Q1 2025 Real Matters Inc Earnings Call
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[music].
Good morning, ladies and gentlemen, and welcome Jim.
The real matters first quarter 2025 earnings call at.
At this time all of them.
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Following the presentation.
We'll conduct a question and answer session.
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Lindsey: I would now like to turn the conference over to Lindsey <unk>.
Lindsey: Please go ahead.
Speaker Change: Thank you operator, and good morning, everyone welcome to ROE matters financial results Conference call for the first quarter ended December 31, 2024 with me today are real matters, Chief Executive Officer, Brian <unk>, and Chief Financial Officer Rodrigo Pinto. This morning before market opened we issued a news release announcing results for the three months ended December 31 2020.
Speaker Change: For the release accompanying slide presentation as well as the financial statements and MD&A are posted in the investors section of our website at real matters Dot com.
Speaker Change: During the call we may 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 that could cause our results to differ materially from our expectations.
Speaker Change: Please see the slide entitled cautionary note regarding forward looking information and the accompanying slide presentation for more detail. You can also find additional information about these risks in the risks factors.
Speaker Change: Factors section of the company's annual information form for the year ended December at September 30 of 'twenty 'twenty, four which is available on SEDAR plus any of 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 net income or loss.
Brian: Adjusted net income loss per diluted share adjusted EBITDA and adjusted EBITDA margin non-GAAP measures are described in our MD&A for the three months ended December 31, 2024, where you will also find reconciliations to the nearest address accounting standards measures with that I'll turn the call over to Brian.
Speaker Change: Yeah.
Brian: Thank you Lynn and good morning, everyone and thank you for joining us on the call today.
Brian: Our first quarter results delivered solid top line growth in all three segments and net revenue margin gains in two of our segments. We grew consolidated revenue, 16% year over year in the first quarter and consolidated net revenue increased 12%.
Brian: First quarter U S. Appraisal revenues were up 9%, we had market share increases with two top customers. We launched one new client in two channels and we continue to perform at the top of lender scorecards.
Brian: We also posted net revenue margins of 26, 5%, which kept us in the range of our target operating model.
Brian: But if you are a U S title, we saw a substantial increase in refinance origination volumes year over year due in part to a brief 50 basis point decrease in rates.
Brian: We witnessed in the first few weeks of the quarter when rates moved lower is indicative of the impact of relative changes in mortgage interest rates.
Brian: It's a good reminder, that even small changes in rates have the power to propel transaction volumes.
Brian: Our refinance origination volumes were up 46% year over year net revenue was up 41% and we launched three new clients in U S title in the first quarter.
Brian: The combination of the short term rally in rates as well as the growing pool of refinance candidates has resulted in broad pipeline movement.
Brian: With recent successes, we are confident that we will have new active franchise title clients in the coming months. Our U S title business is at an inflection point and with this momentum behind US. We are confident that this is the time to amplify our efforts to capture more market share.
Brian: Canada posted stellar results in the first quarter as the market benefited from an improving rate environment, we launched an appraisal with a large reverse mortgage lender in the first quarter and we received top marks for our appraisal performance on a pilot with a big five Canadian Bank.
Brian: Revenues for our Canadian segment were up 38% on a year over year basis, and net revenue margins remained near all time highs at 18, 9%.
Brian: We also converted 90% of year over year incremental net revenue to adjusted EBITDA in the first quarter.
Rodrigo: With that I'll hand, it over to Rodrigo Rodrigo.
Rodrigo: Thank you, Brian and good morning, everyone.
Brian: M B a mortgage application data for fiscal Q1 was relatively flattish purchases year over year, which was likely impacted by the U S election, and the gradual increase in rates during the quarter 30 year mortgage rates moved up by more than 80 basis points during the first quarter.
Brian: On the refinance side application data was more positive as we saw a very short lived rates decline at the end of September or any of the first week of October most of which was captured in our fourth quarter results for U S appraisal.
