fthm-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended September 30, 2024

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______to______

Commission File Number 001-39412

FATHOM HOLDINGS INC.

(Exact name of Registrant as specified in its Charter)


North Carolina						82-1518164
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2000 Regency Parkway Drive, Suite 300, Cary, North Carolina 27518

(Address of principal executive offices) (Zip Code)

(888) 455-6040

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, No Par Value

FTHM

The NASDAQ Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 7, 2024, the registrant had 22,620,255 shares of common stock outstanding.

Table of Contents

FATHOM HOLDINGS INC.

FORM 10-Q

For the Quarterly Period Ended September 30, 2024

TABLE OF CONTENTS


		Page
PART I - FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023	3
	Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023	4
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2024 and 2023	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023	6
	Notes to Unaudited Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	35
ITEM 4.	Controls and Procedures	35
PART II - OTHER INFORMATION		36
ITEM 1.	Legal Proceedings	36
ITEM 1A.	Risk Factors	36
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
ITEM 6.	Exhibits	38
SIGNATURES		40

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements.

FATHOM HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	September 30, 2024		December 31, 2023
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	13,104	$	7,399
Restricted cash	322		141
Accounts receivable	3,210		3,352
Other receivable - current	4,000		—
Mortgage loans held for sale, at fair value	9,033		8,602
Prepaid and other current assets	5,336		3,700
Total current assets	35,005		23,194
Property and equipment, net	1,945		2,340
Lease right of use assets	4,017		4,150
Intangible assets, net	17,537		23,909
Goodwill	19,344		25,607
Other receivable - long-term	3,000		—
Other assets	81		58
Total assets	$	80,929	$	79,258
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,932	$	3,396
Accrued and other current liabilities	4,129		2,681
Warehouse lines of credit	8,642		8,355
Lease liability - current portion	1,275		1,504
Long-term debt - current portion	3,671		416
Total current liabilities	22,649		16,352
Lease liability, net of current portion	3,782		3,824
Long-term debt, net of current portion	5,089		3,467
Other long-term liabilities	2,297		381
Total liabilities	33,817		24,024
Commitments and contingencies (Note 17)
Stockholders’ equity:
Common stock (no par value, shares authorized, 100,000,000; shares issued and outstanding, 21,798,554 and 20,671,515 as of September 30, 2024 and December 31, 2023, respectively)	—		—
Additional paid-in capital	134,040		126,820
Accumulated deficit	(86,928)		(71,586)
Total stockholders' equity	47,112		55,234
Total liabilities and stockholders’ equity	$	80,929	$	79,258

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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FATHOM HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue
Gross commission income	$	78,563	$	88,247	$	227,073	$	256,050
Other service revenue	5,170		5,277		16,370		15,104
Total revenue	83,733		93,524		243,443		271,154
Operating expenses
Commission and other agent-related costs	74,187		83,770		213,399		241,834
Operations and support	2,293		1,886		7,079		5,404
Technology and development	2,044		1,760		5,900		4,674
General and administrative	8,660		9,793		27,166		29,552
Litigation contingency	3,099		—		3,437		—
Marketing	767		796		2,126		2,439
Depreciation and amortization	444		891		1,718		2,406
Total operating expenses	91,494		98,896		260,825		286,309
Gain on sale of business	—		—		(2,958)		—
Loss from operations	(7,761)		(5,372)		(14,424)		(15,155)
Other expense (income), net
Interest expense, net	104		88		318		151
Other nonoperating expense	238		18		572		181
Other expense, net	342		106		890		332
Loss before income taxes	(8,104)		(5,478)		(15,314)		(15,487)
Income tax expense	17		18		28		55
Net loss	$	(8,121)	$	(5,496)	$	(15,342)	$	(15,542)
Net loss per share:
Basic	$	(0.40)	$	(0.34)	$	(0.78)	$	(0.97)
Diluted	$	(0.40)	$	(0.34)	$	(0.78)	$	(0.97)
Weighted average common shares outstanding:
Basic	20,429,791		16,074,225		19,792,773		16,036,656
Diluted	20,429,791		16,074,225		19,792,773		16,036,656

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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FATHOM HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

(in thousands, except share data)


	Common Stock
	Number of Outstanding Shares	Par Value		Additional Paid-in Capital		Accumulated Deficit		Total
Balance at June 30, 2024	21,007,879	$	—	$	131,943	$	(78,807)	$	53,136
Stock-based compensation, net of forfeitures	790,675	—		1,967		—		1,967
Other	—	—		130		—		130
Net loss	—	—		—		(8,121)		(8,121)
Balance at September 30, 2024	21,798,554	$	—	$	134,040	$	(86,928)	$	47,112


	Common Stock
	Number of Outstanding Shares	Par Value		Additional Paid-in Capital		Accumulated Deficit		Total
Balance at June 30, 2023	18,121,402	$	—	$	115,631	$	(57,651)	$	57,980
Stock-based compensation, net of forfeitures	53,071	—		3,320		—		3,320
Net loss	—	—		—		(5,496)		(5,496)
Balance at September 30, 2023	18,174,473	$	—	$	118,951	$	(63,147)	$	55,804


