Fathom (FTHM) Q3 2025 Earnings Call Transcript

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Date

Tuesday, Nov. 11, 2025 at 5 p.m. ET

Call participants

• Chief Executive Officer — Marco Fregenal
• Senior Vice President of Finance — Daniel Weinmann

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Takeaways

• Total revenue -- $115.3 million, up 37.7% year-over-year, with main growth from a 39% increase in brokerage revenue and modest contributions from mortgage and technology segments.
• Gross profit -- Rose 39.1% year-over-year, with gross profit margin steady at 8.3%, reflecting pricing stability and proportional cost scaling.
• GAAP net loss -- $4.4 million, or $0.15 per share, reduced from a net loss of $8.1 million, or $0.40 per share, mainly because of stronger revenue and operating leverage and lower year-over-year litigation contingency expense.
• Adjusted EBITDA (non-GAAP) -- $6,000, a turnaround from a loss of $1.4 million last year, driven by higher revenue, improved operating leverage, and lower marketing expense.
• Brokerage segment revenue -- $109.2 million, up 39%, due to the My Home Group acquisition and modest organic growth among agents.
• Agent licenses -- 15,371 agents at period end, a 24.1% increase from the previous year, primarily from My Home Group acquisition and enhanced recruiting/retention.
• Brokerage adjusted EBITDA -- $1.6 million in 2025, a 100% increase from 2024, driven by higher revenue and ongoing cost control.
• Mortgage segment revenue -- $3.5 million in 2025, up from $2.9 million in 2024, as higher funded loan volume benefited from favorable interest rates and buyer activity.
• Mortgage adjusted EBITDA -- $161,000 in 2025, compared to a loss of $319,000 in 2024, linked to higher loan funding and stable fixed costs.
• Title (Verus) revenue -- $1.8 million, up 28.6%, reflecting more orders, deeper agent relationships, and process improvements; adjusted EBITDA was a loss of $191,000 due to higher expenses to support growth.
• Technology third-party revenue -- $829,000, up slightly from $785,000, marking the initial inclusion of new third-party licensing fees; adjusted EBITDA was $488,000, more than tripling year-over-year on improved leverage.
• Cash balance -- $9.8 million, including $6.5 million from September’s public stock offering; no share repurchases made year-to-date under the authorized buyback program.
• Elevate program -- Over 165 agents onboarded with 45 more in the pipeline; gross profit per Elevate transaction is about five times higher than standard, aiming to drive revenue per agent higher as adoption accelerates.
• Start Real Estate acquisition -- Start, with approximately 70 agents and on track to close roughly 400 transactions this year at a 50% gross margin and 70% mortgage attach rate, is being expanded beyond Colorado into Utah, Arizona, and Nevada as part of a broader plan to enter more than 15 states next year, with this expansion expected to generate over 1,500 additional transactions.
• RealResults expansion -- RealResults, a lead-generation and qualification system proven in Elevate, is being deployed company-wide to shorten sales cycles and boost productivity.
• By Owner partnership -- New alliance gives access to the for-sale-by-owner segment representing approximately 6% of US listings, with By Owner supplying leads from a web base of over 500,000 monthly visitors and an estimated approximately 20% conversion rate to full-service representation.
• Technology licensing opportunity -- Management outlined plans to market IntelliAgent to approximately 18,000 US brokerages (with 25-500 agents), with established relationships already providing an initial pipeline.
• Outlook for operational cash flow breakeven -- Management expects margin expansion and plans to reach operational cash flow breakeven by 2026 through diversification, flagship program scaling, and disciplined execution.

Summary

Fathom Holdings (NASDAQ:FTHM) reported 37.7% year-over-year revenue growth, led by brokerage segment expansion and enlarged agent count, while maintaining stable gross margins and significantly reducing GAAP net loss. Management emphasized the rollout and rapid adoption of the Elevate program, the nationwide expansion of Start Real Estate, and increased leverage in technology monetization through third-party licensing. Partnerships and new programs, including By Owner and RealResults, were highlighted as critical for diversifying growth and improving agent productivity, contributing to the company’s multi-segment revenue and earnings improvements.

• Fregenal noted that market conditions may become more favorable as "the narrowing spread between the ten-year treasury yield and the thirty-year mortgage rate, which is currently around 205 basis points," signals improving affordability in the housing sector.
• Expansion of flagship programs and aggressive technology licensing was described as central to achieving operational cash flow breakeven by 2026.
• Fregenal said the gross profit for an Elevate transaction is on average five times higher than for a standard brokerage transaction, supporting the company's focus on high-margin initiatives.
• Weinmann stated, "No share repurchases were made during the first nine months of 2025 under the company's authorized stock repurchase program," clarifying capital allocation strategy for the period.

