NYSE:STC Stewart Information Services Q1 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 08:21 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$0.17Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AStewart Information Services Revenue ResultsActual Revenue$554.32 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AStewart Information Services Announcement DetailsQuarterQ1 2024Date4/24/2024TimeN/AConference Call DateThursday, April 25, 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 Q1 2024 Earnings Call TranscriptProvided by QuartrApril 25, 2024 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00and thank you for joining the Stewart Information First Quarter 2024 Earnings Call. At this time, all participants are in a listen only mode. Later, you will have an opportunity to ask questions during the question and answer session and instructions will be given at that time. Please note today's call is being recorded. It is now my pleasure to turn today's conference over to Kat Bass, Director of Investor Relations. Operator00:00:30Please go ahead. Speaker 100:00:32Thank you for joining us today for Stewart's Q1 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 involve a number of risks and uncertainties. Speaker 100:00:58Please 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 200:01:23Thanks, Cat, and thank you for joining us today for Stewart's Q1 2024 earnings conference call. Yesterday, we released financial results for the quarter, which David will review with you. Before doing so, I'd like to share our thoughts on the current housing environment. I'll also provide updates on our core business lines and our continued progress on important initiatives that we believe will set Steward up for long term success. As I noted previously, the housing market is bouncing along the bottom. Speaker 200:01:54From a macro perspective, this quarter was a continuation of what we had seen in the past several quarters. Mortgage rates remained elevated hovering just above below 7% during the quarter, which has prolonged the low transaction volumes our industry is facing. The combination of these factors along with low sales inventory yields and overall weak housing market. On previous calls, we shared our expectation that 2024 will be a transitional year for the industry with 2025 seeing more normal volumes of approximately 5,000,000 units for existing home sales. Following activity this quarter, we now believe the transition has been slowed with much of the improvement pushed into 2025 and a more normal market returning in 'twenty six. Speaker 200:02:39I am pleased with our progress and our strategic priorities and we continue to see share gains in most of our businesses. We remain focused on building an improved competitive position by being more efficient and having a more disciplined operating model that functions well throughout all real estate cycles. We are dedicated to growing scale in attractive markets across all lines of our business and we have made great strides in improving the customer experience in all our channels through upgrades in our technology capabilities and operations. Attracting and retaining key talent is always important and we have been even more focused on retaining talent through this market so that we have the right team in place as the cycle improves. In the anticipation of our growth and return to normal home sales volumes, we have also implemented technology to enhance our title production processes and are also working on utilization of technology to improve our data management and data access. Speaker 200:03:34This progress at more normal production levels will result in considerable improvement in our delivery costs. Our direct operations segment is focusing their growth efforts on the expansion in targeted MSAs and we expect to utilize acquisitions to our advantage to gain share. We've been prudent with our acquisition related investments in the current environment and routinely evaluate markets in our direct operations where we have the opportunity to increase share and enhance our leadership capabilities. This has ensured that our deployment of capital provides acceptable long term returns. While we remain cautious from an acquisition perspective, our long term goals for our direct operations remain the same, to grow share and scale in attractive MSAs. Speaker 200:04:18Positioning our commercial operations for growth across all commercial sectors remains a critical business priority for us. We are making investments in talent across our commercial operations so that we have the leadership and sales teams in place to achieve our goals. We are also investing in technology to support the commercial operations to allow us to better serve our customers and manage our business more efficiently. Considering the challenging market in the Q1, our commercial operations performed very well due in large part to our energy sector mix. In the near term, we expect energy to continue to experience solid volumes as compared to sectors like retail and office, which remain sluggish given the current financial market. Speaker 200:04:59Our agency team is focused on driving share gains in attractive agency markets in Florida, Pennsylvania and it is also focused on growing our support of agents in the commercial space. We are delivering on our technology roadmap, which will allow us to offer better solutions to our agents and are leveraging the gains by delivering greater 1st Our agency business finished the Q1 solidly considering current market conditions and we are beginning to see some solid share shift in most of our critical markets. Solutions team is focused on gaining share with the top lenders through cross selling our products as we lend portfolio of services to clients. Our Real Estate Solutions business maintains particularly given market headwinds. We experienced higher revenues as compared to the Q1 of 2023, largely due to our accretive business for