Fathom Holdings Inc

Fathom Holdings Inc.

FORM 10-K

December 31, 2023

TABLE OF CONTENTS

NOTES

In this Annual Report on Form 10-K (this “Report”), and unless the context otherwise requires, “Fathom,” “we,” “us,” “our,” “the Company,” “our Company” and “our business” refer to Fathom Holdings Inc. and its direct and indirect subsidiaries as of December 31, 2023, taken as a whole.

We have a registered trademark with the United States Patent and Trademark Office (“USPTO”) for the name and logo of “intelliAgent” and “Fathom Realty”, as they relate to real estate and associated industries. All other trade names, trademarks and service marks appearing in this Report are the property of their respective owners. We have assumed that the reader understands that all such terms are source-indicating. Accordingly, such terms, when first mentioned in this Report, appear with the trade name, trademark or service mark notice and then throughout the remainder of this Report without trade name, trademark or service mark notices for convenience only and should not be construed as being used in a descriptive or generic sense.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Report regarding our strategy, future operations, future product research or development, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “goals,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “forecast” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements in this Report include, but are not limited to, statements about:

•the risks associated with government spending, inflation, the Federal Reserve’s policies and rate increases, and the unprecedented rapid increase in mortgage interest rates;

•our ability to remain an innovative leader in the real estate industry;

•whether we are able to effectively manage rapid growth in our business;

•the risks associated with litigation filed by or against us, and adverse results therefrom;

•our ability to prevent security breaches, cybersecurity incidents, and interruptions, delays and failures in our systems and operations;

•our ability to grow in the various local markets that we serve or expand into adjacent markets;

•whether we are successful in identifying and pursuing new business opportunities;

•our value proposition for agents, including giving them equity in our Company and allowing them to keep more of their commissions than traditional companies allow;

•our ability to ensure agents understand our value proposition so that we are able to attract, retain and incentivize agents;

•our ability to compete effectively with other companies in the real estate industry;

•the risks associated with making meaningful comparisons of successive quarters;

•our non-GAAP operating performance, as reported using Adjusted EBITDA, which is not equivalent to net income (loss) as determined under GAAP;

•our ability to protect the privacy of employees, independent contractors and consumers or the personal information they share with us so that we do not harm our reputation and business;

•our ability to expand, maintain and improve the systems and technologies upon which we rely on to operate;

•if we fail to maintain compliance with the law and regulations of federal, state, foreign, county governmental authorities, or private associations and governing boards;

•our ability to sell originated loans;

•our ability to obtain sufficient financing to fund the origination of mortgage loans and grow our mortgage business;

•our ability to establish and maintain effective internal controls over financial reporting;

•the risks associated with the loss of our current executive officers or other key management;

•our ability to protect intellectual property rights;

•our ability to evaluate potential vendors, suppliers and other business partners for acquisition to accelerate growth;

•our ability to integrate recently acquired businesses;

•our future revenues and growth prospects and our dependence on other contractors;

•our ability to obtain sufficient additional capital on reasonable terms to grow our business;

•our ability to manage technology that is currently being developed in foreign countries, including Brazil and India, and third-party off-shore service teams, including in the Philippines, which makes us subject to certain risks associated with foreign laws and regulations; and

•other forward-looking statements discussed elsewhere in this Report.

We might not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Report, particularly in the section titled “Risk Factors” included in Item 1A of Part I of this Report, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. The environment in which we operate is highly competitive and rapidly changing and it is not possible for our management to predict all risks, as new risks emerge from time to time, such as the unprecedented increases in interest rates.

Except as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Report. You also should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements.

SUMMARY OF RISK FACTORS

Our business is subject to significant risks and uncertainties that make an investment in us speculative and risky. Below we summarize what we believe are the principal risk factors, but these risks are not the only ones we face, and you should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors” included in Item 1A of Part I of this Report, together with the other information in this Report. If any of the following risks occurs (or if any of those listed elsewhere in this Report occur), our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed.

