Fathom Holdings Inc.

Previous wording

On March 10, 2025, the Company issued and sold shares of its common stock to certain investors and members of the Company’s Board in a registered direct offering (the “2025 Offering”). The cash proceeds to the Company from the issuance of the shares of common stock in the 2025 Offering were approximately $2.7 million after deducting the offering expenses.

Current wording

On March 10, 2025, the Company issued and sold shares of its common stock to certain investors and members of the Company’s Board in a registered direct offering (the “2025 Offering”). The cash proceeds to the Company from the issuance of the shares of common stock in the 2025 Offering were $2.9 million after deducting the offering expenses.

Previous wording

There could also be further changes in real estate industry practices. All of this has prompted discussion of changes to rules established by local or state real estate boards or multiple listing services. All of this may require changes to many brokers’ business models, including changes in agent and broker compensation. For example, many of our competitors may need to develop mechanisms and a plan that enable buyers and sellers to negotiate commissions. In contrast, our flat fee per real estate transaction model has always enabled our agents to negotiate their own fees. Our flat fee allows our agents greater ability to negotiate commissions, and we have no direct incentive to interfere with their doing so. Our flat fee per real estate transaction model enables our agents to freely settle their transaction commissions at their own discretion. Beginning in August 2024, our new revenue share models will continue to enable our agents to freely settle their transaction commissions at their own discretion. The Company will continue to monitor ongoing and similar antitrust litigation against our competitors, however, as our agent compensation model fully supports commission negotiation, we do not expect to have to change our compensation model in a manner that would adversely affect our financial condition and results of operations. However, the litigation and its ramifications could cause unforeseen turmoil in our industry, the impacts of which could have a negative effect on us as an industry participant.

Current wording

There could also be further changes in real estate industry practices. All of this has prompted discussion of changes to rules established by local or state real estate boards or multiple listing services. All of this may require changes to many brokers’ business models, including changes in agent and broker compensation. For example, many of our competitors may need to develop mechanisms and a plan that enable buyers and sellers to negotiate commissions. In contrast, our flat fee per real estate transaction model has always enabled our agents to negotiate their own fees. Our flat fee allows our agents greater ability to negotiate commissions, and we have no direct incentive to interfere with their doing so. Our flat fee per real estate transaction model enables our agents to freely settle their transaction commissions at their own discretion, and our revenue share models enable our agents to freely settle their transaction commissions at their own discretion. The Company will continue to monitor ongoing and similar antitrust litigation against our competitors, however, as our agent compensation model fully supports commission negotiation, we do not expect to have to change our compensation model in a manner that would adversely affect our financial condition and results of operations. However, the litigation and its ramifications could cause unforeseen turmoil in our industry, the impacts of which could have a negative effect on us as an industry participant.

Previous wording

As of March 31, 2025 and March 31, 2024, we had approximately 14,715 and 11,986 agent licenses, respectively, representing growth of approximately 22.8%.

Current wording

As of June 30, 2025 and June 30, 2024, we had approximately 14,981 and 12,224 agent licenses, respectively, representing growth of approximately 22.6%.

Previous wording

General and administrative expenses consist primarily of fees for professional services and personnel costs, including base pay, bonuses, benefits, and share based compensation. Professional services principally consist of external legal, audit, and tax services. In the short term, we expect general and administrative expenses to increase in absolute dollars due to the anticipated growth of our business and to meet the increased compliance requirements associated with operation as a public company. However, in the long term, we anticipate general and administrative expenses as a percentage of revenue to decrease over time, if and as revenue increases.

Current wording

General and administrative expenses consist primarily of fees for professional services and personnel costs, including base pay, bonuses, benefits, and share based compensation. Professional services principally consist of external legal, audit, and tax services. In the short term, we expect general and administrative expenses to increase in absolute dollars due to the anticipated growth of our business and to meet the increased compliance requirements associated with operation as a public company. However, in the long term, we anticipate general and administrative expenses as a percentage of revenue to decrease over time, if and when revenue increases.

Previous wording

Marketing expenses consist primarily of online and traditional advertising, as well as costs for marketing and promotional materials. Advertising costs are expensed as they are incurred. We expect marketing expenses to increase in absolute dollars as we continue to expand our advertising programs, and promote our newly acquired business lines, but we anticipate marketing expenses as a percentage of revenue to decrease over time, if and as our revenue increases.

