1、2017 Annual ReportReal Matters is a leading network management services provider for the$16 billion mortgage lending and insurance industries.Real Matters platform combines its proprietary technology and network management capabilities with tens of thousands of independent qualified field agents to
2、create an efficient marketplace for the provision of mortgage lending and insurance industry services.Our clients include more than 60 of the top 100 mortgage lenders in the U.S.and some of the largest insurance companies in North America.We are a leading independent provider of residential real est
3、ate appraisals to the mortgage market and a leading independent provider of title and mortgage closing services in the U.S.Established in 2004,Real Matters has offices in Buffalo(NY),Cincinnati(OH),Denver(CO),Middletown(RI),and Markham(ON).Real Matters is listed on the Toronto Stock Exchange under t
4、he symbol REAL.For more information,visit .(US$millions)FY 2017FY 2016RevenuesNet Revenue1Adjusted EBITDA1Net LossAdjusted Net Income1$303.0$92.3$9.4$(23.8)$2.8$248.5$68.3$12.8$(6.1)$6.0About Real MattersSummary Financial Information1.Net Revenue,Adjusted EBITDA and Adjusted Net Income are Non-GAAP
5、measures.See page 4 of this Annual Report.Our market share gains in 2017 provide an excellent baseline from which we will continue to deliver growth in fiscal 2018 and beyond.We expect to leverage the franchise value of our existing client relationships with more than 60 of the top 100 lenders in th
6、e U.S.and the strength of our network management platform to fuel that growth.We have a client retention rate of more than 95%,and many of our clients have given us more of their business year after year.These long-term relationships are the foundation of our business.When we started Real Matters ov
7、er a decade ago,our goal was to use technology to bring innovation and efficiencies to a segment of the mortgage lending industry where we knew there was a great opportunity for improvement.Put simply,my team and I knew that there were lender pain points that we could fix with the right combination
8、of technology,creativity and a never-ending commitment to operational excellence.We saw an opportunity,through network management,to create a long-term competitive differentiator.We sought to use technology to create a competitive marketplace for outsourced services that are essential to the underwr
9、iting process by focusing on the most qualified independent field agents to deliver the highest quality product and the best possible experience for the borrower.Our business delivered strong financial performance in 2017,including market adjusted revenue growth of 26%and Net Revenue1 margin expansi
10、on.We also grew our appraisal market share by 30%and our title and closing market share by 17%in 2017 both of which are key leading indicators of the long-term franchise value we are creating.30%2017 YoY Mortgage Appraisal Market Share2 Growth17%2017 YoY Title&Closing Market Share3 GrowthTo our shar
11、eholders,2017 was a landmark year for Real Matters.We added two of the largest Tier 1 lenders in the U.S.to our customer base,expanded our platform into the title and closing industry,and we raised C$125 million of common equity in conjunction with our initial public offering in May.2.Management est
12、imate based on data from the MBA Mortgage Finance Forecast Report of October 24,2017.3.Management estimate of Residential Title Written Premium Market Share based on data from the American Land Title Association as of June 30,2017 and Demotech,Inc.for period ending December 31,2015.Network Managemen
13、t Capabilities:Our Long-Term Competitive DifferentiatorFrom day one,we have had a firm commitment to building long-term value that is fundamental to how we run our business and measure our success.We know that our business will be subject to secular trends and seasonality,as it was in 2016-2017 with
14、 the boom and subsequent return to normalized levels in rate refinance driven mortgage originations.But we dont get distracted by short-term trends.Instead,we focus on the long term by consistently outperforming our competitors,growing market share with our clients,and attracting and retaining franc
15、hise clients.We believe that the true value of our company will be realized by building a business that can prosper in the peaks and valleys,and thrive over the long term.A Firm Commitment to Creating Long-Term Value1 in 15 residential mortgage appraisals in the U.S.on our platform$16B addressable m
16、arketToday,we have established an industry-leading position in the$3 billion appraisal market.We continue to gain market share,and we believe we have just begun to tap into the potential gains possible by doing more for our clients.We also see substantial opportunities for growth in the$13 billion t
17、itle and closing market where we can bring the same approach to bear.To that end,in 2017 we focused our energies on increasing capacity and driving efficiencies on our network to support new customers and organic growth.We also leveraged our core logistics capabilities to launch smarter assignment a
18、nd enhanced consumer inspection scheduling.We are now able to bundle orders for field agents and schedule inspections that meet 95%of consumers preferred inspection times based on qualifications,capacity and availability on the network.These capabilities drive greater efficiencies for field agents a
19、nd lenders on our platform while offering new ways to improve the consumer residential lending experience.Being focused on the long term means we have said no to a lot of opportunities,in order to say yes to the right ones.That is borne out in the choices we have made to grow organically,and in the
20、businesses we have acquired along the way.This approach to managing our business is also reflected in our internal operating principles about people,products and plain common sense.Culture is everything:running a high-growth business requires smart,ambitious people not necessarily a lot of people,bu
21、t the right kind of people.We dont believe in variable compensation or short-term incentives they incent the wrong PeopleIn 2017,we opened a new Denver operations centre,investing in a culturally aligned talent pool which will help sustain our long-term commitment to running a high-growth business.W
22、e also began to expand our field agent network for title and closing,laying the groundwork for growth in that business.behaviour.Many of our employees have an ownership interest in the Company and are aligned to our long-term goals.We recognize the importance of working with professional,qualified f
23、ield agents and we work hard to align our success to their success.Measure twice,cut once not taking the time to make sure of what youre doing will cost you time or money,and most likely both.Fail fast,learn faster.You only get one chance to make a first impression execution is key.Plain Common Sens
24、e In October 2017,we announced the expansion of our platform into the title and closing industry and we are actively engaged in the sales cycle with many of our Tier 2 lenders.Our clients know the impact we have made in the appraisal business,and they are equally excited to see how we can leverage o
25、ur network management capabilities to drive greater performance in the title and closing market.We now have one sales and account management team presenting a unified brand,value proposition,and network management platform to our clients.We also launched a pilot for purchase transactions in the titl
26、e and closing business with a Tier 2 lender in the summer of 2017.We will be disciplined about using an evidenced-based product road map as we evolve our strategy to address this significant market.We build for scale because our clients require it and its how we can grow profitably.Customizations dr
27、ag on growth we focus on scalable,repeatable processes.Products We are prudent with our capital and our resources we make trade-offs in the short-term to meet our long-term goals and to set ourselves up for continued success.In 2017,we began the process of porting our title and closing business to o
28、ur network management platform by implementing our regional manager model and leveraging the same technology we use in the appraisal business to drive better performance in title and closing.We also hardened the controls and processes around our existing title and closing platform,in line with our c
29、apabilities in the appraisal business,such that we can now meet the requirements of regulated banks.60+of top 100 mortgagelenders in the U.S.on our platformLooking AheadReal Matters serves one of the largest asset classes in the world and we have a long runway for growth in a$16 billion total addres
30、sable market.By fiscal 2021,our objectives are to:We are confident in our ability to deliver;we also know that these objectives are not a terminal value for what we believe we can achieve.This is just the beginning.2017 was an outstanding year for Real Matters.We are proud of our achievements and ex
31、cited about what the future holds.Our success would not be possible without the trust of our customers,the loyalty and professionalism of our field agents,the commitment and dedication of our employees,and the support and encouragement of our Board of Directors and shareholders and for that,we are g
32、rateful.Increase our U.S.residential mortgage appraisal market share to 15%-20%;Increase the Companys U.S.title and closing market share to 1%-3%;Increase revenues by a compound annual growth rate of 20%-25%,from base year September 30,2016;Achieve target Net Revenue1 margins of 35%-40%;and Achieve
33、target Adjusted EBITDA1 margins of 25%-30%.Jason SmithFounder,President and CEOReal Matters Inc.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)
34、Real Matters Inc.September 30,2017-1 The following Management Discussion and Analysis(“MD&A”)was prepared as of November 27,2017 and should be read in conjunction with our consolidated financial statements(“financial statements”),including notes thereto,for the years ended September 30,2017 and 2016
35、.All amounts included in this MD&A are reported in thousands of U.S.dollars,unless otherwise stated,and have been prepared in accordance with International Financial Reporting Standards(“IFRS”or“GAAP”).Throughout this MD&A,Real Matters Inc.and its subsidiaries are referred to as“Real Matters,”“the C
36、ompany,”“we,”“our,”or“us.”Initial public offering On May 11,2017,we completed an initial public offering(“IPO”)of common shares(the“Offering”).Our common shares are listed on the Toronto Stock Exchange under the stock symbol“REAL”.The Offering of 12.1 million common shares consisted of a treasury sh
37、are issuance of 9.6 million common shares and a secondary offering of 2.5 million common shares by certain selling shareholders.The Offering price of 13 Canadian dollars(“C$”)resulted in net proceeds to us of C$117.6 million and C$29.8 million to the selling shareholders after underwriting commissio
38、ns of C$7.5 million and C$1.9 million,respectively.Corporate Overview We are a leading network management services provider for the mortgage lending and insurance industries.Our“platform”combines our proprietary technology and network management capabilities with tens of thousands of independent qua
39、lified field agents to create an efficient marketplace for the provision of mortgage lending and insurance industry services.Our platform facilitates competition between field agents,such as residential real estate appraisers,to deliver performance-driven services,which brings superior quality,trans
40、parency and efficiency to our clients.Our platform was created to address key issues within the mortgage lending and insurance industries.We built our platform to create a long-term competitive advantage relative to traditional service providers,who we believe have high-touch,labour intensive and co
41、stly operations.Through our platform and network management capabilities,we believe we are able to deliver services faster and with fewer errors.We believe the efficiencies we provide allow for fewer touch points,which reduces our cost structure and is a scalable business model.We operate different
42、brands focused on individual market segments in the United States of America(“U.S.”)and Canada.We service the U.S.and Canadian residential mortgage industry through our Solidifi brand,and the Canadian property and casualty insurance industry through our iv3 brand.In the U.S.,our clients include more
43、 than 60 of the top 100 mortgage lenders,including all Tier 1 mortgage lenders,as defined in the“Glossary”section of this MD&A.We provide approximately one in 15 residential mortgage appraisals in the U.S.and we estimate we had approximately 6.5%market share as of September 30,2017.We are also a nat
44、ional independent provider of title and closing services and we estimate we had approximately 0.3%market share as of September 30,2017.In Canada,our clients include a majority of the largest Canadian chartered banks as well as some of North Americas largest insurance companies.We provide residential
