Earnings call transcript Q1 2023

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Operator

Good day, and thank you for standing by. Welcome to the Doma's First Quarter Financial Results Earnings Call [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Matt Thunander, Investor Relations for Doma. Please go ahead.

Matt Thunander

operator. you, Thank and XXXX everyone, for Doma's joining Good Conference thank Call. Quarter Earnings First afternoon, you Earlier issued investor.doma.com. results, which today, first is its Doma also a press available at announcing release quarter 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. to 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 position and are market limited performance, Doma's business expectations industry financial competitive

Forward-looking forth on Form cause SEC. from recently results are factors and/or report to results in other filed forecast, annual from and that our those including with Doma's historical statements our could filings the most set risks to subject XX-K uncertainties actual differ subsequent and materially

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

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

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

to found non-GAAP the furnished and results of which Our SEC be on our quarter reconciliation full GAAP and description website. to investor has available first XXXX GAAP been can the release, is measures with earnings in our a a

Max to call I'll with that, the Simkoff, Doma. CEO And over turn of

Max Simkoff

of as Matt. today. afternoon, of significant adjusted profitability. and and business, towards comprehensive also XXXX solidifying scalable progress a you and joining a more made first everyone, Good our you, reaching thank go-forward for while part driving EBITDA strategy we us towards progress of Thank quarter In the mission-driven review

made in end finalizing to on have technology, instant strengthened I going today: on will detail. will discuss two every our our goal American first, our We the before more we are I'm housing CFO, will call profitability our enable get strategies instant significant is to and to themes our our deliver that we've technology we provide underwriting on Mike face value results Smith, profitably that the believe on affordability more four a our what focused proven financial impact underwriting our homeownership more focus There and affordable; proposition making progress with the over profound to deploying us which discuss update be turning core go-forward pressures in of will to efforts the second, an homeowner. efficiently to deploy who nearly

alleviate important there themselves. to markets, brought process support have faster more mortgage of and we've mission the and of significant. better, the on with is stakeholder help originators years market, several in that them And In last us for to number housing pressure benefits home-buying today's an mission, for the Doma's making the homeowners now While mortgage a for, our affordable. remained focused are proven using more technology challenges even has critical

all that income afford home for National roughly now the few have last households everyday to home. from recent gone afford Americans XXXX the American of XX% cannot their Homebuilders Just affordability February quarters, U.S. of most the of data, Association bad house. household The spend to new the current median the median-priced has According Reserve estimates Bank's the challenge severe. would median-priced XX% to Federal to

they of are XX% year items. cost-burdened XX% than worse, them has homeownership affordable U.S. households peak and To considered reference, for than ago a when clear costs, title purchase bubble. closing XXXX purchase industry be income finalizing make averaging spend that is of In less leaving to housing transaction, on For Unfortunately, matters to actually center. X% necessary this the over to up affordable contributing the price title less about just typical of front and less affordable make Mae, been home-buying the more to according housing room challenge a per X% costs, are making upwards purchase to $X,XXX needed which it with and home. our became estimated strategy, settlement in of Fannie home go-forward the

have The insurance is As homeownership. and of ways actively of we discussed as and the efficiently prior seeking calls, instant established while it the earnings to our key down that we core proposition title only believe tool the underwriting this market show our greater and at-scale significant on the deploy proven kind. our $XX profitably via modernizing underwriting more driving proven to been billion we more value patented advances technology instant is its have than technology cost

the of These Our have in XX% the launched to seen our over it sent lenders many they technology since received machine approval. engine's orders XXXX. models have largest in that underwritten multicomponent national patented mortgage XX,XXX decision loans country instant successfully learning of for originators

of our risk title Our policies. over experts data achieved training of outcome machine of past models thousands learning XX by world-class team years on have hundreds through this

technology curative and mortgage traditional title for days time In the by five lower of rates claims close eliminate the to as summary, to up significantly exhibiting fulfillment similar exam and while all costs reduce enable the bulk originators, search, to process. able is the process, title

conducted of optimal organizational and the Over maximize to months, to shareholder on a deliver structure business successfully our past we have evaluate several to the for our review value. us comprehensive mission

technology largest benefits and profitable we where the better With via for new that and business and have are our the core harness underwriting singular efficient a of core partners. external would identified power transformative We the instant distribution to technology by our potential mortgage down now one partnership finalizing respect strategy finalizing origination title of associated specific made distribution channel with consumers players with our strategy, our remains top solid and refinance bring the national end of partnerships some towards Expanding closing. costs to market of for the we progress in priorities. have

