Real Matters Overview - May 2018 Jason Smith Chief Executive Officer
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Real Matters Overview May 2018 Jason Smith Chief Executive Officer
Caution Regarding Forward-Looking Statements
This presentation contains forward-looking statements that relate to our current expectations and views of future events including but
not limited to future market share and transaction volumes. In some cases, these forward-looking statements can be identified by
words or phrases such as ‘‘forecast’’, ‘‘target’’, ‘‘goal’’, ‘‘may’’, ‘‘might’’, ‘‘will’’, ‘‘expect’’, ‘‘anticipate’’, ‘‘estimate’’, ‘‘intend’’, ‘‘plan’’,
‘‘indicate’’, ‘‘seek’’, ‘‘believe’’, ‘‘predict’’, or ‘‘likely’’, or the negative of these terms, or other similar expressions intended to identify
forward-looking statements.
We have based these forward-looking statements on our current expectations and projections about future events and financial trends
that we believe might affect our financial condition, results of operations, business strategy and financial needs. A comprehensive
discussion of the risks that impact Real Matters can be found in the Company's Annual Information Form dated December 27, 2017
available on SEDAR at www.sedar.com. Actual results may differ materially from those indicated or underlying forward-looking
statements as a result of various factors, including those described under the heading “Important Factors Affecting Results from
Operations” outlined in the Strategy and Outlook section of the Company’s MD&A for the periods ended March 31, 2018.
Real Matters cautions that the list of risk factors and uncertainties is not exhaustive and other factors could also adversely affect its
results. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking information
and are cautioned not to place undue reliance on such information.
Information contained in forward-looking statements in this presentation is provided as of the date of this presentation and we
disclaim any obligation to update any forward-looking statements, whether as a result of new information or future events or results,
except to the extent required by applicable securities laws.
All of the forward-looking statements made in this presentation are qualified by these cautionary statements and other cautionary
statements or factors contained herein and there can be no assurance that the actual results or developments will be realized or, even
if substantially realized, that they will have the expected consequences to, or effects on, the Company.
Non-GAAP Measures
The non-GAAP measures used in this presentation, including Net Revenue, Adjusted EBITDA, Adjusted net income and Adjusted net
income per share, do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and are
therefore unlikely to be comparable to similar measures presented by other issuers. These non-GAAP measures are more fully defined
and discussed in the 'Management Discussion and Analysis' ("MD&A") of Real Matters for the periods ended March 31, 2018, available
on SEDAR at www.sedar.com.
Full reports of the financial results of Real Matters for the periods ended March 31, 2018 are outlined in the unaudited interim
condensed consolidated financial statements and the related MD&A of the Company, which are available on SEDAR at www.sedar.com.
In addition, supplemental information is available on our website at www.realmatters.com.
2Real Matters Overview
Leading Provider of Network Management Services for the
Mortgage Lending and Insurance Industries
• Platform combines proprietary technology and network management capabilities with
tens of thousands of independent Field Agents, such as residential real estate appraisers
• Realized significant success and disrupted segments of the mortgage lending and
insurance industries
$16B 4
• Clients include more than 60 of top 100 mortgage lenders in the U.S.1 and Large Addressable
three of the Big Five Banks in Canada
• Provides one in 15 residential mortgage appraisals in the U.S.2
Market with
• Recently won MSAs with five Tier 1 mortgage lenders in the U.S. Significant Runway
• Adjusted EBITDA3 positive since FY2012 for Growth
• Invested significantly in our technology
• Entered title and closing market – provides opportunity to leverage our Platform
and client relationships to grow title and closing market share
Strong Market Share Growth and Financial Performance
(in $ millions)
$92.3
30% 17%
2017 YoY
Mortgage 6.5% 2017 YoY $68.3
Appraisal
Title & Closing 0.3%
Market Share6
Market Share5
Growth
Growth $43.0
$33.7
0.2%
$12.8 $9.4
2.4% $5.3 $2.7
FY2013 FY2013 FY2015 FY2016 FY2017 FY2015 FY2016 FY2017 FY2015 FY2016 FY2017 YTD18
Net Revenue 3 Adjusted EBITDA 3
1. Based on having completed at least one transaction with Real Matters in the fiscal year ended September 30, 2017. Top 100 mortgage lenders according to Inside Mortgage Finance website: Top 100 Mortgage Lenders (twelve months ended December 31, 2016). 2. Management
estimate based on data from the MBA Mortgage Finance Forecast Report of October 24, 2017. 3. Net Revenue and Adjusted EBITDA are non-GAAP measures. See “Non-GAAP Measures” on page 2 of this Presentation. 4. Management estimates of the residential mortgage appraisal
market size of calendar 2016 based on data from the MBA Mortgage Finance Forecast Report of October 24, 2017, plus management estimates of the title market size measured by written premium based data from American Land Title Association Data as of June 30, 2017. Total
addressable market based on roll-out of the Company’s Next Generation Closing strategy. 5. Management estimate based on data from the MBA Mortgage Finance Forecast Report of October 24, 2017. 6. Management estimate of Residential Title Written Premium Market Share based
on data from the American Land Title Association as of June 30, 2017 and Demotech, Inc. for period ending December 31, 2015.
