Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2023 | May 01, 2023 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2023 | |
Entity File Number | 001-39412 | |
Entity Registrant Name | FATHOM HOLDINGS INC. | |
Entity Incorporation, State or Country Code | NC | |
Entity Tax Identification Number | 82-1518164 | |
Entity Address, Address Line One | 2000 Regency Parkway Drive | |
Entity Address, Address Line Two | Suite 300 | |
Entity Address, City or Town | Cary | |
Entity Address State Or Province | NC | |
Entity Address, Postal Zip Code | 27518 | |
City Area Code | 888 | |
Local Phone Number | 455-6040 | |
Title of 12(b) Security | Common Stock, No Par Value | |
Trading Symbol | FTHM | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 18,071,111 | |
Entity Central Index Key | 0001753162 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 6,723 | $ 8,320 |
Restricted cash | 78 | 60 |
Accounts receivable | 3,410 | 3,074 |
Mortgage loans held for sale, at fair value | 4,619 | 3,694 |
Prepaid and other current assets | 3,466 | 3,668 |
Total current assets | 18,296 | 18,816 |
Property and equipment, net | 2,828 | 2,945 |
Lease right of use assets | 5,175 | 5,508 |
Intangible assets, net | 26,608 | 27,259 |
Goodwill | 25,607 | 25,607 |
Other assets | 55 | 52 |
Total assets | 78,569 | 80,187 |
Current liabilities: | ||
Accounts payable | 3,987 | 3,343 |
Accrued and other current liabilities | 3,814 | 3,403 |
Warehouse lines of credit | 4,477 | 3,580 |
Lease liability - current portion | 269 | 564 |
Long-term debt - current portion | 1,636 | 1,609 |
Total current liabilities | 14,183 | 12,499 |
Lease liability, net of current portion | 4,843 | 5,241 |
Long-term debt, net of current portion | 106 | 129 |
Other long-term liabilities | 297 | 297 |
Total liabilities | 19,429 | 18,166 |
Commitments and contingencies (Note 18) | ||
Stockholders' equity: | ||
Common stock (no par value, shares authorized, 100,000,000; shares issued and outstanding, 18,071,111 and 17,468,562 as of March 31, 2023 and December 31, 2022, respectively) | 0 | 0 |
Additional paid-in capital | 112,446 | 109,626 |
Accumulated deficit | (53,306) | (47,605) |
Total stockholders' equity | 59,140 | 62,021 |
Total liabilities and stockholders' equity | $ 78,569 | $ 80,187 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2023 | Dec. 31, 2022 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 18,071,111 | 17,468,562 |
Common stock, shares outstanding | 18,071,111 | 17,468,562 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Total revenue | $ 77,541,000 | $ 90,082,000 |
Operating expenses | ||
Commission and other agent-related costs | 69,172,000 | 79,479,000 |
Operations and support | 1,614,000 | 2,175,000 |
Technology and development | 1,290,000 | 1,474,000 |
General and administrative | 9,601,000 | 10,854,000 |
Marketing | 715,000 | 1,163,000 |
Depreciation and amortization | 695,000 | 572,000 |
Total operating expenses | 83,087,000 | 95,717,000 |
Loss from operations | (5,546,000) | (5,635,000) |
Other expense (income), net | ||
Interest expense (income), net | (16,000) | 1,000 |
Other nonoperating expense (income), net | 159,000 | 336,000 |
Other expense (income), net | 143,000 | 337,000 |
Loss before income taxes | (5,689,000) | (5,972,000) |
Income tax expense (benefit) | 12,000 | 25,000 |
Net loss | $ (5,701,000) | $ (5,997,000) |
Net loss per share: | ||
Basic | $ (0.36) | $ (0.37) |
Diluted | $ (0.36) | $ (0.37) |
Weighted average common shares outstanding: | ||
Basic | 16,011,068 | 16,323,157 |
Diluted | 16,011,068 | 16,323,157 |
Gross commission income | ||
Total revenue | $ 73,170,000 | $ 84,044,000 |
Other service revenue | ||
Total revenue | $ 4,371,000 | $ 6,038,000 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands | Common stock | Additional Paid-in Capital | Accumulated deficit | Total |
Balance at beginning at Dec. 31, 2021 | $ 100,129 | $ (19,979) | $ 80,150 | |
Balance at beginning (in shares) at Dec. 31, 2021 | 16,751,606 | |||
Changes in Stockholders' deficit | ||||
Issuance of common stock for purchase of business | 5,905 | 5,905 | ||
Issuance of common stock for purchase of business (in shares) | 435,294 | |||
Repurchase of common stock | (988) | (988) | ||
Repurchase of common stock (in shares) | (83,811) | |||
Stock-based compensation, net of forfeitures | 2,458 | 2,458 | ||
Stock-based compensation, net of forfeitures (in shares) | 7,820 | |||
Net loss | (5,997) | (5,997) | ||
Balance at ending at Mar. 31, 2022 | 107,504 | (25,976) | 81,528 | |
Balance at ending (in shares) at Mar. 31, 2022 | 17,110,909 | |||
Balance at beginning at Dec. 31, 2022 | 109,626 | (47,605) | 62,021 | |
Balance at beginning (in shares) at Dec. 31, 2022 | 17,468,562 | |||
Changes in Stockholders' deficit | ||||
Stock-based compensation, net of forfeitures | 2,820 | 2,820 | ||
Stock-based compensation, net of forfeitures (in shares) | 602,549 | |||
Net loss | (5,701) | (5,701) | ||
Balance at ending at Mar. 31, 2023 | $ 112,446 | $ (53,306) | $ 59,140 | |
Balance at ending (in shares) at Mar. 31, 2023 | 18,071,111 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (5,701) | $ (5,997) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Depreciation and amortization | 1,357 | 1,061 |
Non-cash lease expense | 337 | 271 |
Gain on sale of mortgages | (831) | (1,181) |
Stock-based compensation | 2,820 | 2,407 |
Change in operating assets and liabilities: | ||
Accounts receivable | (336) | (154) |
Prepaid and other current assets | 202 | (371) |
Other assets | (3) | 80 |
Accounts payable | 644 | (410) |
Accrued and other current liabilities | 411 | (65) |
Operating lease liabilities | (374) | (225) |
Mortgage loans held for sale | (37,179) | (61,488) |
Proceeds from sale and principal payments on mortgage loans held for sale | 37,083 | 67,713 |
Net cash (used in) provided by operating activities | (1,570) | 1,641 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (9) | (317) |
Amounts paid for business and asset acquisitions, net of cash acquired | 0 | (1,572) |
Purchase of intangible assets | (579) | (763) |
Net cash used in investing activities | (588) | (2,652) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Principal payments on long-term debt | (318) | (467) |
Net borrowings on warehouse lines of credit | 897 | (4,852) |
Repurchase of common stock | 0 | (989) |
Net cash (used in) provided by financing activities | 579 | (6,308) |
Net decrease in cash, cash equivalents, and restricted cash | (1,579) | (7,319) |
Cash, cash equivalents, and restricted cash at beginning of period | 8,380 | 37,921 |
Cash, cash equivalents, and restricted cash at end of period | 6,801 | 30,602 |
Supplemental disclosure of cash and non-cash transactions: | ||
Cash paid for interest | 11 | |
Income taxes paid | 0 | |
Amounts due to sellers | 0 | 700 |
Right of use assets obtained in exchange for new lease liabilities | 4 | |
Issuance of common stock for purchase of business | 0 | 5,905 |
Capitalized stock-based compensation | 0 | 51 |
Reconciliation of cash and restricted cash: | ||
Cash and cash equivalents | 6,723 | 30,524 |
Restricted cash | 78 | 78 |
Total cash, cash equivalents, and restricted cash shown in statement of cash flows | $ 6,801 | $ 30,602 |
Organization, Consolidation and
Organization, Consolidation and Presentation of Financial Statements | 3 Months Ended |
Mar. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements | |
