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What changed in Fathom Holdings Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Fathom Holdings Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+314 added−205 removedSource: 10-K (2025-03-28) vs 10-K (2024-03-19)

Top changes in Fathom Holdings Inc.'s 2024 10-K

314 paragraphs added · 205 removed · 176 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFrom April 2014 to October 2015, Ms. Giuggio served as our Regional Vice President and Vice President of Operations. She also served as our District Director RDU from February 2013 to April 2014. She served as an Agent and Group Leader Training Coordinator with us prior to this. Ms.
Biggest changeGiuggio served as our Chief Operations Officer for Fathom Realty since June 2019. She also served as Senior Vice President from October 2015 to June 2019. From April 2014 to October 2015, Ms. Giuggio served as our Regional Vice President and Vice President of Operations. She also served as our District Director RDU from February 2013 to April 2014.
Specifically, using advanced Internet-based software, we can improve compliance and oversight while providing, at no cost to our agents, technology tools and services to our agents and their customers, including: • a robust, mobile-friendly, customer-facing corporate website providing access to view all homes for sale and lease in the markets that we serve, with the ability to search and save favorite properties and receive alerts for new properties that fit their criteria; • a customizable, mobile-friendly agent website with home search, lead capture, and blogging capabilities; • an advanced customer relationship management system, with visitor tracking, property alerts, and customer communication, all designed to help convert leads into customers; • social media tools to enhance agent marketing and visibility; • streamlined solicitation, collection, verification and posting of customer testimonials; • single property websites for our agents’ listings; • a wide array of on-demand training modules for the professional development of agents at all levels of experience; and • agent access to intelliAgent(R), which is described in more detail below.
Specifically, using advanced Internet-based software, we can improve compliance and oversight while providing, at no cost to our agents, technology tools and services to our agents and their customers, including: • a robust, mobile-friendly, customer-facing corporate website providing access to view all homes for sale and lease in the markets that we serve, with the ability to search and save favorite properties and receive alerts for new properties that fit their criteria; • a customizable, mobile-friendly agent website with home search, lead capture, and blogging capabilities; • an advanced customer relationship management system, with visitor tracking, property alerts, and customer communication, all designed to help convert leads into customers; • social media tools to enhance agent marketing and visibility; • streamlined solicitation, collection, verification and posting of customer testimonials; • single property websites for our agents’ listings; • a wide array of on-demand training modules for the professional development of agents at all levels of experience; and • agent access to intelliAgent, which is described in more detail below.
For Fathom Realty, our core business, our overhead business model leverages our proprietary software platform for management of real estate brokerage back-office functions, without the cost of physical brick and mortar offices or of redundant personnel.
For Fathom Realty, our core business, our low overhead business model leverages our proprietary software platform for management of real estate brokerage back-office functions, without the cost of physical brick and mortar offices or of redundant personnel.
Technology Fathom Realty operates primarily as a cloud-based real estate brokerage by utilizing our proprietary consumer-facing website, https://www.FathomRealty.com , and our internal proprietary technology, intelliAgent(R), to manage our brokerage operations.
Technology Fathom Realty operates primarily as a cloud-based real estate brokerage by utilizing our proprietary consumer-facing website, https://www.FathomRealty.com , and our internal proprietary technology, intelliAgent, to manage our brokerage operations.
In a recent study by the NAR, only 3% of home sellers chose their agent because of the agent's brokerage. We believe home buyers and sellers choose an agent because of the agent's marketing prowess, professionalism, and personality.
In a recent study by the NAR, only 3% of home sellers chose their agent because of the agent's brokerage. We believe home buyers and sellers choose an agent because of the individual agent's marketing prowess, professionalism, and personality.
Industry Trends In addition to the negative impacts of recent economic uncertainty and increased interest rates, we believe the following trends have impacted the U.S. real estate market and that their impact will continue to accelerate: • according to the NAR, 97% of homebuyers use the Internet to search for homes, illustrating the importance of technology and transition away from expensive brick-and-mortar offices in the industry, while only 2% found their agent through the agent’s office; • nevertheless, according to the NAR, 89% of home buyers and 89% of home sellers still used an agent or broker in 2023, up from 86% for both buyers and sellers in 2022, for various reasons, including the relative size, importance and infrequency of a home sale for any individual; • the complexity of the home selling or buying process continues to require the best personal service possible, while technology can make the process and business more efficient; and • downturns like the current one are inevitable, and favor companies with lower cost business models that also pay agents higher commissions.
Industry Trends In addition to the negative impacts of recent economic uncertainty and increased interest rates, we believe the following trends have impacted the U.S. real estate market and that their impact will continue to accelerate: • according to the NAR, 97% of homebuyers use the Internet to search for homes, illustrating the importance of technology and transition away from expensive brick-and-mortar offices in the industry, while only 2% found their agent through the agent’s office; • nevertheless, according to the NAR, 88% of home buyers and 90% of home sellers still used an agent or broker in 2024, up from 86% for both buyers and sellers in 2022, for various reasons, including the relative size, importance and infrequency of a home sale for any individual; • the complexity of the home selling or buying process continues to require the best personal service possible, while technology can make the process and business more efficient; and • downturns like the current one are inevitable, and favor companies with lower cost business models that also pay agents higher commissions.
To capitalize on this, we focus on helping our agents improve professionally and increase their financial ability to invest in their personal marketing. Cost Structure The lower overall cost of operating our business primarily virtually enables us to offer our agents a 100% commission model. We charge each agent a flat fee per real estate transaction.
To capitalize on this, we focus on helping our agents improve professionally and increase their financial ability to invest in their personal marketing. Cost Structure The lower overall cost of operating our business primarily virtually enables us to offer our agents a 100% commission model. The 100% commission model charges each agent a flat fee per real estate transaction.
We are a national, technology-driven, real estate services platform integrating residential brokerage, mortgage, title, insurance, and Software as a Service (“SaaS”) offerings to brokerages and agents by leveraging intelliAgent, our proprietary cloud-based software. The Company’s brands include Fathom Realty, Dagley Insurance, Encompass Lending, intelliAgent, LiveBy, Real Results, and Verus Title.
We are a national, technology-driven, real estate services platform integrating residential brokerage, mortgage, title, and Software as a Service (“SaaS”) offerings to brokerages and agents by leveraging intelliAgent®, our proprietary cloud-based software. The Company’s brands include Fathom Realty, Encompass Lending, intelliAgent, LiveBy, Real Results, and Verus Title.
Our proprietary intelliAgent(R) real estate technology platform provides a suite of brokerage and agent level tools, technology, business processes, business intelligence and reporting, training.
Our proprietary intelliAgent real estate technology platform provides a suite of brokerage and agent level tools, technology, business processes, business intelligence and reporting, training.
Period downturns, like the current one, can often be defined by things over which the industry has no control, such as economic uncertainty and increased interest rates. (see "Industry Trends" for further detail below). The following information is based on data published by the NAR.
Periodic downturns, like the current one, can often be defined by things over which the industry has no control, such as economic uncertainty and increased interest rates. (see "Industry Trends" for further detail below). The following information is based on data published by the NAR.
In 2023, our average cost to recruit a new agent was $1,050 and our annual cost associated with each agent was $1,150 so we break even in an agent’s first year if he or she completes just two sales.
In 2023, our average cost to recruit a new agent was $1,050 and our annual cost associated with each agent was $1,150 so we broke even in an agent’s first year if he or she completes just two sales.
We have grown rapidly since inception, and plan to accelerate our growth through the following aspects of our vision: • offer full brokerage services via our technology-enabled, low-overhead business model; • attract and retain high-producing agents by offering high compensation per transaction and industry-leading benefits; • use our publicly traded stock to further incentivize agents; • continue to enhance and develop our proprietary software platform to facilitate our own business and potentially increase our revenue by licensing it to others; and • pursue further growth through potential acquisitions, including potentially using our publicly traded stock as consideration, depending on its value at the time.
We have grown rapidly since inception, and plan to accelerate our growth through the following aspects of our vision: • offer full brokerage services via our technology-enabled, low-overhead business model; • attract and retain high-producing agents by offering high compensation per transaction and industry-leading benefits; • continue to enhance and develop our proprietary software platform to facilitate our own business and potentially increase our revenue by licensing it to others; and 7 Table of Contents • pursue further growth through potential acquisitions, including potentially using our publicly traded stock as consideration, depending on its value at the time.
Our Strategy Our goal is to be the leading 100% commission real estate brokerages in the United States while offering superior customer service, state of the art technology, and a great company culture.
Our Strategy Our goal is to be the leading 100% commission real estate brokerage in the United States while offering superior customer service, state of the art technology, and a great company culture.
We intend for intelliAgent to be more than just a technology platform for Fathom; we might someday use a simplified version of intelliAgent as a platform to unify independent brokerages through a smarter broker network, which would help them effectively compete against larger regional and national brands.
We intend for intelliAgent to be more than just a technology platform for Fathom; we might someday use a simplified version of intelliAgent as a platform to unify independent brokerages through a smarter broker network, which would help them effectively compete against larger 8 Table of Contents regional and national brands.
Our website also gives consumers access to our network of professional real estate agents and vendors. Through a combination of our proprietary technology platform and several third-party systems, we provide our agents with marketing, training, and other support 7 Table of Contents services, as well as client and transaction management.
Our website also gives consumers access to our network of professional real estate agents and vendors. Through a combination of our proprietary technology platform and several third-party systems, we provide our agents with marketing, training, and other support services, as well as client and transaction management.
In the future, we 8 Table of Contents also intend to roll out an enhanced version of the Naberly platform to launch a national real estate portal to help generate leads for our Fathom agents, as well as non-Fathom agents, in the markets in which we are not currently operating.
In the future, we also intend to roll out an enhanced version of the Naberly platform to launch a national real estate portal to help generate leads for our Fathom agents, as well as non-Fathom agents, in the markets in which we are not currently operating.
Industry Background We primarily operate in the U.S. residential real estate industry, with a market size of over $2.5 trillion with over 4.8 million new and existing properties sold in the United States in 2023. Our agents also opportunistically engage in commercial real estate transactions. We derive most of our revenues from serving buyers and sellers of existing homes.
Industry Background We primarily operate in the U.S. residential real estate industry, with a market size of over $2.5 trillion with over 4.06 million new and existing properties sold in the United States in 2024. Our agents also opportunistically engage in commercial real estate transactions. We derive most of our revenues from serving buyers and sellers of existing homes.
“REALTOR” and “REALTORS” are registered trademarks of the National Association of REALTORS(R).
“REALTOR” and “REALTORS” are registered trademarks of the National Association of REALTORS®.
We currently operate in 40 states plus the District of Columbia: Alabama Kentucky Ohio Arizona Louisiana Oklahoma Arkansas Maryland Oregon California Massachusetts Rhode Island Colorado Michigan Pennsylvania Delaware Minnesota South Carolina Florida Missouri Tennessee Georgia Montana Utah Hawaii Nebraska Virginia Idaho Nevada Washington Illinois New Hampshire West Virginia Iowa New Jersey Wisconsin Indiana New Mexico Washington D.C.
We currently operate in 43 states plus the District of Columbia: Alabama Kentucky Ohio Arizona Louisiana Oklahoma Arkansas Maryland Oregon California Massachusetts Rhode Island Colorado Michigan Pennsylvania Connecticut Minnesota South Carolina Delaware Missouri Tennessee Florida Montana Texas Georgia Nebraska Utah Hawaii Nevada Virginia Idaho New Hampshire Washington Illinois New Jersey West Virginia Iowa New Mexico Wisconsin Indiana New York Washington D.C.
IntelliAgent has since grown to include brokerage and agent-level websites, content creation and management, customer relationship management, social media marketing, agent reviews, a training platform, and marketing repository. Our technology roadmap includes our own fully-integrated e-signature platform, goal setting and accountability for agents, expense tracking for agents, and APIs for integration with additional third-party tools.
IntelliAgent has since grown to include brokerage and agent-level websites, content creation and management, customer relationship management, social media marketing, agent reviews, a training platform, and marketing repository. Our technology roadmap includes our own fully-integrated e-signature platform, goal setting and accountability for agents, expense tracking for agents, and application programming interfaces (API) for integration with additional third-party tools.
Human Capital As of December 31, 2023, we had 241 full-time employees. Our operations are overseen directly by management. Our management oversees all responsibilities in the areas of corporate administration, training, agent relations, business development, technology, and research. We intend to expand and retain our current management and skilled employees with experience relevant to our businesses.
Human Capital As of December 31, 2024, we had approximately 270 full-time employees. Our operations are overseen directly by management. Our management oversees all responsibilities in the areas of corporate administration, training, agent relations, business development, technology, and research. We intend to expand and retain our current management and skilled employees with experience relevant to our businesses.
In March 2023, we were ranked the #6 largest independent real estate brokerage firm and the #10 overall largest brokerage firm in the United States (per available data). These rankings were published by The Real Trends Five Hundred based on several criteria including transaction size, sales volume, affiliation, top movers, core services, and others.
In 2024, we were ranked the #6 largest independent real estate brokerage firm and the #9 overall largest brokerage firm in the United States (per available data). These rankings were published by The Real Trends Five Hundred based on several criteria including transaction size, sales volume, affiliation, top movers, core services, and others.