Current wording

Marketing expenses consist primarily of online and traditional advertising, as well as costs for marketing and promotional materials. Advertising costs are expensed as they are incurred. We expect marketing expenses to increase in absolute dollars as we continue to expand our advertising programs, and promote our newly acquired business lines, but we anticipate marketing expenses as a percentage of revenue to decrease over time, if and when revenue increases.

Previous wording

For the three months ended March 31, 2025, gross commission income increased by approximately $23.5 million, or 36%, as compared with the three months ended March 31, 2024. This increase was primarily attributable to a 26.1% increase in transaction volume; 9,715 real estate transactions during the three months ended March 31, 2025, compared to 7,703 transactions during the three months ended March 31, 2024. Our transaction volume increased primarily due to the addition of My Home Group in November 2024. During the three months ended March 31, 2025, average revenue per transaction was $9,148, a 7.8% increase compared to $8,488 during the three months ended March 31, 2024, primarily attributable to a higher transaction value at My Home Group.

Current wording

For the three months ended June 30, 2025, gross commission income increased by approximately $32.9 million, or 40%, as compared with the three months ended June 30, 2024. This increase was primarily attributable to a 25.4% increase in transaction volume; 12,710 real estate transactions during the three months ended June 30, 2025, compared to 10,137 transactions during the three months ended June 30, 2024. Our transaction volume increased primarily due to the addition of My Home Group in November 2024. During the three months ended June 30, 2025, average revenue per transaction was $9,125, a 11.3% increase compared to $8,200 during the three months ended June 30, 2024, primarily attributable to a higher transaction value at My Home Group.

Previous wording

For the three months ended March 31, 2025, other service revenue decreased by approximately $0.9 million, or 17%, as compared with the three months ended March 31, 2024. This decrease is primarily attributable to the reduction of insurance revenue as a result of our sale of our insurance business in May 2024, offset by an increase in mortgage loans and title service transaction volume, which were primarily attributable to organic growth and walkovers.

Current wording

For the three months ended June 30, 2025, other service revenue decreased by approximately $0.6 million, or 10%, as compared with the three months ended June 30, 2024. This decrease is primarily attributable to the reduction of insurance revenue as a result of our sale of the insurance business in May 2024, offset by an increase in title service transaction volume, which were primarily attributable to organic growth and walkovers.

Previous wording

For the three months ended March 31, 2025, commission and service costs increased by approximately $21.4 million, or 34%, as compared with the three months ended March 31, 2024. Commission and service costs primarily includes costs related to agent commissions, net of fees paid to us by our agents. These costs generally correlate with recognized revenues. As such, the increase in commission and service costs compared to the same period in 2024 was primarily attributable to an increase in agent commissions.

Current wording

For the three months ended June 30, 2025, commission and service costs increased by approximately $31.0 million, or 38%, as compared with the three months ended June 30, 2024. Commission and service costs primarily includes costs related to agent commissions, net of fees paid to us by our agents. These costs generally correlate with recognized revenues. As such, the increase in commission and service costs compared to the same period in 2024 was primarily attributable to an increase in agent commissions.

Previous wording

For the three months ended March 31, 2025, general and administrative expenses decreased by approximately $0.4 million, or 4%, as compared with the three months ended March 31, 2024. The decrease was primarily due to a $1.1 million decrease in stock compensation expense partially offset by an increase in compensation expense relative to the Company's investment in growth.

Current wording

For the three months ended June 30, 2025, general and administrative expenses decreased by approximately $0.4 million, or 4%, as compared with the three months ended June 30, 2024. The decrease was primarily due to a $1.5 million decrease in stock compensation expense partially offset by an increase in compensation expense relative to the Company's investment in growth.

Previous wording

For the three months ended March 31, 2025, total marketing expenses increased by approximately $0.2 million, or 14%, as compared with the three months ended March 31, 2024. The increase was primarily due to the Company's investment in growth.

Current wording

For the three months ended June 30, 2025, total marketing expenses increased by approximately $0.1 million, or 5%, as compared with the three months ended June 30, 2024. The increase was primarily due to the Company's investment in growth.