McBride. Speaker 200:05:55We are not immune to the market downturn in these businesses to offset some of these challenges with share gains. We are thoughtfully managing all lines of business and remain prudent with both our expense management and our allocation of investment funds. We have been careful not to take expense actions that we feel would better position or take away from the critical initiatives that will help us meet our long term goals. We feel that this investment in customer technologies and focus on growth resulted in a stronger Q1 as compared even given the difficult market conditions we are now experiencing are yielding results through increased market share gains in our core business lines. We believe that our focus on growth across all business and investments in our capabilities should allow us to achieve low double digit return to more normal 5,000,000 unit purchase market. Speaker 200:06:45We maintain our growth as a positive long term outlook for the real estate market and are confident that Stewart is on a journey to become the premier. We believe in the CNR to further fortify Stewart's long term growth and performance. Our solid financial advantage of the opportunities that we believe will provide. Thank you to our customer and agency partners for your continued trust and excellence. Finally, I'd like to express my gratitude to our employees and dedication to Stewart as we work together to create a more resilient company that continually delivers for our customers. Speaker 200:07:22David, I will now turn over to you to provide the update on the results. Speaker 300:07:26Good morning, everyone, and thank you, Fred. I'm thankful for our Sogany service and our customers for their steadfast support through this difficult market. As Fred mentioned earlier, residential mortgage rates continue to be in the high transaction volumes. While the economy and work habits are impacting growth, solid performances however from our Real Estate Solutions, Energy Commercial, Title Operations and Investment Operations resulted in an improved Q1 compared to last year. Yesterday, Stewart reported Q1 2024 net income of $3,000,000 or $0.11 per diluted share on total revenues of $554,000,000 After adjustments for net realized and unrealized gains and losses acquired in tangible amortization and other expenses detailed in Appendix A of our press release, adjusted net income was $5,000,000 or $0.17 per diluted share compared to breakeven results for the Q1 20 23. Speaker 300:08:27In the title segment, total operating revenues were slightly lower, decreasing by 6,000,000 dollars while first quarter pre tax income was $11,000,000 higher primarily due to improved investment income and expense management. After adjustments for purchase intangible amortization and other items, the title segment's pretax income was $2,000,000 or 41% higher compared to the prior year quarter, while adjusted pretax margin for both quarters was in the low 1% range. On our direct title operations, total open and closed orders in the Q1 increased by 7% 5% respectively compared to the prior year quarter, primarily due to the ramp up of acquisitions completed in late 2022. Domestic commercial revenues increased by $17,000,000 or 52%, primarily due to energy sector activity, which offset lower commercial transaction volume. Average commercial fee per file was approximately $13,900 compared to $8,300 from the prior year quarter. Speaker 300:09:39Domestic residential revenues declined $15,000,000 or 10% as a result of 5% lower purchase and refinancing volumes and a lower average fee per file. Average residential fee per file was $2,900 compared to $3,400 from the prior year quarter, primarily as a result of lower purchase transaction mix. Total international operating revenues were stable. Consistent with lower slightly lower due to geographic mix. Total title loss expense in the quarter was comparable. Speaker 300:10:23As a percentage of title revenues, title to mid 4% range for full year 2024. Regarding the Real Estate Solutions segment, pretax income improved $5,000,000 compared to last year, primarily resulting from increased revenues from our credit related data and valuation and tangible amortization, adjusted pretax margin was approximately 15% compared to 11.5% last year. On our consolidated operating expenses, our employee cost ratio was 32.3%, slightly better compared to 32.8% in the prior year quarter, primarily due to lower average employee counts. Other operating expenses as a percent of operating revenues were 25.6% in the first quarter 2024 compared to 23.2 percent in the prior year quarter, primarily driven by increased expenses related to higher revenues on our Real Estate Solutions and Commercial Services operations. On other matters, despite the current challenging environment, our financial position continues to be solid for supporting our customers, employees and the real estate market. Speaker 300:11:58Our total cash and investments at the end of the Q1 2024 were approximately $325,000,000 in excess statutory premium reserve requirements, while we also have a fully available $200,000,000 line of credit. Total Stewart stockholders' equity was approximately $1,360,000,000 with a book value of approximately $49 per share. Net cash used in operations improved to $30,000,000 compared to $51,000,000 during the prior year quarter, primarily as a result of improved first quarter results and lower liability payments. Lastly, we greatly appreciate our customers and associates, and we remain confident in our service to the real estate markets. I'll now turn the call back over to the operator for questions. Operator00:12:48Thank you. We'll go first to Bose George with KBW. Speaker 200:13:18Good morning, Bose. Speaker 400:13:22Can you just talk about the sustainability of the run rate that you guys did this quarter? Speaker 200:13:33Okay. Sorry, I was at the beginning. So yes, I think our services business is very much