Voxtur Analytics Corp.

Welcome to the Boxter Q3 2022 earnings call. My name is Richard, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press 01 on your touchtone phone. As a reminder, the conference is being recorded. I'll now turn the call over to Mr. Jordan Ross, Chief Investment Officer. Jordan, you may begin.

Good morning, everyone. Thank you for joining us for the Boxster Third Quarter Earnings Call, where we will discuss our financial results for the period ended September 30, 2022. Please note that our results were released November 29, 2022 after the market closed and can be accessed on Zadar or on our website at Boxster.com. Joining me today, our Executive Chairman, Gary Yeoman. CEO Jim Albertelli, and CFO Angela Little. We will begin with prepared remarks and then move into a Q&A. If we are unable to get to your question, you are always welcome to contact me directly at jordan.boxter.com. Angela Little will begin by reviewing our financial results. After that, Gary Yeoman and Jim Albertalli will provide updates as to how we are progressing towards our objectives through capital markets activities, organic growth initiatives, 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, November 29, 2022, and our management's discussion and analysis, both of which are available at SADAR.com and on our website at Boxer.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 will now turn the call over to our CFO, Angela Little.

Thank you, Jordan. Good morning, everyone, and thank you for joining us today. To start, I will provide a high-level summary of market conditions impacting Q3 2021. and then provide a summary of our third quarter performance. Gary and Jim will go into more detail about the impact of the current macroeconomic conditions on the company as well as the strategy for the remainder of 2022 and 2023. Q3 2022 continued to be a challenging environment for the U.S. housing and mortgage market. Interest rates increased by 75 basis points twice during the quarter, with the September increase marking the fifth rate hike of 2022, resulting in mortgage rates peaking in September and October at 7-plus percent. At the end of October, the Mortgage Bankers Association published year-over-year origination data showing purchase origination volumes down 27% year-over-year and refinance volumes down 77% year-over-year. Additionally, default rates remain historically low, ending the quarter with total delinquencies at 0.69%. In November, the Federal Reserve raised rates a sixth time. However, with recent news indicating inflation may have peaked, the last few weeks have reflected slightly reduced mortgage rates and a slight increase in mortgage applications. Despite this, year-over-year mortgage loan applications remain down over 40% and are not expected to increase significantly in the near term, as many buyers and sellers remain on the sidelines waiting to see when and where conditions will level out. With these conditions in mind, we are focused on controllable factors and continue to prioritize positive cash flow, positive adjusted EBITDA, and investments based on areas we believe will provide the greatest long-term benefits for our shareholders. I will now provide a brief summary of the Q3 results. For the third quarter, Boxster's gross revenue was $35 million, gross profit was $13.6 million, and adjusted EBITDA loss was $1.4 million. Year-to-date 2022, Boxster's gross revenue is $114 million, gross profit is $40 million, and adjusted EBITDA loss is $8.3 million. Revenue for Q3 2022 reflects a 44% increase over Q3 2021. And year to date 2022 revenue reflects a 100% increase over year to date 2021. Gross profit for Q3 2022 reflects a 42% increase over Q3 2021. And year to date 2022 gross profit reflects a 60% increase over year to date 2021. Comparing Q3 2022 to Q2 2022, revenue for Q3 decreased only 6% over Q2, even with the significant reductions in origination volumes. This is a direct result of our robust sales efforts, increasing market share in many key areas. By way of example, revenue for our valuation business decreased only 2% from Q2 to Q3 2022. Gross profit margin increased from 33% in Q2 2022 to 38% in Q3 2022. This is a direct result of an increase in SaaS revenue from valuation technology and decreases in direct operating expenses. Finally, the company ended Q3 2022 with cash and cash equivalents of approximately $29 million. For Q3 and year to date 2022, approximately 95% of gross revenue came from U.S. revenue sources. This is up from 91% in Q3 21 and 89% per year to date 21, reflecting the company's continued expansion into the U.S. market from strategic acquisitions. Revenue from software and data licenses represents approximately 19% of Q3 revenue and 17% of year to date revenue. This is an increase from 10% in Q3 21 and 14% year-to-date 21. We expect this trend to continue as we further integrate the Blue Water business. Turning to acquisitions, the company completed two strategic acquisitions in Q3. MTE was completed in July, and Blue Water Financial Technologies was completed in September. Gary will be discussing these in detail, including the synergistic opportunities and expansion into the capital markets. In connection with the Blue Water acquisition, Boxster expanded its credit facility with the Bank of Montreal. Then in October, the company completed a preferred share offering with BMO Capital Markets, evidencing the strong partnership between Boxster and BMO. Finally, and in further support of this point, BMO recently updated the company's loan covenants to reflect the changing market conditions, which have impacted original Q4 projections. BMO has provided a waiver for Q3 loan covenants and continues to work in partnership with Boxster as we navigate these unprecedented market conditions. I will now turn to the company's 2022 financial guidance. As we end 2022 and go into 2023, management's expectation is that market conditions will remain challenging. Based on current conditions and related Q4 projections, we are reducing our revenue guidance to a range of $140 million to $150 million based on revenue streams included in the original guidance. Although we are updating our guidance, the company remains laser focused on positive cash flow and positive adjusted EBITDA and increased revenue from key products, synergistic revenue opportunities from completed acquisitions, and increased market share. As we reported at Q2, the company remains focused on efficiencies and cost reductions, having executed additional cost reductions in Q3. We remain vigilant in these efforts and nimble in order to make necessary adjustments as market conditions evolve. We will continue to write sizes needed while remaining focused on efficiencies, synergies, consolidation, and process improvements. In this manner, management is looking at opportunities to shift to variable cost models where possible to allow for more flexibility and timely adjustments to market changes. With regard to strategic new products, the company has onboarded or is in the process of actively onboarding 12 new clients for our Boxster AOL product and has already begun recognizing revenue for Q4. We also anticipate new revenue from tax products in the Canadian market in early 2023, as well as the gradual return of default-driven products. I will now turn the call over to our Executive Chairman, Gary Yeoman.