This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk06: Good morning and welcome to the Box Tour Earnings Conference. My name is Brandon and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, during which you may dial 01 if you have a question. Please note it is 01, not star 1. As a reminder, this conference is being recorded. I will now turn the call over to Jordan Ross, Chief Investment Officer. You may begin, sir.
spk01: Good morning, everyone. Thank you for joining us for the Voxter first quarter earnings call where we will discuss our financial results for the period ended March 31st, 2022. Please note that our results were released yesterday, May 30th, after the market closed and can be accessed on SADAR or on our website at voxter.com. Joining me today are Executive Chairman Gary Yeoman, CEO Jim Albertelli, and CFO Angela Little. We will begin with prepared remarks and then move into Q&A. If we are unable to get to your question, you are always welcome to contact me directly at jordan.voxter.com. Angela Little will start by going over the financial results. Gary Yeoman will then present our strategic vision and initiatives for 2022 and their updates. Finally... Jim Albertelli will provide an update on how we are achieving our goals through organic growth opportunities and operational efficiencies. Before we get started, please be advised that some of the information that we will share on this call may contain forward-looking statements. We caution you not to place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in our expectations. Further, on today's call, we will report using both IFRS and non-GAAP financial measures. We use these non-GAAP financial measures internally for financial and operational decision-making purposes, as we believe that they provide a meaningful measurement of financial performance and valuation. These non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with IFRS. To see the reconciliation of these non-GAAP measures, please refer to our press release distributed yesterday, May 30th, and our management's discussion and analysis, both of which are available at sadar.com and on our website at voxter.com. A replay of today's call will also be posted on our website. Finally, please note that all references to amounts or currency during today's call are in Canadian dollars unless otherwise stated. I'll now turn the call over to our CFO, Angela Little.
spk03: Thank you, Jordan. Good morning and thank you everyone for joining us. 2022 is off to a great start for our company. We continue to reinvest in the company as well as execute against our strategic growth initiative and are pleased to report that revenue and gross profit have continued to increase quarter over quarter and year over year. Q1 2022 revenue was $40.8 million, which represents 182% increase over Q1 2021 and a 5% increase over Q4 2021. Q1 2022 gross profit was $13.9 million, representing a 93% increase over Q1 2021 and an 11% increase over Q4 2021. Q1 2022 revenue and gross profit increased over Q4 despite the normal seasonality in the title and valuation market, as well as interest rate increases illustrating the company as rate agnostic as those impacts were offset by increases in default title and valuation, as well as increases in HELOC activity. We expect to continue to see increases in these areas, particularly in Q3 and Q4 of 2022. Revenue from U.S. operations represented approximately 96% of total revenue for Q1 2022. up from approximately 87% for Q1 2021 and 94% for Q4 2021. This is a result of our continued expansion into U.S. markets following the Apex, Docter, ANOW, Zoom, and Finitech acquisitions. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $32 million, leaving the company well-positioned to continue executing on its strategic growth plans. For 2022, our focus continues to be on revenue growth. As I already noted, we can expect continued growth from default title and valuation and HELOC activity. We also expect increases from Benutech and our other SAS offerings, as well as new product offerings, including the attorney opinion letter, real property tax analytics enhancements, and Boxster wealth. These increases will primarily be in the third and fourth quarter of 2022. As a result of the increases in revenue combined with efficiencies and synergies gained from the investments made over the last year, we anticipate positive EBITDA during the latter part of 2022. With regard to the 2022 guidance, we are confident both the revenue range of $170 to $190 million and the gross profit range of $87 to $97 million are appropriate based on our Q1 results and anticipated projections for the remainder of 2022. I will now turn the call over to our Executive Chairman, Gary Yeoman, to provide additional guidance as to the company's strategic focus for the remainder of 2022.
spk05: Thank you, Angela, and good morning, everyone, and thank you for joining us. The material investments we have made in the first quarter are in flight. As we leverage our investments in human capital, technology, and infrastructure, we remain focused on SaaS-based solutions. From the beginning, Voxer has targeted accretive acquisitions with a focus on data as a foundation for tools that can reduce costs and inefficiencies in real estate transactions. A few constant pillars remain at the core of our playbook. We look for opportunities to grow organically within each business unit. You've watched as we've worked to strategically integrate our acquisitions with existing technology to expand our footprint within each client base. Positioning is another key growth strategy as we continue to build, scale, and drive growth in our core business units, valuation, tax, and title. We continue to refine our business model and invest accordingly, asking which products are best suited to drive our multifaceted growth plan. This, together with our investments in data, enable us to continually expand our capabilities to meet client needs in a changing market. We remain steadfast in our commitment to reduce the cost of home ownership. This is evidenced by our Boxer AOL platform, which combines sophisticated title processes with legal expertise to create attorney opinion letters with accuracy and scale. This alternative to title insurance offered at a fraction of the cost directly for the benefit of the consumer is gaining traction quickly with lenders of all sizes. Further, we are expanding our real property tax analytics product capabilities by leveraging a proprietary algorithm built on 40 years of historical data to generate comparison modeling. We combine Voxer verified data attributes, mapping, imagery, and census data with local assessment data to analyze property values and verify taxes. Finally, we have accelerated the development of our Boxster Wealth Platform to create an asset management tool to facilitate more intelligent management of real estate assets. Every facet of the client's real estate investment will be transparent and Boxster verified. As we continue to integrate our acquired businesses with our organized business, we are seeing substantial efficiencies and strategic synergies resulting from operating on a single platform. We will continue to focus on capturing market share and improving our SaaS-based applications even further. We are confident in our ability to sustain strong growth and long-term profitability. Our previous guidance implies a profitability improvement in the second half of the year, which we expect to adhere to. I will now turn the call over to our CEO, Jim Apertelli, to highlight our execution and operational strategies. Jim?
