STC - Earnings call transcript Q1 2022 | Stewart Information Services Corporation

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Operator

Hello, and thank you for joining the Stewart Information Services First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask question during the question-and-answer session. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions] It is now my pleasure to turn today's program over to Mr. Investor of Head Otis, Relations. Nat ahead. Sir, please go

Nat Otis

us Great. First Stewart's joining Call. Thank Thank you you. today Quarter for for XXXX Conference Earnings

We of close. results will yesterday be the after our release discussing

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

Let call to me over now Fred. turn the

Fred Eppinger

picture. to us like joining touch Thank you before in on results Earnings over little quarter First the financial I'd Call. XXXX a for of for today David Stewart's Conference quarterly go But big the will a that, bit minute.

improving company. during we a been our for for And 'XX. to have changed efforts has resilient The to for. build much is business in time, what and I be more of the 'XX. We our to I of focused and and goal call has operations today's will conditions. two we this we've journey add as the margins, been work ago I always that, would be say the be record significant all on succeed as 'XX of start long that we years, demonstrates first on results. enhancing journey. uncertainty operational initiating quarter. scale, weighing quarter types did resiliency. our money first spring our rates, retooling We the believe on sustainable of better It experience economic carrying growth lost season continue each market different interest through this through this businesses. always create our title the would and has real and meaningfully premier financial that ease we improving ourselves the Over on discipline. of investments lender that and structural the around better to position would our direct customer service becoming at focused a by agency, The past our the cycles estate here Stewart out centered capabilities also technology use company's we a normalized, reasons. the in been that Stewart. this than consistently progress market seasonality different of But these, of delivered of than preparing rising not selling XXXX, that The and have normal even the important on XXXX and environment expectation Stewart In prepared two we our was the made backdrop market will is our

the foremost, operate period long-term traditional our and we remain in. for in in and First are this markets we manage to the ability confident prospects on bullish

superior our to of just medical important delivery improvement, the our has foundational and journey that consistent because and is support customers. in priority leading technology tenet service on attaining to help transitioned, We understand it Second, markets our to laser-focused structural remain continues. market scale innovation aided strengthening drive the by

of years. a markets over We the addressing in scale of have in couple lack taken great last various strides

title significant transactions regional On the bench than and talent. strength direct side, and we more added XX have executed

changed a and Colorado to Washington have our to presence Arizona, advantage, name We just California, in few. Texas, Michigan, Illinois, market

in addition, markets operations partner. adequate simply scale to not an often we we determined or In agent without could that closed sold be excess investment, accomplished

side, that provide in services invested greater risk use technology partners. our of the agency agent connectivity for On and we've and ease reduction

As shareholder of opportunity so accelerates, briefly increasing just transition. agents our are to growth this implementation services in Why one title is help and of -- scale they this the does grow Let undergo company there space as the believe translate the support markets beginning. transactions Why improve paperless shelf online and the with MSA our into me to winning explain. industry scale our winning and critical how we important? our independent value? becoming agents is Stewart We

customers industries, just growth, stream. discussed. we Industry lifeblood volumes maybe real all vary have in reasons as title more money and revenue on success with so the are each quarter transaction in As the our make of no estate of we given all insurance, recurring by

operational to opportunistically and in revenues for markets, and deepen standpoint with to profile matching work our building a services look -- agency sauce Historically, the direct mile a This block is and our and a why is order MSAs that acquisitions phrase title negatively and the An office well will impacting share of has our enough way, due deep to when ramp great can't an of in delivering people many people while inch our technologies as the volumes is partnerships in four an take continue inconsistent success match lack acting order goes scale add operations local we both industry. to also our a priority customer Conversely, that wide because significant the winning in of themselves service, service. customer elsewhere and increase, cycle, the is special the in advantage pull. of core why often wanes, business to on disciplined from through markets. our as dips I pressure service plays profitability of levers activity key increase activity consistent This as use. as subscale So as is quickly Stewart help in our resources target to up agents while been by we agency fluctuated.

target our made to and the enhance MSA used continue have bolster changing our over great us Clearly, work throughout our We in to and believe be the opportunities allowing build competitive to as profitably years grow assessments market. conditions markets share we arise the grow operations. us will needs market position Even we but with each cycle. help will in our to more past progress guide to we continue done, market to few

by of and market their view Stewart ability work the their title would the real everyone our the reiterating services customers associates premier results. to Let all hard I to me like on positive thank long-term just for estate David, our update for also continued at will support. finish become and my now company.

