Executive Summary / Key Takeaways

• Fathom Holdings ($FTHM) is executing a strategic transformation, leveraging its proprietary intelliAgent platform and the innovative "Elevate" program to drive high-margin growth and achieve sustainable profitability in a dynamic real estate market.
• The company returned to adjusted EBITDA profitability in Q2 2025, reporting $29,000, fueled by robust 36% year-over-year revenue growth and a 25% increase in transaction volume, demonstrating the scalability of its diversified business model.
• The "Elevate" agent concierge program is a critical differentiator, generating significantly higher gross profit (approximately 4x) and adjusted EBITDA (approximately 5x) per transaction compared to standard brokerage deals, with aggressive targets for agent onboarding and lead generation.
• Strategic acquisitions, such as My Home Group, and the expansion of high-margin ancillary services (mortgage and title) are broadening Fathom's market footprint and enhancing overall profitability through increased attach rates and cross-selling opportunities.
• Despite ongoing macroeconomic headwinds and industry litigation, Fathom's agent-centric, low-cost operating model, coupled with disciplined cost management and a clear technological roadmap, positions it for continued outperformance and long-term value creation.

The Tech-Driven Evolution of Real Estate

Fathom Holdings Inc. ($FTHM) stands as a technology-driven, end-to-end real estate services platform, integrating residential brokerage, mortgage, title, and SaaS offerings for brokerages and agents across the United States. Founded in 2010, Fathom's vision has always been to empower real estate professionals through innovation, a strategy that has become increasingly critical in today's evolving housing market. The company's core brands, including Fathom Realty, Encompass Lending, intelliAgent, LiveBy, and Verus Title, reflect a comprehensive approach to the real estate ecosystem.

The broader real estate industry is currently in a state of flux, transitioning from a seller's market towards a more balanced, or even buyer-friendly, environment. Active listings surged by 29% year-over-year in June 2025 to 1.1 million units, the highest level since 2020, offering buyers more choices and moderating price growth. Median listing prices remained relatively flat around $440,000 in June 2025, but some markets are seeing price declines of up to 7%, with 20% of listings nationally experiencing price reductions. This shift, coupled with persistently elevated but stabilizing mortgage rates and the potential for future rate cuts, sets the stage for a modest recovery in transaction volumes in late 2025 and into 2026.

In this competitive landscape, Fathom distinguishes itself with an agent-centric, low-overhead business model. The company boasts one of the lowest direct costs per transaction in the industry, at just $264, significantly below many peers who average $1,200 to $1,800. This cost efficiency is a foundational competitive advantage, enabling Fathom to offer agents highly attractive commission structures and invest in its proprietary technology. The company's flat-fee model also provides a distinct advantage in the wake of industry-wide antitrust litigation, such as the NAR settlement, as it inherently supports agent commission negotiation without direct incentive for Fathom to interfere.

The IntelliAgent Platform and Elevate: Fathom's Technological Moat

At the heart of Fathom's differentiation is its proprietary intelliAgent platform, a comprehensive suite of brokerage and agent-level tools. This technology streamlines operations, provides business intelligence, and offers robust marketing and reporting services. It serves as the foundational engine enabling Fathom to deliver high-touch, high-impact services efficiently and affordably, a capability many traditional brokers struggle to match.

Building on this technological backbone, Fathom launched its highly anticipated "Elevate" Agent Concierge and Growth Program in April 2025. Elevate is a concierge-level, opt-in offering designed to significantly enhance agent productivity and improve transaction efficiency. It provides participating agents with dedicated lead generation support, transaction management, personalized coaching, comprehensive marketing packages, recruiting assistance, and priority customer service. This allows agents to focus on client service while Fathom's team handles administrative tasks.

The quantifiable benefits of Elevate are compelling. Elevate agents contribute a 20% commission split along with a standard transaction fee, a structure that is "incredibly competitive" compared to traditional brokerages. Critically, transactions from Elevate agents generate approximately 4x the gross profit and 5x the adjusted EBITDA of Fathom's standard brokerage transactions. This program is a direct pathway to higher blended margins and scalable recurring revenue. Early traction is promising, with over 120 agents signing up within the first four weeks of its soft launch in Q1 2025. By Q2 2025, over 70 agents were fully enrolled, with another 100 expected within 60 days, targeting over 300 fully onboarded agents by the end of 2025. The program also generated over 1,700 leads in July 2025, with a target to grow to 10,000 leads per month by December 2025, signaling significant incremental revenue potential.

Fathom is actively expanding the Elevate program's reach, developing extensions like "Elevate for Teams" and "Elevate for Partners" to cater to top-producing teams and independent brokerages. A recent partnership with Sovereign Realty Partners in August 2025, which licenses the intelliAgent platform and Elevate program in Arizona, exemplifies a replicable model for unlocking high-margin revenue from external organizations. This strategic initiative underscores Fathom's commitment to technological leadership as a core competitive advantage.

Financial Performance: A Return to Profitability

The second quarter of 2025 marked a pivotal moment for Fathom, as the company returned to adjusted EBITDA profitability. For the three months ended June 30, 2025, Fathom reported total revenue of $121.4 million, a substantial 36% increase year-over-year compared to $89.2 million in Q2 2024. This growth was primarily driven by a 25.4% increase in real estate transaction volume, reaching 12,710 transactions, and a 22.6% increase in agent licenses to 14,981.