spk07: Thanks, Gary. Good morning, everyone, and thank you for joining us. Our first quarter results are indicative of our continuing investment in the market opportunities ahead of us. With that, the current environment necessitates continued discipline and we are actively evaluating our priorities to ensure that we scale sustainably and efficiently. We continue to look for efficiency gains across the organization as we remain focused on areas that drive growth and have a proven return profile. Our strategic focus on growth through Increased market share is evidenced by new partnerships and investments in infrastructure. Our partnerships allow us to concomitantly expand our expertise and our product offerings. This organic growth strategy, which includes scale-based leverage, balanced unit economics, and methodical asset utilization, will allow us to grow efficiently and profitably. Additionally, we continue to refine our strategy with the upcoming launch of our Voxter AOL. As you know, our AOL, as an alternative to title insurance, has been approved for use by both Fannie Mae and Freddie Mac. As agency acceptance becomes more widespread, we see more opportunities for increased market share through organic growth and partnerships. Since our last earnings call, we've been actively engaged with our lending partners, fielding inquiries and guiding Tier 1 and Tier 2 lending institutions through the Voxer AOL onboarding process. We are also leveraging relationships across the enterprise to build a robust distribution network. As Gary mentioned, we intend to launch two new platforms. First, we will deploy Real Property Tax Analytics, RPTA, in the United States as a tool for consumers to determine whether their taxes are too high or too low and by how much. We anticipate that this will bring unexpected transparency to taxation as Voxter facilitates consumer appeals through data by assimilating and normalizing historical data from multiple sources, BoxSoup can provide lenders, investors, and homeowners with unprecedented insight into their most significant home operating expense. This offering will open the door to new lending standards as mortgage servicers will have to do a proper data-driven comparison to choose the best line of sight on one of the largest expenses being carried on their books. We see this as an exciting opportunity. Second, Boxster Wealth is an aggregation of various data elements that we assemble in our normalized data mesh architecture directly for the benefit of the homeowner. It's another cloud-native technology that combines all of the real property data in one location to allow wealth advisors and consumers to manage their highest value assets. Each of these three transformative platforms marks a significant milestone in the Boxster story. Boxster continues to invest in solutions to serve our consuming constituencies. financial institutions, mortgage servicers, mortgage investors, taxing authorities, and ultimately consumers. Finally, we see the default business ramp finally ramping up. This increase in our niche business gives us unique insight into the business of originating and servicing mortgages, which in turn allows us to better address the issues that each servicer, lender, and investor faces. Boxster continues to instill confidence through its partnerships, allowing continued growth in this business line. Borrowers across the United States saw a gain of over $3.2 trillion in equity in 2021 alone, according to CoreLogic. And with a hot housing market driving up home prices, many homebuyers or homeowners are finding themselves with increased equity. As a result, we also expect to see growth in home equity as borrowers adjust for inflation. We will be prepared to serve this market as well as with products that are currently in production. Financial institutions see value in technology and innovations. Boxer is quickly becoming one of the most trusted providers in the space. We are well positioned to continue providing intelligent data-driven solutions that will flourish with the macroeconomic tailwinds. And we will continue our mission to make home ownership more affordable. The opportunity before us is significant and we look forward to achieving our goals that we have set forward for 2022 and beyond. Thank you for joining us on the call today. We're appreciative of your time and your interest. We'd be happy to answer any questions that you may have at this time. I'll hand it over to the operator to start the Q&A. Thank you.
spk06: Thank you. We will now begin the question and answer session. If you have a question, please dial 01 on your touchtone phone. If you'd like to be removed from the queue, please dial 02. If you're on a speakerphone, please pick up your handset first before dialing. Once again, if you have a question, please dial 01 on your touchtone phone. And from Laurentian Bank Securities, we have Lee Chen. Please go ahead.
spk09: Hi, good morning. Good morning, Lee. A quick question for me. I believe you guys briefly mentioned this earlier on. So when looking at the current cycle with regards to the inflationary and interest rate environment, can you provide more color as to how the velocity of home ownership transactions could evolve and how that could impact launchers' business from here?
