads into Q4 is still very much in a growth model.
Speaker Change: With the acquisition of my home group, various expect Q4 to start to report.
Speaker Change: Revenues from transactions and Arizona.
Speaker Change: <unk> has also recently expanded operations into Oregon, and as planned expansion increase for the rest of the west, including Utah, Nevada and Colorado.
Speaker Change: Moving to our technology segment third party revenues remained relatively constant at <unk> 8 million in Q3 of 2024.
Speaker Change: Unceasingly building enhancements to our technology platform to better serve our agents and drive revenues.
Speaker Change: This site has made significant strides in product development and customer engagement. The company launched a new version of its web site showcasing its commitment to improving user experience and increasing inbound leads.
Speaker Change: We continue to keenly focus on our balance sheet, given the dynamic real estate market conditions.
Speaker Change: In September 2024, the company issued senior Securities convertible promissory notes in the aggregate principal amount of five point million two.
Speaker Change: To an existing shareholder who owns more than 5% of thousands common stock and to the chairman of the company's board of directors.
Speaker Change: We ended the quarter with a cash position of approximately $13 4 million, which combined with a <unk> 7 million in cash to be received over the next 24 months and Marcel a V. I a strongly positions us for implementing our growth strategy.
Speaker Change: Regarding our financial outlook.
Speaker Change: In light of the uncertainty of interest rates and yet to be determined and pass on future revenues and adjusted EBITDA from our recently completed and planned acquisitions, along with a new revenue model offerings. The company has elected to withhold guidance for the fourth quarter ending December 31, 2024 management plans to reassess and.
Speaker Change: Tensely reinstate guidance expectation.
Speaker Change: The first quarter of 2025.
Speaker Change: Allowing time to evaluate the performance of these new models and the impact of our acquisition.
Speaker Change: With that I will turn the call back over to Mark <unk> for closing remarks.
Mark Hutchens: Thank you Joanna looking forward, our focus remains squarely on increasing revenue agent counts and transactions by over 25% annually. We believe we can accomplish this by attracting top tier agents teams and brokers is stronger than ever a value proposition which are.
Mark Hutchens: New agent Commission plans.
Mark Hutchens: Tell her to the current market dynamics. These players aren't just about reshaping fathom they are poised to English the entire industry.
Adam we have worked hard to create a premier destination for agents and our fathom accident that I'm sure exactly define that commitment. These offerings allow agents to maximize their armies combine an industry, leading flex the commission structure with an innovative revenue share program our vision is clear.
Mark Hutchens: Fathom Realty is a leading brand in every market, we serve reaching 50 states by 2025 with a new plant is a critical driver of this expansion.
Mark Hutchens: Execution is essential to achieving this vision our industry, leading commission structure and revenue share program are a source of competitive land vintage and remain at the core of our growth strategy.
Mark Hutchens: With us to drive profitability, we provide a powerful value proposition for agents and clients with our scalable and asset light model proprietary technology platform and integrated mortgage and title and SaaS services.
Mark Hutchens: Advantages along with our experienced management team strategic insight position us well for sustained growth in the real estate industry.
Mark Hutchens: I would like to express my gratitude to the entire fathom team.
Mark Hutchens: Dedication and hard work, particularly around implementing our transformative plans and essential to our growing success.
Mark Hutchens: Gather we're not just adapting to change we're driving it with the clear strategy commitment to innovation and unwavering agent focus approach, we're positioned to lead the real estate industry into a new era of growth and profitability.
Mark Hutchens: Over the past months or the double down and bring in and promoting the right people as Jim Collins World is excellent book good to Great building, a resilient high performing organization. It starts with getting the right people on the bus.
Mark Hutchens: With the recent promotions of Joanne and Penelope and additions as John Monica, Mark and Jeremy our new agents I believe we have a strong team that can lead doing our anticipated growth in 2025 and beyond.
Mark Hutchens: We remain committed to prudent financial management and strategic investments in growth and operational excellence, our ability to execute on multiple fronts growing our agent base enhancing profit margins and managing cash flow is a testament to the strength of our business model as we move forward.
Mark Hutchens: We are laser focused on driving results or a new commercial model and integrate into my home group team each of the fathom family and future team and brokerages acquisitions I was weird occur in discussions with.
Mark Hutchens: With planned investments in these areas, we anticipate modest transaction growth in Q4, and given the positive impact on my home group and all of their future transactions, we anticipate 25% agent growth in 2025, and we believe we should lead to adjusted EBITDA profitability in 2025.
Mark Hutchens: We're confident that these initiatives backed by the resilience and commitment of our team to deliver long term value to our shareholders operator, we're ready to take questions.
