Real Matters has a 93 per cent upside, says ATB

It’s been a rough ride in the real estate market, and that also goes for real estate management services platform company Real Matters (Real Matters Stock Quote, Charts, News, Analysts, Financials TSX:REAL), which just released new quarterly numbers. Surveying the damage was ATB Capital Markets analyst Martin Toner, who in a Friday report said REAL is doing an admirable job under difficult circumstances. Toner reiterated an “Outperform” rating on the stock and one-year target of $8.50.

Toronto-based Real Matters, which provides appraisal and title services to morgage lenders in the United States and appraisal and insurance services in Canada, reported its fiscal second quarter 2023 results on Friday for the period ended March 31, 2023. 

Consolidated revenue was down 62.6 per cent year-over-year to $37.6 million, net revenue of $9.9 million was down 62.7 per cent and an adjusted EBITDA loss of $1.7 million compared to positive $2.5 million a year earlier.

The company said it launched one new lender and one new channel in US Appraisals over the quarter, one new lender and one new channel in US Title and three new channels in Canada. REAL also an increased its net revenue margins in the segment to a record 27.6 per cent and ended the quarter with cash and equivalents of $41.8 million.

“Our ability to adjust our cost structure to align with changing market conditions allowed us to scale down operating expenses by 47 per cent year-over-year and we improved our consolidated Adjusted EBITDA to a loss of $1.7 million from the $2.9 million loss we recorded in the first quarter of 2023,” said CEO Brian Lang in a press release.

Toner said the Q2 $37.6 million topline was above the consensus estimate at $34.9 million and ATB’s estimate of $36.1 million, while adjusted EBITDA at negative $1.7 million was also better than the Street’s call at negative $3.1 million and Toner’s negative $3.2 million.

“The Company is weathering a worst-case scenario in the mortgage market environment well, in our opinion,” Toner wrote in his comments.

“Real Matters has continued to execute on cost management. Operating expenses were scaled down by 47 per cent year-over-year. We believe investors will be encouraged by the Company’s ability to limit losses, preserve the balance sheet, and provide market share gains and a top-line beat in a historical down-market,” he said.

Looking ahead, Toner is forecasting full fiscal 2023 revenue and adjusted EBITDA of $178.8 million and negative $7.2 million, respectively, and fiscal 2024 revenue and adjusted EBITDA of $243.3 million and $0.0 million, respectively. At press time, Toner’s $8.50 target represented a projected one-year return of 93.2 per cent.