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spk01: Good morning, ladies and gentlemen, and welcome to the VoxTour Analytics Q2 2023 Earnings Conference Call. At this time, note that all participant lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that the call is being recorded Thursday, August 24, 2023. At this time, I would like to turn the conference over to Mr. Jordan Ross. Please go ahead, sir.
spk00: Good morning, everyone. Thank you for joining us for the Boxster second quarter 2023 earnings call, where we will discuss our financial results and business highlights. Please note that our Q2 2023 results were released August 22, 2023, and can be accessed on CDAR Plus and on our website at boxster.com. Joining me today are CEO Gary Yeoman and CFO Robin Dyson. We will begin with the 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.boxter.com. Robin will begin by reviewing our financial results. After that, Gary Yeoman will provide updates as to how we are progressing toward our objectives through capital market activities, organic growth, and operational efficiencies and highlights. 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 Tuesday, August 22, 2023, and our management's discussion and analysis, both of which are available on CDAR+. 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 to Canadian dollars, unless otherwise stated. I will now turn the call over to our CFO, Robin Dyson.
spk03: Thank you, Jordan. Good morning, everyone, and thank you for joining us today. As addressed on our last earnings call, the rapid increase in the U.S. prime rate has had a negative impact on various lines of business at Boxter, primarily with respect to our appraisal services, capital markets, and title lines of business. From the beginning of 2022 to present, rates have increased from 3.25% to 8.5%. On our Q1 earnings call, we noted that in response to our lower-than-expected revenue, the company is focused on cost reductions and adjustments to the company's strategy. We have taken these actions and continue to focus intensely on profitability. To drive profitability, we are pursuing both revenue growth through the launch of new products and services that we have developed, as well as continually assessing opportunities for process efficiencies and cost reductions. Shifting to our discussion of revenue. Revenue decreased from $38 million to $29.9 million for the three months ended June 30, 2023 and 2022, respectively, and decreased from $79 million to $59 million for the six months ended June 30, 2023 and 2022, respectively. These decreases were primarily attributable to the negative impact of significantly increased interest rates on our appraisal of the service line of business, and the negative impact on revenue of the amendments made to a services agreement with the related party, effective January 1, 2023, which amendments also resulted in a significant decrease in direct operating expense to support this revenue stream. Note that the related party reference is no longer a related party as of April of this year. We maintain a mutually beneficial relationship with this party, but now at arm's length. While revenue decreased on a year-over-year basis, revenue increased approximately $1.1 million in the second quarter of this year as compared to the first quarter. This increase is primarily attributable to a stronger quarter for the capital markets business unit. Gross profit increased to $15 million from $12.7 million for the three months ended June 30, 2023 and 2022, respectively. an increase to $28.5 million from $26.6 million for the six months ended June 30, 2023 and 2022, respectively. These increases, despite the revenue decreases discussed, are primarily attributable to decreases in direct costs required to support appraisal-related revenue, revenue increases being attributable to high-margin offerings, and indirect cost improvements. Other items to highlight with respect to the second quarter include Voxer's achievement of positive adjusted EBITDA of approximately $530,000 for the quarter and the closing of equity financing. In June, the company closed the first tranche of a non-brokered private placement for gross proceeds of approximately $3.3 million. And subsequent to June 30th, the company has closed additional tranches of financing of approximately $7.4 million. I will now turn the call over to our CEO, Gary Yeoman, to provide business updates.
