Q4 2021 Real Matters Inc Earnings Call
Good day, and thank you for standing by and welcome to the real matters fourth quarter and fiscal 'twenty 'twenty. One conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need depressed star one.
On your telephone please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker. Today, then Beauregard. Please go ahead.
Thank you operator, and good morning, everyone. Welcome to roam outer Special result conference call for the fourth quarter and fiscal.
At September 30 of 2021 with me today are real matters, Chief Executive Officer, Brian Lang, and Chief Financial Officer Bill Herman.
This morning before market opened we issued a news release announcing our results for the three and 12 months ended September 30 of 2021, the release accompanying slide presentation as well.
All year financial statements and MD&A are posted in the Investor section of our website at real matters Dot com.
During the call we will make certain forward looking statements, which reflect the current expectations of management with respect to our business and the industry in which we operate however, there are a number of risks uncertainties and other factors.
As the cause our results to differ materially from our expectations. Please see the slide entitled cautionary note regarding forward looking information and the accompanying slide presentation for more details you can also find additional information about these risks in the risk section called risk factors in the company's annual.
Information for them for the year ended September 30 of 2020, which is available on SEDAR and the Investor Relations section of our website.
As a reminder, we refer to non-GAAP measures in our slide presentation, including net revenue net revenue margins adjusted EBITDA adjusted EBITDA margins.
Non-GAAP measures are described in our MD&A.
That concludes three and 12 months ended September 30 of 2021 where you will also find reconciliations to the nearest <unk> measures with that I'll turn the call over to Brian.
Thank you Lynn and good morning, everyone and thank you for joining us on the call.
So I'll kick things off today by discussing some of the business.
Highlights for fiscal 2021, and our fourth quarter Bill.
Bill will then take a deeper dive into our financials, then I'll wrap up the call with some closing remarks prior to taking questions.
I'd like to begin by thanking the real matters team for a ground breaking fiscal 2021, where we continue to.
A win in both of our appraisal and title businesses.
We now have a tier one and tier two lender who are two of the top five mortgage lenders in the U S by mortgage origination volumes.
Lives on our title platform and both of these clients have provided us with market share.
Increases since going live due to our strong performance.
We ended the year with double digit market share in the retail channel with each of these lenders are.
Great achievement in a short timeframe.
With a very strong client base in a proven performance track.
Rack record, we are poised to extend our client relationships in title and grow market share in both appraisal and title.
<unk> is well positioned to continue executing on our strategic plan of doubling our U S appraisal market share and tripling our U S title market share from fiscal 2020.
<unk> levels by the end of fiscal 2025.
Fourth quarter U S appraisal mortgage origination revenues, which includes purchase and refinance increased 32% year over year compared to an estimated 11, 6% increase in market volumes.
In the quarter, we launched eight new lenders in U S appraisal and one new channel with one of our tier one lenders.
We also continued to rank at the top of lender scorecards, which drove market share gains in the main origination channel year over year.
Operational excellence continues to be our principle.
Yes, as we drive toward achieving our fiscal 2025 objectives.
And U S title, we launched four new clients in the fourth quarter and the pipeline is strong.
We're very pleased with our performance and the market share progression, we have seen thus far with our new.
<unk> clients.
As I mentioned earlier, we drove strong performance with our tier one client and the new tier two lenders that resulted in market share already in the double digits with these clients in the retail channel. We are building a strong foundation with these and other franchise clients and we continue to look at opportunities.
Titles to leverage our performance equity with them to enter new channels and to onboard new title clients.
At the same time, we continue to make progress with our purchase title strategy building on our existing platform to position ourselves in this $5 billion market.
Further extending.
<unk> long term runway for growth in title.
In our Canadian segment, we also continued to deliver strong performance, which extends our market share with our Canadian bank clients driving fourth quarter revenues up 32, 8% year over year.
With that I'll hand, it over to.
Our bill.
Thank you, Brian and good morning, everyone.
Turning to slides four and five for a closer look at our financial results.
Consolidated revenues increased in the fourth quarter of fiscal 2021 compared to the same quarter last year.