According to the National Association of Realtors, or the NAR, existing home sales represent approximately 90% of the overall market by number of transactions. 6 Table of Contents The U.S. residential real estate industry has a long history of growth, despite periodical downturns.
According to the National Association of Realtors, or the NAR, existing home sales represented approximately 90% of the overall market by number of transactions in 2024. The U.S. residential real estate industry has a long history of growth, despite periodical downturns.
None of our employees or agents are represented by unions, and we believe our employee and agent relations are good. 13 Table of Contents Information about our Executive Officers The following table sets forth current information concerning our executive officers: Name Age Position Marco Fregenal 60 Chief Executive Officer, President and Chief Financial Officer Samantha Giuggio 54 Chief Operations Officer of Fathom Realty Marco Fregenal – President and Chief Executive Officer, Director Marco Fregenal has been our Chief Executive Officer since November, 2023, and our Chief Financial Officer since 2012.
None of our employees or agents are represented by unions, and we believe our employee and agent relations are good. 13 Table of Contents Information about our Executive Officers The following table sets forth current information concerning our executive officers: Name Age Position Marco Fregenal 61 Chief Executive Officer and President Samantha Giuggio 55 Chief Operations Officer of Fathom Holdings and President of Fathom Realty Jon Gwin 45 Chief Revenue Officer of Fathom Holdings Marco Fregenal – President and Chief Executive Officer, Director Marco Fregenal has been our Chief Executive Officer since November 2023, and our Chief Financial Officer between 2012 and November 2024.
However, there was another housing downturn beginning in 2022, when severe inflation gave rise to high interest rates which caused U.S. existing home sale transactions to decline by approximately 33.5% in 2023, according to Realtor.com.
However, there was another housing downturn beginning in 2022, when severe inflation gave rise to high interest rates which caused U.S. existing home sale transactions to decline by approximately 33.5% in 2023, and decline another approximately 0.7% in 2024.
The acquisition of iPro, a real estate brokerage business, has helped us to expand our reach in the Utah real estate market. Also in February 2022, the Company completed its acquisition of Cornerstone Financial (“Cornerstone”). The acquisition of Cornerstone, a real estate mortgage business, has helped us to expand our reach in the DC and surrounding markets.
The acquisition of iPro, a real estate brokerage business, has helped us to expand our reach in the Utah real estate market. 6 Table of Contents Also in February 2022, the Company completed its acquisition of Cornerstone Financial (“Cornerstone”).
Starting in January 2024, there will be an increase of the agent’s annual fee which is charged on an agent’s first transaction of each anniversary year from $600 to $700. A second change includes a new fee which affects sales of properties over $600,000 and will be in addition to the agent’s transaction fee of $550.
In 2024, we increased the agent’s annual fee which is charged on an agent’s first transaction of each anniversary year from $600 to $700. A second change included a new fee which affects sales of properties over $600,000 and is in addition to the agent’s transaction fee of $550.
More importantly, agents are able to take that increase and reinvest it into their marketing thereby increasing their number of transactions and revenue which also benefits Fathom. Generally speaking, there are only two ways to make more money in real estate: increase revenue or decrease expenses. In a slowing housing market, it’s difficult to increase revenue.
More importantly, agents are able to take that increase and reinvest it into their marketing thereby increasing their number of transactions and revenue which also benefits Fathom. In a slowing housing market, it’s difficult to increase revenue.
Fregenal received a B.S. in economics from Rutgers University and a Masters in Econometrics and Operations Research from Monmouth University. Samantha Giuggio — Chief Broker Operations Officer Samantha Giuggio has served as our Chief Operations Officer for Fathom Realty since June 2019. Prior to this, she served as Senior Vice President from October 2015 to June 2019.
Fregenal received a B.S. in economics from Rutgers University and a Masters in Econometrics and Operations Research from Monmouth University. Samantha Giuggio — Chief Operations Officer and President Samantha Giuggio has served as our Chief Operations Officer for Fathom Holdings and President of Fathom Realty since November 2024. Prior to this, Ms.
We also offer our agents valuable benefits, including equity in our Company if they achieve growth goals. We believe our commission structure, business model, advanced technology offerings, and our focus on treating our agents well attract more agents and higher producing agents to join and stay with our Company.
We believe our commission structure, business model, advanced technology offerings, and our focus on treating our agents well attract more agents and higher producing agents to join and stay with our Company.
Moreover, a growing number of companies are competing in non-traditional ways for a portion of the gross commission income generated by home sale transactions.
Recent industry consolidation could strengthen competitors and increase competitive pressures on us. Moreover, a growing number of companies are competing in non-traditional ways for a portion of the gross commission income generated by home sale transactions.
This new ‘High-Value Property Fee’ will consist of an additional $200 on properties priced between $600,000 and $999,999. Then, there will be an additional fee of $250 charged for each $500,000 tier range over a $1,000,000 property price. The Company expects these changes could add an estimate d $3.1 million in EBITDA for the year ended December 31, 2024.
This new ‘High-Value Property Fee’ consist of an additional $200 on properties priced between $600,000 and $999,999. Then, there is an additional fee of $250 charged for each $500,000 tier range over a $1,000,000 property price.
The flat transaction fee that we collect allows our agents to adjust the commission the charge accordingly to be highly competitive. The commission we collect from our agents is our primary source of revenue.
Commission Comparison We believe our commission model also allows agents to directly compete against discount brokerages and other disruptive new competitors. The flat transaction fee that we collect allows our agents to adjust the commission the charge accordingly to be highly competitive. 5 Table of Contents The commission we collect from our agents is our primary source of revenue.
For leases, we recognized revenue through lease commissions negotiated between our agents and landlords, and we retained $85 per transaction with the remainder paid to the agent.
For leases, we recognize revenue through lease commissions negotiated between our agents and landlords, and we retained $85 per transaction with the remainder paid to the agent. In 2023, our agents paid $550 for each of their first 15 completed sales transactions and $150 per transaction for the rest of their anniversary year.
Below is an example of a traditional brokerage company’s commission model assuming a 30% split, versus our commission model.
Below is an example of a traditional brokerage company’s commission model assuming a 30% split, versus our commission model. This is an example of potential commission savings and results similar to the example below may vary and are not guaranteed.
We achieved gross commission income of approximately $325.4 million on $13.3 billion in real estate sales volume for the year ended December 31, 2023. As of December 31, 2023, we had approximately 11,795 licensed agents or brokers working for us.
We achieved gross commission income of approximately $314.7 million on $12.3 billion in real estate sales volume for the year ended December 31, 2024. As of December 31, 2024, we had approximately 14,300 agent licenses.
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This is an example of potential commission savings and results similar to the example below may vary and are not guaranteed. 5 Table of Contents We believe our commission model also allows agents to directly compete against discount brokerages and other disruptive new competitors.
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In August 2024, we introduced two new commission plans, Fathom Max and Fathom Share, designed to provide agents with greater flexibility while incorporating a revenue share opportunity. • Fathom Max Plan: Agents on the Max plan pay a flat transaction fee of $465 per transaction until they reach an annual cap of $9,000 in fees paid to the Company.
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During 2022, from the gross commission income, we maintained a flat transaction fee of $500 per transaction and the remainder of any commission was retained by the agent. The $500 transaction fee was charged for each of the agent’s first 12 sales per agent’s anniversary year, and then $99 per sale for the rest of their anniversary year.
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Once the cap is met, the transaction fee is reduced to $165 per sale for the remainder of the agent’s anniversary year.
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In 2023, our agents paid $550 for each of their first 15 completed sales transactions, up from $500 on their first 12 sales transactions. For each sales transaction after the first 15, our agents will pay $150 for the rest of their anniversary year, up from $99 in 2022.
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Additionally, transactions on properties priced over $500,000 are subject to a High-Value Property Fee of $250 per $500,000 tier for properties over $500,000. • Fathom Share Plan: Under this plan, agents pay a 12% commission split on each transaction until they reach an annual cap of $12,000 in fees paid to the Company.
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We have also discontinued our agent stock grant program effective December 31, 2022, which had provided for our agents to receive $200 in stock grants for every five transactions completed. We currently plan to continue to provide stock grants to agents based on metrics achieved for recruiting new agents.
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After reaching the cap, they pay a reduced $165 transaction fee per sale for the remainder of their anniversary year. The High-Value Property Fee does not apply to this plan. • Errors & Omissions (E&O) Insurance Fee: A $35 E&O fee is charged on every transaction, regardless of whether an agent has reached their cap.
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(Se e our Current Report on Form 8K filed with the SEC on November 28, 2023 for further information). In just fourteen years since we launched our Company, we have grown rapidly with operations in 40 states plus the District of Columbia.
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This fee helps cover the cost of maintaining professional liability insurance for all transactions. In addition to these changes, the Company launched a revenue share program in August 2024 to provide agents with the opportunity to earn additional income by recruiting other agents into Fathom.
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As of December 31, 2023, we had approximately 11,795 licensed agents and brokers whom we classify as independent contractors.
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This program allows agents to receive a percentage of the Company’s retained commission from agents they sponsor, with earnings based on a five-tier structure. The percentage of revenue share varies by plan, with higher earnings available for Fathom Share participants. Every agent also pays an annual fee of $700, which is charged on their first transaction of each anniversary year.
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Giuggio received an associate’s degree in hospitality management from Holyoke Community College. Fourth Quarter 2023 Executive Officer Changes On November 10, 2023, Joshua Harley, the Chief Executive Officer, Director and Chairman of the Board of Directors of Fathom Holdings, Inc. (the "Board") resigned from his role as CEO and Director of the Company, effective November 13, 2023.
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This fee contributes to covering the Company’s operational costs, including technology, training, and agent support services. These structural changes are expected to enhance agent attraction and retention, increase gross profit per transaction from higher production agents, and provide an additional revenue stream for agents through the revenue share program.
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On November 10, 2023, the Board appointed Marco Fregenal, President and Chief Financial Officer of the Company, to serve as Chief Executive Officer, in addition to his current responsibilities, and appointed Scott Flanders, current Director, as Chair of the Board, both effective as of November 13, 2023.
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The Company anticipates that these adjustments will drive increased agent engagement and transaction volume, ultimately strengthening EBITDA as the new plans and revenue share program gains traction and industry awareness. We have grown rapidly since our Company's launch and now have operations in 43 states plus the District of Columbia.
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For further information, please see the Company's current report on Form 8-K filed on November 10, 2023. A search for a new Chief Financial Officer began in early 2024.
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The acquisition of Cornerstone, a real estate mortgage business, has helped us to expand our reach in the DC and surrounding markets. On November 1, 2024, the Company acquired My Home Group ("MHG"). MHG is a real estate agency group with over 2,200 agents. This acquisition increases the Company's real estate brokerage and ancillary business presence in Arizona and Washington.
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As of December 31, 2024, we had approximately 14,300 agent licenses.
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She served as an Agent and Group Leader Training Coordinator with us prior to this. Ms. Giuggio received an associate’s degree in hospitality management from Holyoke Community College. Jon Gwin - Chief Revenue Officer Jon Gwin has served as our Chief Revenue Officer for Fathom Holdings since November 2024.
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Prior to this, he served as Chief Operating Officer from June 2024 to November 2024. Prior to joining Fathom Holdings, Mr. Gwin served as the Chief Operating Officer for American Financial Network for 14 years. Mr.
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Gwin received his BBA in Business Administration from the University of San Diego and his Juris Doctor in Litigation and Corporate Law from Purdue Global University.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny such sales could also create public perception of difficulties or problems with our business and might also make it more difficult for us to raise capital through the sale of equity securities in the future at a time and price that we deem appropriate.
Biggest changeAny such sales could also create public perception of difficulties or problems with our business and might also make it more difficult for us to raise capital through the sale of equity securities in the future at a time and price that we deem appropriate. 36 Table of Contents Joshua Harley, our Founder and former Chief Executive Officer, Marco Fregenal, our President and Chief Executive Officer, and Scott Flanders, a significant shareholder and director, own a significant percentage of our stock, and as a result, they can take actions that may be adverse to the interests of the other shareholders and the trading price for our common stock may be depressed.
We might not be successful in our efforts to do any of the foregoing, and any failure to be successful in these matters could materially and adversely affect our revenue growth. Our past revenue growth is not indicative of our future growth.
We might not be successful in our efforts to do any of the foregoing, and any failure to be successful in these matters could materially and adversely affect our revenue. Our past revenue growth is not indicative of our future growth.
There is also intense competition in the related businesses we recently expanded into via acquisitions, including insurance, title insurance, mortgage, lead generation, and other ancillary services. We added these services to our platform so our agents could offer critical ancillary services to their clients, but also to gain new and significant incremental revenue streams and enhance our revenues per transaction.
There is also intense competition in the related businesses we recently expanded into via acquisitions, including title insurance, mortgage, lead generation, and other ancillary services. We added these services to our platform so our agents could offer critical ancillary services to their clients, but also to gain new and significant incremental revenue streams and enhance our revenues per transaction.
Loss of our current executive officers or other key management could significantly harm our business We depend on the industry experience and talent of our current executives, including our President and Chief Executive Officer Marco Fregenal. We also rely on individuals in key management positions within our operations, finance, and technology teams.
