Delivers 19% market adjusted revenue growth
(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
first quarter ended December 31, 2017.
“We were very pleased with our performance in the first quarter,” said
Real Matters Chief Executive Officer Jason Smith. “We generated
consolidated revenues of $73.9 million which represented strong organic
growth of 19% on a market adjusted basis. Appraisals and ancillary
services delivered market adjusted revenue growth of 28% driven by our
year-over-year market share gains, and the title and closing business
grew organically with market adjusted revenue growth of 4%. We also
recorded Net Revenue(A) margin expansion on a sequential
basis.”
“The first quarter of fiscal 2017 was a peak quarter for rate refinance
originations, which declined an estimated 50% since that time, making it
a tough comparison. The U.S. mortgage origination market continues to be
very healthy, fueled in part by a steadily growing purchase market.
Higher interest rates resulting in lower mortgage refinancing
transactions have contributed to a more normalized market since the
second quarter of fiscal 2017 – and we’ve seen that come across in our
results since that time,” added Smith.
“We are on track with our appraisal market share goals for 2018 - and
out to 2021. We signed two new Tier 2 appraisal clients in the first
quarter, which have since gone live. We have also progressed our title
and closing pipeline within Top 100 lenders, making us confident in our
ability to achieve our 2018 objectives for title and closing,” concluded
Smith.
Q1 2018 Financial Highlights
-
Consolidated revenues of $73.9 million compared with $78.9 million in
Q1 2017
-
Net Revenue(A) of $22.5 million, compared with $26.0
million in Q1 2017
-
Net Revenue(A) margins (as a percentage of consolidated
revenues) of 30.4% from 33.0% in Q1 2017
-
Adjusted EBITDA(A) of $2.4 million compared with $5.5
million in Q1 2017
-
Net loss of $5.4 million or ($0.06) per diluted share, compared with a
net loss of $2.3 million
or ($0.03) per diluted share in Q1 2017
-
Adjusted Net Income(A) of $1.3 million or $0.01 per diluted
share, compared with Adjusted Net Income(A) of $1.9 million
or $0.02 per diluted share in Q1 2017
Consolidated revenues were down 6.4% to $73.9 million due to a $5.5
million decline in title and closing revenues, which was partially
offset by an increase in appraisal and ancillary revenues. U.S. revenues
were down 7.4% to $66.4 million from the first quarter of 2017
principally as a result of the decline in title and closing which was
partially offset by organic growth in appraisal volumes from market
share gains with new and existing clients. The decline in the refinance
mortgage originations market had a significant impact on the Company’s
title and closing revenues in the first quarter of fiscal 2018 due to
its high correlation to refinance related volumes. U.S. segment revenues
represented 90% of consolidated revenues in Q1 2018. Revenues in Canada
increased 4.2% to $7.4 million the first quarter of 2018 due to higher
appraisal volumes and foreign exchange net of lower market activity.
Net Revenue(A) decreased to $22.5 million from $26.0 million
in Q1 2017, and Net Revenue(A) margins decreased to 30.4%
from 33.0% in Q1 2017 due to changes in revenue mix between appraisal
and title and closing, as well as changes in the product mix within each
of those services lines.
Adjusted EBITDA(A) decreased to $2.4 million from $5.5
million in Q1 2017 due to a significant decline in the residential
mortgage originations market, specifically for refinance mortgage
activity, the mix of business, and higher public company costs.