Bill for record revenues in our U S appraisal segment and strong growth in our Canadian segment.
Which were partially offset by the decline in U S title revenues.
U S appraisal segment revenues increased 28, 4% year over year to $99 million.
Due to Brian outlined earlier, our U S appraisal segment serviced higher origination volumes from net market share gains.
And new client additions as well as higher market volumes.
Conversely revenues from home equity and default volumes declined nine 8% year over year.
Due to lower market volumes for these services.
Transaction costs in our U S appraisal appraisal segment increased 33, 1% year over year.
And net revenue increased 13% to $18 8 million, while net revenue margins declined 280 basis points.
The 27%.
Compared to the same period last year.
The decline in net revenue margins was due in part to the mix of mortgage origination volume serviced.
And appraisal onboarding.
The service higher volumes.
With high origination volumes serviced in our U S appraised.
Segment operating expenses increased 12% to $7 6 million up from the $6 8 million in the fourth quarter of fiscal 2020, due to an increase in payroll and related costs.
U S appraisal segment, adjusted EBITDA increased to $11 2 million.
From $9 8 million in the fourth quarter of fiscal 2020.
And adjusted EBITDA margins expanded to 59, 5% in the fourth quarter of fiscal 2021 from the 59, 2% we posted in the same quarter last year.
And this margin expansion was a result.
Phrasal hurting leverage.
Turning to our U S title segment revenues declined 53% year over year due to the transition of our centralized title client base, resulting from the launch of our first tier one and.
And rollout of a new tier two clients.
The rationalization of our diversified.
Title business.
And lower market activity for home equity services.
Revenues attributable to centralized title services declined to $19 3 million.
Diversifies revenues totaled $1 2 million, representing a decline of $2 7 million from the fourth quarter of fiscal 2020.
The BOP by decreasing diversified revenues was due to lower commercial search and capital markets revenue attributed to lower market volumes and our strategic decision to rationalize this service offering.
We expect that the diversified title business will be fully rationalized by the end of the first quarter.
In fiscal 2022.
Finally, the decline in other revenues was due to lower market activity for home equity services.
Transaction costs in our U S title segment increased 52, 3%, while net revenue margins expanded to 67.1.
1%.
Up from the 65, 7% we posted in the fourth quarter of fiscal 2020.
The expansion in net revenue margins was due to the flow of volumes in the fourth quarter, which saw us close more transactions relative to new orders received.
As we managed our operating expenses.
Fences down this quarter due to lower centralized title volumes and the rationalization of our diversified title business operating expenses in the segment decreased $1 7 million to $11 8 million in the fourth quarter of fiscal 2021.
Yeah.
Adjusted EBITDA declined to $2 nine.
$9 million in the fourth quarter of fiscal 2020 one.
Down from the $15 4 million, we posted in the same quarter last year.
And.
And adjusted EBITDA margins contracted to 19, 7%.
From the 53, 4% we posted in the prior year period, owing to the impact.
Of lower volumes.
As we have done in the past, we continue to be prudent in managing operating expenses to scale with volumes.
While ensuring that we make the right decisions to support our long term objectives.
In Canada.
Revenues increased 32.
8% on a year over year basis to $12 9 million.
Well net revenue margins contracted by 330 basis points due to appraise, our onboarding and a higher volume environment and product mix.
Canadian segment operating expenses were <unk> 5 million in the fourth quarter.
Two point up from 0.4 million in the fourth quarter of fiscal 2020.
And adjusted EBITDA margins decreased to 66, 2% from 71, 8% in the same quarter last year due to lower net revenue margins and modestly higher operating expenses to service increased volumes.
<unk>.
In total sorry in total fourth quarter consolidated net revenue was $35 million compared to $47 million reported in the fourth quarter of fiscal 2020 due to lower revenues in our U S title segment.
Consolidated net revenue margins decreased to 27, 9%.
In the fourth quarter of fiscal 2021 down from the 37, 8% we posted in the fourth quarter of fiscal 2020, reflecting lower margins in our U S appraisal and Canadian segments, and lower net revenue generated by our U S title segment.
