Hello, this is Craig from Red Chip Companies. Thank you for joining today's event with Fathom Holdings, which trades on the Nasdaq under the ticker FTHM. With us today, we have Marco Fregenal, Chief Executive Officer of Fathom. We will begin with a brief presentation in a moment, and then we will answer your questions. Users may submit a question at any time by using the Q&A tool at the bottom of the Zoom window. Before we begin, please allow me to read the safe harbor statement. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements pertaining to future financial and/or operating results, along with other statements about the future expectations, beliefs, goals, plans, or prospects expressed by management, constitute forward-looking statements. Any statements that are not historical fact should also be considered forward-looking statements.
Of course, forward-looking statements involve risks and uncertainties. I now turn this webinar over to Marco. Please go ahead.
Thank you, Craig, and good afternoon. Thank you for joining a brief presentation on Fathom. What I'd like to do is take you through some slides that talk about our company, our goals, and how we'll continue to be successful. Of course, I'll take any questions that you may have. Just to go over some of the highlights about Fathom. Fathom is a national technology-driven end-to-end real estate services platform, and we integrate not only brokers but as well as mortgage, title, and SaaS offerings for brokerages. Some of the highlights for 2024: we did revenues of $340 million. We closed 37,000 transactions. We have agent growth of 21%. We opened five new states. In November of last year, we made one of the most significant acquisitions of the company, which is acquire My Home Group, the 27th largest brokers in the country.
In a few slides, I'll talk in more detail about them. Some people ask me about what is the outlook for the real estate market, and this is NAR's outlook, the Chief Economist of NAR. He currently is forecasting that even after two very difficult years for the industry, that we're going to begin to see some growth in 2025 at about 9% growth. Most of this growth will come probably second half. In 2026, we should see a 13% increase. Now, again, keep in mind that 2023 and 2024 are two of the most difficult years in the real estate industry. We certainly are looking forward to getting back to transaction growth. Let me just highlight some of the key things about our company.
The way we look at real estate, Fathom is a way to reinvent the real estate industry, and we'll talk more in detail about that. We believe that we have an unmatched value to real estate agents. Then we look at one of the interesting things about Fathom is that we look at the real estate agent as our customer. The other thing that makes Fathom rather unique is that we own 99% of our technology. The entire platform is owned by Fathom. We developed that over many years. The best way to think about our technology is to think of it as an ERP solution that runs the entire transaction, the real estate transaction, end to end. Again, in a few minutes, I'll go over our technology.
It's one of the key things that differentiates us that allows us to have the lowest direct cost per transaction in the industry, which are about $270 per transaction. Also, we do, like I said, I mentioned earlier, we own mortgage title and a data business as well. We try to monetize the transaction in many different ways. We do believe we have an interesting and effective growth strategy, which involves not only organic growth but also agent referrals within Fathom and then a roll-up acquisition or an acquisition strategy. We have performed rather well even in difficult years in 2023 and 2024. Certainly prior to the significant change in interest rates, Fathom grew very quickly. I do believe we have a great management team that can continue to help us and achieve our goals going forward.
What is unique about Fathom and why do we think it's reinvented? If you think about the traditional real estate companies out there, they typically charge an agent anywhere from 20% to 40% of the revenue of that transaction. Where Fathom, we charge a flat fee. That is one of the significant differences. Again, we own all the technologies. We are virtual, so we do not have the office expense that most of the brokerages have. Our ability to monetize transactions through mortgage and title is rather unique in the industry and certainly the growth potential of this company going forward. We currently have about 14,300 agents. There are over 1.4 million real estate agents in the country. We have enormous runway in terms of growing our business.
When we talk about the value that we bring to real estate agents, and as I mentioned earlier, real estate agents are our customers. That's who we serve. We do believe we have the best commission splits in terms of what the agent pays to the brokers. We just launched a revenue share, which is another interesting way for agents to earn additional income. Our technology is rather unique because our technology allows us to have a very efficient way to run the transaction and therefore allowing us to close the transaction with about less than $270 per transaction. We do provide real estate leads for our agents. Of course, we provide training, and certainly agent support is key in terms of helping the agents grow their business.
When I mentioned earlier the commission splits, if you think about a typical transaction of, say, $430,000, where the commission may be 2.7%, at Fathom, we only collect $465 plus a $35 fee. So the agent is able to keep about roughly around $11,000. If that agent is working for a traditional brokerage, that agent is keeping around $8,000. You clearly can see that it's a much more favorable program for agents. This is one of the many reasons that we have grown quickly over the years. As I mentioned, we do have revenue share. Our revenue share is something that we just launched in Q4 of last year, late Q3, early Q4 of last year. It's rather new yet for us. There are some other companies out there who have had revenue share models for many years, and we're just starting on this now.