45、 mortgage appraisals to three of the big five banks and we had approximately 18%market share at the end of 2017.We provide residential and commercial property insurance inspections to 10 of the top 15 insurance carriers in Canada and we had approximately 12%market share at the end of 2017.We estimat
46、e that the total annual market spend for our services was approximately$16.0 billion in 2017,which represented the current estimated annual spend by mortgage lenders on residential mortgage appraisal services and written premiums for title insurance provided by us in the U.S.,and residential mortgag
47、e appraisal and insurance inspection services provided by us in Canada.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.Septembe
48、r 30,2017-2 Headquartered in Markham,Ontario,Real Matters had approximately 800 employees across North America on September 30,2017.Its principal offices include Buffalo,New York,Cincinnati,Ohio,Middletown,Rhode Island and Denver,Colorado.Seasonality and Trends Mortgage unit volumes in North America
49、 are a key driver of our financial performance.Our transaction-based revenues are impacted by the seasonality of the residential mortgage industry,with home buyers typically purchasing more homes in our third and fourth fiscal quarters,representing the three months ending June 30 and September 30,re
50、spectively.Mortgage unit volumes are also impacted by other factors such as interest rate fluctuations,refinancing rates,housing prices,the availability of funds for mortgage loans,credit requirements,regulatory changes,household indebtedness,employment levels and the general health of the North Ame
51、rican economy.Our market share is impacted by the size of the residential mortgage market but also our clients relative share of the mortgage origination market when compared to the overall size of the market.Gains or losses in mortgage origination market share by our clients impacts our overall mar
52、ket share.Most of our services are subject to multi-year or evergreen Master Service Agreements(“MSAs”).These agreements do not typically have minimum unit volume guarantees.Instead,we rely on our ability to outperform our competitors to increase our market share of transaction volumes with our clie
53、nts.For the fiscal year ending September 30,2017(“fiscal 2017”),approximately 90%of our revenues were generated in the U.S.For this reason,we have elected to report our consolidated financial results in U.S.dollars,although our functional currency is the Canadian dollar.We dont hedge the impact fore
54、ign currency exchange fluctuations between the Canadian and U.S.dollar can have on our reported amounts of Canadian dollar denominated revenues and expenses.Strategy and Outlook Our mission is to be a leading network management services company,globally.We built our platform to address key issues in
55、 the mortgage lending and insurance industries.In the U.S.,our clients include more than 60 of the top 100 mortgage lenders,including all Tier 1 mortgage lenders.Our platform creates a competitive marketplace for outsourced services that are essential to the underwriting process.Our strategy is to l
56、everage our platform to consistently outperform our competitors,build on our performance to grow market share with our clients,and to attract and retain long-term franchise clients.We believe that our strategy will strengthen our competitive position,and generate increased revenues,Net Revenue(A)and
57、 profitability.This strategy is supported by our continuing focus on a scalable software development discipline,a commitment to client service,operational excellence and creating long-term value for our clients,employees and shareholders.We take a long-term view to manage and measure the success of
58、our ongoing business strategies.In this regard,our principal focus is on market share growth.We seek to achieve market share increases irrespective of residential mortgage origination market conditions.Market share growth is achieved through the onboarding of new customers and by increasing market s
59、hare within our existing client base,including those clients weve recently onboarded.The mortgage market and residential mortgage originations are subject to the influence of many external factors,such as broader economic conditions and fluctuating interest rates,over which we have no direct control
60、.Based on our track record to date,we have routinely been able to grow our market share of a newly onboarded clients residential mortgage appraisal business to 15%of that clients transaction volume by the end of the first year of operation,and to 35%to 40%by the end of the third year.Although the va
61、st majority of mortgage lenders in the U.S.use more than one service provider,we have a number of clients for which we are the majority residential mortgage appraisal provider.Our long-term strategy targets are based on achieving a market share of approximately 30%to 40%with each of our Tier 1 appra
62、isal clients within five years of launch.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-3 If we successfully
63、 execute our plan,we believe that we have significant growth opportunities by September 30,2021(“fiscal 2021”)to:increase our U.S.residential mortgage appraisal market share to 15%to 20%;increase the Companys U.S.title and closing market share to 1%to 3%;increase revenues by a compound annual growth
64、 rate(“CAGR”)of 20%to 25%,from base year September 30,2016(“fiscal 2016”);achieve target Net Revenue(A)margins of 35%to 40%;and achieve target Adjusted EBITDA(A)margins of 25%to 30%.These long-term objectives are supported by continued growth of residential mortgage appraisal market share,disrupting
65、 the title and closing market and continued pursuit of acquisition opportunities.We expect our quarterly results to vary with the seasonal nature and size of the U.S.mortgage originations market,which is significantly impacted by fluctuations in interest rates,amongst other factors.There have been n
66、o significant changes to any assumption or estimate that would cause us to revise our outlook for fiscal 2021.Important Factors Affecting Results from Operations Many factors,including those that are beyond our direct control,may have a significant impact on our financial performance.Since the vast
67、majority of our revenues are generated in the U.S.,the discussion outlined below pertains to factors impacting the near-term outlook for the U.S.market.As discussed in the“Strategy and Outlook”section above,our objectives and strategies have been established with a longer-term view of performance,wh
68、ich includes consideration of the near-term factors expected to impact our operating results outlined below.Residential Mortgage Originations Our business is dependent on the strength of the mortgage lending industry,specifically the volume of U.S.residential mortgage originations for purchase and r
69、efinance transactions.According to the MBA Mortgage Finance Forecast Report of February 15,2017,the U.S.mortgage origination market was estimated at$1.9 trillion in 2016.In that report,the MBA expected residential mortgage originations to decline to$1.6 trillion in 2017,and to remain stable until 20
70、19.The MBA expected refinance transactions to decline to$500 billion in 2017 from$900 billion in 2016.In contrast,the MBA estimated that residential mortgage originations for home purchases would increase by 10%,8%and 6%in each of the next three years,respectively,beginning in 2017.In the MBAs most
71、recent report,the only change to their February estimates was for the refinance market to be modestly stronger than their original prediction for 2017 of$500 billion.The MBAs revised estimate is for the refinance market to deliver$600 billion of activity in 2017 and the overall market for 2017 to be
72、$1.7 trillion,all other estimates remain unchanged.The MBAs anticipated decline in refinance transactions will dampen our revenues through 2019,while the expected increase in residential mortgage originations for home purchases,all else equal,will be a positive to revenues.Economic Conditions Genera
73、l economic conditions in the U.S.including the outlook for major leading indicators such as interest rates,Real Gross Domestic Product(“GDP”)and unemployment levels have historically impacted home ownership levels and the level of residential mortgage originations.Accordingly,the MBA factors all of
74、these leading indicators into their residential mortgage origination estimates.A rising interest environment could result in lower residential mortgage originations and lower revenues,while a stronger U.S.economic environment can result in higher residential mortgage originations,including purchase
75、and refinance originations,which could lead to higher revenues.Lower unemployment levels could lead to higher residential mortgage originations and result in higher revenues.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollar
76、s and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-4 Regulation Changes in regulation can impact the supply of mortgage funding.All else equal,a greater supply of mortgage funding could have a positive impact on our revenues.Conversely,a
77、tighter supply of mortgage funding could lead to lower residential mortgage originations and lower revenues.We do not currently anticipate a tightening of available mortgage funding.The U.S.government may consider a review of certain regulations that,in combination with others,govern residential mor
78、tgage originations.While less restrictive regulation could impact our revenues,we do not view the repeal or easing of certain components of a particular piece of regulation as having a significant impact on our revenues.We expect that anticipated market share growth with current and future clients w
79、ill help mitigate the impact of any weakness in the mortgage lending market,as forecasted by the MBA,on our operating performance.We are also subject to a variety of risks and uncertainties.See“Caution Regarding Forward-Looking Statements”contained elsewhere in this MD&A for a description of the ris
80、ks that impact our business and that could cause actual results to vary.Factors Affecting the Comparability of Results from Operations Our historical results include the acquisition of Linear which has been included in our consolidated results since April 1,2016,which affects the comparability of fi
81、scal 2016 results with fiscal 2017.For more details on this acquisition and its contribution to our financial results,please see the“Review of Operations”section of this MD&A.Non-GAAP measures We prepare our financial statements in accordance with IFRS.However,we consider certain non-GAAP financial
82、measures as useful additional information in measuring our financial performance and condition.These measures,which we believe are widely used by investors,securities analysts and other interested parties in evaluating our performance,do not have a standardized meaning prescribed by GAAP and therefo
83、re may not be comparable to similarly titled measures presented by other publicly traded companies,nor should they be construed as an alternative to financial measures determined in accordance with IFRS.Non-GAAP measures include“Adjusted EBITDA”,“Net Revenue”and“Adjusted Net Income or Loss”.(A)Adjus
84、ted EBITDA All references to Adjusted EBITDA in this MD&A are to net income or loss before stock-based compensation expense,acquisition and IPO recovery or costs,amortization,impairment of assets,interest expense,interest income,net foreign exchange gains or losses,gains or losses on fair value of w
85、arrants,re-measurement loss on previously held equity method investment,net income or loss from equity accounted investees and income tax expense or recovery.Adjusted EBITDA is a measure of our operating profitability,and by definition,excludes certain items detailed above.These items are viewed by
86、us as either non-cash(in the case of stock-based compensation expense,amortization,impairment of assets,unrealized net foreign exchange gain or loss,gain or loss on fair value of warrants,re-measurement loss on previously held equity method investment,net income or loss from equity accounted investe
87、es and deferred income taxes)or non-operating(in the case of acquisition and IPO recovery or costs,realized net foreign exchange gain or loss,interest expense,interest income and current income taxes).Adjusted EBITDA is a useful financial and operating metric for the Company,the board of directors,a
88、nd the Companys lender,as it represents a measure of the Companys operating performance used to assess the value of the Company relative to its peers and compliance with a long-term debt facility covenant.The underlying reasons for excluding each item are as follows:Stock-based compensation expense:
89、These costs represent non-cash expenditures on equity settled awards recognized in connection with our IPO or ongoing stock-based compensation expense.These non-cash amounts are recorded to operating expenses and represents a different class of expense than those included in Adjusted EBITDA.Real Mat
90、ters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-5 Acquisition and IPO(recovery)costs:These recoveries or costs repres