Consolidated adjusted EBITDA.
EBITDA was $11 million in the fourth quarter of fiscal 2021 down from $22 2 million in the same quarter last year.
[noise] and.
<unk> adjusted EBITDA margins decreased to 31, 4% in the fourth quarter of fiscal 2021.
This compares to the 47, 2%.
Posted.
In the fourth quarter of fiscal 2020 due to the lower volumes serviced in our U S title segment.
Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $60 2 million at September 32021.
Two of our more significant U S appraisal clients remitted payments.
A $17 6 million.
Two business days after our year end, which resulted in a significant use of noncash working capital in the current quarter.
And for the year.
We purchased one 1 million shares in the fourth quarter under our NCI b at a cost of $11 7 million.
In fiscal 2020, one we allocated $97 8 million to share purchases buying seven 3 million shares or approximately 8% of the fully diluted shares outstanding at the end of fiscal 2020.
We continue to purchase shares under the NCI be in support of our view that the company has.
Has greater value than its current trading price.
Post quarter end, we purchased an additional 353000 shares under our M CIB.
With that I'll turn it back to Bryan Bryan.
Thanks, Bill looking back at our financial performance for the year consolidate.
<unk> revenues were up 10, 6% to $504 1 million, we generated net revenue of $164 $3 million and adjusted EBITDA of $59 2 million in fiscal 2021.
Business has demonstrated considerable growth since going public in 2017.
Consolidated revenues have increased 66%.
Net revenues were up 78% and we have grown adjusted EBITDA more than fivefold from $9 4 million.
Our $59 2 million.
And U S appraisal fiscal 2021 was a record year U S. Appraisal origination revenues were up 18, 7% compared with an estimated market increase.
Seven 4%.
We grew market share.
With our top clients over the course of fiscal 2021 and ended the year with purchase market share of four 4% and refinance market share of nine 9%.
Our share of each market was driven in part by shifts in our client share of the purchase and refinance markets.
Today, we service all of the tier one lenders nine of the top 10 bank mortgage lenders and five of the top 10 non bank lenders.
Our U S appraisal business generated more revenues in fiscal 2021, then our consolidated business reported in fiscal.
<unk> 2017.
Since going public in 2017, our U S appraisal revenues have grown at a CAGR of 15%.
Net revenue has increased at a CAGR of 20% and we have increased adjusted EBITDA nearly sevenfold.
Demonstrating our ability to scale.
And drive incremental margins over the long term.
We continue to be squarely focused on our fiscal 2025 strategic objectives that we communicated at our Investor day at the beginning of this fiscal year and we remain confident that we can grow our appraisal business to achieve a doubling of.
Our U S appraisal purchase and refinance market share from fiscal 2020 levels and deliver net revenue margins of 26% to 28% and adjusted EBITDA margins of 65% to 70%.
Fiscal 2021 was a milestone year for our U S title business as we rolled out our.
Our first tier one client and a new tier two clients and achieved double digit market share in the retail channel with each of these clients.
We ended the year with market share of one 8% and centralized title revenues were up six 7% compared with an estimated increase in refinance market volumes.
<unk> of 24, 7% as a result of our strategic decision to focus on the long game.
Our centralized title volumes have more than tripled since fiscal 2017 and centralized title revenues have grown at a CAGR of 28, 2%.
<unk>.
Net revenue has grown at a CAGR of 13% and adjusted EBITDA at a CAGR of 23% over that same period.
Despite having rationalized the diversified title business, which we represented a third of this segment in fiscal 2017.
We continue to execute.
Title land with a long term view of the business to Triple our U S title refinance market share to 6% to 8% by the end of fiscal 2025.
And achieved net revenue margins of 60% to 65% and adjusted EBITDA margins of 50% to 55%.
Since going public in.
2017, we've returned significant value to shareholders by purchasing 16, 5% of the issued and outstanding shares at IPO and we ended the year with over $60 million of cash on our balance sheet.
We're excited about our growth opportunities and confident that we have the right strategy.
