- Earnings call transcript Q3 2022

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Operator

Thanks for standing by, and welcome to the Doma Third Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Beatriz Bartolome, Head of Investor Relations. Please go ahead.

Beatriz Bartolome

Thank you, operator. thank call. joining and XXXX third everybody, conference earnings afternoon, you Doma's for quarter Good Doma a investor.doma.com. today, which Earlier issued is quarter its also results, third available at press release announcing and Leading will and Financial Mike today's Officer, Officer, be Founder Chief discussion Smith. Max Chief Doma's Simkoff; Executive

management's we up will Following the questions. for prepared remarks, open call

expectations about will expectations, forward-looking current statements we would to of like on predictions, Before as that remind you based other of contain information our date begin, I that business is our the discussion the and management's presentation.

not Forward-looking but conditions to include, outlook. predictions statements or and of competitive and are and limited performance Doma's business expectations industry financial and

Forward-looking forth cause from X-K goals are factors and/or to results in other filed forecast, today. from and that our those including Doma's historical statements our could Form set risks, to subject uncertainties actual differ materially

the cautionary refer make Report, filed and information, applicable All filings. wherever XX-K to factors more forward-looking Form during make they to recently on risks, For most any in we Annual call statements this discussed statements we uncertainties are that SEC Doma's other appear. please other and

events whether not should a statements undue any the carefully uncertainties Do and other otherwise, reliance as new discussed updating, altering as and or for future You responsibility except any in under filings. statements, SEC result on revising risks factors forward-looking no is forward-looking as DOMA's disclaims required Doma and by obligation consider place expressly information, otherwise law. or of

the described our and non-GAAP measures, call, this including conference to measures retained during premiums in and adjusted profits we fees, financial release. will refer also earnings gross Additionally, other

financial GAAP of release, be and to is and the Max CEO quarter with found can reconciliation a website. Simkoff, earnings available turn furnished description full And with call that, results SEC measures Doma. GAAP XXXX investor the the our on of I'll over been in third our has to which non-GAAP Our to

Max Simkoff

thank and everyone, Good Bea. you Thank you, for us. afternoon, joining

given challenges The way pivotal the continued housing the U.S. I'm Doma, of executed, for was quarter and proud of the third particularly our team market.

to of goal of we adjusted we of actions importance have because Our realities understand And size year for have delivering to the with profitability. housing had the than towards main begun sustainable cycle. of the company In made current cycle, the this delivering we're focusing we be strides of EBITDA calls, short reaching market estate even we financial stated. our real irrespective severity sooner to period length now previously In on I'll our more earnings profitability themes profits, EBITDA considerable adjusted of are of committing keeping results the the right tangible today, today. took expense and a reflect earlier current goal our three there previous time, meaningful benefits

remainder of no First, continued are housing as hope mistaking in now recession, for U.S. relief this has full-fledged pressure and there that dynamic EBITDA the the revising with the little such guidance market for adjusted term. This is is near results, our a we headed our to year. towards sustained

vision this across better towards environment, lower-cost and staying highly is our homeownership. solutions friction, cheaper deliver rapidly underwriting from we realize Second, operating By challenges. positioned nimble the innovator is the we residential solutions customer space for capitalize the a estate and volatile expense now challenging who now we to our the unprecedented believe to platform opportunity homeowners faster creates are on to the affordability an better, our who readapting where will our and industry chain to removing shifting value frustration in company market scaled to in proven unique we're facing priorities in and landscape real only remain demand Doma, are of instant nationally response underwriting as in technology yes,

on and seems our but consecutive and with further financial local lead prioritizing it Third, capabilities to on market U.S. towards had mentioned of XXXX. give our very I QX now call point to QX sooner the a after current I'll rate federal the more now am returns that priority profitability moment. quarter only now us profitable proven cost I'll tightening division, on to the these by on our late year, despite pleased has expectations third than identifying The turn over believe to topic getting basis four EBITDA. in that detail, turn the early timeline already new more across off, relation previously a entering what XX top execution to by are quickly I roll exhaustively in profitable horizon. adjusted a continues this outlook. we this with We recession. To into three financial and faster to details enable as housing which aggressive results dive team hikes EBITDA adjusted market also are to through and communicated that in be the committee working reductions earlier, we would out improvements things delivered business clear the not themes more underwriting in a today can are the significant adjustment addressed the that the more we delivering areas is and cover of making the Mike in open will as our first ways in build year, momentum entire company, we and

