Fathom Holdings Inc. (FTHM) Bundle
Understanding Fathom Holdings Inc. (FTHM) Revenue Streams
Understanding Fathom Holdings Inc.’s Revenue Streams
Total revenue for the third quarter of 2024 was $83.7 million, a decrease of 10% compared to $93.5 million in the third quarter of 2023.
Breakdown of Primary Revenue Sources
The revenue breakdown for the third quarter of 2024 is as follows:
| Revenue Source | Q3 2024 ($ in millions) | Q3 2023 ($ in millions) |
|---|---|---|
| Real Estate Brokerage | $78.6 | $88.2 |
| Mortgage | $2.9 | $1.9 |
| Technology | $1.1 | $0.8 |
| Corporate and Other Services | $1.1 | $2.5 |
| Total Revenue | $83.7 | $93.5 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate indicates a decline of 10% in total revenue from Q3 2023 to Q3 2024. The primary driver of this decline was an 11% decrease in brokerage revenue, attributed to fewer transactions.
Contribution of Different Business Segments to Overall Revenue
In Q3 2024, the contributions from various segments to total revenue were:
- Real Estate Brokerage: 94% of total revenue
- Mortgage: 3.5% of total revenue
- Technology: 1.3% of total revenue
- Corporate and Other Services: 1.3% of total revenue
Analysis of Significant Changes in Revenue Streams
A significant change was observed in the revenue from ancillary businesses, which increased by 44% in Q3 2024, primarily driven by improved performance in mortgage and title services. The absence of revenue from the insurance business, which was sold on May 3, 2024, contributed to the overall revenue decline.
Overall, the gross profit percentage for the brokerage business improved to 5.7% from 5.1% in the previous year. Excluding the insurance business, the gross profit percentage for ancillary businesses rose to 56% from 46%.
Summary of Revenue Changes
The following table illustrates the revenue changes over the quarters:
| Quarter | Total Revenue ($ in millions) | Year-over-Year Change (%) |
|---|---|---|
| Q3 2024 | $83.7 | -10% |
| Q3 2023 | $93.5 | N/A |
A Deep Dive into Fathom Holdings Inc. (FTHM) Profitability
A Deep Dive into Fathom Holdings Inc.'s Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit margin improved to 5.7% from 5.1% in the third quarter of 2023. Excluding the insurance business, the gross profit percentage in ancillary businesses increased to 56% from 46%.
Overall Gross Profit: The overall gross profit percentage, excluding the insurance business, improved to 9% in Q3 2024, compared to 7% in Q3 2023.
Operating Profit Margin: The loss from operations in Q3 2024 was $7.761 million, compared to a loss of $5.372 million in Q3 2023.
Net Profit Margin: The GAAP net loss for Q3 2024 totaled $8.121 million, or $0.40 per share, compared to a loss of $5.496 million, or $0.34 per share, in Q3 2023.
Trends in Profitability Over Time
Over the past year, the trend shows a decline in overall profitability, with net losses increasing from $5.496 million in Q3 2023 to $8.121 million in Q3 2024. The operational losses have also increased, indicating challenges in maintaining profitability amidst changing market conditions.
Comparison of Profitability Ratios with Industry Averages
| Metric | Fathom Holdings Q3 2024 | Industry Average (Real Estate) |
|---|---|---|
| Gross Profit Margin | 9% | 15% |
| Operating Profit Margin | -9.3% | 5% |
| Net Profit Margin | -9.7% | 3% |
Analysis of Operational Efficiency
Despite improvements in gross profit margins, the increase in operational costs has hindered overall profitability. The total operating expenses for Q3 2024 amounted to $91.494 million, a decrease from $98.896 million in Q3 2023, yet the losses from operations still increased.
The breakdown of operating expenses is as follows:
| Expense Type | Q3 2024 ($ in millions) | Q3 2023 ($ in millions) |
|---|---|---|
| Commission and Agent Costs | 74.187 | 83.770 |
| Operations and Support | 2.293 | 1.886 |
| Technology and Development | 2.044 | 1.760 |
| General and Administrative | 8.660 | 9.793 |
| Litigation Contingency | 3.099 | 0.000 |
| Marketing | 0.767 | 0.796 |
| Depreciation and Amortization | 0.444 | 0.891 |
Debt vs. Equity: How Fathom Holdings Inc. (FTHM) Finances Its Growth
Debt vs. Equity: How Fathom Holdings Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Fathom Holdings Inc. reported total liabilities of $33.8 million, comprising current liabilities of $22.6 million and long-term liabilities of $11.2 million. The company's long-term debt is detailed as follows:
| Debt Type | Amount (in thousands) |
|---|---|
| Current Portion of Long-term Debt | $3,671 |
| Long-term Debt (net of current portion) | $5,089 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Fathom Holdings Inc. as of September 30, 2024, is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity = $33.8 million / $47.1 million = 0.72. This ratio is below the industry average of approximately 1.0, indicating a relatively conservative approach to leveraging.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In September 2024, Fathom issued senior secured convertible promissory notes totaling $5.0 million to an existing shareholder and the chairman of the board. Additionally, the company has been proactive in its refinancing efforts, managing existing debts effectively while exploring new financing avenues.
