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spk02: 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.
spk04: 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.
spk00: 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.
spk03: Thank you, Angela. Good morning, everyone, and thank you for joining us. I want to begin by re-emphasizing that our focus remains on leveraging our data assets through various software platforms as a foundation for reducing costs and inefficiencies in real estate transactions, ultimately making home ownership more affordable. We are proud of the advances we have made thus far, but we still have a long way to go. In the meantime, I'm pleased to discuss a few noteworthy successes from the capital markets perspective. prior to turning it over to Jim to discuss operational highlights. Early in the quarter, the company closed the acquisition of Municipal Tax Equity Consultants and MTE Paralegal Professional Corporation, which allowed for the consolidation of our largest competitor in Ontario, offering property tax analytics to municipalities throughout the country, and more specifically in Ontario. This acquisition allows us to scale the rollout and adoption of our real property tax analytics platforms. It also contributes positive EBITDA individually and incrementally and allows for additional cost synergies within our property tax business. Near the end of the quarter, the company closed the acquisition of Bluewater Financial Technologies. Bluewater is a leading provider of digital solutions to mortgage investors and lenders in the U.S. Specifically, Bluewater provides solutions for mortgage asset valuation and pricing, mortgage asset trading and distribution, and mortgage advisory and hedging. Boxster acquired the Bluewater business to diversify its revenue streams from the primary mortgage market, add an EBITDA and cash flow positive business, and create opportunity for new revenue streams for Boxster's core products and data assets. Bluewater SaaS-based solutions allow mortgage originators and investors to review their portfolios analyze transactional data in real time, which is of the utmost importance in these market conditions. Al Pareschi, the founder of Blue Water, has joined Boxster as the president of our capital markets and secondary mortgage market business. Also, in connection with the acquisition, Al and the Blue Water team have become shareholders of the company. It is important to note that the stock issued in consideration for the acquisition will be issued in installments over 16 quarters following the transaction's closing. We believe this transaction will be transformational for the company, both financially and as we continue our path to becoming a pure-play technology provider for the North American mortgage market. Lastly, I want to acknowledge and thank our partner, BMO Financial Group, for continuing to believe in our vision, which allowed us to close the Bluewater acquisition. We are all working hard to integrate our acquisitions with current Vosser technologies to create innovative solutions, add new clients, and expand wallet share with existing clients and leverage cost synergies. I'll now turn it over to our CEO, Jim Ibertelli. Excuse me, it's Gary Yeoman here, operator. I've gotten a number of texts back to say that Jim's, unfortunately, Jim's connection was hard to, well, it was just, he couldn't hear, probably kept breaking up. So I'm going to ask everyone if they'll indulge and I'll just read Jim's speech again so that the opportunity to have a clear insight into what Jim has proposed in operations. So before I discuss operational highlights, I would like to start by acknowledging that from a financial results perspective, this is certainly not where anyone thought we would be at the end of the third quarter. I am extremely proud of our team and what we have accomplished in the face of current market conditions. More specifically, I am proud of how we have come together to find innovative solutions for our clients and outperform our competitors to increase market share. Although we are relatively flat from a financial growth perspective, I consider it a success, especially compared to our peers, most of whom have seen revenue decreases of more than 50%. With unprecedented macroeconomic conditions and historically high rates, what we have accomplished is no easy feat. I want our shareholders to know that while we remain focused on strategic growth, we are prioritizing the integration and performance of our existing businesses over long-term opportunities. Further, we continue our expense realignment efforts to adapt to market expectations and client demands. As our results will indicate, this all lends itself to our focus on being EBITDA and cash flow positive. Now I'd like to share our business highlights for the third quarter. First, Bobster AOL. As you know, AOL was already a Fannie Mae and Freddie Mac approved alternative to traditional title insurance. Now it has also been approved by the VA, the Veterans Administration. This is indicative of the momentum we're seeing in the market and another example of the appetite for change in the title insurance industry. As agency acceptance continues and more and more lenders engage, Boxer's goal of creating more affordable home ownership for all Americans becomes more of a reality. We are especially proud of the opportunity we now have to help our veterans in the U.S., Although Boxer AOL continues to bring new clients and experience high demand in the market, the ramp up and implementation processes have taken longer than expected. It is important to note that this is common