Fathom Holdings Inc. Q4 FY2021 Earnings Call

Good day and welcome to the Fathom Holdings Fourth Quarter and Year End 2021 earnings conference call. Please also note that today's event is being recorded. I'd now like to turn the conference over to Roger Pondel with PondelWilkinson. Please go ahead sir.

Thank you very much, Operator and welcome, everyone, to Fathom Holdings 2021 fourth quarter and year-end conference call. I'm Roger Pondel with PondelWilkinson, Fathom's investor relations firm. It’s 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 statements are subject to numerous conditions, many of which are beyond the company's control, including those set forth in the Risk Factors 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's website at www.sec.gov. As a result of those forward-looking statements, actual results could differ materially. Fathom undertakes no obligation to update any forward-looking statements after today's call, except as required by law. But please note that during today's call, we will be discussing adjusted EBITDA, which is a non-GAAP financial measure as defined by SEC Regulation G. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure is included in today's press release, which is now posted on Fathom's website. And with that, it's my pleasure to turn things over to Josh Harley. Josh?

Thank you, Roger. And of course, thank you to everyone who's on today's call. Our entire team really appreciates your support and your faith in us. Before we review the significant progress Fathom has made since our last call, I want to thank our agents and employees for their ongoing hard work, not just toward our vision, but also helping us grow while generating value for all of our stakeholders. I also want to say thank you to our Fathom family for their unwavering dedication to creating a culture built on service and, more specifically, serving and placing others first. I cannot express how important that is and the role it's played in our success. One of the things I love is when I hear our agents say that they join Fathom for the commission, but they stay for the culture. That fact plays a significant role in why we have one of the lowest agent attrition rates among residential real estate brokerages. If you want a true representation of whether Fathom agents are happy, our low agent attrition rate is the best indicator. I'm extremely proud that our average monthly attrition rate across all of 2021 is only 1.5%, half of the industry average. Quarter after quarter and year after year, our results continue to demonstrate the power of our truly disruptive business model, and I'm proud to be here sharing our significant growth. We are winning through innovation and by delivering real long-term value to our agents, employees, clients, and, of course, our shareholders. For the fourth quarter year-over-year, revenue grew by 79%. Our agent count grew by over 48%, and our transactions grew by over 43%. Importantly, for the third quarter in a row, our real estate business was adjusted EBITDA profitable. I don't believe that any other publicly traded residential real estate brokerage can make that claim, not even at 30,000 transactions per quarter. While we're continuing to invest capital to enhance our foundation for sustained long-term growth of our new business lines, those investment dollars are quickly becoming a smaller percentage of our ongoing expenses. We believe that Fathom is on track to continue our strong revenue, agent, and transaction growth. With the strategic and thoughtful investments we're making in each of our business lines, we look forward to demonstrating strong, solid profitability in the near future. There are still some who do not fully understand who we are yet, but with time, I believe that more investors will come to understand our business and value us accordingly. If you really dig into our story, you'll realize that not only has Fathom generated impressive performance every year for over a decade, we still have an extraordinary runway ahead of us. A lot of companies sacrifice profitability for growth, but I'm proud to say that we do not have to operate that way. We believe that we can achieve strong profits over time while continuing to grow our business at high rates. Our cash position is strong, and we plan to continue to focus on achieving positive operational cash flow. Marco, our President and CFO, does a great job pressing the proverbial no button, keeping our spending in check as we march toward profitability. Our steadfast discipline allows us to be good stewards of the money with which you’ve