1、ANNUAL REPORT2023Real Matters is a leading network management services provider for the mortgage lending and insurance industries.Real Matters platform combines its proprietary technology and network management capabilities with tens of thousands of independent qualified field professionals to creat
2、e an efcient marketplace for the provision of mortgage lending and insurance industry services.Our clients include top 100 mortgage lenders in the U.S.and some of the largest banks and insurance companies in Canada.We are a leading independent provider of residentialreal estate appraisals to the mor
3、tgage market and a leading independent provider of title services in the U.S.Headquartered in Markham(ON),Real Matters has principal ofces in Bufalo(NY)and Middletown(RI).Real Matters is listed on the Toronto Stock Exchange under the symbol REAL.(A)Non-GAAP MeasuresNet Revenue and Adjusted EBITDA do
4、 not have a standardized meaning prescribed by International Financial Reporting Standards and are therefore unlikely to be comparable to similar measures presented by other issuers.These non-GAAP measures are more fully defined on page 23 of this Annual Report.Performance Highlights in thousands of
5、 US$except per share amounts or where otherwise statedFiscal 2023FinancialConsolidatedRevenuesNet Revenue(A)Net Revenue(A)marginNet(loss)incomeAdjusted EBITDA(A)Adjusted EBITDA(A)marginU.S.AppraisalRevenuesNet Revenue(A)Net Revenue(A)marginAdjusted EBITDA(A)Adjusted EBITDA(A)marginU.S.TitleRevenuesN
6、et Revenue(A)Net Revenue(A)marginAdjusted EBITDA(A)Adjusted EBITDA(A)marginCanadaRevenuesNet Revenue(A)Adjusted EBITDA(A)Adjusted EBITDA(A)marginNet Revenue(A)marginTrading Statistics(C$except volume)HighLowCloseAverage VolumeCashLong-term debtCash flow from operating activitiesCommon shares issued
7、and outstandingStock options issued and outstandingWarrants issued,outstanding and exercisableOperating MetricsU.S.Appraisal purchase market shareU.S.Appraisal refinance market shareFiscal 202196$504,107$164,29232.6%$33,080$59,20136.0%$322,109$69,26321.5%$39,79757.5%$129,538$88,23968.1%$31,78436.0%$
8、52,460$6,790$4,77770.4%12.9%$27.61$9.86$10.04543,366$60,213$25,02179,0484,5784.4%9.9%1.8%Fiscal 2020191$455,945$162,11735.6%$42,798$72,24244.6%$282,101$67,22423.8%$39,85159.3%$142,397$89,84563.1%$44,29149.3%$31,447$5,048$3,11161.6%16.1%$33.01$7.74$25.95520,372$129,156$74,68985,3595,1114.6%9.3%2.1%Fi
9、scal 2019874$322,537$102,07531.6%$10,094$28,97728.4%$212,717$50,13023.6%$26,02451.9%$82,649$46,83856.7%$13,69629.2%$27,171$5,107$2,65151.9%18.8%$12.02$2.95$11.04158,404$71,680$25,64384,9466,060NANANA$163,914$43,01526.2%$(6,196)$(2,359)-5.5%$120,846$33,11727.4%$14,17842.8%$9,526$3,86740.6%$(8,338)-21
10、5.6%$33,542$6,031$4,24970.5%18.0%$7.10$3.80$6.20128,466$42,341$(2,564)72,9443,5814.1%10.4%0.5%Fiscal 2022$339,642$85,43925.2%$(9,265)$7,3798.6%$250,916$55,51022.1%$26,99748.6%$36,542$23,04963.1%$(8,084)-35.1%$52,184$6,880$4,48365.2%13.2%$10.52$4.18$4.75559,487$46,142$17,56772,6964,4264.1%12.1%1.2%U.
11、S.Title refinance market share1Fiscal 2023 in ReviewNet Revenue(A)$43.0MRevenues$163.9MAdjusted EBITDA(A)1$(2.4)MU.S.AppraisalU.S.TitleCanadaProgress to Fiscal 2025 Targets U.S.AppraisalU.S.TitleCanadaPurchasemarket share2Refinancemarket shareNet Revenue(A)margin4.1%NANA7-9%NANAF23F25 Target10.4%0.5
12、%NA17-19%6-8%NAF23F25 Target27.4%40.6%18.0%F2326-28%60-65%19-20%F25 Target42.8%Nmf370.5%F2365-70%50-55%65-70%F25 TargetAdjusted EBITDA(A)margin2 Market share expressed as a percentage of TAM as described on page 9 of this Annual Report.3 Not meaningful figure as U.S.Title Adjusted EBITDA(A)was negat
13、ive in Fiscal 2023.14%9%77%(A)Non-GAAP MeasuresNet Revenue and Adjusted EBITDA do not have a standardized meaning prescribed by International Financial Reporting Standards and are therefore unlikely to be comparable to similar measures presented by other issuers.These non-GAAP measures are more full
14、y defined on page 23 of this Annual Report.1 Adjusted EBITDA(A)includes negative Adjusted EBITDA(A)of$8.3 for U.S.Title,and$12.4 million of corporate expenses which is expressed net of stock-based compensation totalling$1.4 million.20%74%6%23%77%2U.S.Appraisal Segment Revenues&Net Revenue(A)Margin v
15、s Addressable Mortgage Market Origination Volumes*Estimated Addressable Market VolumesRevenuesVolumes8,0006,0004,0002,0000 F19$212.7MF20$282.1MF21$322.1MF2223.6%23.8%21.5%22.1%F2327.4%Volumes8,0006,0004,0002,0000 F19$26.0MF20F21F2251.9%59.3%57.5%48.6%F23$14.2M42.8%F19$82.6MF20$142.4MF21F2256.7%63.1%
16、68.1%63.1%F2340.6%F19F20F21F2236.0%(35.1)%$(8.1)MF23(215.6)%$(8.3)M29.2%49.3%Estimated Addressable Market VolumesAdjusted EBITDA(A)U.S.Appraisal Segment Adjusted EBITDA(A)&Adjusted EBITDA(A)Margin vs Addressable Mortgage Market Origination Volumes*Volumes8,0006,0004,0002,0000 Volumes8,0006,0004,0002
17、,0000 Estimated Refinance Market VolumesAdjusted EBITDA(A)$44.3MKey Performance Indicators-U.S.AppraisalKey Performance Indicators-U.S.TitleU.S.Title Segment Adjusted EBITDA(A)&Adjusted EBITDA(A)Margins vs Mortgage Market Origination Refinance Volumes*U.S.Title Segment Revenues&Net Revenue(A)Margins
18、 vs Mortgage Market Origination Refinance Volumes*Estimated Refinance Market VolumesRevenues$250.9M$120.8M$39.9M$39.8M$27.0M$129.5M$36.5M$9.5M$13.7M$31.8M(A)Non-GAAP MeasuresNet Revenue and Adjusted EBITDA do not have a standardized meaning prescribed by International Financial Reporting Standards a
19、nd are therefore unlikely to be comparable to similar measures presented by other issuers.These non-GAAP measures are more fully defined on page 23 of this Annual Report.*Management estimate,in thousands of units.We derive our estimate using a variety of sources,including HMDA data,publicly reported
20、 financial results of U.S.mortgage originators,forecasts from the Mortgage Bankers Association,Fannie Mae and Freddie Mac,and our own internal volumes.3The U.S.mortgage market is cyclical and our business was built to weather its peaks,and valleys.By historical standards,fiscal 2023 was one of the m
21、ost challenging markets we have faced as a company,and as an industry.Inflation,rapidly rising interest rates,a sustained increase in home price appreciation,low housing inventory and continuing economic uncertainty drove mortgage market volumes down to levels not seen in this industry in almost thr
22、ee decades,and certainly not in our time as a public company.Despite the challenging market environment,we posted positive net income and positive consolidated Adjusted EBITDA(A)in the last six months of the fiscal year.We managed our cost base and improved our operational efciency to better align w
23、ith the lower market environment,reducing our consolidated operating expenses by more than 41%year-over-year.We are now operating with the lowest cost structure weve had since going public;a prime example of what our platform is capable of delivering.We ended fiscal 2023 with 4.1%U.S.Appraisal purch
24、ase market share and U.S.Appraisal refinance market share of 10.4%.We believe that our Tier 1 lenders,who account for the majority of our revenues,were disproportionately impacted by the decline in the U.S.mortgage origination market in fiscal 2023.We increased our market share with our Tier 1 clien
25、ts,on average,by 10%in fiscal 2023.The Tier 1s are large lenders both bank and non-bank who value performance,and they continue to represent a significant opportunity for market share growth for Real Matters.To our shareholders,In fiscal 2023,Real Matters focused on preparing for scale by optimizing
26、 our network,our platform and our team,and making the business more efcient at scale.Despite significant market headwinds,we made further inroads with our clients by expanding our channel penetration across all segments and deepening our relationships to build franchise value for the long term.We ha
27、ve kept our commitment to shareholders by focusing on what we can control and running our business with a long-term view.(A)Non-GAAP MeasuresNet Revenue and Adjusted EBITDA do not have a standardized meaning prescribed by International Financial Reporting Standards and are therefore unlikely to beco
28、mparable to similar measures presented by other issuers.These non-GAAP measures are more fully defined on page 2 3 of this Annual Report.4We went live in a second channel with our Tier 1 lender in U.S.Title at the end of the fourth quarter and ended fiscal 2023 with overall market share of 0.5%in U.