excited are to details at provide unable we While opportunity further are today, we specific and hand. the impactful profitable about

taking focus strengthen noncore. a underwriting we we our in look As technology business hard that on the business, everything at are our is

close local more to of an our division, the quarter. aggressively first leading Regarding the to we on communicated refocus closure opportunities, footprint of XX% branches moving total that branch to we efforts have on our additional profitable been profitable previously during our

year. call. end to to I'd on technology, to our the of getting remainder that division the of like and our accelerate of me As part the our to profitability refined of brief the for focus strategy theme also profitability provide This finalized on will company's focus our the update of on this the team brings a the a leadership local and to today's local path by the year. implemented quarter strategic ensure plan EBITDA go-forward second distribution underwriting first key in adjusted

expect the as exemplified which of numbers visible toward progress efficiently we the year. achieving to recent We making in we cost-cutting be measures quarterly as in the still of most by quickly steady adjusted round this second enacted our profitability possible, in starting of are fully XXXX, and as EBITDA half QX

efforts. believe strategy bolster also profitability will refined We our that our

shape. underwriting success Additionally, continued we the business the macro of will remain we regarding being the this as understand we adjusted continue for the end provided the time technology healthy by cautiously agents. of the and transformative to optimistic continue strategy from division for EBITDA pressures, underwriting attainable do independent still stability dedicated our the line rolling we Despite profitability to as feel XXXX. our as to our instant remain importance benefit preserving by of That out new ability our said, persistent is we underwriter take

us is plans our title to our today, that of share of overall believe foresee opportunity than ahead our the grow runway Given a X% market long insurance and we less of business. revised market we

market closing, us the to continue of narrowed set renewed amidst focused on strategy and remain mission, provide reduce on homeownership majority we and our for to faster reevaluate to the continue and the a Doma's in profitability adjusted a focus affordable of mission, success attention To even to executing energy EBITDA we given will this more achieving by ensure anything this conditions. has noncore year. of challenging to In core better, Americans end

Mike financial we'll now our new on Smith, our our updating a on call look with touches we specific expect our performance. the year. to CFO, over you able Mike? on more will finishing strategy, information I within the and further to putting details you the forward to detailed pass recent We few provide be months. to throughout are provide progress we As

Mike Smith

overview providing cited quarter the show afternoon, specified, details with Max, and more in today results. quarter-over-quarter you, of conditions coupled reflect quarters challenging compared we quarter Thank QX an impacted macro release which the tend some full line refer Consistent sequential activity of fourth Please of be third remarks first everyone. Doma's softness our comparisons typically the to lower last my comparisons seen I good year. all Unless are first earlier seasonal the or to financial strength. the otherwise our Today, second expectations, filed earnings to patterns, with seasonal fourth for prior results. quarter. had and our will and quarters, with In to that

as Finance refinance fixed rates of X% industry and closed XX-year quarter. both put volumes year. to of mortgage MBA elevated our refinance conversion from second Mortgage an orders, open quarter foreseeable closed QX, participants. improve XXXX the numbers and industry-wide see as the to which of order that purchase the encouraging and That will did Forecast in still The by and and rate the will to will continue order pipeline to strengthening in for purchase end These rates we open rates on Doma order said, pressure to into and for the second X.X% impact is projecting we create remain expect our latest elevated our above RP&F other likely well future. tailwinds the for quarter the Additionally, in mortgage both continue volumes third

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

gross our we took second our in actions from expense adjusted of mentioned, Max XXXX. rightsize and first profit the adjusted to the structure As quarter benefit did EBITDA cost half

due to full quarter impact in fact we largely the was the the initiated completely be However, measures the that quarter decline employment actions not XXXX. these of in fourth realized of second the the will XXXX of until

and a favorable this pressures, QX seasonal led in of a employee we a of QX. development onetime in compared softness to challenging repeat and Additionally, had did benefit-related adjusted continued not number QX, in macro reductions with some EBITDA to decline which Combined XXXX. reserve

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

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

focus the by important metric, includes RP&F, which and fees, an we Doma's So on excludes third-party agents. -- as premiums retained or retained premium which