Balancing Between Debt Financing and Equity Funding
Fathom Holdings has adopted a balanced approach to funding its operations and growth initiatives. The company has raised equity through common stock issuance, resulting in an increase of 1.1 million shares from December 31, 2023, to September 30, 2024. The company’s total stockholders' equity stood at $47.1 million at the end of Q3 2024, reflecting its strategy to maintain a solid equity base while utilizing debt for growth opportunities.
Summary Table of Debt and Equity Structure
| Metric | Value |
|---|---|
| Total Liabilities | $33.8 million |
| Total Stockholders' Equity | $47.1 million |
| Debt-to-Equity Ratio | 0.72 |
| Current Portion of Long-term Debt | $3.7 million |
| Long-term Debt (net of current portion) | $5.1 million |
| Recent Debt Issuance | $5.0 million |
Assessing Fathom Holdings Inc. (FTHM) Liquidity
Assessing Fathom Holdings Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
Current Assets: $35,005,000
Current Liabilities: $22,649,000
Current Ratio: 1.55
Quick Ratio: The quick ratio is calculated by excluding inventory (none reported) from current assets:
Quick Assets: $35,005,000
Current Liabilities: $22,649,000
Quick Ratio: 1.55
Analysis of Working Capital Trends
The working capital is calculated as:
Working Capital: Current Assets - Current Liabilities = $35,005,000 - $22,649,000 = $12,356,000
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, are summarized as follows:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Used in Operating Activities | ($4,371) | ($6,206) |
| Net Cash Provided by Investing Activities | $5,099 | ($1,358) |
| Net Cash Provided by Financing Activities | $5,157 | $2,178 |
| Net Increase in Cash, Cash Equivalents, and Restricted Cash | $5,886 | ($5,386) |
| Cash, Cash Equivalents, and Restricted Cash at End of Period | $13,426 | $2,994 |
Potential Liquidity Concerns or Strengths
Cash and Cash Equivalents: $13,104,000 as of September 30, 2024, compared to $7,399,000 at the end of 2023. This reflects an increase in liquidity.
Restricted Cash: $322,000 as of September 30, 2024, up from $141,000 at the end of 2023.
Accounts Receivable: $3,210,000 as of September 30, 2024, slightly down from $3,352,000 at the end of 2023, indicating stable collections.
Current Liabilities: Increased to $22,649,000 from $16,352,000 at the end of 2023, reflecting potential pressure on liquidity.
Long-Term Debt: Increased to $5,089,000 from $3,467,000 at the end of 2023, indicating rising obligations.
Is Fathom Holdings Inc. (FTHM) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The trailing twelve months (TTM) P/E ratio stands at – due to a net loss of $8.1 million in Q3 2024, resulting in a net loss per share of $0.40. The absence of a positive earnings figure makes the P/E ratio not applicable.
Price-to-Book (P/B) Ratio
The company’s price-to-book ratio is calculated using the latest available stock price and the book value per share. The book value as of September 30, 2024, is $47,112 in total stockholders’ equity, with 21,798,554 shares outstanding, yielding a book value per share of approximately $2.16. The stock price as of November 7, 2024, is $1.50, resulting in a P/B ratio of 0.69.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value is calculated as market capitalization plus total debt minus cash. With a market cap of $32.7 million, total debt of $8.76 million, and cash of $13.10 million, the enterprise value is approximately $28.36 million. Adjusted EBITDA for Q3 2024 is a loss of $1.4 million, making the EV/EBITDA ratio – due to negative EBITDA.
Stock Price Trends
Over the past 12 months, the stock has experienced significant volatility. The stock opened at $3.00 and reached a high of $4.50 before declining to the current price of $1.50. This represents a 50% decrease from its high, suggesting investor concerns regarding profitability and market conditions.
Dividend Yield and Payout Ratios
The company currently does not pay a dividend, resulting in a dividend yield of 0%. This reflects a focus on reinvestment into the business rather than returning capital to shareholders.
Analyst Consensus on Stock Valuation
As of the latest analyst ratings, the consensus is Hold, with a few analysts suggesting Buy based on potential growth from new revenue models and acquisitions. However, the overall sentiment remains cautious due to recent financial performance.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | 0.69 |
| EV/EBITDA Ratio | N/A |
| Stock Price (Nov 7, 2024) | $1.50 |
| 12-Month High | $4.50 |
| 12-Month Low | $1.00 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Fathom Holdings Inc. (FTHM)
Key Risks Facing Fathom Holdings Inc.
The financial health of Fathom Holdings Inc. is impacted by several internal and external risk factors that may influence its performance in 2024.
Industry Competition
The real estate industry is highly competitive, with numerous players vying for market share. As of September 30, 2024, Fathom's real estate agent network grew by 9% to approximately 12,383 agent licenses, up from approximately 11,333 the previous year. Despite this growth, the company completed 9,331 transactions in Q3 2024, which is a decrease of approximately 9% compared to the same quarter in 2023. This decline is attributed to ongoing challenges such as higher home prices and uncertainty surrounding mortgage interest rates.
