First American(US:FAF)2021-10-21 18:19Financial Data and Key Metrics Changes - The company reported earnings of $4 per diluted share, including $1.85 of net realized investment gains, resulting in an adjusted earnings of $2.15 per diluted share [20] - Revenue in the title segment was $2.1 billion, up 21% compared to the same quarter of 2020, driven by strong purchase and commercial markets [21] - The effective tax rate for the quarter was 25.3%, higher than the normalized tax rate of 24% due to increased state taxes related to investment gains [26] Business Line Data and Key Metrics Changes - Purchase revenue increased by 9%, with a 12% rise in average revenue per order, while commercial revenue reached a record $262 million, an 84% increase year-over-year [21] - Revenue in the agency business was a record $999 million, up 38% from last year, attributed to a surge in remittances related to Q2 economic activity [22] - The home warranty business generated $108 million in revenue, up 7% compared to last year, with a pretax income increase from $4 million to $9 million [24] Market Data and Key Metrics Changes - Commercial orders in October were up 14% year-over-year, while residential purchase orders were down 7% compared to October 2020 but up 11% compared to October 2019 [16] - Refinance orders fell from 1,700 per day in September to 1,500 per day in October due to rising mortgage rates [17] Company Strategy and Development Direction - The company is focused on innovation, leveraging data assets and technology to enhance customer experience and improve the settlement process [10] - The launch of Endpoint, a digital startup, aims to reimagine the closing experience and has captured a 3% market share in its initial market of Seattle [11] - The company announced a $150 million commitment to Endpoint to enhance its digital closing experience and expand capabilities for PropTech companies [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the housing market, expecting continued growth in purchase volumes despite a moderation in home price appreciation [17] - The commercial business is experiencing elevated activity as deals delayed in 2020 are now closing, with expectations for a strong year in 2022 [18] - Management noted that while refinance volumes are expected to decline, increased investment income from the bank and escrow deposits will help offset this decline [18] Other Important Information - The company made direct investments in 16 venture-backed companies in the PropTech industry, generating $278 million in gains this quarter [27] - The company repurchased 208,700 shares for a total of $14 million at an average price of $67.37, with $463 million remaining on its share repurchase authorization as of September 30 [29] Q&A Session Summary Question: Can you elaborate on recent investments and their strategic fit? - Management highlighted that the 16 venture investments are evaluated both strategically and financially, with a focus on becoming closer to customers and forming strategic partnerships [34] Question: What caused the conclusion about the pull forward of commercial volume? - Management indicated that anecdotal evidence suggests that expectations around tax changes may be influencing the timing of deals [37] Question: Are there still opportunities for incremental venture investments? - Management confirmed that opportunities still exist, although deals are becoming more expensive due to increased competition [41] Question: Can you provide revenue color on the "other" line in title? - Management detailed that the "other" line includes various businesses, with significant contributions from data services and title information reports [46] Question: What is the cash balance and plans for monetizing investments? - The company has $714 million in cash at the holding company, with plans to use it for acquisitions and to capitalize its bank [52][54]