Fathom Holdings Inc. (NASDAQ:FTHM) Q3 2024 Earnings Call Transcript

Fathom Holdings Inc. (NASDAQ:FTHM) Q3 2024 Earnings Call Transcript November 9, 2024

Operator: Good afternoon, and welcome to Fathom Holdings Third Quarter 2024 Conference Call. Joining us today are the company’s CEO, Marco Fregenal; and CFO, Joanne Zach. 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 outlined 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 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 EBITDA, a non-GAAP financial measure as defined by SEC Regulation G. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure is included in today’s press release, which is now posted on Fathom’s website. With that, I’ll turn the call over to Fathom’s President and CEO, Marco Fregenal. Sir, you may proceed.

Marco Fregenal: Thank you, operator. Good afternoon, everyone, and welcome to Fathom Holdings Third Quarter 2024 Conference Call. Before diving into our results and new developments, I want to express my deepest gratitude to the Fathom family. You have shown unwavering commitment and resilience in a year filled with considerable challenges, marked by fluctuating mortgage rates, shift in buyer behavior, economic pressures, lawsuits and new rules that have changed the industry. Your exceptional efforts have propelled us forward building a strong foundation that positions us for even greater success in 2025. Our team’s adaptability and innovative spirit has set us apart despite a lower housing market shaped by persistent affordability issues, tighter lending standards and a highly competitive landscape.

We haven’t simply weathered these conditions. We have leveraged them as opportunities to refine our strategy, seek new growth avenues and evaluate our standards. 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 position Fathom to capture growth and conditions improve, setting the stage for sustained long-term success. Before we review our third quarter results, let’s discuss the significant development of the acquisition of My Home Group. As discussed in prior quarters, one of our goals was to return agent growth to 25% plus annually. My Home Group is a top Arizona-based brokers ranked 27th in the nation by transaction volume.

This acquisition makes a significant step in expanding our national footprint and strengthening our presence in Arizona’s rapidly growing real estate market. With over 2,200 agents joining from My Home Group, the Fathom family has grown to approximately 14,500 agents nationwide. Completing over 12,000 transactions annually, My Home Group has built a strong reputation in Phoenix and surrounding markets. Given their established and highly respected local brand and reputation we have retained the My Home Group name. The founders, Jereme Kleven and Mark Hutchins will continue to lead their talented team. Founded in 2005, My Home Group has consistently been recognized for growth in innovation appearing on the Inc. 5000 list of the faster-growing companies for 7 consecutive years.

They have faster collaborative, growth-oriented culture that aligns closely with Fathom’s values, empowering agents to expand their networks, strengthen their brands and advance their careers. For competitive reasons, we will not discuss what 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. Arizona 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 enable cross-selling opportunities for Fathom’s mortgage and title services, enhancing transaction experiences from My Home Group’s clients, which we believe will drive additional revenue across our service platforms.

Together, we believe we’ll build on our Southwest expansion develop a robust network of agents and work towards sustainable nationwide growth. Many reasons led Jereme and Mark to join the Fathom family, such as our shared values, revenue share capabilities, technology and the opportunity to integrate ancillary services into their operation. Going forward, we believe this acquisition will add approximately $100 million in annual revenues in 2025 and significant EBITDA for our company. Strategic acquisitions like My Home Group, which expands our geographic footprint and provide cross-selling opportunities will continue to play an essential role in our company growth. Our objective is to integrate partners who will use and see substantial transaction and revenue growth as they join Fathom platform, while adding positive EBITDA.

Total revenue for third quarter was $83.7 million, a decrease of about 10% from $93.5 million in Q3 of 2023. While comparing the quarter without revenue from Dagley Insurance Agency, the decrease in revenue was about 9%. Adjusted EBITDA, and non-GAAP measure for the third quarter of 2024 total loss of $1.4 million compared to a loss of $250,000 in the third quarter of 2023. Fathom completing approximately 9,331 transactions in the third quarter, a decrease of approximately 9.5% compared to third quarter 2023. Fathom’s real estate agent network grew by 9.3% to approximately 2,383 agent licenses as of September 30, 2024, from approximately 11,333 on September 30, 2023. Of course, after the quarter, we added an additional 2,200 agents from My Home group, bringing Fathom’s total base agent base to over 14,500.