We do have an entire platform that's able to not only keep track of this but give the agents the ability to see what's going on and how much they're earning. We do have two plans, the Fathom Max and Fathom Share. You can see that in the Fathom Share, an agent has the ability to earn a lot more of the revenue share. Now, let's just make one more interesting thing about revenue share. The way revenue share works is that we basically allocate 50% of our gross profit to revenue share. If the revenue share then is allocated through the agent, then the agent can earn more all the way down to five levels. Again, this is just a view for how revenue share is calculated and how it basically works. I'm not going to spend a lot of time here.
If any of you later have questions about revenue share, I can address those either individually or collectively as a group. As I mentioned, technology is one of the key differentiators about our product. When you think about an ERP system for the industry, think of it as a technology suite that allows us to manage the entire process, right? We have agent websites. We have a CRM that allows the agents to manage all their leads, transaction management. We have the ability to create neighborhood reports for agents. As you can imagine, real estate is a local business. When someone's looking for a house, they're typically looking in specific neighborhoods. We have the ability to create reports on about 140,000 neighborhoods across the country, which is a great tool for agents in order to market themselves and then work with their potential customers.
Of course, I mentioned lead generation, marketing campaigns, print marketing. We are able to deliver a great deal of value to our agents in helping them run their business. As I mentioned earlier, 99% of this is our technology. We talk about leads. We are able to generate leads for our agents as well. There is a variety of different programs for leads, all the way from Hometown Heroes, Go Social, creating Go Social leads. We have first-time buyer programs. We are beginning to implement AI in our lead generation program. Again, 87% of agents have indicated that they are always looking for a way to grow their business. At Fathom, we have that ability, and we will continue to increase that in the future. Support is another key component of our value. 80% of our agents said that they continue to need support from their brokerages.
One of the things that makes us unique, because we are a virtual company, is we actually have a great deal of focus on on-demand training, as well as local training. On-demand training is a key factor of helping agents grow their business. Agents want the ability to train themselves whenever they feel like it's the right time to do it, as opposed to having local classes in which they have to go to a specific time. They want the flexibility to have access to training anytime during the day. We have built an entire suite that allows the agents to get trained at any time. Our technology is called intelliAgent. Again, as I mentioned earlier, it automates the entire process of a transaction. One of the key differentiators about our company is that we believe we are the lowest cost provider.
We can close a transaction for about $270. What this means is that once we pass a break-even, adjusted EBITDA break-even, which we believe will be Q2 of this year, we believe that about 60 to 65% of any additional gross profit will actually flow down to the bottom line. That is important because I think once we pass that break-even point, our technology allows us to be incredibly profitable. This allows us then to create all kinds of other products and services for our agents. Ancillary services is a key component of our strategy, both in mortgage and title and data. As you can see from this chart, you can see that the gross profit potential in lending and title is significant. Both of our title and mortgage business have grown significantly over the years. I believe in the last quarter, we just announced earnings yesterday.
For Q4, for the full year last year, I believe our title company grew 50% and our mortgage company grew 49%. We are seeing rapid growth of both our mortgage and title businesses. These companies are going to add significant value to our profitability going forward. As I mentioned earlier, our growth in Verus our title company last year was 50%, and Encompass Lending, which is our mortgage company, is 49%. Let me just highlight one key component of Encompass Lending. Some people always ask me, "As a mortgage company, do you take paper risk? Do you hold the mortgages?" We do not take paper risk. We do not hold mortgages. By the time we close a mortgage, that mortgage is sold to another bank.
As a matter of fact, if you look at our balance sheet, you're going to see a line in our balance sheet that is mortgage held for sale, and then a liability, which is our warehouse line. They go hand in hand in terms of that. If you look at the asset part in our balance sheet, it's always going to be greater than the liability in the balance sheet. That is because we're, of course, selling mortgages for more than we are borrowing. Our growth strategy for the last few years and going forward is going to be based, again, leveraging our platform, okay? We're also going to focus on increasing our gross profit. Our gross profit currently is derived mostly from real estate.
As I will continue to add mortgage and title, we will be able to increase our gross profit overall. That is a key component of it. Not only growing the number of transactions, but also growing the gross profit per transaction. As you can see, $264 roughly is the cost to operate, a direct cost to operate a transaction in our platform. Throughout the last few years, we have grown this company in three different ways: organic growth, which is we do this by having a broad marketing campaign across the 1.4 million agents. About 50% of our growth comes from agent referrals. That means we try to incentivize our agents to refer other agents. We made a few acquisitions over the years.
