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Classified in: Science and technology, Business
Subject: EARNINGS

Doma Reports First Quarter 2024 Financial Results


Doma Holdings, Inc. (NYSE: DOMA) ("Doma" or the "Company"), a leading force for disruptive change in the real estate industry, today reported financial results and key operating data for the three months ended March 31, 2024.

First Quarter 2024 Business Highlights (1)(2):

"With mortgage rates at twenty-year highs and housing supply severely constrained, many of the largest participants in the mortgage ecosystem?the government-sponsored enterprises, software providers, and national lenders?are seeking new and innovative solutions to reduce closing costs for consumers," says Max Simkoff, Doma CEO. "We have long advocated the importance of title insurance and the protection it provides for homebuyers but also the potential for innovation around lenders' title to lower costs for homeowners. We welcome the focus of Fannie Mae in this area, and believe our scale- and market-tested technology puts us in a leading position to participate in their pilot program."

(1)

Reconciliations of retained premiums and fees, adjusted gross profit, and the other financial measures used in this press release that are not calculated in accordance with generally accepted accounting principles in the United States ("GAAP") to the nearest measures prepared in accordance with GAAP have been provided in this press release in the accompanying tables. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

 

(2)

Doma has exited its local retail operations nationwide. Local and associated operations are classified as "discontinued operations" and segregated in Doma's financial results beginning in the third quarter ended September 30, 2023. The financial results and key operating data highlighted today reflect the continuing operations of Doma, excluding the discontinued local and associated operations.

Pending Transaction

As previously announced on March 28, 2024, Doma entered into a definitive agreement and plan of merger to be acquired by Title Resources Group ("TRG") in an all-cash transaction for $6.29 per share. The pending transaction would result in Doma becoming a private company and is expected to close in the second half of 2024, subject to certain closing conditions, including the approval of the holders of a majority of Doma's common stock that are not affiliated with LENX ST Investor, LLC and LEN FW Investor, LLC and certain other persons.

In light of the pending transaction, Doma will not hold an earnings conference call or provide forward-looking guidance.

About Doma Holdings, Inc.

Doma is a real estate technology company that is disrupting a century-old industry by building an instant and frictionless home closing experience for buyers and sellers. Doma uses proprietary machine intelligence technology and deep human expertise to create a vastly more simple and affordable experience for everyone involved in a residential real estate transaction, including current and prospective homeowners, mortgage lenders, title agents, and real estate professionals. With Doma, what used to take days can now be done in minutes, replacing an arcane and cumbersome process with a digital experience designed for today's world. To learn more visit doma.com.

Non-GAAP Financial Measures

Some of the financial information and data contained in this press release, such as retained premiums and fees, adjusted gross profit and adjusted EBITDA, have not been prepared in accordance with GAAP. Retained premiums and fees is defined as total revenue less premiums retained by agents. Adjusted gross profit is defined as gross profit (loss), adjusted to exclude the impact of depreciation and amortization. Adjusted EBITDA is defined as net income (loss) before interest, income taxes and depreciation and amortization, and further adjusted to exclude the impact of net loss from discontinued operations, stock-based compensation, severance and interim salary costs, change in fair value of local sales deferred earnout, and the change in fair value of warrant and sponsor covered shares liabilities. Doma believes that the use of retained premiums and fees, adjusted gross profit and adjusted EBITDA provides additional tools to assess operational performance and trends in, and in comparing Doma's financial measures with, other similar companies, many of which present similar non-GAAP financial measures to investors. Doma's non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial measures determined in accordance with GAAP. Because of the limitations of non-GAAP financial measures, you should consider the non-GAAP financial measures presented herein in conjunction with Doma's financial statements and the related notes thereto. Please refer to the non-GAAP reconciliations in this press release for a reconciliation of these non-GAAP financial measures to the most comparable financial measure prepared in accordance with GAAP.

Forward-Looking Statements Legend

This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "estimate," "plan," "project," "forecast," "intend," "will," "expect," "anticipate," "believe," "seek," "target" or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. The absence of these words does not mean that a statement is not forward-looking. Such statements are based on the beliefs of, as well as assumptions made by information currently available to Doma management. These forward-looking statements include, but are not limited to, statements regarding our ability to offer our technology through, and enter into commercial relationships with, mortgage technology platforms (including any specific partner mentioned), primary and/or secondary mortgage market participants and/or their customers, estimates and forecasts of financial and performance metrics, projections of market opportunity, total addressable market ("TAM"), market share and competition, the ability to expand our product offerings geographically and/or add additional partners, and the impact of FHFA's recently announced "title acceptance" pilot and/or our level of participation, if any, in such pilot, and the pending transaction with the Title Resources Group. These statements are based on various assumptions, whether or not identified in this press release, and on the current expectation of Doma's management and are not predictions of actual performance. These forward-looking statements are provided to allow potential investors the opportunity to understand management's beliefs and opinions in respect of the future so that they may use such beliefs and opinions as one factor in evaluating an investment. These statements are not guarantees of future performance and undue reliance should not be placed on them. Actual events and circumstances are difficult or impossible to predict, will differ from assumptions and are beyond the control of Doma.

