Voxtur Analytics Corp. (OTCQB:VXTRF) Q3 2022 Results Conference Call November 30, 2022 9:00 AM ET
Company Participants
Jordan Ross – Chief Investment Officer
Angela Little – CFO
Gary Yeoman – Executive Chairman
Jim Albertelli – CEO
Conference Call Participants
Frederic Blondeau – Laurentien Bank Securities
Christian Sgro – Eight Capital
Colin Fisher – Garrison Creek
Operator
Welcome to the Voxtur Q3 2022 Earnings Call. My name is Richard and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, the conference is being recorded.
I will now turn the call over to Mr. Jordan Ross, Chief Investment Officer. Jordan, you may begin.
Jordan Ross
Good morning, everyone. Thank you for joining us for the Voxtur third quarter earnings call, where we will discuss our financial results for the period ended September 30, 2022. Please note that our results were released November 29, 2022 after the market close and can be accessed on SEDAR or on our website at voxtur.com.
Joining me today are Executive Chairman, Gary Yeoman; CEO, Jim Albertelli; and CFO, Angela Little. We will begin with prepared remarks and then move into a Q&A session. If we are unable to get to your question, you are always welcome to contact me directly at jordan@voxtur.com. Angela Little will begin by reviewing our financial results. After that, Gary Yeoman and Jim Albertelli will provide updates as to how we are progressing towards our objectives through capital markets activities, organic growth initiatives and operational efficiencies.
Before we get started, please be advised that some of the information that we will share on this call may contain forward-looking statements. We caution you not to place undue reliance on forward-looking statements, and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in our expectations.
Further, on today’s call, we will report using both IFRS and non-GAAP financial measures. We use these non-GAAP financial measures internally for financial and operational decision-making purposes as we believe that they provide a meaningful measurement of financial performance and valuation. These non-GAAP financial measures are presented in addition to, and not as a substitute for financial measures calculated in accordance with IFRS. To see the reconciliation of these non- GAAP measures, please refer to our press release distributed yesterday, November 29, 2022, and our management’s discussion and analysis, both of which are available at sedar.com, and on our website at voxtur.com. A replay of today’s call will also be posted on our website. Finally, please note that all references to amounts or currency during today’s call are in Canadian dollars, unless otherwise stated.
I will now turn the call over to our CFO, Angela Little.
Angela Little
Thank you, Jordan. Good morning, everyone, and thank you for joining us today. To start, I will provide a high level summary of market conditions impacting Q3 and then provide a summary of our third quarter performance. Gary and Jim will go into more detail about the impact of the current macroeconomic conditions on the company, as well as the strategy for the remainder of 2022 and 2023.
Q3 2022 continued to be a challenging environment for the U.S. housing and mortgage market. Interest rates increased by 75 basis points twice during the quarter with the September increase marking the fifth rate hike of 2022, resulting in mortgage rates peaking in September and October at 7% plus. At the end of October, the Mortgage Bankers Association published year over year origination data showing purchase origination volumes down 27% year over year and refinance volumes down 77% year over year. Additionally, default rates remained historically low, ending the quarter with total delinquencies at 0.69%.
In November, the Federal Reserve raised rates of six times. However, with recent news indicating inflation may have peaked, the last few weeks have reflected slightly reduced mortgage rates and a slight increase in mortgage applications. Despite this, year over year mortgage loan applications remain down over 40% and are not expected to increase significantly in the near term as many buyers and sellers remain on the sidelines waiting to see when and where conditions will level out. With these conditions in mind, we are focused on controllable factors and continue to prioritize positive cash flow, positive adjusted EBITDA and investments based on areas we believe will provide the greatest long term benefits for our shareholders.
I will now provide a brief summary of the Q3 results. For the third quarter, Voxtur’s gross revenue was $35 million, gross profit was $13.6 million and adjusted EBITDA loss was $1.4 million. Year to date 2022 Voxtur’s gross revenue is $114 million, gross profit is $40 million and adjusted EBITDA loss is $8.3 million.
Revenue for Q3 2022 reflects a 44% increase over Q3 2021 and year to date 2022 revenue reflects a 100% increase over year to date 2021. Gross profit for Q3 2022 reflects a 42% increase over Q3 2021 and year to date 2022 gross profit reflects a 60% increase over year to date 2021. Comparing Q3 2022 to Q2 2022, revenue for Q3 decreased only 6% over Q2, even with the significant reductions in origination volumes. This is a direct result of our robust sales efforts, increasing market share in many key areas. By way of example, revenue for our valuation business decreased only 2% from Q2 to Q3 2022.