The clear, the most important one has been My Home Group, which is a company we acquired in November of last year, 2,200 agents of the 27th largest real estate company in the country. Our goal over the next few years is to reach 100,000 agents per. Let me just briefly discuss My Home Group because it's an interesting case study on how we acquire companies and what is the potential EBITDA for this company. So we acquired My Home Group last year. It had about 2,200 agents and closed about 12,000 transactions. The 2025 projection is to increase revenue by between $100 million and $110 million for Fathom because of this acquisition. We should do EBITDA between $1 million and $1.2 million. In 2026, we are forecasting revenues of $130 million with EBITDA of $2.1 million. Basically, our break-even in this acquisition is two years.
We typically, when we make an acquisition, try to acquire companies that we can break even within two years in terms of using our technology to reduce expenses, optimize the operation, increase the EBITDA. Therefore, after all this is implemented, we can have a break-even of about two years. Briefly, let's just talk about our financials. Again, we announced earnings yesterday. We closed the year with 14,300 agents. It was roughly a 24% increase in agent year over year. Our revenues for the year last year were $311 million. We grew Q4 revenue by 24%. Transactions, we did 9,902 transactions, and we grew transactions by 22%. Q4 returned the company to not only revenue growth but transaction growth. We do believe that we'll continue this trend into 2025 and beyond.
This is a coverage map that can give you a feel for the coverage throughout the country. Fathom itself, the real estate company, is in 43 states. The majority of the higher transaction states are already covered. We look forward to being in all 50 states by the end of the year. Our mortgage business continues to expand as well, as well as our title business. We will cover most of the states by the end of this year, not only for real estate but mortgage and title. One of the things that also makes us unique is our lower cost of acquisition. We can acquire an agent for about $1,100 or so. Therefore, we are able to, within the first transaction, which is $500 plus $700, we are able to break even.
We believe that we can continue to maintain a low cost of acquisition for single agents as we continue to build our business. Now, turnover is a key component of this. It does not matter how many agents you recruit. It is also how many agents you keep. Fathom is unique in a sense that our turnover is probably the lowest in the industry. If not the lowest, it is one of the lowest, and roughly around 1.7% a month. The other thing that is interesting about our data, and this is Q3 data, we are in the process of updating Q4. Again, we closed our report on earnings yesterday, is that the majority of the agents that leave Fathom, so roughly 86%, close very few transactions, right? That is one of the key things that is so like any other company, we lose agents.
We certainly lose a lot less than our competitors. The significant majority of those agents leaving Fathom are agents that close very little business. I think that has been a pattern for many, many years. We believe that pattern will continue. We have a great management team. Josh Harley was a founder. He stepped down about a year and a half ago. I became the CEO. Samantha Giuggio is the Chief Operating Officer. I have been with the company 15 years. Jon Gwin is the Chief Revenue Officer. Jon joined the company about nine months ago. We do think we have a qualified team that has been involved in real estate, mortgage, title for many years, as well as growth companies. We believe we are well poised to continue growing the business. I'll quickly highlight our board.
It's a board that is represented by individuals who have a great deal of experience in different areas. I'll highlight two very quickly: Scott Flanders, who ran multiple public companies, high-growth businesses, and has been instrumental in helping us grow. Steve Murray, who's been in the real estate industry for over 40 years. He's one of the most well-known industry analysts, experts for the real estate industry. He has been participating in over 400 different M&A deals. Certainly, Steve had the opportunity to choose any company to sit on any board. We're certainly blessed that he decided to join Fathom. With that, I'll stop. I will take any questions that you may have.
Thank you, Marco. You can press the Q&A button and type in your question. Chat it into the chat box there. You can also use the raise hand button nearby.
I will unmute your line, and you can speak to Marco. Marco, we've already got a couple of questions here in the chat box. Do you think in time, with your low transaction cost, you can pass those savings along to the home sellers to reduce fees when selling a home?
That's a great question. I don't know if that's going to happen. By the way, actually, that already happens. What I mean by that is many of our agents already reduce their fees to their customers. What makes us unique is that we allow agents to make those local decisions in their own markets, right? Many of our agents already do this. They may only charge 2% as opposed to 3%. That already happens.
The difference is that we allow agents at their local market to make those decisions as opposed to implementing any kind of saves in a very broad way.
Marco, how many agents do you have in Florida?
I believe in Florida, we have 600, 700 agents, something like that.
