Fathom Holdings Inc. (FTHM) Q1 2022 Earnings Report, Transcript and Summary

Good day, and welcome to the Fathom Holdings First Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Roger Pondel with PondelWilkinson. Please go ahead.

Thank you, Matt, and welcome everyone, to Fathom Holdings 2022 first quarter conference call. I am Roger Pondel with PondelWilkinson, Fathom's investor relations firm. And it is my pleasure today to introduce the company's Founder and Chief Executive Officer, Josh Harley; and Fathom's President and Chief Financial Officer, Marco Fregenal. Before I turn things over to Josh, I want to remind all listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous conditions, many of which are beyond the company's control, including those set forth in the Risk Factors section of the company's latest Form 10-K and subsequent Form 10-Qs other company filings made with the SEC, copies of which are available on the SEC's website at www.sec.gov. As a result of those forward-looking statements, actual results could differ materially and Fathom undertakes no obligation to update any forward-looking statements after today's call, except as required by law. Please also note that during this call, management will be discussing adjusted EBITDA, a non-GAAP financial measure as defined by SEC Regulation G. A reconciliation of this non-GAAP financial measure to the most recently comparable GAAP measure is included in today's press release, which is now posted on Fathom's website. And with that, I will turn things over to Josh Harley. Josh?

Thank you, Roger. And of course, thank you to everyone who's on today's call. Our entire team deeply appreciates your support and of course, your faith in us. Before we review the significant business and financial progress Fathom has made since our last call, I want to thank our agents and our employees for their unwavering hard work and success in moving us forwards toward our vision and of course in helping us grow with the company. Quarter-after-quarter, our results continue to demonstrate the power of our truly disruptive business model and I am proud to be here sharing the reasons why we have and believe we will continue to achieve significant growth. We are winning through innovation and by delivering real long-term value to our agents, our employees, our clients and our shareholders. Now the latest RealTrends brokerage rankers that came out reported that Fathom Realty is now the sixth largest independent real estate brokerage in America and the tenth largest brokerage overall, which includes franchise. Over the last four years, we’ve jumped from the 16th spots to the 11th, to the 9th and now the 6th largest and there is no – and that’s by the way, that’s a very good reason why we are skylocking up the charts mainly due to the fact that the value we provide agents who joined Fathom is unmatched by our peers. I once heard someone state that an agent’s commission split only matters in the absence of value. But what if all things were equal in regard to technology, resource, support, et cetera, [Indiscernible] matter a lot and that’s why I believe we are winning. There is really nothing outside of empty offices that our peers can give their agents that we cannot and yet we can offer everything to our agents for a fraction of the cost. In fact, the average agent who joins Fathom saves between $12,000 to $15,000 per year. Today, our industry is seeing a softening and while this soften may prove to be a headwind for our peers, we believe that we can turn it into a tailwind for us. Where else are agents going to recoup their lost income if they close fewer homes. If an agent is on a 70-30 split and closes 20% fewer homes, the simple act of moving over to Fathom will increase their take home income by around 9%. Now, nobody is suggesting the market will see a 20% dip and I was merely presenting a worst case scenario example, but you can see how our model can be even more disruptive to our peers in a down market. Now for the first quarter year-over-year, our revenue grew by 81.4%. Our agent count grew by more than 49% and our transactions grew by over 47%. Importantly, for the fourth quarter in a row our real estate business was adjusted EBITDA profitable. I don’t believe that any other public real estate brokerage can make that claim and with a long runway ahead of us, we feel very confident in our business even in today’s economic uncertainty. While we are continuing to invest capital to enhance our foundation for sustained long-term growth of our newer business lines, those investment dollars are quickly becoming a smaller percentage of our ongoing expenses. We believe that Fathom is on track to continue strong revenue, agent and transaction growth and with the strategic thoughtful investments we are making in each of our business lines, we look forward to also demonstrated profitability, which is a high priority for us. Now a lot of companies sacrifice profitability for growth, but I am proud to say that we do not have to operate that way. We believe that we can achieve strong profits over time, while continuing to grow our business at high rates. Our cash position is strong and we plan to continue to focus on achieving positive operational cash flow. Marco, our President and CFO does a great job in pressing the proverbial know button keeping our spending in check as we march toward profitability. So, our steadfast discipline allows us to be good stewards of the money with which you can trust of us. Despite the current state of the stock market and what some believe to be a headwind in the broad real estate sector, as I mentioned, we believe that Fathom is on track to continue an impressive growth rate, while also achieving profitability quickly. We look forward to proving it and I’d like to share with you how we’ll achieve those goals. Now since going public we have substantially increased revenue, continued the expansion of our agent network, maintained strong agent retention, which we believe is the best in the industry, entered new geographic markets and completed strategic acquisitions