Q3 2025 Fathom Holdings Inc Earnings Call

Good afternoon. Welcome to Fathom Holdings' third-quarter 2025 conference call.

Joining us today is the company's President and CEO, Marco Fregenal, and Senior Vice President of Finance, Daniel Weinmann.

At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press *0 on your telephone keypad.

Please note that this conference is being recorded.

Before I turn things 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 outlined in the risk factors section of the company's Form 10-K for the year ended December 31, 2024, 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 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 note that during this call, management will be discussing Adjusted EBITDA, which is a non-GAAP financial measure as defined by SEC Regulation G.

Of reconciliation of this, non-gaap financial measure to the most directly compare comparable. Gaap 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's President and CEO, Marco Fregenal. Please go ahead, sir.

Thank you, operator. And good afternoon everyone and welcome to Fathom Holdings, third quarter 2025 conference call.

Before we begin, today's a very special day, it is as it is better than this day. It is the day that we have an opportunity to thank and show gratitude to those who have served and continue to serve our great country.

Let us also thank their families, as we all know that when someone serves, the entire family serves. So, thank you all. For all you do, we are sincerely grateful.

Let us Begin by highlighting some of our Khan accomplishments this quarter, then move to the broader Market Outlook, and our plans for 2026.

The third quarter in Mark, another significant step forward for fathom. We deliver 37.7 year-over-year, Revenue, growth nearly doubling the analysts, expectations of an increase of 20% and Achieve another quarter of a, just a bit that profitability.

These results highlight our financial continued ability to execute our strategy. Maintain operational discipline, and capture growth across both our core Brokers and fast growing ancillary businesses.

Our agent base continues to expand at a healthy Pace. Growing 24% year-over-year to more than 15,300 licensed agents supported by our lowest turnover in recent years. Averaging, just 1% of Agents per month in Q3

Far below the industry average, as we move forward, we remain focused on attracting and empowering high-performing agents who leverage our programs and technology to maximize productivity and earnings.

Our ongoing investments in tools. Technology and culture are helping agents convert, more leads, close more transactions and build stronger more sustainable businesses.

This Investments, not only reinforce our reputation, as 1 of the most agent Centric brokers in the industry, but also Drive, our long-term Revenue growth and profitability.

Gross profit for the quarter increased by more than 2.7 million to over 9.6% in 38.5% year-over-year. Increase

What's most significant is that over 50% of that increase in gross profit flow, directly to ebida, this demonstrates the power of operating model and discipline expense management. We're not just growing Revenue, we're converting that into real earnings.

We have reached an inflection point where each additional dollar of gross profit. Now contributes more to our Bottom Line. This is the result of years, of investment in technology, efficiency and scale. And it's the proof that our models work in exactly. As designed as we continue to grow, we expect this leverage to expand further driving sustained, profitability, growth and creating meaningful long-term value for our shareholders.

Turning to our insular businesses. We continue to see strong momentum across markets title and Technology, our markets company Encompass Landing increased revenues by 20.7% and achieved adjusted of about 160,000 for the quarter which is a clear sign that our strategic investments in process Automation, and Loan offers productivity are paying off various title, our title business delivered 28.6 Revenue growth while our technology segment posted an 18% increase

It is important to highlight. There are ancillary business transactions, generate gross profits. There are 7 to 10 times higher than those of our real estate transactions. The margin Advantage, makes them powerful growth Catalyst for future profitability. Expanding these segments enable us to capture greater share of the real estate transactions, value chain and threatening our overall earnings. As these businesses continue to scale, they're becoming increasingly meaningful, drivers for both margin extension and long-term shareholder value.

As we enter the 4 quarter sheet growth is accelerating with file starts for both our mortgage and title businesses up more than 60% compared to the same period last year. We anticipate these growth rates to continue

This surge reflects the strong alignment between our Real Estate Network and our ancillary services, as Asians increasingly refer clients to our mortgage and title companies for a more streamlined transaction experience.

Growth in these areas reflects our ability to deliver complementary services that simplify the real estate transaction process. As transactions become increasingly complex, both agents and clients are seeking solutions that streamline closings, improve efficiency, and enhance the overall experience.

We are also beginning to see tangible returns from our technology investments. For example, various titles of successful expansion into Arizona and Alabama demonstrate our ability to replicate success in new markets.

These expansions are a key part of our strategy to increase growth.

At the same time, in our local efforts to build strong relationships to improve attach rates, further accelerating revenue per transaction, and strengthening our overall value proposition for both agents and their clients.

