Good afternoon and welcome to the Fathom Realty Holdings First Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Roger Pondel, Investor Relations for Fathom Holdings. Please go ahead.

Thank you, Chad and welcome, everyone to Fathom Holdings 2021 first quarter conference call. I'm Roger Pondel with PondelWilkinson, Fathom's Investor Relations firm. It's my pleasure to shortly introduce the company's Founder and CEO, Joshua Harley; and Fathom's President and Chief Financial Officer, Marco Fregenal. Before I turn things over to Josh, I must remind everyone 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 adding new capabilities, the ability to reduce costs and drive sustainable growth, the type of new revenue generating opportunities identified by the company as well as the company's timing of identifying and completing them. And those set forth in the Risk Factors section of the company's annual report on Form 10-K for the year ended, December 31, 2020, as filed with the SEC and copies of which are available on the SEC's website at www.sec.gov along with other company filings made with the SEC from time to time. 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. So please also note that during this 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. Of course, thank you to everyone who's on today's call. You know our entire team really appreciate your support and your faith in us. We're really proud that you're part of our Fathom family. In our first quarter results once again demonstrate the power of our truly disruptive model. And as you know, we recently acquired a mortgage company, an insurance company, a lead generation and lead nurturing call center, a technology company specializing in big data aggregation and content creation, as well as a technology company building home search and CRM tools to help us attract more home buyers and sellers, which also helps us attract more agents. To say that, we've been busy building Fathom to be an ultimate finding machine with an understatement. On our very first earnings call the fact just eight months ago, I made the statements that we now had jet fuel to pour on the fire. And hopefully we've proven that we're not just hype, we're delivering on what we say we will. Ahead all of that, on top of our entry into the title insurance sector back in November and we now have all the pieces of the puzzle we need to make real and significant change in the real estate space. We may still be small, but we have elite team and we're growing at a pace that will make people notice. On top of that, our cash position remains strong. And we're committed to adding to that position by focusing on operational cash generation. Now since going public, we have substantially increased revenue, continued the expansion of our agent network, improved age retention, entered new geographic markets and completed strategic acquisitions that further solidify our market position. Plus, with our attractive agent commission structure, we believe that…

Thank you, Josh. I'll start by discussing some of our key financial results for the quarter. Our Q2 revenues grew 72% year-over-year to $49.6 million from $28.8 million last year, same quarter. The increase resulted from growth in real estate transactions, average revenue per transaction and their contribution from their recital, which is part of the Fathom family for the full quarter. Supported by our ongoing strong residential real estate market and continue rising home prices that we've seen. As a reminder, home sales in Q4 and Q1 are seasonally lowered during than compared to the rest of the year. GAAP net loss for the quarter was $3.4 million or a loss of $0.25 per share, compared with a GAAP net loss of $43,000 or breakeven per share for the same period last year. Our weighted average outstanding share count increased 35% between the period-to-period primarily due to the impact of our IPO and acquisition. Adjusted EBITDA loss or a non-GAAP measure was $2.5 million for the first quarter versus an adjusted EBITDA profit of $135,000 last year. G&A expense increased to $6.2 million compared with $1.8 million last year, due mainly to the complete acquisitions, costs related to being a public company and an ongoing marketing effort to support our growth. G&A expense is expected to increase going forward for the same reasons as we continue to scale and integrate all the business that we've just acquired. Expenses related to marketing activities increased to $402,000 from $230,000 in last year's first quarter, mostly driven by growth in our talent acquisition team and higher levels of investment in advertising and PR. We believe this efforts have been very fruitful. We closed approximately 6,900 real estate transactions this quarter, a 60% increase from the same quarter last year. This increase is…

Thank you, Marco. As you can tell, we're incredibly excited about our prospects. We've been working hard to deliver on our promises and grow Fathom in accelerated and yet sustainable fashion for long-term, right. This is not a short game. This is a long-term operation and we're excited about it. For those of you who are our shareholders, thank you for trusting and being part of our Fathom family. Now, operator, we're now ready to open up the call to questions.