Gross profit margin increased from 33% in Q2 2022 to 38% in Q3 2022. This is a direct result of an increase in SaaS revenue from valuation technology and decreases in direct operating expenses. Finally, the company ended Q3 2022 with cash and cash equivalents of approximately $29 million. For Q3 and year to date 2022, approximately 95% of gross revenue came from U.S. revenue sources. This is up from 91% in Q3 ’21 and 89% for year to date ’21, reflecting the company’s continued expansion into the U.S. market from strategic acquisitions.
Revenue from software and data licenses represents approximately 19% of Q3 revenue and 17% of year to date revenue. This is an increase from 10% on Q3 ’21 and 14% year to date ’21. We expect this trend to continue as we further integrate the Blue Water business.
Turning to acquisitions, the company completed two strategic acquisitions in Q3. MTE was completed in July and Blue Water Financial Technologies was completed in September. Gary will be discussing these in detail, including the synergistic opportunities and expansion into the capital markets.
In connection with the Blue Water acquisition, Voxtur expanded its credit facility with the Bank of Montreal. Then in October, the company completed a preferred share offering with BMO Capital Markets, evidencing the strong partnership between Voxtur and BMO. Finally, and then further support at this point, BMO recently updated the company’s loan covenants to reflect the changing market conditions, which have impacted original Q4 production. BMO has provided a waiver for Q3 loan covenants and continues to work in partnership with Voxtur as we navigate these unprecedented market conditions.
I will now turn to the company’s 2022 financial guidance. As we end 2022 and go into 2023, management’s expectation is that market conditions will remain challenging. Based on current conditions and related Q4 projections, we are reducing our revenue guidance to a range of $140 million to $150 million based on revenue streams included in the original guidance. Although we are updating our guidance, the company remains laser focused on positive cash flow, positive adjusted EBITDA and increased revenue from key products, synergistic revenue opportunities from completed acquisitions and increased market share.
As we reported at Q2, the company remains focused on efficiencies and cost reductions, having executed additional cost reductions in Q3. We remain vigilant in these efforts and nimble in order to make necessary adjustments as market conditions evolve. We will continue to right size if needed, while remaining focused on efficiencies, synergies, consolidation and process improvement. In this manner, management is looking at opportunities to shift to variable cost models where possible to allow for more flexibility and timely adjustments to market changes.
With regards to strategic new products, the company has onboarded or is in the process of actively onboarding 12 new clients for our Voxtur AOL products and has already begun recognizing revenue for Q4. We also anticipate new revenue from tax products in the Canadian market in early 2023, as well as the gradual return of default driven products.
I will now turn the call over to our Executive Chairman, Gary Yeoman.
Gary Yeoman
Thank you, Angela. Good morning, everyone and thank you for joining us. I want to begin by reemphasizing that our focus remains on leveraging our data assets through various software platforms as a foundation for reducing costs and inefficiencies in real estate transactions, ultimately making homeownership more affordable. We are proud of the advances we have made thus far, but we still have a long way to go.
In the meantime, I’m pleased to discuss a few noteworthy successes from the capital market [Technical difficulty] prior to turning it over to Jim to discuss operational highlights. Early in the quarter, the company closed the acquisition of Municipal Tax Equity Consultants and MTE Paralegal Professional Corporation, which allows for the consolidation of our largest competitor in Ontario, offering property tax analytics and municipalities throughout the country and more specifically in Ontario. This acquisition allows us to scale the rollout and adoption of our real property tax analytics platform. It also contributes positive EBITDA individually and incrementally and allows for additional cost synergies within our property tax business.
Near the end of the quarter, the company closed the acquisition of Blue Water Financial Technologies. Blue Water is a leading provider of digital solutions to mortgage investors and lenders in the U.S. Specifically, Blue Water provides solutions for mortgage asset valuation and pricing, mortgage asset trading and distribution and mortgage advisory and hedging. Voxtur acquired the Blue Water business to diversify its revenue streams from the primary mortgage market, add an EBITDA and cash flow positive business and create opportunity for new revenue streams for Voxtur’s core products and data assets. Blue Water’s SaaS based solutions allow mortgage originators and investors to review their portfolios, analyze transactional data in real time, which is of the utmost importance in these market conditions.
Al Qureshi, the founder of Blue Water has joined Voxtur as a President of our Capital Markets and secondary mortgage market business. Also in connection with the acquisition, Al and the Blue Water team have become shareholders of the company. It is important to note that the stock issued in consideration for the acquisition will be issued in installments over 16 quarters following the transaction’s closing. We believe this transaction will be transformational for the company, both financially and as we continue our path to becoming a pure play technology provider for the North American mortgage market.