all much to to the and on pace Morgan the versus contributed in at While last real at stubbornly point profitable rates estate. XX XX-year last double have concerns These supply high mortgage fixed time mature than operating year. exerted chains a in affordability broken According parallel same inflation, years. Stanley global factors Research, is housing franchises even geopolitical faster effectively and broader in any deteriorating most pressure the enormous have

measures prolonged growth, the of earlier market upfront to our we with a are combination class implementing of particularly unlikely a state many young different conviction our that downturn success. approach to All is it this believe make Doma magnitude. a in operational these stages side in to financial of companies long-term other from For of enable to and proactive the companies, given those other

We are more as a resilient, stronger profitable from cycle housing emerging this company. and to committed steadfast,

premium Our challenging impacted the market from business become performance mortgage sequentially, the rate sharply driven in macro as environment. in mortgage the QX, pressures interest XX% $XX was will readjust the XX% which we homebuyers. delivered we million orders, quarter-over-quarter, fell continues to quarter of to we higher QX to which as aforementioned has fees, QX, a In by and retained closed prior that extremely lower for frame continue refinance versus down did by market by

was directionally purchase orders XX% versus QX, sequentially Our declined expected. which closed

for own we were purchase this QX our to QX, fees. internal discussed execute XX% fact earnings we mortgage and or made and of the forecast plan XX% going reluctant update our earlier more their QX that of As the direct residential volume our calls more other we which and In slower residential by, of year to that numbers. our our industry and felt orders business year, up were premium and retained that direct conservative we considerably forecasts formed macro than had was

amount of have now forecast our into ahead outcomes market the utilized could continued circumstances contraction against, other model no conservatism of have unprecedented to these groups of potential industry that we've independent of to our forecasts pace in and adapt we've baked While set the predicted internal seen. own

Home that anyone has households addition expected. for fixed in the slowed given rate to of a decline, refinance market last volumes XX-year In also more the the to continuing out now has the purchase U.S. X%, than threshold XXXXs. of exceeded reach side purchase is seen early many

being few has pending pace driven home XX% just cancellation from highest the share of increases transactions transactions, This the cancellations canceled. record in is past of the of all March Additionally, months purchase of for rates the rate of on rapid month purchase XXXX. aside with in interest higher September

to for of pressuring our to the and all retained at of year. remainder play premiums continue expect We macro existing generate the ability factors the fees

EBITDA for adjusted Mike factors, Given revising will XXXX. these provide guidance details those are we shortly. our

late many Mac magnitude pay for critical. unique life the they've calls of $X,XXX is Doma. dynamics market overall of us find FHFA things value in such dollar received the difficult more have innovating the environment industry, to the the companies for individuals affordable Fannie across of of our made and market, a challenging access and other for While orders housing more housing made in to nation with Mae, of as ways as the And opportunity seen several provide homeownership. every housing. the mortgage increasing average conforming The increased This a for kind Freddie payment year over from afford having American to in disposable a now income, equitable has who in on homebuyer offers ago. monthly versus largest the average just struggling transaction by they are of over We've mortgage the also stakeholders now to XX%

of We to proven of in we the business transactions demonstrated company, priorities adapt ensure homeowners the business process to platform. faster our is time better, and readapting nimble who more day capabilities the and we types are has exception. Since our and only we've drive are value to our cheaper. we opportunity, profitable no close the technology player estate market across that even founded seize in ensure real enough our our space best arguably to execution and current this be the cycles help underwriting also we the all footprint To that of conditions, and can

purchase potential review the to Doma end, footprint of at configuration get division, can branches forward. we've an in underwriting and building first determine our deployed additional Towards on of in conduct instant best our new should local expansion of gaining our we've be the several team Enterprise pause In transactions what decided further platform going our transactions Intelligence exhaustive opportunities seen more for across the the success distribution power share to business, scale. we so national identified that to our have branch this

recently closing to unprofitable this part footprint, of initial begin review As branches. the took actions the team of