spk05: Sure. I'll take that question. I mean, it's really, really important to look at our four main business operations. First of all, let's look at our tax platform. Everyone knows that there are two certainties in life, death and taxes, and taxes don't go away no matter what the price is. So having this new offering, Real Property Tax Analytics, new offering in the U.S., that is, we've been providing this in Canada for some time now, It is basically anti-cyclical. We will be there in good times and we'll be there in bad times. One thing you can't avoid is taxes and what we want to do is bring certainty to the integrity of that amount. So that's a nice anti-cyclical offering that we have. The other anti-cyclical offering that we have is the asset management piece. With our programmatic asset management platform, We'll have the ability to provide certainty and cost savings in the management of those assets. Again, anti-cyclical. In operating a house, you need to deal with taxes. You need to deal with mortgage payments. You need to deal with grass cutting, snow removal, pest control, pool service. You need to deal with insurance. You need to deal with if you're buying or selling a property. or you're managing opportunities for mortgage renewals. All of that has nothing to do with inflation. It is anti-cyclical, and that brings a consistency in our valuation. Now, with the other two offerings, with Jim and Stacey's new product attorney opinion letter, obviously the number of transactions will change with the advent of interest rates. But what is important in our view is that By us being able to provide a new title alternative, which basically may constitute as much as 50% or more in savings on that title, we think market penetration will more than offset any decline in the number of transactions that take place. We also think that that holds true with our valuation. As everyone knows, Fannie has talked about the intervention of the new desktop valuation platform. Desktop valuation platform is going to reduce the number of requirements for the appraiser to sign off. What does that mean? It means our digitized appraisal valuation process will climb to the top of the ladder. Also, which goes without mentioning, they're also now going to require sketches, and in addition to sketches, some kind of augmented floor plan layouts. We have the number one sketch mobile application in North America. It's been around for 40 years. It is ANSI certified. We believe that we carry the largest repository of sketches in North America. The, the advent of this digitized valuation process which originally started with our a now acquisition and in basically augmenting that with the sketch which we have generated from our apex. You know, company combining those two together. We think it's going to separate us. So what we have is two businesses. So we're going to get increased market penetration to offset any cyclicality in the decline, and two businesses that are anti-cyclical total because taxes and asset management are not affected by that. Perfect.
spk09: That's it for me. I'll turn it back. Thank you. Thank you.
spk06: From A Capital, we have Christian Skro. Please go ahead.
spk04: Hi, good morning, and thanks for the update. As I think of the gross margin expansion through the year, Are there ways you're thinking about expanding margins across segments such as Zome or the settlement services? Or do you think a lot of the margin expansion, say into Q4, will that come from new solutions under the business?
spk05: Andrew, do you want to address that?
spk03: Sure, I'm happy to. Thanks for the question. Yeah, we are obviously in Q1, we have seen margin expansion from Venutech, which we acquired in December 2020. As we look through the remainder of the year, we do expect increases from the consolidation of valuation, our ANAL SaaS-based product, gaining efficiencies across the rest of the valuation platform, as well as expansions in some of our other SaaS businesses and expansions from some of the activity that Gary just discussed in AOL, enhancements to the real property tax and our real wealth product.
spk05: So, Christian, I was just going to say, to bring a little bit more clarity, we expect with our SaaS-based products that we're going to have margins that are going to be north of the gross margin, north of 80%. And in most cases, profit margins, it'll be north of 70%. So, you know, as the increase in those new products, you know, start taking place, and you're going to see an acceleration in our gross margin, hence when we gave our... you know, our forecast with respect to revenues and profit margins. All of that was modestly included in the enhancement of the new offerings that are coming out.
spk04: Okay, perfect. And the mix will drive a lot of the expansion through the year. I'll ask one more question. It's related to one of the products, to the AOL product. Just looking for maybe more candid commentary from what Jim spoke on earlier. like in your conversations with tier one and two lenders, just wondering from your seat while you're here in the marketplace, their appetite, you know, for moving over from traditional insurance products and maybe as a last question, you know, what catalysts we can look out for as you guys keep us updated through the year.