sustainable. We have again, as you know, we've built out our portfolio of products and we've had it together probably for about 3 or so quarters, 4 quarters. And it's now getting some nice traction in our ability to kind of sell the 4th cross sell that portfolio. Speaker 200:13:57We also have some really interesting solutions in our data operation, IR, something called could always lose an account or so, but I feel like we repositioned ourselves in that market pretty nicely and we should be able to sustain that kind of run rate. Speaker 400:14:20Okay, great. Thanks. And then just given the move in rates and then your commentary, Fred, just on the cadence of the housing recovery, how do you see your margins trending over the next sort of 12 to 18 months? Speaker 200:14:31Yes, that's a great question. So I believe that we're going to be better. I think we're going Speaker 500:14:38to bounce off the bottom a Speaker 200:14:39little bit. I think we'll be better. And I think our margins will kind of improve, if you will, as the market gives us a little bit more growth. I don't think that the target we talked about, that 11.5%, 12% area that I'm pretty confident that we could get to in a $5,000,000 purchase market is probably not going to occur until we get to that 26 timeframe if we get up to that level. So it kind of depends on the speed and the movement in that direction. Speaker 200:15:11And as I've mentioned before, we as you know, Bose, we've taken we took some expense actions and some reallocation of resources at the end of the last year. What I did is I looked at some geographies and offices and shut them down because I couldn't see given this kind of more prolonged period of this kind of volume, I couldn't see any transparency to those being what we wanted them to be. And we have the benefit of some of those actions, but I don't think we're going to be taking I don't think there's a need to or I don't think we should take any additional expense actions now. So essentially, we have what I would consider a little bit of excess capacity in our system. So as volume comes, our margins will improve with that increase. Speaker 200:16:00So somebody asked me at the last call, I thought that was a great question. If this year was flat to last year, would we do a little bit better? And the answer is yes. So if you think about the margins we ended up with last year and a little bit better performance we have, I think even in a kind of flat or marginally up market, we will do better from a margin perspective than we did last year by a point of view. Speaker 400:16:27Okay, great. That's helpful. Thanks a lot. We'll go Operator00:16:32next to John Campbell with Stephens Inc. Speaker 500:16:36Hey, guys. Good morning. Speaker 200:16:39Morning, John. How are you, man? Speaker 500:16:41Doing well. Doing well. I want to follow back up on Bose's question on the Real Estate Solutions segment. I mean, I think the strength there probably isn't getting the airtime it probably deserves with investors. I mean, this quarter, it was up, it looks like 35% sequentially versus 4Q. Speaker 500:16:56Obviously, the mortgage market didn't see that type of lift. So maybe if you could first talk to why or how you're able to buck that the typical mortgage market seasonal trend? And then, Fred, if you could maybe double click on the business mix, maybe where you're seeing the most share gains? And I don't know if you have it on hand, but if you could maybe talk to maybe the mix of revenues, what your largest businesses are, what your fastest growing businesses are, just any incremental color there? Speaker 200:17:22Yes. So John, to me what's interesting is we created this business, right? So as you know, when we started in 2019, 2020, we only had about $30,000,000 in the services business. And unlike the big Fs, we didn't have a portfolio of services. And we bought notarization capability, we bought appraisal capability and we bought this kind of credit data capability, okay? Speaker 200:17:53And those are the big pieces of what we're talking about. And what's interesting is when you assemble that and what happens is you have a single product with some of these partners. But now that we have it all together and we're good counterparty and you know how vendors care about having a good counterparty, we're now the 3rd alternative for these guys that's a legit significant company. And so our ability to cross sell those 3 kind of service categories with lenders is all fair game, right? And I would also say because of the little cyber events of last year, it made blenders think about making sure that their shelf space was spread properly to protect themselves. Speaker 200:18:40And so all of that is kind of coming together for us to keep focused on trying to grow the business. Informative research is a big chunk of what we're talking about. It is both kind of the traditional TriMerge credit business, but it's also we created some they've created some wonderful solutions to save the lenders money during the mortgage process. And we've had really good luck with adoption. So as I look forward, I see continued growth in that business, which is, say, it's half of that business. Speaker 200:19:18But I also see the others following suit coming along with it as we cross sell. Now again, to your point, it's a tough mark. I mean, we all know what the that with the mortgage market and the refi market is. And so it is down, but we are in a position of repositioning ourselves, if you will. So I'm very confident. Speaker 200:19:41The other thing you see, I think I've said this in a couple of calls, it's sensitive we needed to get more volume into the platform to help our margins and you've seen that too, right? It's we're in a pretty good place both cash margins and GAAP margins there now because we've kind of got to the critical mass, if you will, in some of those businesses. So I think we're in a good spot. And I like it just because, again, our really well