STC - Earnings call 3 2023 | Stewart Information Services Corporation

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Operator

Hello, and thank you for joining the Stewart Information Services Third Quarter 2023 Earnings Call. [Operator Instructions] Please note today's call is being recorded. [Operator Instructions] It is now my pleasure to turn today's conference over to Brian Glaze, Chief Accounting Officer. Please go ahead, sir.

Brian Glaze

Thank you for joining us today for Stewart's Third Quarter 2023 Earnings Conference Call.

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

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

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

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

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

Let now the Fred. to me call turn over

Frederick Eppinger

released review for and for us today financial Third these you for we joining Stewart's David minute. the in quarter XXXX Earnings a will Quarter Thank results Conference Yesterday, Call.

Before view I'd on will our success. for update of continued you initiatives long-term the set that doing on progress like our believe we up important and so, to Stewart market

This back, last celebrate Stewart's strides the reflect future. quarter, I XXX Stock milestones a our title to up And for New industry coming on more listed performance we in ourselves made the even and caused me see prosperous to XX as have X financial in business years. we on operating on company These also the are that York pioneer as years improving looking a and of Exchange. great proud fundamentally years better position to

of on full continue will current pose strong a to we real title to more materially our a service improved the continues premier over journey Although and in company. cycle. environment, intensely the Even economic have current that enterprise business, economic significant focus become light estate short-term we our to the challenges, environment resilient creating thrive

X% the existing challenging they Rates impact find around into previously quarter. transaction volumes historic of where mortgage in at to second third homes. we managing we of close sale for remain throughout are a at through increased were to the and X.X%, range rates the mortgage lows XXXX. where high will Higher We believe continue the environment elevated ourselves rates quarter

industry which home pricing experiencing are kept purchase strong. low inventory, we listing an historically volumes combined has existing with At level, low

As a be we normal the believe market a see given XXXX continue on forward, we year very will the seasonal to challenging to look top 'XX transition X as impacts. in months macroeconomics more the next typical of laid and

it performance financial enhancing and the and the While can we operational growth company, we in scale remain and and focused improving on significantly will do. have is improved And of capabilities. markets we through underlying attractive critical is more there operational improved resiliency our margins,

focus In environment, lose this achieving long-period it to challenging on is goals. easy

our making take on However, Maintaining enterprise strong extremely pursue shown dedication during the opportunities and pleased third improving they flexibility I'm financial looking our in in in these we advantage even progress quarter continue to current us have to environment long-term progress our performance. this of gives position towards investments initiatives as and the arise. with our

costs manage cost targeted have thoughtfully to continued where and appropriate. have We taken actions

in will and I focused very period the Stewart difficult during done actions improvement with real the strong investing balancing our we on this diligent careful in is and believe We to with continue of expense plan. And good normalize estate investments, believe opportunities. for cycle would threaten a we get long-term financial position targeted remaining our not be to people get continue management later our in discipline we have moment long-term to cycle. best job take through value-creating competitive to We the have been our to that forward path felt will and it XXXX. this

efficiency improve technology elevated in on low to operating targeted remain long-term expense our structure experience focused investments, of our to will set scale We areas. in ratios with for our These will building remain in cause investments future. with and coupled investments model, strategic cost the thoughtful volumes and will in enhancing operations We these and enhance a in our market management us transaction but financial improve long-term. up better near-term that performance performance the believe overall the customer

routinely the leadership operations, increase direct reevaluate enhance We have to and our markets we in where our strength. opportunity share

Given though capital more investment I XXXX. We we this make approach been conservative returns, selective and remain our decisions uncertainty, in even of sure our due commercial challenged we challenges the believe remains remain ongoing market, while will provides see strong half in we the the have properties. sectors energy as maintain in to market sectors and financial of office positive long-term us through first deployment markets on we such believe near-term multifamily like certain the changing to for

all of focus important business a Growth an been for lines is has our in strategy of all positions key sectors of our commercial component commercial operations operations our our across and growth journey. overall

talent We making in place leadership objectives. are to so we have that these the achieve in investments

commercial we will in allow growth in long-term create better our support serve us commercial the believe to operations We for our strategies our investing to are markets technology to us. customers, and

that ease gains, our both experience Agency enhanced agent customer In a experience quarter partners. excellent have use and throughout deployment for we our this to on of the progress risk are services our of improved connectivity, and reduction technology significantly market our leveraging we provide in our business, agents. greater includes year, drive technology for and This share