Regulatory Changes
Fathom Realty is currently facing legal challenges, including a settlement related to claims asserted in Burnett v. The National Association of Realtors. As part of the settlement, the company is required to pay a total of $2.95 million, which includes $500,000 due within five days of formal approval, $500,000 by October 1, 2025, and $1.95 million by October 1, 2026. This settlement is reflected in the company's liabilities, with $1.0 million included in accrued liabilities and $1.95 million in long-term liabilities as of September 30, 2024.
Market Conditions
The overall market conditions remain volatile, with rising interest rates affecting buyer demand and transaction volume. In Q3 2024, total revenue decreased by 10% to $83.7 million from $93.5 million in the same quarter of 2023. The brokerage revenue specifically saw an 11% decline, which was partially offset by a 44% increase in revenue from ancillary businesses like mortgage and title services.
Operational Risks
Operationally, Fathom is focused on enhancing its agent recruitment and retention strategies. The recent introduction of two new revenue share models aims to boost agent engagement and streamline operations. However, the effectiveness of these strategies remains to be evaluated, and the company has opted not to provide guidance for Q4 2024 as it assesses the impact of these changes.
Financial Risks
Financially, Fathom has reported a GAAP net loss of $8.1 million for Q3 2024, compared to a loss of $5.5 million in Q3 2023. The increase in net loss is largely attributed to the $3.0 million recognized for the NAR settlement contingency and related legal fees. The company also reported an Adjusted EBITDA loss of $1.4 million for the quarter.
Mitigation Strategies
To mitigate these risks, Fathom is implementing strategic recruiting efforts and enhancing its service commitment to agents. The company plans to focus on its ancillary services to bolster revenue streams and offset declines in brokerage revenue. Additionally, Fathom's management is committed to optimizing profitability and cash flow as part of its long-term strategy.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | High competition in the real estate sector | Decreased transaction volumes |
| Regulatory Changes | Legal settlements impacting financials | Increased liabilities of $2.95 million |
| Market Conditions | Volatile market with rising interest rates | 10% decrease in total revenue |
| Operational Risks | Challenges in agent recruitment and retention | Potential impact on future growth |
| Financial Risks | Increased net loss and Adjusted EBITDA loss | GAAP net loss of $8.1 million |
Future Growth Prospects for Fathom Holdings Inc. (FTHM)
Future Growth Prospects for Fathom Holdings Inc.
Analysis of Key Growth Drivers
The company has recently made strides in expanding its real estate agent network, which grew by 9% to approximately 12,383 agent licenses as of September 30, 2024, up from approximately 11,333 licenses a year prior. This growth is a crucial driver for future performance.
In addition, the acquisition of My Home Group, a real estate agency with over 2,200 agents, on November 1, 2024, enhances the company's presence in key markets like Arizona and Washington. The integration of My Home Group is expected to significantly boost the company's brokerage and ancillary business capabilities.
Future Revenue Growth Projections and Earnings Estimates
For the third quarter of 2024, total revenue decreased by 10% to $83.7 million, down from $93.5 million in the same quarter of 2023. The revenue decline was primarily driven by an 11% decrease in brokerage revenue due to fewer transactions. However, revenue from ancillary businesses increased by 44%, highlighting a potential shift in the revenue mix that could support future growth.
Analysts have noted that the introduction of new commission plans and revenue share models may begin to positively influence revenue streams in the upcoming quarters, although specific guidance has been withheld pending evaluation of these initiatives.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has introduced two innovative commission plans, Fathom Max and Fathom Share, designed to enhance agent recruitment and retention. These initiatives are expected to create a more attractive environment for agents, which could drive growth in agent numbers and, consequently, transaction volumes.
Furthermore, the recent settlement related to the National Association of Realtors provides clarity and may reduce litigation risks, allowing management to focus on growth strategies.
Competitive Advantages That Position the Company for Growth
The company benefits from a technology-driven platform that integrates residential brokerage, mortgage, title, and SaaS offerings. This comprehensive service model enhances the customer experience and allows for cross-selling opportunities, making the company more competitive in the real estate market.
Additionally, the company has shown resilience by improving its gross profit percentage to 9% in Q3 2024, up from 7% in Q3 2023, excluding insurance revenue. This reflects improved operational efficiency and a focus on higher-margin ancillary services, positioning the company favorably for future profitability.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $83.7 million | $93.5 million | -10% |
| Brokerage Revenue | $78.6 million | $88.2 million | -11% |
| Ancillary Revenue | $5.1 million | $5.3 million | -4% |
| Gross Profit Percentage | 9% | 7% | +2% |
| Net Loss | $8.1 million | $5.5 million | +47% |
Fathom Holdings Inc. (FTHM) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Fathom Holdings Inc. (FTHM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Fathom Holdings Inc. (FTHM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Fathom Holdings Inc. (FTHM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.