NYSE:STC Stewart Information Services Q3 2024 Earnings Report $66.91 +1.85 (+2.84%) Closing price 05/2/2025 03:59 PM EasternExtended Trading$66.92 +0.02 (+0.02%) As of 08:27 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Stewart Information Services EPS ResultsActual EPS$1.17Consensus EPS $0.96Beat/MissBeat by +$0.21One Year Ago EPS$0.86Stewart Information Services Revenue ResultsActual Revenue$667.94 millionExpected Revenue$638.40 millionBeat/MissBeat by +$29.54 millionYoY Revenue Growth+11.00%Stewart Information Services Announcement DetailsQuarterQ3 2024Date10/23/2024TimeAfter Market ClosesConference Call DateThursday, October 24, 2024Conference Call Time8:30AM ETUpcoming EarningsStewart Information Services' Q2 2025 earnings is scheduled for Wednesday, July 23, 2025, with a conference call scheduled at 4:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Stewart Information Services Q3 2024 Earnings Call TranscriptProvided by QuartrOctober 24, 2024 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Hello and thank you for joining the Stewart Information Services Third Quarter 2024 Earnings Call. At this time, all participants are in a listen only mode. Later, you will have an opportunity to ask a question during the question and answer session. Instructions will be given at that time. Please note that today's call is being recorded. Operator00:00:22It is now my pleasure to turn today's conference over to Kat Bass, Director of Investor Relations. Please go ahead. Speaker 100:00:29Thank you for joining us today for Steward's Q3 2024 earnings conference call. We will be discussing results that were released yesterday after the close. Joining me today are CEO, Fred Eppinger and CFO, David Hisey. To listen online, please go to the stuart.com website to access the link for this conference call. This conference call may contain forward looking statements that a number of risks and uncertainties. Speaker 100:00:55Please refer to the company's press release and other filings with the SEC for a discussion of the risks and uncertainties that could cause our actual results to differ materially. During our call, we will discuss some non GAAP measures. For reconciliation of these non GAAP measures, please refer to the appendix in today's earnings release, which is available on our website at stuart.com. Let me now turn the call over to Fred. Speaker 200:01:20Thank you for joining us today for Stewart's Q3 2024 earnings conference call. Yesterday, we released financial results for the quarter, which David will review with you shortly. I'd like to start the call by sharing our outlook on the overall housing market, followed by an update on the continued progress we've made in each of our core business lines. Before jumping into these discussions, I wanted to take a moment to express our sympathies for the many people affected by Hurricane Helene and Hurricane Milton. Our thoughts are with the many communities impacted by these storms and we have and we will continue to find ways to support these communities in their efforts to rebuild. Speaker 200:02:02I am very pleased with the results for the quarter given the continued contraction of the market. At the end of the quarter, we reached 37 consecutive months of year over year reduction in existing home sales. This quarter, we saw existing home sales decrease another 3%. In this environment, we continue to focus on growing our business and improving our operations and our offerings. We feel our performance reflects the effort we have put in over the past 4 years on our journey. Speaker 200:02:32We remain dedicated to positioning ourselves well for the market recovery and feel confident that we will have significant upside in a more normalized market from the actions we have taken to improve the company. This has been an interesting quarter for both the economy at large and housing in the U. S. While inventory has continued to improve over the past several months, the sentiment improved temporarily. The trend of historical low housing volumes lingers with just 2.5% of homes changing hands year to date through August, one of the lowest turnover rates we have experienced in the U. Speaker 200:03:09S. In decades. Affordability remains a hardship and barrier to entry for many would be buyers. In September, the Federal Reserve cut interest rates for the first time in 4 years, which resulted in some temporary green shoots by way of mortgage applications. But we see things leveling back off as mortgage rates have settled in around the mid-six level and typical seasonality plays out. Speaker 200:03:32All of this is on top of the upcoming elections, which lends to a continuation of the very choppy market. We remain, however our view remains, however, that 'twenty five will be a transitional year, leading to a more normal housing market in 'twenty six, which we define as a $5,000,000 of existing homes sold on an annual basis. Turning to our operations, we remain focused on building an improved competitive position by executing upon a disciplined operating model, while also identifying efficiencies to prepare ourselves for the market rebound. We are dedicated to growing share in attractive markets across all our lines of business and we have positioned each business to do so. We have made great advancements in improving our customers' experience in all channels through upgrades in our technology capabilities and operations. Speaker 200:04:23We have implemented technologies to enhance our title production processes and are working on utilizing technologies to improve our data management and access. We continue to focus on attracting and retaining key talent as we know Steward is becoming the best home for the industry leading talent to grow with us as the market improves. We've been diligent in managing our direct operations segment to protect our corner of the market and our margin, as this segment most immediately feels the impact of a suppressed residential housing market. Strategically, our direct operation business remains focused on expansion efforts and targeted MSAs through both organic and inorganic means. We keep a pulse on the markets we are in as well as those we're not to ensure we are operating to our fullest potential across the country. Speaker 200:05:13Choppy housing market conditions have slowed acquisition related activity in recent history. However, we remain very positive about the future outlook for opportunities and maintain a warm pipeline in preparation for an improved market. Our top priority in this business is to grow our share in attractive markets. Our commercial services