spk07: Yeah, sure. So this is Jim Albertelli. So I've been in personal contact with five of the top 10 lending institutions and we've fielded inquiries from, I want to say nine of the top 10 lending tier one lending institutions in the United States around the product offering. As you know, the onboarding process does take some time. The education process takes some time. So the first, I'll say the first half of this month was really spent with the GSEs having direct conversations that we were facilitating so they could get the lay of the land. At this point in time, now we're beyond that. We're in the contracting phase with several lenders. Think about the increase in rates as being a great catalyst and a tailwind for Boxster in two regards. One, the reduction in the cash-out refinance business and the limitation on supply means that every loan is that much more important, whereas the past two years they were drinking out of a fire hose and really there was no appetite, interest, or inclination in innovations. quite frankly. If they would have, they would have taken their eye off of a unique market opportunity. All that's changed, and that change has been accelerated. We're looking at at least two additional interest rate increases, I believe, to continue to tamp down on inflation. And certainly supply-side economics aren't going to change that in the near term. So from our vantage point in the conversation with the lenders, becoming more competitive on a per-unit basis by being able to disclose the which is oftentimes more than $1,000 delta in the expenses around a closing, it's pretty compelling. And so with the market tightening up, where you're seeing a number of lenders doing wide-scale layoffs, they're trying to staunch their flow of talent at the same time as increase the consumer's wallet share or retain the clients that they have in their servicing portfolio. And to do so, they need more competitive products. And that's where the AOL comes into place that Additionally, several lenders are under different forms of consent orders, as you can imagine, with various regulatory bodies in the U.S. Some of those are necessitating a refinance of large tranches of their portfolio for disaffected and minority borrowers. And as such, the AOL provides tremendous opportunities, since they'll be paying the closing costs, of reducing that cost profile and being more effective. So that's what's transpiring today. I expect that the contracting process will be resolved and the distribution network. We've signed a number of large providers of settlement services in the country to confidentiality agreements. We're in the process of looking at who the top one or two or three providers might be. that can help us distribute the product at scale, um, that have considerable market share and have the same approvals or, or, uh, complimentary approvals to Boxster. And so we, we see all of those factors coming together in, um, you know, throughout, uh, June and, and, uh, into July and starting that production, um, in earnest. And then it'll be, it'll be really a rampant scale exercise. But I think we've got a, we've got a, at least a two, if not three-pronged attack at scale, internally and externally. So I think we're well positioned for that Q3, Q4 growth targets that we're highlighting.
spk04: That's a lot of helpful color, Jim. Thanks for taking my questions this morning. You're welcome.
spk06: From Garrison Creek, we have Colin Fisher. Please go ahead.
spk08: Morning, everyone. Morning, Colin. I have a couple of questions sort of in a few different orders. Obviously, in the MIC that came out recently, there is talk about a 20-to-1 consolidation. Is that in preparation for an uplisting, and will you require something that extreme in the 20-to-1 consolidation?
spk05: Right. Well, yes, it is, Colin, as far as with respect to proposed uplisting. Obviously, we're, you know, completing our prospectus and are circular and ready to make application for an up listing, which will take a little bit of time because we haven't filed a prospectus before. But we were advised by our large institutions that are leading this exchange that we have to go to the shareholders and we have to get permission to consolidate if it is necessary. So their advice was keep it as high as you can. Knowing full well that there will be an abundance of changes, hopefully in a much more positive way as far as our revenue and profits increase, so will our share price. And so it gives us complete flexibility on what that consolidation, if any, is needed. So it is not saying that we're going to do a 20 to 1. What it is saying is giving us total flexibility so that we can evaluate what the market conditions are, test the waters as far as what would be the most soluble price as far as what we put on the marketplace, and then govern ourselves accordingly. So it's just, you know, it's a caretaking, safekeeping measure so you don't have to go back to the shareholders again.
spk08: Understood. Is there any contemplation of doing TSX prior to a US listing, or would you do them concurrent still?
spk05: Yeah, it'll be a dual listing, but we suspect, and again, I don't have certainty, but we suspect that the TSX listing will come first. given there'll be less scrutiny since we're already on the venture and the US listing would take a little bit more time because obviously we're not on a major scheme in the US right now. And so they're reviewing all of our acquisitions, our circulars, the prospectus, all of that is going to take some time and hopefully not as much as one might think. So we believe strongly that the opportunity to be able to explain software as a service offerings, to be able to have that opportunity to expand it to a larger customer base, including pension funds, as well as retail and others, It's extremely important. And as you know, I mean, there's a number of indexes out there, whether it's the Bessemer Cloud Index Fund or whether it's Software Equity Group. When you go to those publications and you take a look at what software as a service providers are trading at, We believe that we, as a company, given our offerings that we not only have, but the new offerings that are out there, we believe that we have all the indications from revenue growth, increase in profit margins, profitability that will put us in a strong position in the third and fourth quarters. And profit margins, obviously, will all increase in a material way as we go through the year. And we think that having that understanding of who we are and what we're doing, and expanding that to a larger base, including the U.S., of course, will manifest itself into, you know, hopefully better multiples as far as what we're trading at right now.
spk08: Okay. Cheers. The other question I have is share-based compensation. That seems to be fairly consistently high on the financials. Is that a permanent fix or is this mostly a function of the acquisitions.