29、S.Title.Our team continues to advance the pipeline with an optimistic view of adding new lenders and increasing our market share.Given the efciency of our operations,we remain well positioned for a variety of volume scenarios over the medium and long term.In fiscal 2023,we launched 20 new customers
30、and 13 new channels across all business units.We continued to rank at the top of lender scorecards and our performance continues to reinforce our relationship with lenders who view us as a trusted partner.We believe in the long-term earnings potential of our business,and we remain focused on our fis
31、cal 2025 objectives.Our team did an incredible job in fiscal 2023,managing costs,delivering performance that has kept us at the top of lender scorecards,deploying new technology and innovating ina way that reinforces our competitive advantage,and they remained relentless in ourpursuit of new busines
32、s.We are also grateful for the extraordinary contribution of the field professionals on our network who continue to go above and beyond for our clients.We remain thankful to our Board of Directors and shareholders for their ongoing support and confidence in our business.We have a strong balance shee
33、t,our operations are optimized,and we are well-positioned to scale up when market conditions improve.We have a greater share of our clients business in more channels and across more products than ever.The progress we have made should provide a tailwind for our results when the market turns.Brian Lan
34、gChief Executive Ofcer5?Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)The following Management Discussion and Analysis(“MD&A”)wa
35、s prepared as of November 16,2023 and should be read in conjunction with our consolidated financial statements(“financial statements”),including notes thereto,for the years ended September 30,2023 and 2022.All amounts in this MD&A are reported in thousands of U.S.dollars,unless otherwise stated,and
36、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 Company,”“we,”“our,”or“us”.Additional information about the Company,including the Companys Annual Informa
37、tion Form for the year ended September 30,2022,can be found on SEDAR+under the Companys profile at www.sedarplus.ca.We prepare our financial statements in accordance with IFRS,however,we consider certain Non-GAAP financial measures(as hereinafter defined)useful in the assessment of our financial per
38、formance.All Non-GAAP measures are identified in this MD&A by superscript(A).Please refer to the“Non-GAAP Measures”section of this MD&A for additional details regarding our use of Non-GAAP measures,including,but not limited to,the definitions of Net Revenue(A)and Adjusted EBITDA(A).OVERVIEW Real Mat
39、ters provides residential real estate appraisal and title services to mortgage lenders in the United States of America(“U.S.”)and residential real estate appraisal and insurance inspection services in Canada.Our technology-based platform creates a competitive marketplace where independent field prof
40、essionals,including appraisers,property inspectors,notaries,abstractors and other closing agents,compete for volumes provided by our clients based on their service level,quality of work and professionalism(the“platform”).Our proprietary technology,which we believe is unique in our industry,combined
41、with our network management capabilities,drives greater efficiency by reducing manual processes through robust quality control mechanisms,logistics management capabilities,capacity planning tools and end-to-end transaction management for our clients.We leverage our technology and field professional
42、partnerships with the goal of delivering first-time quality,faster turnaround times and better performance than our competitors.Headquartered in Markham,Ontario,Real Matters principal offices include Buffalo,New York and Middletown,Rhode Island.We service the U.S.and Canadian residential mortgage in
43、dustries through our Solidifi brand and the Canadian property and casualty insurance industry through our iv3 brand.Our services Appraisal services We are one of North Americas largest independent providers of residential real estate appraisal services.A residential appraisal is a survey of a home p
44、repared by a qualified appraiser providing their expert opinion on the market value of a residential property.We leverage our technology-based platform and apply network management capabilities,which are designed to focus on quality at the front-end of the process,to supply residential real estate a
45、ppraisal services.Our platform is an open network where appraiser performance is tracked and managed in real-time.We believe that our national and regionally managed network has the capacity to scale and deliver better performance than our competitors.We provide the breadth of expertise and local kn
46、owledge required to find the most qualified appraiser for every mortgage transaction through robust credentials management and scorecarding.Title services In April 2016,we entered the U.S.Title business through the acquisition of Linear Title&Closing Ltd.Our U.S.Title business leverages our technolo
47、gy-based platform and network management capabilities to deliver a scalable solution that drives better performance for our clients and a superior consumer experience.The closing process is critical to a consumers overall experience as it represents an important point of contact in a mortgage transa
48、ction.Our focus is to provide the best consumer experience by working with experienced abstractors,notaries and attorneys.We are an approved title agent with the largest title insurance underwriters in the U.S.We offer and/or coordinate various title services for refinance,purchase,home equity,defau
49、lt,short sale and real estate owned(“REO”)transactions to financial institutions in all 50 states and the District of Columbia,and each state has differing rules and regulations for title agents.As an independent title agent,we provide services required to close a mortgage transaction,including titl
50、e search,curative,closing and escrow services and title policy issuance.We act on behalf of title insurance underwriters and retain the agents portion of the premium paid for the title policy,which is typically 70-90%of the title insurance premium.The remaining portion of the premium is remitted to
51、the underwriter as compensation for bearing the risk of loss in the event a claim is made under the insurance policy.Premium splits can vary by geographic region,and in some states,premiums are fixed by regulation.In addition,we also provide hosted software solutions to our lenders relating to title
52、 servicing.7Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Insurance inspection services In Canada,we also supply residential and
53、 commercial property insurance inspection services.The purpose of an inspection is to establish the replacement cost of a property in the event of a major catastrophe such as a fire or a flood.The inspection is used as an insurance underwriting tool to properly match the risk with the appropriate in
54、surance premium and to verify the accuracy of the information collected at the time of the policy application.Our clients Our clients include top 100 mortgage lenders in the U.S.,the majority of the big five banks in Canada and some of North Americas largest insurance carriers.In the U.S.,Tier 1 len
55、ders(as defined in the“Glossary”section of this MD&A)typically allocate market share to their service providers based on performance,and our performance often results in us obtaining an outsized allocation of transaction volumes from these lenders compared to our competitors.Our U.S.Appraisal segmen
56、t(as hereinafter defined)provides services to the largest lenders in the U.S.,including all six Tier 1 mortgage lenders.We provide appraisal services to mortgage lenders across the following channels:purchase origination,refinance origination,home equity,default and REO.Purchase and refinance mortga
57、ge origination revenues accounted for 75%of fiscal 2023 revenues in our U.S.Appraisal segment(2022 88%).Our U.S.Title segment(as hereinafter defined)currently services one Tier 1 lender and other top 100 lenders.Our strategy is to increase market share in this segment by onboarding more Tier 1,Tier
58、2 and Tier 3 lenders,many of whom are already clients in the U.S.Appraisal segment.In Canada,we provide residential mortgage appraisal services to the majority of the big five Canadian banks and residential and commercial property insurance inspection services to some of North Americas largest insur
59、ance carriers.Markets we service and their trends Residential mortgage origination volumes in North America are a key driver of our financial performance.The U.S.mortgage market is one of the largest asset classes in the world and it is highly regulated.Refinance activity is highly sensitive to chan
60、ges in interest rates.From the onset of COVID-19 through the first half of fiscal 2022,the mortgage origination market experienced a significant increase in refinance activity due to low interest rates and other contributing factors.Starting in the first half of fiscal 2022 and continuing through fi
61、scal 2023,the U.S.Federal Reserve raised the Federal Funds rate multiple times to mitigate inflationary pressures.Rapidly rising mortgage rates,high inflation,reduced affordability,and broader macroeconomic concerns drove significant declines in mortgage origination volume during this period.For fis
62、cal 2023,we estimated that total mortgage origination volumes decreased nearly 53%from fiscal 2022,which presents a tougher market comparison year-over-year.8Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars
63、and thousands of shares,excluding per share amounts,unless otherwise stated)The table below outlines the estimated number of U.S.mortgage origination loans for purchase and refinance transactions on a calendar year basis from 1999 to the present.Note(1)We derive our estimate using a variety of sourc
64、es,including HMDA data,publicly reported financial results of U.S.mortgage originators,forecasts from the Mortgage Bankers Association,Fannie Mae and Freddie Mac,and our own internal volumes.Our addressable market We estimate that there were approximately 3.3 million mortgage origination transaction
65、s(purchase and refinance)in the U.S.in fiscal 2023.The total addressable market(“TAM”)for our U.S.Appraisal segment excludes appraisal waivers from GSEs and appraisals provided by Veterans Affairs,the majority of which impacts refinance origination volumes.We estimate that in fiscal 2023 there were
66、approximately 2.7 million addressable mortgage origination transactions(purchase and refinance)requiring appraisals in the U.S.U.S.Appraisal market share for origination transactions is generally allocated by lenders on a centralized,combined volume basis.The TAM for our U.S.Title segment is not imp
67、acted by waivers or Veterans Affairs volumes.We estimate that there were 0.6 million refinance transactions in fiscal 2023.Our U.S.Title segment currently targets refinance transactions as this volume is generally centralized by the mortgage lenders(i.e.the allocation of volume is driven by the lend
68、er).While we have the capability,and we do occasionally provide title services for purchase transactions,most volume for U.S.Title purchase transactions is not allocated by the lender.In addition to mortgage origination transactions,we also service home equity,default and REO transactions.However,du
69、e to the lack of market data available,we are unable to estimate the market size for these transactions.Due to the lack of market data available,we are unable to estimate the market size for the Canadian segment.2.0%3.0%4.0%5.0%6.0%7.0%8.0%0.02.55.07.510.012.515.017.520.022.5Number of loans in milli
70、onsU.S.Mortgage Origination Volumes by Calendar Year(excludes default,REO and home equity loans)PurchaseRefinance Avg 30yr mortgage rateSource:Home Mortgage Disclosure Act.data(HMDA)for calendar 1999 through 2022 and management estimate for calendar 20239Real Matters Inc.MD&A for the years ended Sep
71、tember 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)The graph below outlines the estimated size of the TAM for purchase and refinance mortgage origination in the U.S.for fiscal 20
72、19 through fiscal 2023 and our estimate of the TAM spend for these services.Seasonality and other trends Residential mortgage origination volumes in North America are influenced by cyclical trends and seasonality.Cyclical trends include changes in interest rates,refinancing rates,the capacity of len
73、ders to underwrite mortgages,house prices,housing inventory,demand for housing,the availability of funds for mortgage loans,credit requirements,regulatory changes,household indebtedness,employment levels and the general health of the North American economy.Transaction-based revenues for appraisal se
74、rvices in our U.S.Appraisal and Canadian segments are also impacted by the seasonal nature of the residential mortgage industry,which typically see home buyers purchase more homes in our third and fourth fiscal quarters,representing the three months ending June 30 and September 30,respectively.Our m
75、arket share is impacted by the size of the addressable residential mortgage origination market but also by our clients relative share of the addressable market.Gains or losses in our clients share of the addressable market influence our overall market share.As discussed above,the prevalence of appra
76、isal waivers provided by the GSEs and the volume of appraisals provided by Veterans Affairs can also impact the size of the TAM for our U.S.Appraisal segment.Long-term focus We take a long-term view to manage and measure the success of our business strategies since we cannot control the addressable
77、mortgage origination market or the factors that influence it.Accordingly,our principal focus is on growing market share in the residential mortgage origination market over the long-term.Market share growth is achieved by onboarding new customers and increasing market share with our existing clients.