businesses have been a strong performer over the last several quarters as we feel the positive effects of our efforts to grow our share in critical geographies and channels. We have made a lot of investments in talent across our commercial operations, so that we have the right people in place to maximize our growth potential. Speaker 200:05:51We are also investing in upgrading technology to support our business and to provide a better customer experience for our clients. We expect our commercial transaction momentum to continue, but we know near term commercial market challenges may present themselves depending on some of the economic variables that we previously mentioned. Our agency team remains focused on driving share gains in attractive market agency markets by adding new agent partners as well as growing our share with existing agents. We are focused on improving our position, particularly in 15 target states and have seen solid progress in a number of these states already. Our improved support services and enhanced abilities around servicing commercial agents allows us to stand out to our agents. Speaker 200:06:37We will continue to build on these improvements to differentiate our service and offerings to better serve our agent partners. Our Real Estate Solutions business maintained solid financial results and growth in the Q3. The Real Estate Solutions team is focused on gaining share with the top lenders cross selling our products as we leverage our improved portfolio of services. The current market poses some challenge to our cross selling initiatives, but overall, we continue to see share gains for both existing clients and new client introductions. We expect continued momentum in this space as the market improves. Speaker 200:07:14Across the enterprise, we are thoughtfully managing all lines of business and remain intentional with our investment in expense management. We have experienced an increase in other operating expense percentages driven by significant growth in 2 of our businesses, commercial and real estate solutions. In commercial, we encounter higher outside data and search fees to service our customers. And in real estate solutions, other operating expenses are a higher percentage of mix due to use of outside services and data. To date, we are very pleased with the margins we are achieving for our meaningful growth in Agency Services, Data Solutions and in Commercial. Speaker 200:07:58Overall, we remain prudent in our expense management to ensure we achieve both near and long term goals. Our leadership team has an execution based mindset that we feel will allow us to achieve low double digit pre tax margins as we return to a more normal 5,000,000,000 unit purchase market. We remain very positive about the long term outlook for the real estate market and are focused on our journey to become the premier title services company. We believe in the strength of the company and are committed to fortifying Stewart for long term growth and performance. To reiterate this view, in September, we announced an increase in our annual dividend from $1.90 a share to $2 a share. Speaker 200:08:39This is the 4th year in a row we have increased our dividend to shareholders. We have and will continue to position ourselves well to be able to capitalize on the capitalize on the opportunities that this housing market will provide. I want to thank our customers and agent partners for their continued trust. We are committed to doing the best to serve you with excellence. Finally, I'd like to end my remarks by extending my thanks to our employees. Speaker 200:09:06We have not been where we are today without the dedication of our employees and their commitment to bettering our company. Your efforts have had a tremendous impact on Stewart, and we are pleased to share this quarter that we were named as one of the 2024 2024-twenty 5 Best Companies to Work by U. S. News and World Report. Thank you for your loyalty and efforts on our journey. Speaker 200:09:28David, I'll now turn it over to you to provide the update on our results. Speaker 300:09:32Good morning, everyone, and thank you, Fred. My deepest sympathies as well to those impacted by the hurricanes. I appreciate the outstanding service of our associates and I'm grateful for the continued support of our customers. As Fred noted, the market continues to be challenging, existing home sales struggle and mortgage rates came down about 50 basis points from mid August to end of September, but did not have a meaningful impact to volume and it's subsequently increased. Yesterday, Stewart reported 3rd quarter net income of $30,000,000 or $1.7 per diluted share on total revenues of $668,000,000 As presented in Appendix A of our press release, we use adjustments primarily for net realized and unrealized gains and losses, acquired intangibles amortization and other expenses for additional performance measures. Speaker 300:10:25On an adjusted basis, 3rd quarter net income was 33,000,000 dollars or $1.17 per diluted share compared to $24,000,000 or $0.86 per diluted share in the Q3 of 2023. In the Title segment, total operating revenues improved 31,000,000 dollars or 6%, primarily driven by higher revenues from our domestic commercial and agency operations, while our non commercial revenues were comparable to the prior year quarter. Title segment pretax income improved by 10,000,000 or 27%, primarily driven by higher revenues. After adjustments for purchase intangible amortization and other items, the Title segment's adjusted pretax income was $43,000,000 which was slightly better compared to the prior year quarter, while adjusted pretax margins were comparable. On our direct title business, total open orders in the 3rd quarter improved by 8%, while total closed orders were 2% lower, primarily due to lower purchase orders resulting from the slower residential market as previously noted. Speaker 300:11:38Our domestic commercial operations generated another good performance with $16,000,000 or 30 percent higher revenues, primarily due to higher transaction size and volume in the energy and multifamily sectors. Average commercial fee per file improved 25 percent to 17 point 17,700 compared to 14,200 in the prior year quarter. Domestic residential fee per file improved slightly to $3,000 With our agency operations, gross agency revenues increased $17,000,000 or 6%, while net revenues improved $2,000,000 primarily due to a slightly higher average retention rate due to geographic mix. On title losses, total title loss expense decreased 4%, primarily due to a favorable claim experience, which also resulted in