Brian: Given the title transactions typically closed several several weeks after the application of an appraisal water the benefit of that shorts leave the rates decline carried into our first quarter U S title results.
Brian: Turning to our segmented financial performance I will start with our U S. Appraisal segment, where we recorded revenues of $29 4 million up 90% from the same period last year Rev.
Brian: Revenues from purchase mortgage originations were relatively flat in refinance originations were up 17% in line away from that market share increases with existing and new clients and a slightly better market conditions.
Brian: Home equity revenues were up 16% year over year because of solid mass market share growth with former clients and home equity revenues accounted for 24% of the segment's revenues in Q1.
Brian: U S appraisal mats revenue was $7 8 million for the first quarter up from $7 5 million in Q1, 24, and that's revenue margins decreased by 140 basis points, mostly due to the distribution of transaction volumes as it relates to geographies clients and product mix.
Brian: We posted net revenue margins of 26, 5% in Q1, 25, which remains with our target operating model range.
Brian: First quarter U S appraisal operating expenses increased by 600000 year over year to $5 4 million due to a nonrecurring claim expenditures higher than usual legal fees as well as salary increases and higher benefits costs.
Brian: We posted U S appraisal adjusted EBITDA of $2 4 million compared with $2 7 million from the first quarter of fiscal 2024, and we posted adjusted EBITDA margins of 39% compared with the 35, 8% we posted in the first quarter last year as the increasing.
Brian: Revenue was offset by higher operating expenses.
Brian: Turning to our U S. Federal segment first quarter revenues increased 25% year over year to two and a half a million and refinance origination revenues were up 53% principally due to the mass market. She Nick that's market share gains with existing and new clients and higher <unk>.
Finance volumes.
Brian: U S titled Net revenue was $1 4 million up 41% from the first quarter last year and net revenue margins increased to 53, 4% from 47, 3% due to higher refinance origination volumes and a higher proportion of income order volumes that flow.
Brian: <unk>.
Brian: U S title operating expenses were up 22% year over year, primarily due to additional sales personnel to accelerate market share increases and to a lesser extent salary increases and higher benefits costs.
Brian: We recorded an adjusted EBITDA loss of $1 8 million for the U S title segment compared with the $1 6 million loss, we recorded in the first quarter of fiscal 2024.
Brian: In Canada first quarter revenues increased 38% year over year to $9 1 million due to higher appraisal markets volumes and that's market share gains with new and existing clients clients for appraisal and insurance inspection services.
Brian: And that's revenue was up 39% to $1 $7 million with a 100 basis points, increasing net revenue margins in the first quarter of fiscal 'twenty to 'twenty five compared to the first quarter of fiscal 'twenty to 'twenty four as we continue to leverage our platform.
Brian: Canadian adjusted EBITDA was $1 1 million up from the 700000 in the first quarter of fiscal 2024.
Brian: In total first quarter consolidated consolidated revenue and that's revenue were up 16% and 12% year over year to 41 million and 10 point to $90 million, respectively from increased revenues in all three segments.
Brian: We recorded a consolidated adjusted EBITDA loss of $1 7 million compared with a loss of $1 1 million in the first quarter of fiscal 'twenty 'twenty four two due to a modest increase in our operating expenses.
Brian: First quarter net income increased to $2 3 million from a net loss of $3 6 million in the first quarter of fiscal 2024, mainly due to unrealized FX gains.
Brian: Our business is well positioned to face of the current macro environment as further devaluation of the Canadian dollar will benefit us as most of our revenues are generated in U S dollars and most of our corporate costs are incurred in Canadian dollars.
Brian: Finally, we maintained a very strong balance sheet with no debt and cash of $49 million at December 31, 'twenty to 'twenty four.
Bryan: With that I'll turn it back over to Bryan Bryan.
Bryan: Thanks Rodrigo.
