Good day, and welcome to the Fathom Holdings second quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, then 0 on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touchtone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Alex Kovtun from Gateway Group. Please go ahead. Thank you, operator. Welcome everyone to the Fathom Holdings 2023 second quarter conference call. I'm Alex Kovtun with Gateway Group, Fathom's investor relations firm. Before I turn things over to the Fathom management team, I want to remind 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 Form 10-K for the year ended December 31st, 2022, as well as our latest Form 10-Q and 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. 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, we'll 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. With that, I'll turn the call over to Fathom's Founder, Chairman, and CEO, Josh Harley. Josh? Thanks, Alex. Good afternoon, and welcome everyone to our 2nd quarter 2023 earnings call. Our entire team really appreciates your support and encouragement throughout the quarter. We're pleased to report another strong quarter as compared to the overall market, and share the recent progress we've made in advancing our growth strategy. I want to start by thanking our Fathom family across each of our businesses for their hard work and their dedication as we continue to navigate the real estate market. Their commitment to supporting our growth, our vision, and serving others in the communities we operate in, is a testament to the Fathom culture. We recently had the honor of ringing the Nasdaq opening bell to celebrate our 3rd anniversary of our public listing and our significant achievements to date. This milestone is a tribute to the collective effort and unwavering commitment that drives us forward and allows Fathom to adapt and thrive in a rapidly evolving residential real estate industry. We extend our heartfelt gratitude to every Fathom employee and agent who have poured their dedication, passion, and hard work into the journey and in shaping Fathom's success. I'd also like to briefly mention the addition of Steve O to our board of directors, which we announced a few weeks ago. Steve has become a great friend and brings invaluable experience in the residential brokerage industry to Fathom, and should be a tremendous asset as we continue to disrupt the real estate market and execute our growth strategy. Before turning the call over to our President and CFO, Marco Fregenal, for a detailed review of our financial results, I'd like to touch on a few key highlights during the quarter and what gives us confidence in our business going forward. While the second quarter remains challenging for residential real estate overall, we're encouraged by some recent signs of stabilization across our markets, along with the moderation in interest rates during the quarter. Consumers continue to adjust to higher mortgage rates, and while transactions across the industry were down, we remain encouraged by the trends we're seeing across our markets, and we believe we're well positioned to continue growing market share regardless of what happens to interest rates. I'm sure you've all seen the talking heads state that with so many homeowners currently enjoying historically low interest rates, they have no plans to move anytime soon. However, what people plan to do under ideal personal circumstances and what they actually do in the real world are rarely the same thing. The fact is, not everyone has the luxury of being rate sensitive. Life happens. People get married, or they have a growing family and need more space, and God forbid, sometimes they get divorced. People relocate for work or for family. There's always a need, and when that need arises, we'll be there. Our result this quarter continues to demonstrate the power of our truly disruptive business model and how we're able to succeed in a difficult market environment. During the second quarter, Fathom completed approximately 11,000 real estate transactions, and while down 16.7% from the prior year's second quarter, approximately 13,200, we feel good about this number when comparing it to the overall market declines. Even then, as I mentioned, our decrease compares favorably to most of our peers and the entire U.S. residential real estate market. According to the National Association of Realtors, the U.S. residential real estate market saw overall transactions the quarter decline 18.6% compared to 2Q of last year. As our transaction volume reflects, we continue to take market share from legacy brokerages firms despite the volatile environment, and actually saw year-over-year transaction growth in several of our markets. We also increased our agent network 14% to approximately 10,930 agents at the end of the quarter, which compares very favorably to all but one of our public peers especially when many of our peers saw a decline in agent count domestically. We feel optimistic as we continue to provide a compelling value proposition through innovation and an industry-leading commission model that continues to resonate well in this environment. We believe that we'll continue to do so going forward. We are excited to achieve our goal of Adjusted EBITDA breakeven in Q2. During the second quarter, we continued to see the benefits from the cost reduction measures we implemented, along with the improved performance across all of our divisions. In fact, we made tremendous progress in reducing our cash burn from over $5 million in Q4 of 2022 to less than $1 million this quarter. Importantly, we believe that these cost reductions were made without sacrificing our ability to grow. In fact, we