respected competitors all have that position. And we were the only one of the 3 that didn't kind of didn't have this portfolio. Speaker 200:20:19And now I think we're becoming highly respected in that area and it's important for us overall to have it. Speaker 500:20:26Yes, that's good color. I appreciate that Fred. And the big F, I haven't I don't know if I heard that term yet. That's all So just kind of staying on that subject, you just mentioned that the cyber incidents did make some lenders kind of rethink that vendor diversification process. So I'm curious, are you seeing that also in the core title agency channel? Speaker 200:20:44Or are Speaker 500:20:45you hearing that from agents? Speaker 200:20:47So that's a great question. So people ask that. So traditionally in our business, not in the lender always think about risk management and they have multiple places. I just think in the lender space, we're just rolling it yet now. So it just gave us a reason to share a little bit. Speaker 200:21:03And I don't think it's we're not talking about overwhelming volumes or much more than you would see in P and C. And we have been talking about this to much more than you would see in P&C. And we have been talking about this stage about agents for 3 years because it doesn't make sense to me. It's not everybody, a lot of them do, but a lot of them don't. And what's happened in my view is the amount of dialogue we're having with agents now about giving what I would say is our fair share of their business, the better agents in the country, because they want to just be a little bit safe. Speaker 200:21:48And it's Speaker 500:21:49a 3rd, a 3rd, a Speaker 200:21:503rd or fifty-fifty. But again, you'd be surprised how many agents were 80, 20 or 100, 0 given it's just good business practice to be more balanced. And so we are unfairly advantaged in that shift because we're the smallest of the group, right? So that shift is going to benefit us as long as we deliver and we focus on good execution, we should be able to do it. And what I'm seeing is that dialogue is started. Speaker 200:22:20It takes time, takes time. And by the way, because the market is so low, it's hard to share with a new partner when you don't have a lot of you have a lot of mouths to feed and you don't have a lot of business. So as the business grows, I think our momentum and share shift will increase actually because they'll have more business and feel more comfortable with sharing more. So I just think that trend has got people thinking a tad more strategically. I think people overstate the impact in the short term. Speaker 200:22:51I don't think the impact of the short term is that much at all, but the impact over the long term could be somewhat material. Speaker 500:22:59Okay. Thanks for taking our questions and congrats on the continued success, guys. Thanks. Operator00:23:10We'll go next to Jeffrey Dunn with Dowling Partners. Speaker 200:23:14Good morning, Jeff. Speaker 500:23:16Hey, good morning. I was wondering if you could provide an update on your geographic targets right now for potential M and A. I know you've been focused on the Midwest, some South Southwest and West Coast. Where are the where is that next tier of MSAs you're looking to build up scale? And in particular, can you talk a little bit more about California and the effort to become more direct? Speaker 200:23:44Yes. So again, I don't think about target markets a little different from direct and agency. So in agency, there's a number of we like to grow in a lot of states. Both states have good relatively good economics. But there are 14 states in particular that have attractive economics that we're subscale or undershare represented. Speaker 200:24:09They tend to be in the Southeast because we're pretty big in the Northeast. There's some in the Midwest. Pennsylvania is one of those. And so there's a 14, Texas is one Speaker 300:24:21of those, Florida is one Speaker 200:24:22of those. So in agency, it has a lot to do with the economic profile of the splits and other fees and services, etcetera. And so that's kind of what we got to get done. And Florida is the poster child of that for us. On the direct side, it's a little different, right? Speaker 200:24:42So I talked about the 150 MSAs. We did a lot with about 40 of them. As the market gets better and there'll be more transaction opportunity, there's 35 or so that I'm particularly interested in that are kind of core 2nd category is once that's one category. The second category is once you've got a good established position in a city, you can do satellite opportunities. So San Antonio is a great example of that for us. Speaker 200:25:19Dallas is a great example for us. We have a very good position, but there are parts of the suburbs that are real opportunities. And so you could do smaller fill ins. And so I would say there's kind of, as I say, 30, 40 core markets that I think we can make a significant move on. And then there's a bunch more that there are fill ins that we would focus on. Speaker 200:25:39Your point on California, I just want to be clear. I don't see us growing California much. We are kind of a niche player, if you will. We're targeted in certain places. We'll be there forever. Speaker 200:25:50We'll be good where we are. But we're quite a ways behind, and you got the 2 leaders California. So I into California. So I don't think of that as a high priority for the company going forward as far as growth. We'll run it well. Speaker 200:26:14We'll solidify the positions we have. We'll invest in our people there, but I don't see that as a big part of the growth. Speaker 500:26:21Okay. All right. Thank you. Speaker 200:26:23Yes. Operator00:26:26And at this time, as there are no further questions in the queue, I'd like to turn the conference back over to the presenters for any additional or closing comments. Speaker 200:26:33I just want to thank everybody for joining us and having the interest in Stewart. Thank you. Operator00:26:41Thank you. Again, that concludes today's Stewart Information Services Q1 conference call. At this time, you may disconnect. Thank you for your participation and have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallStewart Information Services Q1 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. 