Organization, Consolidation and Presentation of Financial Statements | Note 1. Organization, Consolidation and Presentation of Financial Statements Fathom Holdings Inc. (“Fathom”, “Fathom Holdings,” and collectively with its consolidated subsidiaries and affiliates, the “Company”) is a national, technology-driven, real estate services platform integrating residential brokerage, mortgage, title, insurance services and supporting software called intelliAgent. The Company’s brands include Fathom Realty, Dagley Insurance, Encompass Lending, intelliAgent, LiveBy, Real Results, Verus Title and Cornerstone. The unaudited interim consolidated financial statements include the accounts of Fathom Holdings’ wholly owned subsidiaries. All transactions and accounts between and among its subsidiaries have been eliminated. All adjustments and disclosures necessary for a fair presentation of these unaudited interim consolidated financial statements have been included. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results of operations for the periods presented. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the Security and Exchange Commission (“SEC”) on March 30, 2023 (the “Form 10-K”). The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period. In January and February 2022, the Company acquired Cornerstone Financial (“Cornerstone”) and iPro realty Network (“iPro”), respectively, in separate transactions accounted for as business combinations. Cornerstone is a real estate mortgage business that will help expand the Company’s reach in the Washington DC and surrounding markets. The acquisition of iPro, a real estate brokerage business, will help expand the Company’s reach in the Utah real estate market. Certain prior period amounts have been revised to conform to the current presentation. These changes have no impact on our previously reported consolidated balance sheets or statements of operations. The Company has evaluated the impact of events that have occurred subsequent to March 31, 2023, through the date the consolidated financial statements were filed with the SEC. Based on this evaluation, other than as recorded or disclosed (see Note 19) within these consolidated financial statements and related notes, the Company has determined that there are no material subsequent events that would require recognition or disclosure. |
Risks and Uncertainties
Risks and Uncertainties | 3 Months Ended |
Mar. 31, 2023 | |
Risks and Uncertainties | |
Risks and Uncertainties | Note 2. Risks and Uncertainties Certain Significant Risks and Business Uncertainties Liquidity COVID-19 Risks, Impacts and Uncertainties For the quarter ended March 31, 2023 and the year ended December 31, 2022, due in part to the widespread availability of multiple COVID-19 vaccines, the effects of COVID-19 on business worldwide lessened. However, any lingering impact from COVID-19, as well as the recent increases in interest rates and inflationary pressure in the U.S. and world economies, is not fully known and cannot be estimated as the U.S. and global economies continue to react. Use of Estimates |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2023 | |
Recent Accounting Pronouncements | |
Recent Accounting Pronouncements | Note 3. Recent Accounting Pronouncements In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, In August 2020, the FASB issued ASU No. 2020-06 Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2023 | |
Acquisitions | |
Acquisitions | Note 4. Acquisitions The Company completed two acquisitions in the three months ended March 31, 2022, both accounted for as business combinations. On January 24, 2022, the Company acquired Cornerstone, a real estate mortgage business in the Washington DC and surrounding markets, for approximately $4.7 million. The purchase price was comprised of $1.1 million in cash consideration and 267,470 shares of common stock with an acquisition date fair value of $3.6 million. Approximately $0.6 million of the cash consideration is due within one year of the acquisition date. The Company is currently in discussions with the seller regarding extending the due date of this payment. On February 8, 2022, the Company acquired iPro, a real estate brokerage business in the Utah real estate market, for total consideration of approximately $4.2 million. The purchase price included cash consideration of approximately $1.8 million and 167,824 shares of common stock with an acquisition date fair value of $2.3 million. Approximately $0.1 million of the cash consideration was due within one year of the acquisition date and was paid by the Company in April 2023. Assets acquired and liabilities assumed in the individual acquisitions were recorded on the Company’s condensed consolidated balance sheet at their estimated fair values as of the respective dates of acquisition, including mortgage loans held for sale of approximately $3.5 million, lease right of use assets and lease liabilities of approximately The Company updated the fair value estimates used in the purchase price allocation related to the Cornerstone and iPro acquisitions during the period from acquisition through December 31, 2022, resulting in an increase of $0.5 million in the fair value of assumed finite lived intangible assets, an increase of $0.3 million in other assets, a $0.5 million decrease in goodwill, and a $0.1 increase in deferred tax liabilities. Pro forma information has not been included as it is impracticable to obtain the information due to the lack of availability of historical GAAP financial data. The results of operations of these businesses do not have a material effect on the Company’s consolidated results of operations. Acquisition related costs incurred during the three months ended March 31, 2022, were $51,000 and are included in general and administrative expense. |
Intangible Assets, Net
Intangible Assets, Net | 3 Months Ended |
Mar. 31, 2023 | |
Intangible Assets, Net | |
Intangible Assets, Net | Note 5. Intangible Assets, Net Intangible assets, net consisted of the following (amounts in thousands): March 31, 2023 Gross Carrying Accumulated Net Carrying Amount Amortization Value Trade names $ 7,956 $ (1,461) $ 6,495 Software development 12,927 (3,616) 9,311 Customer relationships 8,180 (2,364) 5,816 Agent relationships 5,856 (1,133) 4,724 Know-how 430 (168) 262 $ 35,349 $ (8,742) $ 26,608 December 31, 2022 Gross Carrying Accumulated Net Carrying Amount Amortization Value Trade names $ 7,956 $ (1,262) $ 6,694 Software development 12,348 (3,029) 9,319 Customer relationships 8,180 (2,085) 6,095 Agent relationships 5,856 (988) 4,868 Know-how 430 (147) 283 $ 34,770 $ (7,511) $ 27,259 Estimated future amortization of intangible assets as of March 31, 2023 was as follows (amounts in thousands): Years Ending December 31, 2023 (Remaining) $ 4,003 2024 5,175 2025 4,937 2026 4,301 2027 3,301 2028 2,197 Thereafter 2,694 Total $ 26,608 The aggregate amortization expense for intangible assets was $1.2 million and $1.0 million, of which $0.7 million and $0.5 million was included in technology and development expense for the three months ended March 31, 2023 and 2022, respectively. |
Goodwill
Goodwill | 3 Months Ended |
Mar. 31, 2023 | |
Goodwill | |
Goodwill | Note 6. Goodwill The carrying amount of goodwill by reportable segment as of March 31, 2023 and December 31, 2022 were as follows (amounts in thousands): Real Estate Brokerage Mortgage Technology Other (a) Total Balance at March 31, 2023 and December 31, 2022 $ 2,690 $ 10,428 $ 4,168 $ 8,321 $ 25,607 (a) The Company has a risk of future impairment to the extent that individual reporting unit performance does not meet projections. Additionally, if current assumptions and estimates, including projected revenues and income growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates, and other market factors, are not met, or if valuation factors outside of the Company’s control change unfavorably, the estimated fair value of goodwill could be adversely affected, leading to a potential impairment in the future. For the three months ended March 31, 2023, no events occurred that indicated it was more likely than not that goodwill was impaired. |
Accrued and Other Current Liabi
Accrued and Other Current Liabilities | 3 Months Ended |
Mar. 31, 2023 | |
Accrued and Other Current Liabilities | |
Accrued and Other Current Liabilities | Note 7. Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following (amounts in thousands): March 31, 2023 December 31, 2022 Deferred annual fee $ 891 $ 1,100 Due to sellers 857 857 Accrued compensation and other employer related costs 1,081 884 Other accrued liabilities 985 562 Total accrued and other current liabilities $ 3,814 $ 3,403 |
Warehouse Lines of Credit
Warehouse Lines of Credit | 3 Months Ended |
Mar. 31, 2023 | |
Warehouse Lines of Credit | |
