Doma (US:DOMA)2023-05-13 21:33Financial Data and Key Metrics Changes - In Q1 2023, Doma reported revenue of $74 million, down 23% quarter-over-quarter [27] - Adjusted gross profit was $4 million in Q1 2023, compared to $14 million in Q4 2022, with adjusted gross profit as a percentage of retained premiums and fees (RP&F) at 18% versus 40% in the previous quarter [27] - Adjusted EBITDA was negative $22 million in Q1 2023, worsening from negative $15 million in Q4 2022 [27] Business Line Data and Key Metrics Changes - Retained premiums and fees (RP&F) were $25 million in Q1 2023, down 29% quarter-over-quarter, driven by a 60% decline in refinance closed orders and a 25% decline in purchase closed orders [6] - Purchase closed orders constituted 61% of direct residential volume and 85% of direct residential RP&F in Q1 2023, up from 46% and 78% in Q4 2022 respectively [6] Market Data and Key Metrics Changes - The mortgage market remains under pressure with high rates, as the 30-year fixed mortgage rate is projected to stay above 6% in Q2 2023 and improve to 5.5% by year-end [12] - The National Association of Homebuilders estimates that approximately 73% of U.S. households cannot afford the current median-priced new home, with homeownership being 18% less affordable than a year ago [10] Company Strategy and Development Direction - Doma is focusing on a core strategy to leverage its instant underwriting technology to make homeownership more affordable and is finalizing partnerships with major players in the mortgage origination market [4][5] - The company is committed to achieving adjusted EBITDA profitability by the end of 2023 and is reducing focus on non-core business areas [5][11] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the path to adjusted EBITDA profitability, emphasizing the importance of launching the new strategy successfully amidst challenging market conditions [33] - The company has seen encouraging improvements in open order momentum and conversion rates, which are expected to benefit Q2 and Q3 results [12][35] Other Important Information - Doma's technology aims to reduce title search and closing costs, which are significant contributors to home affordability challenges [10] - The company has closed an additional 13% of its total branch footprint to focus on more profitable opportunities [4] Q&A Session Summary Question: Early data on Doma Intelligence rollout - Management noted positive outcomes in locations where the technology was deployed, but paused further rollout to focus on profitability [30] Question: Changes in EBITDA guidance - Management indicated a cautious approach due to unexpected challenges in Q1, but remains confident in reaching adjusted EBITDA profitability by year-end [32][33] Question: Expense reduction measures - Full benefits from expense reduction measures taken in Q4 2022 are expected to be realized in Q2 2023 [34] Question: Trends impacting top line - Management observed lower conversion rates in Q1 but noted recent improvements and positive momentum heading into the spring selling season [35] Question: Commitment to profitable branches - The focus remains on maximizing profits from the local business while ensuring the core strategy is effectively executed [37]