<unk> to continue to build value for our shareholders over the long term.
With that operator wed like to open it up for questions now.
Thank you Sir as a reminder to ask a question you will need to press star one on your telephone.
My question Christa.
Pankey, please standby, while we compile the Q&A roster.
Your first question comes from the line of Thanos Ms Coppola from BMO capital markets. Your line is open.
Hi, good morning.
Brian in terms of the share gains for title.
What are.
Kpis that are driving that I mean, you've talked in the past about improving customer experience. Obviously speed is a key factor as well, but just.
It's a one particular kpis at your customers are focusing on that's driving the ramp or is it just a bunch of things.
Thanks, Dan I appreciate the question yeah. So.
The key thing there is the scorecards are quite sophisticated as you can imagine, but we talk really about three big buckets, you mentioned one of them, which is speed another one, especially right now in the market that we're in because of the busyness of it was quality. So quality is very important and then we talk about outlier.
Our management and so managing the files that are more difficult to get at either really expensive properties or some of them are really rural properties. So just difficult to to find comparable so those those are the three main buckets, but within each one of those there's quite a few variations on how they get at.
So I mean, those kpis so as I've mentioned in the past, it's very transparent for us Thanos. So the good news is with both tier one and tier two we have reviews every month.
On those kpis and they measure us against our competitors. So we can see very clearly where we sit amongst amongst our competitors.
And we've seen that we've continued to drive towards the top of those scorecards I was I was fortunate to be down at the Big MBA Conference. A couple weeks ago, where I was able to talk to those title heads and it was really reconfirming from ethane us that they were actually quite surprised how fast we.
<unk> set up the ranks.
And on the scorecards, which is frankly, why we've been given the type of market share allocation that we've got to date, well ahead really of both our expectations and seemingly theirs.
Great and in terms of the tier three business within title you talked about.
Focusing.
We'd move advertising there, but at this point.
The tier three market share kind of stabilized or.
We expect that to kind of trend downwards as you continue to focus on ramping up the tier one tier two and maybe other future tier one tier two customers.
Yes, so to answer that I'd say, there's quite a few moving parts.
And we are now Thanos I mean, you mentioned the strategic focus on the tier one and two that we landed so thats one that continues to be a high priority.
Secondarily of course, new customers, so not only ramping up the 12, new customers that we won this past year, but but looking at the tier one and two.
Pipeline, which again I was fortunate to meet with some of those title heads.
The big tier ones down in San Diego, So I feel the pipeline is really solid and we're going to continue to push the pace with with the <unk> and RFP type type processes.
And of course market conditions.
We continue to evolve and so I think that's going to play in.
Fair bit status over the next little while.
We've seen the new Black Knight reports, so it still seems as though it's about $11 5 million American homeowners that.
That have a 75 basis points refi opportunity. So so there.
There is still a good market out there rates and consumers of course are going to drive a little bit of that in and lastly, I. Just think we've got some tough comparables in Q1 and Q2, you know that Q1 and Q2 of 2021, we're absolutely historic.
<unk> quarters for us and.
And so so we've got some comparable noise there I think for the next couple of quarters. So.
Within the group that we won Thanos this especially this last quarter, we mentioned four new customers. Some of those are win backs from from about a year ago. So I think we're seeing good progress both on the <unk>.
Sales front the operational front of course, we're seeing very good performance and so we got to keep winning market share with those tier threes that we have on the platform and continue to find the right ones for the long term fit of the organization.
Great. Thanks, Brian topline.
Certainly.
Your next question comes from the line of Gavin Fairweather from core Mark Your line is open.
Oh, Hey, good morning.
Good morning.
So I thought we'd start out on.
U S tight oil.
Tier one discussion I think you had been aiming for 5% to 10% market share.
We're in year, one and clearly you are kind of ahead of schedule can you talk about.
Any expectations that maybe you could share for year two.
Well I think Gavin hopefully for us anyway, it's sort of more of the same meaning that we continue.
To operate at the top end of their performed.
For cards and continue to win share. So both of them have been very clear to us that if we continue to deliver the type of <unk>.