Warehouse Lines of Credit | Note 8. Warehouse Lines of Credit Encompass Lending Group (“Encompass”), a wholly owned subsidiary of the Company, utilizes line of credit facilities as a means of temporarily financing mortgage loans pending their sale. The underlying warehouse lines of credit agreements, as described below, contain financial and other debt covenants. Encompass maintains a master loan warehouse agreement with a bank whereby Encompass borrows funds to finance the origination or purchase of eligible loans. Interest on funds borrowed is equal to the greater of the 30-Day Secured Overnight Financing Rate (SOFR) rate plus 2.625% or 5.00%. The agreement expires in July 2023. The maximum funding available under these loans at March 31, 2023 was $7.5 million and December 31, 2022 was $15.0 million. At March 31, 2023 and December 21, 2022, the outstanding balance on this warehouse line was approximately $0.8 million and $1.7 million, respectively. As of March 31, 2023, Encompass was in compliance with the debt covenants under this facility. Encompass maintains a mortgage participation purchase agreement with a bank whereby Encompass borrows funds to finance the origination or purchase of eligible loans. Interest on funds borrowed is equal to the greater of the 1 month Term SOFR Reference Rate (SOFR) Rate plus 2.11% or 3.61%. The agreement expires in July 2023.The maximum funding available under these loans at March 31, 2023 was $7.5 million and December 31, 2022 was $25.0 million. At March 31, 2023 and December 31, 2022, the outstanding balance on this warehouse line was approximately $2.1 million and $0.8 million, respectively. As of March 31, 2023, Encompass was in compliance with the debt covenants under this facility. Encompass maintains a warehousing credit and security agreement with a bank whereby Encompass borrows funds to finance the origination of eligible mortgage loans. Interest on funds borrowed is equal to the greater of the daily adjusting Bloomberg Short-Term Bank Yield (BSBY) rate plus 2.00% or 3.5% per annum. The agreement expires in September 2023. The daily adjusting BSBY rate plus 2.00% as of March 31, 2023 was 6.91% and as of December 31, 2022 was 6.36%. The maximum funding available under these loans at March 31, 2023 was $7.5 million and December 31, 2022 was $15.0 million. At March 31, 2023 and December 31, 2022, the outstanding balance on this warehouse line was approximately $1.6 million and $1.0 million, respectively. As of March 31, 2023, Encompass was in compliance with the debt covenants under this facility. |
Debt
Debt | 3 Months Ended |
Mar. 31, 2023 | |
Debt | |
Debt | Note 9. Debt Long-term debt consisted of the following (amounts in thousands): March 31, 2023 December 31, 2022 3.75% Small Business Administration installment loan due May 2050 $ 128 $ 151 Notes payable: 6.0% director and officer insurance policy promissory note due July 31, 2023 62 246 9.0 % executive and officer insurance policy promissory note due August 1, 2023 185 296 Total debt 375 693 Long-term debt, current portion (269) (564) Long-term debt, net of current portion $ 106 $ 129 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2023 | |
Fair Value Measurements | |
Fair Value Measurements | Note 10. Fair Value Measurements FASB ASC 820, Fair Value Measurement ● Level 1 inputs are quoted market prices in active markets for identical assets or liabilities (these are observable market inputs). ● Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability (includes quoted market prices for similar assets or identical or similar assets in markets in which there are few transactions, prices that are not current or prices that vary substantially). ● Level 3 inputs are unobservable inputs that reflect the entity’s own assumptions in pricing the asset or liability (used when little or no market data is available). A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. In general, fair value is based upon quoted market prices, where evaluated. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure the financial instruments are recorded at fair value. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Mortgage loans held for sale – The fair value of mortgage loans held for sale is determined, when possible, using quoted secondary-market prices or purchaser commitments. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan, which would be used by other market participants. The loans are considered Level 2 on the fair value hierarchy. Derivative financial instruments – Derivative financial instruments are reported at fair value. Fair value is determined using a pricing model with inputs that are unobservable in the market or cannot be derived principally from or corroborated by observable market data. These instruments are Level 3 on the fair value hierarchy. The fair value determination of each derivative financial instrument categorized as Level 3 required one or more of the following unobservable inputs: ● Agreed prices from Interest Rate Lock Commitments (“IRLC”); ● Trading prices for derivative instruments; and ● Closing prices at March 31, 2023 and December 31, 2022 for derivative instruments. The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 (amounts in thousands): March 31, 2023 Level 1 Level 2 Level 3 Total Mortgage loans held for sale $ — $ 4,619 $ — $ 4,619 Derivative assets (included in prepaids and other current assets) — — 34 34 Derivative liabilities (included in accrued and other current liabilties) — — (61) (61) $ — $ 4,619 $ (27) $ 4,592 The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 (amounts in thousands): December 31, 2022 Level 1 Level 2 Level 3 Total Mortgage loans held for sale $ — $ 3,694 $ — $ 3,694 Derivative assets (included in prepaids and other current assets) — — 7 7 $ — $ 3,694 $ 7 $ 3,701 The Company enters into IRLCs to originate residential mortgage loans held for sale, at specified interest rates and within a specific period of time (generally between 30 and 90 days), with customers who have applied for a loan and meet certain credit and underwriting criteria. These IRLCs meet the definition of a derivative and are reflected on the consolidated balance sheets at fair value with changes in fair value recognized in other service revenue on the consolidated statements of operations. Unrealized gains and losses on the IRLCs, reflected as derivative assets and derivative liabilities, respectively, are measured based on the fair value of the underlying mortgage loan, quoted agency mortgage-backed security (“MBS”) prices, estimates of the fair value of the mortgage servicing rights and the probability that the mortgage loan will fund within the terms of the IRLC, net of commission expense and broker fees. The fair value of the forward loan sales commitment and mandatory delivery commitments being used to hedge the IRLCs and mortgage loans held for sale not committed to purchasers are based on quoted agency MBS prices. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2023 | |
Leases | |
Leases | Note 11. Leases Operating Leases The Company has operating leases primarily consisting of office space with remaining lease terms of less than one year to six years, subject to certain renewal options as applicable. Leases with an initial term of twelve months or less are not recorded on the balance sheet, and the Company does not separate lease and non-lease components of contracts. There are no material residual guarantees associated with any of the Company’s leases, and there are no significant restrictions or covenants included in the Company’s lease agreements. Certain leases include variable payments related to common area maintenance and property taxes, which are billed by the landlord, as is customary with these types of charges for office space. Our lease agreements generally do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach to derive an appropriate imputed discount rate. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived an imputed rate, which was used in a portfolio approach to discount its real estate lease liabilities. The Company used estimated incremental borrowing rates for all active leases. The table below presents certain information related to lease costs for the Company’s operating leases (amounts in thousands): The following table presents the weighted average remaining lease term and the weighted average discount rate related to operating leases. March 31, 2023 December 31, 2022 Weighted average remaining lease term (in years) - operating leases 4.5 4.7 Weighted average discount rate - operating leases 6.19 % 6.19 % Three Months Ended March 31, 2023 2022 Operating lease expense $ 460 $ 332 Short-term lease expense 161 112 Total lease cost $ 621 $ 444 The following table presents the maturities of lease liabilities (amounts in thousands): Operating Years Ended December 31, Leases 2023 $ 1,508 2024 1,714 2025 1,429 2026 1,083 2027 969 2028 and thereafter 709 Total minimum lease payments 7,412 Less effects of discounting (933) Present value of future minimum lease payments $ 6,479 |
Shareholders' Equity
Shareholders' Equity | 3 Months Ended |
Mar. 31, 2023 | |
Shareholders' Equity | |
