Real Matters Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Real Matters, a fourth quarter 2020 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Lynn Beauregard, Vice President of Investor Relations and Marketing. Thank you. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to Real Matters Financial Results conference call for the fourth quarter and fiscal year ended September 30th, 2020. With me today are Real Matters Executive Chairman Jason Smith, Chief Executive Officer Brian Lang, and Chief Financial Officer Bill Herman. This morning before market open, we issued a news release announcing our results for the three and 12 months ended September 30th, 2020, as well as our new fiscal 2025 performance targets and executive leadership changes. The release, accompanying slide presentation, as well as the financial statements and MD&A are posted to the investor relations section of our website at realmatters.com. For today's question period, we ask that you limit your questions to the results. We are hosting a virtual investor day on Monday where we will be discussing our five-year strategy and new fiscal 2025 performance targets in greater detail, and you will have the opportunity to ask questions about our new targets at that time. During the call, we may make certain forward-looking statements which reflect the current expectations of management with respect to our business and the industry in which we operate. However, there are a number of risks, uncertainties, and other factors that cause our results to differ materially from our expectations. Please see the slide entitled Cautionary Note Regarding Forward Looking Information in the accompanying slide presentation for more details. You could also find additional information about the risks in the risk factors section of the company's annual information form for the year ended September 30th, 2019, and under the heading COVID-19 impact on risk factors in our MDMA for the year ended September 30th, 2020, each of which is available on CDAR and in the investor relations section of our website. As a reminder, we refer to non-GAAP measures in our slide presentation, including net revenue, net revenue margins, adjusted EBITDA, and adjusted EBITDA margins. Non-GAAP measures are described in our MD&A for the year ended September 30, 2020, where you will also find reconciliations to the nearest IFRS measures. With that, I'll turn the call over to Brian.

Thank you, Lynn. Good morning, everyone, and thank you for joining us on the call today. I will kick things off by discussing highlights from the fourth quarter before handing it over to Bill for a deeper dive into our segment financials. And Jason will wrap up the call with some brief remarks. We will then open up the line for questions. We capped off the year with another strong quarter. We generated consolidated adjusted EBITDA of $22.2 million, an increase of 57.5% from the fourth quarter of fiscal 2019. As we outlined in the news release, our US title segment continued to outperform our other segments and for the second consecutive quarter delivered higher net revenue and higher adjusted EBITDA than our US appraisal segment. Our fourth quarter results once again highlighted the operating leverage we have in the business. Consolidated revenues increased 15.9% to $124.4 million, and we generated consolidated net revenue of $47 million, up 36.6% from $34.4 million in the fourth quarter of fiscal 2019. Our strong top line growth was principally driven by the performance of our U.S. title segment, as well as moderate growth in U.S. appraisal in Canada. We continue to outpace the U.S. mortgage market in terms of growth in the fourth quarter, recording market-adjusted volume growth of 109% in U.S. title and 4.2% in U.S. appraisal due to year-over-year increases in market share and new client additions. We estimate that fourth quarter U.S. mortgage origination market volume was flat on a year-over-year basis as a 6% increase in purchase volumes was offset by a 9% decline in refinance volumes. The market decline in refinance volumes was due in part to a reduction of addressable market volumes as a result of the increased use of waivers for refinance transactions and veterans affairs volume relative to the comparable 2019 period. We estimate the average loan sizes for purchase and refinance transactions increased 35% year over year. Our estimate of loan sizes is based on internal data which reflects the composition of our customer base and will vary from external data points because of this, as larger regulated lenders have the balance sheets to fund larger non-conforming mortgages. Home equity and default volumes comprise 25% of our total U.S. appraisal volume in the fourth quarter. And so the impact of changes in these volumes on our total market adjusted growth calculation were not insignificant. We estimate that home equity and default market volumes were down 57% year over year. The impact of these volume declines are also reflected in the increase of our average U.S. appraisal transaction revenue for the period. As we continue to grow with new clients in the larger origination channel, we expect to see a continued decline in the proportion of our volumes that are derived from home equity and default. When we combine these market changes to drive our view of the total market, We estimate that U.S. mortgage market volumes were down approximately 7% in the fourth quarter of 2020 relative to the same quarter last year, principally because of the significant year-over-year decline in home equity and default volumes. Our fourth quarter results were