Earnings call transcript Q4 2022

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Operator

Hello and thank you for joining the Stewart Information Services Fourth Quarter and Full Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. Later you’ll have an opportunity to ask questions during the question-and-answer session. Instructions will be given at that time. Please note today's call is being recorded. Instructions] [Operator

my Accounting today's Officer. now Brian over to Chief Glaze, Please pleasure is conference turn to It go ahead.

Brian Glaze

joining call. for XXXX you us Stewart's for Thank fourth earnings conference today quarter

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

Eppinger; call. CEO, listen go website today stewart.com David fully access please CFO, Fred me Hisey. and Joining for to to are To online this conference

other and company's forward-looking that call that results involve risks and risks may press of the to contain the statements differ with to for uncertainty. conference could SEC refer This number Please of actual the a filings release a materially. cause discussion our uncertainties and

we discuss our non-GAAP measures. will call, During some

on For measures, appendix refer reconciliation today's the these stewart.com. to please non-GAAP website our at is earnings of available in release, which

to the now Fred. Let over me turn call

Fred Eppinger

our Thank that us joining call. minute, will review quarter for in market. would quarterly four I but in like view Dave Stewart's a you for results cover of financial Stewart overall the the before current earnings conference today to

the The much discussed to more ourselves fundamentally and on title a last the years estate few conditions. operating I efforts business to over resilient company. remains can stronger of cycle focused economic As the journey become our the that to service real better is company's in long-term approach position through goal improving our and premier create before thrive

and attractive discipline. enhancing We are and scale focused on resiliency markets our improving margins operational improving our capabilities growth our and financial by

in market saw quarter. to were by market, we fourth significantly improved impacted purchase manage our our we downturn in significant have performance challenging the ability We and in the but the

continue us just that interest out in rate interest the term. into skills capabilities for materially a XXXX, during challenges managing and business to cost are this are with fourth best and balance over quarter we long with will rates our as discipline The and market position for of investing planning increased and difficult associated environment topped the X% higher

to improving Although, January turn XXX early Interest affordability home declined seen rates, Through XXXX in trends quickly bull interest we've a declining cadences and housing XXXX, managing a and market. have starting a significant been quarters. market by purchase in market, real to all and in market. rapidly rates in with moving a it we increase are declining basis normal estate have points inventory to

result, material but us a thoughtful targeted been As strength, maintain to year we normal our position well, service have taking throughout actions market. expense ensure and and business we the financial for

in quarter, significant, quarter the year-over-year year. the additional flexibility. orders purchase our in fourth market, increase we decrease XX% year lowest point maintained a to additional us December, at in expense targeted but for financial ending an and actions to saw the material This take we closed open the ensure In in decrease the orders a led of trend XX% our

to business our with financial view, continue last ultimately the improvements our we and made have years, structured few over manage maintained however, performance. strengthens, We investments we improving long-term the and have a long-term

an building plan being competitive on functions improved the efficient operating We remain having throughout disciplined by that of in focused well our cycle. strategic more a position model

improving of scale progress lines experience markets significant We all channels. attractive the we our have emphasized business that all made in have across in in growing customer

customer complete. improvements recognize not is our and the the are experience critical we model, remains our all with work on technology, encouraged we While four financial and fronts, talent, journey

financial our the opportunistically cycle. current our this strong We double-digit but position. mindful remains will high generate market, over to be continue of to low invest to long-term maintaining goal during Financially, single we'll margins

the XXXX challenged. first fourth like quarters where However, margins in quarter living be the and will of quarter the

management Disciplined on necessary systems quarter for as financial the they investment the of margins to reflect in and levels long-term. stores to talent growth keys position. arise are seizing improving adjusted and achieve opportunities the Our over

were lot in pre-cash front getting [indiscernible] the the below we to single-digits lost money. consistently the the prior lower normal On margin margins volume market markets and

to portfolio our and particularly our from us direct improve real the improve operating margin estate better have services in and scale efforts acquisitions our model environments. to weather operations strength Our challenging in allowed pressure in

process At significantly to goal. centralization our have automation identified in improving capabilities. improve operational areas efficiencies to tighter of the and needed we our outflow to on the technology we journey, invested then achieve that we Since improve for order production and

which of our made We rolling has already of improving all ease technology the with progress platform, typically – significant connectivity customer agency use the channels and have experience across agents.