78、The mortgage market is subject to the influence of many factors,such as broader economic conditions,changes to interest rates,changes in our clients share of the market and regulatory changes;each of which is not within our control.As we scale transaction volumes,we expect to expand Net Revenue(A)an
79、d Adjusted EBITDA(A)margins.Fiscal 2025 targets At the end of fiscal 2020,we set targets through the end of fiscal 2025 for market share,Net Revenue(A)margins,Adjusted EBITDA(A)margins,corporate expenses and for conversion of Adjusted EBITDA(A)to Free Cash Flow(A)between fiscal 2021 through the end
80、of 2025.Given that we are unable to control the cyclical and seasonal trends that impact the residential mortgage market or our clients share of the overall market,we did not set revenue targets.The fiscal 2025 targets are presented for the purpose of assisting investors,security analysts and others
81、 in understanding our current objectives,strategic priorities,and expectations for the future.Readers are cautioned that our fiscal 2025 targets may not be appropriate for other purposes.$2.1$2.1$2.6$2.4$1.4$0.9$1.7$1.9$1.0$0.3$1.9$5.3$6.4$2.6$0.6$4.9$9.1$10.9$6.0$2.3 20192020202120222023Estimated T
82、otal Addressable Market spend by fiscal year(expressed in billions of dollars)Management estimateAppraisal PurchaseAppraisal RefinanceTitle Refinance10Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and tho
83、usands of shares,excluding per share amounts,unless otherwise stated)Key assumptions:Our fiscal 2025 targets are contingent on,amongst other things:no change in our clients respective share of the market from 2020 levels;a TAM for U.S.Appraisal of$4.0 billion and a TAM for U.S.Title of$2.0 billion;V
84、eteran Affairs volumes for purchase and refinance activity remain largely unchanged from fiscal 2020 levels through fiscal 2025(approximately 9%for purchase market volumes and approximately 15%for refinance market volumes);waivers for purchase and refinance activity return to levels seen in fiscal 2
85、019 by fiscal 2025(approximately 2%for purchase market volumes and approximately 10%for refinance market volumes);continued expansion of market share in our U.S.Appraisal segment,including,by fiscal 2025,a market share of between 30%to 55%with each of our Tier 1 clients;and the successful launch of
86、several Tier 1 clients by our U.S.Title segment through fiscal 2025.Please refer to the“Cautionary Note Regarding Forward-Looking Information”contained in this MD&A for a description of the risks that impact our business and that could impact the achievement of our fiscal 2025 targets,including the
87、size of the U.S.mortgage market in fiscal 2025.Fiscal 2025 Targets Purchase market share Refinance market share Net Revenue(A)margin Adjusted EBITDA(A)margin U.S.Appraisal 7-9%(1)17-19%(1)26-28%65-70%U.S.Title -6-8%(1)60-65%50-55%Canada -19-20%65-70%Note(1)Market share expressed as a percentage of T
88、AM as described above in this MD&A.The target for our Corporate segment is to contain corporate expenses,excluding stock-based compensation expense,to 7%of Net Revenue(A)by the end of fiscal 2025.Our target is to convert 70-75%of Adjusted EBITDA(A)to Free Cash Flow(A)between fiscal 2021 through the
89、end of fiscal 2025,which is contingent on a normalized market.In fiscal 2022 and 2023,we did not achieve our conversion target of 70-75%,due in large part to the sharp decline in mortgage origination volumes and the corresponding impact to Adjusted EBITDA(A),which was most notable in our U.S.Title s
90、egment.We believe we have a significant amount of addressable market beyond our fiscal 2025 objectives.The U.S.mortgage market is one of the largest asset classes in the world and we service large,blue-chip clients in the U.S.and Canada.Getting to first transaction with large mortgage lenders can be
91、 a lengthy process;however,once we launch a client,our strategy is to leverage our platform to outperform our competition and grow market share.This helps us solidify and expand the relationships we have with our clients over the long term.Our business is built for scale;higher transaction volumes t
92、ypically allow us to expand Net Revenue(A)and Adjusted EBITDA(A)margins.We have a strong balance sheet and strong Free Cash Flow(A)generating profile in a normalized market that is expected to support our long-term business objectives.Important factors affecting our results from operations Our busin
93、ess is subject to a variety of risks and uncertainties,and the targets outlined above contain forward-looking information.Please refer to the“Cautionary Note Regarding Forward-Looking Information”contained in this MD&A for a description of the risks that impact our business and that could cause our
94、financial results to vary.11Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)FINANCIAL PERFORMANCE The following is a discussion of
95、 our consolidated financial condition and results of operations for the three months and years ended September 30,2023 and 2022.Review of Operations-For the three months and year ended September 30,2023 This section provides detailed information and analysis about the Companys performance for the th
96、ree months and year ended September 30,2023.Please also refer to the tables in the“Foreign Currency Exchange Rates”section of this MD&A for additional details regarding the impact foreign currency exchange(“FX”)had on our consolidated operating results for the three months and year ended September 3
97、0,2023.Consolidated Three months ended September 30 Year ended September 30 2023 2022 Change%Change 2023 2022 Change%Change Revenues$42,189$58,200$(16,011)-28%$163,914$339,642$(175,728)-52%Transaction costs$31,023$43,833$(12,810)-29%$120,899$254,203$(133,304)-52%Operating expenses$10,860$15,784$(4,9
98、24)-31%$46,751$79,595$(32,844)-41%Amortization$873$1,088$(215)-20%$3,877$4,530$(653)-14%Net income(loss)$1,622$(9,968)$11,590 116%$(6,196)$(9,265)$3,069 33%Non-GAAP measures Net Revenue(A)$11,166$14,367$(3,201)-22%$43,015$85,439$(42,424)-50%Net Revenue(A)margin 26.5%24.7%1.8%7%26.2%25.2%1.0%4%Adjust
99、ed EBITDA(A)$594$(1,112)$1,706 153%$(2,359)$7,379$(9,738)-132%Adjusted EBITDA(A)margin 5.3%-7.7%13.0%169%-5.5%8.6%-14.1%-164%12Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excludi
100、ng per share amounts,unless otherwise stated)Consolidated operating results Three months ended September 30,2023 vs.Three months ended September 30,2022 Year ended September 30,2023 vs.Year ended September 30,2022 Revenues and Transactions Costs The decrease in revenues and transaction costs were pr
101、imarily due to lower addressable mortgage origination volumes across all three segments which was partially offset by higher home equity volumes serviced in our U.S.Appraisal segment.The decrease in revenues and transaction costs were primarily due to lower addressable mortgage origination volumes a
102、cross all three segments which was partially offset by higher home equity volumes serviced in our U.S.Appraisal segment.Operating expenses Operating expenses decreased by 31%primarily due to:A decrease of$4.1 million in salaries and benefits associated with a significant reduction of headcount.A$0.6
103、 million decrease in office and computer expenses from lower Information Technology(“IT”)expenses,U.S.Title segment variable bank and courier expenses and lower FX.Operating expenses decreased by 41%primarily due to:A decrease of$27.7 million in salaries and benefits associated with a significant re
104、duction of headcount.A$3.5 million decrease in office and computer expenses from lower IT expenses,U.S Title segment variable bank and courier expenses and lower FX.A decrease of$0.7 million in professional fees due to a reduction in consulting services.Amortization Amortization expense was 20%lower
105、 mainly due to a reduction of right-of-use assets related to our leased office space combined with fully amortized computer equipment and leasehold improvements.Amortization expense was 14%lower due to a reduction of right-of-use assets related to our leased office space combined with fully amortize
106、d computer equipment and leasehold improvements.Net income(loss)In addition to the Adjusted EBITDA(A)discussion below,the increase in net income was mainly due to:no recognition of impairment charge in Q4 2023(Q4 2022-$17.3 million);higher interest income;higher income tax recovery.In addition to th
107、e Adjusted EBITDA(A)discussion below,net loss was lower mainly due to:no recognition of impairment charge in 2023(2022-$17.3 million);gain on fair value of a total return swap entered into in fiscal 2023;higher interest income;partially offset by higher FX loss as the result of changes in the FX rat
108、e between the Canadian and U.S.dollar.Net Revenue(A)We experienced a Net Revenue(A)reduction of 22%primarily due to lower addressable mortgage origination volumes across all three segments which was partially offset by higher home equity volumes serviced in our U.S.Appraisal segment and improved Net
109、 Revenue(A)margins.We experienced a Net Revenue(A)reduction of 50%primarily due to lower addressable mortgage origination volumes across all three segments which was partially offset by higher home equity volumes serviced in our U.S.Appraisal segment and improved Net Revenue(A)margins.Net Revenue(A)
110、margin Consolidated Net Revenue(A)margins increased by 180 basis points as we leveraged our field professional network in a lower market environment and serviced more standard properties due in part to the decline in GSE waivers.Consolidated Net Revenue(A)margins increased by 100 basis points as we
111、leveraged our field professional network in a lower market environment and serviced more standard properties due in part to the decline in GSE waivers.Adjusted EBITDA(A)and Adjusted EBITDA(A)margins We recorded higher Adjusted EBITDA(A)and Adjusted EBITDA(A)margins due to the decrease in operating e
112、xpenses and Net Revenue(A)margins improvement explained above which was partially offset by the reduction in revenues.We recognized lower Adjusted EBITDA(A)and Adjusted EBITDA(A)margins due to the decrease in revenues explained above which was partially offset by the reduction in operating expenses
113、and Net Revenue(A)margins improvement in fiscal 2023.13Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)The tables that follow comp
114、are our consolidated Revenues,Adjusted EBITDA(A)and Net Income or Loss to estimated mortgage market origination volumes.$322.5M$455.9M$504.1M$339.6M$163.9M-5,000 10,000 15,000Consolidated Revenues relative to mortgage market origination volumes*Management estimate,volumes expressed in thousands of u
115、nitsRevenueEstimated market volumesF19 F20 F21 F22 F23VolumesYear$29.0M$72.2M$59.2M$7.4M($2.4M)-5,000 10,000 15,000Consolidated Adjusted EBITDA(A)relative to mortgage market origination volumes*Management estimate,volumes expressed in thousands of unitsAdjusted EBITDA(A)Estimated market volumesF19 F
116、20 F21 F22 F23Volumes Year$10.1M$42.8M$33.1M($9.3M)($6.2M)-5,000 10,000 15,000Consolidated Net Income or Loss relative to mortgage market origination volumes*Management estimate,volumes expressed in thousands of unitsNet Income(Loss)Estimated market volumesF19 F20 F21 F22 F23VolumesYear14Real Matter
117、s Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Business Segment Analysis-Review of Operations-For the three months and year ended September
118、30,2023 We conduct our business in the U.S.and Canada through three reportable segments:(i)U.S.appraisal(“U.S.Appraisal”);(ii)U.S.title(“U.S.Title”);and(iii)Canada or Canadian.Expenses attributable to corporate activities are recorded in our Corporate segment.U.S.Appraisal Three months ended Septemb
119、er 30 Year ended September 30 2023 2022 Change%Change 2023 2022 Change%Change Revenues Purchase originations$14,433$21,496$(7,063)-33%$57,947$98,203$(40,256)-41%Refinance originations 7,657 14,483 (6,826)-47%32,629 122,835 (90,206)-73%Home equity 8,316 7,201 1,115 16%27,226 26,702 524 2%Other 754 72
120、8 26 4%3,044 3,176 (132)-4%$31,160$43,908$(12,748)-29%$120,846$250,916$(130,070)-52%Transaction costs$22,601$32,763$(10,162)-31%$87,729$195,406$(107,677)-55%Operating expenses$4,624$6,575$(1,951)-30%$18,939$28,513$(9,574)-34%Amortization$112$184$(72)-39%$550$928$(378)-41%Non-GAAP measures Net Revenu