91、ent non-operating items and include transaction related recoveries or costs specific to acquisitions and costs incurred in connection with our IPO.These recoveries or expenses are not indicative of continuing operations and represents a different class of recovery or expense than those included in A
92、djusted EBITDA.Amortization:As a non-cash item,amortization is not indicative of our operating profitability and represents a different class of expense than those included in Adjusted EBITDA.Impairment of assets:As a non-cash item,impairment of assets is not indicative of our operating profitabilit
93、y and represents a different class of expense than those included in Adjusted EBITDA.Interest expense and income:Interest expense or income reflects our debt/equity mix,interest rates and borrowing position from time-to-time.Accordingly,interest expense or income reflects our treasury/financing acti
94、vities and represents a different class of expense or income than those included in Adjusted EBITDA.Net foreign exchange gain or loss:As non-cash items,unrealized net foreign exchange gains or losses are not indicative of our operating profitability.Realized net foreign exchange gains or losses refl
95、ects our treasury/financing activities and represents a different class of expense than those included in Adjusted EBITDA.Gains or losses on fair value of warrants:As a non-cash item,gains or losses on fair value of warrants is not indicative of our operating profitability.Gains or losses on the fai
96、r value of warrants reflects our treasury/financing activities and represents a different class of expense than those included in Adjusted EBITDA.Re-measurement loss on previously held equity method investment:As a non-cash item,the re-measurement loss on a previously held equity method investment i
97、s not indicative of our operating profitability and represents a different class of expense than those included in Adjusted EBITDA.Net income or loss from equity accounted investee:Net income or loss from our equity accounted investee is deducted from or added to Adjusted EBITDA,and as a non-cash it
98、em is not indicative of our operating profitability.Income taxes:Income taxes are a function of tax laws and rates and are affected by matters which are separate from our daily operations.Income taxes are not indicative of our operating profitability and represents a different class of expense than
99、those included in Adjusted EBITDA.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-6 The reconciling items bet
100、ween Adjusted EBITDA and net income or loss are detailed in the consolidated statement of operations and comprehensive income or loss for the years ended September 30,2017 and 2016.A reconciliation between net income or loss and Adjusted EBITDA is provided for the three months ended September 30,201
101、7 and 2016 and fiscal years ending September 30,2017 and 2016.2017201620172016Net(loss)income(3,822)$1,634$(23,769)$(6,079)$Stock-based compensation expense369 -3,497 -Acquisition and IPO(recovery)costs(1,151)485 1,609 3,005 Amortization5,348 5,853 21,241 14,001 Impairment of assets-5,096 -Interest
102、expense160 222 889 687 Interest income(116)(5)(139)(20)Net foreign exchange loss(gain)3,076 (3,538)3,390 (2,841)(Gain)loss on fair value of warrants(281)22 5,011 5,437 Re-measurement loss on previously held equity method investment-976 -Net income from equity accounted investees(104)(139)(18)(475)In
103、come tax(recovery)expense(563)750 (8,403)(891)Adjusted EBITDA2,916$5,284$9,380$12,824$Year ended September 30Three months ended September 30 Management typically calculates Adjusted EBITDA as follows:2017201620172016Revenues82,892$80,983$302,976$248,547$Less:Transaction costs58,863 56,030 210,682 18
104、0,247 Less:Operating expenses21,482 19,669 86,411 55,476 Add:Stock-based compensation expense369 -3,497 -Adjusted EBITDA2,916$5,284$9,380$12,824$Year ended September 30Three months ended September 30 Principle changes in Adjusted EBITDA The decline in Adjusted EBITDA for the three months ended Septe
105、mber 30,2017 and fiscal 2017 versus the same periods last year was due to the following:a significant decline in the residential mortgage originations market,specifically for refinance mortgage activity;revenue growth recognized from lower margin appraisal and ancillary services versus higher margin
106、 title and closing services;lower margin service revenues in our title and closing service line;the transition of certain title and closing services to the network managed business model from the traditional business model;higher public company costs;and,higher transaction costs to service organic a
107、ppraisal and ancillary revenue growth in the first half of fiscal 2017,partially offset by lower transaction costs to service organic appraisal and ancillary revenue growth in the second half of fiscal 2017.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are exp
108、ressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-7 Net Revenue The reconciling items between net income or loss and Net Revenue are detailed in the consolidated statement of operations and comprehensive
109、income or loss.A reconciliation between net income or loss and Net Revenue is provided below for the three months ended September 30,2017 and 2016 and fiscal years ending September 30,2017 and 2016.2017201620172016Net(loss)income(3,822)$1,634$(23,769)$(6,079)$Operating expenses21,482 19,669 86,411 5
110、5,476 Acquisition and IPO(recovery)costs(1,151)485 1,609 3,005 Amortization5,348 5,853 21,241 14,001 Impairment of assets-5,096 -Interest expense160 222 889 687 Interest income(116)(5)(139)(20)Net foreign exchange loss(gain)3,076 (3,538)3,390 (2,841)(Gain)loss on fair value of warrants(281)22 5,011
111、5,437 Re-measurement loss on previously held equity method investment-976 -Net income from equity accounted investees(104)(139)(18)(475)Income tax(recovery)expense(563)750 (8,403)(891)Net Revenue24,029$24,953$92,294$68,300$Year ended September 30Three months ended September 30 Management typically c
112、alculates Net Revenue as follows:2017201620172016Revenues82,892$80,983$302,976$248,547$Less:Transaction costs58,863 56,030 210,682 180,247 Net Revenue24,029$24,953$92,294$68,300$Year ended September 30Three months ended September 30 All references to“Net Revenue”in this MD&A are to Adjusted EBITDA(a
113、s defined above)plus operating expenses less stock-based compensation.Net Revenue is an additional measure of our operating profitability,and by definition,excludes certain items detailed above.Net Revenue comprises revenues less transaction costs,where transaction costs comprise expenses that are d
114、irectly attributable to a specific revenue transaction including:appraisal costs,various processing fees,including credit card fees,connectivity fees,insurance inspection costs,title and closing agent costs,external abstractor costs and external quality review costs.Net Revenue is a useful financial
115、 and operating metric for us and our board of directors to assess our operating performance and the value of our Company relative to our peers.Principle changes in Net Revenue The decline in Net Revenue for the three months ended September 30,2017 versus the same quarter last year was due to the fol
116、lowing:a significant decline in the residential mortgage originations market,specifically for refinance mortgage activity;revenue growth recognized from lower margin appraisal and ancillary services versus higher margin title and closing services;lower margin service revenues in our title and closin
117、g service line;the transition of certain title and closing services to the network managed business model from the traditional business model,partially offset by lower transaction costs to service organic appraisal and ancillary revenue growth in the fourth quarter of fiscal 2017.The increase in Net
118、 Revenue for fiscal 2017 was impacted by each of the items impacting Net Revenues for the three months ended September 30,2017,coupled with contributions to Net Revenues from acquisitions,partially offset by higher transaction costs to service organic appraisal and ancillary revenue growth in the fi
119、rst half of fiscal 2017.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-8 Adjusted Net Income or Loss All ref
120、erences to“Adjusted Net Income or Loss”in this MD&A are to net income or loss before stock-based compensation expense,acquisition and IPO recovery or costs,amortization of intangibles,impairment of assets,net foreign exchange gains or losses,gains or losses on fair value of warrants and re-measureme
121、nt loss on a previously held equity method investment,net of the related tax effects.Adjusted Net Income or Loss is a term we use that does not have a standardized meaning prescribed by IFRS and is unlikely to be comparable to similar measures used by other entities.Adjusted Net Income or Loss is a
122、measure of our operating profitability and,by definition,excludes certain items detailed above.These items are viewed by us as either non-cash(in the case of stock-based compensation expense,amortization of intangibles,impairment of assets,unrealized net foreign exchange gain or loss,gain or loss on
123、 fair value of warrants and re-measurement loss on a previously held equity method investment)or non-operating(in the case of acquisition and IPO recovery or costs and realized net foreign exchange gains or losses).Adjusted Net Income or Loss is a useful financial and operating metric for us and our
124、 board of directors as it represents net income from operations,which excludes treasury,capital,acquisition and related costs,and non-operating costs.The reconciling items between net income or loss and Adjusted Net Income or Loss are provided below for the three months ended September 30,2017 and 2
125、016 and fiscal years ending September 30,2017 and 2016.2017201620172016Net(loss)income(3,822)$1,634$(23,769)$(6,079)$Stock-based compensation expense369 -3,497 -Acquisition and IPO(recovery)costs(1,151)485 1,609 3,005 Amortization of intangibles4,918 5,483 19,649 12,839 Impairment of assets-5,096 -N
126、et foreign exchange loss(gain)3,076 (3,538)3,390 (2,841)(Gain)loss on fair value of warrants(281)22 5,011 5,437 Re-measurement loss on previously held equity method investment-976 -Related tax effects(2,392)(960)(12,696)(6,389)Adjusted Net Income717$3,126$2,763$5,972$Year ended September 30Three mon
127、ths ended September 30 Adjusted EBITDA,Net Revenue and Adjusted Net Income or Loss should not be considered in isolation as an indicator of financial performance,or as an alternative to,or a substitute for,net income or other financial statement data presented in our audited consolidated financial s
128、tatements.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-9 Financial Performance The following is a discussi
129、on of our consolidated financial condition and results of operations for the years ended September 30,2017 and 2016.Foreign Currency Exchange(“FX”)Rates We have elected to report our financial results in U.S.dollars to improve the comparability of our financial results with our peers.Reporting our f
130、inancial results in U.S.dollars also reduces the impact of foreign currency exchange fluctuations in our reported amounts because our complement of assets and operations are larger in the U.S.than they are in Canada.However,we remain a legally domiciled Canadian entity and our functional currency is
131、 the Canadian dollar.Accordingly,our financial position,results of operations,cash flows and equity are initially translated to,and consolidated in,Canadian dollars.The resulting translation adjustments are included in other comprehensive income or loss.Our consolidated Canadian dollar statement of
132、financial position(“balance sheet”)is further translated from Canadian to U.S.dollars applying the foreign currency exchange rate in effect at the balance sheet date,while our consolidated Canadian dollar results of operations and cash flows are translated to U.S.dollars applying the average foreign
133、 currency exchange rate in effect during the reporting period.Translating the financial position,results of operations and cash flows of our U.S.business into Canadian dollars,our functional currency,and re-translating these amounts to U.S.dollars,our reporting currency,has no translation impact on
134、our financial statements.Accordingly,our U.S.results retain their original values when expressed in our reporting currency.Translation adjustments are only included in the determination of net income or loss when we realize a reduction in the investment we hold in operations outside of Canada.Our co
135、nsolidated financial position and operating results have been translated to U.S.dollars applying FX rates outlined in the table below.FX rates are expressed as the amount of U.S.dollars required to purchase one Canadian dollar.Through March 31,2017,FX rates represent noon rates according to the Bank
136、 of Canada.Subsequent to March 31,2017,FX rates represent the daily average rate published once each business day by the Bank of Canada.Consolidated Balance SheetConsolidated Balance SheetCurrentAverageCumulative AverageCurrentAverageCumulative AverageDecember 310.7448$0.7496$0.7496$0.7225$0.7489$0.