XX% the RP&F top driven was We mind, decline closed and this this a Doma's expected refinance decline quarter, of fourth first $XX made direct orders, purchase representation high down in remained first the and premiums in retained quarter, compared respectively. underlying our XXXX, With quarter both residential along XX% better is quarter-over-quarter, XX% of seasonal of and by purchase much with orders in direct orders up the closed line directionally fees, XX% XX% rates QX, of a and to our mortgage believe volume in which in a closed million softness. as performance. XX% XX% residential In in

in deliver significant week-over-week in and late volatile QX the strong second open third tailwinds we head in to we RP&F six improvements of business this QX, expected weeks impacts spring RP&F and close in closed momentum year. and while into early selling rate seasonality our QX have to seen season, orders direct orders the the past effects activity, we due order and mortgage mentioned both which As saw quarters to believe will previously, and eight on across as we

to the tailwinds benefit the XXXX. same these benefits realize at time we took We the expect adjusted we of actions cost-cutting in EBITDA that that late

for the pass this goal questions. goodwill As thank call the we Max remain to EBITDA on mentioned, the any us back today. for Max we is last becoming that now did remarks profitable to open note adjusted item joining focused on achieving closing incur first call before not quarter we With for I'll year. the to XXXX highly you our One of that, charges. call of impairment

Max Simkoff

positioning earnings incredibly strategy Thanks, We questions. our Mike. more and proud in company the play period, affordability the housing how role our made Operator, look volatile We and significant our firm we've updating We providing for everyone in nationwide. ready next pivotal Doma the severe affordable economy. to progress on concerns ensuring only overall new a forward priorities held long-term strides of for of not mitigating market navigated success with we we're solutions. and being home call. experienced I'm faster finalizing such but a in better, our in goals

Operator

from Tom Our from D.A. first & Co. comes of White line Davidson Instructions] question [Operator the

Wyatt Swanson

Swanson the late early in those could or rollout and This branches of Doma the to guys and any channel technology signify is seeing change getting you or last in you cohort got share kind for you're deployed is data maybe it earliest? rolled would orders Realized Intelligence Wyatt been out paused that a the about attention? that have of while, Tom. trajectory the local in live year, the of markets kind analysis where the whether resonating And but maybe that on change area, there share for that any is really closed markets of a the for market

Max Simkoff

I -- those process refer also saw we we last on of did and the producing that as the in to said, call. throughout orders it positive signs probably much that on effort, more more In last frankly, we made the get path a adjusted saw to primary focus that kind think possible. technology, the you That our would we back very because, last in I'll things I EBITDA division profitability our some locations local working locations as year, mentioned, using technology and contributing So is was as the deployment touched pause outcomes. desired conscious quarter, put indeed on accelerating to as our to deployed

across, the out, We I'd the remarks, works cost up remarks frankly, quite other the this mortgage better we initial the think one not only in we've country. speed which deployed incredibly point harnessed to the also scale introduce know I and the mentioned well it the thing We much national know earlier I of originators the now down to that largest is efficiencies seen of works. process that today technology some end at consumer. it needed that to be think bring in can

we to that form to lower the end on, to cost the proven partners some focusing in new with sure ultimately the and scale I focus proven up as regards ensuring deployed show mentioned, be, can ecosystem the broader making that's broader a efficiencies in singular of that the mortgage we've customer. where really So with we're is going strategy get our on that technology

Operator

comes Ward Citi. line Our Michael from the next from of question

Michael Ward

I guess just high level. maybe

what wondering more has It to the EBITDA a cautious of sounded you're little guide. respect like previously. Sort with maybe bit than changed

on So you wondering can if that. expand

Max Simkoff

adjusted profitability from problem. we out And business of we've the in very this of learned making cautiously Why year. last got path means used phrase that do really years, of kind that think net and housing to in of regardless comment, uniquely quick to see give strategy specifics that to singular to optimistic front time. specific and our We've period the we're very, by And we then a the of we want that levers pull for of confidence can get that of successfully we've several and way successfully. advantaged those want quarter such think of the EBITDA multiple issue that we adjusted Mike, going of throughout conditions, and to that from could on confidence just of still may some track get just QX we intend launch end by this of EBITDA us launch is to drive don't kind management's that business our to that see the to QX optimism quarter want get have we couple the just gives to center that used of year. year. plans? our I flexibility affordability operate that cautious we over stress the are there. that you'd to levers The we think success that fact, probably this to focused And the I we're with I've further this macro the on quick become sure around how we comment make term where the of ensure are balance on last comment we we year to profitability by we the pull year I balance to to this and seen movement Mike and we you a last general some our need end sure can because new a some on solving program

Mike Smith

had might look the QX, of point that We top at that from we revenue only that you obviously expected, is soft then a not one know if performance back was Yes, really this we is I out first typically like that QX favorably that there in the basis really pointed we us. if quarter. impacted item didn't line pointed QX. here, had look think but you quite the surprised at that one out here, several things Michael, the out that onetime time we too, that And items we at

a fourth claims was those provision benefited And QX. our didn't hoped first us impact in that benefits also then the had in decent-sized have that We somewhat they that be would unexpected. the did rates QX large of were what did We quarter. not conversion we also the have repeat quarter. That

things So the to there couple quarter did be a as that first quite good somewhat surprise as did of us, fourth the otherwise, were expect we but not quarter.

