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)
| Three months ended | |||||||
|
December 31,
2017 |
December 31,
2016 |
||||||
| Consolidated Statement of Operations | |||||||
| Revenues | $ | 73,870 | $ | 78,894 | |||
| Transaction costs | 51,385 | 52,877 | |||||
| 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) | |||||
| Loss before income tax expense | (1,394) | (1,037) | |||||
| Net income tax expense | 3,995 | 1,248 | |||||
| Net loss | $ | (5,389) | $ | (2,285) | |||
| Net Revenue(A) | $ | 22,485 | $ | 26,017 | |||
| Adjusted EBITDA(A) | $ | 2,391 | $ | 5,495 | |||
| Adjusted Net Income(A) | $ | 1,256 | $ | 1,896 | |||
Note (A) - Net Revenue, Adjusted EBITDA and Adjusted Net Income are Non-GAAP measures. See note A below.
Revenue by geography and service type
| Three months ended December 31, 2017 | Three months ended December 31, 2016 | |||||||||||||||||||||||||
| U.S. |
Percent- |
Canada -
expressed in |
Percent- |
U.S. |
Percent- |
Canada - |
Percent- |
|||||||||||||||||||
|
Appraisal and |
$ | 49,935 | 75.2 | % | $ | 8,230 | 87.0 | % | $ | 49,706 | 69.3 | % | $ | 8,259 | 86.7 | % | ||||||||||
| Title and closing | 16,155 | 24.3 | % | - | - | % | 21,679 | 30.2 | % | - | - | % | ||||||||||||||
| Other | 336 | 0.5 | % | 1,235 | 13.0 | % | 367 | 0.5 | % | 1,268 | 13.3 | % | ||||||||||||||
| Revenues | $ | 66,426 | 100.0 | % | $ | 9,465 | 100.0 | % | $ | 71,752 | 100.0 | % | $ | 9,527 | 100.0 | % | ||||||||||
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
| 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 | 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 | ||||||
| Adjusted EBITDA | $ | 2,391 | $ | 5,495 | ||||
Management typically calculates Adjusted EBITDA as follows:
| Three months ended December 31 | ||||||||
| 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
| 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.
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