Lastly, I want to acknowledge and thank our partner BMO Financial Group for continuing to believe in our vision, which allowed us to a close the Blue Water acquisition. We are working hard to integrate our acquisitions with current Voxtur technologies to create innovative solutions, add new clients and expand wallet share with existing clients and leverage cost synergies.
I’ll now turn it over to our CEO, Jim Albertelli.
Jim Albertelli
Thank you, Gary. Good morning, everyone, and thank you for joining us. Before I discuss operational highlights, I would like to start by acknowledging that from a financial results perspective, certainly [indiscernible] would be at the end of the third quarter. However, I’m extremely proud of our team and what we have accomplished based on the current market conditions. More specifically, I’m proud of how we have come together from an innovative solution [indiscernible] and outperform our competitors to increase market share. Although we are relatively flat from a financial growth perspective, [indiscernible] early success, completely fair to our peers most of whom were seeing revenue decreases by more than 50% by precedent macroeconomic conditions and historically high rates we’ve accomplished, but we have accomplished with no easy feat.
I want our shareholders [indiscernible] to know that, while we remain focused on strategic growth, we are prioritizing integration and performance of our existing businesses, of the long term opportunities. Further, we continue our expense realignment efforts [indiscernible] expectation and client demand. As the results what we’ll indicate is all [indiscernible] of the EBITDA and cash flow positive. I’d like to share some [indiscernible] highlighted in the third quarter. First, Voxtur AOL was already a Voxtur pretty much approved alternative to additional insurance. [Technical Difficulty] It is indicative of the momentum we’re seeing in market and another example of the appetite for change in the [indiscernible] industry.
As agency acceptance continues and more and more lenders engage, Voxtur will be more affordable homeownership for Americans becomes more of a reality. We are especially proud of the opportunity we have had to help [indiscernible] saving money in the refinance and purchase residential real estate in the U.S. Although, Voxtur AOL continues to bring new clients and experience high demand in the market, that ramp up implementation process have taken longer than expected. It is important to note, it is common for a new product and typically requires dedicated resources on the [indiscernible] in a market where any lenders have been forced to downsize.
Despite this, every lender we’ve signed continues to go ahead with implementation. That speaks to the viability of the product and lender she needs for an alternative. Additionally, the AOL is now revenue generating. We’re excited to continue to grow and scale with existing and new clients. We’re restricted to the rest of our business [indiscernible] previously mentioned. We’re keeping a close eye on how the market conditions are impacting the clients and adjusting our resource [indiscernible] accordingly. Although it may appear that these market conditions are having negative impact on our business. We are growing our market share by onboarding new clients who recognize the need for more innovative and efficient ways to do business. These clients are turning to Voxtur to protect their largest revenue sources, whether that is the mortgage portfolio, or property tax assessment.
This market [indiscernible] clients to take pause and review their current processes and technology stack [indiscernible] more fruitful environment for Voxtur AOL clients. Lastly, I want to conclude by discussing our more recent and exciting opportunity, Blue Water. It is important to understand that there’s great demand by investors to take the position on these unprecedented interest rates, investing and acquiring mortgage servicing rights [indiscernible] great way to do so. Blue Water provides access to these investors to real time pricing and the ability to transfer and diligence to key assets electronically and digitally.
The other reality is that, many mortgage originators don’t have the financial means to keep these mortgages on their books and are looking for ways to move these assets. Blue Water provides a cost effective and efficient way to transact these trades. This is exactly what I mean when I say that [indiscernible] Wall Street to Main Street. Furthermore, Blue Water allows Voxtur to, one, diversified its revenues from the primary mortgage market to the secondary mortgage market. Two, to create new revenue opportunity by way of a seamless integration and deliver of Voxtur’s and core solutions, such as our [indiscernible] and our other data products to enhance Blue Water’s already powerful trading pricing and due diligence engine in real time. So as we navigate this changing rate environment, our data driven innovations are proving to be fit with our clients need to save consumers money, while creating shareholder equity.
Finally, I want you to reemphasize what I’m committed [indiscernible] and will ultimately be judged on our performance and our potential. As a result, we remain focused on profitable growth, this is a good demand for us and we will respond accordingly.
Thank you for joining us on the call today. We appreciate your time and your interest. We’d be happy to answer any questions you may have at this time. I’ll hand it over to the operator to start the Q&A.