121、e(A)$8,559$11,145$(2,586)-23%$33,117$55,510$(22,393)-40%Net Revenue(A)margin 27.5%25.4%2.1%8%27.4%22.1%5.3%24%Adjusted EBITDA(A)$3,935$4,570$(635)-14%$14,178$26,997$(12,819)-48%Adjusted EBITDA(A)margin 46.0%41.0%5.0%12%42.8%48.6%-5.8%-12%Market share Purchase mortgage origination Refinance mortgage
122、origination Year ended September 30 Year ended September 30(expressed in whole units)2023 2022 2023 2022 Estimated market volumes 2,683,886 4,268,656 611,624 2,738,730 Non-addressable market volumes (456,529)(685,764)(114,982)(1,207,649)Estimated addressable market volumes 2,227,357 3,582,892 496,64
123、2 1,531,081 Real Matters volumes 90,263 146,092 51,427 185,666 Real Matters estimated market share 4.1%4.1%10.4%12.1%Home equity,default and REO transactions are not included in our market share calculation above as we are unable to accurately estimate the market size for these transactions because
124、public market data is not readily available.In fiscal 2023,these types of transactions represented 25%of our U.S.Appraisal revenues(2022-12%).Our market share is impacted by the size of the addressable residential mortgage origination market but also by our clients relative share of the addressable
125、market.Our respective market shares will shift in line with the mix of business of our client base some of whom have historically been more weighted toward refinance which experienced a steeper decline in fiscal 2023.Notwithstanding that Tier 1 lenders continue to represent a significant opportunity
126、 for market share growth for Real Matters,we believe that they were disproportionately impacted by the decline in the U.S.mortgage origination market in fiscal 2023.15Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S
127、.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)U.S.Appraisal operating results Three months ended September 30,2023 vs.Three months ended September 30,2022 Year ended September 30,2023 vs.Year ended September 30,2022 Revenues Revenues from purchase and refinance
128、 mortgage originations declined principally due to lower addressable mortgage origination volume.Home equity revenues increased by 16%and accounted for 27%of the segments revenues(Q4 2022 16%)mainly due to new clients and market share gains.Revenues from purchase and refinance mortgage originations
129、declined principally due to lower addressable mortgage origination volumes.Year-over-year,we estimate that addressable mortgage origination volumes for purchase and refinance activity declined 38%and 67%,respectively,which compares to a 41%decline in our purchase originations revenues and 73%decline
130、 in our refinance originations revenues.Home equity revenues increased by 2%and accounted for 23%of the segments revenues(2022 11%)mainly due to new clients and market share gains.Transaction costs Transaction costs declined due in large part to lower addressable mortgage origination volumes,as outl
131、ined in the revenue discussion above.Leveraging our field professional network in a lower market environment and servicing more standard properties also contributed to the decline in transaction costs.Transaction costs declined due in large part to lower addressable mortgage origination volumes,as o
132、utlined in the revenue discussion above.Leveraging our field professional network in a lower market environment and servicing more standard properties also contributed to the decline in transaction costs.Operating expenses Operating expenses decreased by 30%primarily on lower salaries and benefits c
133、osts of$1.6 million and lower IT expenses of$0.1 million.Operating expenses decreased by 34%on an$8.4 million decline in salaries and benefits costs.Lower marketing,bank charges,IT expenses and professional fees accounted for the balance of the decline.Amortization Amortization expense decreased due
134、 to a reduction of right-of-use assets related to our leased office space combined with fully amortized computer equipment and leasehold improvements.Amortization expense decreased due to a reduction of right-of-use assets related to our leased office space combined with fully amortized computer equ
135、ipment and leasehold improvements.Net Revenue(A)Net Revenue(A)declined by 23%mainly due to lower addressable mortgage origination volumes partially offset by higher home equity volumes and improved Net Revenue(A)margins.Net Revenue(A)declined by 40%mainly due to lower addressable mortgage originatio
136、n volumes partially offset by higher home equity volumes and improved Net Revenue(A)margins.Net Revenue(A)margin Net Revenue(A)margins expanded by 210 basis points in our U.S.Appraisal segment as we leveraged our field professional network in a lower market environment,which was partially offset by
137、an increase in lower margin home equity volumes.Net Revenue(A)margins increased by 530 basis points in our U.S.Appraisal segment as we leveraged our field professional network in a lower market environment and serviced more standard properties,due in part to the decline in GSE waivers.Adjusted EBITD
138、A(A)Adjusted EBITDA(A)contracted on lower Net Revenue(A),owing,in large part,to lower addressable mortgage origination market volumes partially offset by higher home equity volumes,a reduction in operating expenses and Net Revenue(A)margins expansion as described above.Adjusted EBITDA(A)contracted o
139、n lower Net Revenue(A),owing,in large part,to lower addressable mortgage origination market volumes partially offset by a reduction in operating expenses,higher home equity volumes and Net Revenue(A)margins expansion as described above.16Real Matters Inc.MD&A for the years ended September 30,2023 an
140、d 2022(tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)U.S.Appraisal operating resultsThree months ended September 30,2023 vs.Three months ended September 30,2022Year ended September 30,2023 vs.Year e
141、nded September 30,2022Adjusted EBITDA(A)marginsAdjusted EBITDA(A)margins increased due to higher home equity volumes,lower operating expenses,and improved Net Revenue(A)margins partially offset by a reduction in revenues associated with lower addressable mortgage origination market volumes.Adjusted
142、EBITDA(A)margins contracted on lower Net Revenue(A),owing,in large part,to lower addressable mortgage origination market volumes partially offset by areduction in operating expenses,higher home equity volumes and Net Revenue(A)margins expansion as described above.The tables that follow compare our U
143、.S.Appraisal segment:(i)Revenues and Net Revenue(A)margins;and(ii)Adjusted EBITDA(A)and Adjusted EBITDA(A)margins,against addressable mortgage market origination volumes.Our U.S.Appraisal segment is our more mature business in the U.S.Increased transaction volumes on our platform from net market sha
144、re gains and higher market volumes resulted in annual Net Revenue(A)and Adjusted EBITDA(A)margin expansion through fiscal 2020.Despite the year-over-year increase in transaction volumes in fiscal 2021,our Net Revenue(A)and Adjusted EBITDA(A)margins contracted because we serviced a higher proportion
145、of high-value and complex properties,due in part to an increase in GSE waivers.The use of GSE waivers has declined substantially since fiscal 2021,reverting to historical standards.We expanded Net Revenue(A)margins in the second half of fiscal 2022 and into fiscal 2023,despite a substantial decline
146、in transaction volumes,as we leveraged our field professional network in a lower market environment and serviced more standard properties,due in part to the decline in GSE waivers.23.6%23.8%21.5%22.1%27.4%$212.7M$282.1M$322.1M$250.9M$120.8M-2,000 4,000 6,000 8,000U.S.Appraisal Segment Revenues&Net R
147、evenue(A)margin vs addressable mortgage market origination volumes*Management estimate,volumes expressed in thousands of unitsRevenueEstimated addressable market volumesF19 F20 F21 F22 F23VolumesYear51.9%59.3%57.5%48.6%42.8%$26.0M$39.9M$39.8M$27.0M$14.2M-2,000 4,000 6,000 8,000U.S.Appraisal Segment
148、Adjusted EBITDA(A)&Adjusted EBITDA(A)margin vs addressable mortgage market origination volumes*Management estimate,volumes expressed in thousands of unitsAdjusted EBITDA(A)Estimated addressable market volumesF19 F20 F21 F22 F23VolumesYear17Real Matters Inc.MD&A for the years ended September 30,2023
149、and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)U.S.Title Three months ended September 30 Year ended September 30 2023 2022 Change%Change 2023 2022 Change%Change Revenues Centralized title s
150、ervices$1,351$2,333$(982)-42%$5,160$30,036$(24,876)-83%Diversified title services 206 303 (97)-32%891 1,523 (632)-42%Home equity title services 776 1,330 (554)-42%3,475 4,983 (1,508)-30%$2,333$3,966$(1,633)-41%$9,526$36,542$(27,016)-74%Transaction costs$1,282$2,217$(935)-42%$5,659$13,493$(7,834)-58%
151、Operating expenses$2,632$4,679$(2,047)-44%$12,205$31,133$(18,928)-61%Amortization$672$800$(128)-16%$2,979$3,141$(162)-5%Non-GAAP measures Net Revenue(A)$1,051$1,749$(698)-40%$3,867$23,049$(19,182)-83%Net Revenue(A)margin 45.0%44.1%0.9%2%40.6%63.1%-22.5%-36%Adjusted EBITDA(A)$(1,581)$(2,930)$1,349 46
152、%$(8,338)$(8,084)$(254)-3%Adjusted EBITDA(A)margin -150.4%-167.5%17.1%10%-215.6%-35.1%-180.5%-514%Market share-refinance mortgage origination Year ended September 30(expressed in whole units)2023 2022 Estimated market volumes 611,624 2,738,730 Real Matters volumes 3,312 31,537 Real Matters estimated
153、 market share 0.5%1.2%Home equity,default and REO transactions are not included in our market share calculation above as we are unable to estimate the market size for these transactions because public market data is not readily available.In fiscal 2023,these types of transactions represented 36%of o
154、ur U.S.Title revenues(2022-14%).The decline in market share during the fiscal year was due to changes in our client portfolio,which is in line with our strategy to focus on long-term franchise clients.U.S.Title operating results Three months ended September 30,2023 vs.Three months ended September 30
155、,2022 Year ended September 30,2023 vs.Year ended September 30,2022 Revenues The revenue decline was due primarily to lower refinance mortgage origination market volumes,changes in our client portfolio and lower revenues from home equity volumes serviced.The revenue decline was due primarily to lower
156、 refinance mortgage origination market volumes,changes in our client portfolio and lower revenues from home equity volumes serviced.We estimate the refinance mortgage origination market declined 78%year-over-year,which compares to a decrease of 83%in our centralized title revenues.Transaction costs
157、Transaction costs declined due in large part to lower addressable refinance mortgage origination volumes serviced as outlined in the revenue discussion above,partially offset by a lower proportion of incoming order volumes that closed.Transaction costs declined due in large part to lower addressable
158、 refinance mortgage origination volumes serviced as outlined in the revenue discussion above,partially offset by a higher proportion of lower margin home equity volumes serviced and a lower proportion of incoming order volumes that closed.18Real Matters Inc.MD&A for the years ended September 30,2023
159、 and 2022(tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)The tables that follow compare our U.S.Title segment:(i)Revenues and Net Revenue(A)margins;and(ii)Adjusted EBITDA(A)and Adjusted EBITDA(A)marg
160、ins,against addressable mortgage market origination volumes.Currently,our U.S.Title segment predominately services refinance mortgage origination volumes which are highly sensitive to interest rates.Increased transaction volumes on our platform from higher market volumes and market share gains resul
161、ted in annual Net Revenue(A)and Adjusted EBITDA(A)margin expansion through fiscal 2020.After experiencing a surge 56.7%63.1%68.1%63.1%40.6%$82.6M$142.4M$129.5M$36.5M$9.5M-2,000 4,000 6,000 8,000U.S.Title Segment Revenues&Net Revenue(A)margins vs mortgage market origination refinance volumes*Manageme
162、nt estimate,volumes expressed in thousands of unitsRevenueEstimated refinance market volumesF19 F20 F21 F22 F23VolumesYear29.2%49.3%36.0%(35.1)%(215.6)%$13.7M$44.3M$31.8M($8.1M)($8.3M)-2,000 4,000 6,000 8,000U.S.Title Segment Adjusted EBITDA(A)&Adjusted EBITDA(A)margins vs mortgage market originatio