Shareholders' Equity | Note 12. Shareholders’ Equity On March 10, 2022, the Company’s Board of Directors authorized an expenditure of up to $10 million for the repurchase of shares of the Company’s common stock. The share repurchase program does not have a fixed expiration. Under the program, repurchases can be made from time-to-time using a variety of methods, including open market transactions, privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The actual timing and amount of future repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. The repurchase program does not obligate the Company to acquire any particular number of shares and may be suspended or discontinued at any time at the Company’s discretion. During the year ended December 31, 2022, the Company reacquired 686,097 shares for approximately $6.0 million. As of March 31, 2023, the Company had approximately $4.0 million remaining under the share repurchase authorization. During the three months ended March 31, 2022, the Company issued shares of common stock as part of the purchase consideration in connection with the acquisitions of iPro and Cornerstone. Refer to Note 4 for additional information about these acquisitions and the shares of common stock issued. The Company has an outstanding equity-classified warrant issued to an underwriter in August 2020 (the “Underwriter Warrant”) to purchase 240,100 shares of common stock. The Underwriter Warrant is exercisable at a per share exercise price of $11.00 and is exercisable at any time through August 4, 2025. As of March 31, 2023, no portion of the Underwriter Warrant has been exercised or expired. |
Stock-based Compensation
Stock-based Compensation | 3 Months Ended |
Mar. 31, 2023 | |
Stock-based Compensation | |
Stock-based Compensation | Note 13. Stock-based Compensation The Company’s 2019 Omnibus Stock Incentive Plan (the “2019 Plan”) provides for granting stock options, restricted stock awards, and restricted stock units to employees, directors, contractors and consultants of the Company. As of March 31, 2023, there were approximately 159,000 shares available for future grants under the 2019 Plan. Restricted Stock Awards Following is the restricted stock award activity for the three months ended March 31, 2023: Weighted Average Grant Date Shares Fair Value Nonvested at December 31, 2022 1,375,145 $ 14.23 Granted 651,618 4.32 Released (2,866) — Forfeited (49,069) 12.77 Nonvested at March 31, 2023 1,974,828 10.98 Restricted Stock Unit Awards During 2022, the Company commenced granting restricted stock units to employees and agents. Following is the restricted stock unit award activity for the three months ended March 31, 2023: Weighted Average Grant Date Shares Fair Value Nonvested at December 31, 2022 392,564 $ 6.58 Granted 894,891 4.28 Released — — Forfeited (12,852) 6.05 Nonvested at March 31, 2023 1,274,603 $ 4.97 Stock Option Awards There were no stock option awards granted during the three month period ended March 31, 2023. Stock-based Compensation expense Stock-based compensation expense related to all awards issued under the Company’s stock compensation plans for the three months ended March 31, 2023 and 2022 was as follows (amounts in thousands): Three Months March 31, 2022 2021 Commission and other agent-related cost $ 998 832 Operations and support 202 71 Technology and development 22 2 General and administrative 1,507 1,457 Marketing 91 45 Total stock-based compensation $ 2,820 $ 2,407 The Company capitalized $0 and $51,000 of stock-based compensation expense associated with the cost of developing software for internal use during the three months ended March 31, 2023 and 2022, respectively. At March 31, 2023, the total unrecognized compensation cost related to non-vested restricted stock awards was $11.0 million, which is expected to be recognized over a period of approximately 1.2 years. At March 31, 2023, the total unrecognized compensation related to unvested restricted stock units was $4.9 million which the Company expects to recognize over a period of approximately 1.6 years. At March 31, 2023, the total unrecognized compensation related to unvested stock option awards granted was $0.2 million which the Company expects to recognize over a period of approximately three months. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2023 | |
Related Party Transactions | |
Related Party Transactions | Note 14. Related Party Transactions We lease office space from entities affiliated with certain of our employees. We paid $0.1 million in total rent expense under these leases for both of the three months ended March 31, 2023 and 2022, respectively. Marketing expense for both of the three months ended March 31, 2023 and 2022 includes approximately $0.1 million from related parties in exchange for the Company receiving marketing services. |
Net Loss per Share Attributable
Net Loss per Share Attributable to Common Stock | 3 Months Ended |
Mar. 31, 2023 | |
Net Loss per Share Attributable to Common Stock | |
Net Loss per Share Attributable to Common Stock | Note 15. Net Loss per Share Attributable to Common Stock Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted loss per share is calculated by adjusting the weighted-average number of shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. Diluted loss per share excludes, when applicable, the potential impact of stock options, unvested shares of restricted stock awards, and common stock warrants because their effect would be anti-dilutive due to net loss. The calculation of basic and diluted net loss per share attributable to common stock was as follows (amounts in thousands except share data): Three Months March 31, 2023 2022 Numerator: Net loss attributable to common stock—basic and diluted $ (5,701) $ (5,997) Denominator: Weighted-average basic and diluted shares outstanding 16,011,068 16,323,157 Net loss per share attributable to common stock—basic and diluted $ (0.36) $ (0.37) The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share attributable to common stock for the periods presented because their effect would have been anti-dilutive. Three Months March 31, 2023 2022 Stock options 147,707 43,996 Non-vested restricted stock awards 1,974,828 693,717 Non-vested restricted stock units 1,274,603 — Common stock warrants 240,100 240,100 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2023 | |
Income Taxes | |
Income Taxes | Note 16. Income Taxes In determining the quarterly provision for income taxes, the Company used the annual effective tax rate applied to year-to-date income. The Company’s annual estimated effective tax rate differs from the statutory rate primarily as a result of state taxes, permanent differences, and changes in the Company’s valuation allowance. The income tax effects of unusual or infrequent items including a change in the valuation allowance as a result of a change in judgment regarding the realizability of deferred tax assets are excluded from the estimated annual effective tax rate and are required to be discretely recognized in the interim period they occur. The Company has historically maintained a valuation allowance against deferred tax assets and reported only minimal current state tax expense. The Company recorded income tax expense of approximately $12,000 and $25,000 for the three months ended March 31, 2023 and March 31, 2022 respectively. The Company expects to maintain a valuation allowance on current year remaining net deferred tax assets by year-end due to historical operating losses, but records a net deferred tax liability when reversals of deferred tax liabilities that relate to indefinite-live intangible assets may not be used in realizing deferred tax assets. The Company applies the standards on uncertainty in income taxes contained in ASC Topic 740, Accounting for Income Taxes. The application of this interpretation did not have any impact on the Company’s consolidated financial statements, as the Company did not have any significant unrecognized tax benefits during the three months ended March 31, 2023 and the year ended December 31, 2022. Currently, the statute of limitations remains open subsequent to and including the year ended December 31, 2019. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2023 | |
Segment Reporting | |