Gary Yeoman
Excuse me. It’s Gary Yeoman here, operator. I’ve got a number of text back to say that Jim’s — unfortunately, Jim’s connection was hard to — well, it was just — he couldn’t hear probably, he kept breaking up. So I’m going to ask everyone if they’ll indulge and I’ll just read Jim’s speech again so that the opportunity you have — clear insight into what Jim has proposed in operations. Unfortunately, today with technology and that we do have interference from time to time. So I will indulge and I’ll get through this again and hopefully it’ll leave any clarity result.
So before I discuss operational highlights, I would like to start by acknowledging that from a financial results perspective, this is certainly not where anyone thought we would be at the end of the third quarter. However, I am extremely proud of our team and what we’ve accomplished in the face of current market conditions. More specifically, I am proud of how we have come together to find innovative solutions for our clients and outperform our competitors to increase market share.
Although we are relatively flat from a financial growth perspective, I consider it as success, especially compared to our peers, most of whom have seen revenue decreases of more than 50%. With unprecedented macroeconomic conditions and historically high rates, what we have accomplished is no easy feat. I want their shareholders to know that while we remain focused on strategic growth, we are prioritizing the integration and performance of our existing businesses over long term opportunities. Further, we continue our expense realignment efforts to adapt to market expectations and client demands. As our results will indicate, this all lends itself to our focus on being EBITDA and cash flow positive.
Now I’d like to share our business highlights for the third quarter. First, Voxtur AOL. As you know, AOL was already a Fannie Mae and Freddie Mac approved alternative to traditional title insurance. Now it has also been approved by the VA, the Veterans Administration. This is indicative of the momentum we’re seeing in the market, another example of the appetite for change in the title insurance industry. As agency acceptance continues and more and more lenders engage, Voxtur’s goal of creating more affordable home ownership for all Americans becomes more of a reality. We are especially proud of the opportunity we now have to help our veterans in the U.S.
Although Voxtur AOL continues to bring new clients and experience high demand in the market, that ramp up and implementation processes have taken longer than expected. It is important to note that this is common for a new product and typically requires dedicated resources on client lender side, which has proven difficult in a market where many lenders have been forced to downsize. Despite this, every lender that we’ve signed continues to forge ahead with implementation. That speaks to the viability of the product, and the lender perceived need for an alternative. Additionally, the AOL is now revenue generating and we are excited to continue to grow and scale with existing and new clients.
With respect to the rest of our business lines, as previously mentioned, we’re keeping the close eye on how the market conditions are impacting our clients and adjusting their resources and product roadmaps accordingly. Although it may appear that these market conditions are having a negative impact on our business, we are growing our market share by onboarding ne clients who recognize the need for more innovative and efficient ways to do business. These clients are turning to Voxtur to protect their largest revenue sources, whether that is a mortgage portfolio or property tax assessment. This market has forced our clients to take pause and review the current processes and technology stack, allowing for a more fruitful environment for Voxtur to add clients.
Lastly, I want to conclude by discussing our most recent and most exciting opportunity, Blue Water. It is important to understand that there is a great demand by investors to take a position on these unprecedented interest rates and investing in and acquiring mortgage servicing rights or MSRs as they’re known. They’re a great way to do so. Blue Water provides access to these investors through real time pricing and the ability to transfer and diligence of assets. The other reality is that, many mortgage originators don’t have the financial means to keep these mortgages on their books and are looking for ways to move these assets. Blue Water provides a cost effective and efficient way to transact these trades. This is exactly what I mean when I say that we are bringing Wall Street to Main Street.
Furthermore, Blue Water allows Voxtur to diversify its revenue streams from the primary mortgage market to the secondary mortgage market, create new revenue opportunities by way of a seamless integration and delivery of Voxtur’s core solutions, such as our attorney opinion letter, our appraisal review product, called [RASER] (ph), our other data products to enhance Blue Water’s already powerful trading, pricing and due diligence engine in real time. As we navigate this changing environment, our data driven innovations are proving to be just what our clients need to save consumers money, while increasing shareholder equity.
Finally, I want to reemphasize what I have communicated to all our employees and management team. We will ultimately be judged on our performance, not our potential. As a result, we will remain focused on our profits over growth. This is what the current market demands of us and we will respond accordingly.
Thank you for joining us on the call. We appreciate your time and interest. And we’re happy to answer any questions you may have at this time. I’ll hand it over to the operator to start the Q&A.
Question-and-Answer Session
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question online comes from Frederic Blondeau from Montreal. Please go ahead.