We are leveraging. Our proprietary technology to unlock new high margin revenue streams, the recent intelli agent licensing agreement, Sovereign Partners underscores the scalability of our platform and the strong demand for our technology beyond our own agent Network, by combining intelli agent platform. With our technology enabled Services, real estate companies can significantly boost profitability

A result we have already seen at my home group and Sovereign Partners.

Looking ahead, we estimate that there are more than 18,000 small to mid-size brokerages that could substantially improve their financial performance by adopting intelligent platform. Highlighting a significant growth or opportunity for fathom. These kinds of opportunities validate our Innovative and reinforced patterns position as a forward thinking leader in the real estate industry. Now let's talk about Elevate which we believe will be a meaningful growth driver for both for fathom in 2026 and Beyond.

Version transaction. Support and coaching all offered at a competitive. 20% commission, split, it's a complete business. Building platform that allows agents to focus on clients while fathom handles the back office complexity.

Think about it in this way for the same 20% commission, that an agent might pay for another broker simply to hang their license. The same agent that fathom gains a full service concierge team that is dedicated to help them grow their business. Elevate delivers tremendous value to agents, while simultaneously improving fathoms, retention productivity, and profitability as the gross profit for Elevate transaction is on average 5 times higher. As more agents, join the program, we expect to see measurable increases in closed. Transactions, overall Revenue per agent, this program, not only strengthens our competitive Advantage, but also creates a scalable Pathway to higher margin growth. Well into the future. We have already on boarded over 165 agents to elevate with another 45 agents in the pipeline and adoption is accelerating. Elevated is a powerful example of how our program, our programs help agents maximize profitability,

Ility, while reclaiming their time.

By combining investing clients, tools, coaching, and technology, Elevating Jesus enhances performance and deepens engagement across our network, which in turn drives higher tax rates and greater adoption of our broader platform.

Beyond the other, we also launched several new growth initiatives in recent months. First, we recently announced the acquisition of a startup real estate company dedicated to serving first-time home buyers. The startup, headquartered in Colorado, has approximately 70 agents and is on track to close roughly 400 transactions this year, delivering a 50% gross margin and a mortgage attachment rate of 70%.

With our size and their strategy.

We have already began expanding start into other markets, including Utah, Arizona and Nevada. And with a broader plan to enter more than 15 states over next year. This expansion is expected to generate over 1500 additional transactions. Next year were sustained in both strong margins and high mortgages, attachment rates.

Ultimately, our goal is to launch in every state, positioning Fathom to capture an important share of the first-time homebuyer market and drive meaningful revenue and EBIT growth.

Second, we're expanding the Real Results Team, our lead generation and qualification program, after proving highly effective within the Elevate program. Real Results is now being rolled out company-wide to help agents access vetted, high-quality leads. This program shortens sales cycles, boosts conversion rates, and drives higher productivity, all while creating a more scalable growth engine for the company.

Third, we established a strategic partnership, with By Owner providing Fathom with access to the for-sale-by-owner market, which currently represents approximately 6% of all U.S. home listings. By Owner tracks over 500,000 visitors per month and processes these through its websites.

Including buyers Sellers and renters analysts estimate their approximately 20% off for sale by owner listings, eventually convert to full service representation which which creates a significant opportunity for our agents. Through this partnership by owner, will refer motivated, sellers and buyers of the fathom, network of agents and lenders, expanding our reach and creating additional valuable growth channels.

Collectively, these initiatives demonstrate our commitment to delivering measurable results for our agents and customers by continually enhancing our technology platform and forming strategic partnerships. We are improving efficiency, simplifying transactions, and creating sustainable, diversified growth opportunities. As you can see, our investment of human resources and capital into strategy is translating to consistent operational execution, stronger engagement across our agent base, and accelerating contributions from our businesses with that momentum. Let me turn it over to Daniel Weinmann, our Senior Vice President of Finance, who will walk through the financial results and provide additional insight into segment performance and the profitability trends. Daniel.

For the third quarter of 2025, total revenue was $115.3 million, a 37.7% increase year-over-year compared to $83.7 million. The increase for the third quarter of 2024 was driven by a 39% increase in brokerage revenue, reflecting higher agent production and continued expansion of our brokerage network. In addition, our mortgage and technology segments contributed modest year-over-year growth, including the initial contribution from new third-party licensing fees within our technology platform.

Gross profit. Increased 39.1% in the third quarter of 2025 compared to the same period in 2024, primarily driven by higher transaction, volume and revenue growth.

Gross profit margin remained consistent at 8.3% for both periods, reflecting pricing stability and cost discipline, as increases in agent-related commissions and cost of revenue scale proportionally with revenue growth.