-- to are Florida, our markets, and such market. We the overall platform target as progress we meaningful begun as services our for in that Pennsylvania strong ever commercial it's of pleased see as have and agencies been, we've

of clients. seeing gains improved to leveraged serve share as we our our Real In services we and Solutions, deeply portfolio better more Estate are lender

downturn this and technology point title improve are for capabilities. to able of gains. our is these So the some operational production investments while focused process on our centralization efficiencies improving we immune and of share we've of A the to businesses, not market offset to with been significant our automation

Our in resulted progress already channels. customer our significant experience to all improving across investments have

platform, An agents. example just use of significantly the agency ease our with which technology enhances one in of connectivity this is I and mentioned

area of work of efficiency priority our title digitization our the operating Another data. improve we to and centralization as is

are on pleased improvement and delivery our significant this, this the We progress production have in considerable -- we the year we with see made [indiscernible] in process levels, will costs.

efficiencies low into good turn overall on We to implemented, Integrating in entities unit double-digit been which our our to mentioned, year specifically, ] purchase prioritized with growing investments a our us years. continue margin next should for we've complete X offers and we remaining of acquired achieve And initiatives to a building margins as the have progress we We've depressed XXX that been significant integrate many improve we that improve acquired this [ we normal this past This to aware our margin important of helps has market. returns are a experience systems. strength material and us remain to the production I've basis operating customer and points expect the journey. efforts year. our of normal market. about financial several the that focus million by during this of made companies should effort, cycle. by The been the phase Improving is and integration priority, majority by an mid other allow

disciplined sites. customer persists, a model, know being talent we're in throughout by We plan within efficient experience work technology, and complete. operating that encouraged of functions that not journey on the more and our financial having estate we remain competitive our the While building real by an that focused well improved strategic improvements is position all model

emphasized business, attractive at in We strides growing and have markets across have scale improving all our made lines in we [indiscernible]. great customer experience the of

always cycle focused talent on even so market we place more key been as Retaining in important. retaining the through improves. have the is We've this right team that talent

our year-over-year market and are agency, gains commercial Our businesses. share service direct of efforts increased yielding in estate real each results

Let strengthening while we by Stewart's for performance. thoughtfully expenses balance be investments me mindful challenges, reiterating of current growth our conclude and been market operating also have managing remaining necessary long-term the to discipline dedicated to the that of

will footing solid advantage Our the should this us that financial to difficult take provide. best of cycle position opportunities

ability estate the become long-term services remain the title Finally, I to company. and the positive premier of real view on the Stewart of market

have their continued for challenging have times they these And all I our throughout and thank diligently accomplished. associates appreciate support. customers and to loyalty worked I Our also want

will the Dave for results. update now everyone

David Hisey

Good morning, support. our everyone, their and thank like for thank and you, continued for our Fred. I service to would also outstanding their customers associates

relating net revenues income quarter our to This income today, and presentation indicative non-GAAP quarter, Starting this quarter share lower how through we non-GAAP million. real the to activity, our we the or this the measures continues mortgage operating market performance. of asset Stewart by allows high and EPS low last real segments. to million calculation. estate $XXX consolidated related We don't diluted lower During Yesterday, revised commercial third present rates adjusted Solutions Real measures presentation housing third is quarter our $X.XX to compared per reported and quarter to third contributing to and from us estate net title on inventory, acquired consistent operating revised with experience amortization year. amortization the excluding of intangible be of believe as adjusted residential $XX results and third of Estate

of and share per gains intangible per the XXXX. or detailed third unrealized other $X.XX and compared for amortization the acquired in diluted $X.XX A net $XX income in Adjusted or third realized net quarter of our million, press for was $XX release. share adjusting quarter After and income net losses diluted to the million Appendix items asset

adjustments by to X% year Regarding $XX estate primarily and the XX% or other the On quarter $XXX the for business, the third items, year, purchase pretax XX% by or same to compared declined million pretax Title was After title orders million the for opened real prior respectively, XX%, income last current the quarter $XX the XX% intangible income decreased closed environment. revenues direct segment's to in to while quarter quarter. compared margin X% total our in and due million or last margin and segment, compared total $XX or million amortization third decreased year.