Rodrigo: Overall, the business performed well in the first quarter, we saw year over year volume growth in U S. Appraisal U S title in Canada, we delivered leading performance on scorecards, we launched five new clients and one new channel and we grew market share.
Rodrigo: And Theres more volume flows through our platform, we continue to generate strong operating leverage and expand our margins and profitability in line with our target operating model.
Rodrigo: We remain optimistic about the potential for growth as mentioned earlier, we are at a key inflection point with new title client launches on the horizon.
Rodrigo: <unk> demand also continues to build as the pool of potential future refinance candidates increases.
Rodrigo: Full of refinance candidates expanded by 10% in the first quarter and the inventory of mortgages being written at higher rates continues to climb daily.
Rodrigo: There are now $8 $8 million outstanding mortgages with an interest rate above 6%.
Rodrigo: We have a strong balance sheet and we will continue to prudently manage our cost base to align with market conditions, ensuring we are ready to scale back up when these headwinds become tailwind for our growth.
Rodrigo: With that operator, we'd like to open it up for questions now.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one you touched on Pony.
Speaker Change: Jens will be taken India order received should you wish to cancel your request. Please press the star followed by the tail.
Speaker Change: If you are using a speaker phone please lift the handset pressing.
Speaker Change: Once again that is star one should you wish to ask a question.
Speaker Change: And your first question is from Stephen Mikkelsen BMO capital markets. Your line is now open.
Stephen Mikkelsen: Hey, good morning.
Stephen Mikkelsen: So in the press release, you called out five new clients I'm. Just wondering if you could give us a bit of color on what segments. They were in.
Speaker Change: Sure. Thanks, Thanks, Steven so the breakout in this segments. The first segment is title and so in that segment I think a really strong quarter.
Speaker Change: And it helps sort of prove out the investments that we've made around sales entitled So we had three new customers join in title.
Speaker Change: One of those was a tier one there was a tier two or a top 25.
Speaker Change: A third so that's on the title front as you know big build for us from a franchise standpoint, and bringing those types of customers onto our titled platform. It builds on the momentum that we started seeing last quarter, where we brought on another top 25 and with some of the Rfps Stephen in the pipe.
Speaker Change: We've got another couple of top 25 that we're looking at bringing on the platform in the next couple of quarters. So.
Speaker Change: For us anyway is a really strong title new client quarter.
Speaker Change: Also brought on one of the biggest reverse mortgage lenders in Canada, we brought them on the platform this quarter as well as bringing on a new customer in two different channels in title.
Speaker Change: Thanks, guys and appraisals.
Speaker Change: Alright, good to hear.
Speaker Change: So with the the mortgage rate flip lash that we saw in Q4 is that have you seen any impacts on.
Speaker Change: I guess, the speed with which customers are going through their rfps. I mean are some pulling back a bit now or have you seen.
Speaker Change: Some color on the changes that you've seen.
Speaker Change: Yes, so I'd say not I mean, I think with what happened in September October last year with rates coming down I think that definitely puts some momentum behind rfps. So we talked a little bit about that last quarter and so I think from our standpoint anyways.
Speaker Change: What we're seeing is we're actually able to close some of those rfps. So that's I think the positive for us that they are definitely moving number one and that we're able to close so as I said over the last couple of quarters. We've now closed three top 20 players one of them being a tier one and we see more or less.
Speaker Change: That opportunity upcoming in the next few quarters. So I think Steven good news the sale for US anyway is the sales pipeline has definitely opened up and and we're definitely seeing some good activity as well as some good results.
Speaker Change: Alright, and our final question there were some restructuring expenses in the quarter can you give us some color on how that will impact either opex or net.
Speaker Change: Net revenue margin.
Speaker Change: Run rate going forward sure I'll pass that one over to Rodrigo <unk>.
Speaker Change: Steven No impact right as the nature of restructuring those are things that we do from time to time.