Segment Reporting | Note 17. Segment Reporting The Company identifies an operating segment as a component: (i) that engages in business activities from which it may earn revenues and incur expenses; (ii) that has available discrete financial information; and (iii) whose operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”) to allocate resources and to assess the operating results and financial performance of each operating segment. Our Chief Operating Decision Maker makes operating decisions and assesses performance based on the services of identified operating segments and has identified three reportable segments: Real Estate Brokerage; Mortgage; and Technology. Through its Real Estate Brokerage segment, the Company provides real estate brokerage services. Through its Mortgage segment, the Company provides residential loan origination and underwriting services. Through its Technology segment, the Company provides SaaS solutions and data mining for third party customers and continues to develop its intelliAgent platform for current use by the Company’s real estate agents. Revenue and Adjusted EBITDA are the primary measures used by the CODM to evaluate financial performance of the reportable segments and to allocate resources. Adjusted EBITDA represents the revenues of the operating segment less operating expenses directly attributable to the respective operating segment. Adjusted EBITDA is defined by us as net income (loss), excluding other income and expense, costs related to acquisitions, income taxes, depreciation and amortization, and stock-based compensation expense. In particular, the Company believes the exclusion of non-cash stock-based compensation expense related to restricted stock awards and stock options and transaction-related costs provides a useful supplemental measure in evaluating the performance of our operations and provides better transparency into our results of operations. The Company’s presentation of Adjusted EBITDA might not be comparable to similar measures used by other companies. The Company does not allocate assets to its reportable segments as they are not included in the review performed by the CODM for purposes of assessing segment performance and allocating resources. The balance sheet is managed on a consolidated basis and is not used in the context of segment reporting. Key operating data for the reportable segments for the three months ended March 31, 2023 and 2022 are set forth in the tables below (amounts in thousands). Revenue Three Months March 31, 2023 2022 Real Estate Brokerage $ 73,170 $ 84,044 Mortgage 1,464 2,864 Technology 756 645 Corporate and other services (a) 2,151 2,529 Total revenue $ 77,541 $ 90,082 Adjusted EBITDA Three Months March 31, 2023 2022 Real Estate Brokerage $ 1,298 $ 945 Mortgage (567) (490) Technology (212) (395) Total Segment Adjusted EBITDA 519 60 Corporate and other services (a) (1,888) (2,176) Total Company Adjusted EBITDA (1,369) (2,116) Depreciation and amortization (1,357) (1,061) Other (expense) income, net (143) (337) Income tax (expense) benefit (12) (25) Stock based compensation (2,820) (2,407) Transaction-related costs — (51) Net loss $ (5,701) $ (5,997) (a) Transactions between segments are eliminated in consolidation. Such amounts are eliminated through the Corporate and other services line. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2023 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 18. Commitments and Contingencies From time to time the Company is involved in litigation, claims, and other proceedings arising in the ordinary course of business. Such litigation and other proceedings may include, but are not limited to, actions relating to employment law and misclassification of employees versus independent contractors, intellectual property, commercial or contractual claims, brokerage or real estate disputes, or other consumer protection statutes, ordinary-course brokerage disputes like the failure to disclose property defects, commission disputes, and various liabilities based upon conduct of individuals or entities outside of the Company’s control, including agents and third party contractor agents. Litigation and other disputes are inherently unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur. As of March 31, 2023, there was no material litigation against the Company. In conducting its operations, the Company routinely holds customers’ assets in escrow, pending completion of real estate transactions, and is responsible for the proper disposition of these balances for its customers. Certain of these amounts are maintained in segregated bank accounts and have not been included in the accompanying consolidated balance sheets, consistent with GAAP and industry practice. The balances amounted to $2.0 million and $1.8 million at March 31, 2023 and December 31, 2022, respectively. Encompass Net Worth Requirements In order to maintain approval from the U.S. Department of Housing and Urban Development to operate as a Title II non-supervised mortgagee, our indirect subsidiary Encompass is required to maintain adjusted net worth of $1,000,000 and must maintain liquid assets (cash, cash equivalents, or readily convertible instruments) of 20% of the required net worth. As of March 31, 2023, Encompass had adjusted net worth of approximately $3.5 million and liquid assets of $3.9 million. Commitments to Extend Credit Encompass enters into IRLCs with borrowers who have applied for residential mortgage loans and have met certain credit and underwriting criteria. These commitments expose Encompass to market risk if interest rates change and the underlying loan is not economically hedged or committed to a purchaser. Encompass is also exposed to credit loss if the loan is originated and not sold to a purchaser and the mortgagor does not perform. The collateral upon extension of credit is typically a first deed of trust in the mortgagor’s residential property. Commitments to originate loans do not necessarily reflect future cash requirements as commitments are expected to expire without being drawn upon. Regulatory Commitments Encompass is subject to periodic audits and examinations, both formal and informal in nature, from various federal and state agencies, including those made as part of the regulatory oversight of mortgage origination, servicing and financing activities. Such audits and examinations could result in additional actions, penalties or fines by state or federal government bodies, regulators or the courts. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2023 | |
Subsequent Events | |
Subsequent Events | Note 19. Subsequent Events On April 13, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an accredited investor (the “Holder”) and issued a Senior Secured Convertible Promissory Note in principal amount of $3,500,000 (the “Note”), in a private placement (the “Offering”). The Company paid a placement agent fee in the amount of $175,000 in connection with the Offering. The cash proceeds disbursed to the Company from the issuance of the Note were $3,300,000, after deducting the placement agent fee and purchaser expenses. The Company shall pay interest to the Holder quarterly in cash on the principal amount of this Note at a rate which fluctuates every calendar month, and is equal to (i) the monthly average Secured Overnight Financing Rate (SOFR) plus (ii) 5%, per annum (which interest rate may be increased as provided by the Purchase Agreement); provided, however, that in no event will the rate of interest for any month be less than 8% per annum. Interest shall be due and payable on the last calendar day of each quarter and on the maturity date, April 12, 2025 (the “Fixed Interest Payment Date”); provided, however, notwithstanding anything to the contrary provided in the Purchase Agreement or the Note, interest accrued but not yet paid will be due and payable upon any conversion, prepayment, and/or acceleration whether as a result of an Event of Default, as defined, or otherwise with respect to the principal amount being so converted, prepaid and/or accelerated. In connection with the Offering, the Company also entered into a Security Agreement pursuant to which the Note is secured by all the Company’s existing and future assets. All or any portion of the principal amount of the Note, plus accrued and unpaid interest and any late charges thereon, is convertible at any time, in whole or in part, at the Investor’s option, into shares of the Company’s common stock at an initial fixed conversion price of $6.00 per share, subject to certain customary adjustments. The Note imposes penalties on the Company for any failure to timely deliver any shares of the Company’s common stock issuable upon conversion. The Note may not be converted by the Investor into shares of common stock if such conversion would result in the Investor and its affiliates owning an aggregate of in excess of 4.99% of the then-outstanding shares of the Company’s common stock, provided that upon 61 days’ notice, such ownership limitation may be adjusted by the Investor, but in any case, to no greater than 9.99%. |
