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Real Matters Reports Third Quarter 2017 Financial Results


 Tags:   Networks                This was published: 11 Aug 2017 - 01:26 pm         Print article: Printer friendly page
          

Real Matters Reports Third Quarter 2017 Financial Results - on DefenceBriefing.net

Real Matters Inc. (TSX: REAL) (“Real Matters” or “the Company”), a leading network management services platform for the mortgage and insurance industries, today announced its financial results for the third quarter ended June 30, 2017.



“In line with our strategy, we achieved market share gains that offset the estimated decline in the U.S. mortgage origination market. In the appraisal business, we increased our market share with each of our Tier 1 clients and successfully deployed new Tier 2 clients during the quarter. We were also very pleased with our performance in the title and closing business in the context of a 37% drop in refinance mortgage market volume in the U.S.,” said Real Matters Chief Executive Officer Jason Smith.

“In addition to the market share gains we achieved in Q3, one of our recently launched Tier 1 clients awarded us a very significant appraisal market share increase subsequent to quarter end relative to our expectations for this client. This acceleration underscores our proven ability to obtain market share increases based on the performance advantages of our network management platform. We also made significant progress enhancing the closing process for our existing title and closing clients by leveraging some of our core network management competencies, and we kicked off our next generation closing pilot for purchase transactions with a Tier 2 lender in the U.S. last month,” added Smith.

Third Quarter 2017 Financial Highlights

  • Consolidated revenues of $76.7 million, in line with Q3 2016
  • Net Revenue(A) of $23.3 million, down from $23.9 million in Q3 2016
  • Net Revenue(A) margins, expressed as a percentage of consolidated revenues, declined modestly to 30% from 31% in Q3 2016
  • Adjusted EBITDA(A) of $2.8 million compared with $5.6 million in Q3 2016
  • Adjusted Net Income(A) per share (diluted) of $0.02 compared with $0.04 in Q3 2016

Real Matters generated consolidated revenues of $76.7 million, in line with the third quarter of 2016, as organic market share gains in U.S. appraisals and title and closing were offset by a decline in the overall market for these services.

U.S. residential mortgage origination market volume decreased by approximately 9% year-over-year in the quarter ended June 30, according to the MBA; residential mortgage purchase market volume increased 15% while refinance market volume was down 37%. When adjusting for the estimated market declines, Real Matters’ U.S. revenues grew organically as a result of market share gains and new client revenues in both the appraisal and title and closings businesses. The Company continued to ramp up appraisal market share with its recently deployed Tier 1 customers during the quarter. U.S. segment revenues represented 88% of consolidated revenues in the third quarter of 2017.

Third quarter revenues in Canada declined 4.9% to $9.0 million, largely due to foreign exchange which represented a 3.1% decline in revenues over the prior year quarter. Canadian segment revenues represented 12% of consolidated revenues in the quarter.

Net Revenue(A), which management calculates as revenues less transaction costs, decreased to $23.3 million from $23.9 million in Q3 2016, and Net Revenue(A) margins were 30.4% compared to 31.2%. The modest decline in Net Revenue(A) margins was principally due to an increase in transactions costs related to service revenue mix during the quarter. As Real Matters builds market share with clients, the Company expects to leverage its platform to lower transaction costs as a percentage of revenues, improving margins over the long term.

Adjusted EBITDA(A) decreased to $2.8 million from $5.6 million in Q3 2016 due to higher transaction costs and operating expenses as Real Matters continued to build capacity on its platform to scale for additional transaction volume from new Tier 1 clients. The Company expects that the impact of these costs will be more than offset by increased transaction volumes in future periods.

(tabular amounts are expressed in thousands of U.S. dollars, unless otherwise stated)

Three months ended     Nine months ended
       

June 30,

2017

   

June 30,

2016

   

June 30,

2017

   

June 30,

2016

                 
Condensed Consolidated Statement of Operations
Revenues $ 76,672 $ 76,655 $ 220,084 $ 167,564
Transaction costs 53,339 52,715 151,819 124,217
Operating expenses 23,616 18,348 64,929 35,807
Acquisition and Initial Public Offering ("IPO") costs 1,484 2,311 2,760 2,520
Amortization 5,329 5,345 15,893 8,148
Impairment of assets - - 5,096 -
Interest expense 219 282 729 465
Interest income (23 ) (14 ) (23 ) (15 )
Net foreign exchange loss (gain) 3,603 (67 ) 314 697
Loss on fair value of warrants 721 89 5,292 5,415

