Operator: Good afternoon. My name is Pam and I will be your conference operator today. At this time, I would like to welcome everyone to the Dye & Durham Third Quarter Fiscal 2022 Earnings Call. I would now like turn the call over to Ross Marshall, Investor Relations, on behalf of Dye & Durham. Mr.

Marshall, you may begin your conference.

Ross Marshall: Thank you, Pam and good afternoon, everyone. Welcome to Dye & Durham’s conference call. Before we start, we would like to remind you that all amounts discussed on this call are denominated in Canadian dollars unless otherwise indicated. Please note that statements made during this call may include forward-looking statements and information and future-orientated financial information regarding Dye & Durham and its business and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicate management’s expectation of future growth, results of operation, business performance and business prospects and opportunities.

Such statements are made as of this date hereof and Dye & Durham assumes no obligation to update or revise them to reflect events, disclosures or circumstances except as required by applicable securities laws. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks or uncertainties could cause results to differ materially from the results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward-looking statements information and future-orientated financial information section of our public filings without limitation, our MD&A and our earnings press release issued today for additional information.

Joining us on the call today are Matt Proud, Dye & Durham’s Chief Executive Officer and Avjit Kamboj, Dye & Durham’s Chief Financial Officer. A question-and-answer session follow the formal remarks for research analysts. I will now turn the call over to Matt for his opening remarks.

Matthew Proud: Thanks, Ross. We're pleased to be here with you today to review recent developments at Dye & Durham as well as our financial and operating results for the third quarter of fiscal '22 for the period ending March 31, 2022.

We continue to execute our strategy to build a business of scale through acquisitions and investment in our existing platforms to drive enhancement and new capabilities that improve the efficiency and productivity for our customers. Today, the business is dramatically larger than it was at the time of our IPO 24 months ago. In the last 12 months, we've generated $430 million of adjusted of revenue, and $241 million of adjusted EBITDA. We continue to deliver against adjusted EBIDT margins, well above 50% with this strong growth. We're creating a global leader in the B2B software and services space, services legal and business professionals.

And we're expanding our market reach by entering adjacent ecosystems in the U.K. and Australia with the acquisitions we recently announced. Our products are used for a wide array of underlying transactions across major Western English Speaking economies. We integrate workflows, the processes that legal and business professionals use every day, sometimes multiple times a day into one convenient platform. We built a highly reliable platform that generates digital infrastructure like cash flows, the annuity like nature of our revenue, and relatively fixed nature of our cost base provides for a tremendous level of predictability both for revenue and adjusted EBITDA.

It also allows us to drive the high EBITDA margins we do because revenue can scale dramatically without any corresponding cost increase. Why are we pursuing an acquisition-based strategy? It's the annuity like nature of the revenue streams. Customers in our line of business are extremely sticky. Building a business organically, it's challenging. It's a slow process, and there's no certainty of success.

With a proven track record of acquiring assets, optimizing the value, the assets generate, the customers and retain those customers at the same time. Our acquisition strategy has broadened our product offering with complementary solutions that service adjacent markets extend our position on the value chain and create opportunities to cross-sell with our existing customers, law firms and financial service providers. The results speak for themselves. Adjusted EBITDA in the quarter of nearly $67 million, revenue of nearly 123, each of which are up 78% compared to the same period in 2021. We're delivering this strong performance despite challenges experienced in the real estate market, a market we serve.

Our conveyancing workflow software generates the vast majority of our revenue today. We earn a fee per transaction on a per transaction basis. Real Estate volumes were down significantly on a year-over-year basis in Q3 of this year, but we've managed to migrate this, by establishing a new pricing model that reflects the value of our platform delivers to customers in terms of efficiency and productivity. The fee recharge is a relatively small portion of the total closing costs in a real estate transaction to ensure an efficient and secure housing transaction for what is likely the most important transaction in our customers lives. We've demonstrated through multiple market cycles that we're able to manage the business and retain share and we continue to do that today as you seen by today's results.

In January this year, we introduced a new subscription model that allows our conveyancing workflow software customers to lock in at a fixed price for three years in most cases, based on a minimum number of transactions. By moving to a subscription-based contract model, we're seeing good transaction and pickup with our customers in the early days. Again, just launching this in January, after a very short period of time, we've signed up 21% of our targeted customers, including 42% of the top Ontario customers on our conveyancing workflow software products. We anticipate this number to grow significantly over the coming quarters. We also continue to invest heavily in our offering.

