FTHM: NASDAQ

The views expressed below are those of Anchor Capital Advisors, LLC (‘‘Anchor’’) as of the date written and are subject to change at any time. They are based on our proprietary research of the stated company and the following is a summary of the primary factors that support our beliefs and rationale for investing in the company. Please see additional disclosures at the end of this publication.

FTHM: NASDAQ

Fathom Holdings is a cloud based real estate brokerage in Cary, North Carolina.[1] The company was founded by Joshua Harley in 2010.[2]

Investment Thesis

Fathom Holdings follows a disruptive model for real estate agents charging a commission of $450 per transaction, instead of 80/20 or 70/30 splits.[3] For a $300,000 home, this saves agents thousands per transaction.[4] In our opinion, there is a large market of agents that could be penetrated over time. Based on our research, the company has a low agent acquisition cost, which leads us to believe this is the early innings of a growth story.

Confirmation through Research

The company’s commission structure at $450 per transactions is far lower than the traditional charge of players such as RE/Max or Keller Williams, which charge 30% of the commission.[5] On a $300,000 transaction, in a traditional model agents take home pay of $7,350 versus Fathom at $10,050. Thus, they make quite a bit more with Fathom.[6] The CEO and COO own over 50% of the company.[7] They follow servant leadership, with the CEO receiving a 98% on Glassdoor. [8] As of the second quarter, the FTHM had 4,500 agents. We believe there is a long runway for growth when comparing 4,500 agents to the nearly 2 million total agents in the U.S. [9] Further, they have an opportunity to expand into title and mortgage white label services through their agent base. Finally, there is a path toward offering their technology as Software as a Service, (Saas).[10] The company sells at a discount on an EV/S metric to peers such as EXPI and RDFN.[11] In our opinion, it should grow 50%+ for the next 3 to 5 years.

Variant Perception

We do not believe the market is assigning fair value to the business considering the disruptive business model, growth rates, and differentiation to peers. We believe that if the management can execute at the growth rate mentioned previously, it could be worth a multiple of what this business sells for today.