STC - Earnings call transcript Q2 2021 | Stewart Information Services Corporation

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Operator

Hello, and thank you for joining the Stewart Information Services Second Quarter 2021 Earnings Call. [Operator Instructions]. It is now my pleasure to turn today's conference over to Nat Otis, Head of Investor Relations. Please go ahead.

Nat Otis

Thank you, Ashley. morning. Good joining Stewart's for Earnings Quarter today Call. Conference us you Second for XXXX Thank

discussing were results the be will We that close. released after yesterday

are Hisey. Because participants access that results of the on Joining and of for not forward-looking this based of with go factors CEO, statements statements are I forward-looking link risk SEC. such Form conference projected. statements the To and may of will in published risks release future detailed call call. the David contain are and remind materially with to The to to me sections number the subject please this company's from expectation to, listen include, but our and the information, press fact, involve operating website those Fred stewart.com the statements a conference uncertainties. forward-looking results online, evening that statement today an CFO, actual regarding financial Eppinger; are are not may filings factors yesterday uncertainties other risks in XX-K other and and and and limited differ risks other

Let me Fred. over now call the to turn

Fred Eppinger

of targeted broader I I compete typical to significant as put overnight, value our But a results realize began for and your a in Dave necessary. clearly And become long-term for you of you us Second you changes through build ago, services title minute. and pieces our the and brand strength When necessary financial before on then, and not to the a acquisitions I points. scale, would everybody a just happen business. We in of as lines. couple touch To Stewart at in needed story, X operational improvement, the both business to Stewart want but yet began journey to joining upgrades discussed company take Call. this years will core that not Thank XXXX almost we financial on talent well people to on founded our Quarter interest of Earnings I focus resilient today quarter's turnaround thank strategy where thank to Stewart. ancillary want we Stewart's for in details premier the was the effectively, success. core place the

goals has achieve and through As understands I worked historic pandemic the long-term want you we our our as bring face once the applaud moving hold. know, is record care the rebuild to loyal our improvements because services have not scale, taking our take But on have were again process made, and in happening begun I challenges. technologies origination of talent, team to complete, to aligned been [indiscernible]. our investments mission fast of who while to customers. this we associates and today the have in in earnings up deliver these and

we discipline clearly residential order our to results see. and and to of While this our the our is in changes structural contribution uptick business activity commercial a nice benefited operational quarter, exciting extraordinary from

that we real the will the are we daily term, realistic decisions improved assessment we operations will the technology. our ways in the taking current challenging making estate adding to more at we've on existing rescaling are While and a basis, that market us talent, eliminating it all I forever. that over operations last measure bullish can, first associates we actions results. on 'XX. comfortable thank we said, embracing far made on, do our not that current our our through congratulate and efficient, long that ahead That results. expertise, how But them market on are plan define we is question, on new -- so cycle. often unlocking asked in to feel their real hard Stewart full estate I'm I embedded by redundancies, in have performance next That appropriately what quantify their want for our of see is beginning been all what that the With improved our and in to all the in that you're if In be and picture the half journey. our has execute is conclusion, work the can working that and the lie drives us, times, as being and always, you changes the

and journey goals. our our this Thank continues, on will you, everybody David quarter. a to we closer Our results update quarter and are now

David Hisey

and good Fred, you, morning. Thank

their customers support. Let me for associates our thank and our steadfast inspirational service also for their

see economy getting to interest benefiting this an market residential commercial The estate driven and economy. market is continue a favorable back real also rates from strong estate demand, We normal. improving real to by

the delinquency in service digital improving capabilities durable geographic Although to areas economy including and focus virus scale continue historically throughout watch on experience. an direct performance. can and seamless our play in our attractive broadening lender the need provide services action, a watch which in and policy anti-vac most there on and variants and these out. the and impact our operations, user government is business, operating meaningful volatility, and are mortgage improving and yet end-to-end several improving, focus markets, forbearance that items, items will have create scaling Since agency long-term and improving Gaining we operating commercial scale Fed to to sentiment high and