for a new product and typically requires dedicated resources on client lender side, which has proven difficult in a market where many lenders have been forced to downsize. Despite this, every lender that we've signed continues to forge ahead with implementation. That speaks to the viability of the product and the lender perceived need for an alternative. Additionally, the AOL is now revenue generating and we are excited to continue to grow and scale with existing and new clients. With respect to the rest of our business lines as previously mentioned, we're keeping a close eye on how the market conditions are impacting our clients and adjusting our resources and product roadmaps accordingly. Although it may appear that these market conditions are having a negative impact on our business, we are growing our market share by onboarding new clients who recognize the need for more innovative and efficient ways to do business. These clients are turning to Boxer to protect their largest revenue sources, whether that is a mortgage portfolio or property tax assessment. This market has forced our clients to take pause and review their current processes and technology stack. allowing for a more fruitful environment for Boxster to add clients. Lastly, I want to conclude by discussing our more recent and most exciting opportunity, Bluewater. It is important to understand that there is a great demand by investors to take a position on these unprecedented interest rates and investing in and acquiring mortgage servicing rights, or MSRs as they're known. They're a great way to do so. Bluewater provides access to these investors through real-time pricing, and the ability to transfer and diligence assets. The other reality is that many mortgage originators don't have the financial means to keep these mortgages on their books and are looking for ways to move these assets. Blue Water provides a cost-effective and efficient way to transact these trades. This is exactly what I mean when I say that we are bringing Wall Street to Main Street. Furthermore, Bluewater allows Boxster to diversify its revenue streams from the primary mortgage market to the secondary mortgage market, create new revenue opportunities by way of a seamless integration, and delivery of Boxster's core solutions, such as our attorney opinion letter, our appraisal review product called RACER, our other data products to enhance Bluewater's already powerful trading, pricing, and due diligence engine in real time. As we navigate this changing environment, our data-driven innovations are proving to be just what our clients need to save consumers money while increasing shareholder equity. Finally, I want to reemphasize what I've communicated to all our employees and management team. We will ultimately be judged on our performance, not our potential. As a result, we will remain focused on our profits over growth. This is what the current market demands of us, and we will respond accordingly. Thank you for joining us on the call. We appreciate your time and interest, and we're happy to answer any questions you may have at this time. I'll hand it over to the operator to start the Q&A.
spk02: Thank you. We will now begin the question and answer session. If you have a question, please press 01 on your touchtone phone. If you wish to be removed from the queue, please press 02. There will be a delay before the first question is announced. And if you are using a speaker phone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question on the line, please press 01 on your touchtone phone. And we're standing by for your questions. And our first question on the line comes from Frederic Blondeau from Montreal. Please go ahead.
spk05: Thank you and good morning. Maybe a quick question for Gary was wondering if you could give us a bit more color on the integration of blue water so far and maybe I guess as a second question, you know, what you would be expecting in terms of financial contribution of Blue water and q4 and q1 in the context of this market.
spk03: Thank you Fred I mean I'm happy to answer that but I'm going to try Jim one more time and and see if his connection is good. And if not, then I'll take over. Jim, are you hearing us okay? I guess not. So I'll take over. So, you know, obviously Blue Water, you know, is an extremely important acquisition that we did. It not only brings technology, it not only EBITDA positive and cash flow positive. But most importantly, it also allows us to bring in a lot of the due diligence opportunities in our other service offerings, whether it's in tax, title, or valuation. With respect to the future, I mean, obviously, you know, Blue Water is cash flow positive and EBITDA positive. December is never really, and November for that matter, are never really great months because you almost lose a whole week because of Thanksgiving and we almost lose a week and a half in Christmas and December. So fourth quarter is never usually a robust month only because there's lots of holidays and reduced. But having said that, we're very optimistic with respect to what Al Qureshi and his team are doing. Extremely talented. They created the marketplace for MSRs, HELOC, you know, non-QM. It's, you know, it's amazing platforms that they've done. They offer all of the solutions. And, again, we'll continue to grow. I'm hesitant right now, Fred, to say what that's going to be because, obviously, we have high expectations, but we also like to moderate. But let's just know that the acquisition that we have is not only synergistic, it's accretive, and it's technology-driven, and it will have a significant impact to our bottom line as we go forward.