163、n refinance volumes*Management estimate,volumes expressed in thousands of unitsAdjusted EBITDA(A)Estimated refinance market volumes*Management estimate,volumes expressed in thousands of unitsVolumes F19 F20 F21 F22 F23YearU.S.Title operating resultsThree months ended September 30,2023 vs.Three month
164、s ended September 30,2022Year ended September 30,2023 vs.Year ended September 30,2022Operating expensesOperating expenses declined by 44%due to lower salaries and benefits costs of$1.9 million and a reduction in courier,office and bank charges of$0.1 million as a result of lower volumes serviced.Ope
165、rating expenses declined by 61%mainly due to lower salaries and benefits costs of$16.4 million and a reduction in courier,office and bank charges of$2.3 million as a result of lower volumes serviced.AmortizationAmortization expense decreased due to a reduction of right-of-use assets related to our l
166、eased office space combined with fully amortized computer equipment and leasehold improvements.Amortization expense decreased due to a reduction of right-of-use assets related to our leased office space combined with fully amortized computer equipment and leasehold improvements.Net Revenue(A)Net Rev
167、enue(A)declined by 40%due to lower volumes serviced,as outlined in the revenue discussion above.Net Revenue(A)declined by 83%due to lower volumes serviced,as outlined in the revenue discussion above.Net Revenue(A)marginU.S.Title segment Net Revenue(A)margins increased by 90 basis points mostly due t
168、o a higher proportion of incoming order volumes that closed,which was partially offset by lower volumes serviced.U.S.Title segment Net Revenue(A)margins declined substantially due to a higher proportion of lower margin home equity volumes serviced,a lower proportion of incoming order volumes that cl
169、osed and lower volumes serviced,as outlined in the revenue discussion above.Adjusted EBITDA(A)andAdjusted EBITDA(A)marginsAdjusted EBITDA(A)and Adjusted EBITDA(A)margins improved due to a significant reduction in operating expenses and Net Revenue(A)margins improvement,as outlined above,partially of
170、fset by lower transaction volumes.Adjusted EBITDA(A)and Adjusted EBITDA(A)margins declined due to lower Net Revenue(A)and Net Revenue(A)margins,as outlined above,owing in large part to lower refinance mortgage origination market volumes,which was partially offset by a significant reduction in operat
171、ing expenses.19Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)due to low interest rates,refinance market volumes began to decline
172、 in the second half of fiscal 2021 in line with increases in U.S.mortgage interest rates.Our Net Revenue(A)and Adjusted EBITDA(A)margins contracted in fiscal 2022 and 2023 in line with the substantial decline in transaction volumes on our platform,and we focused on operational efficiencies and signi
173、ficantly reduced our U.S.Title operating expenses.Canada Three months ended September 30 Year ended September 30 2023 2022 Change%Change 2023 2022 Change%Change Revenues$8,696$10,326$(1,630)-16%$33,542$52,184$(18,642)-36%Transaction costs$7,140$8,853$(1,713)-19%$27,511$45,304$(17,793)-39%Operating e
174、xpenses$422$515$(93)-18%$1,782$2,397$(615)-26%Amortization$-$-$-0%$-$-$-0%Non-GAAP measures Net Revenue(A)$1,556$1,473$83 6%$6,031$6,880$(849)-12%Net Revenue(A)margin 17.9%14.3%3.6%25%18.0%13.2%4.8%36%Adjusted EBITDA(A)$1,134$958$176 18%$4,249$4,483$(234)-5%Adjusted EBITDA(A)margin 72.9%65.0%7.9%12%
175、70.5%65.2%5.3%8%Canada operating results Three months ended September 30,2023 vs.Three months ended September 30,2022 Year ended September 30,2023 vs.Year ended September 30,2022 Revenues Revenues declined due to lower market volumes for appraisal services and FX,partially offset by net market share
176、 gains for appraisal services with new and existing clients and modestly higher insurance inspection revenues.Revenues declined due to lower market volumes for appraisal services,modestly lower insurance inspection revenues and FX,partially offset by net market share gains for appraisal services wit
177、h new and existing clients.Transaction costs Transaction costs declined due in large part to lower market volumes for appraisal services,as outlined in the revenue discussion above,as well as FX.Leveraging our field professional network in a lower market environment also contributed to the decline i
178、n transaction costs.Transaction costs declined due in large part to lower market volumes for appraisal services,as outlined in the revenue discussion above,as well as FX.Leveraging our field professional network in a lower market environment also contributed to the decline in transaction costs.Opera
179、ting expenses Canadian segment operating expenses declined by 18%mainly due to lower salaries and benefits costs.Canadian segment operating expenses declined by 26%mainly due to lower salaries and benefits costs.Net Revenue(A)Net Revenue(A)in our Canadian segment increased by 6%due to net market sha
180、re gains and improved Net Revenue(A)margins,partially offset by lower market volumes for appraisal services.Net Revenue(A)in our Canadian segment declined by 12%due to lower market volumes for appraisal services and FX,partially offset by net market share gains for appraisal services and improved Ne
181、t Revenue(A)margins.Net Revenue(A)margin Net Revenue(A)margins in our Canadian segment increased by 360 basis points as we leveraged our field professional network in a lower market environment,partially offset by lower Net Revenue(A)margins from insurance inspection services supplied.Net Revenue(A)
182、margins in our Canadian segment increased by 480 basis points as we leveraged our field professional network in a lower market environment and realized higher Net Revenue(A)margins from insurance inspection services supplied.Adjusted EBITDA(A)Adjusted EBITDA(A)improved due to a significant reduction
183、 in operating expenses and an improvement in Net Revenue(A)margins,as outlined above,partially offset by lower transaction volumes.Adjusted EBITDA(A)was lower due to lower market volumes for appraisal services,partially offset by a significant reduction in operating expenses and an improvement in Ne
184、t Revenue(A)margins.20Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Corporate and other items Three months ended September 30 Ye
185、ar ended September 30 2023 2022 Change%Change 2023 2022 Change%Change Operating expenses$3,182$4,015$(833)-21%$13,825$17,552$(3,727)-21%Amortization$89$104$(15)-14%$348$461$(113)-25%Loss on disposal of property and equipment$24$367$(343)-94%$-$603$(603)-100%Other non-operating costs$-$-$-0%$-$66$(66
186、)-100%Restructuring expenses$14$969$(955)-99%$1,703$1,542$161 10%Impairment of goodwill$-$17,296$(17,296)-100%$-$17,296$(17,296)-100%Interest expense$75$56$19 34%$283$264$19 7%Interest income$(339)$(71)$(268)378%$(825)$(134)$(691)516%Net foreign exchange (gain)loss$(1,797)$(5,040)$3,243 -64%$1,186$(
187、5,725)$6,911 -121%Gain on fair value of derivatives$(60)$-$(60)0%$(815)$-$(815)0%Gain on fair value of warrants$-$-$-0%$-$(249)$249 -100%Income tax recovery$(106)$(6,114)$6,008 -98%$(2,949)$(3,084)$135 -4%Canada operating results Three months ended September 30,2023 vs.Three months ended September 3
188、0,2022 Year ended September 30,2023 vs.Year ended September 30,2022 Adjusted EBITDA(A)margins Adjusted EBITDA(A)margins improved to 72.9%due to a reduction in operating expenses and an improvement in Net Revenue(A)margins,as outlined above,partially offset by lower transaction volumes.Adjusted EBITD
189、A(A)margins improved to 70.5%due to a significant reduction in operating expenses and an improvement in Net Revenue(A)margins,as outlined above,partially offset by lower transaction volumes.Corporate operating results Three months ended September 30,2023 vs.Three months ended September 30,2022 Year
190、ended September 30,2023 vs.Year ended September 30,2022 Operating expenses Corporate operating expenses declined$0.8 million due to lower salaries and benefits costs of$0.5 million,reflecting lower Corporate segment headcount and stock-based compensation expenses and lower FX.Corporate operating exp
191、enses declined$3.7 million primarily due to lower salaries and benefits costs of$2.5 million,reflecting lower Corporate segment headcount and stock-based compensation expense,and lower data center costs,computer expenses and FX.In fiscal 2023,salary and benefit costs include$0.3 million of severance
192、 expense compared to$nil in fiscal 2022.Amortization Amortization expense declined modestly.Amortization expense decreased due to a reduction of right-of-use assets related to our leased office space combined with fully amortized computer equipment and leasehold improvements.Loss on disposal of prop
193、erty and equipment The loss on disposal of property and equipment incurred in Q4 2023 reflects the disposal of a right-of-use asset.In Q4 2022,the disposal of leasehold improvements attributable to a subleased office space contributed to the loss.Gains and losses on disposal of property and equipmen
194、t incurred in fiscal 2023 due to the disposal of right-of-use assets and furniture and fixtures fully offset each other.The loss incurred in fiscal 2022 was due to an adjustment to a leased property related to the remeasurement of a lease liability.Other non-operating costs-N/A.Other non-operating c
195、osts incurred in fiscal 2022 represented professional fees for advisory services.21Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated
196、)Corporate operating results Three months ended September 30,2023 vs.Three months ended September 30,2022 Year ended September 30,2023 vs.Year ended September 30,2022 Restructuring expenses Restructuring expenses incurred represent severance costs attributable to changes in our organizational struct
197、ure which were substantially lower in Q4 2023 than the comparative quarter in fiscal 2022.Restructuring expenses incurred in fiscal 2023 represent severance costs attributable to changes in our organizational structure and due to the timing of the restructuring;those expenses were 10%higher in fisca
198、l 2023.Impairment of goodwill In the fourth quarter of fiscal 2022 we recognized an impairment charge for goodwill attributable to our U.S.Title segment due to the continued decline in economic and market conditions for mortgage origination refinance activity.In the fourth quarter of fiscal 2022 we
199、recognized an impairment charge for goodwill attributable to our U.S.Title segment due to the continued decline in economic and market conditions for mortgage origination refinance activity.Interest expense and Interest Income The increase in interest expense and income is mostly related to the curr
200、ent higher interest rates environment and the interest incurred on our total return swap.The increase in interest expense and income is mostly related to the current higher interest rates environment and the interest incurred on our total return swap.Net foreign exchange(gain)loss Net foreign exchan
201、ge gains or losses represent non-cash gains or losses on long-term financing arrangements between our Canadian and U.S.entities within the consolidated group of companies.The resulting current and comparative quarter gains were the result of changes in the FX rate between the Canadian and U.S.dollar
202、.Net foreign exchange gains or losses represent non-cash gains or losses on long-term financing arrangements between our Canadian and U.S.entities within the consolidated group of companies.The resulting fiscal year losses and comparative fiscal year gains were the result of changes in the FX rate b
203、etween the Canadian and U.S.dollar.Gain on fair value of derivatives In Q1 2023,the Company entered into a total return swap to manage our cash flow exposure arising from changes in our share price attributable to cash-settled RSUs.The fair value of the swap fluctuates on an inverse relationship to
204、our share price.In Q1 2023,the Company entered into a total return swap to manage our cash flow exposure arising from changes in our share price attributable to cash-settled RSUs.The fair value of the swap fluctuates on an inverse relationship to our share price.Gain on fair value of warrants-N/A.Al