Industry glossary

• Attach rate: The percentage of brokerage transactions for which the company sells additional services such as mortgage or title insurance.
• Elevate: Fathom's agent program offering concierge marketing, productivity, and transaction support for a higher commission split, aimed at increasing agent and company profitability.
• RealResults: Fathom's proprietary, company-wide lead generation and qualification system designed to drive transaction volume and agent efficiency.

Full Conference Call Transcript

Marco Fregenal: Fathom's 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 Fathom Holdings Inc. in 2026 and beyond. For those less familiar, Elevate is our concierge-level growth program designed to help agents dramatically increase productivity and earnings through done-for-you branding and marketing, lead generation and conversion, 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 20% commission that an agent might pay for another broker simply to hang their license.

That same agent at Fathom Holdings Inc. gains a full-service concierge team that is dedicated to helping them grow their business. Elevate delivers tremendous value to agents while simultaneously improving Fathom's retention, productivity, and profitability. As the gross profit for an Elevate transaction is on average five times higher. As more agents join the program, we expect to see measurable increases in closed transactions and 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 onboarded over 165 agents to Elevate, with another 45 agents in the pipeline, and adoption is accelerating.

Elevate is a perfect example of how our programs help agents maximize profitability while reclaiming their time. By combining best-in-class tools, coaching, and technology, Elevate enhances performance and deepens engagement across our network, which in turn drives higher tax rates and greater of our broader platform. Beyond Elevate, we have also launched several new growth initiatives in recent months. First, we recently announced the acquisition of Start Real Estate, a firm dedicated to serving first-time homebuyers. Start, headquartered in Colorado with approximately 70 agents, is on track to close roughly 400 transactions this year, delivering a 50% gross margin and a mortgage attach rate of 70%.

With our size and their strategy, we have already begun expanding Start into other markets, including Utah, Arizona, and Nevada, with a broader plan to enter more than 15 states over the next year. This expansion is expected to generate over 1,500 additional transactions next year while sustaining both strong margins and high mortgage attachment rates. Ultimately, our goal is to launch Start in every state, positioning Fathom Holdings Inc. to capture an important share of the first-time homebuyer market and drive meaningful revenue and EBITDA growth. Second, we are expanding the RealResults team, our lead generation and qualification program.

After proving highly effective within the Elevate program, RealResults 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 Holdings Inc. access to the for-sale-by-owner market, which currently represents approximately 6% of all US homes listed. By Owner tracks over 500,000 visitors per month to our website, including buyers, sellers, and renters. Analysts estimate that approximately 20% of for-sale-by-owner listings eventually convert to full-service representation, which creates significant opportunity for our agents.

Through this partnership, By Owner will refer motivated sellers and buyers to the Fathom network of agents and lenders, expanding our reach and creating an additional valuable growth channel. 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 contribution from our ancillary 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 profitability trends. Daniel?

Daniel Weinmann: Thank you, Marco. I will begin with our financial results for 2025 and then provide a breakdown of performance by business segment. For 2025, total revenue was $115.3 million, a 37.7% increase year-over-year compared to $83.7 million for 2024. The increase 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 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 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 IntelliAgent and enhancements to our Elevate program. General and administrative expenses totaled $8.3 million for 2025 compared to $8.1 million for the same period in 2024. The $200,000 increase 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 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 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 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, partially offset by $2 million in litigation contingency expense recognized in 2025.

Adjusted EBITDA, a non-GAAP measure, was $6,000 for 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. I will now 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 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 contributed significantly to transaction volume and commission income. The increase also reflects modest organic growth from our existing agent base, supported by expanded market coverage. We ended the quarter with 15,371 agent licenses, an increase of 24.1% compared to 12,383 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 retaining agents through competitive commission structures, enhanced support services, and targeted recruitment efforts.

Gross profit margin for the brokerage segment was 6% for 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 expense and other agent-related costs, resulting in stable margins year-over-year. Adjusted EBITDA for the Brokerage segment increased by 100% to $1.6 million for 2025, 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 revenue for the mortgage segment was $3.5 million for 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 buyer activity. Adjusted EBITDA for the mortgage segment was $161,000 for 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. Next, our title business, Verus Title revenue was $1.8 million for 2025, an increase of 28.6% compared to $1.4 million in the same period of 2024, driven by strong organic growth from increased order 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 Verus Title was a loss of $191,000 for 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 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 our data and technology platform, representing the first quarter in which these third-party arrangements contributed to revenue.