Speaker Change: Thank you at this time, we will conduct a question and answer session. If he would like to ask a question. Please press star one on your phone now and you will be placed in the queue and the order received.
Speaker Change: Once again to ask a question press star one on your phone now we are ready to begin.
Speaker Change: Our first question comes from Darren I started Darren you May ask your question.
Speaker Change: Hey, this is Don on for Darren Thanks for taking my questions.
Speaker Change: First to start onto my home group acquisition.
Speaker Change: Could you give us some more color or did you approach them did they approach you.
Speaker Change: And then like what else do you see that's out there on that front. It seems like that that organization, specifically skewed a bit higher than your existing agent base in terms of productivity and do you think there there's other options out there or just how are you thinking.
Speaker Change: Thinking about sort of your walk over approach our first acquisition.
Speaker Change: Yeah.
Speaker Change: Hey, Dylan. Thank you for your for your question. We were introduced to my home group by agreement, which is a a real estate emerged as an acquisition company or that we've been working with and we should assume about six seven months ago. Initially the conversation because I need to get to know each other and.
Speaker Change: After we continue that discussion it was so clear that it would make sense for us to to margin and I described many of the reasons why they felt compelled to do that they are a great organization they have a higher productivity.
Speaker Change: In terms of transactions per agent and and so we feel very blessed to be able to work with them. Now we are seeing a since we launched the revenue share program. We certainly have seen an increase in the number of companies approaching us and so yes, we are definitely.
Speaker Change: Seeing an increasing number of companies we are as I discussed in my in the earnings call. We are in other discussions with other companies and and that's why we have confidence that we'll be able to grow agent count by 25% going forward, giving.
Speaker Change: Given that these discussions and the high interest from brokerages teams are.
Speaker Change: Both were in terms of work overs and in terms of acquisitions.
Speaker Change: Great. Thank you and as a as a follow up I know you're working on your recruiting efforts.
Speaker Change: Can you talk about a little bit what what's working and what are you doing differently than before and then.
Speaker Change: Is there anything you think you can do maybe on the educational front or technology side of things that can help you exist in the existing agents continued to be productive. Despite some of the the market trends.
Speaker Change: Oh, absolutely. So yes, we certainly have seen an increase in agents interested in and learning about a revenue share model as you know our revenue share model is unique because we have two different plants right. Unlike most companies out there they have revenue share models or just one plant that traditional split we have a program.
Speaker Change: That has both a flat fee and the traditional split and so a lot of agents are interesting learning and we are spending a lot of time educating prospective agents on that in terms of helping our agents.
Speaker Change: Grow their business, we are working on several programs that we are going to announce in the next 60 to 90 days, we have the fact I'm summit next week.
Speaker Change: Those will be announced next week and all of these programs are designed to help our agents increase their business. They are branding programs marketing programs and we certainly look forward to implementing visa. The next 90 days and we believe that they.
Speaker Change: They would be incredibly helpful to help our agents increase that I'll also point out as they did in the in our earnings call Dan When we looked at October numbers, our October transactions compared to last year, our are pretty much right on in terms of the and so we are the efforts that we began.
Speaker Change: Implementing in Q1 of this year to focus on higher producing agents is beginning to pay off.
Speaker Change: So as we look into into Q4, we believe that we will see an increased number of transactions per agent because of the quality of the agents that we brought on.
Speaker Change: In the beginning of this year and so I think we sort of turned the tide in terms of agent productivity. We are about to launch some specific programs to do that and certainly the additional buy home group all of those will contribute to an increased number of transactions in Q4 and.
Speaker Change: And beyond into next year.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Speaker Change: Thank you for your question.
Speaker Change: Wow.
Speaker Change: Thank you for your question dealing from Roth Capital. Our next question comes from Raj Sharma with B Riley Ross you May ask your question.
Speaker Change: Yeah. Thank you guys. Thank you for taking my question I.
Speaker Change: Just wanted to understand you know congratulations on the acquisition.
Speaker Change: The addition of these agents are you just briefly touched upon Marco that you know.
Speaker Change: Can you talk about how much was paid or what.
Speaker Change: Cash was it you know and how how how.
Speaker Change: Ongoing.
Speaker Change: Compensation incentives are structured for agents agent groups coming on.
Speaker Change: Sure you know for competitive reasons, given that we are in negotiations with several other companies. We certainly don't want to disclose what the painting was.
Speaker Change: What I will share is that the cash component was minimal.
Speaker Change: In terms of the total purchase price of Bulgarian remark.
Speaker Change: You don't believe in the future of the combined companies until the majority of the purchase price was in stock.
Speaker Change: And it was paid over a couple of years.
Speaker Change: And so we feel I think both parties feel very good about the transaction and because again, we are engaged with several other companies.