Risks Related to Our Business

•If we do not remain an innovative leader in the real estate industry, we might not be able to grow our business and leverage our costs to achieve profitability;

•We might not be able to effectively manage rapid growth in our businesses;

•Industry, employee, or agent litigation and unfavorable publicity could negatively affect our future business;

•If we fail to grow in the various local markets that we serve or are unsuccessful in identifying and pursuing new business opportunities, our long-term prospects and profitability will be harmed;

•If agents do not understand our value proposition for them including allowing them to receive equity in our Company and keep more of their commissions than traditional real estate companies, we might not be able to attract, retain and incentivize agents or maintain our agent growth rate, which would adversely affect our revenue growth and results of operations;

•If we fail to expand effectively into adjacent markets, our growth prospects could be harmed;

•Adverse outcomes in litigation and regulatory actions against other companies and agents in our industry could adversely impact our financial results;

•We have a history of losses, and we might not be able to achieve or sustain profitability;

•Our revenue growth rates might not be indicative of our future growth, and we might not continue to grow at our recent pace, or at all;

•We currently use and intend to continue to use Adjusted EBITDA, a non-GAAP financial measure, in reporting our annual and quarterly results of operations; however, Adjusted EBITDA is not equivalent to net income (loss) from operations as determined under GAAP, and shareholders may consider GAAP measures to be more relevant to our operating performance;

•If we fail to protect the privacy of employees, independent contractors and consumers, or the personal information that they share with us, or if we fail to comply with privacy or data security legal requirements, our reputation and business could be significantly harmed;

•We participate in a highly competitive market, and pressure from other companies might adversely affect our business and operating results;

•Listing aggregator concentration and market power creates, and is expected to continue to create, disruption in the residential real estate brokerage industry, which might have a material adverse effect on our results of operations and financial condition;

•Our operating results are subject to seasonality and vary significantly across quarters during each calendar year, making meaningful comparisons of successive quarters difficult;

•Our business could be adversely affected if we are unable to expand, maintain and improve the systems and technologies upon which we rely to operate;

•Cybersecurity incidents, data breaches and other privacy/data security incidents could disrupt our business operations, and result in the loss or exposure of critical, confidential and/or sensitive information, which would adversely impact our reputation, result in costly regulatory investigations or litigation, create legal liability and harm our business;

•We face significant risk to our brands and revenue if we fail to maintain compliance with the law and regulations of federal, state, foreign, or county governmental authorities, or private associations and governing boards;

•Our mortgage business might be unable to sell its originated loans, in which case Fathom would need to service the loans and potentially foreclose on the home by itself or through a third party, either of which option could impose costs on Fathom. Our inability to sell originated loans could also expose us to adverse market conditions affecting mortgage loans;

•If we are unable to obtain sufficient financing through warehouse credit facilities to fund origination of mortgage loans, then we may be unable to grow our mortgage business;

•We might identify material weaknesses in the future that might cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements. If we fail to remediate any material weaknesses or if we otherwise fail to establish and maintain effective internal controls over financial reporting, our ability to accurately and timely report our financial results could be adversely affected;

•We are an “emerging growth company,” and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors;

•Loss of our current executive officers or other key management could significantly harm our business;

•Failure to protect intellectual property rights could adversely affect our business;

•We may evaluate potential vendors, suppliers and other business partners for acquisition to accelerate growth but might not succeed in identifying suitable candidates, or we may acquire businesses that negatively impact us;

•We have acquired businesses that are outside our core competencies as a real estate brokerage, which could be difficult to integrate, disrupt our core business, dilute stockholder value, and adversely affect our operating results and the value of our common stock;

•Our future revenue and growth prospects could be adversely affected by our dependence on other contractors, including off-shore contractors;

•We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all;

•Part of our technology is currently being developed in foreign countries, including Brazil, which makes us subject to certain risks associated with foreign laws and regulations;

Risks Related to Our Industry

•Our results are tied to the residential real estate market, and we might be negatively impacted by downturns in this market and general global economic conditions;

•A lack of financing for homebuyers in the U.S. residential real estate market at favorable rates and on favorable terms could have a material adverse effect on our financial performance and results of operations;

•Potential reform of Fannie Mae or Freddie Mac or certain federal agencies or a reduction in U.S. government support for the housing market could have a material impact on our operations;

Risks Related to Ownership of Our Common Stock

•The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain qualified board of director members;

•Our common stock price might fluctuate significantly, and the price of our common stock might be negatively impacted by factors which are unrelated to our operations;

•Our amended and restated bylaws provide that, unless we consent in writing, North Carolina state court is, to the fullest extent permitted by law, the sole and exclusive forum for substantially all disputes between us and our shareholders. This choice of forum provisions could limit the ability of shareholders to obtain a favorable judicial forum for disputes with us or our directors, officers or employees;

•Future sales of shares of our common stock by existing shareholders could depress the market price of our common stock;

•Joshua Harley, our Founder and former Chief Executive Officer, together with Marco Fregenal, our President and Chief Executive Officer and Chief Financial Officer, and a director, and Glenn Sampson, a significant shareholder, each own a significant percentage of our stock, and as a result, they can take actions that may be adverse to the interests of the other shareholders and the trading price for our common stock may be depressed; and

•If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.