3How Our Network Management Platform Works
Best Performing Appraiser
1 2 Case Study: Prince William County, Virginia1
Lender Fee
$472
Real Matters
Appraiser Fee
Ave. Direct Cost Per Appraisal
$355
Cost to Serve
Contribution Margin
$12
$28
$77
3 Better Performance 4 Increased Client Market Share (illustrative)
Case Study: Prince William County, Virginia1
Traditional Real
AMC Matters
2 to 35%
Turn Time 7-9 days 5.3 days
Defect Rate 15-20% 5.6%
1. Based on Real Matters` actual average for a standard interior appraisal in Prince William County, VA, during Fiscal Q3 and Q4 2016 (April to September 2016). Traditional Appraisal Management Company turn times and defect rates are management estimates of average competitor
metrics based on internal market research and do not relate to any particular competitor or geographic region. 4Established and Growing Blue Chip Client Base
Lengthy and Complex Sales Cycle Developed Blue Chip Client Base
Up to 5 Years to get to 1st Transaction
• Blue-chip client base developed over lengthy and
complex sales cycle
Client Engagement Activities
Request for Information • Proven compliance and regulatory systems in place to
meet client requirements and help retain and develop
Request for Proposal key clients
On-site Visits
Master Services Agreement
U.S. Customer Segmentation
Audits Real Matters clients include 60 of top 100 mortgage
lenders in the U.S.1 and all Tier 1 mortgage lenders
Technology Integration 35%
29% 28%
Roll-out Plan
Market Share Expansion 8%
After Deployment
Tier 1 Tier 2 Tier 3 Tier 4
Year 1 Year 2 Year 3
BUILD GROW OPTIMIZE
Top 5 Banks 7-30 31-100 ~7,000
by Asset Mortgage Mortgage Mortgage
Size and the Banks, Banks, Banks,
Largest Lenders Lenders Lenders
0-15% 35-40% Non-Bank and Credit and Credit and Credit
Mortgage Unions Unions Unions
Lender
Source: Inside Mortgage Finance Top 100 Mortgage Lenders List – March 31, 2017
1. Based on having completed at least one transaction with Real Matters in the fiscal year ended September 30, 2017. Top 100 mortgage lenders according to Inside Mortgage Finance website: Top 100 Mortgage Lenders (12 months ended December 31, 2016). 5Track Record of Increasing Appraisal Market Share with Clients
Case Studies Appraisal Market Share
Tier 1 Lender A Tier 1 Lender B
Recently launched 29.0% FY2021 Target
4.7% 4.7% 20.0%
25.0%
15% to 20%
18.0%
3.5%
1.6% 6.5%
2.0%
0%
28%
0 mth 1 mth 2 mth 3 mth 4 mth 1 mth 6 mth 9 mth 12 mth 18 mth Mortgage
Appraisal
Market Share1
Tier 2 Lender A Tier 2 Lender B CAGR2
40.0% 85.0% 85.0%
85.0%
25.0% 25.0% 55.0%
12.0%
10.0%
2.4%
1.0%
1 mth 6 mth 12 mth 24 mth 36 mth 1 mth 6 mth 12 mth 24 mth 36 mth
FY2013 FY2014 FY2015 FY2016 FY2017
MSAs with Tier 1 Lenders Drive Growth
• Tier 1 mortgage lenders represent approximately 30%3 of annual
spend on residential mortgage appraisals
Recent launches with Tier 1 clients
through typical cycle are expected to • Real Matters often obtains more transaction volume relative to
30%3
result in significant market share competitors based on its ability to outperform
increases over the next 5 years
• Real Matters has historically developed long-term client relationships
and achieved a client retention rate of approximately 95%4
1. Appraisal Market Share based on management estimates based on data from the MBA Mortgage Finance Forecast Report of October 24, 2017. 2. CAGR means Compound Annual Growth Rate. 3. Management estimates based on Inside Mortgage Finance website: Top 100 Mortgage
Lenders (12 months ended December 31, 2016). 4. Retention rate calculated since launch based on number of clients who have completed at least one transaction with the Company in the fiscal year ended September 30, 2017. Based on Real Matters clients on Inside Mortgage Finance
website: Top 100 Mortgage Lenders (12 months ended December 31 2016).