entrusted us. We believe that Fathom is on track to continue our impressive growth rate for the foreseeable future while also achieving profitability quickly. And we look forward to proving it. The question is, how do we get there? Since going public, we've substantially increased our revenue, continued the expansion of our agent network, maintained strong agent retention, entered new geographic markets, and completed strategic acquisitions designed to further solidify our market position. That's a lot to accomplish in less than a year and a half, but it demonstrates our focus, our commitment, and our ability to get things done. With the addition of our own in-house mortgage, title, and insurance companies, along with additional SaaS offerings, we now have the potential to dramatically increase our revenue and, importantly, our profitability per transaction. I want to reiterate that these companies are not joint ventures. We fully own them. That means that we're not giving up any of the revenue and profitability generated by these businesses, and it means that we've got greater control to set a high bar for our quality of service. That matters a lot. It matters to our clients, it matters to our agents, and it should matter to you because that's how we believe that we can achieve a greater tax rate for these growing businesses. As I mentioned earlier, we grew agent count by over 48% year-over-year. We believe that a big part of that is because Fathom continues to have one of the most attractive agent commission plans and one of the most complete offerings in the industry. When it comes to providing the greatest value to agents, we believe that Fathom wins hands down. Our focus is not just on adding more agents but also helping those agents become more productive, close more sales, and ultimately earn more money. We believe that we are accomplishing that by providing more training and more technology to help our agents get in front of more buyers and sellers. As well, we're helping agents reduce the amount of time required to manage the transaction process, giving them even more time to network and sell. To prove that point, based on our internal data, agents who joined Fathom increased their sales by an average of nearly 49% after four years. In fact, many of our agents report doubling their sales after the first year with Fathom. In addition, as we grow our agent base and familiarize our agents with our newly acquired brands, we are inherently growing our referral opportunities, not just for our realty business but for all brands. One of the beautiful things about our incredible agent growth is that our cost to acquire one agent during the period remained at approximately $985, making our breakeven on each agent less than the $1,100 we earn on their first sale. I also want to point out that the average lifetime value of an agent is currently over $21,000 on just the real estate side of the business. The ratio of that lifetime value to our cost of agent acquisition is over 21x. And that does not take into account the revenue we're generating from our mortgage, title, and insurance companies or potential revenue from the leads that we can generate from our agents. Fathom is in a unique position to potentially grow even faster at a time when the real estate market is turbulent. I truly believe Fathom could benefit from a down housing market and that we have the potential to accelerate our growth in 2021, turning a headwind for most real estate companies into a tailwind for us. Moreover, Fathom could prove to be a hedge against other real estate brokerages whose revenue, transactions, and agent count could suffer from these headwinds. I want to spend just a minute on this point, because I think it's very important. While most analysts do not predict the housing bubble, they do believe that the industry could see fewer homes sold in 2022 as compared with 2021 due to rising home prices, rising interest rates, and a shortage of inventory. While this is not good for the majority of real estate companies, Fathom offers real estate agents who joined Fathom from other brokerages the ability to net more income than they did in 2021, even if they sell fewer homes. And that's important. That could result in more agents joining Fathom if they begin to feel the squeeze. In other words, Fathom could further accelerate our growth while other brokerages struggle. There are only two ways for a real estate agent to ultimately net more income, right? Increase their revenue by closing more sales, which is hard to do in a down market, or decrease their expenses. We believe that we