Since the acquisition of the TELUS Financial Solutions business in December, we've enhanced our offering to lenders and lawyers by adding two new financial institutions, TV and simply by CIBC. These have been added to our platform to assist lawyers and the discharge of their mortgage. This is in addition to our relationship with BMO that already existed on the same product. Better connecting lenders and lawyers was a large part of the thesis behind the TELUS Financial Solutions acquisition, and this is executing against that thesis. Moving to Page seven of the presentation that goes along with this quarter.

We believe scale is important. And since the IPO we've rapidly built a business that generates strong top-line growth, with an industry leading margin profile as exhibited in this chart on the right, you can clearly see where we perform in the upper right-hand quadrant relative to a peer set, which is clustered towards the middle of the four quarters. We received a number of questions recently on the announced acquisition of Link Administrative holdings out of Australia. For some background context, in December, we entered into a definitive agreement to acquire Link Group for approximately Canadian $3.2 billion. The acquisition of Link positions Dye & Durham with significant larger scale in Australia and the U.K.

and moves to diversify our revenue mix. It provides a highly recurring revenue compared to the highly reoccurring nature of our revenue that we have today. As an update on where we are in this transaction process, here's an update on where we are in this transaction process. This week, the Australian courts approved the convening of the Link Group's shareholder meeting the scheme meeting to vote on the proposed acquisition of Link Group by Dye & Durham, by way the scheme of arrangement. The Link Group also dispatched to its shareholders this week, the explanatory booklet for the scheme meeting.

The scheme meeting is currently scheduled to be held in mid-July, with a closing of the transaction targeted for early to mid-August this year. Link's Board of Directors have unanimously recommended to Link shareholders they vote in favor this transaction. The transaction requires a 75% approval from Link shareholders in order for it to proceed. Subsequent to the closing, we've already begun the preliminary preparations for the sale of the BCM and Fund Solutions business which are non-core to the acquisition as relates to Dye & Durham. This was previously stated earlier in our last quarter in December.

The Link Group acquisition gives us significant financial and operational scale across core geographies in Canada, Australia and the U.K. Look to put simply, Link is a transformative acquisition for us as we continue to scale this business globally, and it further demonstrates and position to Dye & Durham is an unparalleled Canadian success story when it comes to technology. With that, I'm going to turn it over to Avjit.

Avjit Kamboj: Thank you, Matt, and good evening, everyone. Thank you for joining us today.

It was another record quarter for us. We reported revenue of 122.9 million during the third quarter, an increase of 78% from revenues of 68.9 million a year ago. We generated adjusted EBITDA of 66.8 million, up 78% from 37.6 million a year ago. We continue to maintain our strong EBITDA margins coming in at 55% this quarter, which is in line with our target range of 50% to 50%. Our significant top-line growth has been fueled by both the acquisitions we completed in the last 12 months, along with the integration activities and our organic growth, which includes the realization of synergies from price adjustments, Matt just discussed in his remarks.

Total operating costs, which include direct costs, technology and operations, and G&A and further marketing costs were 56.1 million for the quarter, or 45.6% of revenue, compared to 31.4 million for the third quarter of prior year. The increase in direct costs is directly tied to our revenues, and willing fees proportionally as our revenue increase. Increase in other operating costs is primarily due to costs acquired from the acquisitions completed during the period and our continued investment in human capital for scale, including our significant investment in our technology operations. We expect our operating costs to continue to be within the 40% to 50% range. Net finance costs for the quarter was 18.3 million, an increase of 30% compared to 20 million in the third quarter of prior year.

The decrease is primarily due to non-cash, fair value gain on change in fair value of convertible debentures of $38 million for the quarter. Again, as a reminder, IFRS accounting rules require us to mark-to-market or fair value or convertible debentures each quarter so we do expect this variability in our finance cost to continue. In addition, during the quarter, we made a partial repayment of the Ares credit facility we had drawn down in December, reducing our debt by $615 million. As a result, we paid $12 million of additional interest as prepayment premium and also recognize non-cash loss of $18 million due to write down of unamortized portion of issuance costs. Acquisition, restructuring and other costs for the quarter, where 12.7 million compared to 5.9 million in the third quarter of last year.

Acquisition costs primarily relate to the Link transaction and the professional fees paid related to the CMA matter. Now on to Slide 12. We've built a resilient business. On this slide, you can see the consistent growth we have delivered on our adjusted EBITDA during the past quarters and the growth we have delivered in the last 12-month period. We've managed puts and takes during this period to deliver outstanding performance.