have allocated some of these savings to further strengthen our recruitment efforts and our technology platform. We're continuing to optimize our cost structure for current environment and better position Fathom for improved operating leverage as the residential real estate market returns. We continue to be committed to maintaining Adjusted EBITDA profitability going forward and ultimately achieving cash flow positive as well, although the latter may not be reached until Q3. We anticipate continued cash investments to fuel the growth of our mortgage division, our agent recruiting, and potential acquisitions. Let me now spend some time discussing our progress across the businesses. Fathom Realty has been one of the fastest growing residential real estate brokerages in the U.S. for over a decade. That growth does not happen by accident. We have an incredibly talented, dedicated team who truly live our guiding principles and support our unique culture every day. At Fathom, we'll continue to innovate and disrupt the residential real estate industry and believe that our best years are still ahead of us as we continue to grow our agent network and capture market share from legacy firms. Today, Fathom Realty operates in 37 states and the District of Columbia. We continue to expand our reach with a unique business model to the residential real estate market as we offer agents all the tools, the technology, training, and resources, and support our larger traditional peers do, but at, at an industry-leading flat fee commission split to agents. Our business model allows us to succeed irrespective, irrespective of the market environment, and we believe we're well positioned to attract an ever-increasing number of real estate agents during these unprecedented times when agents struggle to generate leads and close sales. We often hear agents say that they join to earn more commission, but they stay for the culture. Our unique, low-cost and disruptive business model has allowed Fathom to attract high quality agents and enjoy agent retention rates approximately twice the national average. Even though we charge a small fraction of what other brokerages charge their agents, we believe that our realty business can be profitable with smaller number of transactions than our peers. Our technology also remains a key point of differentiation, and we can generate long-term savings and ultimately charge our agents far less than others by owning it outright. We also license our proprietary technology to over 750 brokerages through a recurring revenue subscription model that drives incremental high margin revenue while enhancing awareness of and differentiation of our brand within the industry. Let me now provide an update on our agent trends and steps we're taking to grow Fathom network. Our cost to acquire one agent during Q2 remained low at approximately $980, making our breakeven on each agent still less than the $1,150 that we'll earn on their first sale. We also maintain strong retention rates, which are approximately twice the national average and remain exceptionally strong given the backdrop of agents leaving the industry. During the second quarter of 2023, our attrition rate averaged approximately 1.85% per month, which again, compares favorably to the industry average of over 3%. More importantly, 80% of the agents who left Fathom sold zero or one sale per year. Based on historic trends, we anticipate an additional attrition coming year will continue to be primarily from low-producing agents. Our enhanced agent referral program, called FREE4Life, and revised agent commission structure continue to show traction among our agents. We're pleased to announce that we've continued to see a stronger agent referral rate. The FREE4Life program is a testament to our commitment to fostering a supportive and rewarding environment for our agents. This program is a true win-win. At Fathom Realty, we believe in empowering our agents to reach new heights of success by providing them with unrivaled opportunities and benefits. Once an agent achieves FREE4Life status, they experience a dramatic transformation in their business potential at Fathom Realty and will never have to worry about paying transaction fees again while substantially enhancing their earning potential. Remember, there's only two ways for a real estate agent to net more income: increase their revenue by closing more sales, which is hard to do in a downturn or decrease their expenses. We can help agents do both in this environment. This is why our agent referral program continues to have a positive impact on our recruiting efforts. We're also excited to announce our inaugural Fathom Serves event in August, which illustrates how Fathom can unite and make a tangible difference in our local areas beyond real estate. The week-long event will allow agents and staff to give back to the local community of our favorite charitable organizations by choosing a service project that aligns with three of the company's guiding principles of service, support, and charity. We're committed to positively impacting the areas we serve and are excited to see what meaningful change we can make through our annual event. Lastly, let me briefly touch on our path to profitable growth. A lot of companies sacrifice profitability for growth, but I'm proud to say that we don't have to operate that way. We can do both. This quarter, we achieved Adjusted EBITDA breakeven, even in today's difficult market environment. We believe that 2023 will be a pivotal year for Fathom, as we strive to turn the corner on profitability and really start to show the operating leverage in our business, which Marco will cover in his remarks. Our