Despite a slight decrease in the overall gross profit margin to 7.7% in Q2 2025 from 8.5% in Q2 2024 (attributed to competitive pricing and higher commission splits), the company demonstrated improved operating leverage. Gross profit increased by $1.3 million from Q1 to Q2 2025, while adjusted EBITDA for the same period surged by 114%, or $1.5 million. This indicates that a higher proportion of revenue is now converting to earnings.

The Real Estate Brokerage segment was the primary growth engine, with revenue climbing to $115.98 million in Q2 2025, a 39.5% increase year-over-year. This was significantly bolstered by the acquisition of My Home Group in November 2024, which contributed substantially to transaction volume and commission income. The Mortgage segment (Encompass Lending) saw a 10% revenue decline in Q2 2025 to $3.32 million, primarily due to persistently high interest rates impacting origination volumes. However, management anticipates sequential growth for this segment. The Title segment (Verus Title) delivered a record-breaking month in June 2025, with Q2 2025 revenue soaring 90% year-over-year to $1.5 million, driven by organic growth and expanded agent relationships. While Verus Title's adjusted EBITDA was a loss in Q2 2025 due to investments in capacity and personnel, these investments are expected to support future growth without comparable expense increases. The Technology segment experienced a slight revenue decline in Q2 2025 to $1.06 million, as some third-party clients reduced technology subscriptions amidst cost-cutting efforts.

Fathom's disciplined approach to cost management is evident. General and administrative expenses decreased in Q2 2025, reflecting ongoing cost-cutting initiatives and the absence of costs related to the May 2024 sale of its Dagley Insurance Agency. The company projects annualized cost reductions of approximately $2 million. While technology and marketing expenses increased, these were strategic investments in the intelliAgent platform, LiveBy, and the Elevate program, aimed at driving future growth and enhancing service capabilities.

Strategic Growth and Capital Management

Fathom's growth strategy is multi-faceted, focusing on organic agent expansion, strategic acquisitions, and the deepening penetration of its ancillary services. The acquisition of My Home Group in November 2024, an Arizona-based brokerage, was a significant move, adding over 2,200 agents and projected to contribute approximately $110 million in annual revenues in 2025. This acquisition brought in higher-producing agents and established a strong foothold in a rapidly growing real estate market, creating immediate cross-selling opportunities for Fathom's mortgage and title services.

The company's commitment to strengthening its balance sheet and liquidity has been a priority. In May 2024, the divestiture of Dagley Insurance Agency generated $7.4 million in cash at closing, with an additional $4 million received in the first half of 2025 and $3 million expected by May 2026. Fathom also completed a $3 million registered direct offering in March 2025, generating $2.9 million in net proceeds, and fully repaid a $3.5 million convertible note in April 2025.

As of June 30, 2025, cash and cash equivalents totaled $4.88 million. While Encompass Lending was not in compliance with certain debt covenants under one warehouse line of credit, a waiver has been requested and is expected. Management expresses confidence that existing cash, planned budgets, and expected growth will provide sufficient funding for at least the next twelve months.

Risks and Outlook

Despite the positive momentum, Fathom operates with inherent risks. The company has a history of negative cash flows from operations and operating losses, and its ability to achieve consistent profitability relies on sustained revenue growth and effective cost management.

Macroeconomic headwinds, particularly elevated interest rates and affordability pressures, continue to influence buyer behavior and transaction volumes. While Fathom's flat-fee model offers a competitive edge in the context of the NAR settlement, ongoing class-action lawsuits and potential industry turmoil could still impact its business and financial condition. Agent turnover, particularly among low-producing agents, remains a factor, though Fathom's agent-centric culture and new revenue-share plans aim to mitigate this.

Looking ahead, Fathom's management is focused on building on its Q2 2025 adjusted EBITDA profitability. The company aims to continue driving revenue growth by expanding agent count and transaction volumes, supported by its tech-enabled platform and differentiated agent value proposition. A key priority is to increase blended margins by scaling the Elevate program and deepening the penetration of its ancillary services. Management anticipates a modest recovery in the broader real estate market, which, combined with Fathom's competitive advantages, should enable it to outpace the market. The Zacks Consensus Estimate for FTHM for the fiscal year ending December 2025 is -$0.33 per share, reflecting a cautious but improving outlook.

Conclusion

Fathom Holdings is undergoing a significant transformation, strategically leveraging its proprietary intelliAgent platform and the innovative Elevate program to carve out a distinct and profitable niche in the competitive real estate services industry. The return to adjusted EBITDA profitability in Q2 2025, fueled by strong revenue and agent growth, underscores the effectiveness of its agent-centric, technology-driven model. By offering unparalleled value to agents through its low-cost structure and high-margin concierge services, Fathom is not only attracting and retaining talent but also diversifying its revenue streams through robust ancillary businesses and strategic acquisitions.

While macroeconomic uncertainties and litigation risks persist, Fathom's proactive capital management, disciplined cost control, and clear technological roadmap position it for sustained growth. The company's ability to scale its high-margin offerings, integrate new acquisitions, and expand its platform licensing model provides a compelling blueprint for long-term value creation. Investors should closely monitor the continued adoption of the Elevate program, the performance of its ancillary services, and the broader real estate market's recovery as Fathom executes its strategy to become a more profitable and resilient leader in the evolving real estate landscape.