Risks and Uncertainties (Polici
Risks and Uncertainties (Policies) | 3 Months Ended |
Mar. 31, 2023 | |
Risks and Uncertainties | |
Certain Significant Risks and Business Uncertainties | Certain Significant Risks and Business Uncertainties |
Liquidity | Liquidity |
COVID-19 Risks, Impacts and Uncertainties | COVID-19 Risks, Impacts and Uncertainties For the quarter ended March 31, 2023 and the year ended December 31, 2022, due in part to the widespread availability of multiple COVID-19 vaccines, the effects of COVID-19 on business worldwide lessened. However, any lingering impact from COVID-19, as well as the recent increases in interest rates and inflationary pressure in the U.S. and world economies, is not fully known and cannot be estimated as the U.S. and global economies continue to react. |
Use of Estimates | Use of Estimates |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Intangible Assets, Net | |
Schedule of components of intangible assets, net | Intangible assets, net consisted of the following (amounts in thousands): March 31, 2023 Gross Carrying Accumulated Net Carrying Amount Amortization Value Trade names $ 7,956 $ (1,461) $ 6,495 Software development 12,927 (3,616) 9,311 Customer relationships 8,180 (2,364) 5,816 Agent relationships 5,856 (1,133) 4,724 Know-how 430 (168) 262 $ 35,349 $ (8,742) $ 26,608 December 31, 2022 Gross Carrying Accumulated Net Carrying Amount Amortization Value Trade names $ 7,956 $ (1,262) $ 6,694 Software development 12,348 (3,029) 9,319 Customer relationships 8,180 (2,085) 6,095 Agent relationships 5,856 (988) 4,868 Know-how 430 (147) 283 $ 34,770 $ (7,511) $ 27,259 |
Schedule of estimated future amortization of intangible assets | Estimated future amortization of intangible assets as of March 31, 2023 was as follows (amounts in thousands): Years Ending December 31, 2023 (Remaining) $ 4,003 2024 5,175 2025 4,937 2026 4,301 2027 3,301 2028 2,197 Thereafter 2,694 Total $ 26,608 |
Goodwill (Tables)
Goodwill (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Goodwill | |
Schedule of carrying amount of goodwill | The carrying amount of goodwill by reportable segment as of March 31, 2023 and December 31, 2022 were as follows (amounts in thousands): Real Estate Brokerage Mortgage Technology Other (a) Total Balance at March 31, 2023 and December 31, 2022 $ 2,690 $ 10,428 $ 4,168 $ 8,321 $ 25,607 (a) |
Accrued and Other Current Lia_2
Accrued and Other Current Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Accrued and Other Current Liabilities | |
Schedule of components of accrued and other current liabilities | Accrued and other current liabilities consisted of the following (amounts in thousands): March 31, 2023 December 31, 2022 Deferred annual fee $ 891 $ 1,100 Due to sellers 857 857 Accrued compensation and other employer related costs 1,081 884 Other accrued liabilities 985 562 Total accrued and other current liabilities $ 3,814 $ 3,403 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Debt | |
Schedule of debt | Long-term debt consisted of the following (amounts in thousands): March 31, 2023 December 31, 2022 3.75% Small Business Administration installment loan due May 2050 $ 128 $ 151 Notes payable: 6.0% director and officer insurance policy promissory note due July 31, 2023 62 246 9.0 % executive and officer insurance policy promissory note due August 1, 2023 185 296 Total debt 375 693 Long-term debt, current portion (269) (564) Long-term debt, net of current portion $ 106 $ 129 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Fair Value Measurements | |
Schedule of financial assets that are measured at fair value on a recurring basis | The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 (amounts in thousands): March 31, 2023 Level 1 Level 2 Level 3 Total Mortgage loans held for sale $ — $ 4,619 $ — $ 4,619 Derivative assets (included in prepaids and other current assets) — — 34 34 Derivative liabilities (included in accrued and other current liabilties) — — (61) (61) $ — $ 4,619 $ (27) $ 4,592 The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 (amounts in thousands): December 31, 2022 Level 1 Level 2 Level 3 Total Mortgage loans held for sale $ — $ 3,694 $ — $ 3,694 Derivative assets (included in prepaids and other current assets) — — 7 7 $ — $ 3,694 $ 7 $ 3,701 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Leases | |
Schedule of lease cost | March 31, 2023 December 31, 2022 Weighted average remaining lease term (in years) - operating leases 4.5 4.7 Weighted average discount rate - operating leases 6.19 % 6.19 % Three Months Ended March 31, 2023 2022 Operating lease expense $ 460 $ 332 Short-term lease expense 161 112 Total lease cost $ 621 $ 444 |
Schedule of weighted average remaining lease term and the weighted average discount rate for the Company's operating leases | March 31, 2023 December 31, 2022 Weighted average remaining lease term (in years) - operating leases 4.5 4.7 Weighted average discount rate - operating leases 6.19 % 6.19 % |
Schedule of future lease payments | Operating Years Ended December 31, Leases 2023 $ 1,508 2024 1,714 2025 1,429 2026 1,083 2027 969 2028 and thereafter 709 Total minimum lease payments 7,412 Less effects of discounting (933) Present value of future minimum lease payments $ 6,479 |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Stock-based Compensation | |
Summary of activity related to restricted stock awards and units | Weighted Average Grant Date Shares Fair Value Nonvested at December 31, 2022 1,375,145 $ 14.23 Granted 651,618 4.32 Released (2,866) — Forfeited (49,069) 12.77 Nonvested at March 31, 2023 1,974,828 10.98 Weighted Average Grant Date Shares Fair Value Nonvested at December 31, 2022 392,564 $ 6.58 Granted 894,891 4.28 Released — — Forfeited (12,852) 6.05 Nonvested at March 31, 2023 1,274,603 $ 4.97 |
Schedule of stock based compensation | Three Months March 31, 2022 2021 Commission and other agent-related cost $ 998 832 Operations and support 202 71 Technology and development 22 2 General and administrative 1,507 1,457 Marketing 91 45 Total stock-based compensation $ 2,820 $ 2,407 |
Net Loss per Share Attributab_2
Net Loss per Share Attributable to Common Stock (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Net Loss per Share Attributable to Common Stock | |
Schedule of basic and diluted net loss | Three Months March 31, 2023 2022 Numerator: Net loss attributable to common stock—basic and diluted $ (5,701) $ (5,997) Denominator: Weighted-average basic and diluted shares outstanding 16,011,068 16,323,157 Net loss per share attributable to common stock—basic and diluted $ (0.36) $ (0.37) |
Schedule of outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share attributable to common stock | Three Months March 31, 2023 2022 Stock options 147,707 43,996 Non-vested restricted stock awards 1,974,828 693,717 Non-vested restricted stock units 1,274,603 — Common stock warrants 240,100 240,100 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Segment Reporting | |
Schedule of key operating data for the reportable segments | Key operating data for the reportable segments for the three months ended March 31, 2023 and 2022 are set forth in the tables below (amounts in thousands). Revenue Three Months March 31, 2023 2022 Real Estate Brokerage $ 73,170 $ 84,044 Mortgage 1,464 2,864 Technology 756 645 Corporate and other services (a) 2,151 2,529 Total revenue $ 77,541 $ 90,082 Adjusted EBITDA Three Months March 31, 2023 2022 Real Estate Brokerage $ 1,298 $ 945 Mortgage (567) (490) Technology (212) (395) Total Segment Adjusted EBITDA 519 60 Corporate and other services (a) (1,888) (2,176) Total Company Adjusted EBITDA (1,369) (2,116) Depreciation and amortization (1,357) (1,061) Other (expense) income, net (143) (337) Income tax (expense) benefit (12) (25) Stock based compensation (2,820) (2,407) Transaction-related costs — (51) Net loss $ (5,701) $ (5,997) (a) Transactions between segments are eliminated in consolidation. Such amounts are eliminated through the Corporate and other services line. |
Risks and Uncertainties (Detail
Risks and Uncertainties (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Risks and Uncertainties | |||
Net loss | $ (5,701) | $ (5,997) | |