designed to further solidify our market position and accelerate our path to profitability. That’s a lot to accomplish in less than two years of being public, but it demonstrates our focus, our commitment and our ability to get things done. Now with the addition of our own in-house mortgage title and insurance companies along with additional SaaS product offerings, we have the potential to significantly increase our revenue and importantly, our profitability per transaction as we continue to integrate those operations into each of our markets. And as I mentioned earlier, we grew our agent count by more than 49% year-over-year. We believe a big part of that growth is because Fathom continues to have one of the most attractive agent commission plans and one of the most complete offerings in the industry. When it comes to providing the greatest value to agents, we believe Fathom wins hands down. One of the best parts of our extraordinary agent growth is that our cost to acquire one agent during Q1 remained at approximately $990 making our breakeven on each agent less to be $1,100 we earn on their very first sale. I also want to point out that the average lifetime value of an agent is currently over $21,000 on just the real estate side of the business. The ratio of that lifetime value to our cost of any acquisition is more than 21x and that does not take into account the revenue we are generating from our mortgage, title and insurance companies or potential revenue from the leads that we can generate for our agents. We believe that Fathom is in a unique position to maintain our solid growth rate through 2022 even at a time when the broad real estate market is turbulent. Fathom can prove to be a hedge with other real estate brokerages whose revenue transactions, agent count could suffer from industry headwinds. I want to spend just a minute on this point because I think it’s clear who will better understand us. While the overall real estate industry outlook is not exactly ideal, there are a few important things to remember. First, homes are still selling faster than what is typical in a normal market. In April, around 57% of homes were under contract within two weeks and around 43% of homes were under contract within one week. Additionally around 55% of homes were sold for above listing price. One more stat that I believe adds an additional level of confidence is the fact that rents are also rising at a high rate, which keeps home ownership attractive relative to renting. I am not suggesting that these metrics are not off their tops, but these tops are pretty high to begin with. The biggest concern moving forward is really housing affordability. Like for April, home prices were up 15% year-over-year, the 30 year fixed mortgage rate was up 67% of course, inflation has not been kind to households across the country. With all that said, there is still far more demand than inventory. Inventory is still near or historic lows and while some are beginning to be priced out of the market, there is still more demand than the market can satisfy. On top of that, interest rates are not that far off normal. Prior to 2010, seeing interest rates in the 5% to 7% range was the norm. And another point I want to make here is that, even if we, as an industry, see fewer homes sold throughout 2022 as compared to 2021, we Fathom feel confident that our agent and transaction growth will outperform any decrease in the number of transactions for the industry as a whole. While these market conditions are not good for the majority of real estate companies, and as I mentioned earlier, Fathom offers real estate agents who join as some other brokerages the ability to net more income than they did even in 2021 even if they sell fewer homes. That can result in more agents joining Fathom if or perhaps when they begin to feel the squeeze. There are only two ways for a real estate agent to net more income, increase the revenue by closing more sales, which is hard to do in a down market or decrease their expenses, we believe we can help agents do both and that truly distinguishing characteristic about Fathom. For the vast majority of real estate agents, their largest expense is not their marketing, their largest expense is the splits they pay their brokerage with many paying more than $30,000 per year. In the real estate there is an adage that suggests splits only matter in the absent of value, I said that earlier. However, again, what if all things are equal? With Fathom an agent can get all the technology, training, resource, support they are used to getting at one of the legacy brands and yet save an average of $12,000 or more per year in commissions what’s paid to the brokerage. In essence, an agent could potentially close 20% fewer homes and get more – earn more income than they did the year before. With the potential market shift looming, Fathom is highly attractive to increasing number of agents. Fathom could also see greater market share per agent over time as our agents increase their total income on each sale. With more income per sale, Fathom agents have more money available to invest in marketing during their businesses. When agents with legacy brands are struggling to earn a real living due to the fewer sales and lower income, that may create a need to pullback on their marketing spend in order to pay the bills. Fathom agents could potentially invest more in marketing than their peers helping increase their market share and ultimately our market share as they sell more houses. In fact, we are already seeing some of that interest show through our career site, we actively track our unique visitors and it showed that our career site experienced 85% increase in visitors in Q1 as compared to the same quarter in 2021. We believe that is a strong indicator of future growth. We believe that Fathom’s ability to track an ever increasing number of real estate agents by providing them with greater income potential along with the technology, training and support they need to grow their businesses is even more evident today, especially during these changing times. Fathom