Technology and development expenses were $1.8 million for the third quarter of 2025, compared to $1.7 million for the same period in 2024. The $100,000 increase reflects continued investment in our technology platforms, including new capabilities within Intelligent Agent and enhancements to our Elevate program.

General and administrative expenses totaled. 8.3 million for the third quarter of 2025 compared to 8.1 million for the same period in 2024.

The 200,000 increased reflects modest increases in personnel and administrative support costs while the company continued to discipline spending across the organization.

Marketing expenses were $1 million for the third quarter of 2025 compared to $1.4 million for the same period in 2024, primarily due to a shift towards more efficient conversion-focused marketing channels and reduced broad-based advertising spend.

Our GAAP net loss for the third quarter of 2025 was $4.4 million, or $0.15 per share, compared to a net loss of $8.1 million, or $0.40 per share, for the third quarter of 2024.

The improvement in net loss was primarily driven by higher revenue and operating leverage in the current period, as well as the absence of approximately $3.1 million in litigation contingency expense recognized in the prior year quarter. This was partially offset by $2 million in litigation contingency expense recognized in the third quarter of 2025.

Adjusted EBITDA, a non-GAAP measure, was $6,000 for the third quarter of 2025 compared to a negative $1.4 million for the same period in 2024. The improvement was primarily driven by higher revenue and improved operating leverage, as the increase in transaction volume resulted in a proportionate increase in gross profit. In addition, lower marketing spend and continued cost discipline contributed to the improvement in adjusted EBITDA year-over-year.

Now, let’s walk through the results of our individual business segments. In more detail, we will start with Brokerage.

Revenue for The Brokerage segment was $109.2 million for the third quarter of 2025, an increase of 39% compared to the prior period, primarily driven by the addition of My Home Group.

Which was acquired in November 2024 and contributed significantly to transaction volume and commission income. The increase also reflects Mater's organic growth from our existing agent base, supported by expanded market coverage.

We entered the quarter with 15,371 agent licenses, an increase of 24.1% compared to 12,238 in the same period of 2024, driven primarily by the addition of agents from My Home Group, as well as continued success in attracting and recruiting.

Containing agents through competitive commission structures, enhanced support services, and targeted recruitment efforts.

The gross profit margin for the Brokerage segment was 6% for the third quarter of 2025, consistent with the prior year period, as higher transaction volumes from the addition of My Home Group and modest organic growth were offset by a proportional increase in commission expenses and other agent-related costs, resulting in stable margins year-over-year.

25, an increase of approximately 800,000 compared to the same period in 2024.

Primarily driven by higher revenue and ongoing cost management initiatives.

Our mortgage business.

The revenue for the mortgage segment was $3.5 million for the third quarter of 2025 compared to $2.9 million in the prior year period. The increase was primarily due to higher funded loan volume, supported by a more favorable interest rate environment and increased activity. Adjusted EBITDA for the mortgage segment was $161,043 for the quarter of 2025 compared to a loss of $319,000 in the same period of 2024. The improvement was primarily driven by higher funded loan volume and improved operating leverage as increased revenue flowed through while fixed operating costs remained relatively consistent year-over-year.

Revenue was $1.8 million for the third quarter of 2025, an increase of 28.6% compared to $1.4 million in the same period of 2024. This growth was driven by strong organic growth from increased auto volumes, the expansion of relationships with existing agents, and agent walkovers. Additionally, contributions came from targeted marketing initiatives and process enhancements that improved closing efficiency.

And capacity.

Adjusted EBITDA for various titles was a loss of $191,000 for the third quarter of 2025, compared to a loss of $92,000 in the same period of 2024. Despite a 28.6% increase in revenue year-over-year, profitability declined due to higher operating expenses associated with supporting transaction growth, including increased personnel onboarding costs and other investments to expand capacity.

Our technology business third-party revenue was $829,000 for the third quarter of 2025 compared to $7,855 for the same period in 2024. The increase primarily reflects the initial recognition of licensing fees from external users of our data and technology platform, representing the first quarter in which the third-party arrangements contributed to revenue.

Ebitda was $488,000 for the third quarter of 2025 compared to $152,000 in the same period of 2024. The improvement was primarily driven by the addition of a new third-party licensing revenue stream as well as improved operating leverage relative to total revenue.

Focusing on our balance sheet and capital allocation, we continue to actively manage our balance sheet. In light of current real estate market conditions, we enter the quarter with $9.8 million in cash, which includes $6.5 million in proceeds received in September 2025 from our public stock offering.

No shares were repurchased during the first 9 months of 2025 under the company's authorized stock repurchase program.

That concludes my remarks on the financial results. I will now hand it back to Marco to share more on our strategic initiatives and outlook.