Adjusted EBITDA was $488,000 for 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 ended 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 share repurchases were made during the first nine 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.

Marco Fregenal: Thank you, Daniel. As Daniel highlighted, our financial 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. One encouraging indicator is the narrowing spread between the ten-year treasury yield and the thirty-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 improved affordability and a gradual reopening of the housing market.

We are 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 a prolonged government shutdown would have a negative effect in Q4. As affordability improves, we expect programs like Start Real Estate and Elevate to gain significant momentum. Elevate, in particular, is a differentiator, helping agents boost productivity through integrated marketing, lead generation, and support services that tie directly into our mortgage, title, and technology ecosystems. This program is already driving higher tax rates and incremental revenue across multiple lines of business.

Recent larger acquisitions in the market have created some uncertainty within the broker's landscape and highlight the ongoing trend towards consolidation. The environment reinforces the need for agents to deliver exceptional value and elite service, areas where Fathom Holdings Inc. continues to lead through our agent-centric model and integrated platform. We anticipate that small brokers will explore opportunities to merge with or partner with larger firms. Now looking ahead to 2026, Fathom Holdings Inc. is well-positioned to capitalize on these trends.

Our priorities remain clear: first, to continue diversifying revenue streams with higher margin products and services; to expand flagship programs like Elevate and Start; to strengthen attach rates across mortgage and title; and finally, to license our technology platform to small brokerages and teams to scale efficiently and profitably. These initiatives, combined with our commitment to disciplined execution, are expected to drive further margin expansion and position us to achieve operational cash flow breakeven by 2026. In short, momentum is building across our platform, and we are entering 2026 with confidence and focus. We see tremendous opportunity to build on our foundation, deepen agent engagement, and create 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, operator, we are ready to take questions.

Operator: 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. 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. Our first question will come from Dillon Heslin with Roth Capital Partners.

Dillon Heslin: Hey, thanks for taking my question. To start on IntelliAgent licensing, you talked about 18,000 brokerages you identified, I think. 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?

Marco Fregenal: Yeah. Sure. Thank you, Dillon, for your question. Yeah. There are approximately about 18,000 brokers between twenty-five and five hundred agents. Our go-to-market strategy is really to start, you know, we already built several different relationships across the industry over the last, you know, four or five years. We probably have relationships with a few hundred small brokers already. Also, through our partnership with Live By, Live By has approximately another 200, 300, or 400 small brokers that we have a relationship with. So we will begin with those, and then we will continue marketing to all 18,000 and demonstrating our value proposition to them as we have done for My Home Group and Sovereign Partners as well.

We have already begun discussions, but that will accelerate in 2026.

Dillon Heslin: Thank you. And just as a follow-up, could you comment on attach rates this quarter? And then with Start Real Estate, they seem to have quite high attach rates. What do you think is the possibility of obviously, you are trying to expand that, but keep the attach rates where they are at on that business as you take it into more states and just scale?

Marco Fregenal: Yeah. So Start is really a very interesting business. Randy, the owner, really created a process in which he really holds the hand of a first-time buyer. You know, for people who have never bought a home, buying your first home is a rather complex process. My son just bought his first home, and even he told me that he cannot even measure how complex this is. So it is a complex process. Randy has created a really hands-on operational process that does that. His attach rate is over 70%. He is currently in Colorado. We are already expanding into three other states, and we believe that we will be able to expand to every state in the country.

We do anticipate attach rates to continue to be that high. We have seen that because we already started in Utah, and he has already seen that attach rate. It is a byproduct of the process that he created. We are basically going to replicate that across the country, and that is really his special sauce to run this program. So to answer your question, we do anticipate significant growth in the program, and we do anticipate having attach rates over 70%. Having said that, we continue to improve the attachment rate for 50% of the ELG business coming from Fathom Holdings Inc. As ELG continues to grow, we continue to see that. The same thing with Verus Title.

I think the combination of what we have done with Yield10 Verus combined with Start Realty, I think overall, we will see attachment rates continue to grow next year and beyond.

Dillon Heslin: Great. Thanks, Marco.

Marco Fregenal: Thank you, Dillon.

Operator: At this time, this concludes the question and answer session. Thank you for joining Fathom Holdings Inc.'s third quarter earnings call. You may now disconnect.

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