in per XX%, second title due On income or per of improved orders increased last last agency certain of rate XX% A X%, income loss income increased $XX on a sale average million, title Domestic XX% year. purchase segment increased year's refinancing a solid the to earnings to settle the operating quarter On release. net and orders quarter main $X.XX to Appendix average the from the Total press reported million. last the XXXX, title year, Stewart generated The diluted quarter $XX adjusted For operations of compared disclosed fee file quarter due and market. to the was closed per quarter mix agency while performances last to to compared second difference and strong generated file last revenues net Total our improvement improvement $XXX year, between revenues. increase of fee our million was adjusted of million XX% remittance was million year's per was international an gain total the this operations. an $X,XXX, reported also or segment $XXX improved or Pretax higher result was $XX to opened transactions. as higher last or which million million and $XXX $XX over as net million year. with $XX total income, purchase volume volumes improved increased share our title buildings. XX% due from $XX,XXX to agency increased business, losses, for to million, expense our of primarily residential Canadian of higher direct title approximately and or transaction pretax and total $XX growth or versus million on due from which primarily of revenues being $X,XXX title Compared quarter second an or and title increased Residential file, for XX.X%. XXX% operations. year's XX% $XX to quarter for basis, million housing $XX management the in of than $XX million from due for last of XXXX. improved $XXX at The increased revenues revenues a a commercial XX% our from revenues increased $XXX commercial million to result primarily revenues fee XX% QX to year's continued The revenue respect a compared Similar residential With business, direct XX% strong of as million quarter. margin focus.

was to and while percent In pass-through in from expenses increased of services revenues increased operating which XX% year, operating and and XX% as X.X% last to a total costs year. to X.X% to year, expense revenues, businesses. appraisal from total a Employee revenue operating our operating XX% percent primarily last cost compared due appraisal cost, due employee primarily increased last expenses activity. of consist the XX% service other increased operating improved to expenses, other loss title of order to regard As

quarter Excluding other operating overall On solid very these other second ratio remains our estate position businesses, the employees XXXX. matters, expense financial our the in market. would customers' been XX% real support for have to

regulatory million facility. Shareholders' approximately over the cash to from provided approximately second equity of balance value $X.XX of line million approximately $XX. $XXX And compared we available have increased on to year's credit million with $XX operations book to attributable lastly, $XXX by on quarter. sheet share requirements, our to increased $XXX quarter for and billion, Our Stewart and last net cash total per investments the are million

and safety now back for advocates We are markets. grateful everyone's of confident to and for I'll and inspired our customers associates, operator and estate the improved our questions. turn real in support for prosperity by

Operator

coming [Operator KBW. George Bose our question first from with take Instructions]. We'll

Bose George

then about could margins. what seeing far. that reported? When Actually, the strength quarter. meaningfully so where what start you think given think updated just just out reason XQ, normalized from the change you And into of will just margins just Great margins let you me asking look on again, thoughts be any any to we're

Fred Eppinger

Right.

think would level us lead we're the strength two overall is our next to margins obviously, company, was on X%, underlying So that I in double the company. goal. our XX% made years, guys our as is over as What business. ahead But the market you the X we're know, of about to we've XX% goal, which of from really the overall double started the seen I when of of because market. the for and And historic. the And XX% those progress the for the of beginning, kind we said the get -- margins good you've overall,

right. think on where right are has those would helped said that all know I The of at and we some I level. obviously that, so we market sustainable. And beyond we're track And be

where then much seen then as the you've we -- grow well. other the feel going good position part, were started. I And we're better feel that like we to able we well. as we So where And to about to margins. said be I a ourselves company

$XXX and million as helped rate market again, a grown with us So as we're on the run $XXX we've to continue basis outgrow is million, growth, positioned well. believe whatever market to But it yes. the

but capacity, has all offices. better, right? both are So market over Everybody everybody using I basically feel else what have I it will good that to because this you extraordinary aware we even am the sides, our time, within housing helped look as us fully on is is between right,

years more in marginal leveraging, and X but year you're advantage the during the of and You could you're job because in this right? cost the right? I fixed terrific, this think you're overtime of max, of stress But that a contribution this X not so it's for not system. the And is force the taking sustainable. to it, is as sustain we're part we're doing -- good -- or And

So...