Performance that we've been delivering up until now that don't continue to drive that market share up. So my expectation is the team will continue to deliver on that and it will.
<unk> see that market share grow and as you mentioned Gavin I have been really clear on past calls that when we do launch a tier one my my expectation is that we get to 5% and a great year, we might get to 10%. So the fact that we're already add double digits just over six months into that launch.
We'll continue I think for me reinforces our strategy to ensure that we brought on the right capacity to deliver against those expectations. So that we could ramp them up and the benefit I think for US is that we then use that as our case. When we then go to the other tier ones to.
Launched right that we are performing at very high rates.
That's helpful Ed staying on title the operating expenses in Q4.
$12 million I guess, I'm curious what kind of level of volume you think that internal capacity could support and how do you think about.
Demonstrating your internal operating expenses in that segment, given kind of the ramp up of new clients, plus maybe a softer outlook for rate refi.
Yes, so I think Thats I mentioned sort of those moving parts earlier within us. So I think we've got those moving parts in play I.
We built the capacity up to ensure that we were delivering the performance that was required Gavin so as I say I mean, I'm feeling like we're seeing the benefits of ensuring that we had that capacity in play for the tier one and tier two so we're going to have to see how things evolve how our market share.
<unk> continues to expand with those players.
<unk> on new customers coming on board and ramp up of some of those customers that we've launched in the last few quarters.
But we'll be very mindful right. So number one need to have the capacity for the big players to make sure that we're operating at there.
I think patients on performance.
Make sure that we're keeping enough capacity for expected increases in new customers coming onboard.
But at all at the same time, keeping an eye on what's happening in the market and following sort of how volume plays out depending on 10 year rates over the next few quarters.
Got it and then maybe shifting over to appraisal.
You kind of commented on the market share of stock.
You put out.
We did sell kind of a modest dip in 'twenty. One I think you referenced it as kind of maybe moving share within your client base can you just elaborate on that.
Sure. So I mean I think.
Look Gavin at the information and the data.
Big tier ones, both bank and non bank lenders have put out in the market I think youll see that not surprisingly historically non banks have done quite well in a refi heavy market.
So.
If you somewhat unsurprisingly, then you'd look back at 2021 and non banks.
<unk> outperformed the big the big banks to be asset bank. So.
That I think was a bit of a shift in our overall business simply because as you know on our portfolio we've got the wells.
<unk> the chases the city's those big banks, we also though have quick in and we've brought on a couple of the biggest non banks. This year onto the platform. So over time, I think that will definitely start balancing out but in 2021 with our concentration on incredibly.
So big.
Big banks, we saw a little bit of noise in the market share gains. So I mean, if we took that out Gavin which we did we did the analysis of sort of taking out some of that that shift in market share between those players you would've seen double digit market share expansion for us this past year.
Great I'll pass the line. Thank you.
Thanks, Kevin.
Your next question comes from the line of Martin <unk> from <unk> Capital. Your line is open.
Hey, guys. Thanks, very much for taking the question.
It sounds like share from the new tier one.
Entitle helps offset some of the losses from the cap customers that.
You talked a bit last quarter. This is the second quarter of seeing the impact.
Those.
Losses, how should we think of it.
Impact from those customers over the next couple of quarters.
So when you say those customers Im assuming you mean sort of the historic tier three and tier four customers Martin So I'm working off of that yes.
Yes, so that was sort of my comment I think with Santos around around the moving parts Martin.
Cause of this focus that we've got on the tier ones and tier twos, both the ones.
<unk> that we have currently on the platform as well as out working hard on the new customers.
It's definitely a high priority for the business.
The benefit of course of the work that we've been doing on the tier ones and tier twos from an operational excellence standpoint is we're now offering that.
Benefit across the board to our other customers. So I think the benefit there is I think our overall operational.
Performance is starting to spread now across the portfolio with that focus that we've had on the tier ones and tier two so I think we should see that.
Type of it continuing to be an opportunity for us.
Market conditions continue to evolve as I mentioned, so I think we'll have to see how the rates move.
