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01/11 03:43
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call showed strong financial metrics with a 37.7% revenue increase and improved EBITDA, but the lack of share repurchases and a $2 million litigation expense weigh negatively. Strategic plans like Elevate and partnerships could support growth, yet uncertainties in real estate and execution risks persist. Q&A insights were positive with clear management responses, but no groundbreaking news. Given these mixed factors, the stock price is likely to remain stable, leading to a neutral sentiment.
Revenue $115.3 million, a 37.7% increase year-over-year compared to $83.7 million for the third quarter of 2024. The increase was driven by a 39% increase in brokerage revenue, reflecting higher agent production and continued expansion of our Brokerage network.
Gross Profit $9.6 million, representing a 38.5% year-over-year increase. This increase was primarily driven by higher transaction volume and revenue growth. Over 50% of the increase in gross profit flowed directly to EBITDA, demonstrating the power of the operating model and disciplined expense management.
Adjusted EBITDA $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.
Net Loss $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 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, partially offset by $2 million in litigation contingency expense recognized in third quarter of 2025.
Brokerage Revenue $109.2 million for the third quarter of 2025, an increase of 39% compared to the prior period. This was primarily driven by the addition of My Home Group, which was acquired in November 2024, and modest organic growth from the existing agent base supported by expanded market coverage.
Mortgage Revenue $3.5 million for the third quarter of 2025 compared to $2.9 million in the prior year period, reflecting a 20.7% increase. The increase was primarily due to higher funded loan volume supported by a more favorable interest rate environment and increased buyer activity.
Title Revenue $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 order volumes, the expansion of relationships with existing agents, and targeted marketing initiatives.
Technology Revenue $829,000 for the third quarter of 2025 compared to $785,000 for the same period in 2024. The increase primarily reflects the initial recognition of licensing fees from external users of the data and technology platform.
Elevate Program: A concierge-level growth program designed to help agents increase productivity and earnings through branding, marketing, lead generation, transaction support, and coaching. It offers a competitive 20% commission split and has onboarded over 165 agents with 45 more in the pipeline. Gross profit for Elevate transactions is 5x higher than average.
START Real Estate: Acquired to serve first-time homebuyers. START is headquartered in Colorado with 70 agents and is expanding into Utah, Arizona, and Nevada, with plans to enter 15 states next year. Expected to generate over 1,500 additional transactions in 2026 with strong margins and high mortgage attachment rates.
Real Results Program: A lead generation and qualification program being rolled out company-wide to provide agents with high-quality leads, boosting conversion rates and productivity.
Verus Title Expansion: Expanded into Arizona and Alabama, demonstrating the ability to replicate success in new markets. This expansion is part of a broader strategy to increase growth.
ByOwner Partnership: Strategic partnership providing access to the for-sale ByOwner market, representing 6% of U.S. home listings. ByOwner will refer motivated sellers and buyers to Fathom's network, creating a new growth channel.
Revenue Growth: Achieved 37.7% year-over-year revenue growth, driven by brokerage and ancillary businesses. Gross profit increased by 38.5%.
Agent Base Expansion: Agent base grew 24% year-over-year to over 15,300 licensed agents, with a low turnover rate of 1% per month.
Ancillary Business Growth: Mortgage revenue increased by 20.7%, title business revenue grew by 28.6%, and technology segment revenue rose by 18%. File starts for mortgage and title businesses increased by over 60% year-over-year.
Technology Licensing: Licensing the intelliAgent platform to third parties, with significant growth potential among 18,000 small to midsized brokerages.
Focus on High-Margin Services: Expanding ancillary businesses like mortgage and title services, which generate gross profits 7-10x higher than real estate transactions.
Regulatory and Government Risks: Potential negative effects of a prolonged government shutdown on the real estate industry, which could impact Q4 performance.
Market and Economic Conditions: Uncertainty in the residential real estate market, with affordability challenges and modest declines in home prices in some states.
Operational and Strategic Execution Risks: Challenges in scaling new programs like START and Elevate, which are critical for future growth and profitability.
Competitive Pressures: Ongoing trend towards consolidation in the brokerage industry, creating pressure to deliver exceptional value and elite service to retain agents and clients.
Profitability and Cost Management: Higher operating expenses in the Title business, despite revenue growth, due to increased personnel and onboarding costs.
Litigation Risks: Recognition of $2 million in litigation contingency expense in Q3 2025, which impacts financial performance.
Revenue Growth: Fathom anticipates continued revenue growth driven by its brokerage and ancillary businesses, with programs like Elevate and START expected to contribute significantly to future performance.
Margin Expansion: The company expects further margin expansion as its operating model scales, with each additional dollar of gross profit contributing more to the bottom line.
Ancillary Business Growth: Fathom projects strong growth in its ancillary businesses, including mortgage, title, and technology, which generate significantly higher gross profits compared to real estate transactions.
Technology Licensing: The company sees a significant growth opportunity in licensing its intelliAgent platform to over 18,000 small to midsized brokerages, which could substantially improve their financial performance.
Elevate Program: The Elevate program is expected to drive higher agent productivity, retention, and profitability, with gross profit per transaction being 5x higher than standard transactions.
START Expansion: Fathom plans to expand the START Real Estate program into over 15 states in the next year, targeting first-time homebuyers and generating over 1,500 additional transactions.
Market Recovery: The company expects a gradual recovery in the residential real estate market, driven by improved affordability, narrowing mortgage spreads, and potential Federal Reserve rate cuts.
Operational Cash Flow Breakeven: Fathom aims to achieve operational cash flow breakeven by the second quarter of 2026 through disciplined execution and strategic initiatives.
Share Repurchase Program: No share repurchases were made during the first 9 months of 2025 under the company's authorized stock repurchase program.
The earnings call showed strong financial metrics with a 37.7% revenue increase and improved EBITDA, but the lack of share repurchases and a $2 million litigation expense weigh negatively. Strategic plans like Elevate and partnerships could support growth, yet uncertainties in real estate and execution risks persist. Q&A insights were positive with clear management responses, but no groundbreaking news. Given these mixed factors, the stock price is likely to remain stable, leading to a neutral sentiment.
The earnings report shows strong revenue growth and strategic partnerships, but competitive pricing pressures, high interest rates, and increased operating expenses are concerning. The absence of Q&A insights limits clarity on management's outlook. Given these mixed signals and the lack of market cap data, the stock is likely to remain neutral over the next two weeks.
Despite strong revenue growth and agent count increase, the company faces challenges like economic headwinds, profitability issues, and competitive pressures. The lack of share repurchase and unclear guidance on partnerships weigh negatively. However, optimistic guidance on adjusted EBITDA profitability and transaction volume, along with successful cost-cutting and agent onboarding, balance the sentiment. Therefore, the stock price reaction over the next two weeks is likely to remain neutral, with potential for volatility due to market conditions and uncertainties.
The earnings call presents a positive outlook with strong revenue growth, improved agent growth, and effective cost management. The Elevate program is expected to significantly enhance profitability. However, economic headwinds and competitive pressures pose risks. The Q&A suggests optimism with potential partnerships, but lacks detail. The absence of share repurchases is a minor concern. Overall, the financial performance and strategic initiatives suggest a positive stock price movement, despite some uncertainties.
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