Good afternoon, and welcome to the Fathom Holdings Inc. Second Quarter 2021 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Roger Pondel, Investor Relations for Fathom Holdings. Please go ahead.

Thank you, Allie, and welcome, everyone, to Fathom Holdings 2021 Second Quarter Conference Call. I'm Roger Pondel with PondelWilkinson, Fathom's Investor Relations firm. And it is my pleasure shortly to introduce the company's Founder and Chief Executive Officer, Josh Harley; and Fathom's President and Chief Financial Officer, Marco Fregenal. Before I turn things over to Josh, I want to remind all listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous conditions, many of which are beyond the company's control, including those set forth in the Risk Factor section of the company's IPO registration statement, its latest Form 10-K and other company filings made with the SEC, copies of which are available on the SEC website at www.sec.gov. As a result of those forward-looking statements, actual results could differ materially, and Fathom undertakes no obligation to update any forward-looking statements after today's call, except as required by law. Please also note that during this call, we will be discussing adjusted EBITDA, a non-GAAP financial measure, as defined by SEC Regulation G. The reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure is included in today's press release, which is posted on Fathom's website. And with that, it is my pleasure to turn things over to Josh Harley. Josh?

Thank you, Roger. I’d like to extend my gratitude to everyone on today’s call. Our team greatly appreciates your support and trust in us, and we are proud to have you as part of our Fathom family. In reviewing our quarterly results, it's clear that our truly disruptive model is yielding impressive outcomes. I’m excited to share our significant growth across all key metrics, achieved without relying on gimmicks. We are succeeding the right way—through hard work, genuine innovation, and delivering long-term value to our agents, employees, clients, and shareholders. This past year, we've seen our revenue increase by 118%, transactions grow by 74%, and our agent count rise by 53%. Among publicly traded real estate companies, only a few have matched our performance, and they have been in the market much longer, while we've only been public for a year—and we're just beginning. It’s a mistake to compare us directly with other real estate firms, as many do not yet understand our unique position. With a few more strong quarters, I believe the market will come to recognize our business model and value. Diving deeper into our story, we’ve not only delivered strong performance but have a bright future ahead. Fathom stands out because we’re achieving remarkable growth while rapidly moving toward profitability. Consider how many competitors can double their business and market cap; I believe we can. More importantly, I think we can grow our company fivefold in the next five years. To reach that goal, we recently acquired a mortgage company, title company, insurance company, a lead generation and nurturing firm, plus two technology companies—one focused on big data aggregation and content creation, and another that provides home search and CRM tools to attract buyers and sellers, which in turn helps draw in more agents. These are not joint ventures; we fully own each entity, maintaining full control over revenue and profitability, which is crucial for enhancing service quality and achieving a better attach rate for our new offerings. Our excitement about Fathom’s potential is shared among our entire leadership team, who execute our vision daily. We currently have nearly 7,000 agents with one of the highest retention rates in the industry. Our agents are turning into strong advocates for the company, which should help accelerate our growth over time. I firmly believe that Fathom is a company to support, not oppose. Reflecting on the progress we've made over the last year, we’ve built Fathom into a formidable entity. During our first earnings call last year, I mentioned we had the resources to fuel our growth, and I hope our results demonstrate that we are not just talk; we follow through on our commitments. We now have the essential components to enact significant changes in the real estate industry. While we may seem small compared to some established brands, our elite team is growing at a pace that will command attention. While many companies choose growth at the expense of profitability, I’m proud to say we don’t have to operate that way. We can achieve both. Our strong cash position, maintained by a focus on operational cash flow, shows we are heading in the right direction, treating your investments with the utmost care. Since going public, we’ve significantly increased revenue, expanded our agent network, improved retention, entered new geographic markets, and made strategic acquisitions that further strengthen our market presence. Accomplishing all this in just one year reflects our diligence and capability. Given our attractive agent commission structure, we’re positioned to grow even faster, especially as some investors express concern about potential challenges in the real estate sector; many of those concerns might actually become growth opportunities for us. Before I proceed further, I realize there are many listening who may not fully grasp our story or what makes us different. I know some of you have heard this before, but I will continue to emphasize it until I’m confident everyone understands. Fathom Realty operates as a full-service real estate brokerage, yet we leverage a platform-as-a-service model through our proprietary IntelliAgent cloud-based technology. This model enables us to function virtually while providing agents with crucial services typically found in traditional brick-and-mortar firms. Our technology not only helps our agents but also streamlines our operations, significantly cutting costs and reducing the need for personnel, allowing us to expand into new markets without excessive spending. This efficiency enables us to charge agents a fraction of what many competitors do and achieve profitability much faster. With the addition of mortgage, title, insurance, and further SaaS products, we can substantially increase our revenue and profitability per transaction. My goal extends beyond merely growing our agent network and transaction revenue; I aspire to enhance our profitability. Our technology platform and streamlined