Domestic fee residential to primarily mix. prior last residential compared commercial than $X quarter year's approximately year Average was refinancing transaction due per volume quarter. million lower the lower to $X,XXX revenues and XX% Domestic lower file due or XX%, from due file volumes. commercial XX%, was lower decreased $XX,XXX $XX,XXX to or declined primarily third $XX or quarter the in average revenues million fee per purchase purchase to while

Total revenues of a transaction operations. primarily million $X decreased our result Canadian international volumes lower as or operating XX%, at

third to remittance compared third million XX% the our quarter agency operations was in and year, roughly comparable. or rate commercial quarter the $XX revenues from market, activity last residential average Given the lower while decreased

expense in title $X million loss title due revenues. primarily total XX%, the quarter to Regarding lower declined losses, title by or

a favorable revenues, which As of year's title X.X% quarter compared benefited in percent title experience. claims third quarter, from expense to X.X% last was loss

expect For title the of the we title to year losses average full low XXXX, X% still revenues. in

third help was Pretax adjusting million margin the to transactional primarily X.X% margin intangible After year, Real strength last million quarter credit-related XXXX. income Estate pretax purchase driven to other our quarter. revenues prior dip by for businesses. offset year Related similar segment, was to compared in in to and the $X.X adjusted third pretax was data slight Solutions XX%, the compared X.X% quarter businesses amortization, $X.X a in

operating as consolidated a the in operating to expense higher of third compared to our cost employee Lower result other was ratio XX% XX% in also year. lower primarily last our XX% operating quarter last operating ratio of revenues compared XX% resulted slightly expenses, year, revenues. On

true-up was than expense income completed tax higher due was federal our filed to third taxes, share. The On roughly per normal utilization $X.XX our rate primarily historical tax to resulting our expense rate EPS tax of of as quarter this expect impact tax we XX% foreign return. to additional of do from our tax return credits We lower and tax on levels.

XXXX we our per total we requirements, available $X.XX fully XX, and financial in were of estate book September have end also to the of approximately At approximately our third customers, reserve On attributable position other a associates credit was cash Stewart facility. Total support value premium $XX stockholders' with statutory real over $XXX and continue market. million to line a investments share. billion solid equity a of to $XXX million at quarter, approximately the have matters, the

compared payable million Lastly, during operations third the by net primarily to to $XX by cash provided offset was in lower the due year quarter, million payments claims income. partially $XX quarter net and lower prior accounts

I'll markets. in questions. confident real We remain and the support estate appreciate our of for the turn it associates operator now customers to our and back

Operator

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

Bose George

months? on XX think your updated when double-digit given is give to year, us next on like your we a whatever for XXXX the XXXX normalized just an a you comments transition margin? XX margin expectations being more Can thoughts should about And

Frederick Eppinger

for Yes, Bose, the question. thanks

So right. exactly that's

got So if digits single when I you here, targeting beginning, remember we high talked first at the double. about

I outperformed X.X%, think of excess think XX% to million in that. X that we've in 'XX unit units we've What's work. when of happened in range purchase you're done done we the were range. a I about a margin volume. achieved in market, lot But and 'XX we kind X 'XX was we're XX.X%, it I because Obviously, work, that is XX% range good million think because at

as have so volume the all margin. that capacity, is depressed excess The extract now we really can't problem think about it obviously, is, we and is

our is forecast, of my is X that when get range. you 'XX at that So of view when 'XX back look million point we view to like kind

so see margins think And I where get that's you'll better.

as cratering. I of the X time, that think in because given that kind the this than we year, we're really worse quarters volumes about comes know, still the year, we are started together, where is and previous saw where are, quite last spike with things although obviously, next at rates, difficult you

year we're that next say, not -- to I we're more would sitting half things our so on journey we're were a and so towards into together thing transparency not there's bit first there's And again, from other it's market second like too, But of come through transition a the on, a that we other other things not Bose, here the of improve in quarter next And pretty now, in little particularly good -- quarter. hands. kind we 'XX. working that. to right normal the -- first year, But have will a ourselves,

Bose George

income, nicely reasonable Can of run a on investment rates? sort That's continue that Or was talk pretty you helpful. up Is that? again trend with about for quarter trajectory And then just this rate? to quarter. the that could up this

David Hisey

to had about as what escrows when about really putting Bose, we we the the work. that's were we a quarter, which I that's it is Yes, in $X talked said month, And last million think remains.

of quarter. And of you little general And that hit the in the an the so income. saw saw effect you a full investment then third bit uptick on

more think rate favorable mainly environment. it's I to the due

cause rate. I'd be little a dip might on could rate. balances, it's float, -- a yes, balances stands, change although would you little is meaningfully, negative could it The that balances But able could this bit. go were say get good have rate So to also down I that to volumes a by decent -- it's obviously, pretty run I as mean and now, is it we impact the where a bit if we higher offset elected But right? Yes. continue little. stand run it a a to say

Operator

Our Soham comes from Bhonsle next BTIG. with question

Soham Bhonsle

moving with was I just of where sort rates to wondering orders October. I recently, trending start just are through the guess

September think year-over-year. was sort of I down X%

the So there just rate run on sort of wondering now.