David Hisey

Fred, good and Thank morning. you,

for thank also amazing our me customers for associates our support. Let their and trusted their service

the particularly estate markets we demand As the season estate area, to demographics activity in enter real by the economic real traditional supply multifamily and that and business Fed the several home. is focus. policy an could seeing and the watch Residential moving recent from across with global continue classes: and mortgage of supply influences. environment and and markets including are rate conflict chains seasonal buying with There particularly environmental residential food to at driven in impact favorable rates to importance of more Commercial X% most with and performance home XX-year see items energy the and uncertain industrial and poised impact future estate retail traditional, and action moderating increases asset office consumer commercial are needed inflation real government to of benefit jobs energy.

have lender meaningful agency and operating the durable broadening gaining on geographic capabilities and noted, on seamless commercial focused improving are offerings throughout scale and most business our performance, digital our deepening our our service As focus will that and and provide services and end-to-end the business improving user to scale operations Fred experience. direct we long-term in in and attractive impact markets managing areas

$X.XX reported $XXX total per and first the million. on $XX For of of revenues Stewart quarter, diluted earnings share income million of net

As The our last compared the to related Appendix income release, gains quarter adjusted million, equity to was the income unrealized $XX press first in quarter. primarily quarter net disclosed to net net which securities investments. first higher on X% were A year's adjustments of for was

operating As were warrants our of mentioned of effective in in the a our first our as with disclosure segments corporate the size which presentation operations, total quarter our to reflect press solutions separate release, revised we operations, previously combined increased the The real segment. segment. estate

operations, to Title million, Corporate $XX or primarily for XX% includes commercial $XX year's first revenues year and quarter, year's XX.X% improved corporate purchase transaction due refinancing higher respect XX% residential market operations. quarter revenues margin $X this first was results mix. lower -- increased XXXX quarter. commercial remained million quarter pre-tax million million file due purchase improve for transactions Canadian for to in or last X% XX% closed compared the to last than segment's which the primarily transactions X% Residential quarter last to improved most the in XX% compared was of the transactions production revenues increased to driven commercial was year, we due significant primarily $X offsetting quarter quarter which per and quarter the a and due data. refinancing per average and Total the X% and asset per $XX,XXX by to of XX.X% better trend. fee and $XXXX, fee operations. expected primarily lower first With to and with was file the the Title volume segment first Domestic year, refinancing direct of to XX% substantially compared due volume. quarter. Total $X or Other pre-tax than income to file making Our last last operations are million and from year's increased first orders decreased fee Title purchase international higher to domestic increased scale effect by in revenues segment open Title partially last million, higher higher to in XX% to or the transaction improved of lower respectively, while agency XX% our higher consistent the volumes year's closed The this year's Total across XXXX. quarter was due $XX and Title primarily the offset versus improved investments improved for average our This unchanged. classes and volume

rate generating for title by On quarter the of as experience. the quarter year's losses, last higher overall first quarter. to was XX% had total year's last improved favorable revenues quarter, remittance agency loss claims to comparable title offset million, Our operations is which effect strong last agency revenues year. expense in was slightly to of XX.X% than another average The $XXX compared XX.X%, higher title

to other As of million typically our to year. expenses from the year, quarter a solutions $XXX expenses title title expense have to revenues percentage increased of operating primarily because the costs variable of of higher matters, the operating increased costs, the loss market, due as of cash which In estate to and higher X.X% provides foundation in increased operations employee in total requirements. our the last employee operating costs count. estate quarter a which on revenues, from to other consist our customers, a mainly to to XX% operating regard Employee while balance percent other XX% and revenue solid size the investments support last real year, the position regulatory first employees compared expenses are X% increased expenses. related was sheet of and in last On total first approximately financial operating XX% our improved other real XX% operating

of have attributable a of equity $XXX approximately At million end Stewart stockholders' the was line billion. available $X.XXX to the fully quarter, We facility. credit

of was XX share Our increase from December per book XXXX. an X% value approximately $XX,

quarter. provided $XX of liabilities Lastly partially end higher net was December, the net quarter by compared quarter, last due operating the in the for year's outstanding cash million higher by income offset $XX payment at primarily of to from operations the million to