(tabular amounts are expressed in thousands of U.S. dollars, unless
otherwise stated)
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Three months ended
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December 31,
2017
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December 31,
2016
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Consolidated Statement of Operations
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Revenues
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$
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73,870
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|
|
$
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78,894
|
|
Transaction costs
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|
|
51,385
|
|
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52,877
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|
Operating expenses
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20,378
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20,522
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Acquisition and IPO (recovery) costs
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(7)
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421
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Integration expenses
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50
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|
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-
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Amortization
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5,316
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5,198
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Interest expense
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156
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254
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Interest income
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(106)
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-
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Net foreign exchange gain
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(642)
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(3,741)
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(Gain) loss on fair value of warrants
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(767)
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4,505
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Re-measurement gain on previously
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held equity method investment
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(499)
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-
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Net income from equity
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accounted investees
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-
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(105)
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Loss before income tax expense
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(1,394)
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(1,037)
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Net income tax expense
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3,995
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1,248
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Net loss
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$
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(5,389)
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$
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(2,285)
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Net Revenue(A)
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$
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22,485
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$
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26,017
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Adjusted EBITDA(A)
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$
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2,391
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$
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5,495
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Adjusted Net Income(A)
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$
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1,256
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$
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1,896
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Note (A) - Net Revenue, Adjusted EBITDA and Adjusted Net Income are
Non-GAAP measures. See note A below.
Revenue by geography and service type
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Three months ended December 31, 2017
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Three months ended December 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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49,935
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75.2
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%
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$
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8,230
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87.0
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%
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$
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49,706
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69.3
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%
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$
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8,259
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86.7
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%
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Title and closing
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16,155
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24.3
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%
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-
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-
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%
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21,679
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30.2
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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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336
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0.5
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%
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1,235
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13.0
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%
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367
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0.5
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%
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1,268
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13.3
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%
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Revenues
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$
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66,426
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100.0
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%