And what the evolution is with the consumer.
And then Martin I talked about the year over year comparable because I think those again, we had those historic.
Q1 Q2.
Months quarters last year, and so we're going to have to see how that plays through in the first couple of quarters. This year.
Thanks, very much when I look back to the share you disclosed or.
The appraisal business in the Investor.
Investor presentation last year.
Analyst day, it looks like you've lost a little bit of share in.
Purchase appraisal can you tell us a little bit about the drivers there.
Hotline forward.
Sure. So I mean, I think that was.
In the in the question from Gavin around.
The marginal increase in overall market share. So you are right the slightly down on purchase and slightly up on refi Martin I think a lot of that has to do with the mix in the I'll call. It over performance of the non bank lenders in the refi space over.
For the past year versus.
Some of the Big Bank players. So I think that goes both on refi and on purchase it so happens in a heavy refi market. That's when the the non banks really lean in to the business and so I think thats that really explains it from for our analysis that really is.
Key driver of the explanation around that and as I say, if you take that and market mix out of the equation you would have seen I think a double digit market share growth for us across both refi and purchase.
Yeah.
Awesome. Thank you very much.
Can.
Can you can you share anything new about.
The possibility of developing.
Purchase title business.
Yes sure so.
Of course continue to evolve that we've been working with a few lenders that have been very focused on centralizing.
The purchase experience as many of US many of the overall process of that into a much more centralized play so we've been advancing those conversations.
Martin with a couple of the key lenders, we're feeling very good about the evolution of the design of how that would work and so.
Rising all this year is to is to get out and actually pilot.
Something in the purchased title space. So I think we're on track to do that feeling very optimistic about the design that we're putting around that.
Oh, great well that is exciting last question from me.
Has the impact of waivers had.
Our blade that waiver rate.
Decline.
Yes, it continues to decline Martin so.
<unk> in Q2, we shared with you that I think we are in the low 30% range in Q2, we've now trundle down through the <unk> in.
In Q3 in.
I think we're pretty close to that 20%, maybe even a little bit under at 100 in Q4.
So not surprisingly as sort of I think we laid out at the start of all that Gse's did what I think they should do.
In a time of challenge around the pandemic and now definitely.
And we are the Gse's are becoming a smaller proportion of the overall market and waiver rates are definitely coming down and I think Martin we've shared with you in the past that cash out refi is growing not surprisingly and rate refi has been has been shrinking so that mix is.
Definitely come into play and so as I say.
Then somewhere under 20% right now.
Great. Thanks, that's all for me.
Your next question comes from the line of Robert Young from Canaccord Genuity. Your line is open.
Hi.
Hoping to revisit something you said a few quarters back around.
They were down on the potential for.
New wins share gains to sort of move forward in the.
Market slowed down and so now I guess, we're looking at potentially a slower market.
Given where rates are.
And so are you seeing.
Some of these RFP opportunities.
Tier.
Round pipeline title or.
Appraisal I think you said one eight this quarter is this maybe in a slower environment or are you seeing more opportunities starting to come in the front door.
Yeah. Thanks, Rob I appreciate that question and.
I think I'd actually sort of line that up the reason that I mentioned, the MBA conference a couple.
Couple of weeks ago is number one is the Canadian being down in San Diego I was a little bit blown away by how open the business was down there, but that I think is symbolic of sort of what's going on right now which is I think businesses are now starting to open up.
Employees are now coming.
Back to work and so I actually at that conference because I was able to meet with quite a few title heads. It really drove home for me that for at least the.
Its definitely business as usual now and so those rsi and RSP conversations have started back up with I would say a.
Our pace than they were call it a quarter ago simply because I think with the Delta wave I think that sort of slowed things down again a bit so.
My view would be especially with that with some of those bigger players that we've been in conversations with that those conversations are backup on the table.
Had very.
Specific conversations with two of our big targets in that tier one space and in both of them I think I would have taken away from the conversations both that they're aware that we are performing quite well, Rob with with their competitors with our other customers.
Two that the RFID in RFP.