spk05: It's more a function of the acquisitions, Colin, that we've had to, you know, obviously when you're putting together acquisitions, there's a lot of variables when it comes to getting people across the line and over the table. And one of the key things is basically key employee retention. And so the issue of restricted share units is a key, you know, retention opportunity for us. We believe that you're going to see a significant leveling off of that, but never will it disappear because if we do an acquisition, not only the ability to take advantage of the synergies with the technology that we're acquiring, but making sure that the brains behind all of that is that we got that knowledge retention as well. That will always be used as a tool but more so because, you know, we have been fairly prolific in our acquisitions over the last year, and so I think it's more an anomaly than a rule.
spk03: Gary, I can provide a little for 2022 if you'd like. That number is sort of front-loaded in Q1, just how the grants and the vesting took place, and it will go down considerably for Q2, and then it will go down again for Q3 and Q4 based on what's currently out there.
spk08: So that's based on just what you see now without any further acquisition. I mean, another acquisition would change that, obviously.
spk03: That is correct, yes.
spk08: Okay. Angela, while I've got you, the other questions I have are sort of around the cash flow from operations and the day sales outstanding. The cash flow from operations seem to be getting more materially impacted by many non-cash elements. I think out of the $11 million... operating loss, about $8 million, round numbers, was from non-cash operating or non-cash items. Is that going to be getting partially corrected by the share-based compensation issues?
spk03: That will be part of it. Q1, also from a timing perspective, does have more expenses, some of them adjustments to EBITDA than some of the other quarters. The amortization that you see in that add-back, that's going to continue just based on the acquisitions and the intangibles, but I do think you'll see some improvement in some of those other areas.
spk08: In terms of the intangibles, is that basically on a 10-year even straight-line amortization?
spk03: For the most part, yeah. We look at each acquisition, obviously, on its own and do a fair value and a purchase price allocation analysis, but that's a fair average for the consolidated.
spk08: I've been noticing that day sales outstanding has been lengthening. Is that any particular business that's driving that, or is that just a market function, or what's driving the DSO?
spk03: You're speaking of the accounts receivable? yeah day sales outstanding yeah yeah some of that some of that is going to correct itself in q2 we are expecting um for the accounts receivable to go down quite a bit we're going to be collecting on some of the related party balances um so i think you'll see a big improvement from q1 to q2 okay i was going to ask you about that ar stuff um i know this is a
spk08: tricky thing, but I know you cured it in the past and you have a great relationship with BMO, but you have another debt covenant breach. We do. Do you expect that to solve quickly as it did the last time?
spk03: I do. I expect it to be solved for Q2. As you mentioned, BMO has obviously been a great partner to us and continues to be a great partner. We are in the midst of revising the loan covenants for through the rest of this year. So I expect we will be in compliance for Q2. We won't have a need for a waiver, and we should be good through the end of the year.
spk08: Okay, that's great to hear. The other question I have is gross margin looks like it's back. So, you know, you had decent margins last year, sort of early just after the acquisition. It started to trend down a little bit, and then you had the ZOM acquisition that materially impacted it. It's expanded again, which is great to see. I've run some sensitivity analysis, but is it basically that the new business as it expands? So I did a simple math, which was a million bucks of around 80% gross margin gives you about a 1.23% increase in gross margin. Is that roughly what we're seeing? Is it just your marginal businesses now just coming in at significantly higher margins and the core businesses dragging it back? And by core, I'm sorry, not core, but legacy business like a zone is the primary drag on it at this point?
spk03: Yeah, and I think back to Gary's point, I mean, obviously our focus is on the more SaaS-based products and transitioning to that model. So, you know, you're right, the traditional evaluation and, you know, the acquisition of Zoom clearly had an impact. As we move forward and, you know, we had the Venutech acquisition in December, so that's certainly helping. And, you know, we continue to look for ways to enhance those SaaS-based offerings. AOL will be an example. as well as the additional tax products. So I sort of echo what Gary's already said. I think by the back half of the year, you're going to see that improve quite a bit.
spk05: Yeah, Colin, if I can just expand on that a bit. We basically, we have merged all of our valuation offerings into what we call Voxer valuation. And if you explore what's happening in the marketplace today, especially with the ad bet in July of of Fannie bringing on the new desktop valuation protocol. What you're going to see is a really, really nice mix for us because traditional valuation is not going to go away. It's going to be here to stay. How quickly the transition into a digitized valuation platform with the sketches and that is yet to be determined, but clearly what you have to offer is both. And so ANOW is way ahead of its time, but that full digitized platform along with an insurance wrapper around that we think is going to be extremely prolific. And then when you add on our repository of sketches with a floor plan layout, you put those two together, we think we're in rarefied air, and we think we're going to complement nicely with the existing zone traditional valuation process. So we'll be able to offer both. In addition to that, you have other alternative valuations like broker price opinion, evaluations, et cetera, that are also notably higher margin of business. So I think that, you know, come July and the third and fourth quarters, the valuation margins will improve. Again, everybody knows if you took a look at all other AMCs around the country that, you know, their margins, gross margins are typically somewhere around, you know, 22 to 23%. You know, our blend is higher. It's going to continue to go higher, Colin.