Loss of our current executive officers or other key management could significantly harm our business We depend on the industry experience and talent of our current executives, including our President and Chief Executive Officer and Marco Fregenal. We also rely on individuals in key management positions within our operations, finance, and technology teams.
Any of the following could cause further decline in the housing or mortgage markets and have a material adverse effect on our business by causing periods of lower growth or a decline in the number of home sales or home prices which, in turn, could adversely affect our revenue and profitability: • an increase in unemployment; • a decrease in the affordability of homes due to changes in interest rates, home prices, the cost and availability of building materials, and rates of wage and job growth; • slow economic growth or recessionary conditions; • weak credit markets; • low consumer confidence in the economy or the residential real estate market; • instability of financial institutions; 27 Table of Contents • legislative, tax or regulatory changes that would adversely impact the residential real estate or mortgage markets, including but not limited to potential reform relating to Fannie Mae, Freddie Mac and other government sponsored entities, or GSEs, that provide liquidity to the U.S. housing and mortgage markets; • increasing mortgage rates, like we have experienced recently, and increasing down payment requirements or constraints on the availability of mortgage financing, including but not limited to the potential impact of various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, or other legislation and regulations that may be promulgated thereunder relating to mortgage financing, including restrictions imposed on mortgage originators, as well as retention levels required to be maintained by sponsors to securitize certain mortgages; • excessive or insufficient home inventory levels on a regional level; • high levels of foreclosure activity, including but not limited to the release of homes already held for sale by financial institutions; • adverse changes in local or regional economic conditions, including potential impacts from the COVID-19 pandemic; • the inability or unwillingness of homeowners to enter into home sale transactions due to negative equity in their existing homes; • demographic changes, such as a decrease in household formations, lower turnover in the housing market due to homeowners staying in the same home longer than in the past, or slowing rate of immigration or population growth; • decrease in home ownership rates, declining demand for real estate and changing social attitudes toward home ownership; • changes in local, state and federal laws or regulations that affect residential real estate transactions or encourage ownership, including but not limited to changes in tax law in late 2017 that limit the deductibility of certain mortgage interest expense, the application of the alternative minimum tax, and real property taxes and employee relocation expense; or • acts of nature, such as hurricanes, earthquakes and other natural disasters that disrupt local or regional real estate markets and which may, in some circumstances lead us to waive certain fees in impacted areas.
Any of the following could cause further decline in the housing or mortgage markets and have a material adverse effect on our business by causing periods of lower growth or a decline in the number of home sales or home prices which, in turn, could adversely affect our revenue and profitability: • an increase in unemployment or inflation; • a decrease in the affordability of homes due to changes in interest rates, home prices, the cost and availability of building materials, and rates of wage and job growth; • slow economic growth or recessionary conditions; • weak credit markets; • low consumer confidence in the economy or the residential real estate market; • instability of financial institutions; 32 Table of Contents • legislative, tax or regulatory changes that would adversely impact the residential real estate or mortgage markets, including but not limited to potential reform relating to Fannie Mae, Freddie Mac and other government sponsored entities, or GSEs, that provide liquidity to the U.S. housing and mortgage markets; • increasing mortgage rates, like we have experienced recently, and increasing down payment requirements or constraints on the availability of mortgage financing, including but not limited to the potential impact of various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, or other legislation and regulations that may be promulgated thereunder relating to mortgage financing, including restrictions imposed on mortgage originators, as well as retention levels required to be maintained by sponsors to securitize certain mortgages; • excessive or insufficient home inventory levels on a regional level; • high levels of foreclosure activity, including but not limited to the release of homes already held for sale by financial institutions; • adverse changes in local or regional economic conditions, including potential impacts from the COVID-19 pandemic; • the inability or unwillingness of homeowners to enter into home sale transactions due to negative equity in their existing homes; • demographic changes, such as a decrease in household formations, lower turnover in the housing market due to homeowners staying in the same home longer than in the past, or slowing rate of immigration or population growth; • decrease in home ownership rates, declining demand for real estate and changing social attitudes toward home ownership; • changes in local, state and federal laws or regulations that affect residential real estate transactions or encourage ownership, including but not limited to changes in tax law in late 2017 that limit the deductibility of certain mortgage interest expense, the application of the alternative minimum tax, and real property taxes and employee relocation expense; or • acts of nature, such as hurricanes, earthquakes and other natural disasters that disrupt local or regional real estate markets and which may, in some circumstances lead us to waive certain fees in impacted areas.
Aggregators could intensify their current business tactics or introduce new programs that could be materially disadvantageous to our business and other brokerage participants in the industry including, but not limited to: • broadening and/or increasing fees for their programs that charge brokerages and their affiliated sales agents fees including, referral, listing, display, advertising and related fees or introducing new fees for new or existing services; • setting up competing brokerages and/or expanding their offerings to include products (including agent tools) and services ancillary to the real estate transaction, such as title, escrow and mortgage origination services, that compete with services offered by us; • not including Fathom's or our franchisees’ listings on their websites; • controlling significant inventory and agent referrals, tying referrals to use of their products, and/or engaging in preferential or exclusionary practices to favor or disfavor other industry participants; • utilizing their aggregated data for competitive advantage and/or establishing oppressive contract terms, including with respect to data sharing requirements; and/or • disintermediating our relationship with affiliated franchisees and independent sales agents and/or the relationship between the independent sales agent and the buyers and sellers of homes.
Aggregators could intensify their current business tactics or introduce new programs that could be materially disadvantageous to our business and other brokerage participants in the industry including, but not limited to: • broadening and/or increasing fees for their programs that charge brokerages and their affiliated sales agents fees including, referral, listing, display, advertising and related fees or introducing new fees for new or existing services; • setting up competing brokerages and/or expanding their offerings to include products (including agent tools) and services ancillary to the real estate transaction, such as title, escrow and mortgage origination services, that compete with services offered by us; • not including Fathom's or our franchisees’ listings on their websites; 21 Table of Contents • controlling significant inventory and agent referrals, tying referrals to use of their products, and/or engaging in preferential or exclusionary practices to favor or disfavor other industry participants; • utilizing their aggregated data for competitive advantage and/or establishing oppressive contract terms, including with respect to data sharing requirements; and/or • disintermediating our relationship with affiliated franchisees and independent sales agents and/or the relationship between the independent sales agent and the buyers and sellers of homes.
We believe that our future revenue growth will depend, among other factors, on our ability to: • recruit additional agents and collect additional commissions from existing agents; • increase our brand awareness; • successfully develop and deploy new products for the residential real estate industry; • integrate acquired companies, including those offering new ancillary services, such as title, insurance, and mortgage into our product offerings to increase our revenue per agent transaction; • respond effectively to competitive threats; and • successfully expand our business into adjacent markets.
We believe that our future revenue growth will depend, among other factors, on our ability to: • recruit additional agents and collect additional commissions from existing agents; • increase our brand awareness; • successfully develop and deploy new products for the residential real estate industry; • integrate acquired companies, including those offering new ancillary services, such as title, insurance, and mortgage into our product offerings to increase our revenue per agent transaction; • respond effectively to competitive threats, including recent industry consolidation; and • successfully expand our business into adjacent markets.
In general, the laws, rules and regulations applicable to our business practices include, without limitation, the federal Real Estate Settlement Procedures Act, or RESPA, the federal Fair Housing Act, the Dodd-Frank Act, and federal advertising and other laws, as well as comparable state statutes; rules of trade organization such as the NAR, local MLSs, and state and local AORs; licensing requirements and related obligations that could arise from our business practices relating to the provision of services other than real estate brokerage services, including our title, insurance and mortgage businesses ; privacy regulations relating to our use of personal information collected from the registered users of our websites; laws relating to the use and publication of information through the Internet; and state real estate brokerage licensing requirements, as well as statutory due diligence, disclosure, record keeping and standard-of-care obligations 18 Table of Contents relating to these licenses.
In general, the laws, rules and regulations applicable to our business practices include, without limitation, the federal Real Estate Settlement Procedures Act, or RESPA, the federal Fair Housing Act, the Dodd-Frank Act, and federal advertising and other laws, as well as comparable state statutes; rules of trade organization such as the NAR, local MLSs, and state and local AORs; licensing requirements and related obligations that could arise from our business practices relating to the provision of services other than real estate brokerage services, including our title, insurance and mortgage businesses ; privacy regulations relating to our use of personal information collected from the registered users of our websites; laws relating to the use and publication of information through the Internet; and state real estate brokerage licensing requirements, as well as statutory due diligence, disclosure, record keeping and standard-of-care obligations relating to these licenses.
District Court for the Western District of Missouri), alleging a similar fact pattern and antitrust violations. On or about March 15, 2024, NAR agreed to settle the Burnett Ruling, along with a sister litigation, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions (the “Burnett Settlement”).
District Court for the Western District of Missouri), alleging a similar fact pattern and antitrust violations. On or about March 15, 2024, NAR agreed to settle the Burnett Ruling, along with a sister litigation, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions (the “NAR Settlement”).
For example, although the U.S. residential real estate market has improved in the years after the significant and prolonged downturn that began in the second half of 2008 and continued through 2011, the COVID-19 pandemic significantly impacted the U.S. residential real estate market during the spring of 2020 with home sales in April and May declining to levels unprecedented since the recession of the late 2000’s.
For example, although the U.S. residential real estate market has improved in the years after the significant and prolonged downturn that began in the second half of 2008 and continued through 2011, the COVID-19 pandemic significantly impacted the U.S. residential real estate market during the spring of 2020 with home sales in April and May declining to levels unprecedented since the recession of the late 2000s.
Many of our existing and potential competitors have substantial competitive advantages, such as: • greater scale; • stronger brands and greater name recognition; • longer operating histories; • more financial, research and development, sales and marketing, and other resources; • more extensive relationships with participants in the residential real estate industry, such as brokers, agents, and advertisers; • strong relationships with third-party data providers, such as multiple listing services and listing aggregators; • access to larger user bases; and • larger intellectual property portfolios.
Many of our existing and potential competitors have substantial competitive advantages, such as: • greater scale; • stronger brands and greater name recognition; • longer operating histories; • more financial, research and development, sales and marketing, and other resources; • more extensive relationships with participants in the residential real estate industry, such as brokers, agents, and advertisers; 20 Table of Contents • strong relationships with third-party data providers, such as multiple listing services and listing aggregators; • access to larger user bases; and • larger intellectual property portfolios.
Although we employ measures designed to prevent, detect, address, and mitigate these threats (including access controls, data encryption, vulnerability assessments, and maintenance of backup and protective systems), cybersecurity incidents and other privacy/data security incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption, or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including potentially sensitive personal information of our customers) and the disruption of business operations.
Although we employ measures designed to prevent, detect, address, and mitigate these threats (including access controls, data encryption, vulnerability assessments, and maintenance of backup and protective systems), 22 Table of Contents cybersecurity incidents and other privacy/data security incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption, or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including potentially sensitive personal information of our customers) and the disruption of business operations.
We currently develop portions of our technology in Brazil, India, and Philippines and could conduct operations in foreign jurisdictions in the future.
We currently develop portions of our technology in Brazil, India, and Philippines and could conduct operations in other foreign jurisdictions in the future.
We might not become aware of all privacy laws, changes to privacy laws, or third-party privacy regulations governing the real estate business or be unable to comply with all of these regulations, given the rate of regulatory changes, 19 Table of Contents ambiguities in regulations, contradictions in regulations between jurisdictions, and the difficulties in achieving both company-wide and region-specific knowledge and compliance.
We might not become aware of all privacy laws, changes to privacy laws, or third-party privacy regulations governing the real estate business or be unable to comply with all of these regulations, given the rate of regulatory changes, ambiguities in regulations, contradictions in regulations between jurisdictions, and the difficulties in achieving both company-wide and region-specific knowledge and compliance.
The direct and indirect effects, if any, of the Burnett Settlement and similar settlements upon the real estate industry are not yet entirely clear. There could also be further changes in real estate industry practices.
The direct and indirect effects, if any, of the NAR Settlement and similar settlements upon the real estate industry are not yet entirely clear. There could also be further changes in real estate industry practices.
Furthermore, any proceeds from selling a foreclosed home may be significantly less than the remaining amount of the loan due to us. If we are unable to obtain sufficient financing through warehouse credit facilities to fund origination of mortgage loans, then we may be unable to grow our mortgage business.
Furthermore, any proceeds from selling a foreclosed home may be significantly less than the remaining amount of the loan due to us. 23 Table of Contents If we are unable to obtain sufficient financing through warehouse credit facilities to fund origination of mortgage loans, then we may be unable to grow our mortgage business.
To the extent that one or more of our top executives or other key management personnel depart from our company, our operations and business prospects may be adversely affected. In addition, changes in executives and key personnel could be disruptive to our business . We do not have any key person insurance.
To the extent that one or more of our top executives or other key management personnel depart from our 24 Table of Contents company, our operations and business prospects may be adversely affected. In addition, changes in executives and key personnel could be disruptive to our business . We do not have any key person insurance.
Moreover, there are inherent risks associated with upgrading, improving and expanding our information technology systems. We cannot be sure that the expansion and improvements to our infrastructure and systems will be fully or effectively implemented on a timely basis, if at all. These efforts may reduce revenue and our margins and adversely impact our financial results.