Cash and cash equivalents | $ 6,723 | $ 30,524 | $ 8,320 |
Acquisitions (Details)
Acquisitions (Details) | 3 Months Ended | 12 Months Ended | |||
Feb. 08, 2022 USD ($) shares | Jan. 24, 2022 USD ($) shares | Mar. 31, 2023 USD ($) | Mar. 31, 2022 USD ($) item | Dec. 31, 2022 USD ($) | |
Acquisitions | |||||
Number of acquisitions | item | 2 | ||||
Acquisition date fair value of shares | $ 0 | $ 5,905,000 | |||
Proceeds from sale and principal payments on mortgage loans held for sale | 37,083,000 | 67,713,000 | |||
Accrued liabilities | 3,814,000 | $ 3,403,000 | |||
Goodwill | $ 25,607,000 | 25,607,000 | |||
Cornerstone | |||||
Acquisitions | |||||
Consideration | $ 4,700,000 | ||||
Cash consideration | $ 1,100,000 | ||||
Shares of common stock transferred | shares | 267,470 | ||||
Acquisition date fair value of shares | $ 3,600,000 | ||||
Cash consideration due within one year of acquisition date | $ 600,000 | ||||
Cornerstone and iPro | |||||
Acquisitions | |||||
Mortgage loans held for sale | $ 3,500,000 | ||||
Lease right of use assets | 600,000 | ||||
Lease liabilities | 600,000 | ||||
Accrued liabilities | 400,000 | ||||
Warehouse lines of credit | 3,400,000 | ||||
Finite-lived intangible assets | 3,600,000 | ||||
Goodwill | 4,900,000 | ||||
Goodwill expected to be deductible for income tax purposes | 1,400,000 | ||||
Increase in fair value of assumed finite lived intangible assets | 500,000 | ||||
Increase in other assets | 300,000 | ||||
Decrease in goodwill | 500,000 | ||||
Increase in deferred tax liabilities | $ 100,000 | ||||
Acquisition related costs incurred | $ 51,000 | ||||
iPro | |||||
Acquisitions | |||||
Consideration | 4,200,000 | ||||
Cash consideration | $ 1,800,000 | ||||
Shares of common stock transferred | shares | 167,824 | ||||
Acquisition date fair value of shares | $ 2,300,000 | ||||
Cash consideration due within one year of acquisition date | $ 100,000 |
Intangible Assets, Net (Details
Intangible Assets, Net (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Intangible Assets, Net | ||
Gross Carrying Amount | $ 35,349 | $ 34,770 |
Accumulated Amortization | (8,742) | (7,511) |
Net Carrying Value | 26,608 | 27,259 |
Trade names | ||
Intangible Assets, Net | ||
Gross Carrying Amount | 7,956 | 7,956 |
Accumulated Amortization | (1,461) | (1,262) |
Net Carrying Value | 6,495 | 6,694 |
Software development | ||
Intangible Assets, Net | ||
Gross Carrying Amount | 12,927 | 12,348 |
Accumulated Amortization | (3,616) | (3,029) |
Net Carrying Value | 9,311 | 9,319 |
Customer relationships | ||
Intangible Assets, Net | ||
Gross Carrying Amount | 8,180 | 8,180 |
Accumulated Amortization | (2,364) | (2,085) |
Net Carrying Value | 5,816 | 6,095 |
Agent relationships | ||
Intangible Assets, Net | ||
Gross Carrying Amount | 5,856 | 5,856 |
Accumulated Amortization | (1,133) | (988) |
Net Carrying Value | 4,724 | 4,868 |
Know-how | ||
Intangible Assets, Net | ||
Gross Carrying Amount | 430 | 430 |
Accumulated Amortization | (168) | (147) |
Net Carrying Value | $ 262 | $ 283 |
Intangible Assets, Net - Future
Intangible Assets, Net - Future amortization of intangible assets (Details) $ in Thousands | Mar. 31, 2023 USD ($) |
Intangible Assets, Net | |
2023 (remaining) | $ 4,003 |
2024 | 5,175 |
2025 | 4,937 |
2026 | 4,301 |
2027 | 3,301 |
2028 | 2,197 |
Thereafter | 2,694 |
Total | $ 26,608 |
Intangible Assets, Net - Additi
Intangible Assets, Net - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Intangible Assets, Net | ||
Amortization expense for capitalized software and trade names | $ 1.2 | $ 1 |
Technology and development expense | ||
Intangible Assets, Net | ||
Amortization expense for capitalized software and trade names | $ 0.7 | $ 0.5 |
Goodwill (Details)
Goodwill (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Carrying Value | ||
Goodwill | $ 25,607 | $ 25,607 |
Technology | ||
Carrying Value | ||
Goodwill | 4,168 | 4,168 |
Operating segments | ||
Carrying Value | ||
Goodwill | 2,690 | 2,690 |
Mortgage | ||
Carrying Value | ||
Goodwill | 10,428 | 10,428 |
Other | ||
Carrying Value | ||
Goodwill | $ 8,321 | $ 8,321 |
Accrued and Other Current Lia_3
Accrued and Other Current Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Accrued and Other Current Liabilities | ||
Deferred annual fee | $ 891 | $ 1,100 |
Due to sellers | 857 | 857 |
Accrued compensation and other employer related costs | 1,081 | 884 |
Other accrued liabilities | 985 | 562 |
Total accrued and other current liabilities | $ 3,814 | $ 3,403 |
Warehouse Lines of Credit (Deta
Warehouse Lines of Credit (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Dec. 31, 2022 | |
Warehouse Lines of Credit | ||
Warehouse lines of credit | $ 4,477 | $ 3,580 |
Liquid assets | 18,296 | 18,816 |
Master loan agreement | ||
Warehouse Lines of Credit | ||
Maximum borrowing capacity | 7,500 | 15,000 |
Warehouse lines of credit | $ 800 | 1,700 |
Master loan agreement | SOFR | Minimum | ||
Warehouse Lines of Credit | ||
Spread on variable rate | 2.625% | |
Master loan agreement | SOFR | Maximum | ||
Warehouse Lines of Credit | ||
Effective interest rate | 5% | |
Mortgage participation purchase agreement | ||
Warehouse Lines of Credit | ||
Maximum borrowing capacity | $ 7,500 | 25,000 |
Warehouse lines of credit | $ 2,100 | 800 |
Mortgage participation purchase agreement | SOFR | Minimum | ||
Warehouse Lines of Credit | ||
Interest rate | 2.11% | |
Mortgage participation purchase agreement | SOFR | Maximum | ||
Warehouse Lines of Credit | ||
Effective interest rate | 3.61% | |
Warehousing credit and security agreement | ||
Warehouse Lines of Credit | ||
Maximum borrowing capacity | $ 7,500 | 15,000 |
Warehouse lines of credit | $ 1,600 | $ 1,000 |
Warehousing credit and security agreement | BSBY rate | ||
Warehouse Lines of Credit | ||
Spread on variable rate | 2% | |
Effective interest rate | 6.91% | 6.36% |
Warehousing credit and security agreement | BSBY rate | Minimum | ||
Warehouse Lines of Credit | ||
Spread on variable rate | 2% | |
Warehousing credit and security agreement | BSBY rate | Maximum | ||
Warehouse Lines of Credit | ||
Effective interest rate | 3.50% |
Debt - Long-term debt (Details)
Debt - Long-term debt (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Debt | ||
Long-term debt, current portion | $ (1,636) | $ (1,609) |
3.75% Small Business Administration installment loan due May 2050 | ||
Debt | ||
Interest rate per annum | 3.75% | |
6.0% director and officer insurance policy promissory note due July 31, 2023 | ||
Debt | ||
Interest rate per annum | 6% | |
Notes Payable | ||
Debt | ||
Long term debt | $ 375 | 693 |
Long-term debt, current portion | (269) | (564) |
Long-term debt, net of current portion | 106 | 129 |
Notes Payable | 3.75% Small Business Administration installment loan due May 2050 | ||
Debt | ||
Long term debt | 128 | 151 |
Notes Payable | 6.0% director and officer insurance policy promissory note due July 31, 2023 | ||
Debt | ||
Long term debt | 62 | 246 |
Notes Payable | 9.0 % executive and officer insurance policy promissory note due August 1, 2023 | ||
Debt | ||
Long term debt | $ 185 | $ 296 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - Fair Value, Recurring - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Fair Value Measurements | ||
Mortgage loans held for sale | $ 4,619 | $ 3,694 |
Derivative assets (included in prepaids and other current assets) | 34 | 7 |
Derivative assets (included in prepaids and other current assets) | (61) | |
Total | 4,592 | 3,701 |
Level 2 | ||
Fair Value Measurements | ||
Mortgage loans held for sale | 4,619 | 3,694 |
Total | 4,619 | 3,694 |
Level 3 | ||
Fair Value Measurements | ||
Derivative assets (included in prepaids and other current assets) | 34 | 7 |
Derivative assets (included in prepaids and other current assets) | (61) | |
Total | $ (27) | $ 7 |
Leases (Details)
Leases (Details) | 3 Months Ended | |
Mar. 31, 2023 | Dec. 31, 2022 | |
Leases | ||
Option to extend | true | |
Residual value guarantee | false | |
Weighted average remaining lease term (in years) - operating leases | 4 years 6 months | 4 years 8 months 12 days |
Weighted average discount rate - operating leases | 6.19% | 6.19% |
Minimum | ||
Leases | ||
Lease term | 1 year | |
Maximum | ||
Leases | ||
Lease term | 6 years |
Leases - Lease costs (Details)
Leases - Lease costs (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Leases | ||
Operating lease expense | $ 460 | $ 332 |
Short-term lease expense | 161 | 112 |
Total lease cost | $ 621 | $ 444 |
Leases - Maturities of lease li