137、7489$March 310.7506$0.7559$0.7528$0.7710$0.7274$0.7380$June 300.7706$0.7436$0.7497$0.7687$0.7761$0.7503$September 300.8013$0.7984$0.7613$0.7624$0.7662$0.7542$Consolidated Statement of Operations andComprehensive Income or lossConsolidated Statement of Operations andComprehensive Income or lossFiscal
138、 2017Fiscal 2016 Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-10 FX Impact on Consolidated Results The fol
139、lowing table has been prepared to assist readers in assessing the FX impact on selected results for the year ended September 30,2017.Year endedSeptember 30,2016September 30,2017September 30,2017September 30,2017September 30,2017(as reported)(organic,acquisition and other non-operating changes)(holdi
140、ng FX constant with the comparative period)(FX impact)(as reported)Consolidated Statement of Operations Revenues248,547$54,132$302,679$297$302,976$Transaction costs180,247 30,187 210,434 248 210,682 Operating expenses55,476 30,760 86,236 175 86,411 Acquisition and IPO costs3,005 (1,420)1,585 24 1,60
141、9 Amortization14,001 7,233 21,234 7 21,241 Impairment of assets-5,096 5,096 -5,096 Interest expense687 200 887 2 889 Interest income(20)(118)(138)(1)(139)Net foreign exchange(gain)loss(2,841)6,195 3,354 36 3,390 Loss on fair value of warrants5,437 (473)4,964 47 5,011 Re-measurement loss on previousl
142、y held equity method investment-976 976 -976 Net income from equity-accounted investees(475)457 (18)-(18)Loss before income tax recovery(6,970)(24,961)(31,931)(241)(32,172)Net income tax recovery(891)(7,528)(8,419)16 (8,403)Net loss(6,079)$(17,433)$(23,512)$(257)$(23,769)$Net Revenue(A)68,300$23,945
143、$92,245$49$92,294$Adjusted EBITDA(A)12,824$(3,350)$9,474$(94)$9,380$Adjusted Net Income(A)5,972$(3,066)$2,906$(143)$2,763$Note:(A)Please refer to the“Non-GAAP measures”section of this MD&A Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousand
144、s of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-11 Review of Operations-For the year ended September 30,2017 We conduct our business in the U.S.and Canada.Please refer to the table above for additional details regarding
145、the impact FX had on our comparative operating results for fiscal 2017.Revenues 20172016Change Total302,976$248,547$54,429$U.S.271,242$218,267$52,975$Canada31,734$30,280$1,454$Year ended September 30 Revenue by geography and service type Year ended September 30,2016U.S.Percent-age of revenuesCanada-
146、expressed in thousands of Canadian dollarsPercent-age of revenuesU.S.Percent-age of revenuesCanada-expressed in thousands of Canadian dollarsPercent-age of revenuesAppraisal and ancillary200,168$73.8%36,970$88.7%181,036$83.0%35,348$88.0%Title and closing69,500 25.6%-%36,935 16.9%-%Other1,574 0.6%4,7
147、14 11.3%296 0.1%4,802 12.0%Revenues271,242$100.0%41,684$100.0%218,267$100.0%40,150$100.0%Year ended September 30,2017 Revenue growth or decline components U.S.CanadaConsolidatedOrganic,including market impact6.0%3.8%5.7%Acquisition18.3%-%16.1%FX-%1.0%0.1%Total revenue growth24.3%4.8%21.9%Year ended
148、September 30,2017 Year ended Consolidated revenues increased 21.9%to$303.0 million,on contributions from acquisitions of$40.0 million and organic growth(including the estimated market impact)of$14.1 million.The impact of the change in FX of$0.3 million was nominal.Our fiscal 2017 results were impact
149、ed by changes in the U.S.residential mortgage origination market,which the MBA estimates declined by over 22%,comprising an estimated 4%decrease in residential mortgage purchase activity and a 41%decline in refinance activity.Our acquisition of Linear increased revenues by$37.8 million compared to f
150、iscal 2016.We also acquired a small complementary business in 2016 that contributed additional revenues of$1.1 million in 2017,and we recorded revenues of$1.1 million from the consolidation of a joint venture previously accounted for as an equity accounted investee.We generated consolidated organic
151、revenue growth,including the negative market impact,of 5.7%in fiscal 2017 due to higher transaction volumes gained through additional market share with our existing clients and higher transaction volumes from new clients in both our appraisal and title and closing service lines.Real Matters Inc.MD&A
152、 for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-12 U.S.U.S.segment revenues increased 24.3%to$271.2 million for fiscal 2017.As out
153、lined in the consolidated discussion above,acquisitions accounted for$40.0 million of the increase in revenues.Excluding acquisitions,revenues increased$18.0 million compared to fiscal 2016 due to organic growth in appraisal volumes from market share gains with existing clients and new client volume
154、s.Title and closing volumes were significantly impacted by the MBAs estimated 41%decline in the refinance mortgage originations market.Our title and closing revenues declined$6.3 million in the second half of fiscal 2017 compared to the same period last year due to lower refinance volumes resulting
155、from a higher current period interest rate environment.Title and closing revenues in fiscal 2017 also included lower margin revenues due to service revenue mix.Canada Revenues in Canada increased 4.8%to$31.7 million in fiscal 2017.We managed higher appraisal volumes as a result of increased market s
156、hare and FX contributed 1.0%to the increase in fiscal 2017.Please refer to the Strategy and Outlook section of this MD&A for additional discussion on economic trends affecting revenues,our strategy and our operations.Transaction costs Transaction costs comprise expenses directly attributable to a sp
157、ecific revenue transaction,including appraisal costs,various processing fees,including credit card fees,connectivity fees,insurance inspection costs,title and closing agent costs,external abstractor costs and external quality review costs.20172016Change Total210,682$180,247$30,435$U.S.184,119$155,17
158、9$28,940$Canada26,563$25,068$1,495$Year ended September 30 Year ended On a consolidated basis,transaction costs increased 16.9%to$210.7 million in fiscal 2017 due to organic and acquisition growth.Organic revenue growth from the launch of new clients,market share gains with existing clients and reve
159、nue mix accounted for$17.4 million of the increase in transaction costs from fiscal 2016.Transaction costs were also impacted by our transition of certain title and closing services to a network managed business model from a traditional business model.We incurred higher transaction costs to service
160、organic appraisal and ancillary revenue growth in the first half of fiscal 2017,which was partially offset by lower transaction costs to service the same growth in the second half of fiscal 2017.Acquisitions contributed$13.0 million to the year-over-year increase in transaction costs and were due to
161、 the acquisitions of Linear and a small complementary business in 2016,as well as the consolidation of a previously equity accounted investee in 2017.U.S.Transaction costs in our U.S.segment increased$28.9 million in fiscal 2017 as a result of organic and acquisition growth which accounted for$15.9
162、million and$13.0 million of the increase,respectively.Our acquisition of Linear in April 2016,coupled with a small complementary business acquired in January 2016 and the consolidation of a previously equity accounted investee,generated higher transaction costs of$12.2 million,$0.5 million and$0.3 m
163、illion,respectively.Higher transaction costs attributable to organic revenue growth in fiscal 2017 were due to market share gains from existing clients and new client additions,partially offset by lower transaction costs due to lower refinance mortgage activity.As outlined above,we began to transiti
164、on certain title and closing services to a network managed business model in the second half of 2017,which also contributed to higher transaction costs.Leveraging our platform in the supply of appraisal and ancillary services in the second half of fiscal 2017 improved transaction costs relative to r
165、evenues.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-13 Excluding the impact of acquisitions,Net Revenue(A
166、)margins were lower compared to fiscal 2016 as our 2017 consolidated revenues included a higher proportion of lower-margin appraisal revenues,higher appraiser costs incurred in conjunction with onboarding and deploying our platform with new clients,which included Tier 1 mortgage lenders in the U.S.,
167、in the first half of fiscal 2017,lower margin work completed in our title and closing service line and the transition of certain title and closing service offerings to a network managed model,which were partially offset by improvements to Net Revenue(A)margins from improving our delivery of appraisa
168、l and ancillary services in the second half of fiscal 2017.As we continue to build market share with clients,we expect to leverage our platform to lower transaction costs as a percentage of revenues over the long-term.Canada Transaction costs in Canada increased$1.5 million in fiscal 2017 compared t
169、o fiscal 2016 in line with the increase in appraisal revenues from market share gains.Transaction costs as a percentage of revenues increased by 90 basis points due to revenue mix across our client base.Operating expenses 20172016Change Total86,411$55,476$30,935$U.S.67,722$42,898$24,824$Canada2,886$
170、2,413$473$Corporate15,803$10,165$5,638$Year ended September 30 Year ended Consolidated operating expenses increased$30.9 million in fiscal 2017 compared to fiscal 2016.Higher operating expenses in our U.S.segment accounted for the majority of the increase,driven primarily by acquisitions and organic
171、 growth.Corporate segment operating costs increased due to stock-based compensation expense totaling$3.5 million,compared to$nil in 2016.In 2017,we also hired additional staff to support our platform and growth strategies,including public company readiness,and we incurred higher public company costs
172、.U.S.The increase in U.S.segment operating expenses was due in part to our acquisition of Linear.Acquisitions contributed$18.8 million of additional operating expenses in the current year,comprised principally of payroll and related costs of$13.7 million and office and computer costs of$2.3 million.