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Darren Aftahi with ROTH Capital Partners. Please go ahead.

Hi, this is [Dylan] [ph] on for Darren, thanks for taking my questions. First one, with all the acquisitions that you've been working on and completed. Could you talk a little bit about the timeline for when you expect all these to be integrated into the market you currently covered? I think you said there's like, you're up to 29?

Hey, Dylan. That's a great question. Thank you for asking. It's going to take some time, right. So if you recall, we're now in 29. Just real estate Fathom, the real estate companies in 29 states. And then we are already, Verus Title is already operation in about four or five states in which Fathom is there operating. So we're rolling out Verus already, we have one quarter of Verus. And we are quickly already implementing Encompass and our DIA into the other markets. So if you think about the rollout, right, it's going to take some time to roll out all these businesses in every state, right. It is going to take some time to do that. Having said that, we will quickly see results of the rollout, right. So it's clearly in Q2, we'll see an increase in revenue from these businesses as they are existing businesses. And then we'll go ahead and see additional revenue coming in from the integration with Fathom. So think of it as layers to the increase in the financial statements. So the first one is, of course, just aggregating the revenue from all the businesses. And then the second one will be the additional revenue coming in from the integration and the tax rates that we'll see going forward. So it will take some time to roll this out across all the states. And then on top of that, you know, Fathom needs to continue to add another 21 states to our rollout. So this rollout will take different multiple phases. But we are already seeing early signs of great results. And I think when we show our Q2 numbers, we feel very good about those and I think we'll begin to be able to show how we are rolling out these acquisitions and how well they integrate with the Fathom Realty division of our company.

And one thing I'll add to that, Marco is the fact that now as we roll out our technology more and start fully integrating those companies into our technology through our real estate operation, we'll start to see the attached rates and the growth grow even faster, we believe. So it takes some time. Number one, to get those markets open, get the, you know, get the licenses for those markets, get them introduced to our agents. And then once we get in, you know, integrate the technology, then we'll be able to start capturing the leads in other ways as well. So not just purely reliant on our agents to send business over, but also capturing it on our own as well.

Great, thank you. What is the current cash balance as of today? I mean, post all the acquisitions? And then how much revenue the title amount for in Q1 of the $49.6 million?

Marco, I think you're muted.

I apologize. Our cash position as we stated on March 31st, our financials is approximately $25 million. And then there's some - actually almost $26 million with about $1 million dollar in restricted cash. The various percentage of revenue for Q1, it was about $400,000 or so. Q1, again, is the lowest revenue quarter. So it's about $400,000 in terms of Q1.

Are you willing to share what like cashes in currently?

Not at this point.

Got you. One more for me, and then I'll turn it over. How should we think about some of the add-on businesses going forward in terms of them being a little bit more profitable? And your thought process between flowing that profit down to the bottom line and investing for more growth?

That's a great question. And I think each business is a little different, right. So and keep in mind again, that we are going into the two busiest quarters of the year, right, Q2 and then Q3 being the business quarter, right. And so we look at each business in a very different manner. We have to make some investments in the mortgage business. But for mortgage and title, we will see an impact to the bottom line in probably by Q3, Q2, we're still making some investments. So probably by Q3 we'll start seeing an impact, a positive impact in the cash flow of the business from two businesses. From the IntelliAgent, which is currently the LiveBy, we're still evaluating how quickly we're going to grow the business as there are enormous potential for their business as well. And as you know, that's a fast business. It's a recurring revenue businesses. And we will see how that affects our business. And then from an insurance perspective, the insurance business is a very interesting business, because it's also a recurring revenue business. And at this point, we're probably running that business at a breakeven going forward. But we'll see and that's just a matter of controlling the growth of that business, that business can grow significantly for us, when we start seeing an attach rate coming in from the Fathom, the Fathom Real Estate division. But again, I, from a mortgage and title, we will start seeing a cash flow impact in Q3.