What was your gross profit for the trailing 12 months? What are the typical multiples your competitors are trading at?
The gross profit for the last 12 months was around $20 million or so. The valuation of business is typically based on different factors, right? One factor is the size of the business. Another factor is the growth of the business in a sense that's how quickly the business is growing. We are trading right now at less than one time's gross profit. Competitors were bigger than we are, and we're growing faster than we are.
Although, again, our growth rate is going to significantly change this year. They are trading anywhere from 6x to 10 x gross profit. There is an enormous upside in terms of the multiple of our business based on that. We look forward to being recognized and being rewarded with a higher multiple as we continue to grow the business.
How does the licensing of your intelliAgent work? Are you making a lot of revenue from licensing?
The licensing right now, friend, so intelliAgent, we do not license intelliAgent to other companies yet. That is something that will come in the future. Our technology revenue primarily comes from our LiveBy product, where we license the data to many companies across the country. That is where the revenue comes in for our data business.
We will, at some point, make a decision to license our technology to other brokerages. Currently, that technology really is a significant competitive advantage. We want to make sure that we leverage that across our company first before we start licensing it to other companies.
Can you compare yourself to some of your publicly listed peers like REAX and RDFN? Also, can you give more color around getting to break even?
Sure. There are some similarities, and there are some things that are very different about Fathom, right? Real, which is a great business, and Tamir is a great CEO, and they built a very nice business. They focus primarily initially on their 100%—I'm sorry, on the revenue share, right? They are a traditional company charging 15%. They built a revenue share program similar to eXp.
eXp started with a revenue share program. Then Real came after that. Clearly, there is some difference between Real and eXp, and I am not going to get into all of those. We are a virtual company like they are. The difference about us and Real is that where they are more traditionally 515 with revenue share coming pretty close to the beginning of their business, we just implemented revenue share. We believe that revenue share has a significant upside for us. The other thing is that we are 100% commission in a sense that we charge a much lower fee. Clearly, Real has grown a great deal in the last few years.
We think that given the growth that we've had in Q4 and what we believe is going to happen going forward, we think that we could get back to our traditional pre-change in interest rates growth of 30% to 35% to 40%. We think that going forward, we'll get back to that growth. In terms of adjusted EBITDA positive, we believe that Q2 of this year we'll be able to break through and have a quarter in which we'll be adjusted EBITDA positive. We look forward to continue maintaining that, and of course, growing beyond that.
As I mentioned earlier, one of the things that makes us unique because of that low direct cost per transaction, once we pass break even, adjusted with a break even, we believe we can drive 60 to 65% of any additional gross profit dollars to the bottom line. That is one of the things that makes us incredibly unique and our model incredibly powerful, again, once we pass our adjusted with a break even.
Can you talk more about the partnership with Locafy?
Sure. Locafy is a company out of Australia that has a technology that aids businesses, agents, and others to optimize their SEO, their social presence, online presence through SEO. We are just beginning to work with them. I think potentially it could be a great partnership. That is what they are focused on.
As you can imagine, for real estate agents, having a local social presence is important, right? We are working with Locafy in order to create solutions to help our agents improve their social presence and therefore be able to generate more business and more leads.
With the advent of AI across all industries, how is Fathom adopting AI?
I'm sorry. You broke up a little. Can you repeat the question?
Yeah. AI is spreading everywhere. What is Fathom's stance as regards AI?
Great question. For those of you who do not know, my background is technology. Prior to joining Fathom, I ran multiple software companies, a telecom company. I am someone that's been in the technology space for many years. Look, AI is going to change the world in every industry. That's a given.
In the real estate industry, AI can change and help us in many different ways. One of the ways we're looking at AI, for example, is the ability to look at the documents, of all the documents and transactions, and use AI to optimize the process, right? Use AI to review documents and identify potential issues with a contract or document. That's an example of how AI can be used in real estate. AI can be used in real estate. One of the things that is expected of us is to review and monitor how agents market themselves. AI can help with that. We're already working on that as well. We are looking at AI in terms of optimizing the conversations between a potential client and our technology.
For example, if someone is searching for homes in a specific neighborhood, an AI engine, AI bot can then suggest, "Take a look at this report. This is a report on this neighborhood. And if you like this neighborhood, let me offer you some other neighborhoods that are similar to this neighborhood." AI is able to, 24/7, be able to engage that potential buyer or seller, buyer in this case, in order to give them all the information they want. There are many different ways in which AI can be implemented in the real estate industry. Honestly, almost every large company is already working towards that. That is just the and we are just one of the many companies that are implementing AI solutions.
What are your plans with crypto?