operations let us offer agents lower fees, which not only benefits them but propels our growth organically. We are excited about the advantages IntelliAgent brings, including helping agents become more productive while integrating more sophisticated technology. Our aim is not to just add agents but to make them more successful, allowing them to concentrate on networking and sales. Our recent acquisition of Naberly, a home search tech platform, along with Real Results, a lead generation firm, will help us provide leads to agents, increase revenue, and reduce their dependence on competitors for leads. In Q2, we achieved a 53% increase in agent count, ending with over 6,950 agents, while the average cost to acquire a new agent was around $950, equating our breakeven point per agent to what we make on the first sale. Furthermore, the lifetime value of an agent exceeds $18,000, leading to a cost-to-acquisition ratio exceeding 20x. Even as our acquisition costs rise, given that ratio, we have ample room for growth. Agents often express that they join Fathom to earn more commission but ultimately remain for the culture. Our low agent attrition rate reflects this satisfaction. I take pride in having one of the industry's lowest attrition rates, demonstrating a strong representation of agent happiness. Our attrition rate improved again this quarter, falling to 1.37%. Notably, the majority of attrition stems from agents closing fewer sales, proving our model’s effectiveness, especially since only a minimal percentage are higher-performing agents leaving. I recognize the real estate market's volatility and uncertainty, but I truly believe that the current conditions could benefit Fathom while posing challenges for others. As many brokerages reconsider office space due to COVID-19 and related concerns, agents are questioning their monthly fees for offices they cannot use. This makes Fathom increasingly attractive—especially as we do not incur those costs. While discussions of a housing bubble are frequent, the prevailing consensus suggests that this market is different and we don't foresee a bubble; rather, we think home prices will normalize, which can benefit first-time buyers. Crazy markets have historically favored Fathom, partly because agents can increase revenue by decreasing costs. If conditions become tougher, we anticipate more agents gravitating toward Fathom’s lower fees, allowing them to maintain or potentially increase their income. Even if home prices decline, other companies relying on traditional commission models might struggle, while Fathom continues earning on the same fee structure regardless of agents’ commission amounts. This dynamic should allow us to capture market share quickly, as our growing agent base results in more transactions, which empowers us to generate additional revenue from mortgage, title, and insurance services. Fathom is designed to attract more real estate agents by providing them with increased earning potential, essential technology, and support to grow their businesses. This strategy is proving effective, especially during trying times. Our second quarter results and key performance indicators were outstanding. We are clearly moving in a positive direction, attracting high-performing agents and securing sales in higher-priced markets, which should enhance our mortgage, title, and insurance offerings, as well as our lead generation efforts. Currently, Fathom Realty operates in 31 states and the District of Columbia with plans to expand into several more. Our recent acquisition of EPIC Realty in Idaho illustrates our commitment; I am thrilled with the quality of their agents and management team, who have become an invaluable part of our Fathom family. We have also deepened our presence in the Las Vegas market by bringing on Flavio Jimenez and his team, spearheading a new Hispanic division at Fathom to address the unmet needs of underserved communities. We are determined to evolve our industry in innovative ways to serve Hispanic homebuyers effectively. Our mortgage company, Encompass Lending, now operates in 43 states; Dagley Insurance is in 47 states, and Verus Title operates in 19 states. Each of these companies has exceptional leadership committed to achieving our long-term goals. Our technology platform allows us full control without relying on third-party providers, which significantly reduces costs while offering more capable technology to our agents and clients. IntelliAgent allows us to manage the entire homebuyer and seller lifecycle and leverage our data for continued improvement while generating leads. This positions us to identify potential clients pre-contract, even before agents engage. Our mortgage company is growing and has a bright future with strategic investments optimizing its leadership and operations for market expansion. We’ve seen robust growth in title and insurance; Verus Title is particularly thriving. Delving deeper into the insurance sector has brought to light the potential for Dagley Insurance to enhance our long-term profitability and provide stability through the cyclical real estate market. Starting in Q2, our technology platform has begun generating substantial SaaS revenue, with additional offerings like Live Buy Local poised for release soon, bringing our SaaS revenue over $500,000 before even licensing our core product. As for future acquisitions, we have made several in a brief time. We are currently focused on ensuring we integrate them efficiently to enhance client and agent experiences while expanding our reach. Future acquisitions will mainly aim to enter new markets quicker, foster name recognition, and drive agent referrals. While we'll continue making strategic acquisitions, we are committed to being responsible stewards of your investments, embracing careful, thoughtful strategies without unnecessary dilution. Addressing ownership and recent stock sales—my father-in-law, Glenn Sampson, an early investor and a Board member, has sold some stock recently. At his age, he is gradually diversifying a small portion of his holdings, much like I do. Let me assure you that these minimal sales have no relation to our outlook on Fathom’s future. We still own nearly 50% of the company, and our focus remains on its growth. Today’s discussion and our recent performance clearly indicate our enthusiasm and commitment to the growth trajectory we've set. We are genuinely excited about the future of our company. I’ll now hand the call over to Marco. Marco, it's your turn.

