Fathom Holdings Inc. (FTHM) Earnings Call Transcript & Summary

Hello. This is Craig Brelsford with RedChip Companies. Thank you for joining today's event with Fathom Holdings, which trades on the NASDAQ under the ticker FTHM. With us today, we have Marco Fregenal, Chief Executive Officer of Fathom. We will begin with a brief presentation in a moment and then we will answer your questions. [Operator Instructions]. Before we begin, please allow me to read the safe harbor statement. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements pertaining to future financial and/or operating results, along with other statements about the future expectations, beliefs, goals, plans or prospects expressed by management constitute forward-looking statements. Any statements that are not historical facts should also be considered forward-looking statements. Of course, forward-looking statements involve risks and uncertainties. I now turn the webinar over to Marco. Please go ahead.

Thank you, and welcome, everyone. I hope everybody is having a great afternoon. I'll quickly take you through a set of slides that hopefully give you a feel for Fathom and the potential of our business. So Fathom, as always, a real estate technology company. It provides a complete solution for residential and commercial, including brokerage, mortgage, title and a SaaS offerings, for not only for our agents and brokerages as well. In Q1, we just had our Q1 earnings call about a week ago. We grew our revenue by 32%, transactions by 26% and agent growth was 22.8%. Lifetime, we've invested about $20 million in our software product, and we are currently in 43 states, with 5 new states coming in 2024. One of the most significant acquisitions we made to date was the My Home Group, which was acquired in November of last year for 2,200 agents, $100 million in revenue and roughly about 12,000 transactions per year. We'll touch more about that transaction in a few slides. What makes Fathom unique is several factors. First of all, we think about the brokerage business in a very different way. So the best way to think of it is we have sort of reinvented the real estate business. We believe we had a significant great deal of value for agents, and we'll go over those as well. One of the other things that makes us incredibly unique is that we own all our technology, and we'll talk about that as well. We do own a mortgage company and a title company. Therefore, we can benefit from additional revenue from each transaction. We believe we have a very effective growth strategy. Certainly, we have delivered over the last 13, 14 years, even through difficult years, the last 2 years in the real estate industry, we've done fairly well. And then, of course, we have an experienced management team that can continue to execute as we move forward in this industry. When we think about the real estate industry, what makes Fathom unique is that our model is somewhat different than the traditional brokerage model, where typically an agent pays a percentage of their commission and often get actually very little for that. And so our agent transactions and our agent commission is very different than most companies. We do have a concierge-level service, and we'll talk about that. We are a virtual company for the most part. We do have some small offices across the country in order to meet requirements from real estate commissions. We discussed a little earlier about our technology. We own all our technology. We've done that over many, many years. And then, of course, ancillary services, we actually can monetize the transaction through mortgage and title as well. And we certainly believe that we have an enormous growth potential ahead of us as we are now the tenth largest real estate company in the country in a market that is highly fragmented, and so we believe that there is a long runway for us. When we talk about unmatched value, we talk about the commission splits or how much we charge an agent. Our agents are able to keep a great deal more of their income. We do have revenue share, and we have our revenue share model, is a little different than most of our competitors. Our technology not only helps us be able to run their business in a much more efficient way, but also helps our agents run their business in a much more efficient way. We do provide leads and training and agent support. So we feel like we provide a comprehensive solution and value to our agents, and we continue to add more as we grow. So when we talk about the commissions, and we think we have one of the best commissions values in the country. As I mentioned earlier, most traditional brokers, they charge a percentage, 20%, 30%, sometimes even 40%. At Fathom, we charge an annual fee of $700, and then we charge a flat fee of $465 plus $35. We do have a 12% transaction fee program, our share plan, which is really more focused on agents that want to do revenue share. The majority of our agents are in the Fathom Max plan where they pay a fixed fee and have a $9,000 cap. So as you can see, it's incredibly competitive and a typical agent that comes from a legacy brokerage, when they come to Fathom, they're able to earn an extra $3,000 or keep an extra $3,000 per transaction on a typical transaction. We recently have launched Elevate. Elevate is an offering that is -- we often talk about Shopify. It is more like a Shopify kind of transaction, in a sense, is our Fathom Max program allows the agent to come in and play a flat fee, leverage our technology, but they do everything themselves in order to run their business. Elevate is the complete opposite, where an agent comes and joins Fathom and through a concierge desk, we actually help the agent run their business, from marketing to workflow, productivity, recruiting in a sense, we offer a complete solution where the agent can really just focus on taking care of their customers and their clients, and we do everything else. In this program, we do charge a 20% fee which, again, similar to our competitors, but the significant difference is that we provide a complete solution