ATB trims price target on Real Matters

Real Matters (Real Matters Stock Quote, Chart, News, Analysts, Financials TSX:REAL) reported third-quarter results on July 31 that came in below expectations, with revenue of $45.4-million, down 9% year over year and short of ATB Securities’ $47-million forecast. Net revenue fell 9.4% to $11.9-million, while Adjusted EBITDA remained positive at $0.3-million.

ATB Capital Markets analyst Martin Toner maintained his Outperform rating but lowered his 12-month target to $10.50 from $11.00, citing reduced visibility on the timing of a mortgage market recovery. “We think this multi-year cyclical downturn in U.S. mortgage activity presents a buying opportunity, with REAL having the potential to be both an EBITDA growth and multiple expansion story in a lower rate environment,” he said in a July 31 note.

Markham, Ontario-based Real Matters provides network management services to clients in the mortgage lending and insurance sectors.

Toner said U.S. Appraisal volumes declined due in part to a temporary spike in market share last year, which has since normalized. That segment’s net revenue dropped 17% to $8.5-million, while U.S. Title grew 24% to $1.5-million. Canadian net revenue was flat at $1.9-million. Net revenue margin across the business fell to 26.2% from 27.3% last quarter.

Despite the weak headline numbers, Toner pointed to strong signs of momentum in the U.S. Title business. “We are growing increasingly confident in REAL’s ability to sustain Title share gains,” he said, citing four new client wins during the quarter, including the largest U.S. credit union in Title. After quarter end, Real Matters also launched a second Tier 1 lender in Title, added a top-15 lender in Appraisal, and expanded business with the largest reverse mortgage lender in the U.S.

Operating expenses declined 2% sequentially, which Toner said shows Real Matters can grow volumes without significantly increasing its cost base. ATB now expects Adjusted EBITDA to turn meaningfully positive in fiscal 2026 as volumes recover and new client contributions scale up.

Management said the rising number of mortgages originated at higher interest rates continues to expand the pool of future refinance candidates.

“The number of mortgages being originated at higher interest rates continues to rise, steadily expanding the pool of potential refinance candidates. Currently, nearly 12 million mortgages have rates above 6%, and approximately 8 million of those mortgages have rates above 6.5%. This presents a significant opportunity for us once the rate environment begins to shift – and we are strategically positioned to capitalize on it,” CEO Brian Lang said.

Toner expects Real Matters to post an Adjusted EBITDA loss of $3.5-million on $169.6-million in revenue for fiscal 2025, improving to $11.2-million on $215.0-million in revenue in 2026.

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