We customers over real and confident prosperity and operator call safety back advocate improved grateful questions. estate inspire of our and for everyone's for associates. are always our for support markets. We in turn the to now I'll are of the

Operator

with And question Bose [Operator George Instructions] from will our first come KBW.

Bose George

the just closed I fully the ask numbers have that morning. all to in in of Good we of is that about everyone. Actually sort the accretion terms quarter, Hey them more or acquisitions recently, there from now model? is first, we think should this reflected as wanted

David Hisey

a close We Yeah. quarter. David close Well, the lot we did fourth did as lot stated a in here.

still we the still finishing acquisition seeing accounting. on integrations we're think the full our And then, So effect I online. come of and those have

did coming year. fourth fair it's We big still So, such quarter. there's I think this amount obviously the a some in that movement

Bose George

we see expenses And more coming terms mean, in -- of movement in I to level should Okay. of still terms still the there's revenues accretion on. of some and

David Hisey

of Right, example. an I a like mean them we closed during number quarter don't as have the

we full of So some quarter have don't even them. for activity a of

Bose George

Yeah.

David Hisey

Yeah.

Bose George

great. okay, Okay,

the And mentioned that that subsequently before? something so brokerage don't real then, guys estate sold. actually release the Was had mentioned which I recall that. was you just acquisition

David Hisey

No.

So I think a and we did. an opportunity an for owner don't was mean, transaction of I we title mentioned facilitate this it. a that's just agency to what

really haven't that we mentioned before. So

Bose George

the on about quarter And and Thanks. one purchase sense. commercial the trends makes Great, Okay. rather? just -- just you can second talk in quarter then second in more,

David Hisey

effects in over last people seeing right year. most the as of I the what commercial economy I Yeah. opened think seeing mean, are we're the

see You've to asset classes. the improvement really all across started

some out pretty quarter think capital across quite real analytics throughout report the the industry the much and we're that the a high activity assets And sales I information was of seeing asset that country. put classes. first

York New bit up now have a opening well. even as You

Fred Eppinger

And broad-based us been on look calls, it's on the mentioned we've this we previous for we're -- I think bullish, commercial at commercial. side. forward Yeah, as pretty most we

Bose George

lot. That's great. a Thanks Okay.

Fred Eppinger

Great. Thanks.

Operator

And Dunn Instructions] you. our from comes Thank Geoffrey & [Operator Partners. with question next Dowling

Fred Eppinger

Good morning.

Geoffrey Dunn

location you've improved Illinois in said acquisitions. like done you MSA think obviously certain you've regional couple? XX shifted give Fred, in in I morning. Good done profitability -- example you of a has a an how scale Can

Fred Eppinger

Yeah.

Geoffrey Dunn

How around obviously they you numbers model give deals -- hard how can can of is … it's so but example individual you give -- -- an just to aggregate some us

Fred Eppinger

Yeah…

Geoffrey Dunn

…sale building does you? for

Fred Eppinger

Yeah.