ancillary businesses have the potential to dramatically increase our revenue and profitability per transaction over time. Even in this tough market, we're continuing to see progress across those businesses, giving us increased confidence in our growth strategy. During the second quarter, we saw improved attach rates within our title and mortgage businesses as we continue to go deeper in the markets which, which we operate. To close, we believe that we're well positioned to grow revenue, agents, and transactions through the remainder of 2023. With that, I'd like to pass over to Marco for our financial update. Thank you, Josh. I'll start a detailed review of our second quarter 2023 results. Then we'll finish with a discussion on guidance. Second quarter revenue declined by 22% year-over-year to $100.1 million, compared with $128.2 million for last year's first quarter. This decrease was primarily attributed to a 16.7% decrease in transaction volume, along with a 6% decrease in the average home prices during the quarter. GAAP net loss for the second quarter was $4.3 million, or $0.27 per share, compared with a loss of $5.7 million, or $0.35 per share for the 2022 second quarter. Adjusted EBITDA, a non-GAAP measure, was $458,000 in the second quarter, versus Adjusted EBITDA loss of $2 million for the second quarter of 2022. The $2.4 million improvement in Adjusted EBITDA this quarter was largely driven by a reduction in expenses and additional agent fees that went into effect in January. Notably, this improvement was achieved despite the 22% decrease in revenues this quarter compared to Q2 of 2022. One of the most important achievements this quarter is that approximately 70% of the increase in gross profit from Q1 flowed to the Adjusted EBITDA line. This highlights the operational leverage our company has reached in this quarter. We believe that going forward, we will continue to drive a similar percentage of the increase in gross profit contribution to the bottom line. G&A expense was $10.2 billion in the second quarter, or 10.7% of revenue, compared with $12.4 million, or 10.1% of revenue for the same period a year ago. On a sequential basis, G&A improved from 12.4 of revenue to 10.7% of revenue. In total, our operations and support, technology and development, and G&A expenses decreased by almost $1.3 million, from $15 million in Q2 of 2022 to $13.7 million in Q2 of 2023. This reduction reflects the benefits of our expense reduction initiatives that commenced earlier this year. Expenses related to marketing activities were $927,000 for the quarter, compared with $1.3 million for last year's second quarter. The decrease in marketing expenses is related to leveraging internal resources and optimizing advertising expenditures. Let me spend some time reviewing our business segment results in more detail. We closed approximately 11,000 Real Estate transactions in the quarter, a 16.7% decrease from last year's second quarter, but below the 18.6% reduction in the overall market. We ended Q2 with approximately 10,930 agents, which represents a 14.3% growth rate over Q2 of 2022, while the National Association of Realtors saw a membership decline of approximately 1.5%. Revenue for the Real Estate division was $94.6 million, compared to $122 million for the same period last year. This is a decrease of 22%, of which about 6% is related to a decrease in the price of homes and 16% is attributed to a decrease in transactions. Adjusted EBITDA in the real estate division is approximately $2.5 million, an increase of $800,000 compared to Adjusted EBITDA of $1.7 million in Q2 of 2022. The increase was achieved despite the 16.7% decrease in transactions this quarter compared to the same quarter last year. It reflects our increase in fees and favorable impact of cost-cutting measures. Now that we reached breakeven Adjusted EBITDA, we can begin to show the operating, operating leverage of our business. Going forward, we estimate that 70% of the increases in gross profit will flow to the bottom line. Our mortgage business generated revenues of $2 million in the second quarter, compared to $2.6 million in the prior year period. Mortgage adjusted EBITDA for Q2 was a loss of $240,000, compared to an adjusted EBITDA loss of $860,000 for the same period last year. Our team continues to identify opportunities to reduce expenses to rightsize our mortgage business going forward, as well as increase revenues by recruiting additional loan officers. DIA, our insurance business, generated revenues of $1.7 million for the quarter, compared to revenues of $1.6 million for the same period a year ago. This represents an increase of 6% of revenue. Adjusted EBITDA increased 348% from $107,000 in Q2 of 2022 to $480,000 in Q2 of 2023. This reflects the great work our DIA team has done under Nathan's leadership to significantly increase adjusted EBITDA this quarter. Verus Title have revenues of $960,000 for the quarter, compared to about $1 million in revenue for Q2 of 2022. Adjusted EBITDA was -$25,000, compared to $22,000 positive Adjusted EBITDA in Q2 of 2022. The decrease in revenue and Adjusted EBITDA is primarily due to the significant decrease in the purchase and refi business due to higher interest rates. However, we continue to see an increase in the number of files starting from Fathom agents in North Carolina, Dallas, Utah, and Indiana. Markets which we believe will improve Adjusted EBITDA going forward. Moving to our technology segment, revenues increased 20% to $792,000, compared to $656,000 for last year's second quarter. Adjusted EBITDA loss for the quarter increased by 28% from a loss of $325,000 in the second quarter of last year to a loss of $418,000 in the current quarter. Our LiveBy team continues to increase its footprint across the country to reach over 240 MLSs and 425 agents at the end of the quarter. LiveBy powers more than 40 million community pages, with 125,000 neighborhood reports created. We continue to focus on our balance sheet, given the dynamic Real Estate market conditions, and we have made tremendous progress on reducing our cash burn from over $5 million in Q4 of 2022 to less than $1 million this quarter. We ended the quarter with a cash position of $9.1 million. We believe our cash position and overall liquidity provide us with adequate runway to grow the business and execute a strategy through operating cash flow break even. We did not purchase any shares in the second quarter under the stock repurchase plan, and approximately $4 million remain under the authorization. Before turning the call back to Josh, let me briefly touch on guidance. Given the continued uncertainty in the macro environment, we're only providing guidance for the third quarter, ending September 30, 2023. For the third quarter, we expect revenues in the range of $93 million-$95 million and Adjusted EBITDA in the range of $200,000-$350,000. As a reminder, guidance is a forward-looking, which, as we noted in the beginning of the call, is subject to risks and uncertainties. I want to thank and congratulate the entire team in achieving positive Adjusted EBITDA. Our entire team has worked very hard to achieve such an important milestone in a very challenging economic period. With that, I'll turn the call back to Josh for closing remarks. Thank you, Marco. Sometimes you have to delay a short-term victory in order to ultimately deliver long-term success and market domination. We remain dedicated to executing on our growth plans and doubling down where we can bring the greatest long-term value to our employees, our agents, and of course, our shareholders. With that, operator, let's open up the call to questions. Thank you. We will now begin the question and answer session. To ask a question, you may press Star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. At any time your question has been addressed, and you would like to withdraw your question, please press Star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Darren Aftahi with Roth Capital Partners. Please go ahead. Hey, Darren. Hey, this is Dylan for Darren. Thanks for taking my questions. Hey, Dylan. Sure. Hey, first, on the, on the agent acquisition side, I guess, could you talk about what you might be seeing from agents, given the housing environment? Are they sort of staying put as to not rock the boat and sort of get to a point where there's some more stabilization to sort of the, the supply and demand for them as agents? Then as sort of an adjacent question to that, like, of the agents you did add in the quarter, I guess, how does their productivity compare to your, your base level of agents? No, those are great questions. I think first thing to understand is, you know, the market saw a decline of 1.5%. The overall industry, whether U.S.-based, you know, we saw an increase of 14%. You know, we definitely outproduced the market, and we feel really good about our numbers. Even then, though, you kind of touched on something I think is really important. There's a lot of agents right now have seen a substantial 20%-30% reduction in their personal business. When that happens, a lot of times when you make a change to brokerage, and this is something we're learning along the way as well, you know, when an agent wants to make a change in their business, there's always that concern that, you know, I don't know what I don't know. What if I make a change and, you know, it takes me a while to get set up in the new brokerage and, you know, I might miss out on business or, or whatever it is, or I've got a couple deals working right now? I've got one that's under contract. What if my broker doesn't pay me because they're struggling, too? We're seeing that. As we're talking to agents, we're talking to a lot of agents saying: "I want to come over. I love the story. It makes a lot of sense, but I've got a deal on the sidelines here that, you know, may be coming to fruition. It's under contract. I want to get it closed, and I'm worried about not getting paid." We've heard that time and time again. That's not every deal, of course, but we hear that a lot. As I mentioned, there's a lot of agents, too, are just worried about, you know, what happens if I make a move, you know, my business declines, right? You know, I, I hear, I hear people say, "Don't go to Fathom. You know, yes, you save money, but..." There's always that ridiculous argument that people make because they're scared of us. The fact is, you know, we still beat the market significantly. We just polar- you know, polarized the market in regards to our growth compared to everyone else. Like I said, there's only one other company that, that beat us in regards to agent growth. We feel really good about that number. Even in this market, we feel good. And I think it's going to take some time, obviously, but there's going to be more-- We're seeing more and more agents finally getting off the fence, finally saying, "Okay." They're either getting out of the industry altogether, which we're, we're seeing more and more of, or they're saying, "Okay, I'm ready to make a move." We, we feel really good, you know, positive about the progress moving forward. We're starting to see an accelerated, you know, number of agents coming over. you know, we saw a dip a little bit there in Q2, but again, we still feel really good about that. I'm a little bit ADD, what was the second part of the