Re-measurement loss on previously

held equity method investment 976 - 976 -
Net (income) loss from equity
accounted investees         (3 )       (336 )       86         (336 )
Loss before income tax recovery (12,589 ) (2,018 ) (27,787 ) (9,354 )
Net income tax recovery         (3,835 )       (960 )       (7,840 )       (1,641 )
Net loss       $ (8,754 )     $ (1,058 )     $ (19,947 )     $ (7,713 )
 
Net Revenue(A) $ 23,333 $ 23,940 $ 68,265 $ 43,347
Adjusted EBITDA(A) $ 2,792 $ 5,592 $ 6,464 $ 7,540
Adjusted Net Income(A) $ 1,994 $ 3,354 $ 2,046 $ 2,846

(A): Net Revenues, Adjusted EBITDA and Adjusted Net Income are Non-GAAP measures. See note A below.

Revenue by geography and service type

Three months ended June 30, 2017     Three months ended June 30, 2016
      U.S.    

% of
revenues

 

Canada -

expressed in
thousands of
Canadian
dollars

 

% of
revenues

    U.S.    

% of
revenues

 

Canada -

expressed in
thousands of
Canadian
dollars

 

% of
revenues

                       

Appraisal and

ancillary

$ 51,529 76.2 % $ 11,059 91.5 % $ 49,917 74.3 % $ 11,138 90.1 %
Title and closing 15,734 23.3 % - - % 17,117 25.5 % - - %
Other       401     0.5 %     1,032     8.5 %       151     0.2 %     1,217     9.9 %
Revenues     $ 67,664     100.0 %   $ 12,091     100.0 %     $ 67,185     100.0 %   $ 12,355     100.0 %
 
 
Nine months ended June 30, 2017     Nine months ended June 30, 2016
      U.S.    

Percent-
age of
revenues

 

Canada -

expressed in
thousands of
Canadian
dollars

 

Percent-
age of
revenues

    U.S.    

Percent-
age of
revenues

 

Canada -

expressed in
thousands of
Canadian
dollars

 

Percent-
age of
revenues

                       

Appraisal and

ancillary

$

143,106

72.6 % $ 27,243 88.5 % $ 128,768 88.2 % $ 25,174 87.7 %
Title and closing 52,732 26.8 % - - % 17,117 11.7 % - - %
Other       1,171     0.6 %     3,536     11.5 %       151     0.1 %     3,521     12.3 %
Revenues    

$

197,009

    100.0 %   $ 30,779     100.0 %     $ 146,036     100.0 %   $ 28,695     100.0 %
 

Initial Public Offering

On May 11, 2017, Real Matters completed an IPO of common shares (the “Offering”). Its common shares are listed on the Toronto Stock Exchange under the stock symbol “REAL”. The Offering of 12.1 million common shares consisted of a treasury share issuance of 9.6 million common shares and a secondary offering of 2.5 million common shares by certain selling shareholders. The Offering price of C$13.00 resulted in net proceeds of C$117.6 million to the Company and C$29.8 million to the selling shareholders, after underwriting commissions of C$7.5 million and C$1.9 million, respectively.

Immediately prior to the closing of the Offering, the Company consolidated the Company’s Class A shares on a two-for-one basis pursuant to a share consolidation. At June 30, 2017, there were 87.3 million Real Matters common shares outstanding.

During the third quarter, the Company used a portion of the net proceeds of the Offering to repay $15.5 of long-term debt. Real Matters had cash and cash equivalents outstanding of $70.6 million at June 30, 2017.

Outlook

Please refer to the Strategy and Outlook section of Management’s Discussion and Analysis (“MD&A”) for the third quarter ended June 30, 2017.

(A) Non-GAAP Measures

Real Matters’ financial results are prepared in accordance with International Financial Reporting Standards ("IFRS"). Real Matters reports several non-GAAP financial measures, including "Net Revenue", "Adjusted EBITDA" and “Adjusted Net Loss”. See "Non-GAAP measures" in Real Matters’ MD&A for the periods ended June 30, 2017 for a more complete description of these terms. These measures which the Company believes are widely used by investors, securities analysts and other interested parties, do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar titled measures presented by other public companies, nor should they be construed as an alternative to financial measures determined in accordance with IFRS. Any Non-GAAP measures should be considered in context with the IFRS financial statement presentation and should not be considered in isolation or as a substitute for IFRS revenues or net income.

Adjusted EBITDA

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Further information:
Organisation name:    Real Matters Inc.


 

   

Three months ended June 30,

    Nine months ended June 30,
      2017   2016     2017   2016
           
Net loss $ (8,754 ) $ (1,058 ) $ (19,947 ) $
 


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