Real Matters downgraded at ATB Capital

ATB Capital Markets analyst Gavin Fairweather says Real Matters’ (Real Matters Stock Quote, Chart, News, Analysts, Financials TSX:REAL) client wins remain encouraging, but a weaker mortgage refinancing outlook has reduced the near-term earnings upside.

As reported by the Globe and Mail, in a July 31 update, Fairweather downgraded Real Matters to “Sector Perform” from “Outperform” and lowered his target to $6.00 from $8.00.

“Q3/F26 missed our estimates on net revenue margins, with Adj. EBITDA of $0.7MM below our $1.3MM estimate and consensus,” Fairweather said.

The miss was partly due to rising mortgage rates, which shifted the revenue mix toward HELOCs and away from higher-margin rate-refinance orders.

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Fairweather said the bright spot was sales momentum, with Real Matters adding 10 new clients in the quarter, bringing its last-12-month total to 31, the highest level since its IPO.

In U.S. Appraisal, purchase revenue rose 7% year-over-year, while refinance volume was up 8% but down 18% sequentially because of mortgage rates. HELOC volume rose 18%. Net revenue grew 7% to $9.2-million, slightly below Fairweather’s $9.4-million estimate, as net revenue margin fell 160 basis points to 24.6%.

U.S. Title volume rose 138% year-over-year from a low base as new clients scaled, but was down 24% sequentially. Net revenue of $2.7-million missed Fairweather’s $3.1-million forecast. The segment posted an Adjusted EBITDA loss of $1.3-million as operating expenses rose to support new client launches and sales.

Fairweather said the addition of a new Tier 1 lender in Title, announced last quarter, brings Real Matters to three Tier 1 lenders and one of the largest U.S. servicers, which suggests the company has made progress with large underwriters.

He said the longer-term setup remains attractive, with 14 million mortgages above 6% and a larger client base supporting potential earnings growth in the next refinancing cycle. However, the timing remains uncertain with mortgage rates above 6.5%.

Real Matters’ Solidifi unit has become the first appraisal management company certified with FHA’s Uniform Appraisal Dataset 3.6, a new standard for electronic appraisal submissions to Fannie Mae, Freddie Mac and the FHA. Fairweather said the transition could create a market-share tailwind if competitors struggle to meet the Nov. 2 deadline.

The analyst said AI initiatives are moving from proof-of-concept work into the core business, with annual investment expected at $1.5-million to $2.5-million. Those investments are expected to support operating leverage and potential share gains over time.

Fairweather said Real Matters’ franchise value should protect downside and long-term investors could still earn strong returns, but the lack of a clear medium-term catalyst leaves better opportunities elsewhere in ATB’s coverage.

He expects Real Matters to generate Adjusted EBITDA of $1.9-million on net sales of $54.1-million in fiscal 2026, improving to Adjusted EBITDA of $6.2-million on net sales of $61.8-million in fiscal 2027.

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