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There are 6 speakers on the call. Operator00:00:00and thank you for joining the Stewart Information First Quarter 2024 Earnings Call. At this time, all participants are in a listen only mode. Later, you will have an opportunity to ask questions during the question and answer session and instructions will be given at that time. Please note today's call is being recorded. It is now my pleasure to turn today's conference over to Kat Bass, Director of Investor Relations. Operator00:00:30Please go ahead. Speaker 100:00:32Thank you for joining us today for Stewart's Q1 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 involve a number of risks and uncertainties. Speaker 100:00:58Please 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 200:01:23Thanks, Cat, and thank you for joining us today for Stewart's Q1 2024 earnings conference call. Yesterday, we released financial results for the quarter, which David will review with you. Before doing so, I'd like to share our thoughts on the current housing environment. I'll also provide updates on our core business lines and our continued progress on important initiatives that we believe will set Steward up for long term success. As I noted previously, the housing market is bouncing along the bottom. Speaker 200:01:54From a macro perspective, this quarter was a continuation of what we had seen in the past several quarters. Mortgage rates remained elevated hovering just above below 7% during the quarter, which has prolonged the low transaction volumes our industry is facing. The combination of these factors along with low sales inventory yields and overall weak housing market. On previous calls, we shared our expectation that 2024 will be a transitional year for the industry with 2025 seeing more normal volumes of approximately 5,000,000 units for existing home sales. Following activity this quarter, we now believe the transition has been slowed with much of the improvement pushed into 2025 and a more normal market returning in 'twenty six. Speaker 200:02:39I am pleased with our progress and our strategic priorities and we continue to see share gains in most of our businesses. We remain focused on building an improved competitive position by being more efficient and having a more disciplined operating model that functions well throughout all real estate cycles. We are dedicated to growing scale in attractive markets across all lines of our business and we have made great strides in improving the customer experience in all our channels through upgrades in our technology capabilities and operations. Attracting and retaining key talent is always important and we have been even more focused on retaining talent through this market so that we have the right team in place as the cycle improves. In the anticipation of our growth and return to normal home sales volumes, we have also implemented technology to enhance our title production processes and are also working on utilization of technology to improve our data management and data access. Speaker 200:03:34This progress at more normal production levels will result in considerable improvement in our delivery costs. Our direct operations segment is focusing their growth efforts on the expansion in targeted MSAs and we expect to utilize acquisitions to our advantage to gain share. We've been prudent with our acquisition related investments in the current environment and routinely evaluate markets in our direct operations where we have the opportunity to increase share and enhance our leadership capabilities. This has ensured that our deployment of capital provides acceptable long term returns. While we remain cautious from an acquisition perspective, our long term goals for our direct operations remain the same, to grow share and scale in attractive MSAs. Speaker 200:04:18Positioning our commercial operations for growth across all commercial sectors remains a critical business priority for us. We are making investments in talent across our commercial operations so that we have the leadership and sales teams in place to achieve our goals. We are also investing in technology to support the commercial operations to allow us to better serve our customers and manage our business more efficiently. Considering the challenging market in the Q1, our commercial operations performed very well due in large part to our energy sector mix. In the near term, we expect energy to continue to experience solid volumes as compared to sectors like retail and office, which remain sluggish given the current financial market. Speaker 200:04:59Our agency team is focused on driving share gains in attractive agency markets in Florida, Pennsylvania and it is also focused on growing our support of agents in the commercial space. We are delivering on our technology roadmap, which will allow us to offer better solutions to our agents and are leveraging the gains by delivering greater 1st Our agency business finished the Q1 solidly considering current market conditions and we are beginning to see some solid share shift in most of our critical markets. Solutions team is focused on gaining share with the top lenders through cross selling our products as we lend portfolio of services to clients. Our Real Estate Solutions business maintains particularly given market headwinds. We experienced higher revenues as compared to the Q1 of 2023, largely due to our accretive business for McBride. Speaker 200:05:55We are not immune to the market downturn in these businesses to offset some of these challenges with share gains. We are thoughtfully managing all lines of business and remain prudent