66Porting Our Platform Approach in Appraisals to the Title and Closing Market
• Large addressable market: $13B
• Ability to sell title and closing to existing appraisal clients through existing MSAs
• Process ripe for disruption: significant area of inefficiency
Search Administrative Closing Escrow
(Curative)
• Order starts with a • To insure the • Solidifi works with the • Solidifi is responsible for
title search. transaction, Solidifi, lender to prepare the disbursing funds to all
• Search is performed by a must clear all open final closing package. parties and recording
network of independent interests in the • Soldifi’s network of executed deeds and/or
abstractors through property. independent closing mortgages.
electronic records (title • Curative includes agents executes the
plants) or visit to county obtaining mortgage documents with the
registry/office. payoffs and releases, borrower.
• 40% of counties are still confirming proper • The closing agent
on microfiche. ownership of the returns the documents
• Data is collected from property and review of to Solidifi for recording
public records in the any legal documents and final processing.
jurisdiction where the relevant to the
property is located. transaction, trusts,
power of attorney, etc.
Network Management
Network Management
Notaries, attorneys,
Abstractors
closing agents
7The Solidifi Title & Closing Difference
• Proven track record of leveraging technology and field Exceptional Network of Local Experts to
agent partnerships to service clients efficiently and Drive Performance & Scale
effectively
Closing Title Package Defect Rate
• Local market experts provide flexibility with shifting
state regulations and differing regional practices 6% 6%
5%
Cost breakdown of a typical centralized refinance
transaction end of 2018 1%
Title & Closing Fees
$895*
stay the same Traditional
2017 2018
Lower cost
structure
Network Fee
Ave. Direct Cost Enhanced Consumer
Experience
Cost to Serve
Margin
Higher
profitability Closing Turn Time (days)
41 41
Solidifi 3YR Target 30
22
Better outcome graphs. 35
• Lender fees stay the same and agents receive a higher days to 25 days, files with
percentage of the fee resulting in better scale and outcomes error.
Traditiona l
2017 2018
*Gross revenue based on a typical refinance transaction 8Fiscal 2021 Objectives
Market Share Expansion
FY2017 FY2021
Market Size Market Share Target Market Share
Appraisal $3B 6.5% 15-20%
Title and Closing $13B 0.3% 1-3%
Strong Top-Line Growth and Increasing Operating Leverage
Financial Metrics Baseline FY2021 Targets
Revenues CAGR 38%1 20% to 25% $619M - $760M
Net Revenue Margin
31%2 35% to 40% $232M - $285M
(% of revenues)
Adjusted EBITDA Margin
10%3 25% to 30% $64M - $78M
(% of Net Revenue)
1. Revenue CAGR for Real Matters F2014 to F2017. 2. Net Revenue Margin for Real Matters for fiscal 2017. 3. Adjusted EBITDA Margins for Real Matters for fiscal 2017. See page 2 for non-GAAP measures. 92018 U.S. Mortgage Market Forecast
Quarterly Mortgage Bankers Association - Purchase and Rate Refinance Market
Source: MBA
$700
$600 $332
$500 $242 $265
$147 $151
$400 $115 $100
$197 $153
$300 $161 $149 $128
$200
$100
$220 $190 $300 $305 $258 $212 $316 $320 $262 $218 $330 $350
$0
FY16 - Q1 FY16 - Q2 FY16 - Q3 FY16 - Q4 FY17 - Q1 FY17 - Q2 FY17 - Q3 FY17 - Q4 FY18 - Q1 FY18 - Q2 FY18 - Q3 FY18 - Q4
Purchase Originations (billions) Rate Refinance Originations (billions)
Market Commentary
• Relative to market expectations established in January by the MBA, the rate refinance market is estimated to be healthier in the second
quarter of fiscal 2018 by 6% and 10% healthier in Q3. The purchase market is expected to be weaker in Q3 by 4%. All other quarterly
expectations remain unchanged since the January MBA report.