question? Just on the productivity side of the new agents added in the quarter versus, your, your existing base. No, we're not. We're not seeing a difference. Obviously, we are seeing agents that are coming in, closing less transactions than we're used to, but not any different than the agents, the reduction of agents that we currently have with us, if that makes any sense. Right? If our agents are down, you know, 20% or 30% individually, then we're seeing a lot of agents come in closing a lot less than, than we're used to. Again, that's just reflective of the overall market. Unfortunately, that's just it's the, the industry we're in right now or the market we're in right now. Got it. If I could ask one more, maybe, maybe for Marco. Appreciate the color on sort of the flow-through of gross profit on the Real Estate side of things, that, that goes to the bottom line. I guess, how much wiggle room is there in the OpEx side? Or are you sort of managing it to the point where the pretty tight guidance on EBITDA is sort of based upon your goals of staying Adjusted EBITDA positive, but sort of managing it sort of right to the line as to, to stay positive, but I mean, still near, near breakeven? Yep. I guess, like, how much, how much actual. Yeah. Yeah, great question. The 70% is company-wide, it's not just Midstate. That 70%, we, we increased gross profit Q, Q, Q1 to Q2 by about $2.5 million, and about 70% of that. So that number is for all companies. All companies-- I think that's one of the key points we, we should be driving, is that all companies have reached that inflection point, even our mortgage company. Look at the- if you look at the reduction in the, in the, in the loss of EBITDA from Q1 to Q2, from the mortgage, right? So, that 70% is across all, all companies. W-we, I think you used the, the word wiggle room. Yes, we have some. Yeah, it is not. We now have crossed the EBITDA line, that we do have some room on that. It is not something that we have to manage it carefully. We certainly continue to grow our business, and we're still making investments to continue to grow our business, but it's not something that we have to watch very carefully. We continue to hire people, we continue to hire loan officers. I think we're up to about 45 loan officers now. We probably hire 15 loan officers this past quarter, and we'll continue to hire more. It is not something that we have to manage, with, you know, extra care. We continue to run our business the same way, because, again, I think we passed that inflection point, Dylan. I think that's why we believe that going forward, we'll continue to drive 70% of the gross profit increase to the bottom line. Great. I appreciate, appreciate the help. Thank you. Thank you, Dylan. Our next question comes from Tom White with D.A. Davidson. Please go ahead. Hey, this is Wyatt Swanson on for Tom. Thanks for taking our questions, congrats on achieving positive Adjusted EBITDA. Thank you. We're seeing some signs that the momentum you and some of the other cloud-based brokerages are enjoying is triggering a bit of a competitive response at some other larger brokerages with similar models to yours. I mean, in terms of them having to sweeten the value prop for their agents. Josh, curious to hear about how you think about needing to stay on par or ahead of some of the larger brokerages you're competing with when it comes to the overall appeal of your value prop or financial package. Can, can you give me a specifically? You're referring to other companies with the exact same commission model we have? I'm referring to similar, similar, like, cloud-based brokerages. Yeah. When you think about cloud-based brokerages who are public peers, there's only 2 of them. They, they're both. It's kind of hard, you're not comparing apples to apples. It's hard because, you know, they, while they are cloud-based, they have a traditional model. They, they have the, basically the same model as a, a Keller Williams, or when you think about public peers, as really any of their Realogy brands, I guess now Anywhere brands, you know, aside from the fact that they've got caps. They still charge the, you know, 80-20 split or 85-15 split, or 70-30 split. It's not really apples to apples. Now, as far as what ends up, you know, bottom line for the brokerage, is a little different. You know, for us, when you think about the agent, the agent's the one that we're trying to attract. You know, that agent with a company that has an 80-20 split, even if they're cloud-based, they're still an 80-20 split. They're still paying 20% of the commission, let's say $2,000 or $2,500 on 1 transaction versus paying us $550 on that 1 transaction. It's, it's going to be hard for them to compete in regards to the monetary value. Then the rest of it, you know, what can they provide that we can't? We have all the basically the same tools, technology, training, resources. While I'm not going to say that ours is better, what I can say is they don't provide more than we do. If all things are equal, the only thing left is the commission side, and that's where I think we win hands down, and they can't compete, not without fundamentally changing their whole business model. All of a sudden, you're going to see a massive decline in, in what they've been promoting as far as profitability and so on. I feel really good about that today. I feel really good about that moving forward, and I don't think that they can make a pivot to match us. I just, I don't think they can do that. Not without, again, massive chaos that will ensue after that. Let me also add a couple more things to that as well. You know, we, we, of all the public companies, we are very unique. Our