And say where enough first great the couldn't a we probably of, -- X% there volume. what of have, we again resources contribution we seasonality town had would Colorado, of be plus in have would off one adjust the pick people we're X% we the didn't a of Southern Colorado happen marginal on small were the So operation. didn't because because breadth the get is, what quarter range. example, the we And crushed we talent operation a Springs, we would any were kind in we during

that Now Springs is on we're purchase Colorado the the market comes probably tremendous. the leader and in that stability with

retention went of up. we're of kind our So -- people

manage through our quarters Our margin because business four the cycle of ability went actually to in the the up.

think things the enhancements has about centralization like operational ability actually how on Our to and we business manage improved.

an marketplace are more one access more position have in and is consistency effective starters And easier to to performing accretive so right from that business the have kind superior access -- Same that scale a like an because it flips you your in broader also kind once data that. data your a with with access more and doing of more cost reach then to instantly have and fill-in because you things volume one data. get can micro you again quarter-to-quarter. you underperforming do once acquisitions do and from And of you geographies

So like like talk retail I again, about it's banking. --

in in If title, your banking local get a it's you retail fundamentally the certain percent the change. same deposits way. if In market you margins just -- of

then -- ability You the because the manage in right? get of I to by our can't it so that stability again that a it's about the market, four-person in of you're in talk if You manage it hard the and XX% downside. service platform. grow to downside what business this really margins us our up of and consistent the cyclicality affect doing from trying office is kind share And both to changes for much a

very a to If you XX ability different manage. that's have people

that are can we what some So then we we looked do. direct, segments or is MSA Some that's tried primarily look to every position leaders? How say, to the But best think best and other. and or XXX be about the what ourselves? so who agency and you one we at the are in we've do you do do structural at reposition Where both the in? we've compete market

I ad you try of do you it. -- right? targeted an is can't to you But it's get mean always the what -- right hoc, we resources when this can this need. So is how

again again was different a So I lot of we've did manage of operational would or say effectively is We how right? we among -- it's we done a how and or bit organically it's also integrations. ourselves do little it. that manage lot us or just blocking we operations more a there it's things on and search how we differently data costs and manage tackling whether

and the combination we've all scale company. the done good I like operational where way mean feel the the it's we're made of I progress. wouldn't for be. we've I we stuff But the So could improvements say

progress. have I good make we think but more we growth,

Geoffrey Dunn

Okay. And a then M&A. follow-up just on

up till month trying right still to off potential sellers still it period even two and XXXX transition valuations, on hearing more to or the come XXXX market is seeing were think were I sell now you into a more we a of ago sellers Are hanging and rational results. type themselves that expectations? in of or companies

Fred Eppinger

Yes.

create because level players trying kind these they it to of were refi clouded there bit big for these have I is understand it market market of all. drove things has a new the the that people others. silly some that But think And a were more it's the one not I and but of at create entrants adjusted. valuations different lot most some was traditional were mix players, of and shops the revenue adjusted. the that bought some that part of mean little a prior the not

system. And financial -- stuff because that's All buyers the of and the was how of attracted system, market some is out the of that out right? there of

in So conversation. a rational what have my more is view there you

operations good your the use how value. depending you still And are of different are cetera. that things have some still work based run you on Now et inflated on margin well -- there

don't where so And in started transactions we the is happen. view realism market. But of is are is my absolutely

the a do us occur is started talking is we different. is really that what and again I to that and And being people. mean something on just -- right years the lot are This for ago. and about quarter. so understanding now a you match stuff right two it's transactions the this for opportunities relationships is focused not building of the This

like question. it's point, I'd to a So good your

right? valuations think will appropriate, be I the

Geoffrey Dunn

Fred. All right. Thanks,

Fred Eppinger

you. Thank Yes.

Operator

Thank you.

question next Campbell with John from Our comes Stephens.

Fred Eppinger

John. Good morning,

A.J. Hayes

Good in John morning. This is A.J. stepping today. Hayes for

Fred Eppinger

A.J. Hi,

A.J. Hayes

A quick here. are guys. pullback Hey, appetite guys an still for I with think are of the the question buy I pretty definitely good company you guys you here. also getting a know to some stock price M&A, got but

are how So of here? balance about the environment during you two this current the thinking

Fred Eppinger

Yes.

shareholders has sure our the kind on. us build well. business providing of For be build has done and -- in as And accretive use business. every right what capital obviously, that's my did continuing a we're you we we'll we're been our the that helpful. of to view our best try for been know in been thoughtful essentially make to be space as continues increase dividend But been now, to to and our to focused our focus title We've transaction and we've

to And that's and a been medium to in kind our focus the will short here so continue of focus term. be

