Stewart Information Services (STC) 25 Jul 242024 Q2 Earnings call transcript

Hello and thank you all for joining the Stewart Information Services Second Quarter 2024 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 Kath Bass, Director of Investor Relations. Please go ahead.

Thank you for joining us today for Stewart's second quarter 2024 earnings conference call.

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

website could link me Eppinger; conference please listen stewart.com Fred are call go access CFO, the Joining statements CEO, To may and other results the risks contain today SEC for the that call. this for differ and of to risks number with uncertainties Please conference refer actual David forward-looking Hisey. the discussion filings to of to This cause company's materially. a uncertainties. press to and the that release involve our online, and a

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

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

over call Let turn to me the Fred. now

for by like quarter housing today sharing will Yesterday, kick by our our call you the joining call. conference followed with results I'd each second David am in quarter, released we're which earnings businesses. the on shortly. to our Stewart's we you the I for of XXXX financial review quarter. off very outlook current the with this making for pleased us progress Thank market an results on update

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but but X.XX increased year-over-year a existing bottom down. inventory as continuation low, every country continue X% sale, rates In exception to choppy seasonally pending exercising events, last very home very a of combination headwinds. last around extreme a for are, home returning but month to been factors consumers for a occurring the X market continues life continues homes year, are prior experiencing in are and recent as has of from homes sold has on market, the holding saw been due elevated of some given how reduction bought housing overall the housing where are remain the such given bounce -- was of the still enter are there a to prices improvement of been various interest buyers June, for year. This MSAs The of mortgage the which in sales and a million only rising fully course inventory. suppressed the January to was transactions market being There rates, to that caution. yet experience worse and adjusted We The to are very run prior. continue a we in pattern inventory existing XX year this rate many shows the sentiment current recent have the relative further majority except market conditions Top year. To data recent illustrate sales than the flat

more X million XXXX helping around homes us as transitional see be shepherd back which a will We the expect we characterized year to market, is existing normal annually.

upcoming ourselves monitor as election. like capitalize flat the will to we next be year of diligently are manning the reports the and to improving believe poised interesting on like So market, be X rate things down. that do We will we're results CPA quarters cuts but an and the

capitalize to on improvement. we So any prepared will be

prepare an remain upon while a market identifying executing disciplined operating efficiencies We operations. towards to rebound. Turning on also competitive model for by our improved building focused position a ourselves

attractive in all and our our and scale on our growing our through capabilities lines channels have of and in technology, improving great upgrades to markets dedicated access. data production title processes enhance improve operations. technology customers' working we advances utilizing are and experience to are business across on to implemented technology our to made all We We've management

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our transaction outcomes depending election. momentum market upcoming cuts we rate We commercial continue, the present and near-term the themselves to expect may with commercial know but the on challenges

agency driving team gains markets. on attractive remains focused in share agency Our

seeing focused progress states XX and on number a are of even very target in our conditions. good We are the market in current states

as from have we to our our support Specifically, well commercial enhanced improved seen ability services serve good as agents. leverage

on While gaining products our our for solutions through focused and cross-selling is share we services we tackling, as continued of improved lenders clients. better blocking momentum. to innovative the and solutions the leverage our serve a from lot estate significantly real top with portfolio of success of comes team lender see The basic new opportunity

its in businesses given solid results financial the quarter the solutions maintained Our real market. growth and second particularly estate

challenging, new We significant onboarded our coming growth have last credit a see have gaining with expenses from in in year. In share and toward clients significant compared client to increase solutions market quarter as clients of our challenges valuation can results, are second of as some makes end new of information in offset from bit the we some services. in new These mostly we've been our existing normalize by business The year to experiencing expenses seen and number you an able will our customer acquisition a the the that income we the this but of space introductions. current cross-selling innovative clients. pretax

Our the as of continue market couple improves. significant years next momentum we cross-sell have opportunities should the as to over available upon build

all our of thoughtfully remain intentional managing on expense are in We lines and our investments business management.