spk05: Thank you, Robin, and good morning, everyone, and thank you again for joining us. As always, I would like to thank our shareholders for their support during this transition period and evolution of Voxer becoming a pure technology company. Expanding further on Robin's comments and with respect to our financial strategy, We have had to make very difficult decisions and changes to the company in order to account for some of the macroeconomic headwinds we are still experiencing, and more specifically, the volatility in mortgage rates and mortgage asset pricing. We are committed to making such changes in order to achieve sustainable profitability. As you can see, we are making great headway towards that goal based on our G2 results, and more specifically, ending the quarter with positive adjusted EBITDA. I want to reiterate our focus on executing on near-term revenue opportunities while instilling financial discipline. The improved Q2 results are primarily due to an increase in volume of our high-margin products, such as our mortgage trading platform and technology-based valuation workflow, all being completed with significant expense reductions. While we instill this type of financial strategy of focusing, both from a development and sales standpoint, on high margin technology products, it is important to recognize that it has come at a cost of having lower top line growth. Now I will discuss some of the highlights and specifics within the business lines. Our mortgage asset trading platform facilitated one of the more notable and sizable trades that took place during the second quarter. We hope to leverage this achievement and continue the momentum. In addition, the Bluewater team have onboarded one of the largest FHA and DA lenders in the United States on our platform, which gives the client the ability to see loan-level pricing, transfer, and transaction of all loans and mortgage servicing rights, more commonly known as FSRs, with just a single click. Following this, Bluewater has added additional clients and expect to have a great impact moving forward as we expect to see market stabilization from a mortgage asset pricing data point. Our valuation business has done extremely well on future proofing our valuation business and getting ahead of the curve with respect to modern appraisal approaches put forward by the GSEs. Furthermore, I am proud to announce we have officially become an approved service and technology solution provider for Fannie Mae's data collection business. Boxster's property data collection technology called Walkthrough is a web-based interface that ensures complete and compliant universal data collection. Its holistic approach ensures that one inspection will meet the requirements for the GSEs. It is compatible with all smartphone types, allows for instantaneous content updates and easily integrate the sketch completion into the process. Further, we are finally starting to see some growth and increased volumes within the default segment of our valuation business as default mortgages holds come off and mortgage modifications are being faced. This trend is also at a positive impact on our title business. Additionally, we have changed our management team within our title business We are already beginning to see signs of improvement from a cost standpoint. As previously mentioned, we have continued to evaluate and apply a variable cost model, which we believe will allow us to be more flexible while there is a level of uncertainty within the industry. We are also evaluating a new go-to-market strategy with respect to our alternative to traditional title insurance products. Additionally, we are equipping our title business with new data and software-enabled products to differentiate ourselves from our competition and hope to have these rolled out in the coming weeks and months ahead. Lastly, we are grateful for the support of our shareholders, including the investors that have participated in the recent private placement. We're proud to say that most of the participants have come from our existing shareholder base. which demonstrates their commitment and confidence in what we are trying to achieve at Voxer, which is making home ownership more affordable by leveraging our abundance of technology assets and having a full set of diversified products to be able to provide a solution to our clients throughout the mortgage life cycle. It should be noted that we are continuing to receive interest in the private placement and hope to have it fully closed out in September. Thank you for joining us on the call today. We appreciate your time and your interest in Boxster and obviously your support. We'd be happy to answer any questions you may have at this time. I now hand this over to the operator to start the Q&A.
spk01: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please slowly press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. And if you would like to withdraw from the question queue, please press star followed by two. And if you're using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please go ahead and press star one now if you have any questions. And your first question will be from Christian Esco at 8 Capital. Please go ahead.
spk02: Hi, good morning, Gary and Robin. And thanks for the update this morning, Gary. The first question I'll ask is around the software strength. And you called out the capital markets trading platform. It was a good little sequential lift in Q2. You referenced a customer win and some activity there. I was just hoping you could give a little bit more color on when that customer came on, if you expect that customer to continue to be active with the platform into Q3, Q4, and I guess just more broadly how the capital markets business is trending through the year.
spk05: Yeah, thanks, Christian. You know, as you know, capital markets, you know, can be lumpy, especially when it comes to trade, you know, with our, you know, bulk trades, you know, as they come through. But, you know, from a lumpiness standpoint, the yield usually always tend to kind of balance out over, you know, quarter by quarter period. But the The major client that we've landed has signed a long-term workflow platform. They're using Bluewater's proprietary workflow. They've come on in the second quarter as far as execution. It's going to take a little bit of time to build that up, but they're a very, very solid, reputable client. Unfortunately, we can't share the names because that's just at the request of our clients or to be able to protect their privacy. But from our standpoint, we'll be involved with them on workflow, on MSRs, on whole loading trading, on flow trading of loans on a month-by-month basis. So it really does give us an opportunity to play in the marketplace on a daily basis. And so we're extremely excited about having that opportunity. Was there another part to that question, Christian?
spk02: I think that covered most of it. Okay, thank you. It's good to see it's a longer term. It's a long-term commitment and contract. Yes. On the Q2. Yes, it is. I'll ask another question. I'll move over to the balance sheet and capital allocation. Commentary on the BMO. debts and the government there. I think there was also commentary last quarter on maybe a monetization event in the back half of the year. So I was wondering if that was still the roadmap, if that's the way you're going, or post this private placement, maybe that'd be all the capital needed to keep the business through, just leave it that positive and work forward.