173、The remainder of the increase was related to travel and entertainment,rent and bank charges.Excluding acquisitions,higher payroll and related costs were the largest contributor to the increase in operating expense,increasing$4.8 million year-over-year.Higher payroll costs represent our investment in
174、 new client deployment to support the anticipated growth from market share gains with recently deployed clients.Similar to transaction costs,we expect to leverage our platform to lower operating expenses as a percentage of Net Revenue(A)over the long-term.Computer costs,travel and entertainment and
175、provisions for certain receivables increased$1.5 million in total due to growth in the business and the timing of receivables collection.Canada The year-over-year increase in operating expenses was due to new hires and salary increases of$0.1 million,higher travel and related expenses of$0.1 million
176、 and higher office related costs of$0.2 million.Corporate Corporate operating expenses increased$5.6 million in fiscal 2017 due to stock-based compensation expense of$3.5 million.Additional staff to support our platform and growth strategies,and new hires for public company readiness,resulted in hig
177、her payroll and related costs of$1.1 million.Professional fees increased$0.7 million from fiscal 2016 due to higher costs to operate as a public company and certain litigation related matters.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thous
178、ands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-14 Acquisition and IPO costs(recovery)20172016Change Total1,609$3,005$(1,396)$U.S.(953)$2,406$(3,359)$Canada-$-$-$Corporate2,562$599$1,963$Year ended September 30 Year e
179、nded We incurred acquisition and IPO costs of$1.6 million for third party services in fiscal 2017 which included a recovery due to the settlement of certain amounts owing to the sellers of Linear of$1.4 million.IPO costs reflected professional and consulting fees in both the current and prior fiscal
180、 years.Fiscal 2016 also included costs incurred on our purchase of Linear and a complementary business we acquired in January 2016.Amortization 20172016Change Total21,241$14,001$7,240$U.S.20,539$12,817$7,722$Canada-$-$-$Corporate702$1,184$(482)$Year ended September 30 Year ended Amortization increas
181、ed$7.2 million in fiscal 2017 compared to fiscal 2016.The U.S.segment increase was due to acquisitions completed in 2016,resulting in higher intangible asset amortization of$7.3 million.Amortization of property and equipment in our U.S.segment was$0.4 million higher due to the acquisition of Linear.
182、The decline in amortization expense for our Corporate segment was due to fully amortized investments in our platform.Impairment of assets 20172016ChangeTotal5,096$-$5,096$Year ended September 30 Year ended We incurred an impairment charge of$5.1 million in the second quarter of fiscal 2017 related t
183、o two equity accounted investees recorded in our U.S.segment that we assessed as impaired.Ending these joint ventures arrangements aligns with our long-term growth and integration strategy.Interest expense 20172016Change Total889$687$202$Year ended September 30 Year ended Interest expense increased$
184、0.2 million in fiscal 2017.Indebtedness incurred in conjunction with the acquisition of Linear,including the accretion of deferred financing costs incurred in connection with this debt,and accretion of contingent amounts payable to the sellers of Linear,was the primary reason for the increase in int
185、erest expense compared to fiscal 2016.These increases were partially offset by lower interest expense following our IPO due to the full repayment of amounts drawn on our long-term debt facilities in May of this year.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amount
186、s are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-15 Interest income 20172016Change Total(139)$(20)$(119)$Year ended September 30 Year ended Interest income was nominal in both fiscal 2017 and fi
187、scal 2016.Interest income in fiscal 2017 was marginally higher than fiscal 2016 due to the investment of unutilized proceeds received on our IPO.Net foreign exchange loss(gain)20172016Change Total3,390$(2,841)$6,231$Year ended September 30 Year ended Foreign currency losses in fiscal 2017 and gains
188、in fiscal 2016 principally represent non-cash losses or gains on long-term financing arrangements between a Canadian and U.S.entity within the consolidated group of companies.In fiscal 2016,net foreign exchange gains were partially offset by a realized loss on a foreign currency exchange agreement e
189、ntered into in advance of,and in connection with,the acquisition of Linear.Loss on fair value of warrants 20172016Change Total5,011$5,437$(426)$Year ended September 30 Year ended The recorded loss for fiscal 2017 declined modestly compared to fiscal 2016.A lower increase in the value of common share
190、s used to value warrant liabilities in fiscal 2017 was the primary reason for the lower loss.Re-measurement loss on previously held equity method investment 20172016ChangeTotal976$-$976$Year ended September 30 Year ended Effective April 1,2017,we amended an operating agreement with one of our joint
191、venture partners.This amendment resulted in us obtaining control over the joint venture and required that we re-measured our original investment in this investee at the change of control date.We recorded a non-cash loss of$1.0 million in respect of this re-measurement.Net income from equity accounte
192、d investees 20172016ChangeTotal(18)$(475)$457$Year ended September 30 Net income or loss from equity accounted investees represents our pro rata share of the investees post-acquisition earnings,computed using the consolidation method.Year ended Prior to our acquisition of Linear in April 2016,we had
193、 no investment in equity accounted investees.The decline in mortgage originations attributable to lower residential mortgage refinancing volumes contributed to lower net income Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dol
194、lars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-16 from equity accounted investees in fiscal 2017 compared to fiscal 2016.In addition,and as outlined above in the discussion of the re-measurement loss on a previously held equity met
195、hod investment,one of our joint ventures became a controlled subsidiary which required us to discontinue the use of equity method of accounting.Net income tax recovery 20172016Change Total(8,403)$(891)$(7,512)$Year ended September 30 Year ended We recorded a loss before income tax recovery for fisca
196、l 2017 of$32.2 million.Income tax calculated at the statutory rate resulted in an income tax recovery of$8.5 million.Income tax recoveries attributable to foreign earnings subject to tax at a different statutory tax rate contributed an additional$3.4 million,bringing the total expected income tax re
197、covery to$11.9 million and representing an effective tax rate of 37.2%.Non-deductible and non-taxable expenses partially offset income tax recoveries by$3.3 million,and relate to accounting losses on the fair value of warrant liabilities,net foreign exchange gains or losses on long-term financing ar
198、rangements between a Canadian and U.S.entity and stock-based compensation that are not deductible for tax.State and other tax expense or recoveries were nominal.Review of Operations-For the three months ended September 30,2017 FX Impact on Consolidated Results The following table has been prepared t
199、o assist readers in assessing the FX impact on selected results for the three months ended September 30,2017.Three months endedSeptember 30,2016September 30,2017September 30,2017September 30,2017September 30,2017(as reported)(organic,acquisition and other non-operating changes)(holding FX constant w
200、ith the comparative period)(FX impact)(as reported)Consolidated Statement of Operations Revenues80,983$1,595$82,578$314$82,892$Transaction costs56,030 2,571 58,601 262 58,863 Operating expenses19,669 1,627 21,296 186 21,482 Acquisition and IPO costs(recovery)485 (1,662)(1,177)26 (1,151)Amortization5
201、,853 (512)5,341 7 5,348 Interest expense222 (64)158 2 160 Interest income(5)(109)(114)(2)(116)Net foreign exchange(gain)loss(3,538)6,577 3,039 37 3,076 Loss(gain)on fair value of warrants22 (354)(332)51 (281)Net income from equity-accounted investees(139)35 (104)-(104)Income(loss)before income tax 2
202、,384 (6,514)(4,130)(255)(4,385)expense(recovery)Net income tax expense(recovery)750 (1,330)(580)17 (563)Net income(loss)1,634$(5,184)$(3,550)$(272)$(3,822)$Net Revenue(A)24,953$(976)$23,977$52$24,029$Adjusted EBITDA(A)5,284$(2,268)$3,016$(100)$2,916$Adjusted Net Income(A)3,126$(2,258)$868$(151)$717$
203、Note:(A)Please refer to the“Non-GAAP measures”section of this MD&A Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30
204、,2017-17 Revenues 20172016ChangeTotal82,892$80,983$1,909$U.S.74,233$72,231$2,002$Canada8,659$8,752$(93)$Three months ended September 30 Revenue by geography and service type Three months ended September 30,2016U.S.Percent-age of revenuesCanada-expressed in thousands of Canadian dollarsPercent-age of
205、 revenuesU.S.Percent-age of revenuesCanada-expressed in thousands of Canadian dollarsPercent-age of revenuesAppraisal and ancillary57,062$76.9%9,727$89.2%52,268$72.4%10,174$88.8%Title and closing16,768 22.6%-%19,818 27.4%-%Other403 0.5%1,178 10.8%145 0.2%1,281 11.2%Revenues74,233$100.0%10,905$100.0%
206、72,231$100.0%11,455$100.0%Three months ended September 30,2017 Revenue growth or decline components U.S.CanadaConsolidatedOrganic,including market impact2.1%(4.7)%1.4%Acquisition0.7%-%0.6%FX-%3.6%0.4%2.8%(1.1)%2.4%Three months ended September 30,2017Total revenue growth(decline)Three months We gener
207、ated consolidated revenues of$82.9 million in the fourth quarter of 2017,representing an increase of$1.9 million or 2.4%over the same period last year.Organic market share gains in U.S.appraisal revenues exceeded the estimated decline in the market for these services as estimated by the MBA,growing$
208、4.8 million over the fourth quarter of 2016.Organic market share gains in title and closing revenues were outpaced by the estimated decline in the overall market,which resulted in a decrease to revenues of$3.5 million this quarter compared to the same quarter last year.On a consolidated basis,and in
209、cluding the market impact,revenues increased organically by$1.1 million compared to the same quarter last year.FX represented$0.3 million of the increase and an amendment to an operating agreement between us and a joint venture partner resulted in the joint venture being accounted for as a controlle
210、d subsidiary,and consolidated,versus its previous accounting treatment as an equity accounted investee,which increased consolidated revenues by$0.5 million.The U.S.residential mortgage origination market decreased by approximately 13%in the fourth quarter of 2017 compared to the same quarter last ye
211、ar according to the MBA Mortgage Finance Forecast Report of October 24,2017.The residential mortgage purchase market increased approximately 7%while the refinance market is estimated to have declined by 38%.Notwithstanding the estimated market impact,we achieved market share gains with our existing
212、clients and recorded transaction volumes from new clients.With more than 60 of the top 100 lenders as clients,we have a significant base from which to grow market share in the future.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U
213、.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-18 U.S.U.S.segment revenues increased 2.8%to$74.2 million in the fourth quarter of fiscal 2017.Despite the market decline as estimated by the MBA,we grew appraisal volumes from n