The thing about cryptocurrency for us is that it is three different things.
Really, two of the most important things. One is that we already are getting buyers, especially international buyers, who want to buy properties in the United States, who want to use cryptocurrency to do that. That is potentially one way that crypto can be utilized. Second, agents are already asking, "Can they get paid in crypto?" Right? We are already looking at that as well. Just like AI, crypto is going to be, especially as the government agencies continue to—what I mean by government agents, I am talking about state because real estate is regulated by each state government—that those state organizations continue to embrace some of the changes in the arena of crypto. We are already preparing ourselves for that. That is kind of how we look at crypto.
It'll be just one of the many things that buyers can utilize our platform if they want to do that. And agents can receive compensation in terms of that. It is going to, at some point, it is going to be widely accepted. We're just trying to get ahead of the curve on that.
You recently raised $3 million through a registered direct offering. Can you tell us more about that and about Adam, your newest board member?
Sure. Adam is a highly experienced investor. I'm not going to go into all details of his background because he'll be here for a long time. You can certainly learn about him. He is a very astute, very experienced investor who has a great deal of experience in growing businesses, as well as, of course, Scott Flanders. That's how we got introduced to Adam.
We are certainly very excited about having Adam join our board and continue to help us grow our business. Adam is a big proponent of our roll-up strategy to a certain extent. That is part—there is an enormous opportunity out there for 200 to 300 brokerages who are significantly smaller than we are, who are really going to struggle for the next few years. There is an opportunity to really accelerate our growth by looking at these 200, 300, 400 agent brokerages that will significantly leverage our technology, our operational efficiencies, and become much more profitable. With the $3 million investment, we will continue to grow our business. We will continue to look at small acquisitions. Our goal is to be much bigger than we are. After two very difficult years in the industry, I am excited that in Q4 we are able to return to growth.
I think that over time, as investors realize the potential for this company, we'll be rewarded in terms of valuation. Certainly, all our stockholders will be rewarded with that as well.
Marco, I'm not seeing any more questions in the queue. Could you send us out with the essential value proposition? Why should investors take an interest in Fathom Holdings right now?
First of all, thank you, everyone, for joining. I certainly appreciate you taking the time to listen to me and what Fathom is about. Look, I think the value here is that real estate is not going anywhere. We just had probably the two toughest years in real estate. Many would argue that we hit the bottom and that transactions will begin to increase going forward. People are always going to buy houses and sell houses.
The reality is that it's part of our economy and a key component of our economy. Second, Fathom has had a track record prior to, again, the significant change in real interest rate of significant growth. As we demonstrated in Q4 of this year, we got back to 20+% growth, percent year-over-year growth. We anticipate that we'll continue to grow. Our technology provides us an incredible competitive advantage to have the lowest direct cost. I do believe, like in any other industry, the lowest cost provider is going to be a significant player. When you combine all of this, combined with the potential of the growth in the industry, combined with our track record of growth, combined with our technology, our capabilities of additional gross profit through our ancillary businesses.
We demonstrated that we have grown both of those businesses by 50% year-over-year. Given that, we think that we'll have significant growth going forward. Once the multiple goes and gross profit from 1x to 2x, 3x, 4x, and so on, I think our investors are going to be significantly rewarded. We believe that this is a great investment opportunity for those who want to take a look at the real estate industry as it comes back into the positive side of the market. With that, I want to thank all of you for joining. If anyone wants to have a one-on-one meeting, I'm certainly available to do those. I do many of those on a weekly basis. We can get into a much more detailed conversation about our plans, our technology, and how we see the future of Fathom. With that, I thank you.
Thank you, Marco. For more information about Fathom, reach us at 1-800-REDCHIP or email us at fthm@redchip.com. Visit RedChip's investor information page for Fathom, fthminfo.com. There you can view and download the investor presentation and fact sheet and sign up for news alerts on Fathom. RedChip is excited to announce the launch of RedChat, our advanced AI assistant designed to empower investors with instant, in-depth insights on 4,000 small-cap and micro-cap stocks, including, of course, Fathom. Try it now on fthminfo.com or go to red.chat. Watch Small Stocks, Big Money, RedChip's program featuring exciting small-cap companies every Saturday at 7:00 P.M. Eastern on Bloomberg USA. Finally, join RedChip's next webinar with Kalidi Biotherapeutics on Monday, March 17th at 4:15 P.M. U.S. Eastern. Register for all RedChip webinars at redchip.com/events, where you can also view an archived version of today's webinar. Thanks again to our many participants today.
Thank you, Marco.
Thank you. Have a great day.