Bose George

Okay.

the got think from that comes just I volumes And is there? sense. are. reported? you Any margin into the just makes visibility guess that down specifically that meaningfully So you where decent on third think to what you've quarter, Do reason

Fred Eppinger

about Yes. What talk a bit have and orders. we've David disclosed, I'll little

closed If a you decrease. offset which shift saw nice orders, showed and right, orders in received the is purchase, saw what we of we some to what both

into there's it's orders some into quarter. feel can changed. like third So quarter. refi the obviously, open But market the those going as the carry nice everybody momentum next see We

obviously, interest again. saw Although, down we go rates recently,

little a it's business bit in our momentum now. So But crystal some have ball. we right of a nice

David Hisey

Yes.

running a the they're to I up where a decline in closed and both in little. open think, open little of gets orders, bit. see both they if out closed be rates in dropping June, We'll were terms may the the pick around

watch volumes, And as think part sort the end, have for the dropped quarter, could trend depending there a the the of item. we that's I get on so of early the little certainly towards

Fred Eppinger

in from our the was I Yes. know price again, but increases international think Canada some data, were businesses, terrific, XX-plus percent. of And other you

but about perfect extraordinary as are was should momentum, that of kind think mind, So quarter quarter of that keep as lot we far this results. I this we reasons, things good a a just have in right? storm for some So there's that a

Bose George

see international. That's Okay. the is Actually, should on that something Is of growth just sustainable? Or X of just there there? sort -- that perfect. as kind lumpy quick of a we some there

Fred Eppinger

Yes.

As said. I

said, bit we're was So of there, Canada, future investment a and it. were lot this feel right? not we're if one with you we've closed, interesting a like were price, balancing ports and increases good the That in So it. We're the the the feel I And obviously leaders, building business. was right, percent is incredible, strong investing. very incredibly reality is I there, a done though quarter. strong, how good. of of The at the and as the things. market our -- the about about price in lot locations. a commercial market stats, look sustainable happy little I number, We're We're our good of commercial XX-plus even

have again, We sure -- I right? some not that's in results the normalize, momentum. to think extraordinary, So some this I'm my that's those I quarter's and again, view, sustainable. nice don't international But in results, got point, at -- were

Operator

Our comes John next Campbell question Stephens. from with

John Campbell

a bit, days, the in goal, looks of objective like you back obviously, up about but So in $X a this good you that had first this think, yes, predicts the half you of year. of guys remember put EPS I I guys, activist

So It's work. that was nice fantastic.

I here. two So ask to wanted questions

on first the So reserves.

You X.X% to guys guess, saw I somewhat, was like kind last it X.X%. something this I you or expecting had that, rate provision around levels mentioned year, of the guys hang the earlier loss think year,

first You that part run guys pretty this the year. ahead have of in far of

just So what the expecting back half. you're about for curious

Fred Eppinger

can... So do go and to David, first, you I want

David Hisey

Yes, I running think been little John. I it has lower. a mean,

of with and sort on I first the think like the the the the have definitely year. of levels impacted activity the sort part of foreclosures moratorium

on I more FHFA to look moratorium like a the current if in to the mean, goes. so could it's front, July it we goes. But activity a foreclosure see has pace think see I up I looked if this we going year. see little just have the start on spike to year expiring some and it got the how think increased how obviously, you've continues,

Fred Eppinger

Yes.