for an agent to run their business where our competitors do not provide that as part of the 20%. So as you can see, it provides a great deal in terms of value to our agents. Now the benefit to Fathom is that the Elevate program, our gross profit per transaction is more than 4x. So there is a significant impact, a positive impact to our -- not only our gross profit but our EBITDA per transaction as well. The program was launched about 30 days ago. Our goal by the end of the year is to have 500 agents in this program. And this program will have a significant effect going forward in our EBITDA and gross margin. We estimate given the early results from the program that for every 100 or 120 agents, we will generate approximately $1 million in EBITDA in the next 12 months. So as you can see, it is a significant value and we'll continue. We're going to start marketing the program this coming week. And then as we continue to roll out the program -- ramp up the program across the country, our goal is to have about 400 to 500 agents by the end of the year and then a significant more number of agents next year. We do provide revenue share as part of our program as well. There are several companies out there that have been providing revenue share for many years. Our revenue share program is somewhat similar to those companies. And it does have an increase in our gross profit margin to 9.3%. We have the complete technology solution that allows agents to keep track of all their revenue share and we feel this could be a positive value to our business. This was launched in Q4 of last year, and we're already seeing some agents already migrating to revenue share. Now we are unique in our revenue share program. We offer revenue share both on the 100% commission or the flat fee model as well as in our 12% commission model. So -- and that's a rather unique approach to revenue share. Most of the revenue share companies out there are in the traditional split, either 15% or 20% and do not have a flat commission program revenue share. And so this is a competitive advantage for us as well. We do provide, as I mentioned earlier, a complete platform for technology. The best way to think of our technology, think of it as an ERP system for the real estate industry. It manages every aspect of a transaction and of an agent, all the way from onboarding the agent, to agent websites, a CRM, transaction management. We do all kinds of marketing programs in the neighborhoods, probably one of the companies that can provide about 140,000 reports on every neighborhood in the country. We provide lead generation, marketing campaigns, and a full suite of marketing programs. So as you can see, it manages the entire life cycle of an agent and of a transaction. And then what makes our technology even more efficient is that we can run a transaction in such a way that our direct cost per transaction is less than $270. And most of our competitors have a much higher cost for -- direct cost per transaction. And so we are what we believe to be the low-cost provider and therefore, over time, provide a significant competitive advantage. We don't provide real state leads. We're asking about that question all the time. We have a variety of different programs. This is just an example of some of our programs that we create for agents, and these are customized for agents as well. And many of our agents take advantage of these programs and we help them grow their business. Certainly, training is important. And I think it's important that we show that we have a comprehensive training solution. One of the things that makes our training even more interesting is that is on demand and agents can participate in any of the training classes any time of the day, 24/7 and 7 days a week. And so we also provide a mentorship program that has been incredibly effective in the last 6, 7 years. And so we'll continue to provide training to our agents so they can grow their business. Proprietary technology, I mentioned earlier, we have invested over $20 million over the last 4 or 5 years to develop this technology called intelliAgent. And intelliAgent is the best-of-breed software product that really manages again, every aspect of a transaction. It allows us to run the business in a very cost-effective way. It allows us to bring in new brokers into the business very quickly, and it allows us to reduce the expense not only internally, but also reduce the amount of time on agent spends putting all their paperwork in our software. So an agent typically will spend a lot less hours in terms of dealing with paperwork and running their compliance using our technology than other products out there. We do offer our agents the ability to work with our mortgage company and our title company. We do not take paper risk. So we don't hold any mortgage or any paper. We sell all those mortgages before the transaction is closed. I want to highlight that. It's a question that we often get asked. But the margins on a mortgage and a title business is highly significant. And so we do take advantage of those as much as we can, and it will add to our business. Both our mortgage and title companies have grown significantly. In Q1, our mortgage company, Encompass grew by 15%, Q1 year-over-year. And our title company grew by 61% year-over-year. So even in a difficult quarter and Q1 is rather difficult for the market overall, even though we increased revenue by 32% and agent count in transactions. Most brokerages were challenged in terms of the market overall. And -- so 15% growth in our mortgage business is rather significant and certainly 61% in our title business proves that we're able to execute our strategy in terms of getting additional revenue to our ancillary businesses. We do believe have an effective growth strategy, one by life, by literally leveraging our technology. As I mentioned earlier, our direct cost to run a transaction to our entire platform, including the local managing brokers is less than $270, where most of our competitors are in the $1,200, $1,800. So you can see it is a significant competitive