214、ew clients,achieved market share gains with existing clients and generated additional revenues in the fourth quarter of 2017 totaling$4.8 million.When we adjust for the MBAs estimate of the market decline,title and closing revenues grew organically,but included lower margin revenues due to service r
215、evenue mix.In total,however,title and closing revenues were lower in the fourth quarter of 2017 by$3.5 million compared to the same quarter last year due to lower refinance volumes resulting from a higher current period interest rate environment.As outlined above,acquisition revenue increased title
216、and closing revenues by$0.5 million due to an amendment to a joint venture agreement.Canada Revenues in Canada declined$0.1 million or 1.1%to$8.7 million in the fourth quarter of fiscal 2017.We managed modestly lower appraisal volumes in the fourth quarter this year due to a decline in Canadian mark
217、et activity.FX increased revenues in the fourth quarter of 2017 by$0.3 million.Please refer to the Strategy and Outlook section of this MD&A for additional discussion on economic trends affecting revenues,our strategy and our operations.Transaction costs 20172016ChangeTotal58,863$56,030$2,833$U.S.51
218、,601$48,743$2,858$Canada7,262$7,287$(25)$Three months ended September 30 Three months On a consolidated basis,transaction costs increased 5.1%to$58.9 million in fiscal 2017 due to acquisition and organic growth.Acquisitions contributed$0.1 million to the fourth quarter increase in transaction costs,
219、due to the consolidation of a previously equity accounted investee.Organic revenue growth from the launch of new clients,market share gains with existing clients and a change in revenue mix accounted for$2.4 million of the increase in transaction costs compared to the fourth quarter in fiscal 2016.I
220、n particular,lower margin appraisal revenues grew$4.8 million in the fourth quarter of 2017 compared to the same quarter last year,while higher margin title and closing revenues declined$3.5 million.Transaction costs also increased due to our transition of certain title and closing services to a net
221、work managed business model from a traditional business model,coupled with an increase in lower margin search revenues in our title and closing service line,partially offset by lower transaction costs to service organic appraisal and ancillary revenue growth.U.S.Transaction costs in our U.S.segment
222、increased$2.9 million in the fourth quarter of fiscal 2017 due primarily to organic growth of$2.8 million.Higher transaction costs attributable to organic revenue growth in the fourth quarter this year were due to market share gains from existing clients and new client additions,partially offset by
223、lower transaction costs due to lower refinance mortgage activity.As outlined above,the transition of certain title and closing services to a network managed business model also contributed to higher transaction costs,while improving our delivery of appraisal and ancillary services in the second half
224、 of fiscal 2017 improved transaction costs relative to revenues in the fourth quarter this year.Excluding the impact of acquisitions,Net Revenue(A)margins were lower compared to the fourth quarter in fiscal 2016 due to consolidated revenues comprising a higher proportion of lower margin appraisal re
225、venues,lower margin work completed in our title and closing service line and the transition of certain title and closing service offerings to a network managed model,partially offset by improvements to Net Revenue(A)margins by leveraging our platform in the supply of Real Matters Inc.MD&A for the ye
226、ars ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-19 appraisal and ancillary services in the fourth quarter this year.As we continue to build m
227、arket share with clients,we expect to continue to leverage our platform to lower transaction costs as a percentage of revenues over the long-term.Canada Transaction costs in Canada declined marginally in the fourth quarter of fiscal 2017 compared to the same quarter last year due to lower market act
228、ivity,net of FX.Operating expenses 20172016ChangeTotal21,482$19,669$1,813$U.S.16,931$16,169$762$Canada789$583$206$Corporate3,762$2,917$845$Three months ended September 30 Three months Consolidated operating expenses increased$1.8 million in the fourth quarter of fiscal 2017.Higher operating expenses
229、 in our Corporate segment accounted for the majority of the increase over the same quarter last year,due to stock-based compensation expense of$0.4 million and higher professional fees of$0.3 million.Higher payroll and related costs of$0.5 million were the largest contributor to the increase in U.S.
230、segment operating expenses this quarter compared to the same quarter last year.These costs relate to our investment in new client deployment to support growth from market share gains with recently deployed clients,partially offset by lower payroll costs as we began the transition of our title and cl
231、osing service offering to a network managed solution.The balance of the increase is due to higher computer costs and higher provisions for certain receivables.U.S.The increase in U.S.segment operating expenses was due to higher payroll and related costs,higher computer costs and provisions for certa
232、in receivables.Higher payroll and related costs were the largest contributor to the increase totaling$0.5 million.Looking forward,we expect to leverage our platform to lower operating expenses as a percentage of Net Revenue(A).Canada The increase in operating costs was not significant.Corporate Oper
233、ating expenses in our Corporate segment increased$0.8 million over the same quarter last year,due to stock-based compensation expense of$0.4 million,and higher professional fees,including legal,accounting and advisory of$0.3 million,in aggregate.Real Matters Inc.MD&A for the years ended September 30
234、,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-20 Acquisition and IPO(recovery)costs 20172016ChangeTotal(1,151)$485$(1,636)$U.S.(1,389)$198$(1,587)$Canada-$-$-$Co
235、rporate238$287$(49)$Three months ended September 30 Three months We recognized a recovery of$1.2 million in the fourth quarter of fiscal 2017 due to the settlement of certain amounts owing to the sellers of Linear,partially offset by additional IPO costs.IPO costs reflected professional and consulti
236、ng fees in both the current and prior year quarters.Amortization 20172016ChangeTotal5,348$5,853$(505)$U.S.5,211$5,586$(375)$Canada-$-$-$Corporate137$267$(130)$Three months ended September 30 Three months Amortization declined modestly in the fourth quarter of fiscal 2017 compared to the same quarter
237、 last year.The decrease was due to lower intangible amortization in our U.S.segment from fully amortized intangible assets and lower amortization expense recorded in our Corporate segment due to fully amortized investments in our platform.Interest expense 20172016ChangeTotal160$222$(62)$Three months
238、 ended September 30 Three months Interest expense declined$0.1 million in the fourth quarter of fiscal 2017 due to the full repayment of amounts drawn on our long-term debt facilities from a portion of the proceeds raised on the Offering.Interest income 20172016ChangeTotal(116)$(5)$(111)$Three month
239、s ended September 30 Three months The increase in interest income for the fourth quarter of fiscal 2017 of$0.1 million was due to the investment of unutilized proceeds received on our IPO.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands
240、 of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-21 Net foreign exchange loss(gain)20172016ChangeTotal3,076$(3,538)$6,614$Three months ended September 30 Three months Foreign currency exchange losses in the fourth quarter
241、of fiscal 2017 principally represented non-cash losses on long-term financing arrangements between a Canadian and U.S.entity within the consolidated group of companies.(Gain)loss on fair value of warrants 20172016ChangeTotal(281)$22$(303)$Three months ended September 30 Three months We recognized a
242、nominal gain in the fourth quarter of fiscal 2017 due to the decline in our share price since the third quarter of fiscal 2017.We also recognized gains on certain warrants exercised during the current year quarter due to their exercise occurring at a lower price than the fair value ascribed to each
243、warrant on June 30,2017.Net income from equity accounted investees 20172016ChangeTotal(104)$(139)$35$Three months ended September 30 Three months The decline in mortgage originations attributable to lower residential mortgage refinancing volumes contributed to lower income in the fourth quarter of f
244、iscal 2017 compared to the same quarter last year.In addition,effective April 1,2017,one of our joint ventures became a controlled subsidiary which resulted in us discontinuing the use of equity method of accounting.Net income tax recovery 20172016ChangeTotal(563)$750$(1,313)$Three months ended Sept
245、ember 30 Three months We recorded a loss before income tax recovery in the fourth quarter of fiscal 2017 of$4.4 million.Income tax calculated at the statutory rate resulted in an income tax recovery of$1.2 million.Income tax recoveries attributable to foreign earnings subject to tax at a different s
246、tatutory tax rate contributed an additional$0.4 million,bringing the total expected income tax recovery to$1.6 million,representing an effective tax rate of 36.1%.Non-deductible and non-taxable losses or gains partially offset income tax recoveries by$1.0 million,and relate to accounting gains on th
247、e fair value of warrant liabilities,net foreign exchange losses on long-term financing arrangements between a Canadian and U.S.entity and stock-based compensation that are not deductible or included for tax.State and other tax expense or recoveries were nominal.Dividends The Companys current policy
248、is not to pay dividends.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-22 Selected Annual Information 201720
249、16(1)2015(1)Revenues302,976$248,547$170,495$Net loss(23,769)$(6,079)$(5,103)$Net loss per weighted average share,basic(0.30)$(0.09)$(0.08)$Net loss per weighted average share,diluted(0.30)$(0.09)$(0.08)$Total assets226,563$190,864$78,752$Total long-term liabilities13,474$36,678$15,474$Year ended Sep
250、tember 30Note(1)Net loss per weighted average share,basic and diluted,have been restated to reflect the share consolidation(on the basis of one(new)for every two(old)common shares)which took effect immediately prior to the closing of the Offering.Revenues 2017-2016 Please see the Review of Operation
251、s section of this MD&A for a detailed discussion of the year-over-year changes in revenues.2016-2015 Consolidated revenues increased 45.8%to$248.5 million in fiscal 2016 compared to the year ended September 30,2015(“fiscal 2015”),due to revenues from acquisitions and organic growth of$65.5 million a
252、nd$15.0 million,respectively,partially offset by a decline in FX of$2.4 million.Revenue growth from acquisitions was largely attributable to the results of Linear,which we acquired in April 2016.Revenues from this acquisition contributed$37.2 million in fiscal 2016.The Linear acquisition provided us
253、 with a presence in the residential and commercial real estate title and closing market.We also acquired a small complementary business that contributed additional revenues of$5.2 million in fiscal 2016 and the fiscal 2015 acquisition of Southwest contributed additional revenues of$23.1 million in f