We goals. actions that have threaten initiatives or expense position the careful feel competitive not been meet critical from take we to that take away our our long-term us will help

to journey services the normal low are to unit more estate we to is that and that performance. company on allow long-term We real outlook and long-term all strength to capabilities committed the return become the of double-digit that are growth businesses the growth believe title are achieve premier to Stewart market and Stewart margins pretax confident for in doing invest X we across We a focused market. on purchase million a will we as positive our we what our call are in We work us company. where fortifying confident are maintain and for

financial should your best to continued partners take solid to we trust. of opportunities this believe the customer you and our advantage will continue for that us footing Our that to position agent cycle provide. Thank

to We with you are serve doing our committed excellence. to best

Finally, together to maintained resilient the employees. for to gratitude now a difficult personally have I'd over Houston I our our I turn to like that grateful dedication am level to of continually going customers to weather and results. our more delivers events. David, will a while that excellence update your we for standard to Stewart you on the company employees with it recent particularly thankful my service create work through our provide and to very period area as express I'm our

and you, our I through associates Fred. continued the customers appreciate service of thank of support outstanding Good our and morning, this everyone, difficult period.

million diluted $XX better improved revenues activity Yesterday, $XX from As title geographic in title to $XX open our per estate in primarily Fred historically real million to for caused $X.XX with per persisted share for quarter were our million amortization $X closed total rate noted, while total net amortization prior comparable. A purchase the year agency losses, higher quarter the and net pretax million gains last as diluted the orders million. the pretax direct segment, income release; the Appendix higher driven operations Adjusted income $X.XX of agency comparable. on unrealized causing adjusted in our title The total items, and were reported realized or $XX or After quarter. In mix. million, revenues by margins quarter. similar of Stewart be $XX million acquired compared and and operating was due quarter. decreased press and remittance our adjustments results the pretax which direct during quarter by presented revenues year's income income was commercial $X.XX quarter X% title other X% lower residential low net prior other revenues segment's second diluted total to per year X% or or last while to were X% orders On to $XXX second of compared year's second share quarter to adjusted expenses was segment's share intangible the business, or similar

$X fee transaction primarily in domestic our with per increase increased million expense with volume solid energy, produce title and industrial revenues. volumes driven revenues size results due a lower commercial loss X% to XX% the in primarily XX% improved of revenues $XX,XXX Our $XX,XXX Domestic $XX million the year. primarily or Total to to from or with asset residential or classes. Average continued driven title higher per file losses, operations. X% decreased revenues by approximately $XX XX% consistent and file improved total mix. operating commercial On Canada international compared quarter purchase in lower last fee multifamily title increased improved second transaction operations million to in

As and loss second X% a title was revenues, expense for quarters both percent of title 'XX. 'XX

year average losses full title to in the mid-X% range for to expect low the 'XX. We

increased in was last X.X% Regarding year. the improved business. compared second our margin income Pretax services from the last to real credit valuation segment, primarily resulting from and revenues to X.X% related compared estate data solutions year pretax quarter $X million

quarter. year The support in primarily tax driven year operations, to the solutions primarily which Excluding the XX.X% and as increased to of was domestic comments. the information On Fred increased acquisition, our assessment impact and historical expenses XX% quarter other market income this operations. On compared result our and tax during compared operating margin relative difficult an our matters, estate cost our average real On new margin sourced quarter expenses, expense to expense, than higher average customers improved estate boarding XX%, had last our business. intangible to by from ratio driven prior tax environment. a in business On pretax employee consolidated on credit rate his higher adjusted rate in XX.X% rate primarily the international real income was second employees in sales charge; in by our customers, scaling as to second effective XX.X% noted financial tax approximately year XX.X% prior from a remains lower to our counts. income and position incentive taxes, employee of services operating compensation solid and have XX.X% other our ratio quarter the

by was provided book quarter million $X.XX billion $XX trade Stewart end XX, last Our to $XXX quarter with $XX June the in of premium operations $XXX accounts of consistent stockholders' as excess receivable in million statutory share. Net per million approximately at line primarily approximately and have of a fully requirements credit growth. the and second approximately at was a result facility. was in compared $XX equity total cash a investments million cash with value also year second Total revenue available XXXX we of the

for our to associates, and real service back we turn now confident call our to questions. for the again you over markets. I'll thank the operator estate the in remain Lastly, customers

[Operator line Bhonsle from Instructions] BTIG. the at first We'll hear Soham of

Can estimate doing the great. to Fred, saw Anything bit on about you our maybe note on share. first just If market-specific was anything what just like look or that'd relative this side that looks quarter, to at one market competitors the maybe are I purchase you noncommercial little at lighter. a least on front? line, talk be