a slightly lower title loss ratio for this quarter versus the prior year quarter. For the full year 2024, we expect our title losses to average around 4%. Speaker 300:12:47Regarding the Real Estate Solutions segment, pre tax income improved by $5,000,000 driven by higher revenues in our credit related data and valuation services business. Pre tax margin was 7.7% in the 3rd quarter compared with 3.8% in the prior year quarter. And then excluding acquisition intangible, adjusted pretax margin in the 3rd quarter was 13.4% compared to 13% last year. On consolidated operating expenses, our employee cost ratio improved to 30% from 31% last year, primarily driven by higher revenues. Our other operating cost ratio increased to 24% compared to 22%, primarily driven by increased credit information and services expenses in our Real Estate Solutions business and higher outside search costs in commercial. Speaker 300:13:43Recall in our res businesses that they're very data dependent. So as their revenues increase, our other operating expenses and ratio do as well. Our financial position continues to be strong in support of our customers, employees in the real estate market. At September 30, 2024, our total cash and investments were approximately $370,000,000 in excess of statutory premium reserve requirements. In addition, we also have a fully available $200,000,000 line of credit facility. Speaker 300:14:16Total stockholders' equity at ninethirtytwenty 24 was approximately $1,400,000,000 with a book value of $51 per share. Our net cash provided by operations in the 3rd quarter was 76,000,000 dollars which was $17,000,000 higher than the prior year quarter, primarily due to improved net income. Again, thank you to all our customers and associates. We remain confident in our service to the real estate markets. I'll turn it back to Fred for any questions or comments. Speaker 300:14:52No, I think we can go to questions. Operator? Yes. Operator00:15:12We'll take our first question from Bose George with KBW. Please go ahead. Speaker 400:15:16Good morning, Bose. Hey, guys. Good morning. Actually, first just on the commercial fee profile, obviously, big increase year over year. Is that just larger deals that you're seeing in the market? Speaker 400:15:27Or is there any benefit from the New York Title acquisition just in terms of the deal sizes they were doing there? Speaker 200:15:34It is just because of the mix of business and it's a little bouncy. But this year because we've obviously had outsized growth and it's kind of broad based in the categories, but the category that's the biggest is our energy and the alternative energy deals tend to be larger, right? And so that kind of skewed the average deal size a little bit. And but it Speaker 300:16:01is a little bit of a Speaker 200:16:02bouncy number quarter to quarter. But again, it's from the mix, I'd look at what closings this month, it has a lot Speaker 500:16:11or this quarter has a lot to do with the energy percent. Speaker 200:16:11Okay, great. Thanks. And then as you've Energy percent. Okay, great. And then actually Speaker 400:16:14when I look at your Speaker 500:16:15the order count, that other segment ramped Speaker 200:16:16up relative, I mean, stronger than the Speaker 400:16:17purchase and refi. Can you remind me, is there some sort of geography issues there where stuff that might have gone through purchase and refi kind of go through there now or is there something Speaker 200:16:34like that? Yes. So that's driven a little bit by our bulk business, which if you have a big deal, there's some fluctuation in volumes. And this quarter, we had a couple of large transactions. So it's a little bit bumpy because of the way those deals are. Speaker 200:16:55Yes. So in Speaker 300:16:55the single family rental business, right, those tend to be larger transactions. So there was a big bulk order that came in. Speaker 400:17:04Okay. Okay, great. Thank you. Speaker 200:17:07Thank you very much, Operator00:17:13Bruce. We will take our next question from John Campbell with Stephens Inc. Please go ahead. Speaker 500:17:19Good morning, John. Hey, guys. Good morning. Fred, back to your commentary around the normalized $5,000,000 market. In the Speaker 200:17:26past, I think you talked Speaker 500:17:27to like a 10% margin target with that type of backdrop. I'm hoping you can maybe revisit that target. And also if you could clarify if that 10% target is on a GAAP basis or adjusted with the add back of purchase Speaker 200:17:41amortization? Yes. So again, it's about 11.5%, I think, John, now. I talked about particularly probably the last 4 or 5 quarters, we've implemented some interesting things on data management and centralization of some of our search stuff. So we're now my view that number at a normal market is probably 11.5% or so. Speaker 200:18:03And I think about that all in GAAP, okay? Because again, it's just when I'm it's kind of leveraging the investments we've made across the entire company and the ability to kind of grow share kind of and the efficiency of our overall operating models gets us there. So I've talked about it as a total. And so again, it's and one of the interesting things like I think you think look at the last 9 months as a company, we've grown in a market that's flat to down in general, right? We particularly in existing home sales has gone down for 37 months. Speaker 200:18:40But in a down market, we've grown revenue 9%, but our margin has increased 14% and our earnings have increased about 24%. So you can see the leverage of us growing share and how it helps. There's a lot of leverage in the system. And what's particularly interesting about that leverage is that if the market purchase market grows, it helps us the most because that's where we have the most fixed cost, right? That's where we have our direct operations with our multiple lots and lots and lots of locations, lots of distribution. Speaker 200:19:16And so that's even more levered to growth for us. And so I still believe that's a good number. And I do believe that as we grow, we can manage our margins. But it is the geography of the growth helps a lot, right? If the geography is kind of in the place where you have higher fixed cost, the direct, it's a little bit better. Speaker 200:19:38But it's pretty much good everywhere because if you look at our numbers in the last 9 months, we've kind of held serve a little bit in direct. And the rest of the growth has come from agency and commercial and services and we still see leverage in the margin enhancement. So I feel good about those kind of guidance that I've given in