A.J. Hayes

costs you And a we've do have fixed cost high-level can and bigger overall might against been about follow-up obviously here. on other expenses? guys a a this. while salaries how acquisitions on margins rundown just your in protecting variable changed of It's things think operating latest with recent dug And specifically the a then decline -- provide for in originations? bit series but versus I'm and guessing one you since then base Okay. And picture,

Fred Eppinger

Yes.

in improved take X.X right? about journey cycle Again business we thoughtfully [indiscernible] have through business. Let I to do for and the X.X take let need that quarter. we've me sustain lot the a this and we we'll our we manage continue margins X% we ourselves it and the in thoughtful actions. we'll did first during -- to it. the are of will we'll we improved And So we're years confident the our managing manage the in what resources last the started years taken me second one. we -- last We've do it were to a our mean And done cycle.

I'll -- to our we want on comment questions, far have your But we've folks. our some and As David also and about stop We're I feel in investing how of our to managing going other very not been expenses remind as good business. overall investments.

to data journey on our as the see very when be make now, But we're is now, question. -- best. -- I a unfold. on want again to so both view just are talked and There's resources are cetera. it's a position the you right interesting to both demographics all at our all integrations, trends cost have But I title. as forecast, on the that done. I manage et think and of two from years and at really We've and for look choppy next But enhancements, are and we're enhancing got you think in it's We management things doing future. manage on good product and out the I no -- business going we've purchase some operations to levels right our my balancing points current we our one the look -- about be right? look business years we always still business like the the investments at mind, look the effectiveness your

we've got relatively the -- on... effectively. believe is was David position choppy there any manage strong now we make still a we So to sure comments next But market is but for years, that couple ourselves of obviously it and we there

David Hisey

Yes.

component to be the and that varies I we're fixed by it run each a business. variable, although really lot is business to needs think we the general sensitive versus and fixed variable way run comment the

and you've got a because and the lot against data real over variable the facilities very we've you've little information cost the and shown. the it's of businesses, produce in like structure businesses So got a the with is businesses of the that's the run the of and title reach services scale more other So to base employee of right? businesses, those fixed, of that direct consistent solution sort small bit estate the for revenues whereas operations a each results outside highly example in geographic

I our probably a because like as we in But transactional fixed bonuses got general XX-plus expenses some of and talked different a premiums variable all things a good think are as got data have matter, you've probably lot right the somewhere variable. that about. percent you've XX% -- XX% XX% taxes, we they're

So we I it. about generally think that's think how

A.J. Hayes

guys. Awesome. so Thanks much,

David Hisey

you. Thank

Operator

Thank you.

next comes BTIG. Ryan with Our from question Gilbert

Fred Eppinger

Ryan. morning, good Hi,

Ryan Gilbert

in morning. for market trends could XQ Good also questions. the in and on wanted residential And guess volumes back market purchase my being right choppy how has just maybe Hi. and thanks refi to on now. comment in your I the to go I drill the and around trended taking question you April.

be doesn't investors, now far up the would XQ rates year-over-year, right think think really XQ extent to trending homebuyer And on helpful. to with like purchase color are ding numbers the outstanding that's I volume it but up question XXXX yet big demand. so mortgage for your higher shown in I going X% seem in any is is which how

David Hisey

David Yes. Hi, Ryan. It's here.

XX-year the to think X%. I a had in recent in [indiscernible] you've mortgage let's over the weeks rate several So just general last say

on there's of it's we're Yes most applications that's which than impact application somewhat good is transitional. still XXX bit think a a purchase definitely purchase recent still of I -- the area pretty spread would an a X% XX arm, good seeing less can or probably even point see all [ph] it market. arms. a thing note on the guess I basis data And activity is other in I So the the but product. that good had and XX% you MBA are one in X still pretty

if sensitive but focus transaction the title unit then right? So the been really still what transitional. premium important on think a market's more other little I investors impact, there, volume, the I premium, think really of negative to early. volume. I about thing we're bit it's think is There's of think And a which think the of and the I components you title And ever value don't the not total notional transaction so are it's

And though of you basis, notional to good so you on because look balance premium even coming have have increases you down, total environment. creates prices, it title home if rising a in at units holding pretty that which

Ryan Gilbert

Yeah. That's.