Realty recently grew its geographic reach with the addition of Montana and New Hampshire in Q1. We also expanded our Utah presence through the acquisition of iPro Realty’s 400 plus agents. Now we plan to open several more markets throughout 2022. One more thing I should point out is the announcement we made in December about raising our fees for Fathom agents, which took effect in Q1 starting in January. The annual fee for agents was raised 20% from $500 to $600 per year and the transaction fees were raised 11% from $450 to $500 for the first 12 completed transactions. We are happy to report that these increases continue to have no impact on our agent retention or growth rate, most likely because our agents are still saving an average of around $12,000 or more as compared with traditional split brands. I’d like to talk on intelliAgent next and the advantage that our platform creates. The obvious advantage being that it allows Fathom to reduce cost per agent over time while measurably improving operational efficiencies. Our proprietary technology platform allows us to significantly reduce our reliance on third-party tech providers. In fact, as of March, we're officially using all Fathom built technology for our realty operation, which includes agent and brokerage websites, CRM, transaction management, personal management, and more. Outside of financial reporting systems and social media products, there really isn't anything else that we're using outside of intelliAgent for our realty business. IntelliAgent gives us the power to control the full lifecycle of the home buyer and home seller gaining a greater understanding of our data and how to use it to further improve our offerings while ultimately generating leads for our agents, plus we can now identify potential clients for our mortgage, insurance, and title companies long before they're under contract as they raise their hands requesting more information. Now, throughout 2021 we made significant investments in our mortgage, title, insurance operations and we continue to see very positive return on that investment in the form of improved attach rate and market share. In Q1, we acquired Cornerstone First Financial in Washington D.C. Cornerstone brought a very unique marketing approach to Encompass Lending, which we plan to roll out across the country in each of our markets where Encompass has a foothold. As our SaaS company LiveBy is also making some incredible headway, with the recent launch of LiveBy Local, we now provide tech and/or data to more than 750 companies across the country with over 100,000 agents touching our product. Our mortgage operation in Encompass Lending is currently licensed in across 41 states in DC. We've made significant investments in our mortgage operation and are already seeing a very positive return on that investment in the form of improved attach rate and market share. As you know, our mortgage, title and insurance operations are all added through strategic acquisitions and we are working diligently to integrate each business fully to ensure stronger attach rates. We also made several strategic real estate brokerage acquisitions in a very short period of time. We expect that any future acquisitions we continue – we consider will primarily be focused around opening new real estate markets or expanding our footprint in smaller current markets to hit critical mass faster. Each acquisition we pursue is expected to be immediately accretive to our business as we continue on our path to profitability. We intend to continue growing quickly. While acquisitions are not our primary growth strategy, we will use acquisitions strategically as opportunities arise. We’ve been actively looking to brokerages across the country and we’ll share more as more of these opportunities turn into acquisitions and walkovers. Down in March, we initiated a $10 million share repurchase plan. The plan was designed to qualify for the Safe Harbor under SEC rule 10B-18. So certain purchases under the plan were also designed to be to allow us to make repurchases or otherwise closed trading windows under our insider trading policy in compliance with the SEC rule 10B5-1. So as many of you know, Rule 10B-18 limits our purchases to a percentage of average daily trading volume. So, as of the end of April, 310,00 shares in the amount to $2.9 million were repurchased through the plan. Right now, it’s hard to think that there is any asset available for us to buy that is greater value to Fathom and our shareholders than our own stock. So we remain committed to our buyback and we’ll thoughtful in how we move forward. Final points and I'll turn it over to Marco. Over the last four quarters, our real estate business, Fathom Realty generated adjusted EBITDA positive results, I mentioned that earlier, which we believe demonstrates that we're on the right path. We have strategically built an end-to-end integrated real estate brokerage service company offering real estate brokerage, mortgage, title insurance, and SaaS services. We continue to enhance our underlying proprietary technology in addition to expanding our SaaS offerings. And throughout the rest of 2022, we will continue to focus on strengthening our infrastructure and business integration as we seek to expand our footprint and our family of brands, both organically and via acquisitions. Our focus has been and will continue to be to execute on our long-term vision of being among the top real estate brands in the country. On our last call, we shared that assuming we reach between 100,000 to 110,000 transactions per year, we believe that we can generate adjusted EBITDA exceeding $40 million. While we're not prepared to provide a timeline yet for that transaction milestone, we are confident we can maintain the strong agent and transaction growth that we've achieved consistently for more than a decade. Now as I hope you can tell, we believe Fathom has a great future. We are proud of what we’ve been able to achieve and remain incredibly excited about the years ahead. With that, I will turn the call over to Marco. So, Marco, it's all yours.