footprint to technology-enabled in right platform key we previously and are we're can efficiency in to for priorities place have the businesses, we with As and line know distributing in And while had cost-effective how adjusted both to business most we both call, enterprise of make profitability. our utilizing third because also with EBITDA path attest, the In summary, these adapt XXXX focus our this a our and remaining reaching broader ensure today's on will ways. In keeping important previously near-term theme the and than shift decisions our enabling evolves profitability to communicated. Today's than the to planned. conditions, the EBITDA are now broader solution how in adversely in for given doesn't underwriting maximum that investment this to on we structural faster particularly adjusted to market focus earlier our pace we market committed XXXX reaching the local for customers is, impact timeline revision profitability scaled outlook with downward trajectory. sure reach milestone the right us channels a of is now

quarter provide fourth We our exact will earnings during look call. an to timeline

that the We EBITDA cost million. has reductions our QX second tune we path versus QX in are done and of led our can because it seen a that be profitability this confident now a more in $XX adjusted that of can after significant team of improvement delivering to firsthand quarter to the achieve ambitious set

our trajectory next deliver to by move realized, agility of leaner mission on team those focus, I in that to as upward can a mentioned we QX our cost QX, this expect and we year. into QX cost our reductions continue as we earlier, full as structure with benefit reprioritizing adjusted greater confident is and EBITDA prior the be continue While in

significant market evaluated with margin current and quarter now have updates in the it our for a entire and long-term. over efficient is to for To Our challenging in transactions that underwriting opportunity presents strong more that being with and housing better, in cheaper on to share our industry, solutions the February. sum in to business review the additional we in call drive despite of branch is instant year Doma the mind, network, up, objective way. next during another goal more for Similar earnings demand homeownership to believe paths get deployed across we the expect to sustainably front both our will unique faster benefit the QX the we everything right this more

profitability recent provide to better. outlook. With will EBITDA technology, us We on Smith the momentum that, financial the on space further CFO, people our Mike? have the that to leading a to our remaining the while Mike and details provider pass is toward call the who a performance and path changing do help I will our you faster update now over with this, for our an

Mike Smith

scheduled earlier will filed Unless recapping and the into press quarter. third dive our today everyone. the the Thank later filed of my be financial comparisons. then the cited all quarter-over-quarter will and our Please start today of details I I afternoon, our third are good earnings quarter, refer quarter for you, to XX-Q figures Max, sequential otherwise to results release by full and for in or specified, remarks details.

Given our expense and intense reductions during on are savings outlined We already there. made I'll profitability Max third these and cuts. remarks, focus quarters, realized his significant second seeing in from that the start

EBITDA. continued benefit on of see and our the to improvement actions expect full year We gross this profit contribution adjusted these and our adjusted QX in

in measure, quarter. in last third Adjusted adjusted economics which negative gross was as million profit XX% of gross unit EBITDA, in profitability a million quarter third was percentage to in improved Adjusted main quarter million the compared $XX $XX sequentially. compared X% XXXX $XX of million measure QX. of to to primary Our $XX RPF profit, up the our XXXX, XX% XQ is negative

our in improvements actions we and size adjusted expense driven EBITDA adjusted cost were quarter-over-quarter took to year earlier Our the by this structure. profit gross right

environment. We the all drive and balance growth value will of in will most our for believe the that profitability a navigate and our focus generation long-term we prioritize areas with stakeholders on continue cash investments our to over as current we investments

GAAP a $XXX down of million, we In XQ terms XXXX, on performance in revenue XX% quarter-over-quarter. basis of reported our top-line

GAAP a portion Doma premiums does the not includes agent retain. that As reminder, third-party revenue of

quarter-over-quarter, believe much With mind, quarter, and million $XX better is third lower was premium So underlying performance. retained premiums Doma's in of purchase We down we this refinance top excludes retained this focus representation which RPF, by on the fees, closed driven or line XX% third-party in a Doma's the and by RPF orders. agents.