Frederic Blondeau
Thank you and good morning. Maybe a quick question for Gary. I was wondering if you could give us a bit more color on the integration of Blue Water so far? And maybe I guess as a second question, what should we be expecting in terms of financial contribution of Blue Water in Q4 and Q1 in the context of this market? Thank you.
A – Gary Yeoman
Fred, I’m happy to answer that, but I’m going to try Jim one more time and see if his connection is good and if not, then I’ll take over. Jim, are you hearing us okay? I guess not. So I’ll take over. So obviously, Blue Water is an extremely important acquisition that we did. It not only brings technology, it’s not only EBITDA positive, cash flow positive. But most importantly, it also allows us to bring in a lot of the due diligence opportunities in our other service offerings, whether it’s in tax, title or valuation.
With respect to the future, I mean, obviously, Blue Water is cash flow positive and EBITDA positive. December is never — really in November for that and other are never really great months because you almost lose a whole week because of Thanksgiving and we almost lose a week and a half in Christmas in December. So fourth quarter is never usually a robust month only because, there’s lots of holidays and reduced. But having said that, we’re very optimistic with respect to what Al Qureshi and his team is doing extremely talented, they created the marketplace for MSRs, HELOC, non-QM. It’s amazing plot forms that they have done, they offer all of the solutions. And again, we’ll continue to grow.
I’m hesitant right now, Fred, to say what that’s going to be because obviously we have high expectations, but we also like to moderate. But let’s just know that the acquisition that we have is not only synergistic, it’s accretive and it’s technology driven and it will have dividend impact to our bottom line as we go forward.
Frederic Blondeau
So just in your — I guess, you took your overall revenue for 2023 — sorry 2022 from $140 million to $150 million, if I understood well, how much contribution from Blue Water do you have in there?
Angela Little
Gary, I can take that. Just to be clear, so when we set our guidance for this year, it was prior to the Blue Water acquisition being even considered quite frankly. So just to be transparent, the updated guidance includes only the original revenue streams. We do anticipate obviously some additional revenues from Blue Water. There’s not much in Q3 because the acquisition closed on September 20, but it will have a meaningful contribution to Q4. We are in the process of finalizing our 2023 budget and we look forward to providing some additional guidance as we go into 2023 that will include complete integration of Blue Water.
Frederic Blondeau
So in your expectation, I guess, revenue expectations for 2022, you don’t have anything from Blue Water I would expect.
Angela Little
The original guidance — our original guidance was $170 million to $190 million. So we wanted to be consistent with those revenue streams and resetting the lower guidance. But yes, we do expect it to be a little bit higher as a result of the Blue Water acquisition in Q4.
Frederic Blondeau
Okay. That’s great.
Gary Yeoman
And Fred, it’s Gary. Just to be clear, I heard you say 115 instead of 150, but Angela has amended the guidance, not including Blue Water from $170 million to $190 million down to between $140 million and $150 million without the Blue Water contribution?
Frederic Blondeau
Yes. Go that.
Gary Yeoman
That’s 150, not 115.
Frederic Blondeau
Perfect. Thank you.
Gary Yeoman
Thank you. We have the next question moderator?
Operator
Yes. Our next question comes from Christian Sgro. Please go ahead. Your line is open.
Christian Sgro
Hi, good morning. I want to start with the mechanical question. The financial statements made reference to the notice of a potential claim. Let me just light on detail. So I was wondering what you might be able to share around that as we head into Q4 here?
Angela Little
Hey, Christian. This is Angela. The company received a letter that could constitute a potential claim from a former employee. The letter was vague. However, the company is reviewing the claims as well as the letter. Just given the timing of receipt of the claims and the U.S. holidays, the auditors were unable to complete all of their procedures. Again, it’s a grievance from a former employee. It’s vague and it’s claims. And based on the investigation in the review to date, we believe the ultimate resolution will not have any material adverse effects on the financial condition, results of operations or cash flows of the company.
Christian Sgro
Okay. Thank you. That’s all helpful color and context there. The next question I want to ask and Fred already quotes on this, but the Blue Water business and the secondary mortgage market business there is new to us. A lot of the current business is exposed to the primary market. So just in your view, Gary, what drives growth in the secondary mortgage market? Is it [indiscernible] interest rates or other capital markets activity? Like, what will make Blue Water perform best in what environment?
Jim Albertelli
Hello? Can you hear me now, Gary?