Thank you, Josh. As we indicated last quarter, our financials will look a bit different this quarter in order to provide additional visibility to the many businesses we have acquired. And I'm going to take some time here to review the numbers in more detail with you. Total second quarter revenues grew 118% year-over-year to $84.4 million from $38.7 million. The increase resulted from growth in real estate transactions, average revenue per real estate transaction, and revenue contributions from Encompass Lending, which is a mortgage company; IntelliAgent, which is our SaaS technology company; Dagley Insurance, which is an insurance company; and finally Verus Title, which is our title company. GAAP net loss for the quarter was $2.1 million or a loss of $0.15 per share compared with a GAAP profit of $161,000 or $0.02 per diluted share for the same period last year, which was prior to our IPO. The change from last year's second quarter was due primarily to increases in costs related to operations, marketing, G&A, and expenses related to being a public company. Partially offset by a tax benefit of approximately $2.6 million attributable to the release of the company's valuation allowance against deferred tax assets as a result of the company's second quarter acquisitions. Adjusted EBITDA loss, which is a non-GAAP measure, was $2.3 million for the quarter versus an adjusted EBITDA profit of $329,000 for last year's second quarter, again, prior to our IPO. And while we recorded a loss in total adjusted EBITDA, our real estate division was profitable, which I'll discuss in a moment. In Q2, our G&A decreased to 11.2% of our total revenue from 12.3% during the first quarter of 2021. Total G&A expense increased to $9.4 million compared with $2 million last year, due mainly to the completed acquisitions, costs related to being a public company, and of course, stock compensation. As we discussed on our last call, G&A expense is expected to continue to increase going forward, but as we continue to scale and integrate our vertical businesses. However, as we have demonstrated in Q2, G&A as a percentage of total revenue should continue to decrease. Expense related to marketing activities increased to $378,000 from $138,000 in last year's second quarter, mostly driven by growth in our talent acquisition team and higher levels of investments in advertising and PR to help attract new agents. Now I'll review some of the key results from our business units. As Josh indicated earlier, our real estate division finished the quarter with 6,950 agents, an increase of 53% over the same period last year. We've closed over 10,000 real estate transactions for the quarter, a 74% increase from the same quarter last year. This increase is a great example of the power of our truly disruptive model. The fact that our transaction growth is significantly higher than our agent growth proves the point we have made in the past that agents will close more transactions after joining Fathom by investing their savings back into their businesses. Perhaps the most significant accomplishment in the quarter was that our real estate division reached profitability with almost $500,000 in adjusted EBITDA. Now this should not come as a surprise to both of those of you who have been following us since the IPO. Josh and I have stated that we believe that our real estate business would reach breakeven between 9,000 and 10,000 transactions. And I think we have been consistent on delivering on what we say. We made significant investments in our mortgage operation. For the quarter, revenues exceeded $1.5 million with an adjusted EBITDA loss of $890,000. Please keep in mind that we own this business only for part of the quarter. And at this time, we believe that we made the necessary investments to grow the business including adding to the team, applying for necessary state licenses, and enhancing the systems needed to be able to deliver rapid growth going forward. This very strategic investment should bring a greater return to our shareholders over time. In Q2, the revenues of our IntelliAgent SaaS platform increased to just over $0.5 million with an adjusted EBITDA loss of $307,000. Currently, our primary IntelliAgent product is our offering LiveBy data solution. As Josh indicated, in short order, we'll be releasing a new offering called Live Buy Local, which will deliver hyperlocal information at the neighborhood level. This is an exciting new offering, and we expect our SaaS revenues to continue to increase after this release. Our insurance company and title companies continue to grow as well, combined revenues of almost $2 million for the quarter, and adjusted EBITDA loss of just about $21,000. Going forward, both businesses should contribute significantly to our adjusted EBITDA. Our balance sheet remains strong. It bears repeating that we'll always be a good steward of your investment in Fathom. Reiterating what Josh has said many times, we're not believers in growth simply for growth's sake. By any measure, our second quarter is a fantastic quarter. We delivered profitability for our real estate division. We continue to successfully integrate all of our new businesses and increase their revenue. We made the necessary investments to increase capacity at our mortgage company. We lowered our agent turnover to the lowest number in the company's history. I am incredibly proud of our team. Now as for guidance, as we are concluding our first year as a public company and have achieved the strategic acquisition goal set forth at the time of IPO, we're now in a position to begin to give investors a better view of how scalable our business can be, and we feel confident that we can now offer long-term operating targets. Assuming that we can reach between 100,000 and 110,000 transactions per year, we believe that we can generate adjusted EBITDA exceeding $40 million per year. While we are not prepared to provide a timeline for this transaction milestone, we do feel confident that we can maintain the strong transaction growth that we have demonstrated in the last year since our IPO. With that kind of growth rate in the years to come, it's possible that we could see hundreds of thousands of closings per year. I want to thank our entire team of employees and agents for an incredible quarter. Achieving this impressive result is only the direct byproduct of their hard work. Our employees and agents share the same vision, passion, culture, and work ethic as we do, and we can't wait to see how much more they can accomplish. I'll now turn the call back to Josh so we can answer your questions.