Thank you, Josh. Good afternoon, everyone. I'll start with a detailed review of our first quarter results, and we'll finish with our updated guidance for this year. First quarter revenues grew 81.4% year-over-year to $90.1 million, compared with $49.6 million for last year's first quarter. The increase resulted from growth in real estate transactions, increase average revenue per real estate transaction and revenue contributions from our newly acquired businesses. GAAP net loss for the quarter was $6 million or a loss of $0.37 per share, compared with a loss of $3.4 million or $0.25 per share for the 2021 first quarter. The year-over-year change in GAAP net loss resulted principally from investments in future growth, operational and overhead costs related to acquired companies, incremental costs due to transition to a public company, and increases in noncash stock compensation and noncash amortization of acquired intangible assets. Adjusted EBITDA loss, a non-GAAP measure was $2.1 million versus adjusted EBITDA loss of $2 million for the first quarter of 2021. In the 2022 first quarter, G&A was $10.8 million or about 12% of revenue, compared with $6.1 million or 12.3% of revenue for the same period a year ago. The increase in G&A in absolute terms was primarily attributed to recently completed acquisitions and increases in noncash stock compensation expense. The anticipated that G&A expense will continue to increase on an absolute dollar basis going forward, driven by acquisitions and costs related to scaling integrating our business lines. However, as we did this quarter compared to last year, G&A as a percentage of revenue is expected to decline over the long-term as revenue increases. Expenses related to marketing activities were $1.1 million versus $402,000 for the last year's first quarter, mostly driven by an increase in marketing activities related to new market openings and newly acquired companies. Next, I'll spend some time reviewing our business unit results. Our real estate division continues to perform very well. We finished the quarter with just over 9,000 agents, a 49% increase from the same period last year. We closed just over 10,000 real estate transactions for the quarter, a 47% increase from last year's first quarter. Adjusted EBITDA in our real estate division was about $944,000, building on the adjusted EBITDA profit that we have generated since Q2 of 2021. Gross profit per transaction was over $535 for the period. Our mortgage business generated revenues of $2.9 million in the 2023 first quarter, slightly higher than what we generated in Q4 of 2021. The adjusted EBITDA loss in the business of approximately $490,000 likewise slightly higher than Q4 of 2021. Moving to our technology segment, revenues in the 2022 first quarter totaled $644,000, adjusted EBITDA for the quarter was a loss of $400,000. Our insurance and title businesses have combined revenues of just over of $2.5 million for the quarter, slightly higher than Q4 of 2021. Adjusted EBITDA for Verus our title business was $54,000 and adjusted EBITDA for title insurance was just over $100,000 for the quarter. Given that Q1 is generally the lowest revenue quarter for the year due to industry seasonality, our first quarter results were excellent and we remain very excited for the future. We ended the quarter with a strong cash position of $30.5 million, which gives us plenty of runway to execute our strategy. Now let's discuss the attach rates. For both Encompass Lending and Verus Title, we rolled out several markets in the late December of 2021. After nine short months, we continue to see attach rate that range from 5% to 6%. As we look at the continued increase in file starts from Fathom agents for both Verus and Encompass for Q1 of 2022, we believe that we will exceed the 10% attach rate within 18 months of Verus and Encompass opening any individual new market. As Josh indicated earlier, we implemented a share repurchase plan and at the end of Q1 this year. As of the end of April, we repurchased 310,140 shares for a total amount of $2.9 million. Now, I'll finish with our guidance for the second quarter of 2022, as well as our updated guidance for the full year. We are updating this guidance based on the positive trends we continue to see in Fathom's business. For the second quarter of 2022, Fathom expects total revenue to range between $110 million and $15 million with adjusted EBITDA in the range of a loss of $200,000 to a positive adjusted EBITDA of $200,000. For the full year, , we are increasing our revenue guidance to a range of $445 million to $455 million. Our adjusted EBITDA guidance range remains at a loss of $500,000 to a positive adjusted EBITDA of $500,000. Now, as a reminder, guidance is forward-looking, which, as Roger noted in the beginning of the call, is subject to certain risks and uncertainties. Before I turn the call back to Josh, I would like to say how proud I am of our team and why we have accomplished this best quarter. Due to seasonality of this industry, the first quarter can be the most challenging quarter financially due to a usually lower number of transactions. However, we have outperforming every metric including agent growth, transaction growth, and more importantly, we reduced our EBITDA loss significantly which sets the foundation for reaching profitable adjusted EBITDA this year. I believe that team’s vision and passion will allow us to continue revolutionizing the residential real estate industry. Now with that, I'll give the mic back to Josh so we can take your questions.