spk08: Okay. Thank you. So, Angela, in Q1, you stated that you were on revenue target, and you've bolstered that again today. Me being moderately lazy from time to time, I took the approach of taking $170 million and divided it by four, which gave me 42.5 as the low end. You came in at 40.8. So I'm guessing, which is only 4% off, by the way, which is great. So my laziness paid off. So my question then is, do you anticipate seeing sort of a steady ramp in the revenue throughout the year? So it's not, I just assume it's four equal quarters, but I'm going to guess it has some sort of ramp built into it.
spk03: Yes, it does. So Q2, we don't really anticipate a dramatic change from Q1. It's Q3 and Q4 where I think you're going to see the most significant increases. And I think, you know, sort of the combination of The new products that we've discussed, new business, you know, we're going to have new volumes from default across the enterprise in, you know, both title, valuation, and in our default back office. I think all of those combined are going to make Q3 and Q4, you know, much better than what we've seen in Q1 and Q2.
spk08: And with that, would there be any anticipation of potentially upgrading guidance when you get greater vision on Q3?
spk03: Potentially. I think, like I said, we're not really expecting Q2 to be dramatically different from Q1, so I think we would want to wait and get a little more clarity on how quickly some of those new products come on and then also how quickly – some of the default work shows up. So I think there's opportunity, but at this point, I wouldn't want to commit to a firm date.
spk05: And Colin, you also realize, Colin, I was just going to say, you also realize that sometimes we're loathe on providing guidance because what we want to do is we want to over-deliver and under-promise. But the reason that we issued it is that we didn't want the market to anticipate that we're another $100 million a year revenue business. And so we felt very comfortable. We think that the upside in the new product offerings is substantial. And the only question is, is that how quick will it start penetrating in the third and fourth quarters? But, you know, we're very confident with respect to what the growth is going to look like and what the total addressable is. So we think our upside is unlimited. but we also want to maintain somewhat of what we call humbleness in our approach to providing guidance, but we thought we had to do something given that based on our pricing and that, we didn't think that the market truly anticipated us generating that 170 to 190 guidance, so that's why we issued it.
spk08: Okay. One question around the Are you guys seeing any or do you anticipate seasonality within the numbers? Or are the businesses so disparate that you don't expect seasonality to be material through your numbers?
spk05: Well, like I said at the offset, I think there was a question asked earlier about cyclicality and cyclicality and seasonality. You know, although they're not the same, there's some to each other. Tim, maybe I'll just turn it over to you, and you can talk about seasonality issues, and we can go from there.
spk07: Yeah, happy to do that. There's just so much upside for the Voxter businesses that the net effect, which you normally see in a business, you wouldn't see the growth in Q1 over Q4, right? You know, and what you're really seeing now is that we have the benefit of, you know, the default title, the default valuation technologies that are in place, taking some of that what wouldn't be normal seasonality out of if you were just all on origination business. But then at the same time, you know, I don't see Q4 seasonality being a major impact from the standpoint of our global business because, you like we mentioned, I think, on the last earnings call and certainly echo it again today, that a lot of the auditing of the portfolios that was necessitated after the moratorium or the moratoria really was multiple in place. As a result of that, some of that is just going to come off in June and July and really give us some good tailwinds. So where we might Where you might, if you were in the standard business and you had no new product offerings, you might see that. If you were just in, let's say, just in purchase money mortgage, you know, obviously people don't want to move around the holidays. And so typically Q4 and Q1 are depressive. And Q2 and Q3 are creative to your business on an annual basis. I don't really see that being an impact for us. I expect the fall to come back in line. The home equity, the closed-end second mortgage business is starting, so is the home equity line of credit. I mentioned the $3.2 trillion opportunity. Our product is more cost-effective, and we have nothing in our numbers for that. So in my estimation, we should grow more. through Q3 and Q4, and you should see the results of a very – you won't see the seasonality effect, really.
spk05: And Colin, I think at this time it's also important to kind of get back to our strategy. I mean, listen, real estate is the largest asset class, and if you take all the other asset classes put together and add them up, they still don't equal the value of real estate. Right now, we've 100% focused on residential, but residential in the primary market spot. So I think that, you know, to give the listeners some kind of foresight into what else may be happening, we fully intend to be robust in the secondary marketplace as well. You know, with mortgage portfolios, they're bought and sold and transacted on the capital marketplace. We want to start participating, you know, in those offerings and using the existing technology platforms that we have. We also know that there's a whole, you know, opportunity to double our business and getting into the ICI or investment industrial commercial side, which is also potentially on our site lines as well. So, you know, not only will we be increasing market penetration through our technology offerings in the residential side, and then primary market. But we are going to get into the secondary market, and we will ultimately, you know, down the road, you know, start looking at the ICI pieces too. So we've got just unlimited growth potential with this real estate.