Thank you, Marco. As you can tell, we're incredibly excited about our incredible long runway for the company and our future prospects. We've been working really hard to deliver on our promise to grow Fathom and accelerate in a sustainable fashion for the long term. For those of you who are shareholders, thank you for your trust and being part of our Fathom family. All right. Operator, we are now ready to open the call to questions.

Our first question today comes from Darren Aftahi with ROTH Capital Partners.

Congrats on the quarter. So thanks for the detailed segment breakout and the long-term targets. I just wanted to kind of make sure I have the growth assumptions right on your guidance. So is the right math taking kind of the trailing 12-month transaction since the IPO and then kind of growing over the prior year, I think that kind of comes up with 59% growth, is that correct?

Yes.

Yes, that's correct.

Got it. So if that math is right, it suggests about 2.5 years to reach approximately 100,000 transactions. I guess my question is, go ahead.

So a couple of things. It is looking back on that average. But I think if you look at the last three quarters, transaction growth has been impressive, with Q4 at 50%, Q1 at 60%, and Q2 at 74%. This shows that transaction growth is also accelerating. So while it considers past performance, it also accounts for the acceleration in transaction growth.

Fair enough. So it takes some time to get to that 100,000 transaction and $40 million of EBITDA. My real question is what's the underlying attach rate assumption on your various service portfolio to get to that number?