Thank you, Marco. We believe that Fathom has a clear visible and long runway with tremendous growth prospects, no matter what the market holds, we believe that our model is positioned to win. We've been working hard to deliver on our promise to grow Fathom in an accelerated yet sustainable fashion for the long-term. So thank you again for your trust and a part of our Fathom family. So, with that, operator, we're now ready to open the call to questions.

[Operator Instructions] Our first question will come from Darren Aftahi with ROTH Capital Partners. Please go ahead.

Hey guys. Thanks for taking my questions and a nice quarter. So, a couple if I may. First, I am just kind of curious, I know interest rates have been creeping up throughout the year. I am just kind of curious what your general thoughts? Or if you have seen any changes in your business in the second quarter to-date? And then, I’ve got two more follow-ups.

Yeah, let me address the first part of that and have Marco address the second part. Our friends today sent me a chart showing that buyer sentiment is down, how they feel about the market, is today the right time to buy and it’s pretty low right now. However, what’s interesting is that, buyer sentiment does not actually connect with what we are actually seeing in the street. So, as we talk to buyers in the street, as our agents are talking to buyers, we are not really seeing a reduction in people raise their hands saying I want to look for homes. And I think when we ask them it will feel that great about the market, why you are still looking to buy a home and the reason is because, that whole fear of loss, because I think it’s going to – prices keep going up and if I wait then the $400,000 home I am looking for is not going to be $420,000 or $430,000. So, yes, I don’t love these illustrates but I also don’t love the idea of buying the same home for $430,000 now. So, it’s interesting to see how the sentiment can be disconnected from what’s actually happened in real life. But Marco, do you want to address the second part of that how we are actually seeing an effect of Q2?

Yeah. Thank you, Darren. Thank you for your question. We track file starts almost on a daily basis and up to April of this year we have not seen a reduction in file starts. Now, that does not mean that in May that would change. But from January, all the way to end of April, we have not seen – we are still consistently had the same increase in file starts that we actually had last year – in Q1 of last year, as well. So, that doesn’t mean that it may change by the end of May, but thus far, we have not seen a decrease in that.

That’s helpful. Thanks. Two more so - on, you raised revenue for the full year by, I think $20 million if my math is right. But you kept the adjusted EBITDA range with the same – maybe just the commentary around that contracts, maybe any kind of puts and takes on cost?

