Market share gains in line with expectations
(all amounts are expressed in U.S. dollars unless otherwise stated)
TORONTO--(BUSINESS WIRE)--
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
second quarter ended March 31, 2017.
“We were pleased with our market share gains in the second quarter. We
recorded modest organic growth in revenues quarter-over-quarter which
exceeded U.S. mortgage origination market performance. We continue to
gain traction with the roll out of a number of our Tier 1 clients which
we launched over the last 18 months, and are being awarded more business
from our clients as result of the performance advantages that our
network management platform delivers. Our title and closing business
also delivered growth in the second quarter through new client
relationships and organic market share gains,” said Real Matters Chief
Executive Officer, Jason Smith. “Notwithstanding changes in the U.S.
mortgage origination market going forward, we expect to expand market
share with our clients.”
Second Quarter 2017 Financial Highlights
-
Consolidated revenues up 39% to $64.5 million from $46.4 million in Q2
2016
-
Net Revenue(A) up 87% to $18.9 million from $10.1 million
in Q2 2016
-
Net Revenue(A) margins, expressed as a percentage of
consolidated revenues, increased to 29% from 22% in Q2 2016
-
Adjusted EBITDA(A) of $(1.8) million compared with $1.1
million in Q2 2016
Consolidated revenues increased 39.0% to $64.5 million principally as a
result of higher revenues from acquisition and organic growth. The U.S.
residential mortgage origination market increased by approximately 3% in
the quarter ending March 31, 2017 compared to the prior year period,
according to the Mortgage Bankers Association (“MBA”) April 18, 2017
forecast. The MBA estimates that the purchase market increased 15%,
however the refinance market was down 10%. Real Matters’ organic market
share gains with our clients during the quarter exceeded the MBA
estimated increase for residential mortgage originations
quarter-over-quarter.
Revenue growth from our April 2016 acquisition of Linear Title & Closing
Ltd. (“Linear”) contributed $15.7 million to the quarter-over-quarter
increase. Organic revenue growth in the second quarter of fiscal 2017
was the result of additional market share gains with our existing
appraisal clients and transaction volumes from new appraisal clients. We
successfully launched two Tier 1 U.S. mortgage lenders in the first
quarter of fiscal 2017, which represented a significant achievement and
base from which to grow market share in both the current quarter and
future periods.
Revenues in Canada increased 13.8% to $6.9 million for the three months
ended March 31, 2017. We managed higher appraisal volumes in the second
quarter of fiscal 2017 as a result of increased market share with
existing clients and FX contributed 4.4% to the quarter-over-quarter
increase in Canadian segment revenues.
Net Revenue(A), which management calculates as revenues less
transaction costs, increased 87% to $18.9 million from $10.1 million in
Q2 2016. Higher transaction costs were in line with organic revenue
growth generated in the second quarter of fiscal 2017 due to market
share gains from existing clients and new client additions. Excluding
the impact of the Linear acquisition, Net Revenue(A) margins
were lower quarter-over-quarter due to higher appraiser costs incurred
in conjunction with onboarding and deploying our platform with new
clients, which included Tier 1 mortgage lenders in the U.S. We view this
stage of client deployment as our opportunity to demonstrate the power
of our platform, and we have an established track record of
progressively growing market share with clients over time. As we build
market share with clients, we expect to leverage our platform to lower
transaction costs as a percentage of revenues over the long term.
Adjusted EBITDA(A) decreased to $(1.8) million from $1.1
million in Q2 2016 principally as a result of higher transaction costs
and operating expenses in the appraisal business and new public company
costs. Higher transaction costs and operating expenses in the appraisal
business were in line with our expectations as we build capacity on the
platform to scale for additional transaction volume from our new Tier 1
clients. We expect that the impact of these costs will be more than
offset by increased transaction volumes in future periods. Corporate
operating expenses increased $1.0 million in the second quarter of 2017
and included additional staff to support our platform and growth
strategies as well as new hires for public market readiness.