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$
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9,465
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100.0
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%
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$
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71,752
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100.0
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%
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$
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9,527
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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 first quarter
ended December 31, 2017.
Conference Call and Webcast
A conference call to review the
results will take place at 10 a.m. (ET) on Tuesday, January 30, 2018,
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: (866) 393-4306
-
Participant International Dial-In Number: (734) 385-2616
-
Conference ID: 4699024
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.
(A) Non-GAAP Measures
Real Matters prepares its
financial statements in accordance with International Financial
Reporting Standards ("IFRS" or “GAAP”). However, the Company considers
certain non-GAAP financial measures as useful additional information in
measuring its financial performance and condition. These measures, which
the Company believes are widely used by investors, securities analysts
and other interested parties in evaluating our performance, do not have
a standardized meaning prescribed by GAAP and therefore may not be
comparable to similarly titled measures presented by other publicly
traded companies, nor should they be construed as an alternative to
financial measures determined in accordance with IFRS. Non-GAAP measures
include “Adjusted EBITDA”, “Net Revenue” and “Adjusted Net Income or
Loss”. See "Non-GAAP measures" in Real Matters’ MD&A for the quarters
ended December 31, 2017 and 2016 for a more complete description of
these terms.
Adjusted EBITDA
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Three months ended December 31
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|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
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|
Net loss
|
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$
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(5,389)
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|
$
|
(2,285)
|
|
Stock-based compensation expense
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|
|
284
|
|
|
-
|
|
Acquisition and IPO (recovery) costs
|
|
|
|
(7)
|
|
|
421
|
|
Integration expenses
|
|
|
|
|
50
|
|
|
-
|
|
Amortization
|
|
|
|
|
5,316
|
|
|
5,198
|
|
Interest expense
|
|
|
|
|
156
|
|
|
254
|
|
Interest income
|
|
|
|
|
(106)
|
|
|
-
|
|
Net foreign exchange gain
|
|
|
|
(642)
|
|
|
(3,741)
|
|
(Gain) loss on fair value of warrants
|
|
|
|
(767)
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|
|
4,505
|
|
Re-measurement gain on previously held
|
|
|
|
|
|
equity method investment
|
|
|
|
(499)
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|
|
-
|
|
Net income from equity accounted investees
|
|
|
-
|
|
|
(105)
|
|
Income tax expense
|
|
|
|
|
3,995
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|
1,248
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|
Adjusted EBITDA
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$
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2,391
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$
|
5,495
|
Management typically calculates Adjusted EBITDA as follows:
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|
Three months ended December 31
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|
|
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|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
$
|
73,870
|
|
$
|
78,894
|
|
Less: Transaction costs
|
|
|
|
51,385
|
|
|
52,877
|
|
Less: Operating expenses
|
|
|
|
20,378
|
|
|
20,522
|
|
Add: Stock-based compensation expense
|
|
|
284
|
|
|
-
|
|
Adjusted EBITDA
|
|
|
|
$
|
2,391
|
|
$
|
5,495
|
Net Revenue
|
|
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|
|
|
Three months ended December 31
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
$
|
(5,389)
|
|
$
|
(2,285)
|
|
Operating expenses
|
|
|
|
|
|
20,378
|
|
|
20,522
|
|
Acquisition and IPO (recovery) costs
|
|
|
|
|
(7)
|
|
|
421
|
|
Integration expenses
|
|
|
|
|
|
50
|
|
|
-
|
|
Amortization
|
|
|
|
|
|
5,316
|
|
|
5,198
|
|
Interest expense
|
|
|
|
|
|
156
|
|
|
254
|
|
Interest income
|
|
|
|
|
|
(106)
|
|
|
-
|
|
Net foreign exchange gain
|
|
|
|
|
(642)
|
|
|
(3,741)
|
|
(Gain) loss on fair value of warrants
|
|
|
|
|
(767)
|
|
|
4,505
|
|
Re-measurement gain on previously held
|
|
|
|
|
|
|
equity method investment
|
|
|
|
|
(499)
|
|
|
-
|
|
Net income from equity accounted investees
|
|
|
-
|
|
|
(105)
|
|
Income tax expense
|
|
|
|
|
|
3,995
|
|
|
1,248
|
|
Net Revenue
|
|
|
|
|
$
|
22,485
|
|
$
|
26,017
|
Management typically calculates Net Revenue as follows:
|
|
|
|
Three months ended December 31
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
73,870
|
|
$
|
78,894
|
|
Less: Transaction costs
|
|
|
51,385
|
|
|
52,877
|
|
Net Revenue
|
|
|
$
|
22,485
|
|
$
|
26,017
|
Adjusted Net Income
|
|
|
|
|
|
Three months ended December 31
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
$
|
(5,389)
|
|
$
|
(2,285)
|
|
Stock-based compensation expense
|
|
|
|
|
284
|
|
|
-
|
|
Acquisition and IPO (recovery) costs
|
|
|
|
|
(7)
|
|
|
421
|
|
Integration expenses
|
|
|
|
|
|
50
|
|
|
-
|
|
Amortization of intangibles
|
|
|
|
|
4,890
|
|
|
4,814
|
|
Net foreign exchange gain
|
|
|
|
|
(642)
|
|
|
(3,741)
|
|
(Gain) loss on fair value of warrants
|
|
|
|
|
(767)
|
|
|
4,505
|
|
Re-measurement gain on previously held
|
|
|
|
|
|
|
equity method investment
|
|
|
|
|
(499)
|
|
|
-
|
|
Related tax effects
|
|
|
|
|
|
(1,371)
|
|
|
(1,818)
|
|
Impact of the statutory income tax rate change (U.S. tax reform)
|
|
|
4,707
|
|
|
-
|
|
Adjusted Net Income
|
|
|
|
|
$
|
1,256
|
|
$
|
1,896
|
|
Weighted average number of shares outstanding (thousands), diluted
|
|
|
92,084
|
|
|
82,760
|
|
Adjusted Net Income per share, diluted
|
|
|
$
|
0.01
|
|
$
|
0.02
|
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
future results. 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 and these
forward-looking statements can be found in the Annual Information Form
dated December 27, 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 under the heading “Important Factors Affecting Results
from Operations” outlined in the Strategy and Outlook section of the
Company’s MD&A for the quarters ended December 31, 2017 and 2016.
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.
About Real Matters
Real Matters is a leading network
management services provider for the $16 billion 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 more than 60 of the top 100 mortgage lenders in the
U.S. and some of the largest insurance companies in North America. We
are a leading independent provider of residential real estate appraisals
to the mortgage market and a leading independent provider of title and
mortgage closing services in the U.S. Established in 2004, Real Matters
has offices in Buffalo (NY), Denver (CO), 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/20180130005505/en/
Source: Real Matters Inc.