the past. I hope that's helpful. Speaker 500:20:03Yes, very helpful. Thank you. And then I saw an update from Redfin this morning. They're saying that their pending home sales rose about 3.5% over the last 4 week period year over year. That was a little surprising to us just given the recent spike in rates. Speaker 500:20:18I'm just curious what you guys are seeing on both purchase and refi. Are you seeing any kind of notable response from consumers as rates stick higher? Speaker 200:20:25Yes. So that's a great question. So we saw 2, right? So but the question is the difference between pending and closing is kind of a mystery during this kind of market, right? So we've seen a lot of cancellations with spiky rates. Speaker 200:20:47So I but that could be a help in the next that should translate into existing home sales in the next quarter being a little bit better. To David's point, like it was almost and you know the sentiment, when they first changed rates and actually a couple of weeks before that, the sentiment was quite good and you could feel some of the activity. And then it kind of slipped on us about, I don't know, 3 weeks ago as the 10 year started going back up and interest rate went back. So you can see it in the refi. We also saw a nice little pop in refi orders. Speaker 200:21:23My question is, if you haven't locked, is that going to hold or if you haven't locked in a rate or whatever, are you going to see a backup again a little bit? So the way I would describe it is, I feel like we're bouncing around off the bottom. And so we could see a little bit of help if it's going the other way. I do think in commercial and it's hard to know that until everybody reports, but I think what we're going to find for the first time in the quarter that there's going to be some growth in commercial. For us, we've grown a lot, but I just feel like this is we're going to see a more positive commercial environment for sure. Speaker 200:22:03And I think that's going to continue. But it's a great question because there's a lot of moving pieces right now. And I kind of I just again, I wasn't surprised when we saw the existing volumes be down. I think it was forward and some change for this last month, because it's kind of it had the sentiment was better than the activity, right, almost. But I saw that revenue thing too and that's a hopeful sign. Speaker 500:22:29Yes, that's a good point. And I've noticed on the purchase orders, the closing ratio is lower than average. So the cancellation rate, it seems like that's kind of embedded there. One more, if I could squeeze in, kind of back to Bose's question around the other orders. If I look at just your purchase orders, if I look at your 2 top competitors, I mean, you guys have been last couple of months been down double digits year over year on a kind of closed order per day basis. Speaker 500:22:53Your competitors have been kind of flattish. But on the other hand, on the other order side, you guys putting up really good results. I don't know if there's a differential there or maybe there's a mix shift or some of those might have been categorized as purchase orders in the past that are now falling into other. Maybe if you could provide a little bit more commentary there? Speaker 200:23:10Yes, I don't think so, but it's a great question because it's like the last particularly last kind of few months, there's been a little bit of a differentiation, particularly with one competitor kind of a 8. And so I took that and went back. The way we look at it is MSA by MSA. And so we actually track share at every one of our MSAs. And what I'm seeing is that we're holding serve against specific comparison against the market in every market we're in. Speaker 200:23:43There's a little bit down in a couple and a little bit up in others, but we're holding serve. And so it's not translating into revenue differential. So I don't I kind of struggle a little bit. I don't know what's recorded versus some of the different competitors different or what, but I'm not really worried. We're not growing share in direct right now, given the nature of what's happening. Speaker 200:24:08Although, we've started a bunch of organic additions around micro market expansions and commercial expansions, which are paying some dues. So I feel that that's going to get even better before we do transactions. But I don't see any I don't see share softness that is translated in order. So it's a really good it's a great question. The three things it could be, right, is we are much weaker in the West. Speaker 200:24:33Like where our geographies are in the West, The other thing, could there be some we don't have as many high end homes because as you know, the market is a different animal at the high end than at the low end. The low end is pretty slow. But there could be something in that, but I'm pretty confident that our shares hold in direct and that our trends are good in all the other businesses as far as good growth. But I did again, it's one of those things you kind of go I see the same thing and I keep looking. Because if you go for 36 months, we were ahead of everybody for a lot of months in a row. Speaker 200:25:11It's been it's kind of unfolded in the last handful of months where there's a little difference the other way. But again, I feel good about the share position and feel good about what we're doing. Speaker 500:25:25Okay. That's good color. Thanks guys. Thank you. Operator00:25:30And there are no further questions at this time. I'll turn the call to Fred for any closing remarks. Speaker 200:25:35Yes. I just want to thank everybody for their time this morning and their interest in Stewart. Thank you. Operator00:25:44Thank you. And this does conclude today's program. Thank you forRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallStewart Information Services Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Stewart Information Services Earnings HeadlinesStewart Information Services (NYSE:STC) Shares Gap Down After Earnings MissApril 26, 2025 | americanbankingnews.comStewart Information Services targets growth in commercial and real estate solutions segments amid challenging housing marketApril 24, 2025 | msn.comHere’s How to Claim Your Stake in Elon’s Private Company, xAIEven though xAI is a private company, tech legend and angel investor Jeff Brown found a way for everyday folks like you… To partner with Elon on what he believes will be the biggest AI project of the century… Starting with as little as $500.May 5, 2025 | Brownstone Research (Ad)Stewart (STC) Q1 2025 Earnings Call TranscriptApril 24, 2025 | msn.comStewart Information Services Corporation (STC) Q1 2025 Earnings Call TranscriptApril 24, 2025 | seekingalpha.comStewart Information Services Corp (STC) Reports First Quarter 2025 Financial Results | STC ...April 23, 2025 | gurufocus.comSee More Stewart Information Services Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Stewart Information Services? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Stewart Information Services and other key companies, straight to your email. Email Address About Stewart Information ServicesStewart Information Services (NYSE:STC), through its subsidiaries, provides title insurance and real estate transaction related services in the United States and internationally. The company involves in searching, examining, closing, and insuring the condition of the title to real property. It also offers home and personal insurance services; services for tax-deferred exchanges; and digital customer engagement platform services. It also provides appraisal management, online notarization and closing, credit and real estate information, and search and valuation services. The company serves homebuyers and sellers, residential and commercial real estate professionals, mortgage lenders and servicers, title agencies and real estate attorneys, and home builders through direct operations, network of independent agencies, and other businesses. The company was founded in 1893 and is headquartered in Houston, Texas.View Stewart Information Services ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback PlanMicrosoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of Earnings Upcoming Earnings Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025)Mplx (5/6/2025)Brookfield Asset Management (5/6/2025)Arista Networks (5/6/2025)Duke Energy (5/6/2025)Zoetis (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 6 speakers on the call. Operator00:00:00Hello and thank you for joining the Stewart Information Services Third Quarter 2024 Earnings Call. At this time, all participants are in a listen only mode. Later, you will have an opportunity to ask a question during the question and answer session. Instructions will be given at that time. Please note that today's call is being recorded. Operator00:00:22It is now my pleasure to turn today's conference over to Kat Bass, Director of Investor Relations. Please go ahead. Speaker 100:00:29Thank you for joining us today for Steward's Q3 2024 earnings conference call. We will be discussing results that were released yesterday after the close. Joining me today are CEO, Fred Eppinger and CFO, David Hisey. To listen online, please go to the stuart.com website to access the link for this conference call. This conference call may contain forward looking statements that a number of risks and uncertainties. Speaker 100:00:55Please refer to the company's press release and other filings with the SEC for a discussion of the risks and uncertainties that could cause our actual results to differ materially. During our call, we will discuss some non GAAP measures. For reconciliation of these non GAAP measures, please refer to the appendix in today's earnings release, which is available on our website at stuart.com. Let me now turn the call over to Fred. Speaker 200:01:20Thank you for joining us today for Stewart's Q3 2024 earnings conference call. Yesterday, we released financial results for the quarter, which David will review with you shortly. I'd like to start the call by sharing our outlook on the overall housing market, followed by an update on the continued progress we've made in each of our core business lines. Before jumping into these discussions, I wanted to take a moment to express our sympathies for the many people affected by Hurricane Helene and Hurricane Milton. Our thoughts are with the many communities impacted by these storms and we have and we will continue to find ways to support these communities in their efforts to rebuild. Speaker 200:02:02I am very pleased with the results for the quarter given the continued contraction of the market. At the end of the quarter, we reached 37 consecutive months of year over year reduction in existing home sales. This quarter, we saw existing home sales decrease another 3%. In this environment, we continue to focus on growing our business and improving our operations and our offerings. We feel our performance reflects the effort we have put in over the past 4 years on our journey. Speaker 200:02:32We remain dedicated to positioning ourselves well for the market recovery and feel confident that we will have significant upside in a more normalized market from the actions we have taken to improve the company. This has been an interesting quarter for both the economy at large and housing in the U. S. While inventory has continued to improve over the past several months, the sentiment improved temporarily. The trend of historical low housing volumes lingers with just 2.5% of homes changing hands year to date through August, one of the lowest turnover rates we have experienced in the U. Speaker 200:03:09S. In decades. Affordability remains a hardship and barrier to entry for many would be buyers. In September, the Federal Reserve cut interest rates for the first time in 4 years, which resulted in some temporary green shoots by way of mortgage applications. But we see things leveling back off as mortgage rates have settled in around the mid-six level and typical seasonality plays out. Speaker 200:03:32All of this is on top of the upcoming elections, which lends to a continuation of the very choppy market. We remain, however our view remains, however, that 'twenty five will be a transitional year, leading to a more normal housing market in 'twenty six, which we define as a $5,000,000 of existing homes sold on an annual basis. Turning to our operations, we remain focused on building an improved competitive position by executing upon a disciplined operating model, while also identifying efficiencies to prepare ourselves for the market rebound. We are dedicated to growing share in attractive markets across all our lines of business and we have positioned each business to do so. We have made great advancements in improving our customers' experience in all channels through upgrades in our technology capabilities and operations. Speaker 200:04:23We have implemented technologies to enhance our title production processes and are working on utilizing technologies to improve our data management and access. We continue to focus on attracting and retaining key talent as we know Steward is becoming the best home for the industry leading talent to grow with us as the market