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(tabular amounts are expressed in thousands of U.S. dollars,
unless otherwise stated)
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Three months ended
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March 31,
2017
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March 31,
2016
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Condensed Consolidated Statement of Operations
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Revenues
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$
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64,518
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$
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46,418
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Transaction costs
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45,603
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36,279
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Operating expenses
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20,791
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9,077
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Acquisition and initial public offering costs
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855
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209
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Amortization
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5,366
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1,462
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Impairment of assets
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5,096
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-
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Interest expense
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256
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88
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Interest income
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-
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-
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Net foreign exchange loss
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452
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763
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Loss on fair value of warrants
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66
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5,327
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Net loss from equity accounted investees
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194
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-
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Loss before income tax recovery
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(14,161
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)
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(6,787
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)
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Net income tax recovery
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(5,253
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)
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(357
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)
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Net loss
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$
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(8,908
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)
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$
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(6,430
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)
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Net Revenue(A)
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$
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18,915
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$
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10,139
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Adjusted EBITDA(A)
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$
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(1,823
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)
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$
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1,062
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(A): Net Revenues and Adjusted EBITDA are Non-GAAP measures. See
note A below.
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Revenue by geography and service type
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Three months ended March 31, 2017
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Three months ended March 31, 2016
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U.S.
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Percent-
age of
revenues
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Canada -
expressed in
thousands of
Canadian
dollars
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Percent-
age of
revenues
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U.S.
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Percent-
age of
revenues
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Canada -
expressed in
thousands of
Canadian
dollars
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Percent-
age of
revenues
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Appraisal and
ancillary
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$
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41,871
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72.7
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%
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$
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7,925
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86.5
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%
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$
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40,332
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100.0
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%
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$
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7,277
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87.0
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%
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Title and closing
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15,319
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26.6
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%
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-
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-
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%
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-
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-
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%
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-
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-
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%
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Other
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403
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0.7
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%
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1,236
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13.5
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%
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-
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-
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%
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1,090
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13.0
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%
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Revenues
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$
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57,593
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100.0
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%
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$
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9,161
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100.0
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%
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$
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40,332
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100.0
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%
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$
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8,367
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100.0
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%
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Outlook
Please refer to the Strategy and Outlook section of
Management’s Discussion and Analysis (“MD&A”) for the second quarter
ended March 31, 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" and "Adjusted EBITDA". See "Non-GAAP
measures" in Real Matters’ MD&A for the periods ended March 31, 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, net income or cash flows.
Adjusted EBITDA
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Three months ended March 31
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2017
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2016