Leases - Maturities of lease liabilities (Details) $ in Thousands | Mar. 31, 2023 USD ($) |
Future Minimum Lease Payments | |
2023 | $ 1,508 |
2024 | 1,714 |
2025 | 1,429 |
2026 | 1,083 |
2027 | 969 |
2028 and thereafter | 709 |
Total Minimum Lease Payments | 7,412 |
Less effects of discounting | (933) |
Present value of future minimum lease payments | $ 6,479 |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Mar. 31, 2023 | Mar. 10, 2022 | |
Shareholders' Equity | |||
Stock repurchase program remaining authorized repurchase amount | $ 4 | $ 10 | |
Stock repurchase program authorized amount | $ 6 | ||
Number of underwriters warrants exercised or expired | 0 | ||
Number of shares reacquired | 686,097 | ||
Underwriter Warrant to purchase shares | 240,100 | ||
Warrant exercise price (in dollars per share) | $ 11 |
Stock-based Compensation (Detai
Stock-based Compensation (Details) | 3 Months Ended |
Mar. 31, 2023 shares | |
2019 Omnibus Stock Incentive Plan | |
Stock-based Compensation | |
Stock option granted | 159,000 |
Stock options | |
Stock-based Compensation | |
Number of awards granted (in shares) | 0 |
Stock-based Compensation - Move
Stock-based Compensation - Movements in Restricted Stock Awards (Details) - $ / shares | 3 Months Ended | |
Mar. 31, 2023 | Dec. 31, 2022 | |
Restricted Stock Awards | ||
Shares | ||
Non-vested at beginning | 1,375,145 | |
Granted | 651,618 | |
Released | (2,866) | |
Forfeited | (49,069) | |
Non-vested at ending | 1,974,828 | |
Weighted-Average Grant Date Fair Value | ||
Non-vested at beginning | $ 10.98 | $ 14.23 |
Granted | 4.32 | |
Forfeited | 12.77 | |
Non-vested at ending | $ 10.98 | 14.23 |
Restricted Stock Units | ||
Shares | ||
Non-vested at beginning | 392,564 | |
Granted | 894,891 | |
Forfeited | (12,852) | |
Non-vested at ending | 1,274,603 | |
Weighted-Average Grant Date Fair Value | ||
Non-vested at beginning | $ 4.97 | 6.58 |
Granted | 4.28 | |
Forfeited | 6.05 | |
Non-vested at ending | $ 4.97 | $ 6.58 |
Stock options | ||
Shares | ||
Granted | 0 |
Stock-based Compensation - Summ
Stock-based Compensation - Summary of stock based compensation (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2022 | |
Stock-based Compensation | ||||
Total stock-based compensation | $ 2,820,000 | $ 2,407,000 | ||
Stock options | ||||
Stock-based Compensation | ||||
Total Unrecognized compensation expense | $ 200,000 | |||
Unrecognized compensation expense period for recognition | 3 months | |||
Non-vested restricted stock awards | ||||
Stock-based Compensation | ||||
Total Unrecognized compensation expense | $ 11,000,000 | |||
Unrecognized compensation expense period for recognition | 1 year 2 months 12 days | |||
2019 Omnibus Stock Incentive Plan | Non-vested restricted stock awards | ||||
Stock-based Compensation | ||||
Total Unrecognized compensation expense | $ 4,900,000 | |||
Unrecognized compensation expense period for recognition | 1 year 7 months 6 days | |||
Commission and other agent-related cost | ||||
Stock-based Compensation | ||||
Total stock-based compensation | 998,000 | 832,000 | ||
Technology and development | ||||
Stock-based Compensation | ||||
Total stock-based compensation | 22,000 | 2,000 | ||
General and administrative | ||||
Stock-based Compensation | ||||
Total stock-based compensation | 1,507,000 | 1,457,000 | ||
Marketing | ||||
Stock-based Compensation | ||||
Total stock-based compensation | 91,000 | 45,000 | ||
Cost of developing software | ||||
Stock-based Compensation | ||||
Capitalized of stock-based compensation expense | $ 0 | $ 51,000 | ||
Operations and support | ||||
Stock-based Compensation | ||||
Total stock-based compensation | $ 202,000 | $ 71,000 |
Related Party Transactions (Det
Related Party Transactions (Details) $ in Millions | 15 Months Ended |
Mar. 31, 2023 USD ($) | |
Related Party Transactions | |
Rent expense under leases | $ 0.1 |
Marketing expense | $ 0.1 |
Net Loss per Share Attributab_3
Net Loss per Share Attributable to Common Stock - Calculation of Basic and Diluted Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Mar. 31, 2021 | |
Net Loss per Share Attributable to Common Stock | |||
Net loss attributable to common stock-basic | $ (5,701) | $ (5,997) | |
Net loss attributable to common stock-diluted | $ (5,701) | $ (5,997) | |
Weighted-average basic shares outstanding | 16,011,068 | 16,323,157 | |
Weighted-average diluted shares outstanding | 16,011,068 | 16,323,157 | |
Net loss per share - basic | $ (0.36) | $ (0.37) | |
Net loss per share - diluted | $ (0.36) | $ (0.37) |
Net Loss per Share Attributab_4
Net Loss per Share Attributable to Common Stock - Antidilutive Securities (Details) - shares | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Common stock equivalents excluded from computation of diluted net loss per share attributable to common stock for the periods presented because their effect would have been anti-dilutive | 147,707 | 43,996 |
Non-vested restricted stock awards | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Common stock equivalents excluded from computation of diluted net loss per share attributable to common stock for the periods presented because their effect would have been anti-dilutive | 1,974,828 | 693,717 |
Non-vested restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Common stock equivalents excluded from computation of diluted net loss per share attributable to common stock for the periods presented because their effect would have been anti-dilutive | 1,274,603 | |
Common stock warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Common stock equivalents excluded from computation of diluted net loss per share attributable to common stock for the periods presented because their effect would have been anti-dilutive | 240,100 | 240,100 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Income Taxes | |||
Income tax expense | $ 12,000 | $ 25,000 | |
Unrecognized tax benefits | $ 0 | $ 0 |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Revenues | ||
Total revenue | $ 77,541,000 | $ 90,082,000 |
Adjusted EBITDA | (1,369,000) | (2,116,000) |
Depreciation and amortization | (1,357,000) | (1,061,000) |
Other income(expense), net | (143,000) | (337,000) |
Income tax (expense) benefit | (12,000) | (25,000) |
Share based compensation | (2,820,000) | (2,407,000) |
Transaction-related costs | (51,000) | |
Net loss | (5,701,000) | (5,997,000) |
Technology | ||
Revenues | ||
Total revenue | 756,000 | 645,000 |
Real Estate Brokerage | ||
Revenues | ||
Total revenue | 73,170,000 | 84,044,000 |
Mortgage | ||
Revenues | ||
Total revenue | 1,464,000 | 2,864,000 |
Corporate and other services | ||
Revenues | ||
Total revenue | 2,151,000 | 2,529,000 |
Adjusted EBITDA | (1,888,000) | |
Operating segments | ||
Revenues | ||
Adjusted EBITDA | 519,000 | 60,000 |
Operating segments | Technology | ||
Revenues | ||
Adjusted EBITDA | (212,000) | (395,000) |
Operating segments | Real Estate Brokerage | ||
Revenues | ||
Adjusted EBITDA | 1,298,000 | 945,000 |
Operating segments | Mortgage | ||
Revenues | ||
Adjusted EBITDA | $ (567,000) | (490,000) |
Eliminated in consolidation | Corporate and other services | ||
Revenues | ||
Adjusted EBITDA | $ (2,176,000) |
Segment Reporting - Additional
Segment Reporting - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2023 segment | |
Segment Reporting | |
Number of reporting segment | 3 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Commitments and Contingencies | ||
Cash balance commitment amount | $ 2,000,000 | $ 1,800,000 |
Encompass | ||
Commitments and Contingencies | ||
Adjusted net worth to maintained | $ 1,000,000 | |
Percentage of required net worth liquid assets for compliance | 20% | |
Net worth adjusted | $ 3,500,000 | |
Liquid assets to maintained | $ 3,900,000 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Events - Senior Secured Convertible Promissory Note - Private placement | Apr. 13, 2023 USD ($) $ / shares |
Subsequent Events | |
Principal amount | $ 3,500,000 |
Placement agent fee paid | 175,000 |
Cash proceeds disbursed from issuance of the Note, after deducting placement agent fee and purchaser expenses | $ 3,300,000 |
Initial fixed conversion price | $ / shares | $ 6 |
Maximum ownership holding percentage post conversion | 4.99% |
Notice term for adjustment of ownership limitation | 61 days |
Maximum adjusted ownership holding percentage post conversion | 9.99% |
Minimum | |
Subsequent Events | |
Interest rate per annum | 8% |
SOFR | |
Subsequent Events | |
Spread on variable rate | 5% |