can help agents do both. The vast majority of real estate agents' largest expense is not their marketing; it's the splits they pay their brokerage, with many paying over $30,000 per year. In real estate, there's an adage that suggests that splits only matter in the absence of value. However, what if all things were equal? With Fathom, an agent can get all of the technology, training, resources, and support they're used to getting at one of the legacy brands, yet save an average of $12,000 or more per year in commission splits paid to the brokerage. In essence, an agent could close 20% fewer homes and yet earn more income than they did the year before. With a potential market shift looming, Fathom could be highly attractive to agents. Fathom could also see greater market share per agent over time as our agents increase their total income on each sale. With more income per sale, Fathom agents have more money available to invest in marketing, growing their businesses. When agents with legacy brands are struggling to earn a real living due to fewer sales and lower income, that may create a need to pull back on their marketing spend in order to pay their bills. Fathom agents could potentially invest more in their marketing than their peers, helping increase their market share and Fathom's market share overall. In fact, we're already seeing some of that benefit through our career site, which saw a 181% increase in unique visitors in 2021 compared with 2020. We believe that is a strong indicator of future growth. Now, going back to shifting markets, it's important to note that if home prices fall, many of our competitors may see a strain on their profitability because they take a percentage split on every transaction, but that would not be the case for Fathom. We earn the same transaction fee from the agent, regardless of whether the agent earns a $10,000 commission or an $8,000 commission. We believe this should allow us to continue to capture market share from real estate companies with old traditional commission models. As our agent base grows, those agents generally bring more transactions with them. And as we add more transactions, we have more opportunities to capture mortgage, title, and insurance revenue. Fathom’s ability to attract an ever-increasing number of real estate agents by providing them with greater income potential, along with technology, training, and support they need to grow their business is even more evident today, especially during these unprecedented and changing times. Now as I mentioned earlier, our results for Q4 and all of 2021 were outstanding. Clearly, Fathom is moving in a very positive direction, attracting higher-priced agents and selling more homes in higher-priced markets, which could significantly benefit our mortgage, title, insurance companies and the leads business that we’re building. Fathom Realty recently grew its geographic reach with the addition of New Hampshire and Montana. As I’m sure you saw from recent press releases, we also expanded our Utah presence through the acquisition of iPro Realty and its 435 agents. We’re now licensed in 36 states and D.C., with plans to open several more markets in the coming months. Ultimately, our long-term plans are to expand to all 50 states and eventually Canada. Now, one more thing I should point out is the announcement we made in December about raising our fees for Fathom agents, which took effect in January of this year. The annual fee for agents was raised 20% from $500 to $600 per year, and the transaction fees were raised 11% from $450 to $500 for the first 12 completed transactions. We’re happy to report that these increases did not negatively affect our agent retention or growth rate since implementing this change. Most likely because our average agent is still saving around $12,000 or more as compared to traditional brands. Now, I want to talk about our intelliAgent next and the advantage that our platform creates. The obvious advantage is that it allows Fathom to reduce costs per agent over time while improving operational efficiencies. Our technology platform allows us to significantly reduce our reliance on third-party technology providers. In fact, as of this month, we’re officially using all Fathom-built technology for our Realty operation, which includes agent and brokerage websites, CRM, transaction management, personal management, and more. Outside of finance reporting systems and social media products, there isn’t much else that we’re using outside of intelliAgent for our Realty business. IntelliAgent gives us the power to control the full lifecycle of the home