improves. We've been diligent in managing our direct operations segment to protect our corner of the market and our margin, as this segment most immediately feels the impact of a suppressed residential housing market. Strategically, our direct operation business remains focused on expansion efforts and targeted MSAs through both organic and inorganic means. We keep a pulse on the markets we are in as well as those we're not to ensure we are operating to our fullest potential across the country. Speaker 200:05:13Choppy housing market conditions have slowed acquisition related activity in recent history. However, we remain very positive about the future outlook for opportunities and maintain a warm pipeline in preparation for an improved market. Our top priority in this business is to grow our share in attractive markets. Our commercial services businesses have been a strong performer over the last several quarters as we feel the positive effects of our efforts to grow our share in critical geographies and channels. We have made a lot of investments in talent across our commercial operations, so that we have the right people in place to maximize our growth potential. Speaker 200:05:51We are also investing in upgrading technology to support our business and to provide a better customer experience for our clients. We expect our commercial transaction momentum to continue, but we know near term commercial market challenges may present themselves depending on some of the economic variables that we previously mentioned. Our agency team remains focused on driving share gains in attractive market agency markets by adding new agent partners as well as growing our share with existing agents. We are focused on improving our position, particularly in 15 target states and have seen solid progress in a number of these states already. Our improved support services and enhanced abilities around servicing commercial agents allows us to stand out to our agents. Speaker 200:06:37We will continue to build on these improvements to differentiate our service and offerings to better serve our agent partners. Our Real Estate Solutions business maintained solid financial results and growth in the Q3. The Real Estate Solutions team is focused on gaining share with the top lenders cross selling our products as we leverage our improved portfolio of services. The current market poses some challenge to our cross selling initiatives, but overall, we continue to see share gains for both existing clients and new client introductions. We expect continued momentum in this space as the market improves. Speaker 200:07:14Across the enterprise, we are thoughtfully managing all lines of business and remain intentional with our investment in expense management. We have experienced an increase in other operating expense percentages driven by significant growth in 2 of our businesses, commercial and real estate solutions. In commercial, we encounter higher outside data and search fees to service our customers. And in real estate solutions, other operating expenses are a higher percentage of mix due to use of outside services and data. To date, we are very pleased with the margins we are achieving for our meaningful growth in Agency Services, Data Solutions and in Commercial. Speaker 200:07:58Overall, we remain prudent in our expense management to ensure we achieve both near and long term goals. Our leadership team has an execution based mindset that we feel will allow us to achieve low double digit pre tax margins as we return to a more normal 5,000,000,000 unit purchase market. We remain very positive about the long term outlook for the real estate market and are focused on our journey to become the premier title services company. We believe in the strength of the company and are committed to fortifying Stewart for long term growth and performance. To reiterate this view, in September, we announced an increase in our annual dividend from $1.90 a share to $2 a share. Speaker 200:08:39This is the 4th year in a row we have increased our dividend to shareholders. We have and will continue to position ourselves well to be able to capitalize on the capitalize on the opportunities that this housing market will provide. I want to thank our customers and agent partners for their continued trust. We are committed to doing the best to serve you with excellence. Finally, I'd like to end my remarks by extending my thanks to our employees. Speaker 200:09:06We have not been where we are today without the dedication of our employees and their commitment to bettering our company. Your efforts have had a tremendous impact on Stewart, and we are pleased to share this quarter that we were named as one of the 2024 2024-twenty 5 Best Companies to Work by U. S. News and World Report. Thank you for your loyalty and efforts on our journey. Speaker 200:09:28David, I'll now turn it over to you to provide the update on our results. Speaker 300:09:32Good morning, everyone, and thank you, Fred. My deepest sympathies as well to those impacted by the hurricanes. I appreciate the outstanding service of our associates and I'm grateful for the continued support of our customers. As Fred noted, the market continues to be challenging, existing home sales struggle and mortgage rates came down about 50 basis points from mid August to end of September, but did not have a meaningful impact to volume and it's subsequently increased. Yesterday, Stewart reported 3rd quarter net income of $30,000,000 or $1.7 per diluted share on total revenues of $668,000,000 As presented in Appendix A of our press release, we use adjustments primarily for net realized and unrealized gains and losses, acquired intangibles amortization and other expenses for additional performance measures. Speaker 300:10:25On an adjusted basis, 3rd quarter net income was 33,000,000 dollars or $1.17 per diluted share compared to $24,000,000 or $0.86 per diluted share in the Q3 of 2023. In the Title segment, total operating revenues improved 31,000,000 dollars or 6%, primarily driven by higher revenues from our domestic commercial and agency operations, while our non commercial revenues were comparable to the prior year quarter. Title segment pretax income improved by 10,000,000 or 27%, primarily driven by higher revenues. After adjustments for purchase intangible amortization and other items, the Title segment's adjusted pretax income was $43,000,000 which was slightly better compared to the prior year quarter, while adjusted pretax margins were comparable. On our direct title business, total open orders in the 3rd quarter improved by 8%, while total closed