progress make but work these other done. needs excellent to know We continue what be and we investments, to on that

current targeted the services. direct market that improve scale markets complement additional to present lender believe opportunity is which to attractive existing and will add services We our

strategic remains Share key direct a growth in MSA objective. target markets

of reverse important provider During leaders national scale. fourth Services and investors specializes to and mortgage fields strategy our lenders. companies FNC for Both the to institutional quarter, the Services, we Services increase are BCHH added respective offerings their are and that service -- Title to providing to Title transactions in Title which our

efficiencies [indiscernible] into experience over the our years. our several that we've completed and improves production acquisitions integrated other customers' which as well progress the overall past been as additional systems, operating building

improve quality increase in now scale to our business markets our key with saw agents. share that independent agency and areas growth developments the position our In us in XXXX highest

of connectivity, reduction and risk that We ease have on partners. use of technology progress provide our and services our deployment agency greater for made excellent

As ever move agents our strong XXXX, we platform it's of for services through is as been. as

talent are key all to year a our operations We our as been in operators for and commercial XXXX strategy. important achieving objectives. Positioning growth made significant during overall investments in these this components focus business across lines aid has our these

we changing regarding in headwinds given markets. there We long-term, short-term are optimistic commercial be recognize may the although the market financial some

operating Stewart cycle the will between of growth current finish financial will footing and challenges strengthening to strong balance manage Let should best this advantage that both A take short-term just that the provide. a of the performance. an me expense reiterating with long-term investments position us for market and opportunities practical by we expenses and

reiterating I estate their real services of my support. and our the positive for title Stewart and work I to premier their all will by view to associates of ability would long-term customers thank the market loyalty company. continued also become and the hard conclude like our for

David will now our update results. everyone on

David Hisey

you, Good Fred. thank morning and

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

impacted the rates volatile forward Consumer estate real recession due as and During well. affordability by markets rates inflation, market quarter, was concerns. the rate has of the Commercial higher X%. peaked negatively and been mortgage settlement environment that fourth over XX-year residential impact is seeing to

After primarily compared fourth earnings income office losses of was reported from and and per diluted share XXXX. income Stewart $XX XXXX $X.XX unrealized closure, share equity quarter gains regulatory of total net of million or severance net and adjustments expenses Yesterday $X.XX $XX or $XX adjusted million quarter of securities net fourth diluted and revenues share on $XXX million. diluted $X.XX per litigation per million to fourth quarter the in on

for million driven volume Total the declines quarter the interest XX% due higher primarily to or revenues title by decreased rates. $XXX fourth

prior million year the result, $XXX in As quarter. $XX to income was compared title the a pretax million service

and $XXX the quarter. While in compared our on appendix last quarter was $XX for other adjustments to listed prior press an margin compared to release, year pretax million of X.X% the the adjusted year's basis items million segment's income pretax intangible, adjusted XX.X% for After quarter. fourth in the in fourth amortization purchase was

year Average fee In due lower primarily quarter. our commercial transaction direct and $XX,XXX volume revenues prior to title per million, decreased size. $XX,XXX domestic to was $XX commercial business, compared or the XX%, for file

revenues refinancing XX%, resulting decreased transactions. residential million, Domestic from purchase lower $XX or and

However, the purchase residential $X,XXX last from increased file $X,XXX fee approximately XX% per due mix. year to higher to

the revenues in lower, respectively to our declined and environment. primarily XX% lower primarily operations. XX% or XX% due international the last were Canadian open year, volumes million and fourth quarter due by to closed to $XX compared economic Total Total in orders transaction

last Similar as direct agency million revenues, of revenues primarily rate XX% to our last mix. result agency compared year's to XX% compared or to to year, from The our decreased quarter. decreased a operations slightly average XX.X% remittance title geographic $XXX

losses, revenues. XX%, lower million, expense title On $XX quarter by or decreased driven title fourth title loss in total the primarily

compared title the XXXX. As X% a revenues, percent was in to quarter fourth title the X.X% expense loss of

X.X% economic at environment, current full the title revenues total expect XXXX, recession, to including XXXX. the least year our were compared be XXXX losses of a we XXXX losses to For levels. on possible X.X% Based in title at

million solutions quarter our income last year, segment. $XXX,XXX Regarding real the resulting transaction to environment. $X from from due volumes primarily lower estate decreased economic to pretax Fourth