model is very different, right? There are thousands of small companies like us across the country. I think when you look at this flat model, 100% commission flat model, unfortunately, that, you know, you have to kind of look at the data to kind of realize that. It's actually the fastest growing model in terms of the net agents growth across all companies like us. It's just that we are the only public one. I think, you know, there is a great desire from agents to join companies like us and many others like us who are private. Our model, the 100% commission model, is going to continue to grow significantly across the country. Eventually will be, you know, a model that will have a significant percentage of the agents. There are, you know, there will be different models, and a lot of models will be successful. There isn't such thing, one model for everyone. But the 100% model or flat model is going to continue to grow. There's no question about that. We've seen that across the country, as we see more and more regional or local companies like us who are growing very quickly. It's just that they're not public, and therefore, they don't get a lot of attention. I think you're seeing the, the other cloud-based growing exponentially, not necessarily because they're cloud-based or because they're similar to us. They're growing because they have a, a pitch that no one else has, that, that MLM-type aspect of the business, you know, where you're, you're profit sharing or revenue sharing. Right now, it's exciting, but at some point, it becomes less and less exciting, you know, especially as, as that business grows to a point where it kind of hits its plateau. There's, there's really no more room for people on the bottom to, to benefit from that, from that model. You're, you're seeing one start to plateau, and you're seeing the other one still, you know, hit its stride and, and doing fantastic. We're cheering them on. It's, it's fun to see. I think they've got a great CEO and a great team, but at the end of the day, you know, that only lasts for so long. I think this model that we have at Fathom, long term, will be the future of this industry, and I truly believe that. That's not lip service. That's great to hear. Thank you very much. I appreciate the color, and congrats again. Thank you. Our next question comes from John Campbell with Stephens. Please go ahead. Hey, guys, it's Jonathan Bass, on for John Campbell. Hi. Could you speak to the gain on sale margins in the mortgage business, what you're seeing there, and if you have any outlook on that? Sure. Great question. you know, it, it's honestly is all over the place. it, it, it's, it started, you know, you go back to Q2 of last year, it's probably the worst quarter. sorry, Q3 of last year. The, the big banks who basically buy all the mortgages really squeezed the market out. Over the, the last few quarters, it, it has significantly changed. I think one of the, the things that's, that's happening is that a lot of banks, for a variety of reasons, and that would be a much longer call, are having, some cash challenges, right? One of the things to pay attention to is to look at the, the gap between, the 10-year note and, and mortgage rates. Historically, that gap has been about 150 to 200 basis points, and now we're probably over, you know, in some cases, 300, 350 basis points. Banks are, in a sense, you know, increasing the interest rate on mortgages to slow down the intake of mortgages, and so that's already happening. In some cases, they're also reducing the payout. There, yes, there's absolutely some compression on the commissions from the big banks paying for mortgages. Companies like us and others are adjusting to compensation and other costs within the company, right? There's definitely some forces pushing back compression, and it varies from month to month and quarter to quarter, and companies like us are learning how to do that. I would say that our, our leadership in our mortgage, under Shawn Varin and Paul Marsh, have done a really great job. If you look, for example, at the comparison of the EBITDA loss in Q2 compared to Q1. We've done significant work in reducing that, and we look forward to adjusting our break even in our mortgage business, hopefully within a few quarters. Yes, there's definitely some compression on commissions in the mortgage business. Thank you. That, that's very helpful. Then are you guys seeing any noteworthy regional differences in terms of home sales and price change dynamics? Yes. Historically, in this industry, every trend starts on the West Coast and moves from the West Coast to the East Coast. We've seen this for the last 10 years, and there are so many trends. Certainly, the increase in prices 2 years ago, we've seen a much greater increase in prices of houses in the West Coast. Markets like California, Utah, Idaho, Oregon, Nevada. We saw these prices increasing more rapidly. We are now therefore seeing them decrease more rapidly. In those markets, we're seeing a greater decrease in prices than other markets. The question, I guess, will be, will, you know, will these reductions follow the normal trend that we've seen in the past, that things start in the West Coast and then move across the country? This is really more related to the West Coast because the prices increased so much there, and they're going to just adjust. The jury is still out on that. We absolutely have seen greater decreases in the West Coast. Having said that, there are some pockets across the country that we've seen some decreases, but they tend to be more smaller pockets as opposed to a trend. The trend really is primarily in the West Coast, and that's where we've seen the largest