254、iscal 2016.Our organic revenue growth in fiscal 2016 was the result of higher transaction volumes gained through additional market share with our existing clients,coupled with transaction volumes from new clients and higher comparative market volumes.U.S.segment revenues increased 52.4%to$218.3 mill
255、ion in fiscal 2016.As outlined in the discussion above,acquisitions accounted for$65.5 million of the increase in revenues in fiscal 2016.Excluding acquisitions,revenues increased year-over-year due to the addition of a Tier 1 mortgage lender in June 2015 and growth of appraisal volumes and market s
256、hare following deployment with this client.Higher comparative market volumes also contributed to revenue growth between fiscal 2016 and fiscal 2015.Revenues in Canada increased 11.0%to$30.3 million in fiscal 2016 or 19.8%and$5.4 million when the impact of FX is excluded.We managed higher appraisal v
257、olumes in fiscal 2016 as a result of market share gains.Lower insurance inspection revenues in our Canadian segment represented the decline in revenues from other sources.Net loss 2017-2016 Please see the Review of Operations section of this MD&A for a detailed discussion of the components comprisin
258、g the change in net loss between fiscal 2017 and fiscal 2016.2016-2015 Our net loss was nominally higher in fiscal 2016 compared to fiscal 2015.Although we realized stronger Adjusted EBITDA(A)related to organic and acquisition growth,this growth was more than offset by higher intangible asset amorti
259、zation expense due to the acquisitions completed in fiscal 2016.Acquisition and IPO costs increased over fiscal 2015 as well due to acquisitions completed in fiscal 2016 and the incurrence of costs in respect of our IPO.These amounts Real Matters Inc.MD&A for the years ended September 30,2017 and 20
260、16 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-23 were partially offset by net foreign currency exchange gains due to non-cash gains on long-term financing arrangements betwe
261、en a Canadian and U.S.entity within the consolidated group of companies and higher income tax recoveries attributable to higher recorded losses before income tax.Total Assets 2017-2016 Total assets increased$35.7 million or 18.7%between September 30,2017 and 2016.Cash and cash equivalents increased$
262、44.9 million,due to excess proceeds from the Offering of$51.4 million,partially offset by a$5.1 million use of cash due to our election to pay appraisal vendors faster.Deferred tax assets increased$12.1 million between September 30,2017 and 2016.This increase was the result of a change in accounting
263、 and tax values for intangible assets,due to the amortization of intangible assets more quickly for accounting than tax.The increase in deferred tax assets from a change in intangible assets was partially offset by a decline in deferred tax assets due to a change in non-deductible accounting reserve
264、s.Intangible assets declined$19.6 million between September 30,2017 and 2016,due to normal course amortization.The remainder of the change in total assets was due to lower investments in equity accounted investees of$7.7 million,due in part to an impairment charge recorded in fiscal 2017,higher good
265、will resulting from an amendment to a joint venture agreement and the purchase of the remaining interest in a joint venture in fiscal 2017,and higher trade and other receivables due to net organic growth from new clients and market share increases with existing clients.2016-2015 Total assets increas
266、ed$112.1 million between September 30,2016 and 2015,with goodwill accounting for$34.3 million of the increase.Goodwill recorded on the acquisition of Linear was$33.0 million in 2016,while a complementary business acquired in 2016 contributed$1.3 million to goodwill.Acquisitions also contributed to t
267、he increase in intangibles assets,which increased$45.8 million over 2015.Intangible assets recognized on the acquisition of Linear were$55.9 million and we recognized$2.7 million of intangibles on a complementary business acquisition completed in fiscal 2016.FX accounted for the remainder of the inc
268、rease to intangible assets and these additions were partially offset by normal course amortization totaling$12.8 million.Investments in equity accounted investees contributed$7.9 million to the increase in total assets between 2016 and 2015.This increase was directly attributable to the acquisition
269、of Linear in 2016,combined with our share of net income from these investments since acquisition.Finally,total current assets increased$19.9 million between September 30,2016 and 2015,due in part to higher trade and other receivables,which increased$15.1 million.The increase in trade and other recei
270、vables was due to acquisitions,with Linear accounting for$8.2 million of the increase,and organic growth in our business from new clients and market share gains with existing clients.Cash also increased$4.8 million between 2016 and 2015 on higher cash generated from operations of$4.2 million.Total L
271、ong-Term Liabilities 2017-2016 Total long-term liabilities declined$23.2 million or 63.3%between September 30,2017 and 2016.Long-term debt declined$14.4 million year-over-year due to our full repayment of amounts outstanding from a portion of the proceeds raised on the Offering.Other liabilities dec
272、lined$9.5 million between September 30,2017 and 2016.The decline in other liabilities was due to the reclassification of contingent amounts payable to the sellers of Linear from other liabilities to accrued charges since the amount payable will be satisfied within a year.We expect to satisfy our tot
273、al long-term liabilities as they come due based on our expectations of future operating performance.2016-2015 Total long-term liabilities increased$21.2 million at September 30,2016 compared to September 30,2015.Other liabilities were the largest contributor to the increase,increasing$9.5 million ye
274、ar-over-year.Amounts payable at September 30,2016 represented contingent amounts payable to the sellers of Linear.There were no comparable amounts due at September 30,2015.Long-term debt also increased$5.6 million year-over-year.This increase was due in part to the acquisition of Linear and a comple
275、mentary business in 2016,partially offset by required repayments from excess cash balances.The fair value of warrant liabilities increased$5.6 million year-over-year.The primary reason for this increase was the rise in the fair value attributed to our common shares.Real Matters Inc.MD&A for the year
276、s ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-24 Summary of Quarterly Results 2017Q4Q3Q2Q1(1)TotalRevenues U.S.74,233$67,664$57,593$71,752$27
277、1,242$Canada8,659 9,008 6,925 7,142 31,734 Total revenues82,892$76,672$64,518$78,894$302,976$Net loss(3,822)$(8,754)$(8,908)$(2,285)$(23,769)$Net loss-attributable to common shareholders(3,886)$(8,813)$(8,980)$(2,335)$(24,014)$Net loss per weighted average share,basic(0.04)$(0.11)$(0.12)$(0.03)$(0.3
278、0)$Net loss per weighted average share,diluted(0.04)$(0.11)$(0.12)$(0.03)$(0.30)$2016Q4Q3Q2Q1TotalRevenues U.S.72,231$67,185$40,332$38,519$218,267$Canada8,752 9,470 6,086 5,972 30,280 Total revenues80,983$76,655$46,418$44,491$248,547$Net income(loss)1,634$(1,058)$(6,430)$(225)$(6,079)$Net income(los
279、s)-attributable to common shareholders1,487$(1,113)$(6,430)$(225)$(6,281)$Net income(loss)per weighted average share,basic(1)0.02$(0.01)$(0.10)$(0.00)$(0.09)$Net income(loss)per weighted average share,diluted(1)0.02$(0.01)$(0.10)$(0.00)$(0.09)$Note(1)Net income or loss per weighted average share,bas
280、ic and diluted,has been restated to reflect the share consolidation(on the basis of one(new)for every two(old)common shares)which took effect immediately prior to the closing of the Offering.Revenues U.S.Segment Q4Q3Q2Q1Total201774,233$67,664$57,593$71,752$271,242$201672,231$67,185$40,332$38,519$218
281、,267$Change2,002$479$17,261$33,233$52,975$U.S.segment revenues increased in the first quarter of fiscal 2017 compared to the same quarter last year.Acquisitions accounted for the majority of the increase in revenues.Excluding acquisitions,the increase in revenues was due to growth in appraisal volum
282、es and market share gains with existing clients.Revenues from the acquisition of Linear outperformed expectations due to higher volumes of mortgage refinancings in the first quarter of fiscal 2017.Second quarter U.S.segment revenues improved compared to the same quarter last year.Acquisitions accoun
283、ted for a significant portion of this increase.Excluding acquisitions,revenues increased on growth in appraisal volumes from new clients and market share gains with existing clients.Our second quarter results were impacted by a decline in U.S.residential mortgage refinance volumes,which the MBA esti
284、mates declined by 10%from the same quarter last year.U.S.segment revenues increased in the third quarter of fiscal 2017.Despite the market decline as estimated by the MBA,appraisal revenues increased organically due to growth in appraisal volumes from new clients and market share gains with existing
285、 appraisal clients.Our title and closing revenues grew organically,and included lower margin revenues due to service revenue mix,when adjusting for the MBAs estimate of the market decline.Acquisitions also contributed to third quarter revenue growth.The U.S.residential mortgage declined approximatel
286、y 9%as estimated by the MBA.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-25 U.S.segment revenues increased
287、 in the fourth quarter of fiscal 2017.Despite the market decline as estimated by the MBA,we grew appraisal volumes from new clients and market share gains with existing clients.When adjusting for the MBAs estimate of the market decline,title and closing revenues grew organically,but included lower m
288、argin revenues due to service revenue mix.In total,title and closing revenues were lower in the fourth quarter of 2017 compared to the same quarter last year due to lower refinance volumes resulting from a higher current period interest rate environment.Acquisition revenue increased title and closin
289、g revenues due to an amendment to a joint venture agreement which now requires us to consolidate the entity.Canadian Segment expressed in thousands of C$Q4Q3Q2Q1Total201710,905$12,091$9,161$9,527$41,684$201611,455$12,355$8,367$7,973$40,150$Change(550)$(264)$794$1,554$1,534$Revenues in Canada increas
290、ed in the first quarter of fiscal 2017 compared to the first quarter of fiscal 2016 due to higher appraisal volumes from increased market share.Second quarter revenues in Canada increased compared to the same quarter last year.We managed higher appraisal volumes in the second quarter of fiscal 2017
291、as a result of increased market share with existing clients.Third quarter revenues in Canada declined due to modestly lower appraisal volumes from a comparative decline in market activity.Revenues in Canada declined nominally in the fourth quarter of fiscal 2017.We managed modestly lower appraisal v
292、olumes in the fourth quarter this year due to a decline in Canadian market activity.Net(loss)income Q4Q3Q2Q1Total2017(3,822)$(8,754)$(8,908)$(2,285)$(23,769)$20161,634$(1,058)$(6,430)$(225)$(6,079)$Change(5,456)$(7,696)$(2,478)$(2,060)$(17,690)$Net loss or income generally follows the rise and fall
293、in revenues due to the seasonal nature of our business.Net loss or income is also impacted by changes in stock-based compensation expense,acquisition and IPO recoveries or costs,amortization,impairment of assets,interest expense,interest income,net foreign exchange gains or losses,gains or losses on