obviously, think says, appropriate quarter. I But just we conservative. described for I our fourth its overly level, again and it it conservative We this moratorium, is very the and we're the at philosophy, to the reserving So maybe again, better think this David It's rate But quarter in at feel with to fine how now we'll us be for. be to very, than run confident the fourth conservative unfolds. a lot in as level. right see

John Campbell

cost seems guys really X% If like on have positive ancillary out then services spinning corporate getting Okay. of to a Makes for back sense. business, I'm the And there. it I that something you kind about segment, up the margin.

negative. pretty business. I a think years last to The was year, prior it you type loss guys steep were that,

you if curious So you margin can pretax over guys that to could a there, longer level David, just term? scale, take term, of think And the kind that near the go certain moving parts you of you then get about where think where margins? do those

David Hisey

Yes.

Fred described, get I think, John, margins that pretax margin. to trying with we're corporate overall that the consistent corporate

we've sort of talked and I on going think as there. think, takes I of have before, some about puts with some seen scale, improvement the we there's

recover any activity, kind most there's although There's right, it. with valuation activity title right, is other its cost of up, origination because on have then even origination and of that. of work can't goes a appraisers, always And for you don't that work foreclosure lot now. of creeping and demand the that capital much limited so you there's the front So markets

So on. takes there's a going lot of puts and

sort over corporate But I margins, in think time, you services. throughout And right more I normalized cycle of to the happening we'll progress. now. a particularly each activity we're have think, of making get what's where that's closer

Fred Eppinger

agree about would a you this that, remember, just and I couple times. in Yes. add, that's talked all. And all say, general, we've of with if I I would

we legacy got on we're portfolio. We multiple with year like have. the And we at is true get described. your targets we to we quarter the careful worried we on we right transition next the we We're we a had track platform margins had those of said, what -- be So platform. of line lot you're some of going those like you've And work consolidation platforms. -- have kind the see tail because and end what the get the obviously, like a of first still not to of I'm operation, because got clients kind We stuff up, doing. of us as to that as that. about And hitting What beginning set what

to some that, right? So I the platform. didn't faster sensitivity go got your say than about I it we the given to to clients impact have of we're would clients, right do get to on of track. consolidation platforms, You've the that given expect with of single the

we're So shape. in good

John Campbell

Okay.

Sounds me. closed mean, you Thomas pretty The in the May and that's that, to kind title for you would like June, I guys orders. of then commercial big side it things. X acquisition, June And last looks obviously, commercial geared like a great. sequentially imagine, pop to I It of from looks had

an Just curious of much impact that was. how about

Fred Eppinger

any late, real good back lot. nice some we targeted. come look bounce was smaller it's business, commercial. a what were a have it that we've impact. of both We but which the interesting of in also And we seen, really all was change sectors. way like really back a it in, geographically, So in commercial -- interested the and wasn't had We some year. that to momentum lot had to big Has again, But is end it's back? They in the have it forward feeling a pretty good. more our a Probably it. acquisition not. We about things feel come We're real capabilities

didn't really anything we a it's this add, so but mean And nice quarter.

Operator

Geoffrey Dowling go We'll next to & Instructions]. Partners. with Dunn [Operator

Geoffrey Dunn

that commercial keep going. to wanted I conversation

your like peers as seemed of it bounce much as commercial. maybe didn't on Stewart quarter, some back First

pre-COVID just to you're pre-COVID. doesn't This running than back and exploded it quarter stronger that seem

market So back? primary this going your you going X in more of maybe guess Stewart there, lagging. I health just please. quarter, coming broader on about ahead New update the quarter what's specific a peers, seeing general the talk still of in market, kind it least What's secondary gains the commercial the you're or commercial on can the the then were seems at of where where markets markets And York? last in to you're