Moreover, there are inherent risks associated with upgrading, improving and expanding our information technology systems. We cannot be sure that the expansion and improvements to our infrastructure and systems 15 Table of Contents will be fully or effectively implemented on a timely basis, if at all. These efforts may reduce revenue and our margins and adversely impact our financial results.
We experienced net losses of approximately $24.0 million and $27.6 million for the years ended December 31, 2023 and 2022, respectively. We cannot guarantee when or if we will achieve sustained profitability, particularly considering current economic uncertainty and increased interest rates. We expect to make significant future expenditures to develop and expand our business.
We experienced net losses of approximately $21.6 million and $24.0 million for the years ended December 31, 2024 and 2023, respectively. We cannot guarantee when or if we will achieve sustained profitability, particularly considering current economic uncertainty and increased interest rates. We expect to make significant future expenditures to develop and expand our business.
Additionally, if plaintiffs or regulatory bodies are successful in such actions, this may increase the likelihood that similar claims are made 17 Table of Contents against the Company and/or our real estate brokers and agents which claims could result in significant liability and be adverse to our financial results if we or our brokers and agents are unable to distinguish or defend our business practices.
Additionally, if plaintiffs or regulatory bodies are successful in such actions, this may increase the likelihood that similar claims are made against the Company and/or our real estate brokers and agents which claims could result in significant liability and be adverse to our financial results if we or our brokers and agents are unable to distinguish or defend our business practices.
Historically, changes in the federal funds rate have led to changes in interest rates for other loans, but the extent of the impact on the future availability and price of mortgage financing cannot be predicted with certainty.
Historically, changes in the federal 33 Table of Contents funds rate have led to changes in interest rates for other loans, but the extent of the impact on the future availability and price of mortgage financing cannot be predicted with certainty.
We operate in a heavily regulated industry with regulated labor classifications which present significant risk in general for each potential instance where we fail to maintain compliance. Our agents can be classified as either employees or independent contractors, and we could potentially misclassify or fail to consistently achieve compliance.
We operate in a heavily regulated industry with regulated labor classifications which present significant risk in general for each potential instance where we fail to maintain compliance. 18 Table of Contents Our agents can be classified as either employees or independent contractors, and we could potentially misclassify or fail to consistently achieve compliance.
Our competitors may have access to 15 Table of Contents greater financial resources than us, allowing them to undertake expensive local advertising or marketing efforts. In addition, our competitors may be able to leverage local relationships, referral sources, and strong local brand and name recognition that we have not established.
Our competitors may have access to greater financial resources than us, allowing them to undertake expensive local advertising or marketing efforts. In addition, our competitors may be able to leverage local relationships, referral sources, and strong local brand and name recognition that we have not established.
We cannot assure our shareholders that our hedging strategy and the derivatives that we use will adequately offset the risk of interest 26 Table of Contents rate volatility or that our hedging of these transactions will not result in losses.
We cannot assure our shareholders that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging of these transactions will not result in losses.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. To maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required.
The Sarbanes-Oxley Act requires, 34 Table of Contents among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. To maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required.
The trading price of our common stock has ranged from $2.10 to $56.81 and is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.
The trading price of our common stock has ranged from $1.53 to $56.81 and is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.
Policies of the Federal Reserve Board can affect 28 Table of Contents interest rates available to potential homebuyers. Further, we are affected by any rising interest rate environment.
Policies of the Federal Reserve Board can affect interest rates available to potential homebuyers. Further, we are affected by any rising interest rate environment.
We may bring lawsuits to protect against the potential infringement of our intellectual property rights and other companies, including our competitors, could make claims against us alleging our infringement of their intellectual property rights. There can be no assurance that we would prevail in such lawsuits.
We may bring lawsuits to protect against the potential infringement of our intellectual property rights and other companies, including our competitors, could make claims against us alleging our infringement of their intellectual property rights. There can be no assurance that we would prevail in such lawsuits. Any significant impairment of our intellectual property rights could harm our business.
Acquisitions could disrupt our existing operations or cause management to divert its focus from our core business. An acquisition could cause potentially dilutive issuances of equity securities, incurrence of debt, contingent liabilities or could cause us to assume or incur unknown or unforeseen liabilities.
An acquisition could negatively impact our culture or undermine its core values. Acquisitions could disrupt our existing operations or cause management to divert its focus from our core business. An acquisition could cause potentially dilutive issuances of equity securities, incurrence of debt, contingent liabilities or could cause us to assume or incur unknown or unforeseen liabilities.
For more information see Item 1C. Cybersecurity. 22 Table of Contents Our business, financial condition and reputation may be substantially harmed by security breaches, interruptions, delays and failures in our systems and operations.
For more information see Item 1C. Cybersecurity. Our business, financial condition and reputation may be substantially harmed by security breaches, interruptions, delays and failures in our systems and operations.
Specifically, we use Adjusted EBITDA, which we use to represent net income (loss), excluding other income (expense), income taxes expense (benefit), depreciation and amortization, share-based compensation expense and transaction-related costs.
Specifically, we use Adjusted EBITDA, which we use to represent net income (loss), excluding other income (expense), income taxes expense (benefit), depreciation and amortization, share-based compensation expense and 17 Table of Contents transaction-related costs.
These factors include: • our operating performance and the operating performance of similar companies; • our non-GAAP operating performance, as reported using Adjusted EBITDA, is not equivalent to net income (loss) from operations as determined under GAAP and shareholders may consider GAAP measures to be more relevant to our operating performance; • the overall performance of the equity markets; 30 Table of Contents • announcements by us or our competitors of acquisitions, business plans, or commercial relationships; • threatened or actual litigation; • any major change in our board of directors or management; • publication of research reports or news stories about us, our competitors, or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts; • large volumes of sales of our shares of common stock by existing shareholders; and • general political and economic conditions, including lingering impacts from the COVID-19 pandemic.
These factors include: • our operating performance and the operating performance of similar companies; • our non-GAAP operating performance, as reported using Adjusted EBITDA, is not equivalent to net income (loss) from operations as determined under GAAP and shareholders may consider GAAP measures to be more relevant to our operating performance; • the overall performance of the equity markets; • announcements by us or our competitors of acquisitions, business plans, or commercial relationships; • threatened or actual litigation; • any major change in our board of directors or management; • publication of research reports or news stories about us, our competitors, or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts; • large volumes of sales of our shares of common stock by existing shareholders; and • general political and economic conditions, including lingering impacts from the COVID-19 pandemic. 35 Table of Contents Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities.
These advantages could be increasingly important considering current economic uncertainties and increased interest rates. The success of our competitors could result in fewer users visiting our website and mobile applications, and the loss of market share.
These advantages could be increasingly important considering current economic uncertainties and increased interest rates, and recent industry consolidation could make competition even stronger in our industry. The success of our competitors could result in fewer users visiting our website and mobile applications, and the loss of market share.
Joshua Harley, our Founder and former Chief Executive Officer , Marco Fregenal, our President and Chief Executive Officer, and a director, and Glenn Sampson, a significant shareholder 31 Table of Contents and director, have previously engaged in sales of our stock under Rule 10b5-1 trading plans, which have put pressure on our stock price. In November 2021, Mr.
Joshua Harley, our Founder and former Chief Executive Officer, and Marco Fregenal, our President and Chief Executive Officer, a significant shareholder and director, have previously engaged in sales of our stock under Rule 10b5-1 trading plans, which have put pressure on our stock price.
For the year ended December 31, 2023, our revenue declined to $345 million from $413 million, which represents an annual rate of decline of approximately 16%, however our historic growth has been better than market average increasing from 2020 to 2021 by 87% and from 2021 to 2022 by 25% in revenue.
Our historic growth was better than market average, increasing from 2020 to 2021 by 87% and from 2021 to 2022 by 25% in revenue. However, for the year ended December 31, 2024, our revenue declined to $335 million from $345 million, which represents an annual rate of decline of approximately 3%.
We might use interest rate derivatives from time to time to manage our exposure to interest rate risks associated with our mortgage business. To manage the risks associated with fluctuating interest rates, we may from time to time invest in derivative instruments in an attempt to offset this risk of volatility, but no hedging strategy can protect us completely.
To manage the risks associated with fluctuating interest rates, we may from time to time invest in derivative instruments in an attempt to offset this risk of volatility, but no hedging strategy can protect us completely.
Agents might not understand or appreciate our value. In addition, agents might not appreciate other components of our value proposition including the systems and tools that we provide to agents, and the professional development opportunities we create and deliver.
Participation in our commission plan represents a key component of our agent and broker value proposition. Agents might not understand or appreciate our value. In addition, agents might not appreciate other components of our value proposition including the systems and tools that we provide to agents, and the professional development opportunities we create and deliver.
The Burnett Settlement is subject to court approval. Due to the Burnett Settlement, there may be rule changes for the NAR. In the Burnett Settlement, effective mid-July 2024, NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS, as well as adopt new rules requiring written agreements between buyers and buyers’ agents.
In the NAR Settlement, effective mid-July 2024, NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS, as well as adopt new rules requiring written agreements between buyers and buyers’ agents.
As of December 31, 2023, Joshua Harley, Marco Fregenal, and Glenn Sampson beneficially owned approximately 20.2%, 7.2%, and 7.4% of our outstanding common stock, respectively. This significant concentration of share ownership may adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in companies with controlling shareholders.
As of December 31, 2024, Joshua Harley, Marco Fregenal, and Scott Flanders beneficially owned approximately 25.7%, 6.5%, and 6.8% of our outstanding common stock, respectively. This significant concentration of share ownership may adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in companies with controlling shareholders.
This could also negatively impact our agent growth rate. Our net licensed agent and broker base grew by approximately 14% from 10,370 licensed agents and brokers at December 31, 2022, to 11,795 licensed agents and brokers at December 31, 2023.
This could also negatively impact our agent growth rate. Our net licensed agent and broker base grew by approximately 21% from approximately 11,795 agent licenses at December 31, 2023, to approximately 14,300 agent licenses at December 31, 2024.
Under the Jumpstart Our Business Startups Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.
As of December 31, 2025, we will cease to be an "emerging growth company". Under the Jumpstart Our Business Startups Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.
The results of the 2024 U.S. presidential election, along with the speculation and market response to primaries, campaigning, and candidate statements, could also alter lending and consumer behavior that could adversely affect our business. The residential real estate market also depends upon the strength of financial institutions, which are sensitive to changes in the general macroeconomic and regulatory environment.
The results of the 2024 U.S. presidential election, including economic actions being taken by the new administration, could also alter lending and consumer behavior that could adversely affect our business. The residential real estate market also depends upon the strength of financial institutions, which are sensitive to changes in the general macroeconomic and regulatory environment.
Listing aggregator concentration and market power creates, and is expected to continue to create, disruption in the residential real estate brokerage industry, which might have a material adverse effect on our results of operations and financial condition.
If we are not able to compete effectively, our business and operating results will be materially and adversely affected. Listing aggregator concentration and market power creates, and is expected to continue to create, disruption in the residential real estate brokerage industry, which might have a material adverse effect on our results of operations and financial condition.
In this event, the market price of our common stock could decline, and you could lose part or all of your investment. 14 Table of Contents Risks Related to Our Business If we do not remain an innovative leader in the real estate industry, we might not be able to grow our business and leverage our costs to achieve profitability.
In this event, the market price of our common stock could decline, and you could lose part or all of your investment. 14 Table of Contents Risks Related to Our Business We have a history of losses, and we might not be able to achieve or sustain profitability.
The occurrence of natural disasters, including hurricanes, floods, earthquakes, tsunamis, tornadoes, fires, explosions, pandemic disease, such as the coronavirus pandemic, and man-made disasters, including acts of terrorism and military actions, could adversely affect our operations, results of operations or financial condition, even if home values and buyers’ access to financing has not been affected. 29 Table of Contents Risks Related to Ownership of Our Common Stock The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain qualified board of director members.
The occurrence of natural disasters, including hurricanes, floods, earthquakes, tsunamis, tornadoes, fires, explosions, pandemic disease, such as the coronavirus pandemic, and man-made disasters, including acts of terrorism and military actions, could adversely affect our operations, results of operations or financial condition, even if home values and buyers’ access to financing has not been affected.
In attempting to establish a presence in new markets, we expect to incur significant expenses and face various other challenges, such as expanding our sales force and management personnel to cover these markets. We have a history of losses, and we might not be able to achieve or sustain profitability.
In attempting to establish a presence in new markets, we expect to incur significant expenses and face various other challenges, such as expanding our sales force and management personnel to cover these markets. Our historical revenue growth rates might not be indicative of our future growth, and we might not continue to grow at our recent pace, or at all.
Our business, results of operations and financial condition could be materially adversely affected by the loss of one key relationship, as it would take a significant amount of time to replace this relationship with uncertain results. We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
Our business, 25 Table of Contents results of operations and financial condition could be materially adversely affected by the loss of one key relationship, as it would take a significant amount of time to replace this relationship with uncertain results.
Any significant impairment of our intellectual property rights could harm our business. 24 Table of Contents We may evaluate potential vendors, suppliers and other business partners for acquisition in order to accelerate growth but might not succeed in identifying suitable candidates or may acquire businesses that negatively impact us.