spk05: Justin, I guess you took your overall revenue for 2022 from 140 to 115, if I understood well. How much contribution from Blue Water do you have in there?
spk00: Gary, I can take that one. Just to be clear, so when we set our guidance for this year, it was prior to the Blue Water acquisition being even considered, quite frankly. So just to be transparent, the updated guidance includes only the original revenue streams. We do anticipate, obviously, some additional revenue from Blue Water. There's not much in Q3 because the acquisition closed on September 20th, but it will have a meaningful contribution to Q4. We are in the process of finalizing our 2023 budget, and we look forward to providing some additional revenue guidance as we go into 2023 that will include you know complete integration of blue water so so in your in your uh expectation i guess revenue expectations for 2022 you don't have anything from blue waters that would that and resetting the original guide our original guidance was 170 to 190 so we wanted to be consistent with those revenue streams and resetting the lower guidance But, yes, we do expect it to be a little bit higher as a result of the blue water acquisition in Key 4.
spk03: Okay, that's great. Thank you. And, Fred, it's Gary. Just to be clear, I heard you say 115 instead of 150, but Angela has amended the guidance, not including blue water, from 170 to 190 down to between 140 and 150 without the blue water contribution. Okay. That's 150, not 115.
spk05: Perfect. Thank you.
spk03: Thank you. We have the next question, moderator.
spk02: Yes, our next question comes from Christian. Christian, scroll. Please go ahead. Your line's open. Hi, good morning.
spk06: I wanted to start with a mechanical question. The financial statements made reference to the notice of a potential claim. I was just light on detail, so I was wondering... what you might be able to share around that as we head into Q4 here.
spk00: Sure. Hey, Christian. Angela? Yeah. Hi, Christian. This is Angela. The company received a letter that could constitute a potential claim from a former employee. The letter was vague. However, the company is reviewing the claims as well as the letter. Just given the timing of receipt of the claims in the U.S. holidays, the auditors were unable to complete all of their procedures. Again, it's a grievance from a former employee. It's vague in its claims. And based on the investigation and the review to date, we believe the ultimate resolution will not have any material adverse effects on the financial condition, results of operations, or cash flows of the company.
spk06: Okay, thank you. That's all helpful color and context there. The next question I wanted to ask, and Fred already poked on this, but The blue water business and the secondary mortgage market business there is new to us. A lot of the current business is exposed to the primary market. So just in your view, Gary, what drives growth in the secondary mortgage market? Is it twerk to interest rates or other capital markets activity? What will make blue water perform best in what environment?
spk03: Hello?
spk02: Can you hear me now, Gary? Can you hear me now?
spk03: It's really cracking, Jim. I think it probably just won't work, unfortunately. Sorry. All right. I apologize. I apologize to everyone that it's, unfortunately, technology. You have to be adaptable. So, Christian, you know, Blue Water's business is healthy, you know, whether it's a property business on the origination site or in times like this where interest rates rise. It's even more frothy to the extent that banks need liquidity. And so there's tons of product that's coming on stream in the mortgage market. There's a little bit of hesitation with respect to people acquiring these servicing rights in that, as Angela indicated earlier, the market interest rates keep rising, rising, rising. And people are waiting for a pause to say, well, you know, at what point, you know, how do I price this? But more importantly, how do I get the returns that I'm expecting going forward? And what impact do these continuing interest rates rise? So what we're seeing right now is lots of product coming on the market. And we're also seeing that the businesses start maybe not as profit as it was, but certainly there's lots of product and lots of opportunity there. Al Qureshi is working on lots of deals right now, so we're really optimistic, you know, this is going to be very healthy for us. So what's really, really important, Christian, that, you know, another reason aside from, you know, I've told everyone that when we look at acquisitions, we have to have four main tenets. It has to be real estate, it has to have technology, it has to be accretive, and it has to be synergistic. All of those, you know, tenants have been answered with the Blue Water deal. And so, you know, we have that opportunity to be able to bring all of the service offerings because we've digitized valuation, tax, and title. And if you can imagine, every time that you're selling, you know, servicing rights, people have to review it. They have to say, okay, what is the valuation compared to the mortgage? So we have a digitized... You know, that property tax, it needs to be reviewed. You know, are the taxes paid in full? Same with flood. You know, flood reviews take place. It's very, very important in the U.S. And then from a title perspective, they need to know that they've got clear titles. So all of those things that Voxer has, we've digitized. And so it's a really, really nice synergistic opportunity to augment our existing revenue services. And most importantly, Christian, it acts as an anti-cyclicality in our business where you have seen some of our competitors where their revenues have dropped by anywhere from 50% to 85% between valuation and title. You know, we've shown that our valuation has held up strong and overall our business has held up very strong. And the reason is that we've now integrated, you know, against combating cyclicality by moving very deftly from the primary market to the secondary market. Thank you.