We view this by suggesting that if you consider the 100,000 transactions, on average, we anticipate around a 10% performance across the board. It’s important to note that while some businesses may exceed that 10%, others may fall below it. Thus, we are operating with a conservative attach rate assumption of 10%.

Got it. That's helpful. Beyond kind of some of your tentpole geographies like Texas and North Carolina, where are you seeing kind of over-indexed traction in some of your newer markets?

That's a great question. Honestly, we're seeing growth everywhere right now. The industry is really hot. However, we currently don't have a presence in the Northeast; we're not in New York, Connecticut, or Massachusetts. This means we're not in some areas experiencing population migrations. We are mainly located in states where people are moving to. For instance, our recent merger with EPIC in Boise, Idaho, shows that Idaho is among the top 10 new markets in the country in terms of growth. We're witnessing significant growth in Idaho, Florida, Tennessee, and Texas. Various states are experiencing substantial increases. We have limited exposure in states that are losing market share nationally. While we are not in the Northeast, there are many markets, such as the Raleigh area in North Carolina, that are seeing a significant influx of people. The California market is experiencing population decreases, particularly toward the Northeast, but overall, we have at least 8 or 9 markets where we're seeing significant increases.

And we're also seeing significant increases just in the markets we're currently in, just really starting to see some incredible penetration in each of these markets we're in.

Great. And maybe if I could push you on the spot, your sort of 12 months removed from your IPO, what are kind of your 1, 2 or 3 top strategic priorities kind of over the next 12 months if we're talking August 2022?

I believe our top priority right now is ensuring we fully integrate our newly acquired companies into our technology and real estate operations. We have Fathom Realty, Encompass Lending, Verus Title, IntelliAgent, Dagley Insurance, and others, and our goal is to create cohesive units with these companies and their employees. We're focused on doing this carefully and strategically rather than rushing through the process. Additionally, we want to pursue growth, but not just for the sake of numbers. Many companies add agents without considering the actual transactions, which can harm our reputation. We would prefer a substantial increase in agent count alongside a significant rise in transactions, rather than prioritizing agent growth alone. The third yet equally important focus is achieving profitability. Our real estate business has shown profitability at just 10,000 transactions this quarter, which is a noteworthy accomplishment. Not many real estate firms can claim profitability at that level, let alone 100,000 transactions per quarter. Therefore, our key focuses are integrating our acquisitions, pursuing purposeful growth, and ensuring our profitability remains strong. Marco, do you have anything to add?

No, I think we're good. I think those are it, yes.

In other words, Marco is saying.

Our next question comes from Tom White with D.A. Davidson.

This is Kevin Robinson asking on behalf of Tom. I have two questions for you. Since going public, you've added your Encompass title, Verus Title, Encompass Lending, and Dagley Insurance, and I've seen impressive growth in those areas. Could you discuss the near-term and long-term growth expectations for these plans and what you anticipate these ancillary services will contribute as a percentage of your business? I have a follow-up question after that.

Thank you, Kevin. We expect to see significant growth. As you noted, we made a considerable investment in Encompass Lending in the second quarter. We believe this investment is essential for achieving the growth we aim for. Josh mentioned that increasing revenues will be a key priority for us moving forward, and I anticipate considerable revenue growth over the next 12 to 18 months. These acquisitions are crucial for making Fathom a highly profitable company. As stated earlier, we project that with 100,000 to 110,000 transactions, our adjusted EBITDA could reach around $40 million. More than half of that adjusted EBITDA will come from our mortgage, title, insurance, and technology segments. Therefore, in the next 24 to 30 months, a significant portion of our profitability is expected to originate from these businesses. This highlights our expectations for the profitability of these business units within our overall operations.

Congratulations on the growth of your agents. I'm curious if your value proposition has changed at all, especially with the competition adjusting their offerings to include benefits like dividends. Are there any additional elements you see for enhancing your value proposition for agents over time?