Michael Ward

then maybe in you of that And out? through a should sort reduction curious how that work bit if XQ, expense expecting the I address of sort just XQ to play -- measures could -- from flow

Mike Smith

we talked full those that cost as during we the second continue quarter, first again, quarter. the reiterate we'll meaningful that. progress again that that fourth we'll fourth find see Obviously, And look and in to our actions continue in benefit fully reflected laser-focused quarter at during on to expense the the quarter, we structure We're and there. took

fully So the that you'll see in second coming quarter. through benefit

Michael Ward

And impact underlying your line. the of that the maybe of to just thoughts get sort trends sort guys like on top

curious guys tailwinds rates? what and numbers you is in Just think if driving order conversion

Max Simkoff

again, sure XX-year lot time directions fixed matters of right? happened things is honestly, in behavior unexpected You versus that, have I'm in a QX then than this And markets, an here. things bank I'd say. Mike both were give in rate, outcome that QX answer. when expected closing pretty a that you not causal the really of of a significantly overall that it open difficult orders had had a volatility what really would were the as say it because year. could market, failures. the saw I at One was lower And we you that it's in were in I QX volatile was mentioned, rate on in to we And that wish correlational two were one that observed conversion time for

those and behavior, lot rates. there, things spending sure had had inventory, odd You a so were consumer there not low you influenced those of we're really conversion how housing on going some

come for we'd normalized conversion the rates to weeks. seem the what than open more last very the X really side, On momentum and seen X have expect, back flip to encouraging we have and order to

us great probably other that probably that it the we that, spring really got fact to into selling is we've markets, they the on that season. that great of attribute get in do going I'd Some doing out and the the that we're to adjusted time ensure supposed getting than executing are some and we still But profitable line they're revenue to drive EBITDA there that's people to expect. to what help

Operator

from JMP. Karol the of final Our comes from Chmiel line question

Karol Chmiel

the weeks and of there additional the were calling momentum I'm any of and six most to open answered I is specific recent on from And drivers. of eight in the quarter already one Matt guess it? the Is that questions give to granularity us was kind But to the six of for there you regarding that was weeks? JMP. past the can eight anything orders,

Max Simkoff

rates not to a really hate a mean, think other across some really commend -- think last navigating and getting they've the did delivering top and QX -- business people volatile the broader repetitive, of don't up and activity just expense again, reduction tailwind been focused where on revenue I expect for we for in again, I second considerable sound for And after half leading show through the would than business to into QX. I that but -- -- form executing indicators I a amount been I they've of macro we our of the business streamlining and of mortgage QX, year revenue tough in line really well.

Karol Chmiel

profitable? of of But commitment in the next of to the regarding a question you just the presence that was are Is branches past. unprofitable there it -- what closing the answered kind for mentioned new keeping And is branches. the then the in the beginning and strategy, local

Max Simkoff

think the we here's way So it. about

our to forward two the have core and be going that elements We front need right there center are strategy confidence of that now.

with challenges affordability. getting is, deployed I to is technology as some the mentioned, a community. home its efficiently broader growth continues our more partnerships going second underwriting profitable to a agent objectives can that through stable help continues alleviate transformative partner our which our ecosystem first in platform mortgage believe and on to business, And The execute forward we independent be that deliver the with

core of strategy kind we're focused our that on. of are top mind of immediately areas those the So two

quarter, I year. of primary quickly profits relates markets business, to to this contributes by exit EBITDA our amount goal also unprofitable with decision maximum the said help adjusted of consistent its to it reach EBITDA on business making the profitability end sure local is last the we to the think our is and us of what that focus it As of team together adjusted very extraordinarily quarter making implementing path And first profitability. the leadership help I'm a proud accelerate some that plan the of us but not tough for putting designed local only and is to to our a in

Operator

thank conference Thank concludes everyone. you, you for you, and This today's call. participating. Thank

now may You disconnect.

Doma (DOMA) 9 May 232023 Q1 Earnings call transcript