spk08: So with all the acquisitions that you've made, and now that the technology sector is – and a lot of layoffs are starting to happen. Are you starting to see the ability for cost control and for savings potentially on labor costs for some of your tech sector?
spk05: Yeah, well, you have to remember, four product technology offerings that are all taking place starting in the third and fourth quarter as far as revenues. That means that there was substantive amounts of labor generated on the software engineering side of our business. And so we've basically established ourselves that we wanted to be the 40-60 company. You know, 40% of all of the technology people being employees so that when the product is up and running that we maintain responsibility and the architectural freedom to be able to maneuver. And 60% is outsourced because we can get it at much more affordable rates. And so we've got considerable costs that we've inherited over the last 12 months in building these platforms and getting them completed. So I think that you're going to see natural attrition just with the advent of our new product offerings. And then, you know, obviously, we constantly have to look at austerity measures in areas that are not as profitable and lower margin business and have that transition into, you know, go to sleep at night and make money because technology is taking over. So, you know, Jim, I'm not sure if you have, you know, I want to add to any of that, but it's kind of in our wheelhouses how we're thinking on these kind of austerity measures, Colin.
spk07: Yeah, I'd say it similarly. What Gary highlighted was the amount of investment. How many companies can launch three new products or services relatively simultaneously, all creative to an overall platform effort, all took various scrums and focus for different dev teams, So there was quite a bit of labor and recruiting. Is the tech market slowing down such that we could see further reduction in costs? No, I don't think the tech market is necessarily seeing that much of a slowdown at this point. However, leveraging some of our variable costs per unit and offshore and other resources, bringing them up to speed because you have to provide a certain knowledge base for people to program, especially when they're outside of the industry. They may know code, but they have to know tax, or they have to know title, or they have to know valuation, right? So that takes a little bit of a ramp, but to Gary's point, with those platforms being released and launched and the development waning, it becomes more of an enhancement and a maintenance project. Well, then you should see some cost reduction, and obviously, With the additional sales of those platforms, you see additional revenue that's higher margins. So the combination of those effects should resonate well for you.
spk05: Hey, Colin, time is running up here, and I think that there may be one or two other questions from some other – is there anything, you know, one final point that you want to make before we – and, again, we very much appreciate your questions. Yeah.
spk08: Perfect timing. I just wanted to sort of get a, a little bit more, I don't know if you gave it enough color on Voxer wealth and then just, will there be any chances of either client announcements or some sort of, um, got, uh, you know, something that will signal to us that there is, uh, you know, before the AOL RPTA and Voxer wealth launch, uh, will there be some sort of announcements of we're going live in these markets or, and with these partners and that type of information?
spk05: We have to be somewhat cryptic, as you already know. A lot of the lenders and the clients do not want notoriety unless it directly benefits them. So we have to be respectful of our wishes. And so we have to be somewhat cryptic in that it may be a... You know, whatever. And so to the extent that clients will allow us to use it, that's fine. Others, you know, want us to be a little bit more cryptic, which we will respect. With respect to Boxster, well, stay tuned on that. We're going to, you know, we will be offering much more color on that in the future. We believe that within the next, you know, kind of, you know, 20 days, we'll have our MVP ready to launch to clients in the marketplace. And we'll have a much more robust, you know, website to detail all of that. And it's certainly a... significantly more color on the attributes of that will take place then.
spk08: Okay, that's perfect. I'll pass it on. Thank you so much for indulging me. Thank you. Thank you. Bye-bye.
spk06: Bye. From Cormark, we have Gavin Fairweather. Please go ahead.
spk02: Oh, hey, good morning.
spk06: Good morning, Gavin.
spk02: Questions for me, Amy. It sounds like there's been a lot of conversations on the AOL product with lenders. Curious what types of volumes you're discussing with those customers. Is it purchase, refi, anything else? Can you shed any light on that?
spk07: Yeah, sure.
spk02: Jim, do you want to take over?