Little messes are back in place so back in play, meaning they've got a little bit more pace I think as I say, they slowed down a little bit last quarter, but I feel that they are back moving.
Okay.
And then D.
Appraisal wins, it seems that seems like a large number and so is there any way to put that into context. These are smaller ones.
Hey.
How would I put that into context with the previous quarter.
So there are mixed Rob there are mixed so listen these are tier threes and tier fours, so theres not a tier one or tier two in there.
There are tier two tier threes tier fours and as you know we will continue to bring on customers the ones that of course fit.
Pros who are.
Interested in operational performance type mix and so these are a lot of them are very healthy customers. There is some really great names in there we brought on Zillow this past quarter.
So zillow, we've got a couple of other good names, but maybe not necessarily tier one tier two type volumes.
Okay.
You mentioned the.
The higher level of cash out refi I was hoping you could expand on that just to try and put that into context with.
The rate refi.
Headwind.
How much of an offset is that how large is that how could you put any color around that.
Matt.
That would be helpful.
Yeah. So I think if I put color around it I'd start with the equity that are in People's homes, now, Rob because it's quite a bit different than even 10 years ago. So.
Now Theres nine trillion dollars in in Americans.
Homes, and so, whereas we're at sort of a single percentage of those homeowners that have negative ownership in the home I think we're down in the sort of 2% to 3% So historic lows, whereas even a decade ago, we were in the twenties.
In negative equity so.
You start there I think that's the macro that lots of equity in American homes, now and we'll have to see how that plays through as far as cash outs go.
But what we've seen in the past quarter is that the cash out rate is definitely up so it's up in the teens.
And not surprisingly.
Rising Lee with interest rates, where they are the refinance.
Refinance has definitely come down so.
We'll have to see what that plays through Rob as far as rates go over the next couple of quarters, but we're definitely seeing movements one up on the cash App and then not surprisingly rate refinance coming down a bit.
It would catch up.
Refi lean more towards the bank refi that youre more heavily involved in or would that also be a nonbank driver out here rocket mortgage ads on the radio.
Around cash out refi and so.
I'm just trying to understand how that would impact your mix of business.
Relative to rate refi.
Yes, historically, Rob it's definitely been a.
Bank desk definitely bank centric type play they've definitely.
Thanks for led the charge on cashew, but as you say the non banks will do what they need to do over the next couple of quarters or the next year to.
They are continuing to drive business. So we might see some creative work from from them, but but historically, it's definitely been more bank driven.
Thanks for taking all the questions.
Okay I appreciate it thanks, Rob.
Again to ask a question you will need to press star one.
To make sure again Thats star one on your telephone.
Your next question comes from the line of Richard <unk> from National Bank. Your line is open yes. Thank you. So as you optimize capacity to bring on an increasing number of tier one and twos entitle do you think that.
<unk> as you look forward to either next year or the year after that you'll be able to sort of bring back some of that.
Capacities of the tier threes and fours or should we not kind of think that to be an opportunity going forward here.
No. Thanks for the question, we're going to continue to bring on tier.
And for US as it makes sense, we just we're very focused on the tier one and tier two lenders.
And that's really we built the capacity to start bringing them on so I mean, if you take a look.
In this past quarter, we're bringing on some very solid tier threes and tier fours. So we will continue.
<unk> to bring those types of customers on I've got the sales team know incredibly focused on tier ones and tier two so over time, we're going to bring on those tier ones and tier twos, and we will continually pepper.
Quarterly with tier threes and tier fours.
Okay, and thanks for sort of kind of.
Tier III and the scale of the copy of sort of come to like obviously the margins for the year have been quite strong. So as you look to 2022, given that the volumes will sort of a pullback in the appraisal side, what's your ability to sort of preserve those margins do you have any kind of room.
Sort of.
Our mining.
Opex down a little bit here and there to kind of preserve those margins are.
Probably a bit more negative operating leverage that way.
Yeah, so listen on the appraisal business as you know I mean that business has scaled up we do have all the tier ones. So that that business is.
I would suggest humming.
