Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
|---|
| Our agent growth this quarter further validates that we're winning through innovation and a truly disruptive business model that continues to resonate among agents |
| Despite this volatility and the highest mortgage rates in 20 years, we were encouraged by performance in agent growth in a very difficult market environment |
| So the combination of adjusted EBITDA at negative $1.4 million for Q1 of this year, combined with a reduction in expenses of $1.2 million, combined with the improvement in our mortgage business and our insurance business and title business and the increase in agents, that gives us confidence that we will hit adjusted EBITDA positive in Q1 of 2023 |
| We promised to grow across all 50 states as well as deeper into each state, and we continue to take steps to deliver on that promise |
| This increase was achieved despite a 15% decrease in transactions this quarter compared to the same quarter last year and reflects our increase in fees and favorable impact of cost-cutting measures |
| 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 |
| We also increased our agent network 13% to over 11,333 agents at the end of the quarter, which compares favorably to all but one of our public peers domestic agent growth |
| We're pleased to share the recent progress we've made advancing our growth strategy despite the volatility in the interest rates in the broader residential real estate market |
| And by continuing to grow our agent base, we are positioning Fathom for continued success once the industry rebounds |
| We are making meaningful progress in advancing our growth strategy, expanding our agent network, optimizing our business for profitable growth and taking market share with an industry-leading commission model that continues to resonate well in this environment, and we believe we'll continue to do so going forward |
| So the recent decline in mortgage rates following the Federal Reserve's November rate pause is encouraging |
| While we don't have a crystal ball to predict if we're -- if we reach the bottom of this current cycle in the industry or if rates will start to normalize in the near-term, what we do know is that the industry will eventually recover, and Fathom is well positioned to continue growing market share regardless of when that happens |
| Let me provide an update on our Realty business and why we remain well positioned today to grow our agent network and also expand our reach during this difficult market environment |
| Fathom Realty continues to be among the fastest-growing residential real estate brokerages in the U.S., and we're proud of our growth this year as we expand our presence nationwide to reach more buyers and sellers |
| We believe our model allows us to succeed irrespective of the market environment, and we're well positioned to attract an ever-increasing number of real estate agents from legacy firms during downturns in the industry when agents struggle to generate leads and close sales |
| We continue to believe that we are the most attractive home for agents long-term as we help them ultimately earn more money with an industry-leading flat fee commission split to agents |
| But through the hard work of our team, we've been able to demonstrate that we can adapt and thrive even in the challenging economic times |
| And what happens is because we're getting more business from Fathom, we don't have to spend additional dollars in lead generation, right? And so the attach rate in our insurance business has really benefited from that |
| So now we've got great -- a great operation there |
| Our new agents will have full access to Fathom's proprietary cloud-based software, intelliAgent, and will also benefit from having additional Fathom services to offer their clients, including mortgage and insurance services as we continue to help all of our agents grow their business |
| We see a strong pipeline of walkover opportunities and believe that we'll continue to attract high-quality agent teams and brokerages to our unique low cost and disruptive model |
| So while most of our peers are experiencing flat or declining agent numbers domestically, our agent value proposition remains compelling and allows us to take share now to better position Fathom for a higher overall growth rate once the market recovers |
| We also maintained strong retention rates, which we believe exceptionally positive news given the backdrop of agents leading the industry |
| In summary, we remain encouraged by the trends we're seeing across our business despite a challenging quarter for Fathom and the real estate industry |
| If you look at DIA, our mortgage business, they've been able to increase profit, adjusted EBITDA by 50% while keeping the revenues the same |
| So we put all this together, the increase in our business, what we've done in Q1, the cuts, when you put it all together, we feel fairly confident that we can achieve the goals of adjusted EBITDA breakeven in Q1 and cash flow breakeven -- operational cash flow breakeven in Q2 |
| But we have since identified additional opportunities to further rightsize our cost structure for the current environment and better position Fathom for improved operating leverage when the residential real estate market rebounds |
| I'd love to see it be more effective, but I think we're very pleased with the effective chat so far |
| In Q2, we achieved our goal of adjusted EBITDA breakeven and we've continued to make tremendous progress in reducing our cash burn |
| But we feel very confident we can at least maintain what we've been sharing, but our goal, ultimately, the goal is to increase that dramatically |
| Statement |
|---|
| In Q3, we fell short of maintaining adjusted EBITDA due to the slower home sales in September as a result of further Fed rate increases |
| Third quarter revenue declined 16% year-over-year to $93.5 million compared with $111.3 million for last year's third quarter |
| During the third quarter, we witnessed continued pressure on transactions throughout the industry |
| I'm trying not to be biased here, but I do think it hurts the consumer |
| We closed 10,303 real estate transactions in the quarter, a 15% decrease from last year's third quarter but below the 20% reduction in the overall market experience |
| I think it actually hurts the consumer |
| So I do think it will hurt the buyers and our clients |
| Revenue for the Real Estate division was $88.2 million compared to $105 million for the same period last year, which represents a 16% decrease, of which about 3% is related to a decrease in prices of homes and 13% is attributed to a decrease in transaction |
| Elevated interest rates continue to put pressure on home affordability |
| Adjusted EBITDA was a negative $22,000 compared to a negative $24,000 adjusted EBITDA in Q3 of 2022 |
| This has been one of the most difficult years in Fathom's history |
| 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 |
| This decrease was primarily attributed to a 15% decrease in transaction volume, along with a 3% decrease in the average home prices during the quarter |
| In September, the residential real estate market changed rapidly as mortgage rates exceeded 8%, and we experienced an increase in cancellations, which impacted our transactions during the quarter |
| The mortgage business is tough on the attach rate right now because buyers are shopping every possible [0.125] (ph) |
| As most of you have no doubt seen the National Association of REALTORS, along with several of our country's largest brokerages were found liable in a recent legal battle over agent commissions |
| Joshua Harley Which, by the way, it's right in line with what was happening in the industry, right? Industry year-over-year saw a 1.6% decrease in agent population from end of September to end of September 2023 |
| Mortgage adjusted EBITDA for Q3 was a loss of $293,000 compared to an adjusted EBITDA loss of $406,000 for the same period last year |
| We're not satisfied with 13% growth by any means |
| So there's no question that attach rate in the mortgage business has become more difficult as we've seen the increase in the interest rate |
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