We may evaluate potential vendors, suppliers and other business partners for acquisition in order to accelerate growth but might not succeed in identifying suitable candidates or may acquire businesses that negatively impact us. As part of our growth strategy, we may evaluate the potential acquisition of businesses offering products or services that complement our services offerings.
In addition, an acquisition may prove unsuccessful if we fail to effectively execute a post-acquisition integration strategy. We may be unable to successfully integrate the systems and personnel of the acquired businesses. An acquisition could negatively impact our culture or undermine its core values.
If we identify a business that we deem to be suitable for acquisition and complete an acquisition, our evaluation may prove inaccurate, and the acquisition may prove unsuccessful. In addition, an acquisition may prove unsuccessful if we fail to effectively execute a post-acquisition integration strategy. We may be unable to successfully integrate the systems and personnel of the acquired businesses.
Fraud, defalcation and misconduct by employees are also risks inherent in our business, particularly given the high transactional volumes in our company owned brokerage, title, escrow and settlement services and relocation operations. To the extent that any loss or theft of funds substantially exceeds our insurance coverage, our business could be materially adversely affected.
Fraud, defalcation and misconduct by employees are also risks inherent in our business, particularly given the high transactional volumes in our company owned brokerage, title, escrow and settlement services and relocation operations.
If agents do not understand our value proposition, we might not be able to attract, retain and incentivize agents or maintain our agent growth rate, which would adversely affect our revenue growth and results of operations . Participation in our commission plan represents a key component of our agent and broker value proposition.
Our value proposition for agents includes allowing them to keep more of their commissions than traditional companies do. If agents do not understand our value proposition, we might not be able to attract, retain and incentivize agents or maintain our agent growth rate, which would adversely affect our revenue and results of operations .
The residential real estate market tends to be cyclical and typically is affected by changes in general macroeconomic conditions which are beyond our control. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets, levels of unemployment, consumer confidence and the general condition of the U.S. and the global economy.
These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets, levels of unemployment, consumer confidence and the general condition of the U.S. and the global economy.
Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. This litigation, if instituted against us, could result in substantial costs, divert our management’s attention and resources, and harm our business, operating results, and financial condition.
This litigation, if instituted against us, could result in substantial costs, divert our management’s attention and resources, and harm our business, operating results, and financial condition.
Any such events could also damage our reputation and impair our ability to attract and service home buyers, home sellers and agents, as well our ability to attract brokerages, teams of agents and individual agents to our Company, without increasing our costs.
Any such events could also damage our reputation and impair our ability to attract and service home buyers, home sellers and agents, as well our ability to attract brokerages, teams of agents and individual agents to our Company, without increasing our costs. 19 Table of Contents Further, if we lose our ability to obtain and maintain every regulatory approval and license necessary to conduct business as we currently operate, our ability to conduct business may be harmed.
In addition, current or potential competitors might be acquired by third parties with greater resources than ours, which would further strengthen these current or potential 20 Table of Contents competitors and enable them to compete more vigorously or broadly with us. If we are not able to compete effectively, our business and operating results will be materially and adversely affected.
This increased competition could stall our growth in these areas. We expect increased competition if our market continues to expand. In addition, current or potential competitors might be acquired by third parties with greater resources than ours, which would further strengthen these current or potential competitors and enable them to compete more vigorously or broadly with us.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be impaired, and our business might be harmed. 25 Table of Contents We are subject to certain risks related to litigation filed by or against us, and adverse results might harm our business and financial condition.
We might not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be impaired, and our business might be harmed.
We cannot provide assurance that material weaknesses will not exist or otherwise be discovered, any of which could adversely affect our reputation, financial condition and results of operations. 23 Table of Contents We are an “emerging growth company,” and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
We are an “emerging growth company,” and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
Past performance in similar seasons or during similar weather events can provide no assurance of future or current performance, and macroeconomic shifts in the markets we serve can conceal the impact of seasonality. 21 Table of Contents Home sales in successive quarters can fluctuate widely due to a wide variety of seasonal factors, including holidays, and the school year calendar’s impact on timing of family relocations.
Home sales in successive quarters can fluctuate widely due to a wide variety of seasonal factors, including holidays, and the school year calendar’s impact on timing of family relocations.
Further, if we lose our ability to obtain and maintain every regulatory approval and license necessary to conduct business as we currently operate, our ability to conduct business may be harmed. Lastly, any lobbying or related activities we undertake in response to mitigate liability of current or new regulations could substantially increase our operating expenses.
Lastly, any lobbying or related activities we undertake in response to mitigate liability of current or new regulations could substantially increase our operating expenses.
Because we derive revenue from real estate transactions in which our agents receive commissions, increases in our licensed agent base correlate to increases in revenue. A slowdown in our licensed agent growth rate would have a material adverse effect on revenue growth and could adversely affect our results of operations.
Because we derive revenue from real estate transactions in which our agents receive commissions, increases in our licensed agent base generally correlate to increases in revenue.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and other applicable securities rules and regulations.
Risks Related to Ownership of Our Common Stock The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain qualified board of director members. As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and other applicable securities rules and regulations.
If we were to experience any of the difficulties listed above, or any other difficulties, any international development activities and our overall financial condition may suffer. Risks Related to Our Industry Our results are tied to the residential real estate market and we might be negatively impacted by downturns in this market and general global economic conditions.
Risks Related to Our Industry Our results are tied to the residential real estate market and we might be negatively impacted by downturns in this market and general global economic conditions. The residential real estate market tends to be cyclical and typically is affected by changes in general macroeconomic conditions which are beyond our control.
Harley and Mr. Fregenal sold an aggregate of 350,000 shares of common stock in our underwritten public offering of common stock, and in December 2023 Mr. Harley sold 1,000,000 shares of common stock in our underwriting public offering. The perception that such additional sales could occur could also depress the market price of our common stock.
The perception that such additional sales could occur could also depress the market price of our common stock.
Accordingly, we might not be able to achieve or maintain profitability and we may incur significant losses for the foreseeable future. 16 Table of Contents Our historical revenue growth rates might not be indicative of our future growth, and we might not continue to grow at our recent pace, or at all.
Accordingly, we might not be able to achieve or maintain profitability and we may incur significant losses for the foreseeable future. If we do not remain an innovative leader in the real estate industry, we might not be able to grow our business and leverage our costs to achieve profitability.
We might not be able to obtain additional financing on terms favorable to us, if at all.
We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
Real estate listings precede sales, and a period of poor listings activity will negatively impact revenue.
Real estate listings precede sales, and a period of poor listings activity will negatively impact revenue. Past performance in similar seasons or during similar weather events can provide no assurance of future or current performance, and macroeconomic shifts in the markets we serve can conceal the impact of seasonality.
Removed
Our value proposition for agents includes allowing them to keep more of their commissions than traditional companies do, and receive equity in our Company, which is not typical in the real estate industry.
Added
A slowdown in our licensed agent growth rate would have a material adverse effect on revenue and could adversely affect our results of operations. 16 Table of Contents Our agent commission plans, including Fathom Max and Fathom Share, might not positively contribute to agent recruitment and retention, which would adversely affect our revenue growth and results of operations.
Removed
This increased competition could stall our growth in these areas. We expect increased competition if our market continues to expand.
Added
In addition to our existing agent commission plans, we introduced two new agent commission plans in August 2024. These new plans, Fathom Max and Fathom Share, were designed to enhance agent recruitment and retention while reinforcing our commitment to provide flexible, attractive options for agents.
Removed
As part of our growth strategy, we may evaluate the potential acquisition of businesses offering products or services that complement our services offerings. If we identify a business that we deem to be suitable for acquisition and complete an acquisition, our evaluation may prove inaccurate, and the acquisition may prove unsuccessful.
Added
However, our new plans might not work as designed and might not deliver agent growth and retention, particularly if agents do not appreciate or understand the commission plans. If our new plans do not work as intended, our agent growth rate might be affected, which could adversely affect our results of operations.
Removed
Since December 2015, the Federal Open Market Committee of the Federal Reserve Board has raised the target range for federal funds 18 times, including three times in 2017, four times in 2018, seven times in 2022 and four times in 2023, after leaving the federal funds interest rate near 0% since late 2008.
Added
On November 26, 2024, the NAR Settlement was granted over objections, which resolved the claims against the Company. Due to the NAR Settlement, there may be rule changes for the NAR.
Removed
Future changes in the federal funds rate are uncertain, however the Federal Open Market Committee has indicated it does not expect additional increases to occur in 2024.
Added
We cannot provide assurance that material weaknesses will not exist or otherwise be discovered, any of which could adversely affect our reputation, financial condition and results of operations.
Removed
Joshua Harley, our Founder and former Chief Executive Officer, together with Marco Fregenal, our President and Chief Executive Officer, and a director, and Glenn Sampson, a significant shareholder and director, own a significant percentage of our stock, and as a result, they can take actions that may be adverse to the interests of the other shareholders and the trading price for our common stock may be depressed.
Added
We are subject to certain risks related to litigation filed by or against us, and adverse results might harm our business and financial condition.
Added
To the extent that any loss or theft of funds substantially exceeds our insurance coverage, our business could be materially adversely affected. 26 Table of Contents We might use interest rate derivatives from time to time to manage our exposure to interest rate risks associated with our mortgage business.
Added
If we were to experience any of the difficulties listed above, or any other difficulties, any international development activities and our overall financial condition may suffer. Risks Related to Bitcoin Treasury Strategy Our bitcoin treasury strategy could expose us to various risks associated with bitcoin.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changePrior to engaging a 32 Table of Contents third-party service provider, we carefully evaluate their cybersecurity reputation and track record, industry reports, and any potential information that they would have access to in the course of their work with us.
Biggest changePrior to engaging a third-party service provider, we carefully evaluate their cybersecurity reputation and track record, industry reports, and any potential information that they would have access to in the course of their work with us. 37 Table of Contents Governance As of December 31, 2024, no risks from cybersecurity threats, including as a result of cybersecurity incidents we have experienced in the past, have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition.
Removed
Governance As of December 31, 2023, no risks from cybersecurity threats, including as a result of cybersecurity incidents we have experienced in the past, have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+7 added−0 removed5 unchanged
Biggest changeThe lawsuits allege unlawful conspiracy in violation of federal antitrust law and, against certain defendants (but not us) deceptive trade practices under the Texas Deceptive Trade Practices Act.
Biggest changeThe plaintiff filed an amended complaint on January 21, 2025, and the Company filed another Motion to Dismiss in February 2025. The Company intends to vigorously defend the action. The lawsuits allege unlawful conspiracy in violation of federal antitrust law and, against certain defendants (but not us) deceptive trade practices under the Texas Deceptive Trade Practices Act.
Adverse results in such litigation might harm our business and financial condition. 33 Table of Contents Moreover, defending these lawsuits, regardless of their merits, could entail substantial expense and require the time and attention of our key management personnel. Item 4. Mine Safety Disclosures. Not applicable. 34 Table of Contents PART II
Adverse results in such litigation might harm our business and financial condition. Moreover, defending these lawsuits, regardless of their merits, could entail substantial expense and require the time and attention of our key management personnel. Item 4. Mine Safety Disclosures. Not applicable. 39 Table of Contents PART II
Added
A third purported class action complaint was filed on April 11, 2024, by plaintiffs Shauntell Burton, Benny D. Cheatham, Robert Douglass, Douglas Fender, and Dana Fender in the United States District Court for the District of South Carolina.
Added
Like the Texas lawsuits, the South Carolina lawsuit alleges unlawful conspiracy in violation of federal antitrust law and is purportedly brought on behalf of a class consisting of all persons who used a listing broker in the sale of a home listed on an MLS in the District of South Carolina beginning on November 6, 2019.
Added
The case is currently stayed pending the final approval of the settlement between a nationwide plaintiff class and the NAR. As discussed above, the Company opted into a settlement between a nationwide plaintiff class and the NAR by executing a Supplemental Settlement Agreement in June 2024.
Added
The court approved the NAR Settlement over objections on November 26, 2024, and the approval 38 Table of Contents is subject to appeal. If the NAR Settlement is sustained on appeal, it is expected to resolve claims against the Company related to this matter.
Added
A fourth purported class action was filed on September 26, 2024, on behalf of buyers of residential property nationwide, and with an Illinois-specific sub-class, against Fathom Realty, LLC and other real estate brokers.
Added
In the complaint, the Plaintiffs allege that Defendants conspired to raise buyer broker commissions in violation of Section 1 of the Sherman Act, the Illinois Antitrust Act, and the Illinois Consumer Fraud and Deceptive Business Practices Act. On December 16, 2024, the Company filed a Motion to Dismiss for Failure to State a Claim.
Added
In addition to the foregoing, My Home Group (“MHG”), which the Company acquired on November 1, 2024, is a defendant in four active lawsuits: one in the United States District Court for the District of Arizona, filed in January 2024; and three separate matters in Superior Court of Maricopa County, Arizona, filed in September 2024, January 2023 and April 2022.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed9 unchanged
Biggest changeThere were no equity repurchases for the year ended December 31, 2023. The approximate dollar value of shares that may yet be purchased pursuant to the repurchase program is $4.0 million. Management has no plans to repurchase additional shares at this time. Item 6. [Reserved] 35 Table of Contents
Biggest changeThere were no equity repurchases for the year ended December 31, 2024 . The approximate dollar value of shares that may yet be purchased pursuant to the repurchase program is $4.0 million . Management has no plans to repurchase additional shares at this time. Item 6. [Reserved] 40 Table of Contents
Market Information Our common stock trades on The Nasdaq Capital Market under the symbol “FTHM”. Holders of Common Stock As of December 31, 2023, we had approximately 1,363 shareholders of record of our common stock.