Yeah. So, the reason for that is that we are seeing some compressions in margins in the mortgage business and we don’t know if those are going to continue to accelerate or are they going to stay consistent. So, we did increase our revenue guidance for the year. But we want to be cautious given that we are beginning to see some compression in the mortgage business. The mortgage business is still very small part of our business, right. And so, but we want to kind of hedge that and make sure that we are conservative in our adjusted EBITDA guidance. We are very keen in making sure we make our numbers when we say we are going to make them that. So that’s the reason for that.

Great. And then just last one from me. Can you just talk about where you guys stand on lead generation and kind of how you decide which markets to roll that out to and how fast you are taking kind of greater scales in the markets and kind of what impact that’s having on other areas of the business with the attach rates? Thanks.

Marco, let me just kind of part of it – I want you address how we look at markets and how fast we are rolling out markets. One of the things that we are being very careful about is that while lead generation has a great return on investment long-term, the initial upfront cost can be great. And so, we want to always be good stewards right now. We are pushing for profitability. And so, we are trying to balance the two. How fast we spend the dollars to generate the leads, but knowing that the dollar I spend today may convert – that lead may convert nine months from now or 12 months from now. And so we want to be very careful about how we do that. So, we are trying to be very thoughtful about how quickly rolled out if this was a different era, we’d probably rolling it out much, much faster. Right now we are taking the time to really prove it out and we got a great team that works with the leads that come in. They nurture those leads then they assign those leads to agents. We are spending a lot more time training the agents, working through scripts and what works the best to get the highest conversion ratio. So in other words, for every dollar we do spend, even though it may take nine months or more to actually convert into a closing, we want to make sure we convert higher percentage of those leads into closings. So we are very thoughtful about how we do that to source markets. Why don’t you address that Marco?

Sure. So we generally, our leads program is comprised of three different, with general leads some more and through just regular pay-per-click and ads. Second is use our live by data and third is our Hispanic division. So, again we generate leads in three different ways. We are currently are in five to six markets across the country, markets like Las Vegas, Southern California, Houston, Atlanta, Charlotte and I believe Chicago now. And so, those are the markets that we are in. As we continue to prove the financial results of the pilot, they will go ahead and look into other markets. So we did increased from three to six and thus far continues to go out, but discussion indicated there is a significant investment into lead generation that typically takes six to nine months to prove itself. And so, right now we are currently with six markets. We think we’ll probably continue into six markets for the rest of the year, prove our model and then probably increase that either later in the year or early next year.

Thank you.

[Operator Instructions] Our next question will come from Tom White with D.A. Davidson. Please go ahead.

Good evening guys. Thanks for taking my questions. And maybe just a follow-up on the topic of rising rates and sentiment and it sounds like the transaction pipeline looks fine. I was curious whether you are seeing or whether you anticipate sort of any change in kind of the M&A pipeline and how you are thinking about that over the next few quarters? And then, I had a follow-up or two.

Sure. No, thanks asking the question. So, from an M&A standpoint, we are thinking about brokerages is really a focus of our M&A is on real estate brokerages. There is two ways of doing it, one is through acquisition and the other is through a walkover. So those if you don’t know a walkover is, a walkover be a group of let’s say 50 agents or 90 agents that instead of acquiring their company and going through all of the auditing of their books and make show that, we basically acquire the company or acquire the group by moving them over – moving all the licensing over to Fathom makes it easier. It’s faster instead of taking 4, 5, 6 months to go through the whole process of the acquisition. Sometimes we get that done in 60 days or 90 days. So it cuts the time in-house. It’s faster and it obviously costs less because we don’t have as many legal fees and part of increase all the other funds that they go into it. So, those are nice – we like to focus more on the walkovers. And so, I think over time you will still see acquisitions that we make, we are actively pursuing acquisitions. What’s interesting to know is usually acquisitions pursue us as the walkovers. It’s not as often that we are reaching out the people saying hey, that you are thought about selling, we’d love to have you join our Fathom family? Excuse me. The other way around it. Hey, I see guys in the market. I love what you are doing. We are struggling over here. I’d love to be - actually don’t, they never say that they are struggling, but we can see they are struggling if we look at their numbers. But, yeah, we love the part of the Fathom family. We love to help you grow in this market. What could this look like? And so we tend to be approached and so, we are actually – when we went publicly start seeing a much higher percentage of people approaching us, and as the market starts softening, we saw even more. I think more and more companies, especially small companies who are barely surviving are going to potentially die in a down market like those 86,000 brokers and I think the number is actually higher now. And so a lot of these brokerages, these are mom and pops with 30, 40, 50 agents and so. And so they are struggling to pay the bills if there is a market downshift, then there is no way to pay the bills, right. They are dipping in a fading to survive. So lot of them would come to us as a potential walkover and now, we need more leadership anyways, that person come in and help maybe be a manager in a company, managing agents, we bring the agents over. So, it’s a very attractive way to grow. So we look at lot of that. We are still pursuing, as I said acquisitions and I think that over time you will continue to see more and more of these walkovers and acquisitions.

