Doma (US:DOMA)2023-05-08 16:00Financial Performance - For the three months ended March 31, 2023, Doma reported revenue of $74.368 million, a decrease of 33.8% compared to $112.207 million in the same period of 2022[184]. - The net loss for Q1 2023 was $42.123 million, an improvement from a net loss of $50.026 million in Q1 2022[184]. - Total revenues decreased by $37.8 million, or 34%, in Q1 2023 compared to Q1 2022, totaling $74.4 million[221]. - Total operating expenses decreased by $60.4 million, or 35%, in Q1 2023 compared to Q1 2022, totaling $111.3 million[221]. - Loss from operations improved by $22.6 million, or 38%, in Q1 2023 compared to Q1 2022, resulting in a loss of $37.0 million[221]. - Net loss decreased by $7.9 million, or 16%, in Q1 2023 compared to Q1 2022, totaling $42.1 million[221]. - Adjusted EBITDA improved by $23.3 million to negative $21.6 million in Q1 2023 due to reductions in personnel and operating expenses[250]. - Adjusted EBITDA for Q1 2023 was $(21.6) million, an improvement from $(44.9) million in Q1 2022[255]. Order and Premiums - Opened orders decreased to 9,940 in Q1 2023 from 35,192 in Q1 2022, while closed orders fell to 6,280 from 27,347 in the same period[184]. - Retained premiums and fees for Q1 2023 were $25.184 million, down from $51.605 million in Q1 2022[184]. - Net premiums written decreased by $28.9 million, or 30%, in Q1 2023 compared to Q1 2022, driven by a 69% decrease from Direct Agents and an 18% decrease from Third-Party Agents[222]. - Retained premiums and fees decreased by $26.4 million, or 51%, in Q1 2023 compared to Q1 2022, driven by closed order reductions[247]. - Premiums retained by Third-Party Agents decreased by $11.4 million, or 19%, in Q1 2023 compared to Q1 2022, primarily due to decreases in premiums in the Third-Party Agents channel[226]. Operating Efficiency - Adjusted gross profit for Q1 2023 was $4.471 million, compared to $10.370 million in Q1 2022, with a ratio of adjusted gross profit to retained premiums and fees at 18%[184]. - The ratio of adjusted gross profit to retained premiums and fees is viewed as an important indicator of operating efficiency and machine-learning capabilities[195]. - Management expects adjusted gross profit per transaction to grow faster than retained premiums and fees per transaction over the long term[193]. - Adjusted gross profit decreased by $5.9 million, or 57%, in Q1 2023 compared to Q1 2022, due to declines in retained premiums and an increase in the provision for claims ratio[248]. Expenses and Cost Management - Personnel costs decreased by $37.2 million, or 48%, in Q1 2023 compared to Q1 2022, attributed to workforce reduction plans and lower revenue[229]. - Other operating expenses decreased by $7.3 million, or 32%, in Q1 2023 primarily due to lower revenue and personnel[230]. - Title examination expense decreased by $4.0 million, or 67%, in Q1 2023 compared to Q1 2022 due to declines in order volumes and related fees[227]. - Escrow and other title-related fees decreased by $9.5 million, or 59%, in Q1 2023 compared to Q1 2022, due to a 77% decline in closed orders, partially offset by a 78% increase in average escrow fees per direct order[224]. Market Conditions - The average interest rate for a 30-year fixed mortgage rose to 6.42% in March 2023, compared to 4.17% in March 2022, impacting refinance transaction outlook[178]. - Opened orders decreased by 72% and closed orders decreased by 77% in Q1 2023 compared to Q1 2022, attributed to rising interest rates and low home inventories[245]. - Interest rate risk is the principal market risk for the company, affecting loan refinancing activity and interest income from investments[287]. Strategic Initiatives - Doma plans to invest in customer acquisition, research and development, and new product offerings to improve revenue growth and reduce closing transaction costs[170]. - Doma intends to regain compliance with NYSE listing standards through a reverse stock split, subject to board and stockholder approval[183]. Cash and Debt Management - As of March 31, 2023, the company had $84.2 million in cash and cash equivalents, which is expected to meet working capital needs for at least 12 months[257]. - The company had $150.0 million in senior secured debt, with an interest rate of 11.25% per annum[259]. - The company is in compliance with all covenants related to its senior debt as of the reporting date[260]. Claims and Reserves - Total loss reserves as of March 31, 2023, amounted to $81.5 million, with known title claims at $7.8 million and IBNR title claims at $73.0 million[276]. - Provision for claims decreased by $0.7 million, or 14%, in Q1 2023 compared to Q1 2022, with a provision for claims ratio of 5.9% in Q1 2023 versus 4.8% in Q1 2022[228]. Investment and Revenue Recognition - Investment, dividend, and other income increased by $0.6 million, or 134%, in Q1 2023 compared to Q1 2022, attributed to a larger invested asset base and higher returns from the interest rate environment[225]. - The company recognizes revenues on title insurance policies issued by Third-Party Agents upon cash payment receipt, with a reporting lag of approximately three months[281]. - The company estimates and accrues revenues based on historical transactional volume data, which may vary from period to period[281]. Risk Management - The company manages its investment portfolio's duration to match estimated cash flows required for reserve payments[288]. - The company has credit risk related to the ability of reinsurance counterparties to fulfill their obligations under reinsurance programs[289].