with both our expense management and our allocation of investment funds. We have been careful not to take expense actions that we feel would better position or take away from the critical initiatives that will help us meet our long term goals. We feel that this investment in customer technologies and focus on growth resulted in a stronger Q1 as compared even given the difficult market conditions we are now experiencing are yielding results through increased market share gains in our core business lines. We believe that our focus on growth across all business and investments in our capabilities should allow us to achieve low double digit return to more normal 5,000,000 unit purchase market. Speaker 200:06:45We maintain our growth as a positive long term outlook for the real estate market and are confident that Stewart is on a journey to become the premier. We believe in the CNR to further fortify Stewart's long term growth and performance. Our solid financial advantage of the opportunities that we believe will provide. Thank you to our customer and agency partners for your continued trust and excellence. Finally, I'd like to express my gratitude to our employees and dedication to Stewart as we work together to create a more resilient company that continually delivers for our customers. Speaker 200:07:22David, I will now turn over to you to provide the update on the results. Speaker 300:07:26Good morning, everyone, and thank you, Fred. I'm thankful for our Sogany service and our customers for their steadfast support through this difficult market. As Fred mentioned earlier, residential mortgage rates continue to be in the high transaction volumes. While the economy and work habits are impacting growth, solid performances however from our Real Estate Solutions, Energy Commercial, Title Operations and Investment Operations resulted in an improved Q1 compared to last year. Yesterday, Stewart reported Q1 2024 net income of $3,000,000 or $0.11 per diluted share on total revenues of $554,000,000 After adjustments for net realized and unrealized gains and losses acquired in tangible amortization and other expenses detailed in Appendix A of our press release, adjusted net income was $5,000,000 or $0.17 per diluted share compared to breakeven results for the Q1 20 23. Speaker 300:08:27In the title segment, total operating revenues were slightly lower, decreasing by 6,000,000 dollars while first quarter pre tax income was $11,000,000 higher primarily due to improved investment income and expense management. After adjustments for purchase intangible amortization and other items, the title segment's pretax income was $2,000,000 or 41% higher compared to the prior year quarter, while adjusted pretax margin for both quarters was in the low 1% range. On our direct title operations, total open and closed orders in the Q1 increased by 7% 5% respectively compared to the prior year quarter, primarily due to the ramp up of acquisitions completed in late 2022. Domestic commercial revenues increased by $17,000,000 or 52%, primarily due to energy sector activity, which offset lower commercial transaction volume. Average commercial fee per file was approximately $13,900 compared to $8,300 from the prior year quarter. Speaker 300:09:39Domestic residential revenues declined $15,000,000 or 10% as a result of 5% lower purchase and refinancing volumes and a lower average fee per file. Average residential fee per file was $2,900 compared to $3,400 from the prior year quarter, primarily as a result of lower purchase transaction mix. Total international operating revenues were stable. Consistent with lower slightly lower due to geographic mix. Total title loss expense in the quarter was comparable. Speaker 300:10:23As a percentage of title revenues, title to mid 4% range for full year 2024. Regarding the Real Estate Solutions segment, pretax income improved $5,000,000 compared to last year, primarily resulting from increased revenues from our credit related data and valuation and tangible amortization, adjusted pretax margin was approximately 15% compared to 11.5% last year. On our consolidated operating expenses, our employee cost ratio was 32.3%, slightly better compared to 32.8% in the prior year quarter, primarily due to lower average employee counts. Other operating expenses as a percent of operating revenues were 25.6% in the first quarter 2024 compared to 23.2 percent in the prior year quarter, primarily driven by increased expenses related to higher revenues on our Real Estate Solutions and Commercial Services operations. On other matters, despite the current challenging environment, our financial position continues to be solid for supporting our customers, employees and the real estate market. Speaker 300:11:58Our total cash and investments at the end of the Q1 2024 were approximately $325,000,000 in excess statutory premium reserve requirements, while we also have a fully available $200,000,000 line of credit. Total Stewart stockholders' equity was approximately $1,360,000,000 with a book value of approximately $49 per share. Net cash used in operations improved to $30,000,000 compared to $51,000,000 during the prior year quarter, primarily as a result of improved first quarter results and lower liability payments. Lastly, we greatly appreciate our customers and associates, and we remain confident in our service to the real estate markets. I'll now turn the call back over to the operator for questions. Operator00:12:48Thank you. We'll go first to Bose George with KBW. Speaker 200:13:18Good morning, Bose. Speaker 400:13:22Can you just talk about the sustainability of the run rate that you guys did this quarter? Speaker 200:13:33Okay. Sorry, I was at the beginning. So yes, I think our services business is very much sustainable. We have again, as you know, we've built out our portfolio of products and we've had it together probably for about 3 or so quarters, 4 quarters. And it's now getting some nice traction in our ability to