As uncertainty continues to cloud the housing market, brokerages are looking for ways to cut costs and bring in more cash. Fathom Holdings, the parent company of Fathom Realty, announced Thursday that it has borrowed $3.5 million from an existing investor.
According to the firm, this will give Fathom more resources as it looks to achieve “cash flow profitability” by the third quarter of 2023.
Fathom started off 2023 by raising agent transaction fees by 10% after losing $9.9 million in the fourth quarter of 2022 — and $27.626 million total in 2022. This loss occurred despite a 14% year-over-year increase in transaction side count and a 25% annual increase in revenue to $390.615 million.
“Fathom delivered solid results in year-over-year revenue growth, agent growth, and transaction growth, and despite the current difficult market conditions, we remain optimistic about the year ahead. Our results validate our belief that our model offers the greatest value to agents in all market conditions,” Joshua Harley, Fathom’s CEO, said in statement in March. “Even with today’s economic uncertainty and subdued real estate market conditions, we believe that Fathom has a long and positive runway ahead and we expect to turn the corner towards profitable growth in the coming quarters while starting to really show the operating leverage in our business.”
During the firm’s fourth quarter earnings call with investors, executives said they also expect Fathom Holdings to record an adjusted EBIDTA loss of $1.3 million to $1.5 million during the first quarter of 2023.
At the end of 2022, Fathom Holdings held $8.3 million in cash, down from $37.8 million at the end of 2021.
“We anticipate that our existing balances of cash and cash equivalents and future expected cash flows generated from our operations will be sufficient to satisfy our operating requirements for at least the next twelve months,” the company said in the March 30 report.
In a statement to investors announcing the new funding, Fathom said it will pay a minimum interest rate of 8% on the senior secured convertible promissory note, which matters in two years, and may be repurchase or converted into common stock at a conversion price of $6 per share.
“Given the dynamic real estate market conditions, this capital provides us with additional operating liquidity and flexibility as we drive toward achieving adjusted EBITDA breakeven in Q2 and cash flow profitability in Q3 of this year. We are confident in reiterating our guidance for the next two quarters and remain optimistic about our business,” Harley said in a statement.