advantage, that as we continue to grow the business, we're going to be able to show a much higher percentage of the additional gross profit dollars that would flow to the bottom line through EBITDA. We do intend to increase our gross profit per transaction, not only through adding more agents, but certainly, the Elevate program, as I mentioned earlier, is going to add a 4x in terms of gross profit per transaction, and that will have a significant impact into that. And as well as the ancillary businesses as they have a much higher gross profit margin. So all 3 of these factors will contribute to not only an increase in gross profit, but also an increase to adjusted EBITDA as we move forward. Our goal is to get to roughly around 100,000 agents in the U.S. We currently have close to 15,000. And we think that we continue to grow not only organically, but we also have a significant growth through agent referrals. And then more importantly, through acquisitions. We have done several acquisitions in the last years. Certainly, the most important acquisition we've done in November of last year was My Home Group, which is -- was the 27th largest real estate company in the country and it is going to add a significant value to our business in 2025 and going forward. So let me touch upon My Home Group and show you how this could be incredibly beneficial to us going forward. So My Home Group, as I mentioned, we acquired in November of 2024. It is going to add roughly $100 million in revenue in 2025, and it's going to provide us with about $1.2 million in EBITDA. For 2026, we believe we'll do $130 million in revenue and $2 million EBITDA, and we think the breakeven in this acquisition is roughly 2 years. So roughly between '25 and '26, we got to breakeven point. The other point I'll highlight is this is a company that was basically running at breakeven in 2024. And because of our technology processes and the way we run the business, we're able to significantly increase the profitability of the business. And we think that we can do this as we continue to add more brokerages to our business either through walkover or acquisitions. As I mentioned in Q1, we have a track record of growth. Certainly, 2022 and 2023 were difficult year -- I'm sorry, '23 and '24 were difficult years for the industry as interest rates change rather drastically and that basically reduced the number of transactions by 40% or so. In Q4 of last year, we began growing again. And then in Q1 of this year, as we provided our earnings call about a week ago, we grew revenue by 32%. We grew gross profit by 34% if we exclude Dagley Insurance, which is a company that we divested in Q2 of last year. Agents grew by 22.8% and transactions by 22%. So as you can see, we are going back to becoming a growth company again after 2 difficult years. And we believe 2025 is going to be an inflection point for Fathom as we get back to significant growth and continue to deliver and reach EBITDA. So our goal is to reach adjusted EBITDA positive in Q2 of this year. And we feel this, again, is a transition year for us, an inflection year where the company begins to generate not only adjusted EBITDA but cash flow. One of the things that makes it unique as well is our low agent turnover. We have what we believe is one of the lowest, if not the lowest agent turnovers in the country of roughly 1.7%. Now what makes this even more interesting in terms of agent turnover is that 86% of the agents leaving closed less than 4 transactions and only 6% of the agents leaving sold more than 10 homes, right? And so when you look at 6% of the 1.7%, you can see that we're looking at basically 0.1% of agent turnover of any agent that has a significant business. So the majority of the agents who are leaving, they typically are now leaving to go to the competition. They typically are leaving the industry. And I think that is due to the quality and the value that agents received when joining Fathom. As a matter of fact, about 6 months ago, we were recognized as being the brokers with the highest level of customer satisfaction through agent surveys. And we feel very proud of that in terms of our ability to provide value to our agents. We are almost in every state in the country. We are in 43 states, and we continue to expand our footprint, not only in brokerage, but also mortgage as well and title. And we think that within the next year or so, we should be in all states for brokerage, certainly, almost all states for mortgage and almost all states for title as we continue to expand our footprint across the country. We have a great leadership team. Josh Harley was a founder, and he was the CEO up to about 1.5 years ago. I've been with the company since 2012 as President and CFO. I took the realm of CEO about 1.5 years ago; Samantha Giuggio, the Chief Operating Officer, who runs the brokerage business; and Jon Gwin, Chief Revenue Officer, runs mortgage and title. John has had a great career, ran a very large mortgage company, has a great deal of experience in mortgage and title as well as Samantha in the real estate industry as well. We have a great Board of Directors, who have a great deal of experience in running not only public companies, but fast-growth companies as well as SaaS companies, technology companies. So I am very blessed to have a board that not only is supportive of what we're trying to accomplish, but understand the industry as well. I'll highlight Steve Murray real quickly. Steve Murray has been in the real estate industry for over 40 years. He probably has done over 600, 700 M&A deals, roughly knows almost everyone in this industry. He had a choice to join any Board when he retired, and he decided to join our Board. So we certainly feel grateful there for that. Scott Flanders ran several public companies. Adam Rothstein has been investing in companies for a long time. And so again, we have a Board that not only understands growth companies but public companies and feel that they can continue to help us grow our business. With that, I will stop and take any questions anyone may have.