So yes, of there's good it. I feel a about things. couple

of area, own, our holding quarter. but in As across I of there's kind our kind area of that particularly share this couple board happened a look at the the exceptions res that

if some as did you year micro remember well the So in at as end shut this it quarter, the of down again some offices I've markets. I

going and and we So had our down of we're felt took longer subscale it that that manage approach our markets stay action. to was some kind to appropriate was outlook some our where I margin I

plus think so take saw $X.X you did quarter, I took what million. same this it in $X I million the thing million it So quarter. did the fourth was we'll $X

its on done way working the So there's markets is some that of some we've that through. micro surgical stuff

at I decreases thing home in MSA XX biggest of kind the by NAR number and our say other the markets. look sales, pending you those stuff markets are The of if Top a would

So in #X San was within Antonio Houston Top places like that, the X. the

but So did are we're margin. ensure good my take of in But some to those own view markets, some we the there things holding to kind I feel our in actions share.

micro have kind our business that res lot things in in hiring great commercial street initiatives growing growth we're our of and bending some interesting in where like on teams. business of really main and doing direct organic got what We've with going our a call things we We of offices. res kind kind markets in of

continues really we'll we're because a and down a I that years tweaks not we it's res want we're it the do worried be in But make feel I little. to next there market more that the share about couple that have over secure I'm managing of ourselves in doing are sure today. market pretty some So that to than

a a would the probably for is Because else? the an the then I is where acquisitions more environment And today M&A Is spread bid-ask Okay. of helpful. improvement ripe current that at thought That's function comment, we're here. curious versus that trough super market. have the of on approach the the on was little cautious that something or waiting given sort in for I sort of in just of

what you exactly said. It's

So it's price. the trading

an to So what been usually great price fair about earn-out. is getting what's a we've able do to with between

get up. be a and if person making right And it's get single and can't. most could are and problem You had accretive they if The value great can't, selling been way at to they to set it little can the money every with earn-outs. so hard it we've they now thinks the expectations very transaction more could that's they agents captured it's is bridge done

as And good, we don't as feel so feel don't good. they

to bit outlook it normalization my run fine. bit have of in the rate a got and you So will view, little a and just transparency in about be little the more

is some to or they're do retiring their to that. or be you or so somebody have because whatever And unique it will they because pipeline be transparency and niche it Sure, but in like there a to transactions? tends again something have

frankly. of conversations, So We're comes we that fully having expect lot back. great a dozens

And their so a downturn people given rethought have there's and position stress of through. they're that kind lot of the going the

beat for light I a continue think be going lots really you a to just will but to had what of quarters We'll right to do wanted after be did there, bit we could to opportunities, it's just couple It's and to the 'XX little a took and 'XX the duplicated get of So valuations of going it of get be light was we and it that. so because I think while get but thing where again. like us and right said. there's kind that and of it little next we settle we'll same paid people be that

really not about I'm So worried it.

in overall low asking hear normalizing, Okay. just sort of said your a a how And to versus double it just your farfetched, your story to about margins, one being much can versus long-term think in the But helpful know market you control us lift last it that I'm And seem the the then I would maybe on be just get thoughts sort market. normalized margin for that digits I talk is investors right? of to delineate just of a forget for low set doesn't that think to and STC sort between I double-digit because here while story. show-me it of you

because talk it And have I question. reason is great great in Yes, confidence about again the the we've work I done.

market lot of that the we with XX% in work which works have of we are, market, I where work a lot the particularly capacity right? But my because most consider of some system that's offices our will how number gets market, lot fact operations, the in since it the created high structure it do wasn't overtime That's the to purchase costs the in part while really And through again of back such and that XX.X% line, centralized. right? the offices $X come of because what the utilization excess just normal. And we've gets and direct that those kind that were fixed is a the bottom the now when a our believe workflow capacity I where growth to how we've that was from comes a of in So using is direct a we talk our our are, of was 'XX, So XX.X%, marginal of much has reality robust any in and XX% to The a is. we're normal our revenue the research where margin. we decentralization, million would the -- fake we've margins of guess some that's done, showing is then, sustainable. is to distributed work done contribution in in because XXXX market were in about I

I job also you changed market. would managing discipline tell kind We Now and a financial our of of a we've heck a in done down structure.

to the and before went in in ever, the X.XX% at X% we our we market I journey made the So in XX X%. given margin. years worst was one markets the previous of through here, any just years Well, period at most got XX we're worst ever

margins, the our that's feel to I about feel I good also So manage ability our but market.

what's Now of discipline so a making there. the that more the way the lot is variabilizing we we've us, of costs, manage controllable sure by of model we're operating done kind of the staffing

yes, journey from to the numbers that. So has the here talking some from I'm about help

that what's of exception other of we Now the some are exception in the gaining of share our is that? Well, businesses.