spk06: Our next question comes from Mario from the U.S. Please go ahead.
spk01: I have a couple of questions. So maybe the first one, probably Angela, would be best to answer. So I looked at your balance sheet for all the quarters and in the current liabilities, you have unearned revenue. And for all the quarters since December 2021, that amount is about 4.5 million. And this quarter, it jumped to 8.5 million. And if you take the difference between that, it's about $4 million. So the question is, did you have a revenue during the quarter of about $4 million that wasn't recognized during the quarter, and that's why it showed up as an increase of unearned revenue on the balance sheet?
spk00: Hi, yeah, thanks. So... twofold answer. There was some additional revenue increases in our taxation division that is project-driven and does sometimes result in deferred revenue that's recognized later. That's a small portion of it. A larger portion, probably around $3 million of it, is part of our strategy to resolve the related party AR by the end of the year. As a result of this strategy, we opted to defer the Q3 revenue. We expect to have a resolution by 1231 and have that cleaned up. So just to be conservative, we deferred the Q3 revenue.
spk01: So if that revenue was recognized, it looks to me like you would have probably shown a slight increase in revenue from quarter to quarter, and probably you would have been EBITDA positive. Am I right?
spk00: That is correct, yes. If we had not deferred that revenue, we would have been slightly EBITDA positive, and quarter over quarter, revenue would have increased 3%.
spk01: Okay, thank you for that. The second question that I have is also on the balance sheet. your current portion of long-term debt showed up at $61 million. And I was wondering why is that? Is it because of the covenants? Is this going to move back to long-term liabilities? Please help me here.
spk00: Sure. Yeah, that's a great question. Yeah, so because we were not in compliance with certain loan covenants, We are required under IFRS, even though BMO provided as a waiver of those covenants, we're still required to accelerate all of the debt to current. As I mentioned earlier, we just completed a renegotiation with BMO of new covenants, and we do anticipate we will be in compliance. So when you look at Q4 for the audit, that long-term portion will be reclassed out of current. Okay, thank you very much for this. I'm sure you've also noticed it's higher in Q3 because of the expanded credit facility put in place for the Blue Water acquisition. It was $30 million U.S.
spk01: Yeah, okay. Thank you for that. So I find it very interesting that, going back to my first question, that if it wasn't for that lack of recognition of the revenue, extra revenue of $3 million, you guys would have shown a positive revenue growth from quarter to quarter and EBITDA positive. That is pretty incredible considering how awful the real estate market is right now.
spk00: Absolutely, yeah. And I think it just speaks to what I kind of mentioned earlier. that, you know, yeah, volumes are reducing, but we have been picking up market share. You know, we are doing cost reductions where we can. We're continuing to be strategic in that in certain areas where the volumes are, you know, continuing to be impacted. But, yes, you're absolutely right.
spk01: Okay. Thank you very much. I don't have any further questions.
spk00: Thank you.
spk02: Thank you. Our next question on the line comes from Colin Fisher from Toronto. Please go ahead. Good morning, everyone.