Speaker Change: We prefer not to disclose what the total the total prices too so to answer your question in terms of potential future.
Speaker Change: Acquisitions, Yes, we are engaged in a variety of conversations with other companies since we announced revenue share we've been approached by a greater number of you know small brokers large brokerages teams and those conversations will continue this is critical to us as we return to 25%.
Speaker Change: Our agent growth on an annual basis, and that's how we feel confident that we'll be able to get back to those numbers.
Speaker Change: Yeah. Thank you that's very helpful. So is it fair to assume that the 20.
Speaker Change: 25% growth in agents you are anticipating a starts pretty soon and that the confidence that the payment for <unk>.
Speaker Change: Growth in agents would be similar minimal cash or and mostly stock.
Speaker Change: Well, we certainly we certainly feel that way right I mean, I think that you know when you enter negotiations. Your there are everyones, a little different but we certainly want to bring in companies where the current owners are believe in the long term value that this will break right. Therefore, I E cigs.
Speaker Change: Higher percentage in stock, it's advantageous for both parties.
Speaker Change: Terms of 25% growth with the acquisition of my home group, we're probably pretty close to that kind of growth already this year and so as we look for into 2025.
Speaker Change: I think starting in Q1, you're going to see.
Speaker Change: An increase in agent count as well and so we feel fairly confident that that's one 5% agent growth will continue as we enter into Q1 and beyond.
Speaker Change: Got it.
Speaker Change: And then Michael you mentioned that this would add an incremental $1 million in and in revenues.
Speaker Change: Starting 2025, this is $100 million from the myeloma.
Speaker Change: That's correct yeah. When you look at the total number of transactions and revenue per transaction. This acquisition would add roughly $100 million in revenue for 2025.
Speaker Change: And you know spread in a similar cadence to the existing business or through the year.
Speaker Change: That's correct.
Speaker Change: Also the assumptions you're using for the 100 million are sort of similar agents you know transactions for agents and commission per transaction or so higher.
Speaker Change: No My home group has the highest productivity my home group has done a very good job of having a higher productivity for our transactions per agent.
Speaker Change: So that's incredibly attractive second Derek transactions are a bit higher on the Arizona market is a hot market and so revenue per transaction. There. He average transaction there is a bit higher than ours, because again, we're a national company right. So we already have a lot of markets in which a frenzy.
Speaker Change: Actions are the average transaction was a bit lower but so but focus on the Arizona market. They have a higher transaction a price per transaction.
Speaker Change: In a higher productivity transactions break so both of those are going to have a significant positive impact in the overall performance of fathom.
Speaker Change: Got it and then just lastly, mark or is it too early to.
Speaker Change: Comment on or Pacific eight on the impact of the cuts.
Speaker Change: Today, you know the earlier cut on the transaction yet.
Sure the 25 basis cut that was done today, so it's probably a little too early right.
Speaker Change: We know what happened after 50 basis cut of.
Speaker Change: And couple of months ago.
Speaker Change: And the 10 year note went up and I think everyone anticipated that to go up a little I don't think anyone Washington, Seattle anymore, but I think most of US did not anticipate rates to go up so much higher.
Speaker Change: And so given that I would hold judgment on what the impact would be on the 25 basis points.
Speaker Change: I think we have to see I think that the 10 year came down a little bit after that.
Speaker Change: I think that Theres some recent comments about.
Speaker Change: How the new administration is going to affect the inflation. So I think theres a lot of moving parts to this.
Speaker Change: You know we are going to assume that you know rates are going to be where rates are and our focus is going to be on growing transactions. Therefore growing revenue and costs that currently growing EBITDA and we're going to do that by accelerating our growth getting us focus on growing our business by 25% plus.
Speaker Change: Per year, and then the rest will take care of for it. So we don't have control of interest rate I don't really have control of all the things that I can do which is focus on our entire team on growing the business and getting us back to this 25% plus growth a year, which you know as we continue to do that it will take care of.
Speaker Change: Our profitability so that's our focus.
Speaker Change: Yeah. Thank you so much for answering my questions I'll take it offline again thanks.
Speaker Change: Thank you Ross great talking to you.
Thank you for your questions with that we will be concluding today's question and answer session I'd like to turn the call over to Mr. Fresno for his closing remarks, Sir. Please proceed.
Speaker Change: Thank you everyone for joining us today, we appreciate everybody's.
Speaker Change: Focus I certainly want to thank the entire team for all their hard work and continued commitment as always I'm available for four four calls and I hope everyone has a great rest of the weekend weekend. Thank you all.
Ladies and gentlemen, with that we'll conclude today's conference call. Thank you for joining you may now disconnect your lines have a pleasant evening.