That's a great question. The answer is no, we haven't needed to change our value proposition. When you compare us to public competitors, it's clear that what we offer is significantly more valuable to agents. They must add more to compete with us, not the other way around. Long term, we have opportunities to enhance our offerings, but currently, I truly believe we have one of the best value propositions out there. Our competitors are trying to catch up because we deliver strong value. Right now, we're focused on providing more tools and resources to agents than anyone else. We leverage technology, offer lead generation, and provide active training—things that our competitors may discuss but don't follow through with. We have a comprehensive technology suite for our agents rather than relying on external platforms. This allows us to help agents spend less time at their computers and more time with clients, ultimately generating more business through their connections and marketing efforts. Agents prioritize leads because one additional closing could mean much more to them than a small dividend or better splits. Our aim is to provide more value and help them close more deals, as that's what they truly want. They aren't interested in gimmicks.

Kevin, let me also add that how we look at value is also by looking at turnover, right? So turnover is an indicator of value in a sense that are agents leaving you, right? To attract agents is one thing, but at the end of the day is about keeping them, right? And so when we look at the value exchange, we're looking at who are the agents that are leaving Fathom, what is our turnover? And I think Josh indicated our turnover for Q2 is 1.37%, which we would argue as one of the lowest in the industries, although we don't know what other companies are because they don't post theirs. But if you look at that and given that the significant majority of the 1.37% agents that leave Fathom close very little business. So clearly, the agents that were within Fathom perceive that the value exchange that they're receiving is a positive one. And then the other thing that we're very proud of is the agent referral. So the Fathom agents are referring other agents, and that number continues to increase as a percentage. In the future quarters, we're going to share those numbers, and I think people will see, again, that's the issue about value exchange. How are agents representing? How it is staying with the company? And then how agents are referring other agents? Other companies talk about Net Promoter Score. And to me, at the end of the day, Net Promoter Score is about whether agents are referring other agents, and we're going to start showing that number going forward. And I think that shows the kind of benefit that agents are seeing from the value that they're getting from Fathom, which as we continue to grow, will continue to benefit everyone.

Great. Congrats on an awesome quarter.

Our next question comes from Kris Tuttle with IPO Candy.

I just have two questions. But before that, I want to congratulate you once again on everything you've accomplished over the past year. Our clients are very satisfied. I would say that if there were a way to measure management execution against market capitalization, your company would score very high in that regard, especially considering your IPO.

Thank you.

I had 2 questions for you. One, pretty basic and then one a little more long-term. The basic one is when you guys talk to agents who you would like to have come over to the platform, in cases where they decide not to, I'm curious to know what you generally hear as sort of the top 1 or 2 reasons why someone might stay at a traditional brokerage firm like Weichert or something like that?

It's a great question. It really comes down to psychology. First of all, when we connect with an agent, we rarely lose them. If an agent is considering moving, and they’re talking to us instead of someone else, it's uncommon for them to choose someone else. However, the challenge arises with those agents who aren't thinking of moving when we reach out to them, as other agents may also be trying to recruit them. It often relates to fear—fear of the unknown and fear of loss. Currently, traditional brokers are frightened of our presence in the market. They worry about us attracting their agents and they see us taking many of them. As a result, they tell their agents that if they join Fathom, they won’t be able to close any business because clients prioritize the brand or logo. This is far from the truth. Research has repeatedly shown that clients are more concerned about the agent rather than the brand. In fact, only 1% of homebuyers choose an agent based on the brand, while 99% choose the agent themselves. However, brokers misinform agents, promoting the importance of the brand, which creates fear. Agents think if I leave my current brokerage and I’m closing 15 homes a year, will I lose my business? They are uncertain. Sometimes, they have to witness trusted friends or colleagues successfully transition to us and see their business not only stabilize but actually grow before they decide to make a change. We often face a lot of misinformation because competitors are anxious. I understand the need to protect their agents, which leads to exaggeration. I have a friend who managed a large traditional brokerage with about 500 agents. When I spoke with her, she expressed her frustration with me, saying that when an agent tells her they're leaving for Fathom, her only response is to call their boss. Ultimately, we offer an exceptional value proposition, and it’s becoming increasingly difficult for agents in the long run to ignore this or resist change. I hope that answers your question without being too long-winded.

