John Campbell: I’m well. Thank you. I’m doing well. Thank you. Look forward to seeing you guys next week. On the brokerage additions, let’s stay on that topic real fast. Obviously, your press machine has been on fire lately. You’ve had a flurry of those additions. Josh, you referred to those as walkovers. I’m assuming at least the ones of late, those are all organic additions, so no cash or equity payouts.
Joshua Harley: I’m going to let Marco speak to that part of it.
Marco Fregenal: Yes. So it depends — John, a great question. It depends on the size. In some cases, there are some small cash part and some stock. But again, we are not making acquisitions. We can — we do implement some signing bonus for some of the larger ones to make the move. But it is a significant lower amount compared to a full acquisition. And so the cost is very advantageous for both sides, for them and for us. And so we’re beginning — as I mentioned earlier, we’ve seen our onboarding starts increase by 25% this quarter. And so it’s a combination of just single agents as well as a combination of smaller companies. So I do — we — both Josh and I do believe that this is going to significantly increase, and we’re seeing that already from the interest in having conversations. And this is pretty much across the country.
John Campbell: Okay. Makes sense. You guys, I’m sure, given the conditions, probably a little bit more of a price maker at this point. But I want to touch also on the agent count additions. I think in the press release, you might have outlined a couple of those. But maybe if you could shortcut us how much of those agent additions hit in the third quarter versus those agents coming over into 4Q?
Joshua Harley: The announcements we made on those press releases were all Q4.
John Campbell: All Q4. Okay. So that’s coming. Okay. Great. And then, Josh, you hit on this a couple of different ways, but as far as the trigger point, what exactly would you point to? Is that mostly macro driven, just prolonged pressures where people are seeking ways to help grow their business and maybe find ways to reduce costs, get better technology or is it maybe a little bit also of kind of growing fears around the legal landscape and potential large-scale industry changes?
Joshua Harley: Are you referring specific to the walkovers like the trigger point of why they would move over?
John Campbell: Right.
Joshua Harley: It really comes down to — there’s a lot of these broker owners if we’re going to be real. A lot of these broker owners that are — if the broker owner themselves have to be producing agents as well. So they may close 20, 30 homes a year on their own, and they’ve got 20 or 30 agents that are on their — in their company who each close 5, 10, 15 homes per year each, right? And so unfortunately, that the agents that they have in their team don’t close enough business for them to pay their bills. So that means they have to continue to also produce. And if their business is down 20% and our agents’ business is down 20%, a lot of them find themselves in a position where they were making some pretty decent money and now they’re actually losing money because they’re having to pay for an office space.
They’re having to pay for technology for all their agents. And they realize that, gosh, I’ve got 20 agents on my team, 30 agents on my team, and I’m actually losing money, because I’m having to provide them with leads and provide them with technology and provide them with training, provide them an office space. And so if they can shutter, if they can shed all of those expenses and move over to Fathom, and we can now compensate them to be the managing broker for those agents, especially in markets where we don’t already have a presence, like in Stockton, that group that came over in Stockton. We’ve got a presence nearby, but we’re not in Stockton. So now we’ve got great — a great operation there. So that — it’s really been coming down to money.
They just can’t make it on their own. And the option is in the most case to shut down or join forces. And joining forces just makes more sense versus giving up something they worked so many years to build.
John Campbell: Yes, makes sense. I feel like you’ve preached this message for the last couple of years. And unfortunately, it takes a fall out in the macro to see some of this come out. But I think a lot of it’s playing out as you’ve kind of called out. On the gross margin, maybe this is for Marco, but you’ve got a lot of moving parts there, below the surface, you’ve got the fee increases and whatnot. I was hoping you could help us kind of piece out why it’s sequentially declined as much as it did? And then I know again, a lot can change as you look out the next year, but maybe if you could give some kind of indication just broadly of what you’re expecting out of gross margins for next year?
Marco Fregenal: Sure. Gross margin for us is a little bit more complex than other companies because of all the ancillary businesses. And because as you recall, when agents reach a certain volume, they cap and then transactions go down to $150 from $550. So typically, Q3 and Q4, you’re going to see a little bit of reduction in gross profit for Fathom, right? Now we’ve said that before that over time, because agents are joining us throughout the year that they work itself out, right? So we will — we think the gross — the market sort of goes back to normal, right? And we can see going back to maybe 5 million transactions a year across the country and Fathom continues to grow. I mean we should see gross profit margins at 13%, 14%.
That’s kind of our goal to get to that number. If you look at gross margins now, we’re looking around 10.5%, 11%. But we would like to get to 13%, 14% gross margin. That will help once we also get our mortgage company and title company to adjusted EBITDA positive, right? Because what happens is once they get to adjusted EBITDA positive, as we mentioned earlier, we’re going to get — we’re going to be able to drive $0.70 on the dollar down to the bottom line, right? And so our gross profit continues to increase. So we think longer term, a couple of years, we can get to the — between 14%, 15%, something like that, and we’ll feel really comfortable about that. We might be able to get higher than that, but that’s kind of — when we budget and we forecast, that’s the number we’re looking for, 14%, 15%.
John Campbell: Okay. Very helpful. Thank you.
Operator: [Operator Instructions] The next question is from Darren Aftahi of ROTH MKM. Please go ahead.