Market Information Our common stock trades on The Nasdaq Capital Market under the symbol “FTHM”. Holders of Common Stock As of December 31, 2024, we had approximately 713 shareholders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

69 edited+24 added−13 removed58 unchanged
Biggest changeSome of these limitations are that: • Adjusted EBITDA excludes share-based compensation expense related to restricted stock awards, restricted stock unit awards, and stock options, which have been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy; • Adjusted EBITDA excludes transaction-related costs primarily consisting of professional fees and any other costs incurred directly related to acquisition activity, which is an ongoing part of our growth strategy and therefore likely to occur; and • Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation and amortization of property and equipment and capitalized software costs, however, the assets being depreciated and amortized may have to be replaced in the future.
Biggest changeSome of these limitations are that: • Adjusted EBITDA excludes share-based compensation expense related to restricted stock awards, restricted stock unit awards, and stock options, which have been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy; • Adjusted EBITDA excludes transaction-related costs primarily consisting of professional fees and any other costs incurred directly related to acquisition activity, which is an ongoing part of our growth strategy and therefore likely to occur; • Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation and amortization of property and equipment and capitalized software costs, however, the assets being depreciated and amortized may have to be replaced in the future; • Adjusted EBITDA excludes the gain on the sale of the business, as this item is non-recurring and not indicative of the company’s core operating performance; and 49 Table of Contents • Adjusted EBITDA excludes NAR related litigation expenses, which could continue to be significant recurring expenses in our business until a final settlement has been approved by the court.
Certain of these exemptions are, including without limitation, from the requirements of (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis.
Certain of these exemptions are, including without limitation, from the requirements of (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s 51 Table of Contents report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis.
In the event of a sustained market deterioration, we may need or seek 42 Table of Contents advantageously to obtain additional funding through equity or debt financing, which might not be available on favorable terms or at all and could hinder our business and dilute our existing shareholders.
In the event of a sustained market deterioration, we may need or seek advantageously to obtain additional funding through equity or debt financing, which might not be available on favorable terms or at all and could hinder our business and dilute our existing shareholders.
For further information on goodwill, see Note 4 - Goodwill. Business Combinations The Company accounts for its business combinations under the provisions of Accounting Standards Codification (“ASC”) Topic 805-10, Business Combinations (“ASC 805-10”), which requires that the purchase method of accounting be used for all business combinations.
For further information on goodwill, see Note 4 - Goodwill. 50 Table of Contents Business Combinations The Company accounts for its business combinations under the provisions of Accounting Standards Codification (“ASC”) Topic 805-10, Business Combinations (“ASC 805-10”), which requires that the purchase method of accounting be used for all business combinations.
Insurance Agency Service Revenue The revenue streams for the Company’s home and other insurance agency services business are primarily comprised of new and renewal commissions paid by insurance carriers.
Insurance Agency Service Revenue The revenue streams for the Company’s home and other insurance agency services business were primarily comprised of new and renewal commissions paid by insurance carriers.
Based on Freddie Mac data, the average rate for a 30-year, conventional fixed rate mortgage was 6.61% in December 2023 compared to 6.42% in 2022. If inflation continues to moderate into 2024 as anticipated, mortgage rates should decline, which we expect to boost homebuyer demand and homebuilder sentiment.
Based on Freddie Mac data, the average rate for a 30-year, conventional fixed rate mortgage was 6.61% in December 2024 and 2023. If inflation continues to moderate into 2025 as anticipated, mortgage rates should decline, which we expect to boost homebuyer demand and homebuilder sentiment.
No additional impairment steps 44 Table of Contents are necessary if we qualitatively determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
No additional impairment steps are necessary if we qualitatively determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
Looking ahead, we remain focused on getting back to positive total company Adjusted EBITDA for the full year 2024. For the years ended December 31, 2023 and 2022, due in part to the widespread availability of multiple COVID-19 vaccines, the effects of the COVID-19 on business worldwide lessened.
Looking ahead, we remain focused on getting back to positive total company Adjusted EBITDA for the full year 2025 . 42 Table of Contents For the years ended December 31, 2023 and 2022, due in part to the widespread availability of multiple COVID-19 vaccines, the effects of the COVID-19 on business worldwide lessened.
These are the trends we are currently facing. Additionally, regulations imposed by local, state, and federal government agencies can also negatively impact the housing markets in which we operate. Finally, national and global events, including geopolitical instability, that impact economic conditions and financial markets, including interest rates, can adversely impact the housing market.
Additionally, regulations imposed by local, state, and federal government agencies can also negatively impact the housing markets in which we operate. Finally, national and global events, including geopolitical instability, that impact economic conditions and financial markets, including interest rates, can adversely impact the housing market.
Of the federal net operating losses $1.0 million are subject to expiration beginning in 2035 and $48.4 million carry forward indefinitely. State net operating losses will begin to expire, if not utilized, in 2032.
Of the federal net operating losses $1.0 million are subject to expiration beginning in 2035 and $53.6 million carry forward indefinitely. State net operating losses will begin to expire, if not utilized, in 2032.
Adjusted EBITDA also excludes other income and expense, net which primarily includes nonrecurring items, 43 Table of Contents such as, gain on debt extinguishment, severance costs, and non-cash items representing reserves on certain agent fee collection, if applicable.
Adjusted EBITDA also excludes other income and expense, net which primarily includes nonrecurring items, such as, gain on debt extinguishment, gain on sale of business, severance costs, and non-cash items representing reserves on certain agent fee collection, if applicable.
Market Conditions and Industry Trends Our business is dependent on the economic conditions within the markets in which we operate. Changes in these conditions can have a positive or negative impact on our business. The economic conditions influencing the housing markets primarily include economic growth, interest rates, unemployment, consumer confidence, mortgage availability and supply and demand.
Rising Interest Rates, and Other Risks Our business is dependent on the economic conditions within the markets in which we operate. Changes in these conditions can have a positive or negative impact on our business. The economic conditions influencing the housing markets primarily include economic growth, interest rates, unemployment, consumer confidence, mortgage availability, and supply and demand.
We believe our business model and our focus on treating our agents well will attract more agents and higher-producing agents. Fathom’s real estate agent network grew 14% to approximately 11,795 agent licenses at December 31, 2023, up from approximately 10,370 at December 31, 2022.
We believe our business model and our focus on treating our agents well will attract more agents and higher-producing agents. Fathom’s real estate agent licenses grew 21% to approximately 14,300 agent licenses at December 31, 2024, up from approximately 11,795 at December 31, 2023.
For each business combination completed during the year ended December 31, 2022, the estimated fair value of identifiable intangible assets, primarily consisting of agent relationships, tradenames, customer relationships and technology, was determined using the relief-from-royalty and multi-period excess earnings methods.
For each business combination, the estimated fair value of identifiable intangible assets, primarily consisting of agent relationships, tradenames, customer relationships and technology, was determined using the relief-from-royalty and multi-period excess earnings methods.
Please see Note 3 - Acquisitions, for more detail. 45 Table of Contents Recent Accounting Standards For information on recent accounting standards, see Note 2 to our consolidated financial statements included elsewhere in this report. JOBS Act Transition Period In April 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was enacted.
Recent Accounting Standards For information on recent accounting standards, see Note 2 to our consolidated financial statements included elsewhere in this report. JOBS Act Transition Period In April 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was enacted.
The Company is also eligible for certain contingent commissions from insurers based on the attainment of specific metrics (i.e., volume growth, loss ratios) related to underlying polices placed.
The Company was also eligible for certain contingent commissions from insurers based on the attainment of specific metrics (e.g., volume growth, loss ratios) related to the underlying policies placed.
National Housing Inventory Throughout 2023, increased mortgage interest rates and higher home prices have caused inventory levels, as measured in months of supply, to rise. Construction of new homes continues to slow also due to rising mortgage rates and the strained availability of labor and materials.
National Housing Inventory Throughout 2024, historically elevated mortgage interest rates and high home prices have caused inventory levels, as measured in months of supply, to rise. Construction of new homes continues to slow also due to historically elevated mortgage interest rates and the strained availability of labor and materials.
Commission and other agent-related costs primarily includes costs related to agent commissions, net of fees paid to us by our agents. These costs generally correlate with recognized revenues.
Commission and service cost primarily includes costs related to agent commissions, net of fees paid to us by our agents and commission costs for our mortgage and other ancillary business. These costs generally correlate with recognized revenues.
Reportable Segments Our Chief Operating Decision Maker makes operating decisions and assesses performance based on the services of identified operating segments and has identified three reportable segments: Real Estate Brokerage; Mortgage; and Technology. Through its Real Estate Brokerage segment, the Company provides real estate brokerage services. Through its Mortgage segment, the Company provides residential loan origination and underwriting services.
Reportable Segments Our CEO, who is our Chief Operating Decision Maker ("CODM"), makes operating decisions and assesses performance based on the services of identified operating segments and has identified three operating and reportable segments: Real Estate Brokerage; Mortgage; and Technology. Through its Real Estate Brokerage segment, the Company provides real estate brokerage services.
As a result of certain acquisitions during the period ended December 31, 2022, we realized a portion of the pre-existing deferred tax assets due to the reversal of taxable temporary differences. As of December 31, 2023, we had federal net operating loss carryforwards of approximately $49.4 million and state net operating loss carryforwards of approximately $26.0 million.
As a result of certain acquisitions during the period ended December 31, 2022, we realized a portion of the pre-existing deferred tax assets due to the reversal of taxable temporary differences. As of December 31, 2024, we had federal net operating loss carryforwards of approximately $54.6 million and state net operating loss carryforwards of approximately $28.9 million.
Generally Accepted Accounting Principles (“GAAP”), we do not amortize goodwill. Income Taxes U.S. federal and state income tax benefits for a portion of historical net losses was recognized in the period ended December 31, 2022. Previously, we have not recognized the tax benefits because of the uncertainty of realizing a future benefit from those items.
Income Taxes U.S. federal and state income tax benefits for a portion of historical net losses was recognized in the period ended December 31, 2024. Previously, we have not recognized the tax benefits because of the uncertainty of realizing a future benefit from those items.
We define the non-GAAP financial measure of Adjusted EBITDA as net income (loss), excluding other expense, income tax benefit, depreciation and amortization, share-based compensation expense, and transaction-related cost.
We define the non-GAAP financial measure of Adjusted EBITDA as net income (loss), excluding other expense, income tax benefit, depreciation and amortization, share-based compensation expense, gain on sale of business benefit, NAR related litigation contingency expenses and transaction-related cost.
However, a change in facts and circumstances as of the acquisition date can result in subsequent adjustments during the measurement period, but no later than one year from the acquisition date.
However, a change in facts and circumstances as of the acquisition date can result in subsequent adjustments during the measurement period, but no later than one year from the acquisition date. Please see Note 3 - Acquisitions, for more detail.
The cash proceeds disbursed to the Company from the issuance of the Note were $3,300,000, after deducting the placement agent fee and purchaser expenses.
The cash proceeds disbursed to the Company from the issuance of the Note were $4.9 million, after deducting the placement agent fee and purchaser expenses.
As such, the decrease in commission and other agent-related costs compared to the same period in 2022 was primarily due to a decrease in agent commissions paid due to lower transaction volume mainly due to rising interest rates.
As such, the decrease in commission and service costs compared to the same period in 2023 was primarily due to a decrease in agent commissions paid due to lower transaction volume mainly due to historically elevated interest rates.
As of December 31, 2023, our cash totaled approximately $7.4 million, which represented a decrease of $0.9 million compared to December 31, 2022. As of December 31, 2023, we had net working capital of approximately $6.8 million, which represented an increase of $0.5 million compared to December 31, 2022.
As of December 31, 2024, our cash totaled approximately $7.1 million, which represented a decrease of $0.3 million compared to December 31, 2023. As of December 31, 2024, we had net working capital of approximately $5.6 million, which represented a decrease of $1.3 million compared to December 31, 2023.
The following table presents a reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure, for each of the periods presented (amount in thousands): Year Ended December 31, 2023 2022 Net loss $ (23,981) $ (27,626) Depreciation and amortization 5,947 5,346 Other expense (income), net 580 903 Income tax expense (benefit) 148 (54) Stock based compensation 12,994 9,131 Other non-cash and transaction-related cost 201 73 Adjusted EBITDA $ (4,111) $ (12,227) Critical Accounting Estimates Discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP.
The following table presents a reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure, for each of the periods presented (amount in thousands): Year Ended December 31, 2024 2023 Net loss $ (21,577) $ (23,981) Gain on sale of business (2,958) — Stock based compensation 8,839 12,994 Depreciation and amortization 5,423 5,947 Litigation contingency 3,491 — Other expense, net 2,094 580 Other non-cash and transaction-related cost — 201 Income tax expense (benefit) (1,022) 148 Adjusted EBITDA $ (5,710) $ (4,111) Critical Accounting Estimates Discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP.