spk07: Good morning, Colin. So a couple of questions that I think are on the burning edge of a lot of people's minds. The related party receivables, obviously it has remained high. I know that the goal was originally to have it be fully current by the end of September as per the last call. Can you give me some clarity as to what's going on there? And I noticed also that you post the quarter, there has been some additional collection of around 1.1 million based on the 9% additional collected. Can you give some clarity as to where that is? And maybe that also goes back to Maurice's question vis-a-vis the deferred revenue.
spk03: Angela?
spk00: Yeah, sure. Yeah, I mean, obviously the related party issue is top of mind for everyone. It's always a sensitive issue. We want to be as completely transparent as possible. We have made some good collections, as you noted, this quarter. We collected more than we invoiced, and we are working on a more wholesale plan for the end of the year to have that AR cleaned up. We're not really ready at this time to go into the details, but know that when we issue our audit, you're not going to see a related party balance quite that high.
spk07: Okay. Regarding the acquisitions that you do, do you capitalize all of the costs at the time of closing of acquisition, or do you expense any of those costs? or sorry, capitalize any of those and then bleed them into income costs later?
spk00: Under IFRS, we capitalize the majority of the acquisition costs as appropriate. Some items are obviously expensed, but again, we just defer to the IFRS guidance on that. Generally with the acquisitions, we record everything on a provisional basis and then do a full purchase price analysis. Some of the more complex acquisitions, we use outside consultants like DuckCroll to help make sure that we're valuing the intangibles and the goodwill appropriately. But yes, we generally follow IFRS guidance and anything that would be expensed would be backed out, backed for adjusted EBITDA calculations.
spk07: Right. And can you give some color? In the last call, you guys had referred to some of the cost controls that you guys were implementing for Q, I think they were starting in September. I'm wondering if you could give some color on that and how that's looking on a go-forward basis.
spk00: Sure, yeah, so kind of going back, we did a pretty significant reduction in force in May. We did another pretty significant reduction in force in August. Since that time, we have done what I would call more sort of strategic reductions, targeting specific businesses that have been more impacted than others. We continue to do that as we're obviously looking at our forecast You know, it's not just monthly now, it's almost daily. And, you know, so we continue to make adjustments where needed. But we're also doing other things. I mean, you know, continuing to try to integrate and consolidate the acquisitions to get efficiencies, particularly in the, you know, kind of administrative areas where you can centralize tasks. We've looked at all of our project and product development, prioritize what we think you know, in this environment makes the most sense to continue doing. And, you know, I've kind of put on hold some of the other things that, you know, we'd like to do but probably aren't in the best interest right now in this market. And we're just going to continue to do that. You know, I think we've made some really good strides in, you know, the cost cuts that we've done. And, you know, hopefully between some of the synergies and process improvements, I think we're really bridging the gap.
spk07: Can you guys give some color as to where you're at vis-a-vis breakeven or becoming profitable for Q4, or is that going to put you into Q1?
spk03: Well, I think – well, go ahead, Ange. Go ahead, Ange.
spk00: Well, I was just going to say, yeah, we are, because we, you know, the conditions obviously have been evolving so quickly. You know, we have internally updated our forecast for Q4 to reset BMO covenants. I think, you know, we are finalizing our 2023 budget. It's pretty close to being done. And then I think we'll be comfortable giving out guidance for 2023, hopefully in the near term.
spk07: And is that because the guidance you've given has dropped Q4 revenues based on previous business lines significantly. Is that primarily for covenant reasons?
spk00: Well, I think it's, you know, based on the market conditions, the volumes, you know, particularly in some of the business units like in our title area that's, you know, been more impacted from the refinance and, you know, some of the purchase origination volumes going down. You know, some of it's been timing of rolling out some of our new products. So I think it's just indicative of, you know, just the overall market conditions.