bolstered by year-over-year market share increases with our clients across both U.S. segments, including share gains with our Tier 1 lenders and U.S. appraisals. Sustained strength in the U.S. refinance mortgage origination market also provided a healthy backdrop for the growth of our U.S. title business in the fourth quarter. We set a new record for transaction volumes in U.S. title in the fourth quarter, surpassing last quarter's records, and we went live with two new lenders. Fourth quarter U.S. title segment revenues rose 45.9% year-over-year, As you know, we calculate market adjusted volume growth based on our estimate of the total market. However, our U.S. title segment almost exclusively services refinance activity. U.S. title market adjusted volume growth for refinance only volume was 114.1% in the fourth quarter. In U.S. appraisal, revenues increased 2.7% and market adjusted volume growth for origination only volume with 7.4% in the fourth quarter. We continue to rank at the top of lender scorecards in the fourth quarter, and we launched two new clients. In our Canadian segment, fourth quarter revenues were up 16.8% on a year-over-year basis. Higher appraisal volumes due to market share gains and stronger mortgage market volumes were offset by lower insurance inspection revenues due to COVID-19. The team delivered excellent results in the fourth quarter with the vast majority of our employees still working from home. We onboarded 88 new employees in the fourth quarter and a total of 185 in fiscal 2020, principally to support the growth of our US title business. As we look ahead and focus on the long game, we will continue to onboard new employees in our US title business, creating additional capacity to support existing volumes and new client launches which we now expect will ramp at a more aggressive pace than originally anticipated. We progressively increased our title capacity over the course of the fourth quarter. We intend to maintain the level of capacity that was in place at the end of the quarter throughout the first half of 2021 with a further ramp up ahead of expected requirements coming from pipeline conversions in the second half of fiscal 2021. We expect to cross the chasm into the largest lender segment with franchise type clients that are operations focused and aligned with our performance based model. We are continuing to reallocate existing title resources to support the expansion of our centralized refinance title business. As we've said before, today's market conditions are providing a catalyst for growth in our US title segment and momentum is building. The heightened level of refinance activity has triggered the RFI and RFP process with many lenders as they look to add new vendors, and as a result, our sales pipeline is accelerating. In fact, we are actively engaged in the sales process with the majority of Tier 1s on title today. As the strong refi market is affecting each Tier 1 lender differently, we are at the contract phase with one, and others are moving up the timeline aggressively. We are confident that these engagements will result in new title client launches in fiscal 2021. We continue to believe that lender underwriting capacity remains the largest hurdle to industry growth. Although U.S. Department of Labor statistics are demonstrating signs of progress We believe that lenders remain challenged in hiring the level of loan origination staff required to support higher mortgage origination volumes on a sustained basis. Once industry underwriting capacity expands, we believe there is a large multi-year market opportunity for Real Matters that will provide a tailwind to our market share growth story. We continue to believe that we are in the early innings of a two to three year market surge even if U.S. 10-year Treasury rates increase to 1.2% and remain at those levels for the next few years. Taking a look at our full-year results, fiscal 2020 consolidated revenues increased over 41% year-over-year to $455.9 million, consolidated net revenue was up nearly 59%, and consolidated adjusted EBITDA more than doubled, to $72.2 million while consolidated adjusted EBITDA margins increased to 44.6% from 28.4% in fiscal 2019. Our strong financial performance in fiscal 2020 was underpinned by origination only market adjusted growth of 17.5% in U.S. appraisal and refinance only market adjusted growth of 59.2% in U.S. title. Looking back at the objectives we set when we went public in 2017, we achieved three of those four targets in fiscal 2020, one full year ahead of our committed timeline. We exited fiscal 2020 with 11.7% market share in U.S. appraisal and 2.4% market share in U.S. title, landing squarely in our fiscal 2021 target range for title. If you recall, we had committed to achieving consolidated net revenue margins of 35 to 40 percent and adjusted EBITDA margins of 25 to 30 percent by fiscal 2021. We reported consolidated net revenue margins of 35.6 percent for the full year in fiscal 2020, hitting the low end of the range, and consolidated adjusted EBITDA margins of 44.6 percent, well above our guidance range for fiscal 2021. As outlined in our news release, we have new five-year targets for our key performance indicators, targets which support our views of the longer-term potential of our business, the significant runway for growth ahead, and the inevitable decline of the refinance boom years out. This company is built for the long run. While we won't go into detail on the new targets on today's call, We will be discussing them in greater detail during our investor day on Monday. With that, I'll turn it over to Bill. Bill?