Thank you very much, Marco. [Operator Instructions] We have already have some questions here for you, Marco. How many transactions does your average agent do per year?

Yes. It varies. But a full -- an agent who's been at least for a year, a full-time agent will do 10 to 12 transactions. A part-time agent will do 2 to 4 transactions. And that's for an agent that's been with us for at least 12 months.

Thank you very much. What are you doing in the commercial real estate segment?

Yes, we have several agents. We primarily are a residential real estate company. I would say about 2% or 3% of our transactions are commercial. That number continues to grow. It will not surprise me 3, 4 years from now to have about 5% to 7% of our transactions on the commercial side. But primarily, we are a residential company. But again, we do have agents who are not only just focused on commercial, but do both. And like I said, we'll continue to see that percentage of commercial continue to increase over time.

What is the barrier to a competitor to replicate the Elevate platform? And is it something you can license to others?

Sure. So keep in mind, again, we're charging a 20% split and then providing the agent a significant value in terms of a concierge desk, marketing, lead generation an ISA team that qualifies the lead, transaction coordination, reviews, I mean, post card marketing. I mean we offer great deal. The Elevate platform is a combination of technology and services. And so our intelliAgent platform actually brings all this data together and is able to manage all aspects of these transactions and these services. So in order for somebody to replicate Elevate, they certainly will have to have some technology to do it to make the whole process efficient. That's number one. Second, if there's a company that's already charging 20% or 25% or 30%, and they're going to add the Elevate program, they're going to have to increase their fees from 20% to 30% to 50%. And so as you can see, that's going to become incredibly cost prohibitive for them to do that. And so I think what's going to happen and ever since we launched Elevate, we've been approached by a variety of brokerages who want to license the technology and license the service. I think what's going to happen over time as we continue to develop Elevate -- the Elevate program is that we're going to find technology. We're going to find company brokerage, specifically in small brokerages, midsized brokers who would like to license private label Elevate, and we are already in a variety of discussions with companies that want to do that. I think that's probably what's going to happen in the future. But certainly, other companies could create something like Elevate. But they will have to have to invest in some technology, a significant amount of money in technology and then, of course, make sure that they can charge for the program, which is going to have a significant effect on their transaction fees to their agents.

When do you expect to sign your first deal to license Elevate?

It's a little early to tell. It's early discussions, and we haven't given any guidance on when that's going to happen. But I think it could be rather soon. But we're taking our time to make sure that we're first launching Elevate within Fathom agents, then offering to non-Fathom agents and then the technology -- providing the technology platform to other brokerages. Like I said, there are a variety of companies have approached us. We want to make sure that the first few are the right ones as well. But we are going to take our time in order to make sure that we do this in the most effective and efficient way.