Speaker Change: We've seen our business, but it should have no future impact in opec's, our net revenue margins or any other area of the P&L.
Speaker Change: Okay, So no savings to come from it.
Speaker Change: Yeah.
Speaker Change: So the savings no no no real savings coming from from that restructuring adjustment that we made during the quarter.
Speaker Change: Okay, Alright that all past boy and thanks for taking my questions.
Speaker Change: Thanks, Steve.
Speaker Change: Thank you.
Speaker Change: Next question is from Gavin Fairweather Cormack Securities. Your line is now open.
Gavin Fairweather: Oh, Hey, good morning, and congrats on that tier one title win great to see maybe just discuss kind of the state of the nascent in terms of how they are conducting their title and closing activities. Today and then maybe you can also discuss kind of what kind of ramp in in share Youre planning for with that a new franchise clients.
Speaker Change: Thanks, Good morning, Gavin Thanks for the question so.
This tier one that we are bringing on is is right now the biggest bank lender in the U S. So.
Speaker Change: We've got quite a bit of enthusiasm to bring that on with the current tier one that we've got on the platform and so we have been given very clear direction on what our market share should look like as we start building and ramping the business up the goal for both ourselves and the customer is to get us to.
Speaker Change: Our market share by the end of the year so.
Speaker Change: In the past, we've talked around ramping up to.
Speaker Change: Tier ones on our platform that usually in the first year, we look at trying to get the market share up to 5% to 10%.
Speaker Change: In this particular case the market share that we've been awarded is greater than 10% and I would definitely suggest that both our team and our customer team are working very hard to get us to that market share that we won with them in the next three to four months. So our goal would be to have that ramped.
Gavin Fairweather: And the impact then on the business of that Gavin is that that would really double our current title revenue volume and revenue.
Gavin Fairweather: So that's the goal that the team is working on for the next couple of quarters. We also then have.
Gavin Fairweather: As I mentioned, a couple of top 25 coming on the platform. So that will sort of roll out and again I think it's sort of by the end of the year. We should start seeing that benefit we will definitely have I think ourselves set up incredibly well for 2026 and as I mentioned, we've got some in the pipeline that we think will close before the end of the year. So.
Gavin Fairweather: 2025, we should see some of that impact by the end of the year the run rate should be double what we see today and setting us up incredibly well I think for 2026.
Gavin Fairweather: That's great to hear maybe one just just one follow up on that.
Speaker Change: When you think about them being one of the bigger lenders in the U S. I mean, how active are they on the refinance side versus the purchase side I mean, how how does their volume SKU, maybe not in this market, but in a in a normal market what kind of appetite for that for refi.
Gavin Fairweather: I'd say, they're pretty balanced.
Gavin Fairweather: I think theyre very similar to most of the other tier one banks anyways Gavin So I don't think Theres really a lean one way or another there there <unk> been consistently good at both purchase and refi. So I assume that's what we'll see as we start rolling it out.
Speaker Change: Okay, Great and then lastly for me maybe for Rodrigo and in terms of the U S. Appraisal on that revenue margins. I mean, you called out a few different factors in terms of Geo mix client mix and product mix, maybe we can just dig into that a little bit and let us know whether you see any kind of rebound going forward towards the mid or higher end of your range is on U S appraising that.
Rodrigo: Margins sure Gavin.
Rodrigo: As you already said right. So net net revenue margins will fluctuate based on the distribution of transactions.
Rodrigo: Our view is that we will continue to see strong net revenue margins in fiscal 2025, and so we stay within our target operating model range right, Yes, youre going to see ups and downs, but we still believe like between the 2006% to 88% is where we will land in the future.
Speaker Change: Okay. That's it for me thank you.
Rodrigo: Thanks, Kevin.
Speaker Change: Can you.
Speaker Change: Your next question is from Martin <unk> from ATB capital market. Your line is now open.
Eric Lipsitz: Hi, This is Eric Lipsitz for Martin Toner.