Great. Thanks. Thanks for that. Maybe just one follow-up on the buyback. I realize you guys announced the program I think in mid March. But the balance sheet is healthy and I realize you’ve got a bunch of different kind of growth investment opportunities in parts of the business. But just curious if what are your thoughts on maybe getting more aggressive on buying back stock or given kind of what’s happening with it?

Sure. As far as the aggressive and we are kind of – our hands are tied a little bit because of the qualified plan that we had under that SEC rule, we can only sell so much per day, like we had no control over what was sold – what was bought per day. So we had no control over it. It just happened the way it happened. Can we get more aggressive? I don’t - honestly I don’t have the answer to that. I think Marco might be able to speak to that a little better than I do. I know that we created a plan, we said we want to be aggressive and honestly, I think we are – if we look at what we are buying per day, we were doing just that as far as what we are allowed to do. The problem is we don’t have as much activity in our stock. So we are not selling, I think our average is about 70,000 to 80,000 shares per day and so, we are kind of limited there. But yes, if we have the ability, we’d love to be a bit more aggressive on it, especially right now where the stock is still incredibly desirable where it is right now. We think it’s incredible opportunity. So, one of the things, kind of go back to your first question is, we’ve got a pretty healthy balance sheet and where do we best spend that dollar, right. Is it better to buy back a share? Or is it better to buy another agent? Like how do we grow and I think we can – as my saying goes chew gum and walk at the same time, I think we continue to be aggressive and buy back more stock as well as making acquisitions or walkovers. And so that’s kind of what we are pursuing. But there is probably lot of data goes by that Marco and I don’t have a conversation with sometimes with some of our Board members as well about how we best move forward in this avenue or that avenue or this lane or that lane. And so we are trying to be very thoughtful and making sure we are always doing the best for our shareholders.

Tom, I think one of the things that makes our position interesting is that, given our guidance for Q2 to be adjusted EBITDA positive, and then if we reach our adjusted EBITDA positive for the year it means that, for Q2, 3 and 4 are all going to be adjusted EBITDA positive, right. And so, it puts us in a very strong position then we are not going to burn cash anymore and give our strong balance sheet. So we have a variety of the opportunities here to look at not only a cash buyback, continuing to do that, but also if you look at all the interesting opportunities in the market as Josh mentioned earlier, we are beginning to see more and more companies between 25 and 100 agents, right. And I think that’s going to be – one of the things that are going to sort of change the slope of the curve for our growth curve going forward, is the number of these walkovers that we are going to see in the second half of this year and first half of next year. I think that’s one of the things that – the reason we raised capital at the end of last year is because to a certain extent we anticipated somewhat that will be more company that will be interested in doing this. So, I think when you put all together, I think it puts us in a very strong position. We are estimating reaching adjusted EBITDA in Q2. We have a strong balance sheet. You put those things together, it gives us the ability to go execute, continue to grow at a significant pace and still look at continue to buy stock. So, we feel very good about our position right now.

Great. Thank you guys.

Thank you.

[Operator Instructions] As there are no more questions, 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 so much operator, appreciated. Thank you again for everyone that’s been on the call today and of course for your continued support. We are extremely proud of all that we've accomplished, and we'll continue to work diligently toward achieving our objective of adding greater value to our company for the benefit of all of our stakeholders. And so with that, have a wonderful week, and May the 4th be with you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.