Frederick Eppinger

affected have order rates The counts. Yes.

And as to so would of a bit I little system. a the describe shock it

quarter. And you they continued so dipping of this this at what tail saw the has started and end that into quarter,

you the remember started And last the really started of seconds the I now so towards of shock and it about ago, year. couple the if mentioned think as end -- I a year, dropping

below the quarter. in So last we're still fourth year

to happened together toward for year weeks there's so so the went that last decreasing what still I an last the end the a impact are But down will we think bit X year in it's because sure. but little -- much. we're come And below, of

Soham Bhonsle

right, that of So we're does above sort the it flattish are easier, going that but to that X%? mean or think sort way the comps sort is get that to then? of below of about I get

Frederick Eppinger

splashy ], [ I'm Soham.

impact got rates. the impact and So both again, I'm we and down it's seasonal got the you saying continued of

are So move orders to the quarter down again. going of fourth

Soham Bhonsle

right. All Okay.

Okay.

think I understand. I

like just picked the bit share then and quite Okay. It also of on drivers there was refi a looks on guess up share, I And there. purchase. some curious a market I'm on bit,

the Fred, can share you who what maybe just and walk on think from? through ground maybe you the you're So you're taking seeing

Frederick Eppinger

Sure.

been our about growth, were ease until were So up That businesses just and So of right? XX in have each ago, for on we right, up. we positioned behind Agency, months use of caught meaningfully integrations.

traction to agents to we maybe starting we in share good lot X% states of targeted there's have particular ourselves shelf So reintroduce them now that a to XX%. of go get space, have we or within introduce we're XX and as in -- gain we we kind and

So think shift. better We're and value work, of is innings been, seen that, a as happening share and a one ourselves have proposition, think, X at agents we share. where we've it's I it's points of we increases early to or we're with but nice time. hard agents. what's again, reintroduce so And I quarters little getting And it's in new of bit the

other unique have we a competitors. percent, less that The some than little is of refi about a is us thing as the

And our of in and were core as well. essence, but helped that markets. XX lot the XX We better years talent [indiscernible]. in than in purchase the became market, markets a bad, it's of But a essentially, so did agency. X we -- In or better markets, wise And ago. market bunch as acquisitions many we're we're are story that while direct, that's with us

bit a too. our And own, and so holding we're winning actually there we're little

more bit have, capabilities holding because we agencies. and as own we skills back in market a were I we that But of think think we'll the in. the and markets we little as gets the right better getting and buy more to get our normal we're get now, will -- to I go --

business, full again, just lender the than less it's a year On services and assembled. we portfolio had of a we really -- products these that

able cross-sell of worked about million what's revenue we're have a and with these started a happening broader journey. X when is with as deepen We lender And to portfolio. this there interesting of $XX the so we lot what's in And lenders before. were because we our relationship we top

grown has So that million business. $XXX to a

better. So our is much there positioning so

continuing the So I organically alternative we of kind that legitimate to become guys. a see X big as

also And then finally, commercial very is that organic.

key done also the the We've commercial. we've we interested we did thing. markets. markets in well investments done hires some We that lot of done were that's So a of is smaller picked direct, there what a made as lot same in. We've We've the there.

other The our of -- is energy right? business XX% last probably market our year, if obviously business interesting and at down, energy commercial, thing you real was weigh one XX% that's look probably strengths in but up, is of now. of is the So our energy

our So also of of we benefit mix areas invested a of But a have bit quite because in commercial. expertise. resilient a having we've

our enhancing tough really but also progress, make investments focused it's thing. and It's a the of if But view allegiances So to because expense again, change again, our it's good. targeted get keep sure to improving. to so my trying people we we of to the be haul, stay I'm thoughtful to I in going happy as we all We're think gain robust with kind we're balancing market I some sure which going the the businesses, little And to in comes these more are a share. reluctant proposition. team. that's be can actually set think is is up management of back, only showing And effort better long over bit down make value markets, and keep

Soham Bhonsle

fee was reported more, Yes. I wondering file peer No, I'm to on than morning. on guess, hear. side, the per And it stronger this your great commercial. one what that's just

do the can development see it So of about you -- just the how just quarter that the energy talking here? talk piece you're drivers? fourth And sort Is then about? you