During Q3, we made a strategic decision to invest in sales and marketing to promote our new commission plant, Fathom Max and Fathom Share, which we introduced in Q2 of 2024. Second, we invest in additional employee talent to help with their acquisition of My Home Group. Finally, the swing in interest rates during the last month of the quarter significantly negatively impact our real estate transactions and mortgage profitability. Our 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. Moreover, adding My Home Group should significantly increase restate transactions in Q4, increasing revenue and EBITDA starting in Q1 of 2025.

This past quarter, Fathom Realty opened operations in New York, with plans to expand into all 50 states by the end of 2025. Fathom Realty is now in 43 states and Washington, D.C. 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. I would like to turn to our ancillary 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 a strong growth trajectory in the third quarter of 2024, with revenues rising by 52% 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 our tax rate. 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 $319,000 and compared to a loss of $219,000 in the same quarter last year. Looking ahead into 2025, which you see our mortgage business increase as we leverage growth in transactions from My Home Group acquisition. Now let’s turn to our Title division, which saw notable growth in the third quarter.

Verus Title generated $1.5 million in revenue compared to $834,000 in Q3 of last year. This represents a 71% increase in revenue, reflecting steady momentum in this critical segment and reinforcing our value to — and our ongoing investments in ancillary services. Adjusted EBITDA this quarter was $93,000 loss compared to $23,000 loss in the same period last year. We continue to make investments and changes in Verus Title to prepare the company for anticipated growth in 2025, adding seasoned industry leaders, Monica Schroeder as President; and Penelope Vockel, as Chief Operating Officer, of Verus Title, further reinforces our commitment to Verus Title’s growth. Monica brings over 20 years of experience, including leadership in scaling a national title agency.

Her expertise in technology and client-focused solutions aligns perfectly with our mission of Verus Title, and we are confident her leadership will drive new levels of operational excellence and expand reach. Penelope, now Verus Title’s COO, 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, Penelope brings a strategic perspective that has already proven invaluable. Together, Monica and Penelope are well positioned to lead Verus for its next phase of growth, fostering innovation and advancing our service standards. The success we’re seeing in our Title division demonstrates how Fathom’s integrated real estate services platform not only enhancing the experience for agents and clients but also expands and diversifies our revenue streams.

By offering a cohesive suite of services will create multiple touch points to engage clients and reinforce agent satisfaction strengthening our entire ecosystem. We are confident that Verus Title’s performance in Q3, coupled with our expanded leadership and market reach points to this division’s potential. As we refine operations and continue growing, our strategy of building a fully integrated full-service real estate platform is providing its value. Our business segment, supported by a strong leadership team, contribute meaningfully to Fathom’s financial health and growth trajectory. We’ve achieved them exemplified the long-term opportunities to create and retain our service offerings as we build sustained value for agents, clients and shareholders.

At the beginning of 2024, we outlined several key objectives, including strengthening our balance sheet. We strengthened our balance sheet in May by selling Dagley 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 Chairman, enabling us to fast track target acquisitions and agent walkover. This capital injection reflects strong shareholder confidence in our vision, our low fee model and reimagine revenue share program. We ended Q3 with $13.4 million in cash and given that our acquisition of My Home group did not significantly impact our balance sheet, we feel very confident of our cash position going forward.

In August, we launched our 2 new revenue share commission plan, Fathom Max and Fathom Share. These 2 new plans were designed to boost agent recruitment and retention, while fostering sustainable growth and long-term profitability. Fathom Max plan of offers an industry low $465 transaction fee with a $9,000 annual cap. While Fathom Share plan offers a highly competitive traditional commission split of only 12% with a $12,000 cap. Both plans offer revenue share for our agents with Fathom Share plans revenue share opportunity being twice as lucrative as Fathom’s Max plan. This model aligns well with a high commission approach and adds a compelling income structure for agents seeking flexible and increased earnings potential. Since the launch feedback from both turning perspective agents has been overwhelmingly positive.

While it has been less than 3 months since we launched a new plant, we have seen 95% of new agents joining the Fathom Max plan and 5% joining the Fathom Share plan. However, we’ve seen significant interest in the Share plan from top agents and team leaders who have historically been slower to move over the — due to open transactions with their current brokerage. We believe we will see increased participation in their share plan as we move into 2025. One of the many aspects that make our commission model are attractive is the fact flexibility for agents to choose between the 2 plans and the ability to change plans once per year as their business changes. In any other brokerages if an agent wants a better split they must leave the company for another lower price competitor.