decrease in home prices. Okay, great. Thank you. Thank you. Next question. Our next question comes from Raj Sharma with B. Riley. Please go ahead. Yeah. Hello, good afternoon. Thank you for taking my, my questions. Congratulations on getting breakeven here. Thank you. Yeah, I, you know, I just have a few questions, just trying to understand your uniqueness here. First of all, you know, can you touch upon your referral tiers and how are they better than an MLM type of a marketing? Why the referral tiers not get impacted when you've gained a lot of share in the market, assuming there's a lot of share in the market? Well, first of all, I wouldn't say they're better. The fact is, we've, we've had a lot of investors over the years saying: Why don't you do what, you know, ABC and XYZ company do? Why don't you do that with, you know, the MLM business? The fact is, we don't take enough money. We're not taking 20% or 30% of the commission to be able to do that, you know, so we had to come up with something that was different. It's not necessarily better, it's just different. I will say, though, in the one side, you're being rewarded for what other people are doing, and therefore you're dependent on other people to perform. I know plenty of people who've come over to our company from companies like that, who said, "I referred, you know, 8 people and never made any money, or barely made any money," because they just were not producing agents, right? So they have to produce for you to make anything. In, in our scenario, you're rewarded for your efforts, not someone else's efforts. That's why I think from that standpoint, it's superior, right? The more, harder I'm willing to work, the more benefit I get from it. Not necessarily re-related to how much money they can make or how many transactions they close, right? I think, number 1, there's a, a benefit. You're not dependent on someone else closing business for you to be financially rewarded. Now, you have to close business to be financially rewarded because it, it comes down to savings. The, the other issue is that you've got... In some of those cases, you've got to refer, you know, 8-10, 8-12 agents just to break even with what we give you from day 1, right? You, you have to refer a lot of agents in that model just to get what we get from day 1. That- I think that's important to start, to start with. Now with us, you know, an agent refers 4 people to Fathom. Now, of course, we, we have a minimum requirement of, of how many transactions they can close before they get that benefit. They refer 4 people who, let's say, on average, close what they do. I think on average, close 5 transactions each. That's 20 transactions that came into the into the company, and they're now capped for life, which means they're not free. They still have to pay their annual fee. They still have to pay their $150 transaction fee, you know, the capped fee. At the end of the day, though, it, it's a huge win-win because they're saving money, and we're getting a lot of transactions, right? On the free for life, they've got to refer 8 agents, right, to become free. Once they've gone free, there's no transaction fees of any kind. There's no annual fee either. They're truly free. They've brought in 8 agents who close, let's say, 5 transactions each, right? You can imagine, start doing the math. We're giving up 5 transactions in exchange for 40 transactions. Got it. plus everyone's annual fees and so on. Got it. It's a massive win for us, and it's a win for them as well. Got it. Got it. That, that's very helpful. On the referral tiers, I mean, they're very unique referral tiers. How do you internally measure whether these are working? Also, what was the referral as a percentage of the new agent? I didn't- So- I didn't look at this last... Yeah, I'm sorry. Go ahead, Marco. Yeah. So we, we typically average between 35 and 40% of our agents coming in to Fathom are, referring by other agents, okay? Second, historically, agents who, the agents referred by other agents, okay, historically close a higher number of transactions than the average agent out there. When a Fathom agent refers a non-Fathom agent to join the company, historically, that agent has a higher producing number of transactions. The reason for that would make sense, right? Typically, agents know other agents because they're closing business, right? They're working- Right. - on the other side of transactions. That agent typically is more productive for us. We have increased the number after we introduced the new program in October, November last year. Now we're up to about 40%. We used to be about 28%-30%, and now we're increasing to 40%. We think we can even get as high as 50% as we continue to market the program internally. We actually one quarter, we hit as high as 60, I think 65%, one quarter. It's clearly, if there's a benefit, agents get excited about it. We need to, we need to do a better job of keeping them excited about it. We've been working with our District Directors, finding activities and programs. You know, every time someone does become FREE4Life or Cap4Life, we make sure to promote that, saying, "Hey, you can do this too." Just keep them engaged and keep them excited. We've seen a lot of great benefit coming from it, so we're pleased. Got it. Got it. Thank you. If I could ask you on, on agent growth, you know, clearly your model is seems very attractive to an agent in terms of the 100% commission and also the infrastructure you provide. There's also a churn, even though it's lower than the industry, you know, you still. It's 1.8% a month, or so about a yearly, you're, you know, 20% of the agent is churning away. How much what kind of a