Frederick Eppinger

Yes.

caution. a there's So

insight very what on not based is us, close your right. So right? huge, we're lumpy ]. they're But [ For mix

that. if large. you energy deals, of we're the drove So some at of some That look quite

on the that don't just -- look size tend be because it's again, we lumpy we little to of a on So that big.

down It's But deals probably matter. it we're but X look continue a industry down it's down down I market, could XX%, if to data, a as So little really Commercial and you it's look XX%, pretty is again, because market, forward, less will successful than probably we're tough significantly. being that right? a be. at

the commercial, to little risk. about weird that's something we understand have that What's bit, a understand view, my in and

So the different uncertainty in lot of lot with it And end we stuff business lot tends at December. the pipe the have percent could year. have But and lot have we we of a of of a to a market in a close have closings a and of this files.

with the we've biggest and watching lots lots got far comfortable December focus the But And a business how so market. that. of general, where weird very on we're always one it's We've pipe. month to We'll that's see of again, so got that by our thing I'm is in attacking activity. I'm got turns because, up. how But obviously we've

Operator

Our come [Operator Campbell John with Inc. from Instructions] Stephens, question will next

John Campbell

wanted you had other to the up -- maybe there. was on big I over pretty think there. Hoping sequential with it can orders. help a you maybe just XXX% increase, check I a modeling I mean the step

help you've the the seasonality. fee really be But I'm seasonal that too in David, with curious orders. how that mirror also, And other average of said past, if think you the going to the file I that per can that's to forward? maybe going about not model then purchase won't

David Hisey

particularly the where estate it's of a because that No, lumpy bit orders purchases the institutional a all securitizations. stuff where acquired that's we the Yes. business then at John. institutional and -- function equity home estate last go is of end real those I year. there and real That's vault the mean

then stuff like purchase tends per a terms refi more like stuff the to file, securitization the when more but of of is purchase and then fee like the average be institutional transaction. a a the deal transaction, you look reverse tends In the to transaction some buy

per so weighted purchase little probably reverse. it's file would fee lumpy. then sway a of bit. to to probably say, I and because it's going securitizations is acquisition that can And be timing closer bulk just pretty But a more quite heavily

John Campbell

seen down maybe you on of mean But higher the get fair quarter it How in a the than suggest what amount I but month reported Okay. you've -- I would like steadily seems you pretty lumpiness, each I of think average then last momentum couple next quarters. we that that? do mean see modeling kind about year? maybe how you just taking continued should and

David Hisey

Yes. individual have about to I you mean think those markets.

choppy. stuff probably I The and because over a back. watch And is we price-to-rent had think so issues that a Tom still -- much. good, capital you Last seen for if but weren't But sense I was lot, the continue reverse. you fall, it's about you think also choppy you and reverse it sell commercials that's recovered, ] little and means better side recovery. think lately then when that, as doing him time, to it's ratio don't markets very the mean securitizations you not to rent, pretty about [indiscernible] that is that when just a doing get there's markets see usually have the getting because better institutional it's is him, choppy. on if slower mean, Tom you the continue if well. come my see like would pretty it's But pretty and I [ so done --

John Campbell

mean, adjusted that a the back $X.XX your that question -- like It XX%, look added tax think foreign that metric. tax guys. on maybe I the And lower you sense. rate. standpoint, first, the a X-part was it I doesn't just like $X.XX sounds a to or But drag reported you was credits. Makes GAAP from then Okay. the EPS for EPS like

guess, I first, is that So right?

David Hisey

not not. be Yes, to on right, you you're you focus we would said. But if like impact, much We a stuff. big were did the it, as tax normalize it to tend

John Campbell

onetime, then to credit want sounds tax Okay. you forward? normalize that's sure that make And That's foreign a expectation as then helpful. reiterate David, the but you're moving just secondly, like that I that going that, lower viewing to it

David Hisey

we what rate No, my to we that's spend the in say right. did expect historically. come script tax I back that to

have had had million just It's We probably where more had lumpy income $X similar -- million, type as a hasn't base, adjustments. $X lower pronounced some evident we just since this periods. been quarter. It it's we

Operator

turn any does I'll for our call or closing additional presenters the over to This conclude now back Q&A. remarks. today's

Brian Glaze

want I for interest our much. everybody call. you the in Well, thank to Appreciate Thank joining very it.

Operator

ladies you, concludes This gentlemen. today's Thank event. and

disconnect. may now You

Stewart Information Services (STC) 26 Oct 232023 Q3 Earnings call transcript