Thank you, Daniel, as Daniel highlighted, for the initial performance. This quarter reflects both the strength of our core business and the early benefits of our strategic initiatives.

I would like to take a few minutes to discuss the broader housing market and our outlook for 2026.

The residential real estate market is beginning to show early signs of recovery.

Uh, what encouraging indicators include the narrowing spread between the 10-year Treasury yield and the 30-year mortgage rate, which is currently around 205 basis points.

Combined with the growing expectations of lower Federal Reserve rates and modest declines in home prices. In some states, these factors Point towards and improve affordability and a gradual reopening of the housing market.

We're also encouraged by the potential agreement in reopening of the government. Although, thus far, we have not seen a significant negative effect on the real estate industry. We believe that we believe that a prolonged government shall would have a negative effect in Q4.

This program is already driving higher tax rates and incremental revenue across multiple lines of businesses.

Recent larger acquisitions in the market have created some uncertainty within the brokerage landscape and highlight the ongoing trend toward consolidation. The environment reinforces the need for brokers to deliver exceptional value and elite service areas where Fathom continues to lead with our agent-centric model and integrated platform.

We anticipate that small brokers, as we explore opportunities to merge with or partner with larger firms.

Now, looking ahead in 2026.

That is well positioned to capitalize on these trends. Our priorities remain clear: first, to continue diversifying revenue streams with higher-margin products and services; and second, to expand flagship programs like Elevating Star.

To threaten and attach rates across mortgage and title. Finally, to license our technology platform to small brokers as teams to scale efficiently and profitably. These initiatives combined, with our commitment to discipline and execution, are expected to drive further margin expansion and position us to achieve operational cash flow break-even by the second quarter of 2026. In short, momentum is building across our platform, and we are entering 2026 with confidence.

It is in focus that we see tremendous opportunity to build on our foundation, deepening engagement and creating long-term value for our shareholders. Before we open the line for questions, I want to express my sincere gratitude to our team and partners for their relentless focus, to our agents for their trust and commitment, and to our shareholders for their continued support and confidence in our vision. With that, we're ready to take questions.

Thank you, sir. We will now be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

And our first question will come from Dillon Heslin with Roth Capital Partners.

Hey, thanks for taking my question.

To start on Intel agent licensing, you talked about 18,000 brokerages. You identified, I think, um, could you sort of go into a bit more detail on your go-to-market strategy on that? How many are you potentially in talks with or have approached you?

Yeah, sure. Thank you Del uh for your question. Uh, yeah. They're processing me about 18,000 Brokers between 25 and 500 agents. Um, and we already our our go to market strategy, really so sorry. You know, we already built.

Several different relationships across the industry over the last, you know, 40 or 5 years. Uh, we probably have relationships with a few hundred, uh, small Brokers already also through our, um, partnership, uh, with uh, uh, live by live by has approximately another 200 brokerages as customers. So when you combine, um, all of this you're looking at 300 or 400, uh, small Brokers that we have our relationship with. So, uh, we'll begin with those and then we'll continue marketing to all 18,000 and demonstrating our value proposition to them as we have done for my home group and, and Sovereign Partners as well. So, um, and we'll begin that. Um, we already have begin that in terms of discussions, but that will accelerate in q1 of 20 of next year.

Thank you. And just just as a follow-up could, could you call on a tax rates, this, this quarter? Um, and then with, with start real estate, uh, they seem to have quite High attached rates. Um, what do you think is the possibility of of, of, obviously, you're trying to expand that, but but keep the attached rates where they're at on that business, as you take.

Get into more states and just scale.

Process that does that um his attach rate is over. 70%. He currently is in Colorado. We're already are expanding into 3, other states and we believe that we'll be able to expand to every state in the country. Um, we do anticipate a tax rates to continue to be that High. Um, and we've seen that because he already started uh, in Utah and is already seeing that attach rate because Bill is a byproduct of the of the process that he created. And so he's going to we're going to go basically going to replicate that across the country and and, and that's really his Special Sauce that to run this program. So to answer your question, we do anticipate significantly growing the program and we do anticipate to have attached rates, uh, over 70%, have instead that we continue to improve the attach rate, attachment rate for elg across the country as well, um, and about 50% of the EOG business coming from fathom.

The Zog continues to grow. We continue to see that. And the same thing with the various titles. So, you know, I think the combination of what we have done with EOG virus, combined with Start Realty, I think overall we see attachment rates continue to grow next year and beyond.

Great. Thanks. Marco.

Thank you, Dylan.

And at this time, this concludes the question and answer session. Thank you for joining fathoms. Third quarter earnings call. You may now disconnect