How many agents do you have that currently average 5 or more transactions per year? How many that do more than 10? And of those over the 10 level, how many have left in the past year?

So over 10 transactions, I don't have the number, how many left, but I know that the number is less than 0.1% a month in terms of turnover. So you're looking for -- I mean, typically -- we typically lose agents that close more than 10 transactions. We lose 2 or 3 a month. That's about it. And when we lose them, they typically are going to a small brokers, where they're going to get ownership or they're creating their own small brokerage. It's rare that they're going to a large competitor typically is to go to a small company where they're going to get equity in the business or it's a company -- or they're creating their own business, which is -- it happens not that often, but it does happen. Roughly 20% -- 25% of our agents close more than 5 transactions a year.

Are there any plans to expand into the appraisal market to complement the overall coverage of real estate?

Not at this time.

What percentage of growth in agent count do you account for M&A?

Our organic growth is in Q1, that was roughly 5% -- 5%, 6%. And then the rest of the growth was nonorganic or acquisitions. We think that, again, Q1 for most companies, was a difficult quarter. So Q1 is always a difficult quarter because agents will have paid fees to MLSs typically charge those fees. If there are annual fees they get charged in Q1. And so we typically -- the industry typically see a higher turnover in Q1. And so -- but our organic growth is around 5% or so. And then the balance is the nonorganic growth or acquisitions. We think that over time, organic growth is going to continue to get back to the 10%, 15%. And then through walkovers and acquisitions, we should double our growth to the -- close to 30%.

Are there any plans to incorporate new AI ideas into Fathom's technology?

We've been working on AI for many, many months. As some of you may know, if we've spoken before, I've been in the technology for many years, ran several software companies. So I'm a technologist at heart. So we've been working with a variety of different solutions with AI. We already have implemented AI in a variety of different ways in order to improve efficiencies, reduce expenses, marketing lead generation, our mortgage business. So yes, we -- and we're not the only ones. I mean, I think every large brokerage is implementing AI in some sort of shape or format. And I think this will benefit the industry. I think the key is how do you find the right combination between AI and still the human aspect of it. And I think that's going to be the challenge is, how do you put the 2 together in a way that you're providing value to your agents, to your customers. That's going to be the challenge going forward is how you do that.

How do you see Fathom competing with Rocket Mortgage long term?

Yes. We don't -- our mortgage business is never going to be that kind of business, right? We don't hold paper. By the time we close a mortgage, and we're very small compared to Rocket. We generate -- our ELG, Encompass Lending generates more than 50% of our business, maybe 60% because of Fathom agents are providing those transactions. We don't -- we don't spend money in marketing to market our mortgage company. If you think about Rocket, which is a great company, they spend a significant money in marketing, right, whether commercials or TV, and that's how they generate their leads and their business. That's not what Encompass Lending is. Encompass Lending is a mortgage company that's part of a real estate platform like ours. It's going to benefit from the Fathom agents. But we are around -- we're a very, very small company compared to Rocket. The way we operate is different. And that's why our mortgage company can be very profitable because we don't spend a lot of any money in marketing. We're getting the significant share of our business from Fathom agents. And so we don't have to spend a significant amount of money in marketing like a company like Rocket does.

It's good to see positive Q2 EBITDA guidance. Can you maintain it for the rest of the year?

Yes. Our goal is to continue to do that. Yes. We believe we'll be adjusted EBITDA positive in Q2. I think the combination of several factors are going to aid us in being adjusted EBITDA positive going forward, provide the market at least stay stable. Those factors are we implementing -- we implemented some cost reductions in Q1. That's going to have an effect in Q2 and more importantly in Q3. Second, our ancillary business continued to grow. And as I presented earlier, they have a much higher gross profit margin and EBITDA per transaction. Third, our Elevate program is going to continue to add from its early stages that we have done only 4 weeks ago, but it will continue to grow and add significant gross profit EBITDA going forward. And so all of those are going to contribute to us being able to not only stay positive EBITDA going forward, but continue to accelerate our EBITDA margin as we continue to grow the business.