in our if business and ago, gain I and again double reality the like services So continue now as continue was and business to it opportunity cross-sell, an that million has is can things business et million a think mature share X cetera. to $XX larger years $XXX we it's we to

regardless there's in be from to we'll literally market benefit the So of have share not to to may with growth of there improvement, get seeing -- some an I we're the horrible. bit in that states. get we're has it better But agency running many other where all than way the X%, also think things little a some

volume problem bit. it make So that got a I us I again do little we base to your against in to so going to or market a the down X% talk normalize overcoming again additional you the model and the get X% have full right we But to need to cost lost is you X% now for for need fixed have direct. the about, up our opportunity work to you're market just that

help, the in but good feel confident I'm I from little a about it, I'd So market. let's love say, it,

Next from KBW. George we'll hear Bose at

wanted I on follow just the to up margin again.

continue, year right outlook is But similar trends all now well. last of look think guys and trends if the alluded to given you of margin like kind did sort the as this you to going what year? look in your does I Just this it to comments

I Yes, about way that's think it. the

stay to kind bit, the where -- of got be is. tread last what kind on it We of stays we'll were going to market a kind today down or of the to this are market we what relatively last bit, we be still tad water the decreasing if it's we at better little similar is we a a year. and it where little just about if made year So is

comparisons are couple But little about you way to comparison quarters think because the it month-to-month is kind of robust a Now third world of came the way similar the is an it. last a year quarter, right? we are very little bit the end, the and then remember So kind odd was if a last I you year's interesting. think articulated the of from there

little there just then cost-cutting it much for the is your side you kind like Okay. to need you're market Great. do from is of said as -- now comments positioned the or help that? earlier And on a in and

the keep done we're a needed end that kind question. the year the of micro long-term of of most the markets I to. quarter bit couldn't mean We've we're little for and there. on actually some a I part said, we see But view sense. I getting we're where make I great it's this things, as where of of Yes, surgical in running out saying some kind things

by is trying a opportunity. whether make trade-offs of making But of some decreasing it's We investments to in after lot we're talking a particularly offset ramping we're the making businesses find commercial, about; we're because we kind that of I it's XX months do trying smart place sure the think the magical There's trying to we're up description. number no of on in whatever we're your manage businesses; to prioritization to services I some investments to talked being a we're clients. other are making left since of expense places point, to what are whether about that of of some it. market But

Campbell John from next hear We'll at Stephens Instructions] Inc. [Operator

Okay.

progress. estate here, you real results you of hoping touch standouts, obviously few off rattled of the solutions, help the on you're of a to I'm you Fred, with talked at kind maybe little really market bit wanted a can modeling. broader the to some I share. good So guys

So click first, extent if revenues want I for on commentary like maybe David, can transactional contractual? a cost maybe the onboard. help see on of mix, to normalizes versus And around what that this you as year. costs. versus to then It mismatch the maybe transactional secondly, double onboarding sounds you just

So maybe you as well. on could us help that

good John, both questions.

our where of if right portfolio, look So Verification Waterfall. a data you called there's it's a kind at standout projects solutions place we one is little call bit of of some the now the a of --

And so onboarding it's we a a and that uptick quite really have nice few. new clients in we're

but it's so by its data too. and selling of is nature, And transactional insight it kind

And ramp of is a up, what there up big you of a onboarding had see costs. that, so is we ramp because

of the You clients solution, your got ramp-up transition get integrate to you've systems, into new of access got kind bunch buy into to servicing the to there's you of have and personnel. a a data

of solutions double and tad end on high. a little the there's mix it margin growth. that digit little up things into the quarter at XX%, have little significant the I it a can XX% was happened to that normalize our as had bit, see a And from we so I to probably I made would will we so sell. that some go end say But first low margins pressure as we of bit, do went the right? And year And I all a and think a that again kind we the little solutions of those think high, the year margin mid-teens depending onetime the get also of on getting we things

we're is if have passing about that we'll more market I comes explicit our market traction like for we lenders. services Now a little that it quite know in very of what other returns I a that this There like had believe a cost that little delay, what down world back the we're data a exactly excited the business ramp-up a much predict increases that's our little on of and bit. it's some know difficult to clients, get too. input services and But been good some there's on doing in really in the bit, is $XX because doing, still know grow little is we will anemic that's we what particularly expenses million bit quite bit are. mentioned I'm don't time But my that now clients too. in transcript we're our a to We business. mix also really some those because