buyer and seller, gaining a greater understanding of our data and how to use it to further improve our offerings while ultimately generating leads for our agents. Plus, we can now identify potential clients for our mortgage, insurance, and talent companies long before they’re under contract, as they raise their hands requesting more information. Our SaaS company, LiveBy, is also making some incredible headway with a recent launch of LiveBy Local. We now provide tech and data to more than 750 companies across the country, with over 100,000 agents touching our product. Our mortgage operation in Encompass Lending is currently licensed across 41 states and D.C. We made significant investments in our mortgage operation and are already seeing a very positive return on that investment in the form of improved tax rates in market share. As you saw, we recently announced the acquisition of Cornerstone First Financial out of Washington, D.C. market. Cornerstone brought a unique marketing approach to Encompass Lending, which we planned to roll out across the country in each of the markets where Encompass has a foothold. Our title company, Verus Title, is growing exceptionally as well, and I could not be more proud of our team’s efforts. Verus is now licensed in 29 states, and we’re seeing impressive improvements in our tax rate every single month. In fact, our Q4 title revenue alone was as high as what was generated by Verus in all of 2020 prior to the acquisition. Industry-wide, online notarization was up 547% in 2020, and while 2021 numbers for this online trend are not out yet, the industry is seeing that trend continue. It’s important to note that this trend benefits our title model as more agents accept this new virtual or remote norm. Our insurance company, Dagley Insurance, is currently licensed in 47 states and D.C., and we're gaining traction with Fathom agents every single month. One important statistic to note is that over 43% of the insurance quotes we sent out in 2021 were converted into policies. We believe that over time, our insurance operation could help us improve our revenue profitability during the seasonally slower winter months and help us through the cyclical nature of the real estate industry. Total personal lines grew by over 17.5% in the fourth quarter year-over-year. Total premiums grew by over 16%, but keep in mind, we did not acquire Dagley Insurance until April of 2021, so we feel very good about our progress so far. As you know, our mortgage, title, and insurance operations were all added through strategic acquisitions, and we’re working diligently to integrate each business fully to ensure strong attach rates. We also made several strategic real estate brokerage acquisitions in a very short time period. We expect that any future acquisitions we consider will primarily be focused on opening new real estate markets or expanding our footprint in smaller markets to hit critical mass faster. Each acquisition we pursue is expected to be immediately accretive to our business as we continue on our path of profitability. We intend to continue growing quickly, and while acquisitions are not our primary growth strategy, we will use acquisitions strategically as opportunities arise. Now, final points and I’ll turn it over to Marco. Over the last three quarters, our real estate business was adjusted EBITDA positive, which we believe demonstrates that we’re on the right path. We have strategically built an end-to-end integrated real estate brokerage service company offering residential real estate brokerage, mortgage, title insurance, and SaaS services. We continue to enhance our underlying proprietary technology in addition to expanding our SaaS offerings. In 2022, we’ll continue to focus on strengthening our infrastructure and business integration as we seek to expand our footprint and our family of brands, both organically and via acquisitions. Our focus has been and will continue to be to execute our long-term vision of being among the top three residential real estate brands in the country. On our last call, we shared that assuming we reach between 100,000 to 110,000 transactions per year, we believe that we can generate adjusted EBITDA exceeding $40 million. While we’re not prepared to provide a timeline for this transaction milestone, we do feel confident we can continue to maintain the strong agent and transaction growth we’ve demonstrated consistently for over a decade. As you can tell, we believe that Fathom has a great future, and we’re incredibly excited and proud. With that, I will turn the call over to Marco. Marco, it’s all yours.