growth rate do you think it's or what kind of growth rates are out there? What, you know, for you to grab at, and what kind of net growth do you think we should kind of see from you going forward? If it's possible to comment on that. Yep. We still... you know, Josh mentioned earlier, 1 of the things that's happening is agents are still, and if you, you know, sit down and think about it, you can understand why. Some agents are still worried about moving over, right? As a matter of fact, 1 of the things that we've seen in the last, I'd say 45 days, is that our onboarding starts, right? Onboarding starts when an agent actually starts filling out the paperwork that they want to move over, right? They're just basically starting the process. "Yes, I would like to join Fathom. Let me start the process," right? The process can take a day, and the process can take 2 months, right? Our onboarding starts in the last 45 days have increased significantly, right? What happens is the agents are still waiting to, to close an additional transactions because they're doing less transactions, so that extra transaction they're about to close is really important to them. We've seen a delay, a greater delay, than historical, in terms of the gap between an agent onboarding start to the agent complete. We're working a variety of different ways to, to improve that. That is a good sign. Onboarding starts are significantly increasing, so that's important. Look, historically, the company has grown. Prior to this significant change in interest rates, the company has grown 35% a year, right? We think that, you know, once the, the market settles again, which probably we're looking at sometime next year, right? The interest rates settle, come down a little, then we'll be, you know, we'll begin to see the 35% growth again. That's not going to happen until, until we see interest rates, coming down some. Okay? We're not talking about interest coming down to 3%, right? I, I don't think we're, we're ever gonna... I don't think I will see that in my lifetime, 3% interest rates again, right? Certainly- Right. you know, in the low sixes, high fives, low sixes, I mean, we, we believe, and by the way, others in the industry believe that if interest rates come down to high fives and low sixes, we're gonna see, you know, that, that, that, that segment of the market that's kind of frozen and don't want to sell their houses because they have a 3.5% interest rate, that's gonna open up, right? So, to answer your question, we believe that once the market comes back to some normal equilibrium, we should see, you know, 30%-35% growth rates for Fathom, as we have seen in the past. I'll add from this, by the way. These are net of churn, right? That, that is correct. Net of churn. That's correct. Right. Got it. Lastly, the transactions per agent ticked up. Are these just indicative of the market or the percentage of more productive, you know, agents in your mix is going up? Part of it. How should Part of it we're seeing, as I mentioned, 80% of the agents who left us closed 0 or 1 sale per year. You know, while that 1.85%, by the way, is higher for us, it's not normally what we see in Q2. That's usually something that's reserved for Q1, you know, when people have to pay their dues. We did see an increase in loss of agents, you know, from typically 1.5, 1.6 to 1.8. Again, those agents are closing very few transactions. The more of them get out of the business, our transaction per agent, you know, as you calculate it, actually, you know, looks like it improves. Part of that's just the fact that they're getting out of business. Got it. That's right. Thank you so much for answering my questions. I'll take it offline. Yeah, thank you. I do want to- Thank you. do want to address 1 more thing. The potential for growth, you know, 30%, could we do 40% or 50% growth? One of the things we're seeing right now, because the market is tough, you know, we're, we're in a position where we're growing in spite of the market. That's not true for a lot of companies. In fact, it's not true for most companies out there. So we're finding ourselves in a position where we're having more and more people reach out to us, saying, "Look, I, I've been watching you guys for a long time. I love your story. Our business is struggling. You know, would you consider an acquisition? Would you consider a merger?" Whatever, you know, they, they tend to call it, but ends up being acquisition. The opportunities out there, we're seeing more and more. We're seeing an accelerated rate of people reaching out to us. The potential is fantastic. You know, we could see greater growth, like, there's a lot more. By the way, even if we don't acquire them, at some point, some of them either are going to be acquired by someone else or they may just shutter and go out of business, which case those agents have to suddenly. We see that actually happen a lot. We see a lot of, unfortunately, a lot of brokerages go out of business, they shutter, and all of a sudden, agents are scrambling to find a new home. So we could be the beneficiary, either through an acquisition or it could be the beneficiary through agents just looking for a new home. Again, if you'd like to ask a question, please press Star, then one. Seeing no further 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 for joining our call today and for your interest in Fathom. For those of you who are Fathom shareholders, thank you for your trust. We will continue to work hard and look forward to sharing future updates with you. With that, have a wonderful week. Thank you. The call thank you is now concluded. Thank you for attending today's presentation. You may now disconnect.