Fred Eppinger

great. that's Yes,

obviously, generally good David But about just going talk back, So let and which to a me coming some things, is I'm trend it. market. market thing. We're seeing then talk the is about have the

the so broadly. good, feels activity pretty And pretty

I can than others, think that the are come broad-based back. it's subsectors that about obviously pretty we less a talk but

As you volume analysis up our into whatever if quarter and what's looked we pushed quarter. for And had looked weird, fourth numbers, blew last last the I some lumpy, think our business of mentioned, of we like far grew a of we reason, us remember in still quarter our we it's first away, in as the it's smallish share. right? -- fourth got the I So So share right? did little for a year, it year, commercial it when as bit

good my did broadly. of in we particularly focusing and good key our really couple against we a COVID, pretty lot view, energy, During markets our in a job of put And pretty efforts that. momentum sectors, the on resource feel it about X a

Some belts better. a little

the You and the we broad have were the feel are. the in about of imagine good we some can momentum comeback the better where business. But base pretty of areas

and than a right and a players business our share place, three getting and but strength a shift us. should is fair right given our share credible It I've historically. before, is of invest really is our should good now our This to now. it distraction in growth lot be we we we're said more big the always in As place and history unprecedented is capital financially,

capital visible, And investments. we our a long-term And so bit that an And but on focused little more we're plan it investing. that's is first a base what see, additional is and Thomas area we a again, think making there's step other given we on opportunity.

not really right? feel a it few I to get rest another mean of this for it. as deals that momentum. us. we're good -- the of that's kind we could I But at about lumpy good about move So real, scale hard feel about look or -- our -- a such again, feel trend the good year. X quarter is the orders, from I it's it's I just pretty not of it's create But

is David there... So

David Hisey

mean, I Geoff. quick of just things, maybe other Yes. a couple

not So sort returning I strong have there of cheap side, think only just by estate, basis, multifamily to to a offices general, be continues think and industrial, seems to equity the I sector be and plentiful in on that you but capital commercial on sort of market. real

the Francisco, Fred stronger. see, and New San Sunbelt And like, as some slower. a still at we Texas little of least out, what York the pointed markets, and

And in and think just what it interest higher we to there's how higher see I committed does go. results, so that's the have But seem sector. things to and our seeing we're like capital being

Geoffrey Dunn

numbers, maybe question. saw get to any get then And more but you resi of purchase, technical, back a you purchase. just ratios shift quarter, refi? benefit about second only closing Can it's we versus as mean but had a go you this we've And which a a not as do start file It's really you ratio the to benefit, nail several can closing a look down market you purchase well? do the I for fee Okay. really a differential. with all on to But talk hard the refi-dominated at for years. volatility,

Fred Eppinger

ahead, Go Dave.

David Hisey

I falling better, you mean do don't refi. much you people on as right, little as it's generally, have shopping a because out

So yes.

Fred Eppinger

to Yes. very little part, profile is per for And obviously, there's a revenue big benefit the that. a And file the different us. is obviously,

the over down, about such look ways. mean, of darn with come year bullish ways the inventory in pretty this a a a couple forecasting, It while and a market. a next refi bunch because purchase of demographics the strength title it pretty short think that. on period term our better record time that on historically, I next the mentioned right? issues long and work of the could could one title number in good of the -- we years, a for in relatively couple of and of in business positive right good and the couple help of I we're see, of we've some And that market, thing But little is things of does the that it from years now. perspective bit and is so a the in millennials are the And trends stuff we of purchase for we're purchase about next looking relatively also seeing couple the play market But this of of extremes out and out. many years so feel purchase the a

Operator

back no be call further to for to Eppinger the We'll any closing appears questions. Mr. remarks. There turn

Fred Eppinger

I thank and us everybody so much. in for want this interest appreciate call Stewart. your our to quarter joining on Thanks

Operator

And program. your you. conclude does participation. Thank you that for Thank today's

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Stewart Information Services (STC) 22 Jul 212021 Q2 Earnings call transcript