Thank you, Josh. I’ll start with a detailed review of our fourth quarter results, and we’ll finish with an updated increase in guidance. Fourth quarter revenues grew 79% year-over-year to $95.5 million compared with $53.4 million for last year’s fourth quarter. The increase resulted from growth in real estate transactions, average revenue per real estate transaction, and revenue contributions from our newly acquired businesses. GAAP net loss for the quarter was $3.6 million or a loss of $0.24 per share compared with a loss of $1.3 million or a loss of $0.09 per share for the 2020 fourth quarter. The year-over-year change in GAAP net loss resulted principally from investments in future growth, operational and overhead costs related to acquired companies, incremental costs due to transition into being a public company, and increases in non-cash stock compensation and expenses related to non-cash amortization of acquired intangible assets. Adjusted EBITDA loss, a non-GAAP measure, was $2 million versus an adjusted EBITDA loss of $850,000 for the fourth quarter of 2020. Our real estate segment continues to be adjusted EBITDA positive. In the 2021 fourth quarter, G&A increased at Fathom in an absolute basis as well as a percentage of revenue. G&A was $9.1 million in Q4 or 9.5% of revenue compared with $3.6 million or 6.8% of revenue for the same period a year ago. The increase in G&A is primarily attributed to recently completed acquisitions and increases in non-cash stock compensation expenses. It is anticipated that G&A expense will increase in absolute dollar terms going forward, driven by acquisition-related costs associated with scaling and integrating the company’s business lines. G&A as a percentage of revenue is expected to decline over the long term as revenue increases. Expenses related to marketing activities were $524,000 versus $383,000 for last year’s fourth quarter, mostly driven by an increase in marketing activities related to new market openings. Now, I’ll spend some time reviewing our business unit results. Our real estate division continued to perform extremely well. We finished the quarter with 8,100 agents, a 48% increase from the same period last year. We closed almost 10,800 real estate transactions for the quarter, a 44% increase from last year’s fourth quarter. Adjusted EBITDA in our real estate division was $126,000, building on the adjusted EBITDA profit we have generated since Q2 of 2021. Our mortgage business generated revenues of $2.7 million in the 2021 fourth quarter, slightly higher than what we generated in Q3. The adjusted EBITDA loss in the business was approximately $154,000, slightly higher than Q3 of 2021. Moving to our technology segment, revenues in the 2021 fourth quarter totaled $743,000, which represents an increase of 9.4% over Q3 of 2021. Adjusted EBITDA for the quarter was a loss of $225,000. Our insurance and title business also continued to grow, with combined revenues just shy of $2.5 million for the quarter, slightly higher than Q3 of 2021. Our adjusted EBITDA profit for these was $54,000 compared to $13,000 in Q3 of 2021. As I mentioned last quarter, we do plan to provide a separate breakout for our title business starting Q1 of 2022. Even with the normal seasonal industry downturn in the winter months, our fourth quarter results were excellent, and we remain very excited for the future. We ended the year with strong cash position of $37.8 million, which gives us plenty of runway to execute our strategy. Now let’s discuss the attach rate. For both Encompass Lending and Verus Title, we rolled out several markets in the late summer of 2021. After six short months, we are seeing attach rates in the range of 5% to 6%. We look at the continued increase in file starts from Fathom Agents for both Verus and Encompass for Q1 2022, and we believe that we’ll exceed the 10% attach rates within 12 to 18 months of Verus and Encompass opening in any individual market. I’ll finish with our guidance for the first quarter of 2022, as well as our increased guidance for the full year. We’re updating this guidance based on the positive trends we continue to see with Fathom’s business. For the first quarter of 2022, we expect revenues in the range of $77 million to $78 million and adjusted EBITDA loss in the range of $3.2 million to $3.3 million. For the full year 2022, we now expect revenues in the range of $425 million to $435 million and an adjusted EBITDA in the range of a loss of $500,000 to a profit of $500,000. As a reminder, guidance is forward-looking, which, as Roger noted in the beginning of the call, is subject to certain risks and uncertainties. Now, before I turn the call back to Josh, I would like to say how proud I am of our team and what we have accomplished in 2021. I do believe that when we look back at 2021, we’ll see that this past year was a significant year in Fathom’s history. Besides expanding our revenue streams, we have built this foundation to reach our goal for positive adjusted EBITDA and continue significant growth in the years ahead. I believe our team’s vision and passion will allow us to continue to revolutionize the residential real estate industry. Now I’ll give the mic back to Josh, so we can take your questions.

