Clarocity Corp CLRYF

Note today from Canaccord on Real Matters

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After a weaker-than-expected Q2 report, Matters announced yesterday morning that its early win on a T&C deployment with a US Tier 1 lender will not proceed as previously expected. The Tier 1 T&C contract was expected to be a modest contributor to revenue as soon as the current quarter. The company will continue to pursue the opportunity with this customer and believes it can eventually support their needs. Matters reiterated its 2021 targets and continues to believe it can outpace US mortgage origination market trends through share gains. The company has reported a strong pipeline for the T&C segment, having been engaged with large banks, but admits the sales cycle is long. The company recently ported all existing title business, the bulk of which is Tier 3/4 refinance-driven, onto the Solidifi platform. This helps to lower cost-to-serve while improving the offering and, notwithstanding todays announcement, better positions the product for more significant Tier 1 and 2 customers. It also helps provide cross-selling opportunities. Management highlighted Fidelity National Financials acquisition of Stewart Information Services as a catalyst for diversification to Real Matters benefit, and noted that a single Tier 1 had 70% of its title business concentrated with the combined entity. The T&C business was expected to see a much slower growth trajectory given the wind-down of non-core offerings such as commercial appraisal, third-party search and REO. CEO Jason Smith continues to buy REAL stock, suggesting that management sees value in the stock during this period of weakness.