I want to kind of, I know the question you're asking, Dylan. I know I didn't quite give you what you're looking for and apologize for that. But I will say that, look, our cash position remains really strong. And we're committed to actually adding to that position by focusing on that you know the cash generation. So one thing you'll remember is that, this industry is cyclical and seasonal, rather. And so you know, as we go from Q1, which tend to be the lowest, and we start moving to Q2, Q3 and so forth, we're able to generate more revenue and possibly to add to that cash position, so we feel really good about it.

Great, appreciate it, guys. Thank you.

[Operator Instructions]

You know, Chad, I'm just - we're so good on our call that they - no one has questions, because we just - we've answered them all ahead of time.

Thank you, sir. And we do have a question and it's from Will Hamilton with Manatuck Hill. Please go ahead.

Yes. Hey, Will.

Hey, guys. Just a question on SG&A. Apologize if I missed this. But can you break down the $6.2 million a little bit more in the sense of maybe what was related to the acquisitions versus other growth investments? That didn't look like in the EBITDA breakdown that had anything's broken out?

Yeah. Hey, Will. Good to hear from you. So that when you look at the $6.2 million - a $6.3 million G&A - a $6.2 million from G&A. About - we spent about between $1 million and $1.2 million in acquisitions and related acquisition costs. Some of those costs are legal fees that are actually for the acquisition that happen in Q2 as well. So when you look at the total costs in G&A related to, everything related to acquisitions, it was about $1.2 million. And then you can also see there's an increase in stock compensation also related to, which is, the majority of the increase is related to acquisitions as well for another $500,000 or so. So when you put all that together, you're looking about $1.6 million between all the costs related to the acquisitions, not only in Q1, but in Q2 that closed in Q2 as well of the compensation for stock related to the acquisitions. Having said that, we also invested, because as you know, this is a seasonal business, right and then Q2 and Q3 are the busiest month for us. We've also made investments in staff preparing for that increase in business, we also made investments in staff preparing for the aggregate of having all the other businesses as part of Fathom. So their investments made also in staff, and then preparing the company for having these multiple divisions. So we can benefit from the attach rate as quickly as possible. So the increase in G&A was related to the acquisitions, as well as an increase in staff preparing us for having all these additional business, so we can benefit from them as quickly as possible.

Okay, it's helpful. So it's like - on a go-forward basis like $4.5 million to $5 million, maybe reasonable? I know you don't like to guide, but just yet in terms of a run rate?

That's a great question. So keep in mind that, once we add all the other business, they have G&A costs as well, right.

Yeah.

And so the number will be larger than that, because you know, we have an insurance business, a mortgage business, the title business is going to increase as well. So, the number will be bigger than that just because we're increasing and adding all those businesses, but you also get the revenue, right. And so there will be significant revenue added as well that will correlate to the G&A. As a percentage of, when we look at G&A as a percentage to the revenue that's going to increase in the next two quarters significantly compared to this, the G&A percentage will decrease, right, because you don't have these additional costs that are related to the acquisition, but as a whole, the number will increase, because again, we're adding all these other businesses that have G&A expenses as well. But again over time, the G&A percentage will decrease. And again, keep in mind, that Q2 and then Q3 have much stronger revenue numbers for us. And I think that's when we're start seeing, again, the benefit of having all these businesses, as well as the increase in the tax rate. And so, Josh and I are very excited about how, by having all the companies that we always wanted to have as part of our family, how this is going to affect the bottom line of the business. And so I think that once we're done with Q2 and Q3, I think everyone will be very pleased about the results.

Okay. Thank you.

Thank you.

[Operator Instructions] Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Josh Harley for any closing remarks.

Thank you, Chad. I really appreciate it. And, of course, thanks to all of you for joining our call today and for your continued support. You know 2020 was a watershed year for us and Q1 proved that we're just getting started. You know we're extremely proud of what we've accomplished. And we look forward to taking additional actions that will add even more value to our company and to benefit all of our stakeholders. We're excited about the long-term prospects for our company and we anticipate even more growth ahead. Now with our culture of service and everything that we do at Fathom, we will also and always focus on enhancing value to our agents, and, of course, to our shareholders. So have a wonderful evening. And thank you again.

And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.