Speaker Change: On the other tier one lender front I'm just wondering whether you.
Speaker Change: Do you have any additional tier ones in the pipeline and whether you expect any additional tier one wins in the coming quarters. Thanks.
Eric Lipsitz: Thanks, Eric I know you are referring to title and so.
Eric Lipsitz: Everything going smoothly that will have two tier ones on the platform as I say hopefully receiving.
Eric Lipsitz: Orders at the end of this quarter started next quarter and Theres. Another tier one RFP that is in market, which we are we are diligently working on and our view is that that should come to fruition in the following couple of quarters, it's a little bit smaller than the two that we have on the platform today, but it is a tier one.
Eric Lipsitz: So we're working diligently towards that end and as I mentioned, there's a couple of other top 25, Rfps, what we would historically called tier twos that are we're also working on so that's that's the grouping. The end result of course would be that we'd be having quite a few more top 20 fives as we get to the end of.
Eric Lipsitz: The year and enter 2026.
Eric Lipsitz: Great. Thank you.
Eric Lipsitz: Tom.
Eric Lipsitz: Thank you.
Speaker Change: Next question is from Robert Young from Canaccord. Your line is now open.
Robert Young: Hi, good morning.
Speaker Change: You gave us some indication in the past on capacity I think you had quite a bit of idle capacity entitle and so if you're ramping up something you know double volume maybe you can just revisit where you think capacity is today and where it goes what do you have to start.
Robert Young: Reinvesting there.
Robert Young: And I have a couple more questions.
Robert Young: Sure Rob I'll take that one so yeah.
Robert Young: Again, as we said before we believe we have three to four times capacity in our title segment and 30% in appraisal specific for title.
Robert Young: <unk> doubling the volumes.
Robert Young: <unk> reached the capacity we have in the system right now so we don't.
Robert Young: Expect to make investments to increase capacity at this point.
Robert Young: Again, what it does is basically creates this shows the operating leverage that we have in the business, where we don't need to.
Increased costs at this point based on what we know the volumes, we expect from a new client.
Robert Young: You saw that Rob a little bit in first quarter. I mean, we don't talk a lot about Canada, but just because Canada did have good growth in the quarter you saw that we were up 38%.
Robert Young: In order volume and again incremental net revenue, 90% of that is falling to the adjusted EBITDA line.
Robert Young: Our assumption is youre going to see dynamics like that in the business when volume starts moving up.
Robert Young: Okay.
Speaker Change: Just to push a little bit deeper on that I know that when you win these tier ones, they're nationwide and so you have to have capacity idle.
Speaker Change: To serve a nationwide level of demand and so is that the case right out the gate or is the market share allocation regional or is there anything.
Speaker Change: It would suggest that you can manage your capacity.
Speaker Change: And more reasonable way or could you find yourself in a situation where you've added tier one you got a second one RFP is there a situation where you might have to read revisit all of this.
Speaker Change: No I mean, Rob that the deal is when we've got a national player tier one like we have right now the capacity that you have and so that you can cover all of the territory nationwide to make sure you can cover all of their needs. So the idle capacity sort of sits in that it's not regional it's not there's no real new one.
Speaker Change: Once there and the new volume that we're going to be taking on very clearly is national. So we're only one of a few national players.
Speaker Change: That they have selected and so we know that that's what we're going to be delivering as a very national as opposed to some of the regional players. So our view is it's going to be very similar to the format and layout that we've got now with the usual little nuances by quarter.
Speaker Change: But but.
Speaker Change: We've got the capacity, we don't expect to increase it and we should see a decent amount of operating leverage coming into the business. Once we start seeing these orders.
Speaker Change: Okay, Great and then the market share allocation with the with this new tier one give us a sense of.
Speaker Change: The the way this is allocated across multiple players.