spk07: Absolutely, I could do that. I'm happy to. Yeah, so when you're talking about volume, remember, let's take a look in relation to what we had projected. And we had looked at, you know, a 10,000 unit a month production level, you know, by the end of Q4, and then we would ramp up and we believed that we could be, modestly, but 100,000 units, you know, a month by the end of next year, right? So, you know, in the discussion with With the lenders that we're having now, it has been about scale, about ramp, and about signing up additional distribution because of the numbers that we're discussing. One top-tier lender loan has a special project, and you're looking north of 50,000 units. So pretty prolific production. I think we're still – We're still very conservative to think that we do 10,000 by the end of the year. I think we can exceed that, perhaps by a large margin. But we're looking at moving towards how do we get from today to roughly 10% of the market. And the mix, as you'd expect, is really the first batch looks like it'll be where lenders have more and more control over which is in that refinance business, which, again, we don't have a trailing history of a large percentage, so it's all growth to us, right? So we're looking at could we capture more than 10% of the transactions by the end of next year, and I think that's fair. I think that's over 100,000 units, so the lenders we're talking to certainly could support that. The second piece of it is the education with the loan officers, right? And I think there's another piece that really benefits us, which is the fair lending laws. For example, once you roll out AOL and you go to a marketplace and you offer it to one group of constituents, it's not like you can offer something else to the other folks at the same price point. In other words, there are fair lending concerns that once you provide this cost reduction to one group of consumers, it should be to all. And the second tailwind really for us that should really help us is that, you know, consumers now, even when they're in the purchase market and our product is set up and approved for purchase, both for Fannie and Freddie, in the purchase market, when you look at it, people are going out and getting those pre-qualifications. And there are even certain lenders out there that are providing like, we'll call it bridge financing. So consumers can compete against the hedge funds by having essentially an all-cash offer. There's a product out there called Cash Edge, for example. It's a nice product out there, almost like a bridge loan. Well, the AOL is primed where you get that prequalification and your costs are $1,000 or $2,000 less, then you're less likely to be steered to a captive title company or some other third parties. So I think you're going to see the combination of it'll be refinances at first. That goes right into the production model with, like I said, a tier one lender or one of the top couple of mortgage originators. You'll see that in production. And quite frankly, they need to do it to be competitive. Otherwise, they'll lose wallet share in this already tightening market. And then the second thing you'll see is is consumers becoming more educated, taking their prequalifications that they need, especially in that, I'll call it $200,000 to $500,000 U.S. range, where the hedge funds have their typical buy box. You know, these alternative products and the reduction in the closing costs should be pretty compelling for those consumers as well. Hope that helps.
spk05: And Jim, just to make sure that for everyone's benefit, when you're giving your estimates of $10,000 up to $100,000, remember that that's on a per month
spk02: transaction basis right that's correct you know that's correct i'm talking monthly units monthly units of production thank you got it and then just secondly for me it sounds like um you see default volumes kind of building nicely throughout the year can you just remind us how much upside there is to quarterly numbers uh maybe versus 2019 levels and how much torque that might be there and maybe what you've included in your guidance for that and that's it for me thank you
spk07: Yeah, I think that we're, you know, look, we've been pretty conservative on our guidance. We, you know, around the percentage defaulted, Angela can take a look at that guidance and give it to you, break down the actual percentage that's default related. But I think that at this point in time, we are, again, with that, we're fairly conservative in nature. We believe that, you know, some of the things we've talked about, the raising rate environment, and the opportunity with home equity. But on the other side, all of the, I'll say, bill collection infrastructure firing back up will result in additional defaults. And you can see that right now. I think there was an article in the Wall Street Journal recently talking about around the unsecured loans and the auto loans already seeing an uptick in default activity. Well, that's just the precursor for larger assets, right, such as homes. So I see all of those things coming together in Q3 and Q4 and be right on target with our guidance. You know, what could it mean as an impact? And again, I look at the monthly impact. You know, it could easily mean close to $750 to $1 million in net revenue towards the end of Q3 and beginning of Q4. I could see those numbers start to, again, on a net income basis, be in that range. So I wouldn't be shocked to see that. I also wouldn't be shocked to see, you know, there's some conversation about you know, different related parties, which is, again, like a laboratory for some of our technologies. And one of our technologies goes into production and was created there in the bankruptcy space for one of the three largest Tier 1 lenders. So that portends well, too, for our default business starting to crank up as far as on the revenue side. And that's over an 80% gross margin. So some hidden gems in that default analysis as well.
spk05: And, Gavin, I'm going to remind Jim that, you know, when we merged together a year and change ago, one of the things that we looked at, aside from this gem, which is the attorney opinion letter, and the more well-rounded, you know, suite of offerings that we wanted to provide our clients, was that Jim's business was a very profitable business in, you know, when normal defaults were taking place. to the tune of about a million and a half dollars a month. This was pre-moratorium. And so that was a pretty influential, you know, consideration when we did this merge was, you know, him returning to, you know, a material profitable business. And then with the augmentation of the attorney opinion letter, we thought it was a home run and that's all coming true as planned. It's the merger that we did, albeit it's taken much longer for this moratorium and the hangover of COVID, all of the thesis that we went behind and strategy that we put together in this merger, I think has turned out extremely well, both for Jim's team at the A-Law before the merger and us at iLookabout, which obviously rolled together and become Voxer. So I think everything is just coming together nicely as planned. And we expect, you know, continually improvement in our financial results because of that.
spk02: Appreciate the call, Eric. Thank you.
spk05: Thank you. Any more questions?
spk06: No further questions at this time.
spk05: Okay. Well, on behalf of everyone here at the Boxer team, we thank you all for supporting us and for following us today and your questions. And look forward, and certainly Jim and his whole team are available to to anyone at their back-end call as far as questions or answers. So thanks very much, everyone, for participating today. And we'll end the meeting. Thank you.
spk06: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for joining. You may now disconnect.
Disclaimer