spk05: No, I think, Christian, that we have debt, obviously. And we have a number of opportunities to monetize the assets that we have. And we continue to work very, very closely with the Bank of Montreal. We talk to them regularly. As you know, I've got a long-term 25-year relationship with them. They've been just incredible partners for us in every way. You know, when you're building a technology company, it does take some patience. And I have to, you know, basically take my time. cut off the demo because it's just been incredible as far as having the patience and the understanding as far as as we get through our processes of rolling out new technology in that. So we're going to continue to look at opportunities to monetize because our goal is to reduce the debt. But I guess, you know, from that from our standpoint, we also remain extremely buoyant with respect to increasing of our profits. More specifically, I think it's going to become more abundant in the fourth quarter. We continue to roll out some of the technologies now. We're just thrilled that we've been approved by Fannie and Freddie for our data collection technology. We're thrilled about having that opportunity. We're continuing to um you know see opportunities in all of the other business sectors and so again we're just working with bmo we're going to continue to you know look at these monetization opportunities um and you know look at some joint venture opportunities as well so um it's it stays a steady course um they're very much surprised meaning the bank is very much surprised in every aspect of what we're doing in our business and they continue to be extremely supportable and patient as we go through our process.
spk02: That's great. Thanks for the update, Gary. If you have any questions, I'll pass the line. Thank you.
spk01: Thank you. Once again, please press star 1 if you do have any questions. And your next question will be from Colin Fisher at Garrison Creek.
spk04: Good morning. Good morning. Congrats on the quarter. It looks quite good. I just had a couple of administrative questions. With the new CFO and the new auditor, is there any changes in the revenue recognition driven by them?
spk05: I'll let Robin answer that, but I think the short answer is not to my knowledge. I don't I will take, again, my hat off a second time to our new owners, MNP. They have been absolutely incredible. For them to get through the year end and, of course, having to review historical financial reporting and then kick out Q1 and Q2 in the time that they have, I have to tell you, it's just been incredible. Their staff that they have allocated to this, have been extremely diligent, extremely cooperative. Obviously, it's a very serious obligation today to provide audited financial statements in a public company. There's certainly no short cuts that anyone can take, but the transition you know, has been extremely, extremely well, and our relationship is real strong. Robin, is there anything you can add to that as far as any changes as far as revenue recognition?
spk03: Yeah, no, Gary, I would echo exactly. Very pleased with the auditors, and Colin, I can confirm that there have been no changes in revenue recognition policies or adjustments with that respect.
spk04: Then a continuation on that, is there any changes in the – in the recognition of direct costs, or has any direct costs moved from direct costs into indirect costs?
spk03: Nothing of significance. No, no changes in that methodology either.
spk04: Okay. And then you've got the – so from Q1 to Q2, we've seen an increase in the software and data licenses revenue, and then technology and managed services revenue. continued to decline is there cannibalization between the software and data licenses from the technology managers services or is it just separate business units one is growing and one is falling behind given the macro events that's correct I don't see any cannibalization okay and with regards to the EBITDA I'll add two questions in there. Is there a chance that you guys are going to start reporting your revenues in USD given the amount of noise that you get both in the comprehensive income as well as in the adjustments for the EBITDA? Also, can you give some color as to what the cost related to non-operating items non-recurring items and or strategic initiatives. This year, this quarter did quite a bit of heavy lifting at a little over $4 million. I wonder if you could provide some color on that. You want to take that, Robin?
spk03: Sure, yeah. In terms of the reporting in U.S. dollars, I think that's probably, yes, a natural thing that we would need to look at in the future. It's just, as you can imagine, quite an undertaking in terms of we would have to present all of the historic information back in U.S. dollars. But I think that that is a fair consideration in the future because you're absolutely correct. The amount of foreign exchange gains and losses is quite significant when the majority of our business is in U.S. dollars. So, yes, fair comment. With respect to the EBITDA adjustments, The most significant adjustments I would say are with respect to transaction type related costs, non-recurring type costs in terms of some of the audit costs because we had a duplication of that were added back as well as development costs that we don't capitalize for financial reporting purposes but new product development, those are another significant bucket. I think those are the key items.
spk04: Okay. Is that a fair – so I'm going to guess that's going to continue to be quite a big, noisy element then?
spk03: I would suspect that, yes, the nature of those adjustments will continue at the magnitude that they are for the current quarter.
spk04: Can you give some color as to what the business units are that are driving the revenue composition and roughly what the margins are for those new businesses that are driving the business? I mean, we've had a great expansion now above 50%. Is there a push that's going to finally start breaking out the business units so we can get some color as to what is driving what? especially given the macro sensitivity of some business units, and then maybe a bit of additional color on what the gross margins are in those units?