205、l outstanding warrants were fully exercised in the second quarter of fiscal 2022,resulting in no gain or loss being recognized in fiscal 2023.Our share price declined in the period prior to the exercise of all remaining outstanding warrants in fiscal 2022,resulting in a decrease to our warrant liabi
206、lity accrual and the recognition of a corresponding gain on the fair value of warrants.Income tax recovery We recorded income before income tax recoveries of$1.5 million for Q4 2023.Income tax calculated at the statutory income tax rate,including foreign income subject to tax at a different statutor
207、y tax rate,resulted in an income tax expense of$0.4 million.Income tax recoveries related to non-deductible expenses,including RSUs,and non-taxable income totaled$0.5 million.We recorded a loss before income tax recoveries of$9.1 million for fiscal 2023.Income tax calculated at the statutory income
208、tax rate,including foreign income subject to tax at a different statutory tax rate,resulted in an income tax recovery of$2.4 million.Income tax recoveries related to non-deductible expenses,including RSUs,and non-taxable income totaled$0.7 million.22Real Matters Inc.MD&A for the years ended Septembe
209、r 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)NON-GAAP MEASURES We prepare our financial statements in accordance with IFRS.However,we consider certain Non-GAAP financial measure
210、s useful additional information to assess our financial performance.These measures,which we believe are widely used by investors,securities analysts and other interested parties to evaluate our performance,do not have a standardized meaning prescribed by GAAP and therefore may not be comparable to s
211、imilarly 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”,“Adjusted Net Income or Loss”,“Free Cash Flow”and“Free Cash Flow Conv
212、ersion”.(A)Adjusted EBITDA All references to Adjusted EBITDA in this MD&A are to net income or loss before stock-based compensation expense,amortization,gain or loss on disposal of property and equipment,other non-operating costs,restructuring expenses,impairment of goodwill,interest expense,interes
213、t income,net foreign exchange gain or loss,gain or loss on fair value of derivatives,gain or loss on fair value of warrants and income tax expense or recovery.Adjusted EBITDA is a measure of our operating profitability and therefore excludes certain items that are viewed by us as either non-cash(in
214、the case of equity-settled stock-based compensation expense,amortization,gain or loss on disposal of property and equipment,impairment of goodwill,unrealized net foreign exchange gain or loss,unrealized gain or loss on the fair value of derivatives,gain or loss on the fair value of warrants and defe
215、rred income taxes)or non-operating(in the case of cash-settled stock-based compensation expense,other non-operating costs,restructuring expenses,realized net foreign exchange gain or loss,realized gain or loss on the fair value of derivatives,interest expense,interest income and current income taxes
216、).Adjusted EBITDA is a useful financial and operating metric for the Company,and our board of directors,and represents a measure of our operating performance to value our Company relative to our peers.The reasons for excluding each item are as follows:Stock-based compensation expense:These costs rep
217、resent non-cash expenses for equity-settled stock-based compensation awards and non-operating expenses for cash-settled stock-based compensation awards.These amounts are recorded to operating expenses and represent a different class of expense than those included in Adjusted EBITDA.Amortization:As a
218、 non-cash item,amortization is not indicative of our operating profitability and therefore represents a different class of expense than those included in Adjusted EBITDA.Gain or loss on disposal of property and equipment:As a non-cash item,the disposal of property and equipment is not indicative of
219、our operating profitability and therefore represents a different class of expense than those included in Adjusted EBITDA.Other non-operating costs:Other non-operating costs represent non-operating items and include professional fees for advisory services not attributable to the operation of the busi
220、ness.These costs are not indicative of continuing operations and therefore represent a different class of expense than those included in Adjusted EBITDA.Restructuring expenses:Restructuring expenses represent costs attributable to employee severance resulting from changes in our management and organ
221、izational structure.These costs are not indicative of continuing operations and therefore represent a different class of expense than those included in Adjusted EBITDA.Impairment of goodwill:As a non-cash item,the impairment of goodwill is not indicative of our operating profitability and therefore
222、represents a different class of expense than those included in Adjusted EBITDA.Interest expense and income:Interest expense or income reflects our debt and equity mix,interest rates,investment strategy and borrowing position from time-to-time.Accordingly,interest expense or income reflects our treas
223、ury and financing activities and therefore 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 forei
224、gn exchange gains or losses reflect our treasury and financing activities and represents a different class of income or expense than those included in Adjusted EBITDA.Gain or loss on fair value of derivatives:As a non-cash item,gains or losses resulting from the fair value of derivatives are not ind
225、icative of our operating profitability.Gains or losses from the fair value of derivatives reflect our treasury activities and represents a different class of income or expense than those included in Adjusted EBITDA.Gain or loss on fair value of warrants:As a non-cash item,gains or losses resulting f
226、rom the fair value of warrants is not indicative of our operating profitability.Gains or losses from the fair value of warrants reflects our treasury and financing activities and represents a different class of income or expense than those included in Adjusted EBITDA.23Real Matters Inc.MD&A for the
227、years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Income taxes:Income taxes are a function of tax laws and rates and are affected by matters that are separate fro
228、m our daily operations.Income taxes are not indicative of our operating profitability and represents a different class of expense or recovery than those included in Adjusted EBITDA.The reconciling items between Adjusted EBITDA and net income or loss are detailed in the consolidated statements of ope
229、rations and comprehensive income or loss for the three months and years ended September 30,2023 and 2022.The reconciling items between net income or loss and Adjusted EBITDA for the three months and years ended September 30,2023 and 2022 were as follows:Three months ended September 30 Year ended Sep
230、tember 30 2023 2022 2023 2022 Net income(loss)$1,622$(9,968)$(6,196)$(9,265)Stock-based compensation expense 288 305 1,377 1,535 Amortization 873 1,088 3,877 4,530 Loss on disposal of property and equipment 24 367 -603 Other non-operating costs -66 Restructuring expenses 14 969 1,703 1,542 Impairmen
231、t of goodwill -17,296 -17,296 Interest expense 75 56 283 264 Interest income (339)(71)(825)(134)Net foreign exchange(gain)loss (1,797)(5,040)1,186 (5,725)Gain on fair value of derivatives (60)-(815)-Gain on fair value of warrants -(249)Income tax recovery (106)(6,114)(2,949)(3,084)Adjusted EBITDA$59
232、4$(1,112)$(2,359)$7,379 Management calculates Adjusted EBITDA as follows:Three months ended September 30 Year ended September 30 2023 2022 2023 2022 Revenues$42,189$58,200$163,914$339,642 Less:Transaction costs 31,023 43,833 120,899 254,203 Less:Operating expenses 10,860 15,784 46,751 79,595 Add:Sto
233、ck-based compensation expense 288 305 1,377 1,535 Adjusted EBITDA$594$(1,112)$(2,359)$7,379 Adjusted EBITDA by reportable segment was as follows:Three months ended September 30 Year ended September 30 2023 2022 2023 2022 U.S.Appraisal$3,935$4,570$14,178$26,997 U.S.Title (1,581)(2,930)(8,338)(8,084)C
234、anada 1,134 958 4,249 4,483 Corporate(excluding stock-based compensation expense)(2,894)(3,710)(12,448)(16,017)Consolidated Adjusted EBITDA$594$(1,112)$(2,359)$7,379 Adjusted EBITDA margin(expressed as Adjusted EBITDA divided by Net Revenue)by reportable segment and consolidated was as follows:Three
235、 months ended September 30 Year ended September 30 2023 2022 2023 2022 U.S.Appraisal 46.0%41.0%42.8%48.6%U.S.Title -150.4%-167.5%-215.6%-35.1%Canada 72.9%65.0%70.5%65.2%Consolidated Adjusted EBITDA margin(including Corporate,but excluding stock-based compensation expense)5.3%-7.7%-5.5%8.6%24Real Mat
236、ters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Net Revenue All references to“Net Revenue”in this MD&A are to Adjusted EBITDA plus operati
237、ng expenses less stock-based compensation expense.Net Revenue is an additional measure of our operating profitability and therefore excludes certain items detailed below.Net Revenue represents the difference between revenues and transaction costs.Transaction costs represent expenses directly attribu
238、table to a revenue transaction and include:appraisal costs,various processing fees,credit card fees,connectivity fees,insurance inspection costs,closing agent costs,external abstractor costs and external quality review costs.Net Revenue is a useful financial and operating metric for us and our board
239、 of directors to assess our operating performance and serves to measure our Company relative to our peers.The reconciling items between net income or loss and Net Revenue for the three months and years ended September 30,2023 and 2022 are detailed in the consolidated statements of operations and com
240、prehensive income or loss and were as follows:Three months ended September 30 Year ended September 30 2023 2022 2023 2022 Net income(loss)$1,622$(9,968)$(6,196)$(9,265)Operating expenses 10,860 15,784 46,751 79,595 Amortization 873 1,088 3,877 4,530 Loss on disposal of property and equipment 24 367
241、-603 Other non-operating costs -66 Restructuring expenses 14 969 1,703 1,542 Impairment of goodwill -17,296 -17,296 Interest expense 75 56 283 264 Interest income (339)(71)(825)(134)Net foreign exchange(gain)loss (1,797)(5,040)1,186 (5,725)Gain on fair value of derivatives (60)-(815)-Gain on fair va
242、lue of warrants -(249)Income tax recovery (106)(6,114)(2,949)(3,084)Net Revenue$11,166$14,367$43,015$85,439 Management calculates Net Revenue as follows:Three months ended September 30 Year ended September 30 2023 2022 2023 2022 Revenues$42,189$58,200$163,914$339,642 Less:Transaction costs 31,023 43
243、,833 120,899 254,203 Net Revenue$11,166$14,367$43,015$85,439 Net Revenue by reportable segment was as follows:Three months ended September 30 Year ended September 30 2023 2022 2023 2022 U.S.Appraisal$8,559$11,145$33,117$55,510 U.S.Title 1,051 1,749 3,867 23,049 Canada 1,556 1,473 6,031 6,880 Consoli
244、dated Net Revenue$11,166$14,367$43,015$85,439 Net Revenue margin(expressed as Net Revenue divided by Revenues)by reportable segment and consolidated was as follows:Three months ended September 30 Year ended September 30 2023 2022 2023 2022 U.S.Appraisal 27.5%25.4%27.4%22.1%U.S.Title 45.0%44.1%40.6%6
245、3.1%Canada 17.9%14.3%18.0%13.2%Consolidated Net Revenue margin 26.5%24.7%26.2%25.2%25Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stat
246、ed)Adjusted Net Income or Loss All references to“Adjusted Net Income or Loss”in this MD&A are to net income or loss before stock-based compensation expense,amortization of intangibles,other non-operating costs,restructuring expenses,impairment of goodwill,net foreign exchange gain or loss,gain or lo
247、ss on fair value of derivatives and gain or loss on fair value of warrants,each net of the related tax effects,as applicable.Adjusted Net Income or Loss is a term that does not have a standardized meaning prescribed by IFRS and is unlikely to be comparable to similar measures used by other entities.