Previous wording

For the three months ended March 31, 2025, total technology and development expenses increased by approximately $0.3 million, or 22%, as compared with the three months ended March 31, 2024. The increase was primarily due to our ongoing investment in the intelliAgent platform and our LiveBy business.

Current wording

For the three months ended June 30, 2025, total technology and development expenses increased by approximately $0.3 million, or 18%, as compared with the three months ended June 30, 2024. The increase was primarily due to our ongoing investment in the intelliAgent platform and our LiveBy business.

Previous wording

For the three months ended March 31, 2025, depreciation and amortization expenses decreased by approximately $0.2 million, or 24%, as compared with the three months ended March 31, 2024. The decrease was due to the absence of amortization related to our insurance business that we sold effective May 3, 2024.

Current wording

For the three months ended June 30, 2025, depreciation and amortization expenses decreased by approximately $0.01 million, or 1%, as compared with the three months ended June 30, 2024. The decrease was due to the absence of amortization related to our insurance business that we sold in May 2024.

Previous wording

The Company recorded income tax (benefit) expense of approximately $0.02 million for each of the three months ended March 31, 2025 and 2024. This tax expense is primarily the result of current state income tax liabilities and deferred tax expense related to deferred tax liabilities that cannot be fully offset by deferred tax assets.

Current wording

The Company recorded income tax (benefit) expense of approximately $0.06 million and $(0.01) million for the three months ended June 30, 2025 and 2024, respectively. This tax expense is primarily the result of current state income tax liabilities and deferred tax expense related to deferred tax liabilities that cannot be fully offset by deferred tax assets.

Previous wording

To date, our principal sources of liquidity have been the net proceeds we received through public offerings and private sales of our common stock, the sale of one of our businesses, as well as proceeds from loans. As of March 31, 2025, our cash and cash equivalents (including restricted cash) totaled approximately $8.2 million, which represented an increase of approximately $0.8 million compared to December 31, 2024. As of March 31, 2025, we had net working capital of approximately $4.8 million, which represented a decrease of $0.8 million compared to December 31, 2024. As noted above, in May 2024 we sold our wholly-owned subsidiary Dagley Insurance Agency for approximately $15.0 million in cash, $7.4 million of which we received at closing.

Current wording

To date, our principal sources of liquidity have been the net proceeds we received through public offerings and private sales of our common stock, the sale of one of our businesses, as well as proceeds from loans. As of June 30, 2025, our cash and cash equivalents (including restricted cash) totaled approximately $5.1 million, which represented a decrease of approximately $2.3 million compared to December 31, 2024. As of June 30, 2025, we had net working capital of approximately $5.7 million, which represented an increase of $0.1 million compared to December 31, 2024. As noted above, in May 2024 we sold our wholly-owned subsidiary Dagley Insurance Agency for approximately $15.0 million in cash, $7.4 million of which we received at closing. The Company received $4.0 million during the first six months of 2025 related to the sale of its insurance business, which was completed in May 2024. The Company expects to receive the remaining $3.0 million in May 2026. On April 7, 2025, the Company repaid its $3.5 million convertible note (the “2023 Note”) in full. In March 2025, the Company completed an offering of common stock (the "2025 Offering"), which resulted in the issuance and sale by the Company of 3,505,364 shares of common stock at an offering price of $0.68 per share and 832,639 shares of common stock at an offering price of $0.72 per share, generating gross proceeds of $3.0 million, of which the Company received total net proceeds of $2.9 million, after deducting underwriting discounts and other offering costs.

Previous wording

We anticipate that our existing balances of cash and cash equivalents and future expected cash flows generated from our operations and from the sale of our insurance business will be sufficient to satisfy our operating requirements for at least the next twelve months from the date of the issuance of the unaudited interim consolidated financial statements.

Current wording

We anticipate that our existing balances of cash and cash equivalents and future expected cash flows generated from our operations and from the sale of our insurance business will be sufficient to satisfy our operating requirements for at least the next twelve months from the date of the issuance of these unaudited interim consolidated financial statements.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2025 consisted of a net loss of $5.6 million, non-cash charges of $1.8 million, including $1.5 million of stock-based compensation expense and $1.4 million of depreciation and amortization, partially offset by $1.5 million in gains on the sales of mortgages. Changes in assets and liabilities were primarily driven by $54.7 million in mortgage loan originations, partially offset by $51.4 million in proceeds from the sales and principal payments on mortgage loans held for sale.

