Stockwatch Daily

Real Matters earns $42.8-million in F2020

- Ms. Lyne Beauregard reports

REAL MATTERS Inc. has provided its financial results for the fourth quarter and fiscal year ended Sept. 30, 2020. The company’s board of directors also announced that it has appoint ed Jason Smith as executive chairman and Brian Lang as chief executive officer of the company. Mr. Lang has also joined the board. The new appointmen­ts are effective today.

“As the company sets its sights on the next chapter of growth and its longer-term data strategy comes into focus, now is the right time for Brian to step into the CEO role,” said former Real Matters chairman and current board member, Blaine Hobson.

Real Matters chief executive officer Mr. Lang said: “We capped off the year with another strong quarter posting consolidat­ed adjusted EBITDA of $22.2-million, an increase of 57.5 per cent from the fourth quarter of fiscal 2019. Our U.S. title business continued to outperform our other segments, and for the second consecutiv­e quarter delivered higher net revenue and adjusted EBITDA than our U.S. appraisal segment. Fourth-quarter U.S. title net revenue was up 69.7 per cent, and adjusted EBITDA increased 102.0 per cent year over year to $15.4-million. We estimate that the U.S. mortgage originatio­n market was flat in the fourth quarter on a year-over-year basis, as the estimated 6-per-cent increase in purchase volumes was offset by a 9-per-cent year-over-year decline in refinance volumes. The estimated market decline in refinance volumes was partially attributab­le to a reduction of addressabl­e market volumes as a result of the increased use of waivers for refinance transactio­ns due in part to COVID-19. We continued to rank at the top of lender appraisal scorecards in the fourth quarter, and U.S. appraisal net revenue increased 4.6 per cent, generating adjusted EBITDA margins of 59.2 per cent.

“We ended the year with U.S. appraisal market share of 11.7 per cent and U.S. title market share of 2.4 per cent. Our fiscal 2020 consolidat­ed revenues increased over 41 per cent year over year to $455.9-million, consolidat­ed net revenue was up nearly 59 per cent, and consolidat­ed adjusted EBITDA more than doubled to $72.2-million while consolidat­ed adjusted EBITDA margins increased to 44.6 per cent from 28.4 per cent in fiscal 2019,” added Mr. Lang. “The business surpassed the majority of our fiscal 2021 targets, one year ahead of our com-

mitted timeline. We look forward to discussing our fiveyear strategy and our updated growth targets at our virtual investor day on Monday, Nov. 23.”

(See REAL Table 1 on page 20)

Fiscal 2021 performanc­e targets

At the end of fiscal 2020, the company achieved or surpassed three of its four fiscal 2021 targets, namely U.S. title market share, consolidat­ed net revenue margins and consolidat­ed adjusted EBITDA margins. New fiscal 2025 performanc­e targets

The company has new targets through the end of fiscal 2025. These targets include a bifurcatio­n of U.S. appraisal market share between purchase and refinance, and a refinance only target for U.S. title, as the purchase and refinance markets each has distinct market factors that drive growth. These targets supersede fiscal 2021 targets as well as the margin targets that the company establishe­d in November, 2018, based on a doubling of volumes from fiscal 2018 levels.

The company has also establishe­d a target for its corporate segment to contain corporate expenses, excluding stock-based compensati­on expense, to 7 per cent of net revenue by fiscal 2025 and a target to convert 70 per cent to 75 per cent of adjusted EBITDA to free cash flow between fiscal 2021 through fiscal 2025.

Executive leadership changes

Mr. Smith has been appointed executive chairman of Real Matters. Mr. Lang, the current president and chief operating officer, has been named chief executive officer of the company, and will assume day-to-day leadership responsibi­lity. He has also joined the company’s board.

“Brian is a proven leader whose experience and track record of working with leading financial institutio­ns will provide a steady hand in continuing to expand our market share in the U.S. mortgage industry. His strong leadership skills and background in technology position him well to lead the team into new markets as the company looks to diversify its revenue streams through our data monetizati­on strategy. Brian and I have worked very closely over the last 18 months. I look forward to supporting him in my new role and continue to be committed to the company’s long-term success,” said Real Matters executive chairman Mr. Smith. “On behalf of the board, I’d like to thank Blaine for his strategic guidance and insights during his time as chairman of Real Matters. His contributi­ons to the growth and developmen­t of our company have been invaluable, and we look forward to continuing to serve together on the board,” concluded Mr. Smith.

As the company’s executive chairman, Mr. Smith will focus on leading selected strategic initiative­s for the company and facilitati­ng a smooth leadership transition with Mr. Lang. As result of these changes, Mr. Hobson will remain on the board as a director, and Garry Foster will assume the role of lead independen­t director.

We seek Safe Harbor.

Erika Flores condensed this news release (erikaf@stockwatch.com).

Garry M Foster, Blaine Michael Hobson, William Thomas Holland, Frank V McMahon, Lisa Adrienne Melchior, Jason P Smith, Peter Michael Vukanovich

(REAL) Shares: 85,004,718

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