294、 fair value of warrants and re-measurement losses on a previously held equity method investment which are not tied to the seasonal nature of our business and which fluctuate with other non-operating variables.Net income tax expense or recovery and net income or loss from equity accounted investees a
295、lso impacts net loss or income.Our net loss in the first quarter of fiscal 2017 was greater than the net loss we posted in the first quarter of fiscal 2016.The decline was due to a higher loss on fair value of warrants due to an increase in the fair value of our common shares used to value our warra
296、nt liabilities and higher amortization expense due to acquisitions completed in 2016,which resulted in higher intangible asset amortization in the first quarter of fiscal 2017.These higher expenses were partially offset by stronger current period Adjusted EBITDA(A)related to organic and acquisition
297、growth,and a significant foreign exchange gain from the revaluation of long-term financing arrangements between a Canadian and U.S.entity within the consolidated group of companies.Higher Adjusted EBITDA(A)led to higher income tax expense recognized in the period which in isolation negatively impact
298、ed net loss.Our net loss in the second quarter of fiscal 2017 was higher than the same period in 2016.An asset impairment charge recognized on two investments in equity accounted investees was the single largest contributor to the increase.Other factors included higher amortization expense from high
299、er intangible amortization due to acquisitions completed in 2016 Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2
300、017-26 and lower Adjusted EBITDA(A).Higher appraiser costs incurred in conjunction with onboarding and deploying our platform with new clients,the hire of additional staff to further enhance and support our platform to accommodate both our short and longer-term growth strategies and new hires for pu
301、blic company readiness,resulted in higher payroll and related costs which led to lower Adjusted EBITDA(A).We also incurred higher IPO costs from third party professionals and consultants.Partially offsetting these increases were lower losses on the fair value of warrants due to a higher increase in
302、the fair value of common shares used to value warrant liabilities in the comparative period and an increase in deferred income tax recoveries.Higher deferred income tax recoveries were due to lower deferred income tax liabilities from intangible asset amortization related to intangibles recognized o
303、n acquisitions completed in 2016,the asset impairment charge recognized on two equity accounted investees,coupled with an increase in deferred income tax assets from tax loss carryforwards.Our net loss in the third quarter of fiscal 2017 was higher than the same quarter last year.Higher operating ex
304、penses was the primary reason for the increase in comparative net losses,the majority of which was due to stock-based compensation expense.We did not incur stock-based compensation expense in the third quarter of fiscal 2016 as none of the issued and outstanding options had vested.Higher payroll and
305、 related costs also contributed to higher net losses in the third quarter of fiscal 2017 due to our investment in new client deployments to support growth from market share gains from these recently deployed clients.Together,legal,bad debt and office rent expense increased in aggregate as the result
306、 of various legal matters,including supporting our defense position in a collective action law suit,providing for accounts receivable at risk of collection,and higher facilities expenses incurred for our new Denver operating facility.Higher net foreign currency exchange losses also contributed to hi
307、gher net losses in the third quarter this year due to non-cash losses on long-term financing arrangements between a Canadian and U.S.entity within the consolidated group of companies.Net losses in the third quarter of 2017 were also higher due to the amendment of an operating agreement with one of o
308、ur joint venture partners.This amendment resulted in us obtaining control over the joint venture and required us to re-measure our original investment.Finally,we recorded a higher loss in the current quarter from the fair value of warrants.These amounts were partially offset by higher income tax rec
309、overies attributable to higher recorded losses before income tax in the third quarter of fiscal 2017.We posted a net loss in the fourth quarter of fiscal 2017 compared to net income in the fourth quarter of fiscal 2016.Higher net foreign currency exchange losses was the primary reason for the net lo
310、ss in the fourth quarter this year due to non-cash losses on long-term financing arrangements between a Canadian and U.S.entity within the consolidated group of companies from a strengthening Canadian dollar relative to its U.S.counterpart.Lower Adjusted EBITDA(A)also contributed to the fourth quart
311、er loss in fiscal 2017 on lower Net Revenue(A)and higher operating costs.Lower Net Revenue(A)was due to revenue mix,lower comparative mortgage origination volumes,partially offset by new client volumes and market share gains with existing clients.Higher operating expenses reflect stock-based compens
312、ation expense,which we did not have in 2016,and higher professional fees.Higher payroll and related costs also increased operating costs in our U.S.segment due to our investment in new client deployment to support growth from market share gains with recently deployed clients.Higher payroll and relat
313、ed costs were partially offset by lower payroll costs as we began the transition of our title and closing service offering to a network managed offering.The balance of the increase is due to higher computer costs and higher provisions for certain receivables.Higher income tax recoveries partially of
314、fset these contributions to higher net losses in the fourth quarter this year compared to the same period last year.Higher income tax recoveries were due to higher net losses before income tax for the reasons outlined above.We also recorded a recovery in the fourth quarter this year on the settlemen
315、t of certain amounts owing to the sellers of Linear,incurred lower amortization expense due to fully amortized assets and recognized lower losses on the fair value of warrant liabilities due to a lower share price during,and at the end of,the fourth quarter of fiscal 2017 compared to third quarter t
316、his year.Net(loss)income per weighted average share,basic and diluted Net loss per weighted average share was higher in the first quarter of fiscal 2017 compared to the same period last year due to higher net losses,details of which are outlined above.The issuance of shares as consideration to the s
317、ellers of Linear impacted our weighted average share count,basic and diluted,while stock option grants and forfeitures account for the comparative change in our diluted weighted average share count.These changes only had a modest impact on the net loss per share recognized comparatively.Real Matters
318、 Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-27 Net loss per weighted average share was higher in the second quarter o
319、f fiscal 2017 than the second quarter of fiscal 2016 due to higher net losses in the quarter,details of which are outlined above.The issuance of shares as consideration to the sellers of Linear and additional shares issued for no consideration as a result of not completing our IPO before the end of
320、calendar year 2016,impacted our fiscal 2017 second quarter weighted average share count,basic and diluted.The comparative change in our diluted weighted average share count was also impacted by stock option grants and forfeitures.These changes only had a modest impact on the net loss per share amoun
321、ts.Net loss per weighted average share was higher in the third quarter of fiscal 2017 than the third quarter of fiscal 2016 due to higher net losses in that quarter,details of which are outlined above.The issuance of additional shares for no consideration as a result of not completing our IPO before
322、 the end of calendar year 2016 and the successful completion of our IPO in the third quarter of fiscal 2017 impacted our fiscal 2017 third quarter weighted average share count,basic and diluted.In addition,the comparative change in our diluted weighted average share count was impacted by stock optio
323、n grants and forfeitures and the exercise of certain warrants.These changes only had a modest impact on the net loss per share amounts.Net loss per weighted average share was higher in the fourth quarter of fiscal 2017 than the fourth quarter of fiscal 2016 due to higher net losses in the current qu
324、arter,details of which are outlined above.The issuance of additional shares for no consideration as a result of not completing our IPO before the end of calendar year 2016 and the successful completion of our IPO in the third quarter of fiscal 2017 impacted our fiscal 2017 fourth quarter weighted av
325、erage share count,basic and diluted.In addition,the comparative change in our diluted weighted average share count was impacted by stock option grants and forfeitures and the exercise of certain warrants.These changes only had a modest impact on the net loss per share amounts.Financial Condition Sel
326、ect Consolidated Balance Sheet Information As at September 30,2017U.S.CanadaCorporateTotalTrade and other receivables30,667$1,433$-$32,100$Intangibles36,837$-$34$36,871$Goodwill58,890$-$-$58,890$Working capital position -(current assets less current liabilities)32,667$158$48,557$81,382$As at Septemb
327、er 30,2016U.S.CanadaCorporateTotalTrade and other receivables27,267$1,945$-$29,212$Intangibles56,106$-$412$56,518$Goodwill56,643$-$-$56,643$Working capital position -(current assets less current liabilities)10,429$(54)$221$10,596$Trade and other receivables September 30,2017 versus September 30,2016
328、 Change-Consolidated 2,888$Change-U.S.3,400$Change-Canada(512)$Change-Corporate-$The increase in trade and other receivables was due to higher outstanding amounts in our U.S.segment,partially offset by a decline in the Canadian segment.The increase in U.S.segment trade and other receivables is due t
329、o higher appraisal volumes,specifically with recently launched Tier 1 clients,partially offset by higher provisions for certain receivables.The decline in Canadian segment trade and other receivables was due to the timing of payments from two Canadian clients whose outstanding balance on September 3
330、0,2017 were more current than they were on September 30,2016.Real Matters Inc.MD&A for the years ended September 30,2017 and 2016 (tabular amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Real Matters Inc.September 30,2017-
331、28 Intangibles September 30,2017 versus September 30,2016 Change-Consolidated (19,647)$Change-U.S.(19,269)$Change-Canada-$Change-Corporate(378)$The decline in intangibles was due to normal course amortization recorded by our U.S.and Corporate segments.Goodwill September 30,2017 versus September 30,2
332、016 Change-Consolidated 2,247$Change-U.S.2,247$Change-Canada-$Change-Corporate-$In the third quarter of fiscal 2017,we amended an operating agreement with a joint venture partner,effectively obtaining control of the joint venture on April 1,2017.The equity method of accounting was discontinued in co
333、njunction with the amendment and we applied the business combination guidance which resulted in us recognizing goodwill of$2.2 million.In addition,we purchased the remaining ownership interest in another joint venture which also resulted in us recognizing a nominal amount of goodwill in the third quarter of fiscal 2017.Working capital position September 30,2017 versus September 30,2016 Change-Cons
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