Speaker Change: Uncertain on the way that an RFP runs as it suddenly that there's five new players sharing incremental allocation of share and then you are fighting on a balanced scorecard to take an unfair share or maybe just give a sense of like how many other players. There are that are allocated in the sale process.
Speaker Change: Yes, just to get a sense of that sure. This is I don't want to say, it's a clean slate, Rob, but it's actually somewhat close to that so.
Speaker Change: Previously they had a few vendors a few of our competitors that we're providing the service for them.
Speaker Change: Two of them are no longer going to be on the platform. So they have been removed from the platform and the one that had the largest share with them has become a much smaller player a much more a much smaller player. So they have now introduced.
Speaker Change: Handful of new vendors onto the platform. We've all been given the percentage that we are going to be getting.
Speaker Change: So they are going to ramp theyre going to make that sort of evolutionary change they would like to make it quite quickly and it's not surprising since I. Just let you know a couple of the vendors have now been released off the platform and the one with the largest share that's the share thats going to start flowing to the other new vendors. So they wanted to do that frankly as quickly as.
Speaker Change: Is there a big bank. So as you know they take a little bit of time, but that's why I would say that we are confident.
Speaker Change: They have made it clear to us they would like us to have our share ramped up to the.
Speaker Change: The percentage that they've given us by the end of this year. So as I said, Rob earlier, I mean, we usually target to get that 5% to 10% in the first year, we've been allocated more than that 10% share and thats. What they are driving to is to get us to full allocation by the end of the year, that's what drives the doubling of our overall title business.
Speaker Change: Great. Okay. That's really helpful. And then maybe just last question I know there is a hard one to answer probably but all of that the U S administration changes hearing a lot about.
Speaker Change: Just the regulations and regulatory relief on the banks.
Speaker Change: Maybe you can give us a summary of what you've seen so far in.
Speaker Change: As much as you can help us understand how things might or might not change that would be helpful. In our platform.
Rob: Sure I mean, I think we're slightly cautious about making too much of a comment around that right now Rob.
Rob: I would say that less regulation at least for the banks will probably make them slightly more aggressive.
Rob: And so knowing that that's who we do our big business with I think there could be a tailwind somewhere and all of that but as you know we're going to have to see how rates flow you saw the movement yesterday, we won't comment on what sort of went on there politically that all has to find its way through the system. So we're going to keep running the business.
Rob: <unk> setting it up for the long term franchise of this organization you've seen in the appraisal numbers you've seen hopefully a really solid delivery continued solid delivery good management of the business and on title, we really think as I mentioned in my commentary that we are at an inflection point as far.
Rob: Is getting momentum getting new customers.
Rob: Rfps actually closed and starting to see some new orders. So that's really the focus for us as you know Rob and we will be very agile to what ends up going on from a a more either political or regulatory standpoint.
Speaker Change: Okay, Thanks, and congrats on the tier one title win.
Rob: Thanks, so much appreciate it.
Speaker Change: Okay.
Speaker Change: Thank you once again, ladies and gentlemen did you guys to ask a question press star one.
Speaker Change: Your next question is from Dan Chen from TD Securities. Your line is now open.
Speaker Change: Good morning. This is Jonathan on for Dan Chen just wanted to get a better sense of the title bump you guys got from the rate cuts in September and October can you give us some sense of how much of the volumes you did during the quarter related to that month.
Speaker Change: Were related to the way Jonathan This works in the business for Us is.
Speaker Change: When there is an application that comes in and when that application comes in on the title side.
Speaker Change: There's work to be done, but we don't see our revenue until it closes which is very similar to the lenders by the way. So that is usually call. It six plus weeks. After the actual application is when we start seeing the revenue. So we saw a good chunk of that revenue as we commented on in the quarter.
Speaker Change: And so we would have seen that in call. It October November. Unfortunately, the rates then went back up after that first week of October and so the volume would have quieted down in the second half of the quarter. So that's sort of the flow of of how we see stuff and so that's where he is I'd say you saw the the 46% growth a good chunk of that was earlier in the quarter.