248、Adjusted Net Income or Loss is a 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 equity-settled stock-based compensation expense,amortization of intangibles,impairment of goodwill,unrealized
249、 net foreign exchange gain or loss,unrealized gain or loss on fair value of derivatives and gain or loss on fair value of warrants)or non-operating(in the case of cash-settled stock-based compensation expense,other non-operating costs,restructuring expenses,realized net foreign exchange gain or loss
250、 and realized gain or loss on fair value of derivatives).Adjusted Net Income or Loss is a useful financial and operating metric for the Company,and our board of directors,as it represents net income or loss from operations which excludes treasury and capital costs,acquisition and related costs,non-o
251、perating costs,restructuring expenses and impairment of goodwill.The reconciling items between net income or loss and Adjusted Net Income or Loss for the three months and years ended September 30,2023 and 2022 were as follows:Three months ended September 30 Year ended September 30 2023 2022 2023 202
252、2 Net income(loss)$1,622$(9,968)$(6,196)$(9,265)Stock-based compensation expense 288 305 1,377 1,535 Amortization of intangibles 385 351 1,485 1,389 Other non-operating costs -66 Restructuring expenses 14 969 1,703 1,542 Impairment of goodwill -17,296 -17,296 Net foreign exchange(gain)loss (1,797)(5
253、,040)1,186 (5,725)Gain on fair value of derivatives (60)-(815)-Gain on fair value of warrants -(249)Related tax effects 388 (3,868)(929)(4,088)Adjusted Net Income(Loss)$840$45$(2,189)$2,501 Free Cash Flow and Free Cash Flow Conversion All references to“Free Cash Flow”in this MD&A are to cash generat
254、ed from operating activities,adjusted for changes in non-cash working capital items,intangible asset additions,property and equipment additions,income taxes paid,current income tax expense,other non-operating costs,restructuring expenses,interest expense net of interest paid and net foreign currency
255、 exchange gain or loss net of unrealized foreign currency exchange gain or loss on internal financing arrangements.Free Cash Flow is a term that does not have a standardized meaning prescribed by IFRS and is unlikely to be comparable to similar measures used by other entities.Free Cash Flow is a mea
256、sure of our ability to generate cash from operating activities and represents a proxy for cash to cover costs,including but not limited to,interest expense,current income taxes,intangible asset additions and property and equipment additions,and by definition,excludes certain items detailed above.Exc
257、luded items are viewed by the Company as non-cash(in the case of net foreign currency exchange gain or loss net of unrealized foreign exchange gain or loss on internal financing arrangements),or non-operating(in the case of other non-operating costs and restructuring expenses).The Company exclude ch
258、anges in non-cash working capital items from the calculation of Free Cash Flow,as changes in non-cash working capital items are often temporary in nature and reflect the timing of cash receipts for trade and other receivables or payments made on account of trade payables or accrued liabilities.We fu
259、rther exclude differences attributable to the timing of cash tax and interest payments and have reduced Free Cash Flow by the expense recognized for each as recorded in our consolidated statements of operations and comprehensive income or loss.Free Cash Flow is a useful financial and operating metri
260、c for the Company,and our board of directors,as it represents a proxy for our ability to generate cash that we can use for other purposes,including but not limited to,the purchase of shares under a Normal Course Issuer Bid(“NCIB”)and future acquisitions or investment.All references to“Free Cash Flow
261、 Conversion”in this MD&A are to Free Cash Flow divided by Adjusted EBITDA.Free Cash Flow Conversion is a useful financial and operating metric for the Company,and our board of directors,as it represents a proxy for our ability to convert Adjusted EBITDA to Free Cash Flow.26Real Matters Inc.MD&A for
262、the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Three months ended September 30 Year ended September 30 2023 2022 2023 2022 Cash(utilized in)generated from
263、operating activities$(29)$(4,813)$(2,564)$17,567 Less:changes in non-cash working capital items (3,459)(2,400)636 16,847 Less:intangible asset additions 173 106 496 160 Less:property and equipment additions 28 -534 1,015 Add:income taxes(recovered)paid (2,411)358 (420)4,721 Less:current income tax e
264、xpense(recovery)344 (282)494 1,761 Add:other non-operating costs -66 Add:restructuring expenses 14 969 1,703 1,542 Add:net foreign currency exchange gain or loss net of unrealized foreign exchange gain or loss on internal financing arrangements (175)(11)100 200 Free Cash Flow$313$(921)$(3,341)$4,313
265、 Management calculates Free Cash Flow as follows:Three months ended September 30 Year ended September 30 2023 2022 2023 2022 Adjusted EBITDA$594$(1,112)$(2,359)$7,379 Less:interest expense 75 56 283 264 Add:interest income 339 71 825 134 Less:current income tax expense(recovery)344 (282)494 1,761 Le
266、ss:intangible asset additions 173 106 496 160 Less:property and equipment additions 28 -534 1,015 Free Cash Flow$313$(921)$(3,341)$4,313 Free Cash Flow Conversion is calculated as follows:Three months ended September 30 Year ended September 30 2023 2022 2023 2022 Free Cash Flow$313$(921)$(3,341)$4,3
267、13 Divided by:Adjusted EBITDA$594$(1,112)$(2,359)$7,379 Free Cash Flow Conversion 52.7%82.8%141.6%58.4%Adjusted EBITDA,Net Revenue,Adjusted Net Income or Loss,Free Cash Flow and Free Cash Flow Conversion should not be considered,in isolation,indicators of our financial performance,or as an alternati
268、ve to,or a substitute for,net income or loss,cash from operating activities or other information presented in our financial statements.SELECTED ANNUAL INFORMATION Year ended September 30 2023 2022 2021 Revenues$163,914$339,642$504,107 Net(loss)income$(6,196)$(9,265)$33,080 Net(loss)income per weight
269、ed average share,basic$(0.08)$(0.12)$0.40 Net(loss)income per weighted average share,diluted$(0.08)$(0.12)$0.39 Total assets$128,738$137,004$194,340 Total long-term liabilities$2,941$4,312$6,979 Revenues 2023-2022 Please see the“Review of Operations For the three months and year ended September 30,2
270、023”section of this MD&A for a detailed discussion regarding the change in revenues between fiscal 2023 and fiscal 2022.2022-2021 Consolidated revenues declined due to lower revenues across all three segments.Revenues in our U.S.Appraisal segment declined due to lower addressable mortgage originatio
271、n volumes,partially offset by net market share gains with existing clients,new client additions and higher home equity and default volumes serviced.The revenue decline in our U.S.Title segment was due primarily to lower refinance mortgage origination market volumes,changes in our client portfolio,th
272、e 27Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)rationalization of our diversified title business to align with our long-term
273、market share objectives and lower home equity revenues.Excluding the impact of FX,Canadian segment revenues increased modestly on higher insurance inspection revenues while appraisal services were flat as net market share gains were offset by lower market volumes.Net(loss)income 2023-2022 Please see
274、 the“Review of Operations For the three months and year ended September 30,2023”section of this MD&A for a detailed discussion of the components comprising the change in net income between fiscal 2023 and fiscal 2022.2022-2021 We recorded a net loss in fiscal 2022 versus net income in fiscal 2021.Fa
275、ctors contributing to the decline included the recognition of a goodwill impairment charge,lower Adjusted EBITDA(A)generated by all three operating segments and higher restructuring expenses.These declines were partially offset by higher net foreign exchange gains between periods due to changes in t
276、he FX rate between the Canadian and U.S.dollar.A large deferred income tax recovery attributable to the decline in our financial performance and the goodwill impairment charge also partially offset the declines noted above.Total Assets 2023-2022 Total assets declined$8.3 million between fiscal 2022
277、and fiscal 2023.Lower cash and cash equivalents of$3.8 million,lower trade and other receivables of$4.5 million,lower income tax recoverable of$0.9 million,lower intangibles of$1.0 million,lower property and equipment of$3.1 million,was partially offset by higher other assets of$0.8 million and high
278、er deferred tax assets of$3.5 million.Please refer to the“Financial Condition,Liquidity and Capital Resources”section of this MD&A for a detailed discussion of the components comprising the change in cash and cash equivalents and trade and other receivables.The decline in intangibles was the result
279、of normal course amortization.Lower property and equipment balances were due to the disposal of a right-of-use asset and normal course amortization,partially offset by new equipment additions.The decrease in income taxes recoverable reflects income tax refunds collected during the year.Other assets
280、represent the fair value of our total return swap.The increase in deferred tax assets is largely attributable to loss carryforwards in our U.S.and Canadian operating entities.2022-2021 Total assets declined$57.3 million between fiscal 2022 and fiscal 2021.Lower cash and cash equivalents of$14.1 mill
281、ion,lower trade and other receivables of$26.2 million,lower intangibles of$1.2 million,lower goodwill of$17.3 million and lower property and equipment of$4.1 million,was partially offset by higher income taxes recoverable of$0.9 million and higher deferred tax assets of$4.7 million.The decrease in c
282、ash and cash equivalents was due in large part to the purchase of common shares and related costs under our NCIB totaling$28.7 million.Income taxes paid of$4.7 million,investments made in property and equipment of$1.0 million,primarily for end-of-life computer equipment,and the net repayment of leas
283、e liabilities of$1.5 million also contributed to the decline in cash and cash equivalents.These outflows of cash and cash equivalents were partially offset by a non-cash working capital recovery of$16.8 million,due primarily to the timing of payment from two significant clients in our U.S.Appraisal
284、segment at the end of fiscal 2021,and$7.4 million of Adjusted EBITDA(A)recognized in fiscal 2022.The decline in intangibles was the result of normal course amortization,while lower goodwill reflected an impairment charge attributable to our U.S.Title segment due to the continued decline in economic
285、and market conditions for mortgage origination refinance activity.Lower property and equipment balances were due to the disposal of a right-of-use asset for a Denver property lease,including the disposal of leasehold improvements attributable to that lease,and normal course amortization,partially of
286、fset by new equipment additions due primarily to the replacement of end-of-life computer equipment.The increase in income taxes recoverable reflected income taxes paid that were higher than the current year provision for income taxes payable,partially offset by amounts payable in respect of dividend
287、 withholding tax attributable to the transfer of cash between the U.S.and Canada to support the purchase of common shares and related costs under our NCIB.The increase in deferred tax assets was largely attributable to loss carryforwards in our U.S.and Canadian operating entities.Total Long-Term Lia
288、bilities 2023-2022 Total long-term liabilities declined$1.4 million due primarily to lower long-term lease liabilities of$1.9 million,mainly representing normal course lease payments and lease amendments,partially offset by an increase in other liabilities of$0.5 million associated with the future p
289、ayment of cash-settled RSUs.We expect to satisfy our total long-term liabilities as they come due based on our expectations of future operating performance and our current cash and cash equivalents balance.28Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical
290、amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)2022-2021 Total long-term liabilities declined$2.7 million due primarily to lower long-term lease liabilities of$2.0 million,representing normal course lease payments and a r
291、eduction to lease liabilities attributable to the reassessment of the Denver property lease.The decline in warrant liabilities of$0.7 million reflected the exercise of all remaining warrants in fiscal 2022.SUMMARY OF QUARTERLY RESULTS The following table sets out selected financial information as re