spk03: Yeah, Colin, I think the big, you know, the big impact for us is that Stacey and Jim have done a, you know, a hell of a job as far as bringing AOL online, and we have an abundance of clients that we're working through. But as you know, when you're dealing with major financial institutions, The integration and the testing and all that is moving at the pace of a slot. And so it doesn't really indicate how vibrant and robust this business is going to be. And quite frankly, you know, if we've made an overzealous, you know, position, it was in our AOL that we felt that it was going to move a lot quicker than what it was. It has moved a lot quicker in the way that we've been able to board new clients, but everything that we go through, testing and piloting and all the other things, just takes some time. I mean, one of the reasons that we, for example, bought Clare Ops 10 years ago, because we inherited 150 master service agreements. And so, you know, as most people know, logging a major bank could take up to one and a half years to get, you know, approved, you know, from a, you know, from a, you know, legal standpoint, a financial standpoint, the whole, the veracity of reviews that have to be done in order for you to, you know, you know, receive the authorization with a master service agreement is extremely robust. bringing AOL on is much in the same way, and so it's just taking a little bit longer. Otherwise, I think we would have had a knockout quarter and year end.
spk07: Thank you for that. Regarding the financial reporting, is there going to be any movement towards breaking out the different business units to give some clarity as to what's moving what? Angela?
spk00: Yeah, sure. Yeah, that is segment reporting is something that we have been discussing all year. Now that I think that we've kind of gotten through all of the acquisitions, we are analyzing what's the best way to move forward with that. And we will definitely be in the future providing a lot more data on specific lines of business.
spk07: Will you also be putting some sort of roadmap as to what you expect for future amortization and depreciation matrix so that we can get some more forward-looking guidance on that as well?
spk00: Sure, yeah. I mean, that's obviously something that we have, and we're happy to provide that as well. I know it's a significant number because of the value of the intangibles and the goodwill on the balance sheet. So, yeah, we will definitely be able to provide that.
spk07: One other question vis-à-vis the covenants. How... How material are the waivers and how difficult or easy will it be for you guys to get back on side?
spk00: Well, you know, BMO has obviously been an outstanding partner for Voxter for a very long time. You know, they have worked with us through all of the acquisitions and, you know, just sort of the evolution of the company. So, you know, it kind of goes without saying we can't thank them enough. And, you know, I think they recognize the long-term value of the company and they recognize, you know, the kind of unprecedented market conditions that are taking place right now. I think we have, you know, reset covenants recently in a very, you know, kind of reasonable and conservative manner. That should get us through, you know, the next couple of years as, you know, these conditions progress. probably continue to be challenging at least through 2023 and then hopefully start to rebound a bit in 2024.
spk03: Having said that, we have utmost confidence that our repayment of interest and principal, as we will engage in that over the course of the next, you know, 14 months, is very attainable for us, and we do believe that we'll have free cash flow after that. So we're very confident, as the bank is, in for us being able to meet our thresholds.
spk07: Okay, I'd like to move maybe to a little softer items then. Vis-a-vis the TSX uplisting, is that still on the table, or has that been deferred, or what's the plan on that?
spk03: Yeah, we're moving forward with that, Colin. We've got a few administrative details to deal with, but the intention is that as soon as possible, we'll move towards it.
spk07: And then in terms of communication, I know that there are certain criteria and limitations that you have. Will there be any sort of I mean, I think there's a big fear out in the marketplace that the next major update is going to be after Q4 or the annual, which is June or whatever, May, June. Is there going to be a bit more of an updating of the marketplace on what's actually happening with AOL foreclosure, the tax, the A&L Voxer direction, the Voxer wealth? Is there going to be a bit more of a communication from the firm on that type of information?
spk03: Well, Colin, I think that the biggest criticism that you have had, and I think, you know, the exasperation of everyone is that we need to have more, you know, press releases, you know, or at least updates with respect to how we are progressing. And so we're certainly top of mind. And, you know, as we, you know, log on with new clients when permitted and As we reach certain milestones, it's our intention to try and keep all of our shareholders up to date as humanly possible without breaching any requirements that they have with respect to the Securities Commission. We know that providing our shareholders updated information as soon as possible given the challenges of these economic times right now, we will do our best to keep everyone updated as we are progressing.
spk07: Okay, that's it for me. Thanks very much. Thank you very much.
spk02: Thank you. Again, for any questions, that is zero, then one on your touchstone phone. Standing by. And I'm showing we have no further questions in queue. I'll now turn it over to Gary for closing comments. Yes.
spk03: Okay. Thank you very much, everyone, for calling in today. This concludes our conference. Thank you for participating. You may now disconnect.
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