Thank you, Marco. We believe Fathom has a clear, visible, and long runway with tremendous growth prospects. No matter what the market holds, we believe that our model is positioned to win. We’ve been working hard to deliver on our promise to grow Fathom in an accelerated yet sustainable fashion for the long term. So thank you again for your trust and being part of our Fathom family. So operator, we’re now ready to open the call to questions.

Thank you. Our first question will come from Darren Aftahi with Roth Capital Partners. Please go ahead.

Hey guys. Good afternoon and thank you for taking my questions. A few if I may. First, can you give us a general sense on ancillary services? How much of that came from Fathom agents versus non-Fathom agents?

Hey Darren, great question. It varies from business to business. In our title business, about 50% comes from Fathom; mortgage business, about one-third comes from Fathom; and same on the insurance. Remember, Verus Title we purchased over a year ago, right? So that company’s more advanced in the attach rate. So that’s why it’s about 50%. The other two companies are about one-third coming from Fathom. We think that over time we will exceed that 50% mark.

By the way, I’d like to add some more color to that. And that is we don’t necessarily want Fathom to ever represent 100% of the business. I mean, to us, we want Fathom to always represent 50% to 60% or so of the business. That means that we’re getting not just Fathom business, but business outside of Fathom from other real estate brokerages, which is why we didn’t name it Fathom Lending or Fathom Title or Fathom, whatever. We want to make sure that we can service other real estate agents across other companies. The more we provide great service, the more revenue we can generate outside of just the attach rate we can capture.

Great. Thanks for that. On the agents added outside of M&A, can you just speak to how they skew, whether that’s from traditional brick-and-mortar or online or more PropTech competitors that you guys have?

Yeah, sure. So what we’re typically see is that most of the agents that join our company are coming from more of the big name brand companies, without putting names out there. We typically see a lot of the larger publicly traded with the traditional brick-and-mortar and traditional splits. So a very large percentage from there. We get a lot of agents also from some of the more virtual companies as well. And then it's really the mom-and-pop companies that come secondary. So we tend to attract a lot of the companies from some of the biggest brands. When you think about PropTech, you think about companies that are known mostly not just online but generating leads for their agents. We don’t get a whole lot of those agents. We do get those agents, and I’ll actually name Redfin, for example, would be a great example of that kind of PropTech, great organization. We don’t get a lot of their agents. They do a great job at feeding their agents with leads. We do get some of their agents, but that type of company, most companies don’t get a lot from. But all the rest that have the traditional split models, that’s typically where most of our agents come from. And again, mostly from the larger brands than the small mom-and-pop companies.

Great. And then just last one for me. Marco, maybe you could talk on gross margins. So into the quarter, what was the gross margin on the – excuse me, real estate business versus the other components?

Sure. In the real estate business, about 4%. Keep in mind, as you know, that because of the way our cap works, we still have a significant percentage of our agents there from January to December, and this was probably the last year that this is going to happen. If you look at the margins from Q1 all the way to Q4, they decrease, right? Because we have more agents there and the $99 per transaction. We probably – this is probably the last year that you're going to see a decrease; I think next year, I'm sorry, last year, 2022, I think we're going to see more of even EBIT as a larger percentage of our agents have caps used throughout the year. So they're not going to all be finishing on December 31. So on the ancillary services, we've probably seen margins of 75% to 80%.

Great. Thank you. Congrats.

Thank you.

Our next question will come from Tom White with D.A. Davidson. Please go ahead.

Great. Thanks guys. And nice end to the year. A couple, if I could, maybe just appreciate the color you guys gave on kind of the current attach rates for Encompass and Verus and kind of the target. Can you maybe just give a little bit more color on like how specifically you can improve attach rates? Is it certain best practices when dealing with agents? Is it sort of financial incentives? Like how do you get from kind of five to six to 10 plus?

Sure. It's actually a combination of various factors. To start with the mortgage side, many of our competitors prefer joint ventures, which means they lose control over quality—something that matters to agents. Additionally, a lot of them rely on call centers, which means there's often no direct contact person. We approach our agents in each market and ask them who their preferred loan officer is, someone who offers excellent service, as we prepare to launch our mortgage services. This way, we already know that there are existing business ties because several Fathom agents have already worked with them. The quality of service improves as more Fathom agents use these loan officers. If agents refer their clients to someone providing poor service, it negatively impacts their business. Ongoing referral business hinges on the quality of service offered, making local relationships crucial. Moreover, personal connections can influence business referrals; if agents spend time together outside work, they're more likely to support each other's success. Another factor is that we incentivize agents by making them shareholders. Although we can’t directly incentivize them to direct business our way, transferring their mindset from agents to stakeholders encourages them to want the company to flourish. We also generate leads for our agents, nurturing potential home buyers long before the agents even receive those leads. We check if they are prequalified and ensure they are ready to buy before starting the home search. This structure gives us better control over where leads go, further improving attach rates. Overall, we take a comprehensive approach: even small improvements across various areas can significantly enhance our attach rates.