Our new revenue share commission plan addresses this issue, which we believe will help us improve agent retention going forward. As discussed earlier, the revenue share program was attributable to My Home Group acquisition. I have personally spent the last few days with the My Home team agents, 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 from their professional networks. I’m most excited to share that Fathom Realty recently achieved the highest satisfaction rating among the top 40 real estate companies in the U.S. according to a recent career data survey, with an impressive 4.7 rating on Glassdoor, highlighting the risk media.

This accomplishment reflects our commitment to fostering a supported and empowering environment for agents and employees. I am grateful to Fathom Realty COO, Samantha Giuggio, her team and our managing brokers whose dedication to agent success has made a positive impact company-wide. This recognition is a testament to our agent-first business model, which includes industry-leading compensation plans like Fathom Max and Fathom Share unparalleled training, innovative technology and a collaborative culture that equips our agents to succeed and deliver exceptional client service, by investing in agent satisfaction and professional growth, we’re creating a win-win environment where agent success directly contributes to Fathom success helping us build a brand that stands out in the industry.

I’d like to take a moment to discuss an important recent development for Fathom Realty and our ongoing focus on transparency and integrity in our business operations. In September, Fathom reached a nationwide settlement related to the Burnett v. National Association of Realtors et. Although we believe this settlement amount is immaterial in GAAP terms, we felt it was important to disclose this information to ensure transparency with our investors and stakeholders. As part of this settlement, Fathom Realty will contribute $500,000 to a settlement fund and another $500,000 by October 1, 2025, with a final payment of $1.950 million by October 1, 2026. We’re confident in our ability to make this payment without impacting ongoing operations or our financial help.

Our decision to settle reflects our commitment to our agents and their clients. Fathom Realty has built on the principal delivering the highest level of support to our agents, and we see the settlement as the most responsible path forward. It will enable our agents to focus fully on their clients without distraction of prolonging litigation. To be clear, this settlement is not an admission of liability or acknowledgment of any claims against us. We maintain that Fathom did not participate on any conspiracy to inflate commissions. And given our flat fee model, we had no incentive to do so. Resolving this matter now allows us to avoid ongoing legal costs and the time demand of the executive team, freeing us from continued growing our business and supporting our agent success.

As always, our focus remains on delivering excellent service to our agents, clients and customers. We’re moving forward. We’re needing stronger dedication to empower our agents to ensuring that they have the resources to excel. Before we turn to the financials, I want to recognize and congratulate Joanne 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 2021. In her impact on our financial strategy has been nothing short of exceptional. With over 25 years of experience in finance, spanning in public and private sectors and industries ranging from life science to manufacturing, Joanne brings a wealth of knowledge and leadership that aligns perfectly with our vision of Fathom’s growth.

Having worked closely with Joanne over the past 3 years, I have heard dedication, strategic insight and commitment to advancing Fathom’s goals firsthand. Her contributions have not only enhanced our financial efficiency but also position us to better navigate an ever evolving market. As we move forward, I’m confident that Joanne’s leadership as CFO, will straighten our financial framework and drive continued success. Joanne, thank you for your hard work, and partnership, I could not be more thrilled to see you in this new role. With that, I’ll turn the call to Joanne.

Joanne Zach: Thank you, Marco, for the kind words and the confidence you have placed in me. I’m truly honored and dedicated to take on this role at Fathom. 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. As we enhance our financial strategies and leverage our technology, I’m excited to drive Fathom’s growth, innovation and value creation for our clients agents, partners, employees and shareholders. 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.

With that, let’s dive into our financial results. Third quarter total revenue was $83.7 million, a 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 3, 2024. 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. 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. Technology and development expenses were approximately $2 million for the 2024 third quarter compared to $1.7 million for the third quarter of 2023.

The approximate $0.3 million increase was primarily due to our continued investment in our technology platforms, including the build-out for our new revenue share program. General and administrative expense totaled $8.7 million for the 2024 third quarter compared to $9.8 million for the third quarter of 2023. The decrease was primarily due to the absence of costs attributable to the sale of our insurance segment business effective May 3, 2024. Marketing activity expense stayed consistent at approximately $0.8 million for both the third quarter of 2024 and the third quarter of 2023. GAAP net loss for the third quarter of 2024 totaled $8.1 million or a loss of $0.40 per share compared to a loss of $5.5 million or a loss of $0.34 per share for the third quarter of 2023.