Gary Yeoman
It’s really cracking, Jim. I think it’s probably just won’t work unfortunately, sorry. I apologize to everyone that it’s unfortunately technology, you have to be adaptable. So Christian, Blue Water’s business is healthy, whether it’s a property business on the origination side or in times like this where interest rates raise, it’s even more frothy to the extent that banks need liquidity. And so there’s tons of product that’s coming on stream in the mortgage market. There is a little bit of hesitation with respect to people acquiring these servicing rights. In that, as Angela indicated earlier, the market interest rates keep rising, rising, rising and people are waiting for a pause to say, well, at what point — how do I price this, but more importantly, how do I get the returns that I’m expecting going forward and what impact of these continuing interest rates rise.
So what we’re seeing right now is lots of product coming on the market and we’re also seeing that the businesses start [Technical Difficulty] maybe not as property as it was, but certainly there’s lots of product and lots of opportunity. Al Qureshi is working on lots of deals right now. So we’re really optimistic. This is going to be very healthy for us. So what’s really, really important, Christian, that another reason aside from, I told everyone that when we look at acquisitions, we have to have four main tenants. It has to be real estate, it have to have technology, it has to be accretive and it has to be synergistic. All of those tenants have been answered with the Blue Water deal. And so, we have that opportunity to be able to bring all of the service offerings, because we digitize valuation backed entitle. And if you can imagine, every time that you’re selling servicing rights, people have to review it, they have to say, okay, what is the valuation compared to the mortgage?
So we have a digitized property tax we need, it needs to be reviewed. The taxes paid in full is, same with flood. Flood reviews take places very, very important in the U.S. And so — and then from a title perspective, they need to know that they got clear titles. So all of those things that Voxtur has will digitized. And so it’s a really, really nice synergistic opportunity to augment our existing revenue services. And most importantly, Christian, it acts as an anti-cyclicality in our business where you have seen some of our competitors where the revenues have dropped by anywhere from 50% to 85% between valuation and title, we’ve shown that our valuation has held up strong and overall our business has held up very strong. And the reason is that, we’ve now integrated against combating cyclicality by moving very definitely from the primary market to the secondary market.
Christian Sgro
Thanks for the color, Gary. That’s all from me. I’ll pass it back.
Gary Yeoman
Thank you.
Operator
Thank you. Our next question on the line comes from Mario [indiscernible] from U.S. Please go ahead.
Unidentified Participant
I have a couple of questions. So maybe the first one probably Angela would be best to answer. So I looked at your balance sheet for all the quarters. And in the current liabilities, you have unearned revenue. And for all the quarters, since December 2021, that amount is about $4.5 million and this quarter it jumps to $8.5 million. And if you take the difference between that, it’s about $4 million. So the question is, did you have a revenue during the quarter of about $4 million that wasn’t recognized during the quarter and that’s why it showed up as an increase of unearned revenue on the balance sheet.
Angela Little
Hi, yes, thanks. So twofold answer. There was some additional revenue increases in our taxation division that is project driven and does sometimes result in deferred revenue that’s recognized later. That’s a small portion of it. A larger portion probably around $3 million of it is part of our strategy to resolve the related party AR by the end of the year. As a result of this strategy, we opted to defer the Q3 revenue. We expect to have a resolution by [1231] (ph) one and have that cleaned up. So just to be conservative, we deferred the Q3 revenue.
Unidentified Participant
So if that revenue was recognized, it looks to me like your — you would have probably shown a slight increase in revenue from quarter to quarter, and probably you would have been EBITDA positive. Am I right?
Angela Little
That is correct. Yes. If we had not deferred that revenue, we would have been slightly EBITDA positive and quarter over quarter revenue would have increased [3%] (ph).
Unidentified Participant
Okay. Thank you for that. The second question that I have is, also on the balance sheet, your current portion of long term debt showed up at $61 million, and I was wondering why is that? Is it because of the covenants? Is this going to move back to long term liabilities, please help me here?
Angela Little
Sure. Yeah. We — so because we were not in compliance with certain loan covenants, we are required under IFRS even though BMO provided as a waiver of those covenants, we’re still required to accelerate all of the debt to current. As I mentioned earlier, we just completed a renegotiation with BMO of new covenants, and we do anticipate we will be in compliance. So when you look at Q4 for the audit, that long term portion will be re classed out of current.
Unidentified Participant
Okay. Thank you very much for this…
Angela Little
I’m sure you’ve also noticed this higher in Q3 because of the expanded credit facility put in place for the Blue Water acquisition. It was $30 million.
Unidentified Participant
Yes, okay. Thank you for that. So I find it very interesting that going back to my first question that if it wasn’t for that lack of recognition of the revenue, extra revenue of $3 million you guys would have shown a positive revenue growth from quarter to quarter and EBITDA positive. That is pretty incredible considering how awful the real estate market is right now.