That's super helpful. Maybe just a follow-up from Marco on the guidance. So the calendar 2022 revenue outlook was raised. Is that just kind of starting the year, maybe with more agents because you kind of outperformed on agent attraction here the last few months? Is it because of some of the new acquisitions? Just any color you can give on kind of the moving pieces behind the guidance increase?

Yes. I think it's several things. I think one is that our recruiting, as we've been looking, getting some visibility into Q1. We feel very good. I think part of it is acquisitions as well. And I think part of it is the – as we look at file starts. We have had strong file starts in Q1. So I think when we look at all three key elements, that could have a positive effect on our revenue, they're all looking in upwards now. There's always the risk of the market tightening and as interest rates rise. So we just took a look at all the positive trends we're seeing versus the potential of a slowdown. We still feel very confident about increasing our guidance for the year. But it's based on all those key factors.

Okay. That's great. One last one for me, and then maybe we'll jump back in the queue. Josh, thank you for kind of walking through the reasons why your business is going to be more resilient if transaction volume growth slows or declines. The one thing you didn't touch, I guess, maybe on what it may mean for your M&A strategy, is there going to be a lot of interesting targets for you guys, or maybe you'd be less inclined to be inquisitive? Just any color there would be helpful?

Yeah. You actually raised a fantastic point. I think right now, even before or during this last quarter, last several quarters, we've had an increase in companies reaching out to us saying, hey, love the Fathom story. I know you're going to be moving into my market. I don’t want to compete with you; instead, I'd like to work with you and help grow the Fathom brand, would you consider an acquisition? That story happens over and over again. Mark, like I’d say, you've got to kiss a lot of frogs before you find that prince. And so we talk to a lot of people; for the few that we actually end up acquiring. One of the things that we look at is we want to make sure we've got, talking to companies and going, in other words, not wasting our time. If the company doesn't have great leadership, have some kind of growth trajectory, have a similar model that we have, and could also be immediately accretive to our business. So with that point and to your point, as a lot of brokerages struggle to generate or I guess attract more agents, generate enough sales to close, to make enough revenue to make enough profit to pay their bills, I think we're going to have an increase of those companies calling us. I didn't bring that up because to me that's just a, would be, could be. We do believe that's going to happen. That's potential. But we're not ready to put our stamp on say that is going to happen, because we haven't seen that increase yet. Whereas we have a very strong belief that our model is very attractive in downturns because I started in this industry during downturns; I started Fathom during the last housing recession. A big part of why we had such amazing early success was because a lot of agents were seeking opportunities to recoup the losses that they had coming out of 2007, 2008, and 2009. So that's why we feel so confident that we'll be able to see the same thing happen. So hopefully that answers that question.

Yep. Appreciate it. Thanks, guys.

Our next question will come from indiscernible with Cole Capital. Please go ahead.

Good afternoon, gentlemen. Thank you for doing the call and best of luck here in 2022. Just kind of a quick four-part question. You acquired a number of real estate brokerage firms here later in the year. Could you just kind of quantify the revenue and gross margin dollars you believe they will add to the business in the first quarter? And then a second part is, as you mentioned, you raised prices for your agents for starting in January, approximately what's the revenue and gross margin dollar lift you'll be getting from that in the first quarter?