spk05: There's no question that is a goal of ours is to, you know, to be able to send that and get, you know, some color as far as each of our business units. But, you know, for the most part, Colin, you know, other than, you know, primarily the AMC business that we have, Most of the businesses that we have right now are focusing on pure technology. And so those businesses will continue to be high margin business, high gross margins as well as profit margins. And as I've indicated in past discussions, we expect to start seeing some of those results with these new products offered in the fourth quarter. And as I said before, the AMC business, I think that Al Broadway probably runs one of the best valuation businesses in the country. But in that particular case, which derives a good portion of our revenue right now, those gross margins are in and around the 30% to 32% margin space. And so therefore, it has a material impact with respect to if you want to look at gross margins and profit margins because its profit margins are in and around the 10% mark. But other than that, most of our other businesses are focused on technology. You're going to see a massive transition with respect to what we're doing on the title side of the business and some of the new products that we're offering. We brought a new management team, a new holistic approach in how we want to tackle the title. And I think that for the first time, you know, and probably in September, we're, you know, fully expect to see actual profit where historically, you know, it just wasn't that. It was focused on assuming that default that this was going to come back. And so, therefore, you know, we'd have the staff to do it. Basically, our current management team said that this is not going to work. We can't wait in perpetuity. We're going to tackle a whole different approach. And so we're going to see profitability in the title business grow over the year, and that's going to equate to a massive difference on our balance sheet because of the losses that we previously incurred in that space.
spk04: Can you, maybe as an extension to what you were referring to in terms of businesses, can you give some color as to where you expect, which businesses are hurting the most and where you're expecting to see some forward growth from the different business lines?
spk05: Well, we're going to see forward growth on all of our business lines, but I think that the business that has had the most profound impact is the one that we just bought, which is Bluewater. I mean, we're seeing some very evident and real tangible growth in that space. Um, but you know, with, with these interest rates rising, I think really what happens, there's two things, material things have happened, Colin. One is that with the rates rising so quick, I think there was a whole pause for a while on, on the, on the MSR space because you know, what did, how do you price them and what do we do and what is the marketplace? I think that there's been some selling of that. And so the MSRs are back in bold again. But we did have that interlude that was impactful on that business. I think the second aspect is that what Al Qureshi and his team have done is they've built, as you know, a fully digitized workflow platform. And with that workflow and that digitization they're able to do is they're able to review every loan. I've went through this process before. I mean, there's over 1,200 rules or more that have to be in compliance with when a loan is reviewed. He's able to review every one of those loans now in a fully digitized basis. I mean, the only thing that we can't wrap a warrant on is any misrepresentation or fraudulent activity. But for him to be able to go through that process and run right through those 1200 rules in a digitized basis is going to have a material impact on the industry. Because I'm not sure if you've noticed this, but a lot of the loans right now that Fannie have taken on, they have the right to send them back if they find that there's any anomalies in those loans. And so someone that buys an MSR, where they may make one or two points, you know, on that, you know, to purchase that servicing right, they also bear the responsibility of taking that whole loan back. And if there's, you know, more than a small amount of loans that they have to take back, it could just totally wipe out the profit that can be made. So Al has built two platforms, a post and pre due diligence platform where he can review all of the loans for those that are wanting to sell the servicing rights. And so they can hopefully, when they sell them, have a reasonable amount of confidence that those loans are not going to come back and sit on their balance sheet again. And for those that are buying it, they're also going to feel that what they're buying is a quality loan batch, that they're buying a portfolio. So again, a major shift. Yes, we're going to continue to do servicing rights and whole loans. It's like I said, but there's also a big shift to this whole due diligence. I know Al and the team are extremely excited. They have a number of statement of works out there surrounding that. We signed an agreement with the Mortgage Collaborative represent over 250 banks and lending institutions, credit unions, etc. And now we are the go-to platform within that collaborative to do exactly what Al is doing. So he's working very closely with the executives at the Mortgage Collaborative. And so we're, again, really excited about the growth in that opportunity.
spk04: Okay, thank you for that. Can you also give some color on the property tax division, how that's going, and any color as to whether there's expansion either in the current markets or into new markets?
spk05: Yeah. Obviously, most people know that, you know, the property tax has been around in that business, you know, for many, many years. I mean, I built the largest property tax business in the world when I – when I started Altus and was the CEO there, we have focused largely on servicing municipalities. And the biggest impact that we have on our property tax business is in the province of Ontario as we speak right now. For those that are on the call today, they're probably reading on a weekly basis material concerns by a number of constituents that they want a reassessment done because the last time a reassessment was done in Ontario was 2016. And so it's seven plus years removed from what values are today. And there's been significant shifts in valuations. As most know, because of the pandemic, et cetera, if you go into an office building today, for example, in Toronto, you're going to see probably 30% occupancy from Tuesday to Thursday and 10% occupancy for Monday and Fridays. And so that whole segment of the industry is challenged. No question about it. The retail industry has challenged. But what has remained strong is the industrial and the multi-res side of the business. So we've been working very closely with the province. and making them aware of what our respective services are, our ability to review all assessments and the impact on tax and the impact within class, and an ability to help municipalities with our proprietary real property tax analytics. And I'm very confident that we're going to get extreme growth in that business unit. in the coming weeks and months. We will have a prolific role for our company.