Angela Little
Absolutely. Yeah. And I think it just speaks to what — I kind of mentioned earlier that, yeah, volumes are reducing, but we have been picking up market share. We are doing cost reductions where we can. We are continuing to be strategic in that in certain areas where the volumes are continuing to be impacted. But yes, you’re absolutely right.
Unidentified Participant
Okay. Thank you very much. I don’t have any further questions.
Angela Little
Thank you.
Operator
Thank you. Our next question online comes from Colin Fisher from Toronto. Please go ahead.
Colin Fisher
Good morning, everyone.
Gary Yeoman
Good morning, Colin.
Colin Fisher
So a couple of questions that are, I think, are on the burning edge of a lot of people’s minds. The related party receivables, obviously, it has remained high. I know that the goal was originally to have it be current — fully current by the end of September as per the last call. Can you give me some clarity as to what’s going on there? And I noticed also that post the quarter, there has been some additional collection of around $1.1 million based on the 9% additional collected. Can you give some clarity as to where that is and maybe that also goes back to [indiscernible] question vis-a-vis the deferred revenue?
Gary Yeoman
Angela?
Angela Little
Yes, sure. Yes, I mean, obviously, the related party issue is top of mind for everyone. It’s always a sensitive issue. We want to be as completely transparent as possible. We have made some good collections as you noted this quarter. We collected more than — we invoiced and we are working on a wholesale plan for the end of the year to have that [indiscernible] units, to have that AR cleaned up. We’re not really ready at this time to go into the details, but [indiscernible] when we issue our audit, you’re not going to see a related party balance quite that high.
Colin Fisher
Regarding the acquisition that you do, do you capitalize all of the costs at the time of closing of acquisition or do you expense any of those — sorry, capitalize any of those and then lead them into income costs later?
Angela Little
Under IFRS, we capitalized the majority of the acquisition costs as appropriate. Some items are obviously expensed. But again, we just defer to the IFRS guidance on that. Generally, with the acquisitions, we record everything on a provisional basis and then do a full purchase price analysis, some of the more complex acquisitions, we use outside consultants like [indiscernible] to help make sure that we’re valuing the intangibles and the goodwill appropriately. But yes, we generally follow IFRS guidance and anything that would be expensed would be backed out — backed for adjusted EBITDA calculation?
Colin Fisher
And can you give some color, in the last call you guys had referred to some of the cost controls that were — you guys were implementing 4Q, I think they were starting in September. I’m wondering if you could give some color on that and how that’s looking on a go forward basis?
Angela Little
Sure. Yes, we — so kind of going back, we did pretty significant reduction in force in May. We did another pretty significant reduction in force in August. Since that time, we have done what I would call more sort of strategic reductions, targeting specific businesses that have been more in active than others. We continue to do that as — we’re obviously looking at our forecast, it’s not just monthly, now it’s almost daily. And so, we continue to make adjustments where needed, but we’re also doing other things. I mean, continuing to try to integrate and consolidate the acquisitions to get efficiencies, particularly in the kind of administrative areas where you can centralize task. We’ve looked at all of our project and product development, prioritize what we think in this environment makes the most sense to continue doing and kind of put on hold some of the other things that we’d like to do but probably aren’t in the best interest right now in this market. And we’re just going to continue to do that. I think we’ve made some really good strides in the cost cuts that we’ve done. And hopefully between some of the synergies and process improvements, I think we’re really bridging the gap.
Colin Fisher
Can you guys give some color as to where you’re at vis-a-vis breakeven or becoming profitable for Q4? Or is that getting pushed into Q1?
Gary Yeoman
Well, I think — go ahead Angela.
Angela Little
I’m just going to say, yeah, we are — because we — the conditions obviously have been evolving so quickly. We have internally updated our forecast for Q4 to reset BMO covenant. I think we are finalizing our 2023 budget. It’s pretty close to being done. And then I think we’ll be comfortable giving out guidance for 2023 hopefully in the near term.
Colin Fisher
And is that — because the guidance you’ve given has dropped Q4 revenues based on previous business line significantly. Is that primarily for covenant reasons?
Angela Little
Well, I think it’s based on the market conditions, the volumes, particularly in some of the business units like in our title area that’s been more impacted from the refinance and some of the purchase origination volumes going down. Some of it’s been timing of rolling out some of our new products. So I think it’s just indicative of just the overall market conditions.