Yeah, we have not – we have not gotten into details yet in terms of what they will add for the increase in transaction price. Part of it, because we wanted to see, if there would be any negative effect from it, and we haven't seen any. So I think when we announced our Q1 results, we'll update our guidance for Q2 and for the full year based on what we see the positive effect that we'll see from the increase in the transaction fees. Keep in mind also that part of the increase in transaction fees is also related to inflation and increase in expenses, right? Inflation is affecting all companies and all companies have to increase payroll to attract and keep talent. So part of that goes towards that. On the acquisition front, we just acquired iPro in February. It's a little too early to tell what the impact is going to be. Every time you do an acquisition, there's always some uncertainty on the acquisition as we move agents over. And so again, when we announce Q1 results, we'll be able to update our guidance for the full year and certainly for Q2, and be able to give everyone a greater visibility and very accurate numbers in terms of the impact for Q2 and for the full year. This is part of why we feel confident about the increase in guidance already for the full year that we just gave. In part, it’s because of some of this positive trend we've seen, but I think we'll be able to give much greater visibility once we finish Q1 and begin Q2. And then when we report Q1 in a few weeks.

Okay. And then just one follow-on, for 2022, to what degree have you improved or changed some of your hiring practices for new agents? Obviously, you did a nice job in 2021, but I'm just wondering what sort of additional innovations you're doing in 2022 to allow you possibly to hire more agents than last year and maybe even hire them at a lower cost?

Sure. Yeah. I think it's a fantastic question. So first of all, a couple of things we've done, not necessarily hiring practices, but what we've done to continue to increase our hiring is number one, we've even improved our agent referral model. So that way, when agents refer other agents, they receive greater value for those referrals because we want, right now we've always had really strong agent referrals, but we wanted to take advantage and really grow that because there's no greater referrals to your business, especially to our business, than another agent referring an agent to our business. And so taking, the agents we already have, providing great service is important, providing great value is important. And then on top of that, incentivizing them and essentially turning your 8,000 agents into a recruiting force, a group of evangelists who love the company and want to share the company. So I think part of it is making sure that we provide great value to the agents to be able to grow and accelerate our growth rate from internal agent referrals. We continue to invest in hiring more salespeople, essentially recruiters, on our recruiting team to start bolstering that recruiting department and doing a better job at training them to improve the conversion ratio as well for the recruiting team. I know that's not exactly what you asked, but I want to start there because one is, not just how do you improve the hiring process, but how do you also accelerate the hiring? So that's a big part of it. And then once agents come in, we've done a great job. We've got a fantastic internal staff that focuses on serving agents. So we've got great support staff, a great accounting team, people that are just dedicated to answering questions. Whenever a new agent joins, we get them onboarded, but then we also have local managers who follow up with them to make sure they have everything they need. We also have someone in our customer service team that reaches out to them right away. Hey, is there anything you need? Can we introduce you to this program, to that program? Have you set this up yet? Can I help you get that set up? And then several weeks down the road, we’ll have a follow-up call again to say, Hey, it's been a couple of weeks now, are you getting settled? Is there anything you're missing? So we want to make sure that not only do we do a better job at bringing more agents in, but once they're in, we do a much better job at making sure that they feel settled, they feel good because we know that those good feelings turn into going back kind of full circle and turning into evangelists and telling other people about the organization. And then last thing, of course, is making sure that we continue to provide better technology, continue to enhance that technology, provide more services. As you know, we rolled out our Hispanic division. Part of that is making sure that we're developing tools in Spanish, and marketing resources in Spanish so that our agents can better serve the Hispanic community. We are also getting ready to launch our veterans division, providing more tools and resources for our agents who are veterans to be able to better serve their clients who are veterans. So we're doing a lot to help empower our agents. In the course, we're also developing more training programs and platforms. We launched Fathom Academy so that way they’ve got more access to training, to continue to improve all aspects of our business to make sure that the agent has a better and better experience being with Fathom.

Great. Thank you. And best of luck. Thanks again.

Thank you.

As there are no more questions, this concludes the question-and-answer session. I would like to turn the conference back over to Josh Harley for any closing remarks.

Thank you, operator. Of course, thank you to all of you for joining our call and for all the questions we had. We do appreciate your continued support. We are extremely proud of all that we've accomplished and will continue to work diligently toward achieving our objective of adding greater value to our company, to the benefit of all of our stakeholders. So with that, have a wonderful week. And thank you again.

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