Yes, I appreciate that. I just want to point out one thing. I've noticed that some established brokerages have a relocation business with large companies. A few agents I've spoken with mentioned that while it's not a major aspect for them, they receive a handful of relocation clients each quarter. This seems to be enough to encourage them to remain with their current agents. So, I'm curious, are you considering relocation services or have you thought about incorporating that into your offerings?

The answer is yes. We've looked into this internally and have explored opportunities further. However, I must mention a caveat. There are very few companies that actually handle significant relocation, and within those companies, only a small number of agents receive relocation leads. Typically, these agents get very few leads, with many receiving just one or two per year. While some may get more, it's not common for every agent. If an agent receives two relocation deals, they often have to give up 50% to the relocation company and then another 30% of the remaining amount goes to the broker, leaving them with very little. They would need to complete three relocation deals to equal the value of one deal at Fathom. If you consider the total amount given up from those two relocation deals is around $6,000, moving to Fathom typically saves an agent between $12,000 to $15,000. Even if they close two fewer deals, they still end up with significantly more earnings. Sometimes, it takes time to sit down with agents, show them the math, and clarify the facts rather than emotions. When we present the numbers, they often come to the realization that it makes sense, but it does require some patience to help them understand the figures.

Thank you for that information. I appreciate it. My last question is about the interest in a more transactional model in real estate, similar to what companies like Opendoor and Zillow are doing, as well as the discussions from Cathie Woods and the ARK funds regarding fungible real estate. I recognize this as a segment of the market, but I wanted to ask if you have any insights on how this more liquid and efficient transactional real estate market might impact your vision for long-term growth.

Sure. No, actually. So look, iBuyers, kind of the term we've given those companies, iBuyers are here to stay. I don't think they'd go anywhere. They've been around for, I don't know, 40, 50 years. I mean that We Buy Ugly Homes has kind of beat them to the punch. That model has been on forever. Now it's got a prettier spin to it, and there's a lot more money backing it up, but they've been on forever. And I don't think they're going anywhere. I know they're struggling a lot of struggles relating to that model, but I don't think they're going anywhere. So the question is you can freak out and try to compete against them or you can use them to your advantage. And so we actually have a lot of agents, and we encourage agents to use them to our advantage. So what we do is, for example, we've got agents who will promote the iBuyer, the instant offer. We can offer you a home, just like they can, immediately. Now, it's not Fathom that's buying the property, but we can utilize investors and Zillow and Opendoor and the rest to be able to do that. So we market it. That allows us to get in front of 10 homes, for example, as an agent markets that property or that offering. They go into those 10 different listing appointments with the instant offers. They might walk in with free 3 instant offers, but they also walk in with here's what an actual listing would look like as well. So offer #1, offer #2, offer #3, or list with me, and it might take 30 days, but here's what you met at the end of the day. And what we find is that typically, the ones who actually opt for that instant offer, it's like 1 out of 10 or 1 out of 20 people. The rest of them become great opportunities for listings for our agents. So our agents are using them to actually generate more business. And then the ones who do opt for that instant offer, that's okay because our agents got 9 other listings potentially, but also they typically still get their full commission from that iBuyer. So whether they choose the instant offer or they go the listing route, our agents still get paid, and Fathom still makes a profit. So why fight against them? Let's work together. Let's use them to make more money and become more profitable. And that's what we do.

All right. Very good. Well, listen, I'll step down. Just congrats again, and I'll circle back with you guys and Marco on some more detailed questions about the model.

Well, those are great questions.

Our next question comes from Gregg Kitt with Pinnacle Fund.

I have one comment and one question. I was really pleased to see your long-term guidance of $40 million in adjusted EBITDA. Building on Darren's previous question, it seems this could potentially happen as early as 2024, which is exciting for me because I appreciate businesses with strong incremental margins. As you increase revenue, EBITDA should also increase. Additionally, one of your virtual brokerage competitors is trading at over 75 times the current year's EBITDA. If those multiples remain stable, I would love to see you achieve 75 times $40 million of EBITDA and become a $3 billion company in a few years, especially in comparison to your current $400 million enterprise value. If I understood Marco correctly, a significant part of the growth may be coming from your services businesses, which could be quite profitable in the coming years. I also noted that you are making some investments to obtain licenses and prepare those businesses, particularly the mortgage sector, for growth. What steps still need to be taken to prepare the services businesses you’ve acquired for the anticipated future growth?