Gary Yeoman
Yes, Collin, I think that the big impact for us is that, Stacy and Jim have done a hell of a job as far as bringing AOL online and we have an abundance of clients that we’re working through. But as you know, when you’re dealing with major financial institutions, the integration and the testing and all that is moving at the pace of a slot. And so, it doesn’t really indicate how vibrant and robust this business is going to be. And quite frankly, if we’ve made an overzealous position, it was in our AOL that we felt that it was going to move a lot quicker than what it was. It has moved a lot quicker in the way that we’ve been able to board new clients, but everything that we go through testing and piloting and all the other things just take some time.
I mean, one of the reasons that we — for example, bought [indiscernible] years ago, because we inherited 150 master service agreements. And so, as most people know, logging a major bank could take up to 1.5 years to get approved from a legal standpoint, a financial standpoint, the veracity of reviews that have to be done in order for you to receive the authorization with the master agreement is extremely robust. Bringing AOL on is much in the same way. And so it’s just taking a little bit longer. Otherwise, I think we would have a knockout quarter and year end.
Colin Fisher
Thank you for that. Regarding the financial reporting is there going to be any movement towards breaking out the different business units to give some clarity as to what’s moving what?
Gary Yeoman
Angela?
Angela Little
Yes, that is — segment reporting is something that we have been discussing all year. Now that, I think, that we’ve kind of gotten through all of the acquisitions, we are analyzing what’s the best way to move forward with that. And we will definitely be in the future providing a lot more data on specific lines of business.
Colin Fisher
Will you also be putting some sort of roadmap as to what you expect for future amortization and depreciation matrix so that we can get some more forward looking guidance on that as well?
Angela Little
Sure. Yeah. I mean, that’s obviously something that we have and we’re happy to provide that as well. I know it’s a significant number because of the value of the intangibles and the goodwill and the balance sheet. So yes, we will definitely be able to provide that.
Colin Fisher
One other question vis-a-vis the covenants. How material are the waivers and how difficult or easy will it be for you guys to get back on side?
Angela Little
Well, BMO has obviously been an outstanding partner for Voxtur for a very long time. They have worked with us through all of the acquisitions and just sort of the evolution of the company. So it kind of gets about saying we can’t think them enough. And I think they recognize the long term value of the company and they recognize the kind of unprecedented market condition that are taking place right now. I think we have reset covenants recently in a very — kind of reasonable and conservative manner that should get us through the next couple of years as these conditions probably continue to be challenging, at least through 2023 and then hopefully start to rebound a bit in 2024.
Gary Yeoman
[Multiple Speakers] Excuse me, Colin. Having said that, we have utmost confidence that our repayment of interest and principal as we will engage in that over the course of the next 14 months is very attainable for us and we do believe that we’ll have free cash flow after that. So we’re very confident as the bank is and for us being able to meet our thresholds.
Colin Fisher
Okay. I’d like to move maybe to a little softer items then. Vis-a-vis the TSX uplisting, is that still on the table or has that been deferred or what’s the plan on that?
Gary Yeoman
Yes, we’re moving forward with that Collin. We’ve got a few administrative details to deal with. But the intention is that, as soon as possible we’ll move towards it.
Colin Fisher
And then in terms of communication, I know that there are certain criteria and limitations that you have. Will there be any sort of — I mean, I think there’s a big fear out in the marketplace that the next major update is going to be for — after Q4 or the annual, which is June or whatever, May, June. Is there going to be a bit more of an updating of the marketplace on what’s actually happening with AOL foreclosure, the tax [indiscernible] Voxtur Direct and the Voxtur Wealth, is going to be a bit more of a communication from the firm on that type of information.
Gary Yeoman
Well, Colin, I think that the biggest criticism that you have had and I think the aspiration of everyone is that, we need to have more press releases or at least updates with respect to how we are progressing. And so, it was certainly top of mind and as we log on with new clients when permitted and as we reach certain milestones it’s our intention to try and keep all of our shareholders up to date as humanly possible without breaching any requirements that they have with respect to the Securities Commission. So we know that providing our shareholders updated information as soon as possible given the challenges of these economic times right now, we will do our best to keep everyone updated as we are progressing.
Colin Fisher
Okay. That’s it for me. Thanks very much.
Gary Yeoman
Thank you very much.
Operator
Thank you. [Operator Instructions] And I’m showing we have no further questions in queue. I’ll now turn it over to Gary for closing comments.
Gary Yeoman
Okay. Thank you very much everyone for calling in today. This concludes our conference. Thank you for participating. You may now disconnect. Speakers, please standby for your debrief. Thank you.
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