As we all know, and as Matt discussed, one headwind we continue to encounter is the real estate market. It has cooled off on a year-over-year basis as sequentially on a quarter-over-quarter basis. Again, we took very decisive action in short order and managed it through this environment. Despite lower real estate market transactions, our adjusted EBITDA growth stays strong. With that, I will now turn to the operator for Q&A.

Operator?

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Rob Young with Canaccord. Please go ahead.

Rob Young: I didn't see any reiteration of the guidance for 2023, they get to 350 million as a bottom-line for 2023.

Is that still relevant now?

Matthew Proud: Yes, no change in the guidance.

Rob Young: Okay. And I think you also mentioned EBITDA margin target that's no change either. I think you also said something about operating costs and 40%, 50% operating costs target. Maybe if you could just repeat that.

Avjit Kamboj: Yes. It's Avjit. No, change in our EBITDA margin targets, Rob, the flip side, which is 40% to 50% operating costs because no change from what we've previously guided.

Rob Young: Okay, great. And then, I mean, there have been a number of changes in pricing, you mentioned new pricing model.

Just talk us through a little bit of what you've seen on customer churn or any -- customer churn. And if you could just give us some context around that?

Avjit Kamboj: Yes. I mean, it's been mid-single digits. Generally smaller customers, we've seen virtually no churn, extreme minimum churn along largest customers. But for this exact context, like we are talking as low as 4% in British Columbia, and kind of 5%, 6%, Ontario.

Rob Young: Okay. And the challenge in real estate market conditions you're talking about? I think most of your comments you were talking about fiscal Q3, but I was wondering if you could give us a sense of where you see things going in the fiscal Q4?

Avjit Kamboj: I think to be honest, Rob, your guess is as good as mine. I mean, the reality is, we are seeing real estate market volume drop in April. But then they have picked up significantly in May. Historically, May and June are very strong months.

So we still remain confident that these two months we'll deliver strong performance. But again, there's macro factors that we don't control and we continue to monitor the market.

Rob Young: Okay. And then last question for me, I just getting a few questions about a note in the explanatory booklet Link put out around a material adverse change highlighted around one contract up for renewal, and I was hoping you can give us a little bit of context of what that is all about. Then I'll pass the line.

Thank you.

Matthew Proud: Yes, Rob. It's Matt here. I mean, Link has one or two larger customers. The contract is up for renewal as per what the public disclosure says.

And obviously, if that customer is not renewed, which we don't, we don't know, to be the case. That would create a risk. So I think that's what disclosure is about. Nothing more than that, that risk exists without every contract. It has not been renewed, you'd have a risk, so I wouldn't read too much into that.

Rob Young: Okay. So there's not, you don't expect that you'll get an indication whether that sort of renewal or not before the deal closes. It's just in case –

Matthew Proud: I don't know the exact question.

Operator: Your next question comes from Thanos Moschopoulos with BMO. Please go ahead.

Thanos Moschopoulos: Hi, good afternoon. Seems there was 80 million of M&A in the quarter that wasn't previously disclosed. Is there any color you can provide in terms of geography or type of asset required?

Avjit Kamboj: No, so there was a confidential acquisition that was made. There's nothing additional we can add to that.

Thanos Moschopoulos: Not even in the geography.

Avjit Kamboj: It was not a material acquisition for us. The total amount you're seeing in the column is multiple geographies.

Thanos Moschopoulos: Multiple geographies, but one acquisition, or is it multiple acquisition.

Avjit Kamboj: Multiple acquisition.

Thanos Moschopoulos: Okay.

So just to clarify, so the 30 million target because I mean, basically, you've done additional acquisitions, you're maintaining the target. So the implication that, the targets would have had to be reduced, if not for the acquisitions, or was your position that the targets given previously had contemplated future acquisitions that you have since completed?

Avjit Kamboj: It’s a minimal, minimal attribution. It doesn't change anything materially to be honest from our business.

Thanos Moschopoulos: Okay. Maybe going back to the June quarter outlook.

I mean, understanding that there's moving parts as far as the transaction volumes, but might it be safe to conclude that we should see a directional uptick in EBITDA versus the March quarter? Or is that really going to depend on transaction volume shake out?

Avjit Kamboj: So directionally you're absolutely right. We should see an uptick in the June quarter compared to the March quarter.