XX.X% was year for pretax to the Appendix fourth X.X% adjusting Pretax X.X% items X.X% and margin quarter. the other for in purchasing amortization the in tangible, to quarter prior After adjusted compared quarter, fourth A, fourth the in the for was segment listed margin XXXX. compared quarter in

the operating due Regarding of for compensation other employee and cost which quarter results. expenses incentive consist expenses, lower decreased and based operating costs, lower revenues primarily to related on operating lower total

as in operating as XX% operating year lower quarter Employee expenses, XX% due revenues. XX% of and the compared were prior primarily revenues, XXXX percent were XX% in the operating cost, fourth of quarter, to operating fourth and in the a a respectively. to revenues, quarter, XXXX Other percent

quarter. ratio regulatory XXXX litigation the XX% in expenses, compared closures, the fourth in office and to XX% quarter year expense prior Excluding operating other was the

customers' strong matters, other the is to On our employees our financial in market. support estate real position

XXXX, share and XX, and $XXX $XX $X.XX facility. to December billion $XXX are line of requirements XXXX. as value regulatory credit also was Stewart which X% of investments approximately higher stockholders' and is million million December approximately a XX, we per cash total the have equity than fully attributable available book Our is our in Total

to everybody it now our provided primarily our to real and cash fourth confident income the XXXX. $XXX call always compared in for over advocate prosperity fourth for quarter last of estate questions. decreased I'll for quarter safety million million, year's the to markets. in the associates. We supported to net the quarter, Lastly, grateful and by We're customers the net inspire turn operator $XX back due and are lower operations and

Operator

Instructions] question Campbell [Operator from from first John Our Stephens. is coming

Fred Eppinger

John. morning, Good

John Campbell

you on guys I cost share guys. is it's one-timers you avoid the down is market. that the the so sharper maybe less staff don't than half know, down of to retain Hi, I revenue. Good invested operating expense Other side personnel want out than the strip you've lose And garner here, showing rate a and the to share I'm know revenues, that bit to If little other morning. loss. of important I that

here question the the salaries? and faster what's movement other the expenses, my of in preview expense So than operating to cutting is items? a line basically of revenues come? those You're that kind Is XQ by

Fred Eppinger

bit, little A John.

So lagging a bit. the reality little we're is that

of of kind amount we've the both I last a on $XX saw the third gift, lines, call, order. in targeted and took about done action in a in XX old quarter. that into mentioned three I actually surgical fourth five probably we've personnel quarters. the done million bit So when past the earnings end material with -- little say took of will action I But that at will this the stuff like, We be fourth. we open in thoughtfully

of So we the shifts in changes of the kind kind what did. during balance year

the what so you some saw. you in in. stuff. But closures this of that stuff, of restructuring result that that's been of obviously kind going the so And And -- the balance and office has some can with relevant of see

-- obviously, some is what announce count ways. we obviously, quarter going toughest know orders is see in to like quarter we what see first the open so be the always, order the first of kind quarter we and to our And the

three make want so, my can was I we're in across will. momentum because your quarters, going when capabilities great we sure to but the it to we to got terrible view through, being is we point, And of -- to And about the thoughtful the thought but it that to sure, are or comes the I make take appropriate advantage two stays back and organization. this and built I market we get stay. still And otherwise

has be quite really about I it. feel the managed And trying it. about is And good through so, to very how thoughtful team we're

David Hisey

Dave. is this John,

and thing maybe other be whether cost there. employee may the one a in of a lot than that difference expense real estate percentages one. Just services varies, other to A lot third-party it revenue the has more on the data other line, closely so the and

John Campbell

and it's if I year-over-year. a thinking there's lift about might then mix kind That's that per kind be shift I that sequentially. going on implied the little a look that, that. I'm maybe direct title sequentially, fee the of orders, skewing point. If shift it's back recent acquisitions by at similar mix divided I'm of of a a file, closed the direct there. a bit bit. And was the a know kind XX% trouble move just a But great I of I into XX% take think revenue

if that, maybe So help you to could that. explain talk

David Hisey

Yes.

for acquisitions, the the difference, of closed mean high. I a so think isn't see of talking Those other any reverse like for in that kind year, you're to And impact I file wouldn't the that. mix later quite that. and geographic John, we that probably one stuff fee

just So that sense more is mix that's geographic shift.

John Campbell

That’s Thank helpful. Okay. guys. you,

Fred Eppinger

John Thanks,

Operator

[Operator Instructions] John we like it from And looks another question have Campbell.

John Campbell

my today Yes, show this is guys.