292、ported for each of the eight most recent quarters,the latest of which ended September 30,2023.This information has been prepared on the same basis as the Companys audited consolidated financial statements,and all necessary adjustments have been included in the amounts stated below to present fairly
293、the unaudited quarterly results when read in conjunction with the audited consolidated financial statements of the Company and the related notes to those statements.2023 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Revenues U.S.Appraisal$31,160$33,430$27,996$28,260$43,908$57,299$70,374$79,335 U.S.Title 2,333 2,609
294、2,223 2,361 3,966 5,606 10,775 16,195 Canada 8,696 9,911 7,391 7,544 10,326 15,799 13,832 12,227 Total revenues$42,189$45,950$37,610$38,165$58,200$78,704$94,981$107,757 Net income(loss)$1,622$(619)$(2,580)$(4,619)$(9,968)$(1,424)$(509)$2,636 Net income(loss)-attributable to common shareholders$1,622
295、$(619)$(2,580)$(4,596)$(9,960)$(1,437)$(545)$2,670 Net income(loss)per weighted average share,basic$0.02$(0.01)$(0.04)$(0.06)$(0.14)$(0.02)$(0.01)$0.03 Net income(loss)per weighted average share,diluted$0.02$(0.01)$(0.04)$(0.06)$(0.14)$(0.02)$(0.01)$0.03 Seasonality Residential mortgage origination
296、volumes in North America are influenced by cyclical trends and seasonality.Cyclical trends include changes in interest rates,refinancing rates,the capacity of lenders to underwrite mortgages,house prices,housing inventory,demand for housing,the availability of funds for mortgage loans,credit require
297、ments,regulatory changes,household indebtedness,employment levels and the general health of the North American economy.Transaction-based revenues for appraisal services in our U.S.Appraisal and Canadian segments are also impacted by the seasonal nature of the residential mortgage industry,which typi
298、cally see home buyers purchase more homes in our third and fourth fiscal quarters,representing the three months ending June 30 and September 30,respectively.Net income(loss)Net income or loss generally follows the rise and fall in revenues.However,net income or loss is also impacted by changes in st
299、ock-based compensation expense,amortization,gains or losses on disposal of property and equipment,other non-operating costs,restructuring expenses,impairment of goodwill,interest expense,interest income,net foreign exchange gains or losses,net gains or losses on fair value of derivatives and gains o
300、r losses on fair value of warrants.Net income tax expense or recovery also impacts net income or loss.We recorded a net loss in the first quarter of fiscal 2023 which compares to net income in the first quarter of fiscal 2022.Lower Adjusted EBITDA(A)contributions recognized across each of our segmen
301、ts was the primary contributor to the loss,owing in large part to lower addressable mortgage origination volumes.In addition,we recorded restructuring expenses of$1.3 million in the first quarter of fiscal 2023,representing severance costs attributable to changes in our management and organizational
302、 structure,compared to$nil in the same quarter last year.In the first quarter of fiscal 2023,we recognized higher foreign currency exchange losses of$0.5 million as a result of changes in the Canadian dollar relative to the U.S.dollar.The aforementioned contributed to the higher net loss in the firs
303、t quarter of fiscal 2023 compared to the same quarter last year,which was partially offset by lower cash and deferred income tax expenses of$3.5 million.Lower cash and deferred income tax expenses reflect the decline in our financial performance which was due in large part to the comparative decline
304、 in mortgage market origination volumes.29Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)We recorded a larger net loss in the sec
305、ond quarter of fiscal 2023 compared to the same quarter last fiscal year.Lower Adjusted EBITDA(A)contributions recognized across each of our segments was the primary contributor to the higher current quarter loss,owing in large part to lower addressable mortgage origination volumes.In addition,we re
306、corded restructuring expenses of$0.3 million in the second quarter of fiscal 2023,representing severance costs attributable to changes in our management and organizational structure,compared to$nil in the same quarter last year.The aforementioned contributed to the higher net loss in the second quar
307、ter of fiscal 2023 compared to the same quarter last year,which was partially offset by lower foreign currency exchange losses of$1.2 million,due to changes in the Canadian dollar relative to the U.S.dollar,lower losses of$0.2 million recognized in the comparative quarter on the disposal of property
308、 and equipment,due to an adjustment to a leased property related to the remeasurement of a lease liability,and a higher gain recognized on the fair value of derivatives from a total return swap used to manage our cash flow exposure arising from changes in our share price attributable to cash-settled
309、 RSUs.Higher net income tax recoveries of$0.2 million reflect the decline in our financial performance,which was due in large part to the comparative decline in mortgage market origination volumes.Net loss in the third quarter of fiscal 2023 was lower than the net loss recorded in the third quarter
310、of fiscal 2022.A higher consolidated Adjusted EBITDA(A)contribution was the primary contributor to the lower loss in the third quarter of fiscal 2023.Although revenues were lower across each of our segments owing in large part to lower addressable mortgage origination volumes,we recorded substantial
311、ly lower operating expenses from lower salary and benefit costs and other operating expenses.In addition,we recognized a higher gain on the fair value of derivatives from our total return swap and incurred lower income tax expense.The aforementioned contributed to the lower net loss in the third qua
312、rter of fiscal 2023 compared to the same quarter last year,which was partially offset by higher foreign currency exchange losses due to changes in the Canadian dollar relative to the U.S.dollar.Please see the“Review of Operations For the three months and year ended September 30,2023”section of this
313、MD&A for a detailed discussion of the components comprising the change in net income between the fourth quarter of fiscal 2023 and the fourth quarter of fiscal 2022.FINANCIAL CONDITION,LIQUIDITY AND CAPITAL RESOURCES Select Consolidated Statement of Financial Position(“Balance Sheet”)Information As
314、at September 30 2023 2022 Change Trade and other receivables$15,295$19,831$(4,536)Intangibles$4,004$4,992$(988)Goodwill$43,181$43,181$-Working capital position -(current assets less current liabilities)$47,097$52,047$(4,950)Trade and other receivables The decline in trade and other receivables was d
315、ue in large part to lower mortgage origination market activity for our U.S.and Canadian operations.Intangibles The decline in intangibles was due to normal course amortization recorded in our U.S.segments,partially offset by capitalized software development costs incurred to enhance our software pla
316、tforms.Working capital position Our consolidated working capital position declined on a comparative basis to$47.1 million.The Company has no outstanding debt.Total current assets declined$8.4 million while total current liabilities declined$3.5 million.The decline in total current assets was due to
317、lower trade and other receivables of$4.5 million,lower cash and cash equivalents of$3.8 million and lower income taxes recoverable of$0.9 million,partially offset by higher prepaid expenses of$0.9 million.The decline in trade and other receivables was due in large part to lower mortgage origination
318、market activity.The decline in total current liabilities was due to a decrease in trade payables and accrued charges owing to the decline in volumes serviced and the timing of certain payments.Please refer to the“Cash Flows”section below for a detailed discussion of the components comprising the cha
319、nge in cash and cash equivalents.30Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of shares,excluding per share amounts,unless otherwise stated)Cash Flows Three months ended September 30 Year
320、 ended September 30 2023 2022 Change 2023 2022 Change Cash flows(utilized in)generated from:Operating activities$(29)$(4,813)$4,784$(2,564)$17,567$(20,131)Investing activities (174)(39)(135)(799)(1,080)281 Financing activities 201 (1,955)2,156 (445)(30,424)29,979 Effect of foreign currency translati
321、on on cash and cash equivalents (192)(92)(100)7 (134)141 Net cash outflow$(194)$(6,899)$6,705$(3,801)$(14,071)$10,270 Changes in cash flows(utilized in)generated from:Three months ended September 30,2023 vs.Three months ended September 30,2022 Year ended September 30,2023 vs.Year ended September 30,
322、2022 Operating activities Cash generated from operating activities increased$4.8 million due in part to a$1.7 million increase in Adjusted EBITDA(A)as outlined in the“Review of Operations-For the three months and year ended September 30,2023”section of this MD&A.In addition,income taxes recovered to
323、taled$2.4 million versus income taxes paid of$0.4 million in the comparable period.Cash generated from operating activities declined$20.1 million due in part to a$9.7 million decline in Adjusted EBITDA(A)as outlined in the“Review of Operations-For the three months and year ended September 30,2023”se
324、ction of this MD&A.Non-cash working capital declined$16.2 million,which was due in large part to the timing of payments combined with lower comparative mortgage origination market activity leading to lower trade and other receivables balances.In fiscal 2022,we paid income taxes of$4.7 million versus
325、 a recovery in fiscal 2023 of$0.4 million.Investing activities Cash utilized in investing activities increased modestly by$0.1 million mainly due to higher additions of intangible assets.Cash utilized in investing activities decreased to$0.8 million compared to$1.1 million mainly due to lower expend
326、itures on the acquisition of property and equipment,partially offset by higher additions of intangible assets.Financing activities Cash utilized in financing activities was lower on a comparative basis by$2.2 million mainly due to a decline in common shares purchased under our NCIB and an increase i
327、n proceeds received from the exercise of stock options.Cash utilized in financing activities was lower on a comparative basis by$30.0 million mainly due to a decline in common shares purchased under our NCIB and a decline in RSUs purchased and held in trust.Contractual Obligations September 30,2023
328、Payments due Total Less than 1 year 1-3 years 4-5 years After 5 years Leases$4,444$1,825$1,884$682$53 Trade payables and accrued charges 12,549 12,549 -Other liabilities 508 -508 -Total contractual obligations$17,501$14,374$2,392$682$53 The Company expects that cash and cash equivalents and future o
329、perating cash flows will be sufficient to fund ongoing business requirements,including working capital and other contractual obligations.31Real Matters Inc.MD&A for the years ended September 30,2023 and 2022 (tabular and graphical amounts are expressed in thousands of U.S.dollars and thousands of sh
330、ares,excluding per share amounts,unless otherwise stated)Total return swap In December 2022,the Company entered into a total return swap to manage our cash flow exposure arising from changes in our share price attributable to cash-settled RSUs.Details of the total return swap as at September 30,2023
331、 are as follows:Total return swap Date entered Notional amount C$(expressed in millions)Share price C$Number of units(expressed in millions)Effective date Expiration date December 2022$2.4$4.21 0.6 December 2022 December 2025 DISCLOSURE OF OUTSTANDING SHARE DATA Number of shares issued and outstandi
332、ng(in thousands)September 30,2023 November 16,2023 Common shares 72,944 72,944 Restricted shares (101)(101)Preferred shares -Total contributed equity 72,843 72,843 Normal course issuer bid(“NCIB”)Effective June 13,2022,we received approval from the Toronto Stock Exchange(“TSX”)to renew our NCIB for
333、a one-year period which expired on June 12,2023.Under the renewed NCIB,we were approved to purchase up to 6 million common shares.Daily purchases made on the TSX,or through alternative Canadian trading systems,were limited to a maximum of 99,319 common shares.We were permitted to purchase a block of common shares once a week which could exceed the daily purchase limit subject to certain conditions
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