to they a get to the $XXX tend they be get ability use we counterparty we're business tad and multiple participating. bigger companies. really to on then Typically, in and lenders to We It with markets their better have with space. to ability players a some they that that. have a balance so even going products just because better, our shelf gets cross-sell to their in million interested business private people Over like and risk boys was time like market as big have multiple weren't sheet the that participating the

client new here living of to forward quarters. go we're transition growth, of period cross-sell growth kind the which on we as few next a will So over

seasonal to I'm so that the about bullish there's of And so talk pretty it's it's a as believe I That's are nature on business. seasonal get I seeing year space. we it some gets to trends going to what normal we're the I I like at of think the the of normalize revenue will onboarding is. where be the end that more percentage and I some the But there. continue why margins because do

couple things of a add to just there. John, And

like is subscription the little transactional. transactional give think cost. or a just that more on a is Most I color range. trying business on also the were of versus probably revenue you XX% the around so to only And to sense get of in subscription more and

so what you're So bank you if give need up right? particular need on ramping of you for to or to big big team, people decent a them account. about run So service amount a set on reps bringing you in a their and they think account a lender, bringing business a have to

the But again I today, they'll frankly, think like a bit get margins I little better and going and forward. normalize

we're there. pretty think spot I in good a So

That's Okay. helpful. very

the David, XX% pretty setting So it's be move to you going it's team market. guess with housing to lender, in transactional, seasonal, it up maybe the these sound right? a you're does I that going when that's lock But it's like where revenue, guys, secure around generally reoccurring

Correct. varies I it mean by service.

lion's more. side, credit spread varies you business and around on their getting the you market. the by But share tend you're get it's account, to like the side, business the their an then yes, appraisal sign on the So once of business;

Okay. And X other for at on real last of rate Obviously OpEx. estate like the part sounds then just That's the me, grown It office the cost solution, that a onboarding closures. one the revenues faster quarters. is last you much than actions that. total took

I'm facility was guessing or cost. little maybe So there office of bit obviously excess a

real expect maybe sound to from So normalize if you does solutions like help talk those mismatch you office and extent segment. that could estate through in the the of closures the the savings it

on overall So just any revenue kind of total high year. level thoughts in OpEx this on

was were closings $XXX,XXX. only I office and severance about then think Again $X.X the million

that's So about million. $X

amount. a not huge it's So

big severe in and is of of a do lot a we've had interesting relatively the John, of else energy, outside of growth commercial search had work We've and is operations. lot clarify pretty a just ramp-up is what which our big energy and data in that there, a in to commercial One tremendous and you things, significant. commercial

in this to upsized and search we've we're don't the third places using of accessing outside or energy you're is we rural of remote it's the our street on our party where own purchase make So locations third-party lot where sure feet have because a of some data a stuff data.

period the the ramp the also of the those pay of don't all close. transactions the lot things bit commercial. but a in So because you provide side, it's a on so that ramp-up services till if have all a come and up, those there's right? So interesting services, from services is it's And mismatch, those for is in you you expenses; revenue one little you commercial of

business in that costs. ramped of going pipeline third-party commercial nice and up to we our really through that's search a have we continue outside the So year

real really X category. places are by they and in those that growing materially and that pretty the serves better don't businesses input are So the far have it's it's that where estate costs

those and you are generation it things. by a in our because cases, of right? little earnings margins fast, a businesses, there's margins bit it down was timing When at tad and a But generation the ramp-up the are you some look revenue So bit of So those for delay good. there's break both of the so good. in both also

reason comfortable of the So I'm those of about those. But with it line if the really businesses and sight for think model. our to the -- I margin very is

the shrunk have X% year these we right? capacity. to excess Not about flat. versus so That business model Well, is different? where your year done has you continues our and we've to that so, what look a what's or share you we think was the X% what's and are, But where the beginning at we've I through grown was think going businesses. other our expand significant of of If is felt model lot guys' and grow we going the core different market

in so this because profile fact is category, our inputs enhancing so expense They both other margins shrinkage the very places of is we've have these grown market us. any. their that nicely have have if changed for other and the again the other comfortable these over of that timing going offset of expense just the of helps profiles But base. the which to the margins I'm growth time of of profile businesses we're with And different that economics, in right? businesses, by part businesses those but the And that

floor signals Instructions] phone from to And turn for any back having audience, I'll closing the our or [Operator no remarks. Eppinger additional Mr.

I'd just like Stewart in much. during Thank for thank interest your our you call. so to everybody

teleconference Ladies and this do does you for all and gentlemen, thank we participation. your conclude today's

now lines. may your You disconnect