BCHH business. guys something acquired December. That's If you you could in on obviously, touch the late

synergy a that that the bit P&L? and segment. If how impacts Estate But the that can maybe potential probably could also -- little in you give you Solutions strategy. I'm then complements the color if, of thinking of falls Real talk on the to kind how talk

David Hisey

operation, actually title John to be segment. the is Yes, it's that a in so going title

the customer that the think is about to that their of is, thing. think single-family kind build sort to base think investor about institutional I about side way and rental, run primary think of

And business FNC, and reverse looking the the with demographics what's growth I think in differentiate where economy the did of with for with you can half like of segments sort market potential sort like. with happening so, we much we're

done some I'm maybe the market And family size and some of to some you've real sort XX% XX% [indiscernible] institutional on it sure total and that people of at sort estate point. work of or

just to opportunity after it's go the premier there. segment. And And so providers of market that an one is this

John Campbell

you was to you on last other you orders. And BCHH somewhat going I that I to said if that could this up go impact Is if think related then back in could picked think other to it that's hit -- good to also going quarter and about the is now? about And Okay. BCHH, on was that but bit the past to talked FNC, you mix was then maybe sequentially had If in a purchased. purchase maybe other? or maybe a hit talk orders then that

David Hisey

Yes. It's some it's going that look take hard so could another. With FNC think other need that I is to at purchased. to of a BCHH because we're be -- and

probably be of And so split a bit there. there's going to a

John Campbell

Okay. guys. That's Thank you helpful.

David Hisey

Thanks, John.

Operator

program session. over I It for to will that looks like is now time turn the Fred. our allotted question-and-answer back

Fred Eppinger

the the more in think queue. I in there is some Question there queue.

Operator

we looks a have just couple KBW. actually like up, George Bose and It queued from

Fred Eppinger

Bose. morning. Hi, Good

Bose George

Hey, good morning.

wanted Just John to question the follow-up from on on expenses.

you roughly expectations? way kind As sort -- a XXXX next the is this benefit flow did of there remains the with of for quarter is consensus the to for in us market of cuts what range for about that think margin assuming through the line

Fred Eppinger

that fourth to I by order -- after obviously we we're we view believe we've mean, be think indicated excess in think in the materially. I and gives going in system is first more where doing. [indiscernible] us capacity going much the stuff at it's the still again, quarter poor the And my intake are that we done to I have pretty given what some The in improve personnel quarter. now

that improves, as obviously, those increase if improved the steady so state the market ratios as have materially And through year, the capacity you those. volume the

end So about good are we up. and pretty where we're to going feel we

good we right? where the about business, pretty get I ratio on like if gives basis we XX manage can sense And you a are. that we've full good was of year a way though you total you we how if feel even and kind done So manage annual how the of and you declining what is in pretty at -- at this year's business an look it the you it at look look months

one our income The have know the don't investment to as we disadvantage but revenue goes is different, these is have that line we you a portfolio changes a of little ratios. that bag

just well little big that you managed obviously times, on others were apples-to-apples. us a would there's And of say, pretty comparable the a But we three its very basis at different a size actually. It's have. portfolio the taken guys if So a of look comparison actually basis, take we've in, that we top. the have actions the on overhead our times I we've relative four level bit little actions at

Bose George

helpful. That's great. Okay,

David Hisey

little mean, where thing guys the a that, lower maybe is were actual taken have though one even the ratio we those Just the thing bit on fourth of one to on saw I I actions, side. other about that quarter than the think I relationships of think all think in you employee you some

quite because Some of may dollar-for-dollar, maybe but things continue, the don't get that that. we

Fred Eppinger

like will both you've the what's are though, something. orders XX% here. -- be by at first challenging because that commercial us bottom very or the quarter interesting and exciting I fourth, seen right sure orders to just What's XX% orders And think in I'm January are for the we're up it. up or

has higher-quality. quarter first fourth quarter your But what driven invest the

So which right? of it's really that like is off kind we're while the So we're here excellent. bouncing I bottom feel good lags,

first the more other But else's thing and everybody huge California. and the we have Florida, seasonal about other quarter because -- is all don't. the least the positions remember in We we're than competitors, us, in California

a double big we're we first quarter our So big and [indiscernible]. quarter into a that little because a win, bit fourth weakish of in had of [indiscernible]. We're

more bit So we a have seasonal of a little lag.