kind of sell the 4th cross sell that portfolio. Speaker 200:13:57We also have some really interesting solutions in our data operation, IR, something called could always lose an account or so, but I feel like we repositioned ourselves in that market pretty nicely and we should be able to sustain that kind of run rate. Speaker 400:14:20Okay, great. Thanks. And then just given the move in rates and then your commentary, Fred, just on the cadence of the housing recovery, how do you see your margins trending over the next sort of 12 to 18 months? Speaker 200:14:31Yes, that's a great question. So I believe that we're going to be better. I think we're going Speaker 500:14:38to bounce off the bottom a Speaker 200:14:39little bit. I think we'll be better. And I think our margins will kind of improve, if you will, as the market gives us a little bit more growth. I don't think that the target we talked about, that 11.5%, 12% area that I'm pretty confident that we could get to in a $5,000,000 purchase market is probably not going to occur until we get to that 26 timeframe if we get up to that level. So it kind of depends on the speed and the movement in that direction. Speaker 200:15:11And as I've mentioned before, we as you know, Bose, we've taken we took some expense actions and some reallocation of resources at the end of the last year. What I did is I looked at some geographies and offices and shut them down because I couldn't see given this kind of more prolonged period of this kind of volume, I couldn't see any transparency to those being what we wanted them to be. And we have the benefit of some of those actions, but I don't think we're going to be taking I don't think there's a need to or I don't think we should take any additional expense actions now. So essentially, we have what I would consider a little bit of excess capacity in our system. So as volume comes, our margins will improve with that increase. Speaker 200:16:00So somebody asked me at the last call, I thought that was a great question. If this year was flat to last year, would we do a little bit better? And the answer is yes. So if you think about the margins we ended up with last year and a little bit better performance we have, I think even in a kind of flat or marginally up market, we will do better from a margin perspective than we did last year by a point of view. Speaker 400:16:27Okay, great. That's helpful. Thanks a lot. We'll go Operator00:16:32next to John Campbell with Stephens Inc. Speaker 500:16:36Hey, guys. Good morning. Speaker 200:16:39Morning, John. How are you, man? Speaker 500:16:41Doing well. Doing well. I want to follow back up on Bose's question on the Real Estate Solutions segment. I mean, I think the strength there probably isn't getting the airtime it probably deserves with investors. I mean, this quarter, it was up, it looks like 35% sequentially versus 4Q. Speaker 500:16:56Obviously, the mortgage market didn't see that type of lift. So maybe if you could first talk to why or how you're able to buck that the typical mortgage market seasonal trend? And then, Fred, if you could maybe double click on the business mix, maybe where you're seeing the most share gains? And I don't know if you have it on hand, but if you could maybe talk to maybe the mix of revenues, what your largest businesses are, what your fastest growing businesses are, just any incremental color there? Speaker 200:17:22Yes. So John, to me what's interesting is we created this business, right? So as you know, when we started in 2019, 2020, we only had about $30,000,000 in the services business. And unlike the big Fs, we didn't have a portfolio of services. And we bought notarization capability, we bought appraisal capability and we bought this kind of credit data capability, okay? Speaker 200:17:53And those are the big pieces of what we're talking about. And what's interesting is when you assemble that and what happens is you have a single product with some of these partners. But now that we have it all together and we're good counterparty and you know how vendors care about having a good counterparty, we're now the 3rd alternative for these guys that's a legit significant company. And so our ability to cross sell those 3 kind of service categories with lenders is all fair game, right? And I would also say because of the little cyber events of last year, it made blenders think about making sure that their shelf space was spread properly to protect themselves. Speaker 200:18:40And so all of that is kind of coming together for us to keep focused on trying to grow the business. Informative research is a big chunk of what we're talking about. It is both kind of the traditional TriMerge credit business, but it's also we created some they've created some wonderful solutions to save the lenders money during the mortgage process. And we've had really good luck with adoption. So as I look forward, I see continued growth in that business, which is, say, it's half of that business. Speaker 200:19:18But I also see the others following suit coming along with it as we cross sell. Now again, to your point, it's a tough mark. I mean, we all know what the that with the mortgage market and the refi market is. And so it is down, but we are in a position of repositioning ourselves, if you will. So I'm very confident. Speaker 200:19:41The other thing you see, I think I've said this in a couple of calls, it's sensitive we needed to get more volume into the platform to help our margins and you've seen that too, right? It's we're in a pretty good place both cash margins and GAAP margins there now because we've kind of got to the critical mass, if you will, in some of those businesses. So I think we're in a good spot. And I like it just because, again, our really well respected competitors all have that position. And we were the only one of the 3 that didn't kind of didn't have this portfolio. Speaker 200:20:19And now I think we're becoming highly respected in that area and