We recognized segment on declines triggering quarter, quarter's distribution and other expectations price closed heard companies The rates participants. on mortgage and landscape. but goodwill or current cash last macroeconomic volume its As potential, of to purchase and and industry, call, in until continue events Accordingly, and X% charge to of mortgage Fed are are note XX%. a have generation $XX price. rate as down you we funds refinance during and Doma housing we rates reflection down non-cash refinance as charge our orders charge for the in tightening accounting million. orders coupled depressed the of cycle. at believe economic third impacted rising significantly closed One the mentioned not apex that the this rise our both with from goodwill other a stock impacts expected were stock impairment profitability this rather impairment conditions other reaches have industry for current item future our this do were include sustained XX% on the in Doma's Today,

year turning and our outlook updated full the to XXXX. for guidance Now,

our call, retained purchase risk and we was for our earnings refinance premiums second of in rates. in deteriorate rise further were due both at mortgage for QX year potential a in to fees the highlighted expected we and full the mortgage as believed half As faster-than-expected XXXX to volumes

EBITDA. for $XXX million adjusted full XXXX year are to negative now to million negative our We $XXX guiding

has not in guidance for revised our expectations Importantly, XXXX. impacted profitability our

managing the profitability to more As business we mentioned, to timeline. we adjusted previously are now a accelerated on EBITDA us get

focusing and pass we At adjust before the in I call the to open uncertainty our expense we for on continue closing the are can will time the a base Max industry, in to control. and what and we closed remarks open to now will back watch trends call orders accordingly. We closely operations of questions.

Max Simkoff

stated. to of Thanks EBITDA take I and reiterating we've remarks our side steadfast faster these emerge our the will adjusted of opportunity questions. laser-focused better, forward committed Operator, stronger outlook and progress support. on we and look than by faster and to for ready affordable, potential contribution driver's profitability in that are of the Mike. our continued even everyone and on this to to would challenging acknowledge other more us that we thank the a previously remain the housing my enable for long-term owning their our of conclude team like selling us more seat having buying, on wide conditions. home to a to XXXX vision rebalanced I way in market or the market customers the reaching who Despite We confident to priorities ongoing updating and make QX. focus experience our range we're will we're keeps outcomes,

Operator

our JMP from the line Securities. comes Instructions] from question [Operator Carletti first of And Matthew

question Your please.

Matthew Carletti

Thanks. I up in the EBITDA And you made conservative could of hoping Good statements obviously reaching assumptions. on afternoon. you XXXX Max, the kind I earlier housing about follow background had profitability previously than guided. market was commentary some about

broadly So just is? housing can variability be does what of the make commitment? adapt? that of kind what of a you there market have are sort that business that guys kind kind that have when question in how matter flexibility Or to the you you such is assuming of, some it backdrop of backdrop readjusted you and much the And

Max Simkoff

platform of are to to and we largely will doesn't scalable business on timeline making why that in with progress, question, able your be the which regardless backdrop would the of making second more start backdrop. don't continue does question, part our and that is and Matt, progress matter good the I say leaner good developing matter. Great how Yes. I infrastructure because that much it meet

strategies for how of What a significant we standard XX-year that have last of proved other actions we'd than year more market business. formed numbers in manage movement do we and I that was our we even this benefit conservative minutes which fixed. has mentioned the this see to to we've learned that was see adjusted use enterprise we we're said You conservative us at evaluating, EBITDA be kind And and more quarters, next the in and with quite channel. now further bit probably not thought recall, industry you're reflected so the technology allow ago, the internal we efficient year own expect the dynamically have enough that potential forecasts. forecast and were as and leaner we that the demonstrated our even in taken several the frankly, more now scale quarter also even conservative quarter a despite which than going the in would greater it which just that we thought – in already we more two this being is, And what to think way few we've forecast, you'll achieved earlier what entrepreneurially upward starting we've given to learned our an conservative perhaps

prepared I'm to EBITDA again has their mentality our the evaluating no many is. prepared to So really not matter and we're organization now specifics what too that on strategies But sure to several backdrop do demonstrated to make because, get that the market think I more go that. into right we mindset is goal,

Matthew Carletti

opportunities, I of going think some along is you follow-up to My Great. kind there. Okay. but those covered it of be other

So some till more color. next we'll to wait quarter get

you much. So thank very

Max Simkoff

Matt. Thanks Great.

Operator

of the Davidson. our D.A. And from Tom Instructions] from [Operator question you. line comes Thank next White

Your question please.