can we little of again, balancing would kind I back. say I the the because right, things call trends But we it a that, and feel see like coming bit

good. So it's

Bose George

drives can non-controlling Thanks. very That's you what helpful. interest actually Great. line. then, And Okay. remind that us

despite down big down come income. it's modestly, very move in Now, the

Fred Eppinger

varies from it Yes, of don't period-to-period. businesses. ownership have we where XXX% that's some And our Yes. in

purchase years that. and we like staging ago couple we've then been slight into of So majority had a a done

had so quarter then, to going we're but fourth there's new a off ownerships, the fluctuation. a was trying in be entities of minimize the general, helping the kicked that in that bit. ratio so And of line. couple that might have we But little And partial to periods

of would ownership for get So get to lining was to historic that have and of beginning of we I and recent had of some a good little we bit incentives. a reasons rid a but did try buy lot real strategic the acquisitions the at that one ownership

So I huge bounced base a any but going that's that little or getting bit, jump. it don't that's not why to see

Bose George

one Any more, going of regulatory a Great. add that on that? color And to one-off? and legal Okay. actually just the settlement just kind just was

Fred Eppinger

with on we service they York you it with anti-poaching. kind about did that is of of It will. New Fidelity some came in and was if anti-poaching Yeah. out looked Everybody industry our the is transaction tired believe, I at have actually

settled so [indiscernible]. want it we But to settle And I us. in just We that. third I the behind think a on player think to one-off get

Bose George

Yeah.

Got Okay. and Great thanks a it. lot.

Operator

Our comes Partners. & from from next question Dowling Dunn Geoffrey

Geoffrey Dunn

Hi guys. Good morning.

David Hisey

morning. Good Hi.

Fred Eppinger

Good morning.

Geoffrey Dunn

near the So it first picking respect to just term, like sounds is with up. activity

You the but have don't completely in of certainly first expenses necessarily processing get those those the quarter you orders. revenues the

up, as you think is sounds main I we're it do like compressed underneath make you sequentially. looking question shapes can directionally So first quarter? margins more And my guess in it the money

Fred Eppinger

question. Great

think I very challenging most our definitely right, it’s quarter, challenging a quarter.

quarter challenge. But I think aggressive we've done -- again, job managing most think a again, first all our pretty we've expenses. is the I

Geoffrey Dunn

the reposition beforehand. portfolio investment it a lagged yields quarter income, is or David, impact And going money uptick this up? seen Okay. you you differently, – know after just much pretty movement like the you I've good looks then did from had this a

David Hisey

Yes, that. I lot money you can you the of Geoff. getting right now. in just mean that's I markets get benefit X%-plus mean markets in money here. the getting we're the weren't It's where a David

And it's earnings just the on the cash. so, excess

portfolio investment of but the our short over relatively keeping rates. and indexing ways the effect the side duration we're think that's money market to on mainly grow the business I

Fred Eppinger

Yes.

know, you a a is. gap depository good our is the and a shows right? bit unique don't As right quickly for money it And and little now, moved money it short escrow. short situation. our of very have so good we that It's again, How how

get bit billion investments. market little investments the portfolio countercyclical the But come It's right? a going to the of it now and of escrow unique right of a very our our time is $X but from XX/XX best investment from with our in tough time. So, business. a are It's little benefit a we really kind don't

Geoffrey Dunn

last is my And question commercial. on

people the very commercial, when year I normalization, for as and of think can but results. the of like to what seem off normalized economic pluses are lot an be beyond minuses probably normalization -- are a What they're remained on to about what you think areas talk you're as you that basis? coming hotspots? it like to the painful the But can relative What get starting actually maybe level? that impacted a think the

Fred Eppinger

because places the is think Yes. first that, the pretty the Again I for orders some I slow going to in I going us what's up is year -- interesting are the is be so but up think tail, it's think quarter shape good. interesting to

I on some now. right going geography think there's stuff

very a our US us, So energy little interesting mix, strong. I bit But what's is think is slower. for given

so seeing have we're really pickup us, that sector. the in And in some energy in for nice what advantages growth is we

the a in general, last And was commercial. pretty comparison like But that others, to obviously, going a struggle. on I good it's do going little obvious think going year's more to good. be market quarter we there's than really first to is bit the in struggle think office, sectors are

a think year, I commercial be the be question. going your first But the and to no going for is quarter. year. think There's But So I solid it's there's in to a the comparison there the takes point. to puts overall

Geoffrey Dunn

you. Thank Okay.

Fred Eppinger

Thank you.

Operator

It Fred further program turn over appears back no I'll the for we now remarks. to have any closing questions.

Fred Eppinger

you. everybody Well, quarter's call. want I on thank us joining earnings this Thank to for

Operator

conference. today's conclude does this And

day. disconnect. Have a You may now great

Stewart Information Services (STC) 9 Feb 232022 Q4 Earnings call transcript