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Real Matters keeps Outperform rating with ATB

Real Matters (Real Matters Stock Quote, Charts, News, Analysts, Financials TSX:REAL) reported quarterly results that showed almost a two-thirds year-over-year revenue decline. But ATB Capital Markets analyst Martin Toner is keeping it real on the software and services company. In a Friday report, Toner maintained an “Outperform” rating on the stock, saying the company has done well to keep its head up in a market under pressure.

Toronto-based Real Matters, whose products serve the mortgage lending and insurance industries, announced on Friday its fiscal first quarter 2023 financials for the period ended December 31, 2022, featuring consolidated revenue of $38.2 million, down 64.6 per cent year-over-year and down 34.4 per cent sequentially. Adjusted EBITDA was a loss of $2.9 million compared to a gain of $5.9 million a year earlier and the company finished the quarter with cash and equivalents of $45.1 million. (All figures in US dollars except where noted otherwise.)

“We made solid progress in the first quarter as we continued to win market share, added new clients, and achieved record high Net Revenue margins in our U.S. Appraisal segment,” said CEO Brian Lang in a press release. “At the same time, we continued to optimize headcount and manage our cost base to align with the current lower volume environment, which allowed us to maintain sequentially flat Adjusted EBITDA in our U.S. Title segment.”

Looking at the results, Toner said the $38.2 million in consolidated revenue was below the consensus projection of $44.6 million, while net revenue of $9.8 million was below the consensus of $10.6 million. The $2.9 million EBITDA loss was also below the Street’s call at negative $2.1 million.


Toner noted the 64.4 per cent year-over-year drop in its US Appraisal business, with an even larger 85.4 per cent decrease in its US title segment. 

“The Company’s results continued to deteriorate this quarter, and Real Matters continued to limit losses by rationalizing operations in line with the market. We believe investors will be satisfied with the Company’s ability to preserve its healthy balance sheet, and they should be encouraged by the recent decline in mortgage rates and uptick in mortgage activity,” Toner wrote.

With his “Outperform” rating, Toner also maintained a 12-month target price of C$8.00, which at press time represented a projected return of 85 per cent.

As for the road ahead, Toner is forecasting Real Matters to generate full fiscal 2023 revenue and adjusted EBITDA of $202.5 million and negative $4.4 million, respectively, and moving to 2024 revenue and EBITDA of $260.5 million and positive $2.6 million, respectively.

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