Current wording

Net cash used in operating activities for the six months ended June 30, 2025 consisted of a net loss of $9.2 million, non-cash charges of $6.1 million, including $2.5 million of stock-based compensation expense and $2.9 million of depreciation and amortization, partially offset by $3.2 million in gains on the sales of mortgages. Changes in assets and liabilities were primarily driven by $120.0 million in mortgage loan originations, partially offset by $115.0 million in proceeds from the sales and principal payments on mortgage loans held for sale.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 consisted of a net loss of $5.9 million, non-cash charges of $3.4 million, including $2.7 million of stock-based compensation expense and $1.5 million of depreciation and amortization, partially offset by $1.2 million in gains on the sales of mortgages. Changes in assets and liabilities were primarily driven by $49.6 million in mortgage loan originations and $0.9 million in prepaid and other current assets; partially offset by $50.7 million in proceeds from the sales and principal payments on mortgage loans held for sale, as well as a $1.1 million increase in accrued and other current liabilities.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 consisted of a net loss of $7.2 million, a gain on sale of a business of $2.9 million, non-cash charges of $5.7 million, including $5.2 million of stock-based compensation expense and $2.8 million of depreciation and amortization, partially offset by $3.2 million in gains on the sales of mortgages. Changes in assets and liabilities were primarily driven by $131.5 million in mortgage loan originations; partially offset by $132.8 million in proceeds from the sales and principal payments on mortgage loans held for sale, a decrease in operating lease liabilities of $1.0 million, as well as a $0.3 million increase in accrued and other current liabilities, and a $1.2 million decrease in prepaid and other current assets.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 primarily consisted of $0.5 million for purchases of intangible assets related to technology development.

Current wording

Net cash provided by investing activities for the six months ended June 30, 2025 primarily consisted of proceeds from the sale of Dagley Insurance Agency completed in May 2024 of $4.0 million, partially offset by the purchases of intangible assets related to technology development of $1.4 million.

Previous wording

Net cash provided in financing activities for the three months ended March 31, 2025 consisted primarily of the $3.0 million in proceeds from the issuance of common stock in connection with a public offering and the change of $4.7 million on our warehouse lines of credit.

Current wording

Net cash provided in financing activities for the six months ended June 30, 2025 consisted primarily of the $3.0 million in proceeds from the issuance of common stock in connection with a public offering and the change of $8.1 million on our warehouse lines of credit, and the repayment of a $3.5 million convertible note.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 consisted primarily of approximately $0.2 million in principal payments on debt and $0.1 million in deferred acquisition payments, partially offset by $0.2 million in net activity on our warehouse lines of credit.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 consisted primarily of approximately $1.7 million in net activity on our warehouse lines of credit, partially offset by $0.3 million in principal payments on debt and $0.2 million in deferred acquisition payments.

Previous wording

The preparation of financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Our Annual Report on Form 10-K for the year ended December 31, 2023 contains a discussion of our critical accounting estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section. There have been no material changes to these estimates during the nine months ended March 31, 2025.

Current wording

The preparation of financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Our Annual Report on Form 10-K for the year ended December 31, 2024 contains a discussion of our critical accounting estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section. There have been no material changes to these estimates during the six months ended June 30, 2025.

Previous wording

Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier to occur of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO in 2020, (b) in which we have total annual gross revenues of at least $1.07 billion, or (c) in which we are deemed to be a “large accelerated filer” under the rules of the U.S. Securities and Exchange Commission, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. Our status as an emerging growth company ends as of December 31, 2025.

Current wording

Subject to certain conditions, as an emerging growth company, we may rely on certain other exemptions and reduced reporting requirements under the JOBS Act. Certain of these exemptions are, including without limitation, from the requirements of (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier to occur of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO in 2020, (b) in which we have total annual gross revenues of at least $1.07 billion, or (c) in which we are deemed to be a “large accelerated filer” under the rules of the U.S. Securities and Exchange Commission, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. Our status as an emerging growth company ends as of December 31, 2025.