As opposed to later in the quarter, that's right that's right.
Speaker Change: Okay, Great and then just one more from me.
Speaker Change: I did want to dig deeper into the EBITDA margin side on title it was pretty consistent quarter over quarter I'm. Just wondering how we should be thinking about it from the next quarter and maybe for the rest of the year. Thank you Jeff.
Speaker Change: Yes, no I'll take that one so Jonathan again, as we discussed before we need to increasing volumes to improve those margins rights to dilute fixed costs and other things that <unk> seen opec's again as volume starts to go up you should expect that margin to improve.
Speaker Change: And again it depends on the market again, we are onboarding a tier one we will get volumes there. So as soon as youll see those volumes going up.
Speaker Change: Adjusted EBITDA margins will improve and the goal is to get to our target operating model.
Speaker Change: We pointed out.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Our next question is from Mitch your tier.
Speaker Change: National Bank financial your line is now open.
Mitch Youtier: Yes, just wondering if you maybe provide some comments with respect to the competitive landscape I guess, probably more so on our appraisal, but curious on titles.
Mitch Youtier: Just thinking about from the perspective that these volumes are gradually going on turn and so.
Mitch Youtier: It seems to me that you are served better relatively a position than before I think there are some players that are off the market but.
Mitch Youtier: <unk> talked about that much.
Mitch Youtier: <unk> suddenly, but just wanted to get your perspective in terms of the competitive landscape here.
Mitch Youtier: Sure Great question and thank you for that so so on the appraisal side.
Mitch Youtier: Some of the changes in the competitive landscape sort of has to have taken place over the last couple of years. So we would have talked last year about corelogic exiting the business and this past year, we talked about a company called valuation connect which is under mortgage connect they exited the business or at least were sold off the business.
Mitch Youtier: We sold off.
Mitch Youtier: So there hasn't really been that much.
Mitch Youtier: Further changes I would say.
Mitch Youtier: From from from that standpoint on appraisal, we continue to be the biggest player in the U S.
Mitch Youtier: And so and I think we're positioned very well from a market share standpoint to continue to grow our market share. So I think that's the.
Speaker Change: The input I would give around that there has been not so much a change in title. We did mention that one of the competitors in the title space.
Speaker Change: Did this past year, a couple of quarters back, which was a company called Doma.
Speaker Change: So they were competing in a couple of the tier ones. They have now frankly, they again their business was sold off but they have somewhat exited the servicing side of the title business.
Speaker Change: And also I mean, I think the big competitive piece for us this past quarter.
Speaker Change: It was more once we were able to see who the finalists that had been selected for the tier one are and to see a couple of the players that frankly, we assumed would continue to service. This tier one big competitors of ours that were taken off of their vendor list and.
Speaker Change: And replace with ourselves and some regional players.
Speaker Change: That was for US a frame it was a big kudos, we're going to take some kudos for that debt that I think shows that we're positioned very well to continue winning title business.
Speaker Change: Okay and then.
Speaker Change: Just from like a win standpoint is the value proposition on the title side.
Speaker Change: Similar to appraisals.
Speaker Change: Chose around what you offer relative to those competitors.
Yes, so again, it's back to the network impact and capabilities of our platform that we've got and so a title that's all about closing the whole closing experience for the consumer and so again, what I what I turn to is the current tier one that we've got in our scorecard that we've got with them we.
Speaker Change: Continue to be number one on their scorecard.
Speaker Change: And thats, because we are delivering a better sort of end consumer experience, but especially around that closing experience. Its something that we can distance ourselves from our competition on again, just because of the platform and the way we built out the business. So that's very similar to the appraisal network effect that we have on pushing all of our <unk>.
Speaker Change: Work out to the network and getting them to perform better than any of our competitors.