spk04: Okay, and then I'm just going to finalize with the last two questions. Default and foreclosures, is that still being held up? And then I guess the last question after that is the million-dollar question. Where do you see uh, net profit for the whole company and cashflow positivity for the whole company? Yeah.
spk05: Um, well, I mean, um, I guess, you know, from a profitability standpoint, you know, as you can see, I mean, we've, we've, we've made massive cuts, you know, um, not only with, um, you know, our, our people, but, um, on certain technology that, you know, uh, We want to focus on immediate gratification and spending our time and our money on products that we know that are not going to generate five years from now, but is going to give us more of an immediate gratification. We've been through a hell of a lot, as you know, having to deal with our accounting anomalies that took place because of the former auditor leaving you know, having to kind of regroup from that. But each of our business units have all been right-sized, have all been focused. We have, you know, I could go through each business unit, which I'm not going to. I'm just going to say that each one of them have near-term opportunities to develop new products right now. And so, you know, we, you know, I believe that third quarter is going to be much the same. Although, you know, uh you know september still waiting and and it could be extremely good but we think that there are a number of initiatives that are going to be brought on in the fourth quarter and i won't be as overt enough to say that you know we'll be cash flow positive even a positive but we're certainly trending for that we're not we're not talking about years calling we're talking about you know quarters away and you know i'm really really um you know it It's funny, our share price has not been lower, and I don't think our company has ever been better. Our gross margins have improved because we've right-sized the business. We have no frails. There is no excess anywhere in this. Every dollar is watched, every penny is watched. I'm really, really confident in our business. I actually love what Boxer is doing right now and where we're going. And, you know, the unfortunate thing in business, sometimes where you just think you got a corner turn, then, you know, all of a sudden something else comes up and interest rates double again or whatever. But listen, we are structured right now that we want to be anti-cyclical. That's why we brought Blue Water in, so they can serve not only capital markets, but on the secondary side when the primary new purchase, you know, is languishing. Defaults, you know, I... We're seeing some improvements, but at the same time, I don't think it's something that we can hold our hats on and the gates are going to be knocked down with an abundance of defaults. People still have a lot of equity in their properties and they're leaning on that to sell as opposed to go into any kind of default at all. But what we are noticing, quite frankly, is an increase in the bankruptcy files. And about two years ago, we embarked on a platform, we'll call it a bankruptcy platform, where we have basically digitized the whole process. And it's very regulated. There's a number of, there's a whole bunch of different aspects where you have to be in compliance. I mean, listen, Stacey Medea is on our line. She knows more than anyone, but it's heavily regulated As you go through, there's a whole bunch of bells and whistles and areas that have to be fulfilled. We built that platform with a major lending institution. By the grace of God, we're hoping that in the fourth quarter, some point in time, that we'll be able to see some benefits of that platform that we built. We're really, really upbeat. Certainly, we're not upbeat with someone's plight, But we think that what we're offering right now is going to save all the lending institutions a lot of money by digitizing this process. And this platform that is led by Scotty Walters, we're pretty confident that there's a lot of interest in that right now because we're going to save everyone a lot of money, but everything will be digitized and accounted for. It's going to be a massive upgrade to anything that's out there in the marketplaces.
spk04: Okay, thank you. I'd just like to leave it with I think it was a huge lift to get all those financial reportings done in the time you did. And congratulations on getting one done before the deadline by quite a significant amount. So congrats, Robin, and congrats to the team on that and Gary. And also it looks great with the amount of cost controls that you've been doing, and I look forward to seeing some more growth as it goes forward. So congratulations on the corner. Thank you. Thank you.
spk01: Thank you. As a reminder, ladies and gentlemen, please press star 1 if you have any additional questions. And at this time, it appears we have no other questions registered. Please proceed with any closing remarks.
spk05: Again, thank you all very much for your support. We've come through some difficult times, but only know that I know that this company is at the precipice of turning things around. Couldn't do it without your support. Lots of bumps and bruises, but only know that this team at Boxer has never worked harder, have never been more confident. And, you know, we very much look forward to the days of being cash flow positive, even a positive. and talking about and sharing with some of the big wins that we have. So thank you very much for sticking with us and helping us get through this. We will reward your dedication to this company. Thank you.
spk01: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
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