In April 2023, we entered into a securities purchase agreement (the “Purchase Agreement”) with an accredited investor (the “Holder”) and issued a Senior Secured Convertible Promissory Note in the principal amount of $3,500,000 (the “Note”) in a private placement (the “Offering”).
In March 2025, we raised approximately $2.7 million in net proceeds of a registered director offering of common stock. In April 2023, we entered into a securities purchase agreement (the “Purchase Agreement”) with an accredited investor (the “Holder”) and issued a Senior Secured Convertible Promissory Note in the principal amount of $3,500,000 (the “Note”) in a private placement (the “Offering”).
We granted such stock grants quarterly. Effective January 1, 2023, agents will primarily be able to earn stock grants in the form of stock units based on agent referral metrics achieved. These stock grants will be granted quarterly and will vest in two years.
Agent Equity Ownership Beginning January 1, 2023, agents have been primarily able to earn stock grants in the form of stock units based on agent referral metrics achieved. These stock grants typically are granted quarterly and vest in two years.
Additionally, we have an efficient operating model with lower fixed costs driven by our cloud-based model, with minimum brick-and-mortar locations. 36 Table of Contents Regardless of whether the housing market continues to slow or grow, we continue to believe that we are positioned to leverage our low-cost, high-engagement model, affording agents and brokers increased income and ownership opportunities while offering a scalable solution to brokerage owners looking to prosper in a series of fluctuations in economic activity.
Regardless of whether the housing market continues to slow or grow, we continue to believe that we are positioned to leverage our low-cost, high-engagement model, affording agents and brokers increased income and ownership opportunities while offering a scalable solution to brokerage owners looking to prosper in a series of fluctuations in economic activity.
According to the NAR, inventory of existing homes for sale in the U.S. was 990,000 at the end of December 2023 compared to 970,000 at the end of December 2022. Mortgage Rates The sharp increase in mortgage rates is negatively impacting the demand for homebuying.
According to the NAR, inventory of existing homes for sale in the U.S. was 1.15 million at the end of December 2024 compared to 990,000 at the end of December 2023. Mortgage Rates Historically elevated mortgage interest rates are negatively impacting the demand for homebuying.
We also have other service revenue, including mortgage lending, title insurance, home and other insurance, and SaaS revenues. 38 Table of Contents Gross commission income We recognize commission-based revenue on the closing of a transaction, less the amount of any closing-cost reductions.
We also have other service revenue, including mortgage lending, title insurance, home and other insurance, and SaaS revenues. Gross Commission Income We recognize commission-based revenue on the closing of a transaction, less the amount of any closing-cost reductions. Revenue is affected by the number of real estate transactions we close, the mix of transactions, home sale prices, and commission rates.
Liquidity and Capital Resources (amount in thousands) Capital Resources December 31, 2023 December 31, 2022 Change Dollars Percentage Current assets $ 23,194 $ 18,816 $ 4,378 23 % Current liabilities 16,352 12,499 3,853 31 % Net working capital $ 6,842 $ 6,317 $ 525 8 % To date, our principal sources of liquidity have been revenues and the net proceeds we received through public offerings and private sales of our common stock, as well as proceeds from loans.
Liquidity and Capital Resources (amounts in thousands) Capital Resources December 31, 2024 December 31, 2023 Change Dollars Percentage Current assets $ 24,956 $ 23,194 $ 1,762 7.6 % Current liabilities 19,381 16,352 3,029 18.5 % Net working capital $ 5,575 $ 6,842 $ (1,267) (18.5) % To date, our principal sources of liquidity have been revenues and the net proceeds we received through public offerings and private sales of our common stock, as well as proceeds from loans.
Revenue for contingent commissions is estimated based on historical and current evidence of achievement towards each insurer’s annual respective metrics and is recorded as the underlying policies that contribute to the achievement are placed. Due to the uncertainty of the amount of contingent consideration we constrain estimated revenue to an amount for which a significant negative adjustment is not probable.
Revenue for contingent commissions was estimated based on historical and current evidence of achievement toward each insurer’s respective annual metrics and was recognized as the underlying policies contributing to those achievements were placed. Due to the uncertainty in the amount of contingent consideration, the Company constrained estimated revenue to an amount for which a significant negative adjustment was not probable.
All other finite-lived intangibles are amortized on a straight-line basis over the term of the expected benefit. Purchased software and capitalized software development costs are amortized on a straight-line basis over the term of the expected benefit and the respective amortization expense is included in technology and development expense. In accordance with U.S.
Purchased software and capitalized software development costs are amortized on a straight-line basis over the term of the expected benefit and the respective amortization expense is included in technology and development expense. In accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we do not amortize goodwill.
Retail origination fees are principally revenues from loan originations and recorded in the statement of operations in other service revenue. Direct loan origination costs and expenses associated with the loans are charged to expenses when the loans are sold. Interest income is interest earned on originated loans prior to the sale of the asset.
Direct loan origination costs and expenses associated with the loans are charged to expenses when the loans are sold. Interest income is interest earned on originated loans prior to the sale of the asset.
In December 2023, the Company, completed an offering of common stock, which resulted in the issuance and sale by the Company of 2,000,000 shares of common stock, at a public offering price of $2.00 per share and an option to the underwriters to purchase up to additional 450,000 shares.
The cash proceeds disbursed to the Company from the issuance of the Note were $3,300,000, after deducting the placement agent fee and purchaser expenses. 47 Table of Contents In December 2023, the Company, completed an offering of common stock, which resulted in the issuance and sale by the Company of 2,000,000 shares of common stock, at a public offering price of $2.00 per share and an option to the underwriters to purchase up to additional 450,000 shares.
The transaction price is set to be the estimated commissions to be received over the term of the policy based on an estimate of premiums placed, policy changes and cancellations, net of restraint. The commissions are earned upon effective date of the associated policies, which is when control of the policy transfers to the client.
The transaction price was determined based on the estimated commissions to be received over the term of the policy, which were based on estimates of premiums placed, policy changes, and cancellations, net of constraints. Commissions were earned upon the effective date of the associated policies, which was the point at which control of the policy transferred to the client.
During the year ended December 31, 2023, average revenue per transaction decreased by 2% to $8,532 from $8,739 during the year ended December 31, 2022. For the year ended December 31, 2023, other service revenue was approximately $19.8 million.
During the year ended December 31, 2024, average revenue per transaction increased by 2.1% to $8,712 from $8,532 during the year ended December 31, 2023. For the year ended December 31, 2024, other service revenue was approximately $20.4 million, a 3.1% increase from 2023.
Fathom Realty Holdings, LLC, a Texas limited liability company (“Fathom Realty”), is a wholly owned subsidiary of Fathom Holdings Inc. Fathom Realty owns 100% of 39 subsidiaries, each an LLC representing the state in which the entity operates (e.g. Fathom Realty NJ, LLC). Company Acquisitions In January 2022, the Company completed its acquisition of Cornerstone Financial (“Cornerstone”).
Fathom Realty Holdings, LLC, a Texas limited liability company (“Fathom Realty”), is a wholly owned subsidiary of Fathom Holdings Inc. Fathom Realty owns 100% of 43 subsidiaries, each an LLC representing the state in which the entity operates (e.g. Fathom Realty NJ, LLC). Company Acquisitions On November 1, 2024, the Company acquired My Home Group ("MHG").
Cash Flows Comparison of the Years Ended December 31, 2023 and 2022 (amount in thousands) Year Ended December 31, Change 2023 2022 Dollars Percentage Net cash used in operating activities $ (10,572) $ (6,583) $ (3,989) (61) % Net cash used in investing activities $ (1,868) $ (7,096) $ 5,228 74 % Net cash provided by (used in) financing activities $ 11,600 $ (15,862) $ 27,462 173 % Cash Flows from Operating Activities Net cash used in operating activities for the year ended December 31, 2023 consisted of a net loss of $24.0 million, including non-cash charges of $13.0 million of share-based compensation, $5.9 million of depreciation and amortization, and a $3.7 million gain on sale of mortgages.
Cash Flows Comparison of the Years Ended December 31, 2024 and 2023 (amounts in thousands) Year Ended December 31, Change 2024 2023 Dollars Percentage Net cash (used in) operating activities $ (4,688) $ (10,572) $ 5,884 (56) % Net cash provided by (used in) investing activities $ 3,302 $ (1,868) $ 5,170 (277) % Net cash provided by financing activities $ 1,236 $ 11,600 $ (10,364) (89) % Cash Flows from Operating Activities Net cash used in operating activities for the year ended December 31, 2024 consisted of a net loss of $21.6 million, including non-cash charges of $8.8 million of share-based compensation, $5.4 million of depreciation and amortization, and a $5.9 million gain on sale of mortgages.
Through its Technology segment, the Company provides SaaS solutions and data mining for third party customers and continues to develop its intelliAgent platform for current use by the Company’s real estate agents. Components of Our Results of Operations Revenue Our revenue primarily consists of commissions generated from real estate brokerage services.
Through its Mortgage segment, the Company provides residential loan origination and underwriting services. Through its Technology segment, the Company provides SaaS solutions and data mining for third party customers and continues to develop its intelliAgent platform for current use by the Company’s real estate agents.
The economic conditions influencing the housing markets primarily include economic growth, interest rates, unemployment, consumer confidence, mortgage availability, and supply and demand. In periods of economic growth, demand typically increases resulting in increasing home sales transactions and home sales prices. Similarly, a decline in economic growth, increasing interest rates and declining consumer confidence generally decreases demand.
Changes in these conditions can have a positive or negative impact on our business. The economic conditions influencing the housing markets primarily include economic growth, interest rates, unemployment, consumer confidence, mortgage availability and supply and demand. In periods of economic growth, demand typically increases resulting in higher home sales transactions and home sales prices.
Leasehold improvements are depreciated over the lesser of the life of the lease term or the useful life of the improvements. Amortization expense consists of amortization recorded on acquisition-related intangible assets, excluding purchased software. Customer relationships are amortized on an accelerated basis, which coincides with the period of economic benefit we expect to receive.
Amortization expense consists of amortization recorded on acquisition-related intangible assets, excluding purchased software. Customer 45 Table of Contents relationships are amortized on an accelerated basis, which coincides with the period of economic benefit we expect to receive. All other finite-lived intangibles are amortized on a straight-line basis over the term of the expected benefit.
Cash Flows from Financing Activities Net cash used in financing activities for the year ended December 31, 2023 consisted of $4.8 million of net borrowings on warehouse lines of credit, $4.0 million in debt proceeds from the issuance of a $3.5 million convertible note payable and approximately $0.5 million in notes payable attributable to financing certain insurance premiums, plus $4.2 million in net proceeds from our December 2023 equity offering, partially offset by $0.7 million in debt payments, $0.2 million in debt issuance cost payments, and $0.5 million in deferred acquisition consideration payments.
Cash Flows from Financing Activities Net cash used in financing activities for the year ended December 31, 2024 consisted of $3.8 million of net borrowings on warehouse lines of credit, $5.7 million from the issuance of convertible note payable, partially offset by $0.6 million in debt payments.
On October 31, 2023, a federal jury in Missouri found that the NAR and certain companies conspired to artificially inflate brokerage commissions, which violates federal antitrust law. The judgment was appealed on October 31, 2023, while the plaintiffs have now sued a number of other companies, although not us yet.
On October 31, 2023, a federal jury in Missouri found that the NAR and certain companies conspired to artificially inflate brokerage commissions, which violates federal antitrust law. The judgment was appealed on October 31, 2023. Additionally, certain other brokerage defendants settled with the plaintiffs, including both monetary and non-monetary settlement terms.
This decrease was primarily attributable to a decrease in transaction volume caused by higher mortgage interest rates. During the year ended December 31, 2023, transaction volume decreased by 15% to approximately 38,139 transactions compared to approximately 44,700 transactions for the year ended December 31, 2022.
This decrease was primarily attributable to a decrease in transaction volume caused by historically high house prices. During the year ended December 31, 2024, transaction volume decreased by 3.0% to approximately 37,000 transactions compared to approximately 38,139 transactions for the year ended December 31, 2023.
For the year ended December 31, 2023, technology and development expenses primarily attributable to our ongoing investment in the intelliAgent platform and our LiveBy business remained relatively constant as compared with the year ended December 31, 2022.
For the year ended December 31, 2024, technology and development expenses increased by approximately $0.4 million, or 5.6%, as compared with the year ended December 31, 2023. This increase is primarily attributable to our ongoing investment in the intelliAgent platform and our LiveBy business.
Income Taxes The Company recorded an income tax expense of $0.1 million and an income tax benefit of $0.1 million for the years ended December 31, 2023 and 2022, respectively.
Income Taxes The Company recorded an income tax benefit of $1 million and an income tax expense o f $0.1 million for the years ended December 31, 2024 and 2023 , respectively. The tax benefit for the period ended December 31, 2024 primarily the result of the release of a portion of the valuation allowance against historical deferred tax assets.
Operating Expenses Commission and other agent-related costs Commission and other agent-related costs consists primarily of agent commissions, less fees paid to us by our agents, order fulfillment, share-based compensation for agents, title searches, and the direct costs to perform the services provided. 39 Table of Contents We expect commission and other agent-related costs to continue to rise in proportion to the expected growth in our operations.