How do you see agent growth organic versus M&A for the next few years?

Well, there's going to be -- look, the market, as I mentioned in several calls in the past, there's a great deal of consolidation that's going to happen in the real estate industry in the next 2, 3 years. And we already have seen this in the past year. with Rocket acquiring Redfin, Encompass acquired Properties. And there are a lot of small deals that don't get the attention that those 2 large deals have received, right? So there's going to be a great deal of consolidation in the market. This market is highly fragmented. There are roughly 80,000 brokerages. I mean if you think about Fathom, for example, we are roughly 15,000 agents, and we're #10 in the country. So it is a highly, highly fragmented market. A lot of midsized to smaller brokerages are facing significant challenges in terms of profitability. As you all know, the real estate market in terms of transactions has suffered a 40% to 50% decline in number of transactions, right, in '23 and '24. '25 looks like it will be more of a flat year, and then '26 hopefully get back to growth. And so there's going to be a great deal of consolidation. We certainly are going to partake in that. And we think that we'll bring on several smaller brokerages, certainly nothing as big as My Home Group, at least not at this time. But certainly, smaller ones that we can continue to add as we go forward. So yes, there's going to be a great deal of consolidation. How do I see the percentage of one versus the other is too early to tell. I think time will tell. But certainly, we're not going to be the only ones in terms of taking advantage of this market and the potential partnerships we can create with smaller companies.

What kind of profit multiples are small/private brokerage is expecting for takeouts?

Encompass in their last call, I believe, mentioned that they believe that the acquisition market for them is 4 to 6x EBITDA. That is certainly what they paid for some of their acquisitions, which then typically be larger companies. I think when you're looking at the smaller market, I mentioned earlier, for example, that when we bought My Home Group, we're going to be able to pay that back between 2 years, right? So 2x forward EBITDA. So I think that what we're seeing in the market is roughly 3x, 2.5x to 3.5x, something like that, depending on the efficiencies of the business depends on a variety of different factors in terms of who is the acquirer, who is the acquiree, do they bring presence in a market that we're not there? I mean there's a lot of fact, leadership. And so there's a lot of factors that contribute to the valuation of the business just past the EBITDA multiple. And so there are a lot of nonquantitative factors that are important in the kind of discussion. We are very excited for the acquisition of My Home Group because you gave us a footprint on the West Coast, and that was an acquisition that were -- not only we're very excited, but continue to be excited about. And -- but 2.5 to 3.5x typically seems to be the normal value as long as it's a company that's running efficiently. I've seen any -- some acquisitions in the 2x depending on the situation as well.

Generally, when you buy a small brokerage, what percentage of costs can you take out, i.e., real estate, IT costs, et cetera?

It depends on the company. It depends on what kind of technology they have. It depends on their manual processes. So not every company operates the same. But in -- we're able to reduce expenses by 20% to 30%, again, depending how manual they are depending on, in some cases, 40%. So it really varies because every small real estate company operates very differently. It depends how they sort of grew, right, and how they will create it. But roughly 20% to 40% seems to be a mark sort of a zone that we're able to sort of navigate between those 2 numbers.

I'm going to combine 2 questions having to do with dilution. First person asks, please explain how Fathom plans on expanding with M&A and how that would impact debt and how that would impact overall finances without diluting shareholders further? Please wait for the second question here. Marco, will there be any need to dilute based on current cash holdings and burn rate?

Yes, we don't anticipate -- we just raised capital a couple months ago, and we feel positive about our cash position at this point. So there are no plans for that. In terms of the acquisition, it depends on the acquisition, right, in terms of the value that they can bring. If we can acquire, I think we begin to see our stock begin to behave more appropriately in terms of the value of the company, and we hope to continue to see that in the future. Certainly, we feel that when we reach adjusted EBITDA positive, I would hope to be rewarded in terms of the valuation of the company. But again, we look at -- when you look at dilution, keep in mind that between Josh, myself and our board members and insiders within the company, we own a significant percentage of the company north of 60%. And so we take dilution very seriously because we're diluting ourselves as well. And so when we do that is always in a way to continue to increase the value of the business in relative terms to the dilution. We don't have any plans right now, but again, we look at everyone, every situation -- every situation in a selfish way as well because we are significant stockholders of the company.