• Despite the Q2 market decline of 6% (units), U.S. revenues grew 8% on a market adjusted basis and 15% for appraisal revenues
specifically.
• The refinance market is forecast to continue its decline as a percentage of the total market, with the healthy purchase market increasing
steadily through 2018 on a comparative basis.
• Looking ahead to the third and fourth quarters of fiscal 2018, the total market is estimated to be roughly the same size as the
comparable quarters in fiscal 2017.
10Mortgage Volumes: Historical Context and
2400 the 3-year forecast
2200
Total Annual U.S. Mortgage Market Volumes
2000 ‐ Purchase and Refinance
Source: March 2018 MBA, Fannie Mae, HMDA
Purchase Market Projections 1800 Refinance Market Projections
$ in billions $ in billions
1600 1600
1400 1400
1200 1200
1000 1000
800 800
600 600
400 400
200 200
0 0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Fannie MBA HMDA 2005 Peak Fannie MBA HMDA 2008 Levels 2000 Levels
Purchase Market Commentary
• The purchase market has been growing since 2011 and is expected to continue a steady upward trend, growing by 5% YoY in 2018.
• In 2019 and 2020 purchase volumes are expected to continue growing by 5-6% per year, and are expected to reach similar levels to those achieved
during the volume peak in 2005.
Refinance Market Commentary
• While we have been in a purchase market since 2014, the market remained somewhat balanced through 2016, with refinance volume continuing to
represent between 40% and 50% of total market volume.
• In 2017 interest rates began to rise, causing the refinance market began to decline by an estimated 38% vs 2016 to levels below the lows of 2008. In
2017 refinance transactions were just 35% of the market.
• 2018 projections are for refinance to represent only 27% of the market, the lowest share on record. The refi market is expected to continue to fall
further in 2019 and 2020 to the lowest levels in 18 years in the range of 23% or ~$400B, still in line with estimates at IPO.
11
11
11Q2 2018 Business Highlights
Solid financial and operational performance
• 15% market adjusted U.S. appraisal revenue growth.
• Network effect in appraisal drove significant improvements in margins.
• Awarded additional appraisal market share with Tier 1 lenders.
• Won new Tier 1 lender RFP for appraisals in the main origination channel and moved into deployment during
the quarter.
• Expanded into the home equity channel with two Tier 1 lenders.
• Completed the transition of title and closing to our technology platform and launched our closing network.
• Announced the deployment of a Tier 1 lender for centralized refinance mortgage origination title and closing
services subsequent to quarter end.
• Began the rationalization of non-core title and closing revenues to support growth in centralized refinance
mortgage origination market.
• Expect to continue to deliver strong organic growth which will allow us to outpace U.S. mortgage origination
market trends going forward.
Appraisal Market Achieved Significant Confident in
Share Increasing Milestones in Title Fiscal 2021
On Plan and Closing Objectives
12Q2 2018 and YTD Financial Highlights
Market Market
Q2 2018 Q2 2017 Change adjusted YTD 2018 YTD 2017 Change adjusted
growth growth
U.S. Revenues
Appraisal and Ancillary $45.9 $41.9 10% 15% $95.8 $91.6 5% 21%
Title and Closing 13.1 15.3 (15%) (12%) 29.3 37.0 (21%) (5%)
Other 0.3 0.4 (29%) 0.6 0.7 (19%)
Total U.S. Revenues $59.3 $57.6 3% $125.7 $129.3 (3%)
Canada Revenues
Appraisal and Ancillary $5.7 $6.0 (4%) $12.2 $12.2 -
Other 1.1 0.9 15% 2.1 1.9 8%
Total Canada Revenues $6.8 $6.9 (2%) (1%) $14.3 $14.1 1% 1%
Consolidated Revenues $66.1 $64.5 2% 7% $139.9 $143.4 (2%) 12%
Net income (loss) $3.0 ($8.9) ($2.4) ($11.2)
Net Revenue1 $20.5 $18.9 8% $43.0 $44.9 (4%)
Net Revenue1 Margin 31.0% 29.3% 0.7% 30.7% 31.3% (0.6%)
Adjusted EBITDA1 $0.3 ($1.8) 117% $2.7 $3.7 (27%)
• Significant net revenue margin expansion in appraisals due to network effect on the platform
• Q2 Net Revenue +8% on strong performance in appraisals
• Increasing operating leverage
1. Net Revenue, Net Revenue Margin and Adjusted EBITDA are Non-GAAP measures. See page 2. 13You can also read