Operating Expenses Commission and service costs Commission and service costs consists primarily of agent commissions, less fees paid by the Company to agents, order fulfillment, share-based compensation for agents, title searches, and direct cost to fulfill the services provided for our brokerage, mortgage lending, title service, insurance services and other services provided.
The SaaS contracts are generally annual contracts paid monthly in advance of service and cancellable upon 30 days’ notice after the first year. The Company’s subscription arrangements do not provide customers with the right to take possession of the software supporting the platform.
SaaS Revenue The Company generates revenue from subscription and services related to the use of the LiveBy platform. The SaaS contracts are generally annual contracts paid monthly in advance of service and cancellable upon 30 days’ notice after the first year.
For the year ended December 31, 2023, marketing expenses decreased by approximately $1.9 million, or 36%, as compared with the year ended December 31, 2022. The decrease in marketing expenses is primarily related to leveraging internal resources and optimizing advertising expenditures.
For the year ended December 31, 2024, marketing expenses decreased by approximately $0.2 million, or 4.0%, as compared with the year ended December 31, 2023. The decrease in marketing expenses is primarily related to an decrease in marketing investment for our brokerage business.
In periods of economic growth, demand typically increases resulting in higher home sales transactions and home sales prices. Similarly, a decline in economic growth, increasing interest rates and declining consumer confidence generally decreases demand. Additionally, regulations imposed by local, state and federal government agencies and geopolitical instability, can also negatively impact the housing markets in which we operate.
In periods of economic growth, demand typically increases resulting in increasing home sales transactions and home sales prices. Similarly, a decline in economic growth, increasing interest rates and declining consumer confidence generally decreases demand. These are the trends we are currently facing.
Depreciation and amortization Depreciation and amortization represent how we expense our fixed and intangible assets other than capitalized software. Depreciation expense is recorded on a straight-line method, based on estimated useful lives of five years for computer hardware, seven years for furniture and equipment and seven years for vehicles.
Depreciation expense is recorded on a straight-line method, based on estimated useful lives of five years for computer hardware, seven years for furniture and equipment and seven years for vehicles. Leasehold improvements are depreciated over the lesser of the life of the lease term or the useful life of the improvements.
As part of being an emerging growth company, the Company is also considered a small reporting company ("SRC") as of December 31, 2023. Under the terms of the JOBS Act, a SRC has public float of less than $250 million or has less than $100 million in annual revenue and no public float or public float less than $700 million.
Under the terms of the JOBS Act, a SRC has public float of less than $250 million or has less than $100 million in annual revenue and no public float or public float less than $700 million. Being a SRC allows the Company to include less extensive narrative disclosure than required of other reporting companies, particularly concerning executive compensation.
Being a SRC allows the Company to include less extensive narrative disclosure than required of other reporting companies, particularly concerning executive compensation. It also provides audited financial statements for two fiscal years, in contrast to non-SRCs, which must provide audited financial statements for three fiscal years.
It also provides audited financial statements for two fiscal years, in contrast to non-SRCs, which must provide audited financial statements for three fiscal years.
On or about March 15, 2024, NAR 37 Table of Contents agreed to settle these lawsuits, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions. This settlement is subject to court approval. Due to this litigation, there may be rule changes for the NAR.
On or about March 15, 2024, NAR agreed to settle the Burnett Ruling, along with a sister litigation, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions (the “NAR Settlement”). On November 26, 2024, the NAR Settlement was granted over objections, which resolved the claims against the Company.
Non-cash lease expense was $1.7 million and was offset by a $1.8 million decrease in operating lease right of use liabilities. Other principal changes in operating assets and liabilities were the $1.2 million negative net effect of sale and payment of mortgage loans held for sale, $0.3 million increase in accounts receivable, and a $0.4 million decrease in accrued liabilities.
Non-cash lease expense was $2.1 million and was offset by a $2.3 million decrease in operating lease right of use liabilities.
Revenue is affected by the number of real estate transactions we close, the mix of transactions, home sale prices, and commission rates. Other Services Revenue Mortgage Lending We recognize revenue streams for our mortgage lending services business which are primarily comprised of loans sold, origination and other fees.
Other Service Revenue Mortgage Lending Revenue We recognize revenue streams for our mortgage lending services business which are primarily comprised of loans sold, origination and other fees. The gain on the sale of mortgage loans represents the difference between the net sales proceeds and the carrying value of the mortgage loans sold and includes the servicing rights release premiums.
Contingent consideration is generally received in the first quarter of the subsequent year. Title Service Revenue Title services revenue includes fees charged for title search and examination, property settlement and title insurance services provided in association with property acquisitions and refinance transactions. SaaS Revenue The Company generates revenue from subscription and services related to the use of the LiveBy platform.
The Company sold its home and other insurance agency services business on May 3, 2024. 44 Table of Contents Title Service Revenue Title services revenue includes fees charged for title search and examination, property settlement and title insurance services provided in association with property acquisitions and refinance transactions.
For the year ended December 31, 2023, general and administrative expenses decreased by approximately $4.5 million, or 10%, as compared with the year ended December 31, 2022.
For the year ended December 31, 2024, general and administrative expenses decreased by approximately $2.5 million, or 6.9%, as compared with the year ended December 31, 2023. This decrease is primarily attributable due to the elimination of costs attributable to our insurance business effective upon its sale in May 2024.
Cash Flows from Investing Activities Net cash used in investing activities for the year ended December 31, 2023 consisted primarily of $1.9 million for costs incurred related to developing intangible assets.
Other principal changes in operating assets and liabilities were the $9.8 million positive net effect of sale and payment of mortgage loans held for sale. 48 Table of Contents Cash Flows from Investing Activities Net cash provided by investing activities for the year ended December 31, 2024 consisted primarily of $7.4 million related to the sale of our insurance business on May 3, 2024 offset by cash used in investing activities of $3.2 for costs incurred related to intangible assets.
The gain on the sale of mortgage loans represents the difference between the net sales proceeds and the carrying value of the mortgage loans sold and includes the servicing rights release premiums. Servicing rights release premiums represent one-time fee revenues earned for transferring the risk and rewards of ownership of servicing rights to third parties.
Servicing rights release premiums represent one-time fee revenues earned for transferring the risk and rewards of ownership of servicing rights to third parties. Retail origination fees are principally revenues from loan originations and recorded in the statement of operations in other service revenue.
The Company believes that it continues to be well positioned for growth in all of its businesses in the current economic climate. We have a strong base of agent support, which should drive organic market share growth, retention and productivity.
In 2023, the existing home sales market declined 6.2%, and declined an additional 0.7% in 2024 according to the NAR, which is the lowest the market has been since 1995. The Company believes that it continues to be well positioned for growth in all of its businesses in the current economic climate.
This revenue decrease is primarily attributable to a decrease in mortgage loans and title service transaction volume, which were primarily attributable to rising interest rates and economic uncertainties impacting the number of home sales and mortgage refinancings.
This revenue increase is primarily attributable to an increase in mortgage loans and title service transaction volume, which were primarily attributable to organic growth and walkovers, partially offset by the reduction of insurance revenue as a result of our sale of our insurance business in May 2024.
For the year ended December 31, 2023, depreciation and amortization expenses increased by approximately $0.1 million or 2% from the year ended December 31, 2022.
For the year ended December 31, 2024, depreciation and amortization expenses decreased by approximately $0.9 million or 29.2% from the year ended December 31, 2023. The decrease in depreciation and amortization expense is primarily attributable due to the absence of depreciation and amortization related to our insurance business that we sold effective May 3, 2024.
Utilization of the net operating loss carryforwards may be subject to an annual limitation according to Section 382 of the Internal Revenue Code of 1986 as amended, and similar state law provisions. 40 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2023, and 2022 (amount in thousands) Revenue Year Ended December 31, Change 2023 2022 Dollars Percentage Gross commission income $ 325,405 $ 390,615 $ (65,210) (17) % Other service revenue 19,821 22,349 (2,528) (11) % Total revenue $ 345,226 $ 412,964 $ (67,738) (16) % For the year ended December 31, 2023, gross commission income decreased by approximately $65 million or 17%, as compared with the year ended December 31, 2022.
Results of Operations Comparison of the Years Ended December 31, 2024, and 2023 (amounts in thousands) Revenue Year Ended December 31, Change 2024 2023 Dollars Percentage Gross commission income $ 314,741 $ 325,405 $ (10,664) (3.3) % Other service revenue 20,443 19,821 622 3.1 % Revenue $ 335,184 $ 345,226 $ (10,042) (2.9) % For the year ended December 31, 2024, gross commission income decreased by approximately $10.7 million or 3.3%, as compared with the year ended December 31, 2023.
Operating Expenses Year Ended December 31, Change 2023 2022 Dollars Percentage Commission and other agent-related costs $ 308,094 $ 372,246 $ (64,152) (17 %) Operations and support 7,513 8,249 (736) (9 %) Technology and development 7,609 7,715 (106) (1 %) General and administrative 38,751 43,217 (4,466) (10 %) Marketing 3,348 5,218 (1,870) (36 %) Depreciation and amortization 3,164 3,096 68 2 % Total operating expenses $ 368,479 $ 439,741 $ (71,262) (16 %) For the year ended December 31, 2023, commission and other agent-related costs decreased by approximately $64.2 million, or 17%, as compared with the year ended December 31, 2022.
Operating Expenses Year Ended December 31, Change 2024 2023 Dollars Percentage Commission and service costs $ 306,913 $ 316,932 $ (10,019) (3.2 %) General and administrative 33,573 36,061 (2,488) (6.9 %) Marketing 5,796 6,038 (242) (4.0 %) Technology and development 6,635 6,284 351 5.6 % Litigation contingency 3,491 — 3,491 100 % Depreciation and amortization 2,239 3,164 (925) (29.2 %) Total operating expenses $ 358,647 $ 368,479 $ (9,832) (2.7) % 46 Table of Contents For the year ended December 31, 2024, commission and service costs decreased by approximately $10.0 million, or 3.2%, as compared with the year ended December 31, 2023.
Due to the increasing interest rates and increasing inflation, the market began a contraction trend beginning in the second quarter of 2022. In 2023, the existing home sales market declined 6.2%, according to the NAR. which is the lowest the market has been since 1995.
Additionally, regulations imposed by local, state and federal government agencies and geopolitical instability, can also negatively impact the housing markets in which we operate. 41 Table of Contents Due to the increasing interest rates and increasing inflation, the market began a contraction trend beginning in the second quarter of 2022.
Removed
The acquisition of Cornerstone, a real estate mortgage business, has helped us to expand our reach in the DC and surrounding markets. In February 2022, the Company completed its acquisition of iPro Realty Network (“iPro”). The acquisition of iPro, a real estate brokerage business, has helped us to expand our reach in the Utah real estate market.
Added
MHG is a real estate agency group with over 2,200 agents. This acquisition increases the Company's real estate brokerage and ancillary business presence in Arizona and Washington.
Removed
However, according to. the NAR, pending home sales increased by 8.3% in December 2023 compared to November 2023. The pending home sales index measures housing contract activity and is based on signed real estate contracts for existing single-family homes and condos.
Added
In September 2024, the Company sold and issued senior secured convertible promissory notes in aggregate principal amount of $5.0 million (the "2024 Notes") to an existing shareholder, who beneficially owns more than 5% of Fathom's common stock, and the chairman of the Company's Board of Directors in a private placement (the "2024 Offering").
Removed
According to the NAR, as home prices and interest rates have increased, seasonally adjusted existing home sale transactions for the year ended December 2023 (preliminary) decreased to 3.78 million compared from 4.02 million for the year ended December 2022. The NAR anticipates transactions to increase slightly in 2024 due to mortgage rates decreasing in the latter part of the year.
Added
The cash proceeds to the Company from the issuance of the 2024 Note were $4.9 million after deducting the 2024 Offering expense. On March 10, 2025, the Company issued and sold shares of its common stock to certain investors and members of the Company’s Board in a registered direct offering (the “2025 Offering”).
Removed
According to the NAR, nationwide existing home sales average price for December 2023 (preliminary) was $382,600, up 4.3% from $366,900 December 2022. Rising Interest Rates, and Other Risks Our business is dependent on the economic conditions within the markets in which we operate. Changes in these conditions can have a positive or negative impact on our business.
Added
The cash proceeds to the Company from the issuance of the shares of common stock in the 2025 Offering were approximately $2.7 million after deducting the 2025 Offering expense. Market Conditions and Industry Trends Our business is dependent on the economic conditions within the markets in which we operate.
Removed
In the settlement, effective mid-July 2024, NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS, as well as adopt new rules requiring written agreements between buyers and buyers’ agents. However, the direct and indirect effects, if any, of the judgment upon the real estate industry are not yet entirely clear.
Added
Similarly, a decline in economic growth, increasing interest rates and declining consumer confidence generally decreases demand.
Removed
Agent Equity Ownership Effective January 1, 2019, agents could receive stock grants, which vest in three years based on continued affiliation with the Company, in two ways: 1) when the agent closed a sale of a property for the Company; and 2) when the agent referred another agent to join the Company as independent contractor.

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