How many of your agents do you expect to move to Elevate when it's fully done?

Again, Elevate is only for agents that close at least 4 transactions a year, right? And so not every agent within Fathom is going to move to Elevate. And it's too early to tell. Some agents already pay for some of these services already. So it's too early to tell. We certainly think that within the next 18 months, we'll see a significant number of agents migrate from our current plans to Elevate. But really, the future of Elevate is the growth outside of non-Fathom agents, right? And so we have a very modest goal of this year, roughly 400 agents or so in Elevate, 400 to 500. And then we'll continue to market the program and that will have significant effect. As I mentioned, we think that about 100 to 120 agents in Elevate, we generate about roughly $1 million in EBITDA. And so if we're able to reach 500 agents by the end of the year, you can do the math and see what the positive EBITDA will be next year just from those. And then, of course, we'll be adding more agents next year, right? But at this point, it's too early to tell. This program is roughly 4 weeks old.

Thank you, everyone, for your great many questions. We'll take a few more before we wrap up. Marco, what is the attach rate of your ancillary services? And how have they changed over time?

So they continue to increase over time. I mean part of that is, I think I showed earlier that our title business grew by 16% in Q1 year-over-year and mortgage grew by 15%. And it was a tough quarter for mortgage in Q1. I think in Q2, we see an increase in the growth rate as well. So our ancillary business continued to grow. Our goal is to have at least 50% of our business in ancillary companies, mortgage and title, about 50% coming to Fathom agents and 50% non-Fathom. I think we're probably north of 60% right now coming from Fathom. So we continue to increase that. We have a variety of programs that we've launched and continue to help our agents not only work with us but help their clients. And so over time, I think that our mortgage and title businesses are going to grow with a higher percentage of growth over our real estate business, which then hopefully dictates that we are getting a higher and higher attach rate from the business, right? So we believe that's going to continue to happen going forward. And we feel good about our business. But they're never going to be both mortgage and title are going to be meaningful, but not significant. And so at the end of the day, we are a real estate platform company, and the majority of our revenue come from real estate transactions and our SaaS product offerings. But certainly, mortgage and title will be meaningful to the bottom line.

And our final question for the day, Marco, can you comment on why Fathom divested from the insurance company last year?

Sure. Yes, we divested from the insurance company because we wanted to grow at a much higher rate. The insurance business, even though it's a great business, typically grows 6%, 7% a year. And as we demonstrated in Q1, we grew our company overall by 32%. And so we felt it was a better return to our stockholders in terms of capital to sell the business and then put that money to work in growing our businesses that provide a higher gross profit, higher growth rate, higher gross profit margin, higher EBITDA margin. I think it was just -- it was the best way to allocate our assets and our resources in a way they can -- in a way that it can deliver a higher return to our stockholders. And so that's why we did that. And given that we're now getting back to 30-plus percent growth rate in our business, we feel like we made the correct decision.

Thank you very much, Marco and to our many attendees today. For more information about Fathom Holdings reach us at 1-800-RedChip or e-mail us at [email protected]. Visit RedChip's Investor Information page for Fathom, fthminfo.com. There, you can view and download the investor presentation and fact sheet and sign up for news alerts on Fathom. RedChip is excited to announce the launch of Red Chat, our advanced AI assistant designed to empower investors with instant in-depth insights on thousands of small cap and micro-cap stocks. Try it now on fthminfo.com or go to red.chat. Watch Small Stocks Big Money, RedChip's program featuring exciting small cap companies every Saturday at 7:00 p.m. Eastern on Bloomberg USA. And finally, join RedChip's next webinar with Atossa Therapeutics on Thursday, May 22 at 4:15 p.m. U.S. Eastern. Register for all RedChip webinars at redchip.com/events. Thank you, again, participants. And thank you, Marco.

Thank you. My pleasure. I hope everybody has a great rest of the day.