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Net loss
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$
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(8,908
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)
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$
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(6,430
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)
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Stock-based compensation expense
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53
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-
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Acquisition and initial public offering costs
|
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|
855
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|
|
|
|
209
|
|
|
Amortization
|
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|
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5,366
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|
|
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1,462
|
|
|
Impairment of assets
|
|
|
|
5,096
|
|
|
|
|
-
|
|
|
Interest expense
|
|
|
|
256
|
|
|
|
|
88
|
|
|
Interest income
|
|
|
|
-
|
|
|
|
|
-
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|
Net foreign exchange loss
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|
452
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|
|
|
763
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|
Loss on fair value of warrants
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|
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66
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|
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5,327
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Net loss from equity accounted investees
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|
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194
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-
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Income tax recovery
|
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(5,253
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)
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(357
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)
|
|
Adjusted EBITDA
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$
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(1,823
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)
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$
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1,062
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Management typically calculates Adjusted EBITDA as follows:
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Three months ended March 31
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2017
|
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|
2016
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
64,518
|
|
|
|
$
|
46,418
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|
Less: Transaction costs
|
|
|
|
45,603
|
|
|
|
|
36,279
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|
Less: Operating expenses
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|
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|
20,791
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|
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|
9,077
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|
Add: Stock-based compensation expense
|
|
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|
53
|
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|
|
-
|
|
Adjusted EBITDA
|
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|
$
|
(1,823
|
)
|
|
|
$
|
1,062
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue
|
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|
|
Three months ended March 31
|
|
|
|
|
|
2017
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
$
|
(8,908
|
)
|
|
|
$
|
(6,430
|
)
|
|
Operating expenses
|
|
|
|
20,791
|
|
|
|
|
9,077
|
|
|
Acquisition and initial public offering costs
|
|
|
|
855
|
|
|
|
|
209
|
|
|
Amortization
|
|
|
|
5,366
|
|
|
|
|
1,462
|
|
|
Impairment of assets
|
|
|
|
5,096
|
|
|
|
|
-
|
|
|
Interest expense
|
|
|
|
256
|
|
|
|
|
88
|
|
|
Interest income
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Net foreign exchange loss
|
|
|
|
452
|
|
|
|
|
763
|
|
|
Loss on fair value of warrants
|
|
|
|
66
|
|
|
|
|
5,327
|
|
|
Net loss from equity accounted investees
|
|
|
|
194
|
|
|
|
|
-
|
|
|
Income tax recovery
|
|
|
|
(5,253
|
)
|
|
|
|
(357
|
)
|
|
Net Revenue
|
|
|
$
|
18,915
|
|
|
|
$
|
10,139
|
|
|
|
|
|
|
|
|
|
Management typically calculates Net Revenue as follows:
|
|
|
|
Three months ended March 31,
|
|
|
|
|
|
2017
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
64,518
|
|
|
$
|
46,418
|
|
Less: Transaction costs
|
|
|
|
45,603
|
|
|
|
36,279
|
|
Net Revenue
|
|
|
$
|
18,915
|
|
|
$
|
10,139
|
|
|
|
|
|
|
|
|
Forward-Looking Statements
This new release contains
forward-looking statements that relate to our current expectations and
views of future events including with respect to future market share and
transaction volumes. In some cases, these forward-looking statements can
be identified by words or phrases such as ‘‘forecast’’, ‘‘target’’,
‘‘goal’’, ‘‘may’’, ‘‘might’’, ‘‘will’’, ‘‘expect’’, ‘‘anticipate’’,
‘‘estimate’’, ‘‘intend’’, ‘‘plan’’, ‘‘indicate’’, ‘‘seek’’, ‘‘believe’’,
‘‘predict’’, or ‘‘likely’’, or the negative of these terms, or other
similar expressions intended to identify forward-looking statements.
We have based these forward-looking statements on our current
expectations and projections about future events and financial trends
that we believe might affect our financial condition, results of
operations, business strategy and financial needs. A comprehensive
discussion of the risks that impact Real Matters can be found in the
Company's Final Long Form Prospectus dated May 5, 2017, and the most
recently filed MD&A for the periods ended March 31, 2017 available on
SEDAR at www.sedar.com.
Actual results may differ materially from those indicated or underlying
forward-looking statements as a result of various factors, including
those described below under the heading “Important Factors Affecting
Results from Operations” outlined in the Strategy and Outlook section of
the Company’s MD&A for the quarter ended March 31, 2017.
Real Matters cautions that the list of risk factors and uncertainties is
not exhaustive and other factors could also adversely affect its
results. Readers are urged to consider the risks, uncertainties and
assumptions carefully in evaluating the forward-looking information and
are cautioned not to place undue reliance on such information.
Information contained in forward-looking statements in this news release
is provided as of the date of this news release and we disclaim any
obligation to update any forward-looking statements, whether as a result
of new information or future events or results, except to the extent
required by applicable securities laws.
All of the forward-looking statements made in this news release are
qualified by these cautionary statements and other cautionary statements
or factors contained herein and there can be no assurance that the
actual results or developments will be realized or, even if
substantially realized, that they will have the expected consequences
to, or effects on, the Company.
Conference Call and Webcast
A conference call to review the
results will take place at 10:00 a.m. (ET) on Monday, May 15, 2017,
hosted by Chief Executive Officer Jason Smith and Chief Financial
Officer Bill Herman. An accompanying slide presentation will be posted
to the Investor Relations section of our website shortly before the call.
To access the call:
-
Participant Toll Free Dial-In Number: (877) 201-0168
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Participant International Dial-In Number: (647) 788-4901
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Conference ID: 21264972
To listen to the live webcast of the call:
The webcast will be archived and a transcript of the call will be
available in the Investor Relations section of our website following the
call.
About Real Matters
Real Matters is a leading network management services provider for the
mortgage lending and insurance industries. Real Matters’ platform
combines its proprietary technology and network management capabilities
with tens of thousands of independent qualified field agents to create
an efficient marketplace for the provision of mortgage lending and
insurance industry services. Our clients include 60 of the top 100
mortgage lenders in the U.S. and some of the largest insurance companies
in North America. We serve the mortgage industry through the Solidifi
and Linear Title & Closing brands, and the property and casualty
insurance industry through the iv3 brand. Solidifi is a leading
independent provider of residential real estate appraisals to the
mortgage market and Linear is a leading independent provider of title
and mortgage closing services in America. Established in 2004, Real
Matters has offices in Buffalo (NY), Cincinnati (OH), Middletown (RI),
and Markham (ON). Real Matters is listed on the Toronto Stock Exchange
under the symbol REAL. For more information, visit www.realmatters.com.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170515005673/en/
Source: Real Matters Inc.