orders were 2% lower, primarily due to lower purchase orders resulting from the slower residential market as previously noted. Speaker 300:11:38Our domestic commercial operations generated another good performance with $16,000,000 or 30 percent higher revenues, primarily due to higher transaction size and volume in the energy and multifamily sectors. Average commercial fee per file improved 25 percent to 17 point 17,700 compared to 14,200 in the prior year quarter. Domestic residential fee per file improved slightly to $3,000 With our agency operations, gross agency revenues increased $17,000,000 or 6%, while net revenues improved $2,000,000 primarily due to a slightly higher average retention rate due to geographic mix. On title losses, total title loss expense decreased 4%, primarily due to a favorable claim experience, which also resulted in a slightly lower title loss ratio for this quarter versus the prior year quarter. For the full year 2024, we expect our title losses to average around 4%. Speaker 300:12:47Regarding the Real Estate Solutions segment, pre tax income improved by $5,000,000 driven by higher revenues in our credit related data and valuation services business. Pre tax margin was 7.7% in the 3rd quarter compared with 3.8% in the prior year quarter. And then excluding acquisition intangible, adjusted pretax margin in the 3rd quarter was 13.4% compared to 13% last year. On consolidated operating expenses, our employee cost ratio improved to 30% from 31% last year, primarily driven by higher revenues. Our other operating cost ratio increased to 24% compared to 22%, primarily driven by increased credit information and services expenses in our Real Estate Solutions business and higher outside search costs in commercial. Speaker 300:13:43Recall in our res businesses that they're very data dependent. So as their revenues increase, our other operating expenses and ratio do as well. Our financial position continues to be strong in support of our customers, employees in the real estate market. At September 30, 2024, our total cash and investments were approximately $370,000,000 in excess of statutory premium reserve requirements. In addition, we also have a fully available $200,000,000 line of credit facility. Speaker 300:14:16Total stockholders' equity at ninethirtytwenty 24 was approximately $1,400,000,000 with a book value of $51 per share. Our net cash provided by operations in the 3rd quarter was 76,000,000 dollars which was $17,000,000 higher than the prior year quarter, primarily due to improved net income. Again, thank you to all our customers and associates. We remain confident in our service to the real estate markets. I'll turn it back to Fred for any questions or comments. Speaker 300:14:52No, I think we can go to questions. Operator? Yes. Operator00:15:12We'll take our first question from Bose George with KBW. Please go ahead. Speaker 400:15:16Good morning, Bose. Hey, guys. Good morning. Actually, first just on the commercial fee profile, obviously, big increase year over year. Is that just larger deals that you're seeing in the market? Speaker 400:15:27Or is there any benefit from the New York Title acquisition just in terms of the deal sizes they were doing there? Speaker 200:15:34It is just because of the mix of business and it's a little bouncy. But this year because we've obviously had outsized growth and it's kind of broad based in the categories, but the category that's the biggest is our energy and the alternative energy deals tend to be larger, right? And so that kind of skewed the average deal size a little bit. And but it Speaker 300:16:01is a little bit of a Speaker 200:16:02bouncy number quarter to quarter. But again, it's from the mix, I'd look at what closings this month, it has a lot Speaker 500:16:11or this quarter has a lot to do with the energy percent. Speaker 200:16:11Okay, great. Thanks. And then as you've Energy percent. Okay, great. And then actually Speaker 400:16:14when I look at your Speaker 500:16:15the order count, that other segment ramped Speaker 200:16:16up relative, I mean, stronger than the Speaker 400:16:17purchase and refi. Can you remind me, is there some sort of geography issues there where stuff that might have gone through purchase and refi kind of go through there now or is there something Speaker 200:16:34like that? Yes. So that's driven a little bit by our bulk business, which if you have a big deal, there's some fluctuation in volumes. And this quarter, we had a couple of large transactions. So it's a little bit bumpy because of the way those deals are. Speaker 200:16:55Yes. So in Speaker 300:16:55the single family rental business, right, those tend to be larger transactions. So there was a big bulk order that came in. Speaker 400:17:04Okay. Okay, great. Thank you. Speaker 200:17:07Thank you very much, Operator00:17:13Bruce. We will take our next question from John Campbell with Stephens Inc. Please go ahead. Speaker 500:17:19Good morning, John. Hey, guys. Good morning. Fred, back to your commentary around the normalized $5,000,000 market. In the Speaker 200:17:26past, I think you talked Speaker 500:17:27to like a 10% margin target with that type of backdrop. I'm hoping you can maybe revisit that target. And also if you could clarify if that 10% target is on a GAAP basis or adjusted with the add back of purchase Speaker 200:17:41amortization? Yes. So again, it's about 11.5%, I think, John, now. I talked about particularly probably the last 4 or 5 quarters, we've implemented some interesting things on data management and centralization of some of our search stuff. So we're now my view that number at a normal market is probably 11.5% or so. Speaker 200:18:03And I think about that all in GAAP, okay? Because again, it's just when I'm it's kind of leveraging the investments we've made across the entire company and the ability to kind of grow share kind of and the efficiency of our overall operating models gets us there. So I've talked about it as a total. And so again, it's and one of the interesting things like I think you think look at the last 9 months as a company, we've grown in a market that's flat to down in general, right? We particularly in existing home sales has gone down for 37 months. Speaker 200:18:40But in a down market, we've grown revenue 9%, but our margin has increased 14% and our earnings have increased about 24%. So you can see the leverage of us growing share and how it helps. There's a lot of leverage in the system. And what's particularly interesting about that leverage is that if the market purchase market grows, it helps us the most because that's where