Real Matters Inc.

Good day, ladies and gentlemen, and welcome to the Real Matters fourth quarter and fiscal 2022 conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, November 16, 2022. I would now like to turn the call over to Lynn Beauregard, Vice President, Investor Relations, 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, 2022. With me today are Real Matters 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 months and year ended September 30th, 2022. The release, accompanying slide presentation, as well as the financial statements and DNA are posted in the Investors section of our website at realmatters.com. 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 could 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 detail. You can also find additional information about these risks in the Risk Factor section of the company's Annual Information Form for the year ended September 30th, 2021, 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 NDNA for the three months and year ended September 30th, 2022, where you will also find reconciliations to the nearest IFRS measures. With that, I'll turn the call over to Brian. Brian?

Thank you, Lynn. Good morning, everyone, and thank you for joining us on the call today. By most measures, fiscal 2022 was a challenging year for our industry. Following a period of historically low interest rates and elevated mortgage origination volumes in 2021, these last 12 months have seen the U.S. mortgage market absorb the impact of record home price appreciation, low housing inventory, and rapidly rising interest rates in the second half of the year. The result has been a steep mortgage market slowdown that we haven't experienced in several decades. Despite these unprecedented market headwinds, we continue to focus on the core fundamentals of our business in fiscal 2022 by growing market share with existing clients, launching new clients, achieving top performance on lender scorecards, and actively managing our costs. The cyclical nature of the mortgage market is nothing new to us. It's the very reason we built a business that could weather the peaks and valleys and why we prioritize long-term objectives and profitability. It's why we focus on building market share with large blue-chip clients that are driven by performance metrics and why we created a platform that would allow us to scale up and down with a lower cost to serve than our competitors. And so today, I will focus the bulk of my remarks on the fundamental drivers of our business that are germane to how we operate the business, which is what will drive our long-term success. Before we move into the review of our performance, I'd like to take a moment to recognize our team for the incredible job they've done over the course of the year to ensure our business remains on solid footing and positioned for growth on the other side of this cycle. We have excellent leaders and a strong bench with decades of experience in this industry under their belts who are aligned to our business model and our long-term objectives. Turning to our results, I'll kick things off with a review of our full-year performance, and then Bill will discuss the fourth quarter. I'll wrap things up with some brief closing remarks before we take questions. In fiscal 2022, we launched a total of 27 new lenders across all three segments, and we increased market share with our five largest U.S. appraisal clients by an average of 6%. We also marked a major milestone by surpassing 50% market share with one of our Tier 1 lenders in U.S. appraisal. Our market share gains with clients was the direct result of our performance as we continue to rank at the top of lender scorecards in both appraisal and title, expanding our leadership position. We ended the year with more than $46 million of cash on our balance sheet and no debt. We continue to focus on managing our costs in line with market volumes and keeping the business EBITDA neutral on a full year basis through this part of the mortgage market cycle. In fiscal 2022, we launched 14 new lenders and two existing clients in new channels in U.S. appraisal, including a Tier 1 lender in the home equity channel. We closed out the year with U.S. appraisal purchase market share of 4.1%, which compares to 4.4% at the close of fiscal 2021, and U.S. appraisal refinance market share of 12.1%, up from 9.9% at the end of fiscal 2021. As you know, our respective market shares will shift in line with the mix of business of our client base, some of whom have historically been more weighted towards refinance. When taking into consideration the shift in purchase market share of our clients, our purchase appraisal market share for fiscal 2022 would have been higher. U.S. appraisal purchase and refinance origination revenues were down 26% year-over-year, largely the result of an estimated addressable market decline of 32%, and other revenues were up 39%, mainly due to higher home equity volumes. As market volumes receded from last year, the platform directed more work to our top appraisers, which bolstered quality and drove faster turn times. This also allowed us to benefit from the network effect in U.S. appraisal, which increased net revenue margins to 22.1% from 21.5% in fiscal 2021, and we exited fiscal 2022 at 25.4%, which is the highest quarterly net revenue margin we've ever posted in the company's history. Over the course of the year, we actively managed our operating expenses in response to progressively declining market volumes. In fiscal 2022, we posted adjusted EBITDA of $27 million in U.S. appraisal, down from $39.8 million in fiscal 2021. In U.S. title, we launched seven new lenders in fiscal 2022, and we ended the year with U.S. title market share of 1.2% down from 1.8% at the end of fiscal 2021. Our U.S. title market share was impacted by changes in our client portfolio, as well as certain clients shutting down their mortgage operations due to market conditions for refinance mortgage origination activity. That said, our sales team continues to advance the pipeline, leveraging the home equity opportunity to expand our channels with existing clients and to win new title business. In fiscal 2022, our performance remained at the top of scorecards across our lender base. We will continue to maintain our focus on operational excellence by improving performance and closely managing our expenses through this part of the cycle. U.S. centralized title revenues were down 74% year-over-year largely due to the estimated decline in refinance market volumes of 61%. We reduced our operating expenses in U.S. title over the course of the year by 45% and we exited the fourth quarter of fiscal 2022 with a 61% year-over-year decline in payroll and related costs compared to the same quarter last year. We expect to garner the full-year impact of these initiatives in fiscal 2023. As we've said in the past, our focus remains on leveraging our current performance and home equity strategy to onboard new clients and build franchise value for the long term. In Canada, we launched six new clients in fiscal 2022. The Canadian segment revenues were generally flat on a year-over-year basis. However, excluding FX, Canadian segment revenues increased modestly on higher insurance inspection revenues. Appraisal revenues were flat year-over-year as solid market share gains were offset by significantly lower market volumes. Net revenue margins increased to 13.2% from 12.9% in fiscal 2021, exiting the year at 14.3 percent, and we posted adjusted EBITDA of $4.5 million compared with $4.8 million in fiscal 2021. With that, I'll hand it over to Bill. Bill?