Let me take a moment to emphasize an important point. Regarding the 100,000 transactions, the real estate segment alone could yield operating profits of $10 million to $15 million, which is quite significant. This represents about 20% to 25% of the projected $40 million. It's crucial to highlight this, especially since many companies in the sector aren't generating any profit from their real estate transactions. They rely on other areas to balance their performance, while each of our businesses can stand strong individually. I know Marco will want to clarify my choice of words, but it's important for us to focus on fully integrating our operations now that we have them in place. We need to build solid relationships among agents, loan officers, escrow officers, and insurance agents since these relationships are vital. Even though we own the business, we cannot impose our solutions on our agents; we must earn their business. We've made significant investments in leadership and in hiring top-tier loan officers and support staff, which is crucial for attracting agents to work with us instead of feeling pressured to do so. Many other companies tend to shroud their attach rates in secrecy, likely because those rates are low due to their approach of pushing services rather than building relationships. Therefore, our strategy revolves around ensuring robust operations with the best talent so that agents are motivated to bring us their business. This emphasis on strong investments now will be key for increasing our attach rate and ensuring future collaboration with real estate agents who genuinely want to work with us.

Great question, Gregg. One of our goals is to enhance visibility by examining segmentation and each business unit. For example, in real estate, the adjusted EBITDA for the quarter was nearly $0.5 million, while the title and mortgage segments were close to breakeven. However, we did experience a loss of about $890,000 in the mortgage sector, mostly due to necessary investments aimed at scaling the business, which we believe will yield returns in the future. We are confident that many of our businesses will soon contribute positively to adjusted EBITDA. We expect that, based on our estimates of 100,000 to 110,000 transactions, we will reach adjusted EBITDA exceeding $40 million. We are optimistic about this target, forecasting around $15 million from real estate and another $25 million from various business units, maintaining a modest attach rate of about 10%. There could be variations across businesses, but we are using conservative projections. Looking at our past three quarters, we have averaged transaction growth of about 61% to 62%. Applying that same growth rate to transactions over the last couple of years will help indicate when we might reach 100,000 to 110,000 transactions. We are confident that within this timeframe, we’ll achieve an adjusted EBITDA of $40 million, and we hope that, by then, investors will reassess how they value our company.

I just want to briefly address my follow-up question regarding how you encourage agents to utilize these services. Josh described it well; you aren't imposing this on your agents. Instead, your focus is on developing a high-quality service offering. After taking the necessary steps to integrate title, insurance, and mortgage services, your aim is to create a top-notch experience that agents will be eager to use. This is because agents are consistently having a positive experience every time they refer clients to any of the Fathom-owned service businesses. Is that the correct way to understand it?

It is. You said it better than I did. There is one added benefit. I wish we could legally incentivize the agents directly for sending business over; that can't happen, I wish we could, but there's rules on that. However, there is an indirect way that we can incentivize agents. And it's something we're doing that right now, no other company is doing, and that is the fact that not some of our agents but every single one of our agents from the time they close the first transaction own stock in Fathom. We all become shareholders in the company. And there's no other company that I know right now that can say that, every single one, not some, but everyone. And so that means that the more they send business to mortgage, title, insurance, leads, and so on, the more revenue we generate, the more profit we're able to create, which brings more value to their stock potentially, right? has never ever again, could be, but potentially, right? So that means that there is a benefit in some way for them as they utilize the services; they are shareholders as well. If they want to see their shares go up in value, then we all have to do our part to bring more value to our shareholders as a whole.

This concludes our question-and-answer session. I'd like to turn the call back over to Josh Harley for any closing remarks.

Thank you so much. And of course, thank you all for joining our call today and for your continued support. We are extremely proud of all that we’ve accomplished. And we look forward to taking additional actions that will add even greater value to our company and benefit all of our stakeholders. So with that, have a wonderful evening, and thank you again.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.