we have the most fixed cost, right? That's where we have our direct operations with our multiple lots and lots and lots of locations, lots of distribution. Speaker 200:19:16And so that's even more levered to growth for us. And so I still believe that's a good number. And I do believe that as we grow, we can manage our margins. But it is the geography of the growth helps a lot, right? If the geography is kind of in the place where you have higher fixed cost, the direct, it's a little bit better. Speaker 200:19:38But it's pretty much good everywhere because if you look at our numbers in the last 9 months, we've kind of held serve a little bit in direct. And the rest of the growth has come from agency and commercial and services and we still see leverage in the margin enhancement. So I feel good about those kind of guidance that I've given in the past. I hope that's helpful. Speaker 500:20:03Yes, very helpful. Thank you. And then I saw an update from Redfin this morning. They're saying that their pending home sales rose about 3.5% over the last 4 week period year over year. That was a little surprising to us just given the recent spike in rates. Speaker 500:20:18I'm just curious what you guys are seeing on both purchase and refi. Are you seeing any kind of notable response from consumers as rates stick higher? Speaker 200:20:25Yes. So that's a great question. So we saw 2, right? So but the question is the difference between pending and closing is kind of a mystery during this kind of market, right? So we've seen a lot of cancellations with spiky rates. Speaker 200:20:47So I but that could be a help in the next that should translate into existing home sales in the next quarter being a little bit better. To David's point, like it was almost and you know the sentiment, when they first changed rates and actually a couple of weeks before that, the sentiment was quite good and you could feel some of the activity. And then it kind of slipped on us about, I don't know, 3 weeks ago as the 10 year started going back up and interest rate went back. So you can see it in the refi. We also saw a nice little pop in refi orders. Speaker 200:21:23My question is, if you haven't locked, is that going to hold or if you haven't locked in a rate or whatever, are you going to see a backup again a little bit? So the way I would describe it is, I feel like we're bouncing around off the bottom. And so we could see a little bit of help if it's going the other way. I do think in commercial and it's hard to know that until everybody reports, but I think what we're going to find for the first time in the quarter that there's going to be some growth in commercial. For us, we've grown a lot, but I just feel like this is we're going to see a more positive commercial environment for sure. Speaker 200:22:03And I think that's going to continue. But it's a great question because there's a lot of moving pieces right now. And I kind of I just again, I wasn't surprised when we saw the existing volumes be down. I think it was forward and some change for this last month, because it's kind of it had the sentiment was better than the activity, right, almost. But I saw that revenue thing too and that's a hopeful sign. Speaker 500:22:29Yes, that's a good point. And I've noticed on the purchase orders, the closing ratio is lower than average. So the cancellation rate, it seems like that's kind of embedded there. One more, if I could squeeze in, kind of back to Bose's question around the other orders. If I look at just your purchase orders, if I look at your 2 top competitors, I mean, you guys have been last couple of months been down double digits year over year on a kind of closed order per day basis. Speaker 500:22:53Your competitors have been kind of flattish. But on the other hand, on the other order side, you guys putting up really good results. I don't know if there's a differential there or maybe there's a mix shift or some of those might have been categorized as purchase orders in the past that are now falling into other. Maybe if you could provide a little bit more commentary there? Speaker 200:23:10Yes, I don't think so, but it's a great question because it's like the last particularly last kind of few months, there's been a little bit of a differentiation, particularly with one competitor kind of a 8. And so I took that and went back. The way we look at it is MSA by MSA. And so we actually track share at every one of our MSAs. And what I'm seeing is that we're holding serve against specific comparison against the market in every market we're in. Speaker 200:23:43There's a little bit down in a couple and a little bit up in others, but we're holding serve. And so it's not translating into revenue differential. So I don't I kind of struggle a little bit. I don't know what's recorded versus some of the different competitors different or what, but I'm not really worried. We're not growing share in direct right now, given the nature of what's happening. Speaker 200:24:08Although, we've started a bunch of organic additions around micro market expansions and commercial expansions, which are paying some dues. So I feel that that's going to get even better before we do transactions. But I don't see any I don't see share softness that is translated in order. So it's a really good it's a great question. The three things it could be, right, is we are much weaker in the West. Speaker 200:24:33Like where our geographies are in the West, The other thing, could there be some we don't have as many high end homes because as you know, the market is a different animal at the high end than at the low end. The low end is pretty slow. But there could be something in that, but I'm pretty confident that our shares hold in direct and that our trends are good in all the other businesses as far as good growth. But I did again, it's one of those things you kind of go I see the same thing and I keep looking. Because if you go for 36 months, we were ahead of everybody for a lot of months in a row. Speaker 200:25:11It's been it's kind of unfolded in the last handful of months where there's a little difference the other way. But again, I feel good about the share position and feel good about what we're doing. Speaker 500:25:25Okay. That's good color. Thanks guys. Thank you. Operator00:25:30And there are no further questions at this time. I'll turn the call to Fred for any closing remarks. Speaker 200:25:35Yes. I just want to thank everybody for their time this morning and their interest in Stewart. Thank you. Operator00:25:44Thank you. And this does conclude today's program. Thank you forRead morePowered by