Okay, and just a last question Sir on competition to not for you or something else, but your customers in your MD&A I think you make a reference here to some of your customers losing share in the market. Just wondering if you can maybe elaborate on that for us as well. Thanks.
Speaker Change: Sure Yeah, So we've talked a little bit about this in the past and what we sort of referenced as a turning point you're exactly right that our some of our tier ones have definitely lost share over the last year.
Speaker Change: But when we look to is number one we look at the loan production.
Speaker Change: Revenue and costs that MBA put out every year and so what we experienced with the tier ones experienced through two years was that their loan production revenue costs were higher than their sort of their loan production costs were higher than their revenues.
Speaker Change: So frankly, they were actually losing money on every new mortgage that they were taking on their books. So that has changed now the last two quarters that has moved into positive territory, which therefore of course for those big banks makes it an option then for them to start reinvesting in as opposed to focusing on.
Speaker Change: Other lines of business credit cards investment banking other parts of the the institution Theyre definitely now drawing their attention back and our view is and they've reiterated with us that they are focusing back on the mortgage space. So that's sort of the big piece and so right now they have been challenged from a market share standpoint, but our view is that one.
Speaker Change: Over the upcoming quarters and years, we're going to see them start stepping back into the market.
Speaker Change: I had one small of you on this in September October when the rates did go down we saw some of the biggest tier one lenders in the U S stepping competitively.
Speaker Change: Competitively into that space with the lowest rates during that time, which kind of reiterate that theyre back to loan production revenue positive space, where they can make money and so that's our view again, they've reiterated that with us. So I think we should see that turn over the upcoming quarters and we should see them start.
Speaker Change: Gaining back some of that share they've lost.
Speaker Change: Yeah.
Speaker Change: Who are those money, losing mortgages going to when it comes to share.
Speaker Change: Well listen I think the big what happens in a market like we've just gone through is the non banks step in because you have to remember that non banks. This is their business mortgage is their business. These big Bank bank lenders, they they've got multiple business lines that they can pull on.
Speaker Change: Everything as I mentioned from credit cards to lines of credit to all of those other products. The non banks. This is what they focus on so it's not surprising to us that our customers have given up a bit of share through this time, it gets very price competitive and a lot of the non bank step in so I mean, good news for us our overall portfolio is in Reis.
Speaker Change: And we'll shape, we've got a 50 50 type portfolio non bank to bank, but definitely non banks would have stepped in more here. Unfortunately the.
Speaker Change: The benefit to the non banks, but the loss to the tier ones.
Speaker Change: Okay. That's great. Thank you.
Speaker Change: Thank you. Your next question is from Steven Li from Raymond James Your line is now open.
Steven Li: Hey, thanks.
Speaker Change: Brian Lee the competitive dynamics you just describe on this new tier one and I understand is usually a ramp at the beginning so it's going to take.
Steven Li: A few quarters.
Steven Li: But at steady state with this new tier one would you fully expect to have a higher market share compared to what you have with your current tier one.
Steven Li: If I can Steven can I go that's slightly different slightly different angle in the tier one that we are onboarding is quite a bit bigger than the tier one that we've currently got so they are doing quite a bit more overall volume in the market. They are more market share than our than our current tier one so our mark.
Steven Li: Shares are somewhat similar to the target that we've got with the new one and where we are with the existing one.
Steven Li: I think that's less relevant because one is quite a bit bigger. So that's why when we say Steven our view is that by the end of this year when we get to our market share target with our new tier one our view is that volume will be equal if not bigger to the tier one that we've currently got on the platform, which will double our more or less double our tier one business with <unk>.
Steven Li: A couple of these other top 25 players that are joining the platform.
Speaker Change: Got it thanks.
Steven Li: Okay.
Speaker Change: Thank you there are no further questions at this time the question and answer session is now closed ladies and gentlemen, the conference has now ended.
Steven Li: Thank you all for joining you may all disconnect your lines.
Steven Li: Okay.