it's important for us overall to have it. Speaker 500:20:26Yes, that's good color. I appreciate that Fred. And the big F, I haven't I don't know if I heard that term yet. That's all So just kind of staying on that subject, you just mentioned that the cyber incidents did make some lenders kind of rethink that vendor diversification process. So I'm curious, are you seeing that also in the core title agency channel? Speaker 200:20:44Or are Speaker 500:20:45you hearing that from agents? Speaker 200:20:47So that's a great question. So people ask that. So traditionally in our business, not in the lender always think about risk management and they have multiple places. I just think in the lender space, we're just rolling it yet now. So it just gave us a reason to share a little bit. Speaker 200:21:03And I don't think it's we're not talking about overwhelming volumes or much more than you would see in P and C. And we have been talking about this to much more than you would see in P&C. And we have been talking about this stage about agents for 3 years because it doesn't make sense to me. It's not everybody, a lot of them do, but a lot of them don't. And what's happened in my view is the amount of dialogue we're having with agents now about giving what I would say is our fair share of their business, the better agents in the country, because they want to just be a little bit safe. Speaker 200:21:48And it's Speaker 500:21:49a 3rd, a 3rd, a Speaker 200:21:503rd or fifty-fifty. But again, you'd be surprised how many agents were 80, 20 or 100, 0 given it's just good business practice to be more balanced. And so we are unfairly advantaged in that shift because we're the smallest of the group, right? So that shift is going to benefit us as long as we deliver and we focus on good execution, we should be able to do it. And what I'm seeing is that dialogue is started. Speaker 200:22:20It takes time, takes time. And by the way, because the market is so low, it's hard to share with a new partner when you don't have a lot of you have a lot of mouths to feed and you don't have a lot of business. So as the business grows, I think our momentum and share shift will increase actually because they'll have more business and feel more comfortable with sharing more. So I just think that trend has got people thinking a tad more strategically. I think people overstate the impact in the short term. Speaker 200:22:51I don't think the impact of the short term is that much at all, but the impact over the long term could be somewhat material. Speaker 500:22:59Okay. Thanks for taking our questions and congrats on the continued success, guys. Thanks. Operator00:23:10We'll go next to Jeffrey Dunn with Dowling Partners. Speaker 200:23:14Good morning, Jeff. Speaker 500:23:16Hey, good morning. I was wondering if you could provide an update on your geographic targets right now for potential M and A. I know you've been focused on the Midwest, some South Southwest and West Coast. Where are the where is that next tier of MSAs you're looking to build up scale? And in particular, can you talk a little bit more about California and the effort to become more direct? Speaker 200:23:44Yes. So again, I don't think about target markets a little different from direct and agency. So in agency, there's a number of we like to grow in a lot of states. Both states have good relatively good economics. But there are 14 states in particular that have attractive economics that we're subscale or undershare represented. Speaker 200:24:09They tend to be in the Southeast because we're pretty big in the Northeast. There's some in the Midwest. Pennsylvania is one of those. And so there's a 14, Texas is one Speaker 300:24:21of those, Florida is one Speaker 200:24:22of those. So in agency, it has a lot to do with the economic profile of the splits and other fees and services, etcetera. And so that's kind of what we got to get done. And Florida is the poster child of that for us. On the direct side, it's a little different, right? Speaker 200:24:42So I talked about the 150 MSAs. We did a lot with about 40 of them. As the market gets better and there'll be more transaction opportunity, there's 35 or so that I'm particularly interested in that are kind of core 2nd category is once that's one category. The second category is once you've got a good established position in a city, you can do satellite opportunities. So San Antonio is a great example of that for us. Speaker 200:25:19Dallas is a great example for us. We have a very good position, but there are parts of the suburbs that are real opportunities. And so you could do smaller fill ins. And so I would say there's kind of, as I say, 30, 40 core markets that I think we can make a significant move on. And then there's a bunch more that there are fill ins that we would focus on. Speaker 200:25:39Your point on California, I just want to be clear. I don't see us growing California much. We are kind of a niche player, if you will. We're targeted in certain places. We'll be there forever. Speaker 200:25:50We'll be good where we are. But we're quite a ways behind, and you got the 2 leaders California. So I into California. So I don't think of that as a high priority for the company going forward as far as growth. We'll run it well. Speaker 200:26:14We'll solidify the positions we have. We'll invest in our people there, but I don't see that as a big part of the growth. Speaker 500:26:21Okay. All right. Thank you. Speaker 200:26:23Yes. Operator00:26:26And at this time, as there are no further questions in the queue, I'd like to turn the conference back over to the presenters for any additional or closing comments. Speaker 200:26:33I just want to thank everybody for joining us and having the interest in Stewart. Thank you. Operator00:26:41Thank you. Again, that concludes today's Stewart Information Services Q1 conference call. At this time, you may disconnect. Thank you for your participation and have a great day.Read morePowered by