The increase in net loss was primarily due to recognizing the $3.5 million NAR settlement contingency and related legal fee expense. 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 $0.3 million in the third quarter of 2023. The decline in adjusted EBITDA is primarily due to a decrease in brokerage revenue and increased costs in growing our ancillary businesses. Now I’ll spend time reviewing our business segment results in more detail. 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.

There were 9,331 real estate transactions during the 3 months ended September 30, ’24, compared to 10,303 transactions during the 3 months ended September 30, 2023. Real estate transactions decreased due to the continuation of higher home prices and uncertainty surrounding mortgage interest rates. Fathom is resolved to address this decline and return to meaningful growth by continuing its strategic recruiting efforts, powered by its most recently announced new revenue share models and a service commitment to its agent. Gross profit margin for our Real Estate division improved to 5.7% from 5.1% for the third quarter of ’24 compared to the third quarter of ’23. The increase in margin was largely due to our increasing our agent’s annual fee from $600 to $700 and to implementing our new high-value property fee commencing January 1, 2024.

Adjusted EBITDA income in the Real Estate division was approximately $0.8 million in Q3 of 2024, a decrease of $0.8 million compared to adjusted EBITDA of $1.6 million in Q3 of 2023. This was largely due to the decrease in transactions in 2024 into the commencement of internal charges from our Technologies division to Fathom Realty for transaction management and CRM services provided. We are very excited about the significant improvement made in our mortgage businesses revenue. 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 our strategic increase in our loan officer base. Mortgage adjusted EBITDA loss for Q3 2024 of $0.3 million was relatively consistent with Q3 of 2023 due to our strategic investments and planned future growth.

Verus Title had revenues of $1.4 million for the third quarter of 2024 compared to $0.8 million for the third quarter of 2023, an increase of 71%. The increase in revenue was driven by organic growth and walkover. Verus Title’s adjusted EBITDA for the 2024 third quarter was a loss of $0.1 million versus close to breakeven for Q3 2023. This is again due to our strategic investments and planned future growth. Verus Title heads into Q4 still very much in the growth model. With the acquisition of My Home Group, Verus expects Q4 to start to record revenues from transactions in Arizona. Verus has also recently expanded operations into Oregon and its planned expansion increase for the rest of the West, including Utah, Nevada and Colorado. Moving to our Technology segment.

Third-party revenues remained relatively constant at $0.8 million in Q3 of 2024. We are unceasingly building enhancements to our technology platform to better serve our agents and drive revenues. LiveBy has made significant strides in product development and customer engagement. The company launched a new version of its website, showcasing its commitment to improving user experience and increasing inbound leads. We continue to keenly focus on our balance sheet given the dynamic real estate market conditions. In September 2024, the company issued senior security convertible promissory notes in the aggregate principal amount of $5 million to an existing shareholder who owns more than 5% of Fathom’s common stock, and to the Chairman of the company’s Board of Directors.

We ended the quarter with a cash position of approximately $13.4 million, which combined with the $0.7 million in cash to be received over the next 24 months from our sale of DIA strongly positions us for implementing our growth strategy. Regarding our financial outlook. In light of the uncertainty of interest rates and yet to be determined impact on future revenues and adjusted EBITDA from our recently completed and planned acquisitions, along with our new revenue model offerings, the company has elected to withhold guidance for the fourth quarter ending December 31, 2024. Management plans to reassess and potentially reinstate guidance expectations in the first quarter of 2025, allowing time to evaluate the performance of these new models and the impact of our acquisition.

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

Marco Fregenal: Thank you, Joanne. Looking forward, our focus remains squarely on increasing revenue, agent count and transactions by over 25% annually. We believe we can accomplish this by attracting top-tier agents, teams and brokerages to a stronger-than-ever value proposition with our new agent commission plan. Tailor to the current market dynamics, these plans aren’t just about reshaping Fathom, they are poised to implace the entire industry. At Fathom, we have worked hard to create a premier destination for agents and our Fathom Max and Fathom Share plan exemplifies that commitment. These offerings allow agents to maximize their earnings combined an industry-leading flat fee commission structure with an innovative revenue share program.