	Common Stock
	Number of Outstanding Shares	Par Value		Additional Paid-in Capital		Accumulated Deficit		Total
Balance at December 31, 2023	20,671,515	$	—	$	126,820	$	(71,586)	$	55,234
Stock-based compensation, net of forfeitures	1,127,039	—		7,118		—		7,118
Offering costs in connection with public offering	—	—		(28)		—		(28)
Other	—	—		130		—		130
Net loss	—	—		—		(15,342)		(15,342)
Balance at September 30, 2024	21,798,554	$	—	$	134,040	$	(86,928)	$	47,112


	Common Stock
	Number of Outstanding Shares	Par Value		Additional Paid-in Capital		Accumulated Deficit		Total
Balance at December 31, 2022	17,468,562	$	—	$	109,626	$	(47,605)	$	62,021
Stock-based compensation, net of forfeitures	705,911	—		9,325		—		9,325
Net loss	—	—		—		(15,542)		(15,542)
Balance at September 30, 2023	18,174,473	$	—	$	118,951	$	(63,147)	$	55,804

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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FATHOM HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Nine Months Ended September 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(15,342)	$	(15,542)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	4,050		4,466
Gain on sale of business	(2,958)		—
Non-cash lease expense	1,372		1,291
Other non-cash	—		200
Deferred financing cost amortization	—		46
Gain on sale of mortgages	(5,033)		(2,778)
Stock-based compensation	7,118		9,325
Deferred income taxes	—		14
Change in operating assets and liabilities:
Accounts receivable	51		(1,050)
Prepaid and other current assets	(1,704)		(136)
Other assets	(23)		(7)
Accounts payable	1,708		59
Accrued and other current liabilities	1,383		(3)
Operating lease liabilities	(1,510)		(1,412)
Other long-term liabilities	1,916		—
Mortgage loans held for sale originations	(192,230)		(111,722)
Proceeds from sale and principal payments on mortgage loans held for sale	196,832		111,043
Net cash used in operating activities	(4,371)		(6,206)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(46)		(21)
Purchase of intangible assets	(2,160)		(1,337)
Proceeds from sale of business	7,435		—
Other investing activities	(130)		—
Net cash provided by (used in) investing activities	5,099		(1,358)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt	(557)		(566)
Proceeds from note payable, net $100 and $200 in loan costs respectively	5,435		3,768
Borrowings from warehouse lines of credit	191,837		108,398
Repayment on warehouse lines of credit	(191,550)		(105,088)
Other financing	20		(366)
Payment of offering cost in connection with issuance of common stock in connection with public offering	(28)		(200)
Net cash provided by financing activities	5,157		5,946
Net increase in cash, cash equivalents, and restricted cash	5,886		(1,618)
Cash, cash equivalents, and restricted cash at beginning of period	7,540		8,380
Cash, cash equivalents, and restricted cash at end of period	$	13,426	$	6,762

Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest	$	299	$	188
Right of use assets obtained in exchange for new lease liabilities	$	1,572	$	175
Other receivables related to sale of business	$	7,000	$	—
Income taxes paid	$	2	$	50
Amounts due to seller	$	300	$	—

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Reconciliation of cash and restricted cash:
Cash and cash equivalents	$	13,104	$	6,616
Restricted cash	322		146
Total cash, cash equivalents, and restricted cash shown in statement of cash flows	$	13,426	$	6,762

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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FATHOM HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization, Consolidation and Presentation of Financial Statements

Fathom Holdings Inc. (“Fathom,” “Fathom Holdings,” and collectively with its consolidated subsidiaries and affiliates, the “Company”) is a national, technology-driven, real estate services platform integrating residential brokerage, mortgage, title, and supporting software called intelliAgent. The Company’s brands include Fathom Realty, Encompass Lending, intelliAgent, LiveBy, Real Results, Verus Title, and Cornerstone. Dagley Insurance Agency was part of Fathom Holdings' operations until May 3, 2024 (see further detail in Note 17).

The unaudited interim consolidated financial statements include the accounts of Fathom Holdings’ wholly-owned subsidiaries. All transactions and accounts between and among its subsidiaries have been eliminated. All adjustments and disclosures necessary for a fair presentation of these unaudited interim consolidated financial statements have been included.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results of operations for the periods presented. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the Security and Exchange Commission (“SEC”) on March 19, 2024 (the “Form 10-K”). The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

Certain prior period amounts have been revised to conform to the current presentation. These changes have no impact on our previously reported consolidated balance sheets or statements of operations.

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.

Note 2. Risks and Uncertainties

Certain Significant Risks and Business Uncertainties — The Company is subject to the risks and challenges associated with companies at a similar stage of development. These include dependence on key individuals, successful development and marketing of its offerings, and competition with larger companies with greater financial, technical, and marketing resources. Furthermore, during the period required to achieve higher revenue in order to become consistently profitable, the Company may require additional funds that might not be readily available or might not be on terms that are acceptable to the Company.

SEC Form 10-Q filed by Fathom Holdings Inc.