Tom White

easy kind sounds follow-up the branches Can to difficult – local those by about talk maybe big lowered I kind least curious, piece Great. for to taking that or of the about percent of maybe then you seed recapture? does on a these those, your year. just, of earlier the and think of about like somebody had that you market what at exiting a one follow-up. a what you outlook profitability at last is EBITDA of my just – re-enter it share be down long-term? that this Also guys. is this reconciling point I do of the might piece. you evening And close? kind guess some how might Good maybe biggest branches with shutting It question. mean else comments markets Thanks Like for to

Max Simkoff

Yes.

shut – seen right on can And parts to the pretty we're or actually gains think many of driver markets. ground I can I let that share of those the there. might for I a branches market, we're adjusted that, the a last work, Mike so our into customers. would now different I mean in market first overall in enterprise a team driven, the even its markets the don't with profitability of the business kind confident headway contraction getting to some here say the me profitable. wallet across In new are we there's share in EBITDA we've think main detail. speaking, least quarter. for share. your started provide take we've seen some also even down business, exit. ask our make business, number our a mortgage to we've local has exiting gets of expand And quite significant faster and how larger specifics go going business driven. that that think part we're question, going significant on of to many and gain not number And focus we yes, We've is is, number the how I which additional broadly answering the materially example, may I shot accounts parts added of would in that just enterprise at to had that, we that decisions I the by target profit of And

experienced actually growth. In third local in; think fact, over I that of we're those quarter-over-quarter we markets in

going question, what's guess part adjusted kind I is that a to against markets target that despite of the gains on faster, our decisions. that's I those across lot the get really share think behind biggest primarily decisions. driving really make with harder market we're and we so. your how these to them? great cases back of to that a But the prioritize to EBITDA a the some is strategy for into exiting making of that last to don't will factor I we we be that off our making business, in fact get we're of, platform frankly, scale – how business. the it's long grow seeing sure have the run in and focus it's So It's sure driver profitable around say, again, would not main it make those

Tom White

That's helpful. Thank that. follow-up. one just you for Maybe

of touched calls some You kind kind make Fannie Freddie to affordable. other and and on of housing industry the participants in more of kind

can title you're earlier and year, what Fannie of I I traditional loans. discussing think before and for curious I your give that insurance opinion Freddie an guess, was changed on into to this business? what where means use that of kind some rules letters fits and some like instead just that now lenders, option attorney

Max Simkoff

Yes.

letters as minutes decision the process. you title Fannie pretty expensive them. Mae reach a And deal. it's time. homeownership of single-family I traditionally really referencing, I for accepting I I probably it's insurance, lot attorney is country, had part about out seeing would mentioned Freddie action they I so great of a I some opinion we're offered you're industry in know, point greater The title we're enclosing actually now that of the been a was say kinds mortgage this the that ago, is also out even a think product bottom significant announced for had would things already people. the [ph] as And around those it participants. and of call largest from that talking is, would to think about been And completely Fannie that – is purchaser pretty and mortgages line of think of Freddie few what accepting being urgency as and that example broader residential the start sure, I'm

And as reach, here process. mean, because a of literally thousand part cost people and some dollars the $X,XXX of becomes I several that can product there, of we're just talking those closing or about out of

amongst part more the So to we GSEs and would wanting interested GSEs think, great a of market, is, and that. in letter the there area, the products I amongst to think and the more about in the over more the And years, expect a great alignment, really in of be frankly that making affordable it. and I alongside see innovation for FHFA sure there's both FHFA, and coming keenly the us a attorney and opinion example lot expedient we're we're

Tom White

Great, thanks. the local the One last The a with Like a rolled something that happening? factor about in, your how there up else line one you that growth I'll of Or made in Intelligence curious, third seeing sorry. was just markets the that comment I'm local quarter-over-quarter. does flip had Doma markets platform was growth? out?

Max Simkoff

Yes.

Doma Intelligence to business. it business, more actually rolled because the to the platform think part of i.e., I in local where we've is safe now say out we've now seen progress in that

embraced really of I driving was part business of that technology We've our the would advantage that think making that quarter that because escrow that heard and part now there. officers building share say relationships, fair that of number really this now the a sure say in in are managing from that part we've critical to out rolled added growth. of successful it a would customer servicing be I in have it's who we're past meaningful and advantage. selling them

to fair say advantage. be that of would is it think helping that that I growth some So drive

Tom White

you. Thank Okay.

Operator

your Thank you. program. for Thank you, gentlemen, conclude well participation. and question-and-answer today's as session ladies This does as the

disconnect. Good day. now may You

Doma (DOMA) 12 Nov 222022 Q3 Earnings call transcript