Our vision is clear, establish Fathom Realty as a leading brand in every market we serve, reaching 50 states by 2025 with a new plan as a critical driver of this expansion. Execution is essential to achieving this vision. Our industry-leading commission structure and revenue share program are a source of competitive advantage and remain at the core of our growth strategy, equipped 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. These advantages, along with our experienced management team, strategic insight, position us well for sustained growth in the real estate industry. I’d like to express my gratitude to the entire Fathom team.

Your dedication and hard work, particularly around implementing our transformative plans and essential to our growing success. Together, we’re not just adapting to change,we’re driving it with a clear strategy, commitment to innovation and unwavering agent-focused approach. We’re positioned to lead the real estate industry into a new era of growth and profitability. Over the past months, I’ve doubled down on bringing in and promoting the right people. As Jim Collins wrote in his excellent book, “Good to Great”, building a resilient, high-performing organization, it starts with getting the right people on the bus. With the recent promotions of Joanne and Penelope and additions as John, Monica, Mark and Jereme, our new agents, I believe we have a strong team that can lead during our anticipated growth in 2025 and beyond.

We remain committed to prudent financial management, 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, we are laser focused on driving results over a new commission model and integrating the My Home Group team into the Fathom family and future team and brokerage acquisitions as we are current discussions with. With planned investments in these areas, we anticipate modest transaction growth in Q4 and given the positive impact of My Home Group and other future transactions, we anticipate 25% agent growth in 2025, and we believe we should lead to adjusted EBITDA profitability in 2025.

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 are ready to take questions.

Q&A Session

Operator: [Operator Instructions]. Our first question comes from Darren Aftahi

Dillon Heslin: This is Dillon on for Darren. First, to start, on the My Home Group acquisition, could you give us some more color? Did you approach them? Did they approach you? And then like what else do you see that’s out there on that front? It seems like that organization specifically skewed a bit higher than your existing agent base in terms of productivity? Do you think there’s other options out there? Or just how are you thinking about sort of your walkover approach or first acquisition?

Marco Fregenal: Dillon, thank you for your question. We were introduced to the My Home Group by Remo, which is a real estate mergers and acquisition company that we’ve been working with. And we introduced them about 6, 7 months ago. Initially, the conversation was just getting to get to know each other. And after we continue that discussion, it was so clear that it would make sense for us to merge. And I described many of the reasons why they felt compelled to do that. They are a great organization. They have a higher productivity in terms of transactions per agent. And so we feel very blessed to be able to work with them now. We are seeing — 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 seeing an increase in number of companies. We are, as I discussed in my — in the earnings call, we are in other discussions with other companies, and that’s why we have confidence that we’ll be able to grow agent count by 25% going forward given that these discussions and the high interest from brokerages, teams, both in terms of walkovers and in terms of acquisitions.

Dillon Heslin: Great. And as a follow-up, I know you’re working on your recruiting efforts. Can you talk about a little bit what’s working and what you’re doing differently than before? And then is there anything you think you can do maybe on the educational front or technology side of things that can help your existing agents continue to be productive despite some of the market trends?

Marco Fregenal: Absolutely. So yes, we certainly have seen an increase in agents interested in learning about our revenue share model. As you know, our revenue share model is unique because we have 2 different plans, right? Unlike most companies out there that have revenue share models with just one plan, a traditional split. We have a program that has both, a flat fee and a traditional split. And so a lot of agents are interested in learning, and we are spending a lot of time educating prospective agents on that. In terms of helping our agents 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 Fathom Summit next week. Some of those will be announced next week.

And all these programs are designed to help our agents increase their business. They are branding programs and marketing programs, and we certainly look forward to implementing these in the next 90 days. And we believe that they would be incredibly helpful to help our agents increase that. I will also point out, as I did in our earnings call, then when we look at October numbers, our October transactions compared to last year are pretty much right on in terms of the — and so we are — the efforts that we began implementing in Q1 of this year to focus on higher-producing agents is beginning to pay off. And so now that as we look into Q4, we believe that we’ll see an increased number of transactions per agent because of the quality of the agents that we brought on in the beginning of this year.

And so I think we’ve sort of turned the tide in terms of agent productivity. We’re about to announce some specific programs to do that and certainly the addition of My Home Group all those will contribute to an increased number of transactions in Q4 and beyond into next year.

Operator: Our next question comes from Raj Sharma with B. Riley.