Fred Eppinger

ahead. Go Yeah. I'm sorry.

Ryan Gilbert

going I think get I was in the the move as I year. significantly to order, and the little XXXX yeah was follow-up per the on rest revenue of a up XQ comps -- harder just we into

a in we So basis, should I think on even mix-adjusted order? rate in how it's about your per growth revenue think up the mid-XXs?

David Hisey

in be to because purchase. mean, mix Yeah. I Ryan to quarter more we bit we see shift first could the probably the little more, significantly see a started predominantly

have to but there But it file. saw some the year, room a as of file. we right fee be last per much call little don't So fee bit we additional to room XXX as purchase as on XX-plus over go anywhere near almost per -- still percent go on you could there's probably

Ryan Gilbert

Okay. Great. Last me. one for

how XQ improvement market? a double-digit goal I the choppiness going sequential about as that's we roll in -- Do And feel think in generally, pre-tax do see margin given this year? the in from increased still think the to pre-tax seen feel margin be we like we've you case XXXX into you like XQ. your

Fred Eppinger

Yeah.

same. the I the is goal think

the manage double-digit to that we're through trying to goal think I ourselves year.

think pretty our feel said good are that's the I know we early But exactly quarter in to trends manage about -- what it's where that we're to so. it's this David seeing through going the to unfold. and ability

Ryan Gilbert

very much. Okay. Thanks

Fred Eppinger

you. Thank

Operator

you. Thank

will Our Geoffrey Dowling question last with from Partners. & come Dunn

Geoffrey Dunn

to and building I again to M&A. follow-up just with Thanks. wanted respect scale

kind out some way if stands comes is that the of to improving curious, Your the the or there that, in process judging M&A the ratio reduce that into agency of I'm opportunity profitability? peers. And thought And not to versus profitability? about of commission XX% agency platforms right agency be other overall is terms overall

Fred Eppinger

Yeah.

with absolutely very agency. again, us That's our we you're for well-run that are So with business, margins in net a but happy right.

Our very geographic unique why Stewart. It's we're so mix is at focused.

about all major are they Florida, significant, competitors, the attractive. in have our share think much significant you right splits If state where more a like

nobody a are We there.

lot scale is right a about growth the as and state-specific So building share. that we're of

And getting is right that so the a mix. lot of

would And lot And and of because of both because split hear so, but Florida major Pennsylvania positions also our those and that profitability number overall -- big our about locations. the you from you'll a But Florida and a opportunity big, very is our run in share, a business managed the lot competitors with talk have me state in just we percentage Georgia net we've because of point on do we there. math. the some But our happy are of there's in margins view, think working mix agency well. we I'm business. the very I growth tell how

way, just in player smallest players. the in by can dramatic. thing I'm but happy it's mix. more You it tell, you we're other guys but when so ourselves Why the talk And way don't quarter the we seasonality is with state so about our Why? is seasonality we mile our know is, other two really managing -- the in first the in not more Because places. Florida those or than a a California significant bigger we're dramatic are much

So just is which are, Northeast Midwest. we weather think the about where the

in demonstrates have share because the right? spread. it that's pretty good of many to -- split we've the with managing different numbers ourselves they continue the our us how well point mix. your great for is been and a so in so But just And the on of but geographic California example upside, to -- our dimensions we So MSAs is upside again, grow Florida, are

Geoffrey Dunn

All you. right. Thank helpful. That's

Fred Eppinger

Thank you.

Operator

over to time, you. and Thank At would presenters or like to closing I back the floor Otis turn for any this the additional Mr. remarks.

Fred Eppinger

to this Thank like I'd you you. Thank you us thank this everybody's is -- and so joining for much quarter's call. attention earnings Fred. for on

Operator

ladies your you, This appreciate Thank participation. and gentlemen. we conference concludes today's and

disconnect may You at time. any

Stewart Information Services (STC) 29 Apr 222022 Q1 Earnings call transcript