And so when we take a look at the year, even if if there the.
The rates continue to move up and even if there is an impact from a volume standpoint.
Our intention is to continue to drive very strong margins, both net revenue and EBITDA. So you've seen I think that the.
This quarter, we continue to have strong strong margins there.
I think the lessening of the waivers in the GSE proportionality in the market also plays to our favor as far as addressable market going forward. So I think when we look at our at both of those.
Those margin lines the scale of the business is such that we continue that we can continue to flex as need be and really preserve those those those margins.
Okay.
And then just one other one for me if you can maybe update us on the status of <unk>.
The acquisition prospecting.
<unk> on the data side I didn't hear that sort of in your initial comments and it's something that you had talked about through the course of the past few quarters and your recent not so recent investor day, just wondering kind of give us a sense of where that stands.
Sure well I mean that of course continues to be part of our longer term view.
Where we're going to go and the opportunity in the data business. So we've continued this past quarter as we have much of the year looking at verticals talking to companies within those verticals and really honing our overall strategy around data. So we're going to continue to do that.
You can take a look at other.
Inorganic growth opportunities. So we've continued to do that whether they are there tuck ins or other opportunities in that space that of course will continue to be part of what we what we look at it from a long term perspective. The reality is we are very focused right now on the title.
<unk> business as you've seen from the results we're going to continue to focus both on the performance side of the business, but also on Onboarding, new customers and so that's really been at the forefront, which is why you're sort of hurt us spend a good chunk of time on it and continue to drive as you mentioned that the margins in the.
Business on appraisal.
And as I say, we will continue to have in our scope.
Data and other inorganic opportunities.
And we'll just have to see how that unfolds over the over the next few quarters and years.
Okay. Thank you for that update.
Your next question comes from the line of Paul steep from Scotia Capital. Your line is open.
Great. Thanks, just caught the first part of my question with Richard So just two quick model Cleanups, just can you clarify for us on central with title, but maybe the client shift occurred therefore.
Through that and then where we fully ramped with the tier one and tier two for the full quarter or was it still building and then just one clarification on Bill's comment on the non centralized piece.
So.
I'll try and tackle that as best I can so.
The first piece that I'll tackle as tier ones. So we.
We were awarded that share during the quarter. So I think youre asking me is it fully ramped it wasn't fully ramped in the quarter, we as I say, we were sort of allocated that during the quarter.
That's the first piece the second piece I think was around.
Hum.
I guess sort of to our tier one tier twos versus our tier threes and fours, so tier ones and twos. The goal of course will be to continue to perform the way. We have this past year and continue to build share there we are.
Now getting the benefits of some of.
<unk> operating performance that we've got with that with those tier one and tier two now we can now start pushing that throughout the business. So some of our tier threes and fours are now experiencing some of the benefits of that operational work that we've done by adding the capacity that we added.
So my assumption is that Paul.
We will continue to see.
Positive market share trending with those customers.
Other pieces or are those things sort of the moving parts right, which is the new customers. So when they come on and.
And which tearing comes on and sort of what cadence over the next.
Orders slash.
And then and then of course, the market piece and continuing to figure out which lenders are able to take advantage of the $11 5 million homeowners that are that are ready for a refi so which of those are actually going to start really pushing in putting a lot of marketing and driving driving some results from that so.
Here I think there's sort of a bit of a mix in there depending on which of the moving parts pulls which lever.
That helps and then Paul I think your last question was just.
Alright, Yes, Paul I think your last question was around the diversified piece.
In my prepared remarks diversified revenue has basically been.
Fully rationalized, we really have.
Our view is a trickle of revenue coming through in our Q1 'twenty two time frame, but really expect no further revenue from from that service offering in Q2 and beyond.
Got it.
Thanks, guys.
Okay. Thanks, Paul.
There are no further questions at this time presenters. Please continue.
Presenters. Please continue I think that means we'll probably wrap up the call then if theres no other questions.
Thanks, everyone. Appreciate your time.
Thank you. This concludes today's conference.
Carl Thank you for participating you may now disconnect.
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