Thanos Moschopoulos: Okay. And then I understand that there was a price increase announced assist effective in July. Can you just clarify, whether that's the case? What proportion of the business that might influence just any color on that would be helpful?

Avjit Kamboj: Sorry, I missed the question again.

Can you repeat that for me?

Thanos Moschopoulos: Yes. Sorry. Just my understanding is there was a price increase that was announced for your assist business effective in July. So just wondering if you could provide any color in terms of confirming, what proportion of the TELUS business that influences any sense of magnitude or potential impact? Is any color on that would be helpful?

Avjit Kamboj: Yes, it's related to the Quebec portion of the business. And I wouldn't call it a price increase, we are bundling a lot of products together to create more value.

That said, it will result in more revenue for us. But it's Quebec only. And that product, we did not change the price as we did recently in January, the rest of the country.

Operator: [Operator Instructions] Your next question comes from Stephen Boland with Raymond James. Please go ahead.

Stephen Boland: Maybe the first question going back to the booklet, part of the Australian regulator in there says they're going to may interview two of your large shareholders. Do you know that is for certain -- when does that occur? And what's the scope of that meeting?

Matthew Proud: I'm not sure of the question quite frankly. I do not believe this Australian regulators are interviewing our customers.

Stephen Boland: Sorry, your shareholder, your direct shareholders. It just says any shareholder greater than 10%.

Basically advise the regulators referred to that they can have a meeting with them. I was just wondering what the scope of that would be. You can get back to me.

Matthew Proud: I can get back to you. I will get back.

Stephen Boland: Okay. Just want to confirm, certainly with the stock price where it is, Ares is taking stock at a much higher price.

Matthew Proud: Steve, I think you're referring to, Australia. I think you're referring to the British regulators until the European regulators around the Fund Solutions business. Would you want to be asked to want to divest off that is a highly regulated business and they may talk to shareholders as it goes through the process, but so you caught me off guard saying Australian regulator.

So let's just to be clear, there's multiple regulators in this transaction, there is multiple Australian and multiple -- different regulators in different jurisdictions. This case, it's more European and British regulators referring to. So you caught me off guard with a question.

Stephen Boland: Oh, sorry. Yes.

It's not clear in that document. So that it's British. It's going to the UK. I mean, okay. Just, there's no -- with the stock price where it is with Ares getting stock at a much higher price part of the deal.

Is there have been the discussion about repricing, it's a question we get a lot. Sorry, you have to ask it.

Matthew Proud: Yes. I know Steve, absolutely. We have certainty of funds with our lenders.

And so the view we have is a deal we did. And they are they've contracted to give us funds on the terms we agreed to.

Stephen Boland: Okay. And then just my last question. Again, I don’t see you answer this.

But the press has picked up meetings with regulators over there may or may not be going great, are they concerned about competition, things of that sort. Can you provide an update how your meetings with the regulators have been going over there?

Matthew Proud: Obviously can't give you that kind of color and context. Look, there's multiple regulators involved in this transaction. Just we just talked about a whole handful in Europe. There's different ones in Australia as well.

I can't comment on press speculation, they are kind of what it is and they are going to say what they are going to say. I think the public disclosure is the best place to look for answers to your questions.

Stephen Boland: Okay. But in your mind, I’m not asking a comment specifically on the part certainly, your meetings with the regulators haven't opened up any kind of big issues that you're aware of.

Matthew Proud: I think the best way to refer to is, I don't want to comment on regulators thing.

But I mean, Link put out a public [indiscernible] and no material change, that should be some comfort around some of this stuff.

Stephen Boland: Okay. That's great. And maybe just sorry, last one I know of hogging the puck here. Just talk a little bit more about the integration with TELUS, how that's going where you're at all that kind of operational stuff.

Matthew Proud: Well, look, I think on the performance side now, a lot of like the thesis had to do with connecting lenders and lawyers across Canada as we create and transaction manager workflow system by adding two more banks in the quarter to know where the banks that for mortgage discharge or that part of the thesis is playing out and working, do what we are saying, we're going to do. As it comes integration look, it's ongoing. This is what we do day in day out. Our strategy is to acquire businesses. We're in good shape and at least it’s on track to plan.

Operator: There are no further questions at this time. Please proceed.

Ross Marshall: Thanks, operator. Thank you everyone for joining us today. We look forward to updating our Q4 results.

Good night.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.