Raj Sharma: I just wanted to understand, congratulations on the acquisition. The addition of these agents, you just briefly kind of touched upon, Marco, that can you talk about how much was paid or was it cash? Was it — and how ongoing compensation incentives are structured for an agents groups coming on.

Marco Fregenal: Sure. For competitive reasons, given that we are in negotiations with several other companies we certainly don’t want to disclose what the payment was. What I will share is that the cash component was minimal in terms of the total purchase price. Both Jereme and Mark believe in the future of the combined companies until the majority of the purchase price was in stock, and it was paid over a couple of years. And so we feel — I think both parties feel very good about the transaction. And because, again, we are engaged with several other companies we prefer not to disclose what the total price is. So to answer your question in terms of potential future acquisitions, yes, we are engaged in a variety of conversations with other companies.

Since we announced revenue share, we’ve been approached by a great number of small brokers, large brokerages, teams and those conversations will continue. This is critical to us as we return to 25% agent growth on an annual basis. And that’s how we feel confident that we’ll be able to get back to those numbers.

Raj Sharma: That’s very helpful. And so is it fair to assume that the 25% growth in agents you are anticipating starts pretty soon, and that the payment for the growth in agents would be similar, minimal cash and mostly stock.

Marco Fregenal: Well, we’re certainly feel that way, right? I mean, I think it’s — when you enter negotiations, there are — everyone is a little different. But we certainly won to bring in companies where the current owners believe in the long-term value that this will bring, right? Therefore, a significant higher percentage in stock, it’s advantageous to both parties. In 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 forward into 2025, I think starting in Q1, you’re going to see an increase in agent count as well. And so we feel fairly confident that, that 25% agent growth will continue as we enter into Q1 and beyond.

Raj Sharma: Got it. And then, Marco, you mentioned that this would add an incremental $100 million in revenues starting 2025. This is $100 million from the My Home.

Marco Fregenal: That’s correct. Yes. When you look at the total number of transactions and revenue per transaction, this acquisition would have roughly $100 million in revenue for 2025.

Raj Sharma: And spread in a similar cadence to the existing business or through the year?

Marco Fregenal: That’s correct.

Raj Sharma: Also, the assumptions you’re using for the $100 million are sort of similar agents — transactions for agents and commission per transaction or basically, it’ll be higher?

Marco Fregenal: No. My Home Group has a higher productivity. My Home Group has done a very good job of having a higher productivity transactions per agent. So that’s incredibly attractive. Second, their transactions are a bit higher. The Arizona market is a hot market. And so revenue per transaction there — the average transaction there is a bit higher than ours because, again, we’re a national company, right? So we are in a lot of markets in which the transactions are — the average transaction is a bit lower. So — but focus on the Arizona market, they have a higher transaction price per transaction in a higher productivity transactions per agents. So both of those are going to have a significant positive impact in the overall performance of Fathom.

Raj Sharma: Got it. And then just lastly, Marco, is it too early to comment on or pontificate on the impact of the cuts today, the earlier cut on your transactions?

Marco Fregenal: Sure, the 25 basis cut that was done today. So it’s probably a little too early, right? We know what happened after 50 basis cut a couple of months ago. And the 10-year note went up. And I think everyone anticipated it to go up a little. I don’t think anyone — well, I shouldn’t say anymore. But I think most of us did not anticipate rates to go up so much higher. And so given that, I would hold judgment on what the impact will be on the 25 basis points. I think we have to see — I think the 10-year came down a little bit after that. I think that there’s some recent comments about how the new administration is going to affect the inflation. So I think there’s a lot of moving parts to this. We are going to assume that rates are going to be where rates are.

And our focus is going to be on growing transactions, therefore, growing revenue and consequently growing EBITDA. And we’re going to do that by accelerating our growth, getting us focused on growing our business by 25% plus per year, and then the rest will take care for itself. We don’t have control of interest rate I only have control about 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 as we continue to do that, it will take care of our profitability. So that’s our focus.

Operator: 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. Fregenal, for his closing remarks. Sir, please proceed.

Marco Fregenal: Thank you, everyone, for joining us today. We appreciate everybody’s focus. I certainly want to thank the entire team for all their hard work and continued commitment. As always, I’m available for calls. And I hope everyone has a great rest of the week and weekend. Thank you all.

Operator: 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.