These forward-looking statements are subject to a number of risks and uncertainties, including changes in business, market, financial, political and legal conditions; risks relating to the uncertainty of our market opportunities; future global, regional or local economic, political, market and social conditions; the development, effects and enforcement of laws and regulations, including with respect to the title insurance industry; Doma's ability to manage its future growth or to develop or acquire enhancements to its platform; the effects of competition on Doma's future business; the outcome of any potential litigation, government and regulatory proceedings, investigations and inquiries; Doma's ability to complete the pending transaction with Title Resources Group on the anticipated timeline, if at all; and those other factors described in Part I, Item 1A - "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023 and any subsequent reports filed by Doma from time to time with the U.S. Securities and Exchange Commission (the "SEC").

If any of these risks materialize or Doma's assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Doma does not presently know or that Doma currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Doma's expectations, plans or forecasts of future events and views as of the date of this press release. Doma anticipates that subsequent events and developments will cause Doma's assessments to change. However, while Doma may elect to update these forward-looking statements at some point in the future, Doma specifically disclaims any obligation to do so, except as required by law. These forward-looking statements should not be relied upon as representing Doma's assessment as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.

Key Operating and Financial Indicators from Continuing Operations

 

 

Three Months Ended March 31,

 

 

2024

 

2023

 

 

(Unaudited - in thousands)

GAAP financial data:

 

 

 

 

 

 

Revenue (1)

 

$

66,067

 

 

$

68,812

 

Gross profit (2)

 

$

4,108

 

 

$

2,101

 

Net loss (3)

 

$

(19,474

)

 

$

(31,233

)

Non-GAAP financial data (4):

 

 

 

 

 

 

Retained premiums and fees

 

$

13,676

 

 

$

14,275

 

Adjusted gross profit

 

$

7,093

 

 

$

4,963

 

Ratio of adjusted gross profit to retained premiums and fees

 

 

52

%

 

 

35

%

Adjusted EBITDA

 

$

(5,562

)

 

$

(12,785

)

________________

(1)

Revenue is comprised of (i) net premiums written, (ii) escrow, other title-related fees and other, and (iii) investment, dividend and other income.

(2)

Gross profit, calculated in accordance with GAAP, is calculated as total revenue, minus premiums retained by agents, direct labor expense (including mainly personnel expense for certain employees involved in the direct fulfillment of policies) and direct non-labor expense (including mainly title examination expense, provision for claims, and depreciation and amortization). In our consolidated income statements, depreciation and amortization is recorded under the "other operating expenses" caption.

(3)

Net loss is made up of the components of revenue and expenses.

(4)

Retained premiums and fees, adjusted gross profit and adjusted EBITDA are non-GAAP financial measures.

Non-GAAP Financial Measures

Retained premiums and fees

The following table reconciles our continuing operations retained premiums and fees to our gross profit, the most closely comparable GAAP financial measure, for the periods indicated:

 

 

Three Months Ended March 31,

 

 

2024

 

2023

 

 

(Unaudited - in thousands)

Revenue

 

$

66,067

 

$

68,812

Minus:

 

 

 

 

 

 

Premiums retained by agents

 

 

52,391

 

 

 

54,537

 

Retained premiums and fees

 

$

13,676

 

 

$

14,275

 

Minus:

 

 

 

 

 

 

Direct labor

 

 

3,414

 

 

 

3,808

 

Provision for claims

 

 

730

 

 

 

3,287

 

Depreciation and amortization

 

 

2,985

 

 

 

2,862

 

Other direct costs (1)

 

 

2,439

 

 

 

2,217

 

Gross Profit

 

$

4,108

 

 

$

2,101

 

__________________

(1)

Includes title examination expense, office supplies, and premium and other taxes.

Adjusted gross profit

The following table reconciles our continuing operations adjusted gross profit to our gross profit, the most closely comparable GAAP financial measure, for the periods indicated:

 

 

Three Months Ended March 31,

 

 

2024

 

2023

 

 

(Unaudited - in thousands)

Gross Profit

 

$

4,108

 

$

2,101

Adjusted for:

 

 

 

 

 

 

Depreciation and amortization

 

 

2,985

 

 

 

2,862

 

Adjusted Gross Profit

 

$

7,093

 

 

$

4,963

 

Adjusted EBITDA

The following table reconciles our continuing operations adjusted EBITDA to our net loss, the most closely comparable GAAP financial measure, for the periods indicated:

 

 

Three Months Ended March 31,

 

 

2024

 

2023

 

 

(Unaudited - in thousands)

Net loss (GAAP)

 

$

(20,551

)

 

$

(42,123

)

Adjusted for:

 

 

 

 

 

 

Depreciation and amortization

 

 

2,985

 

 

 

2,862

 

Interest expense

 

 

6,604

 

 

 

3,971

 

Income taxes

 

 

(504

)

 

 

156

 

EBITDA

 

$

(11,466

)

 

$

(35,134

)

Adjusted for:

 

 

 

 

 

 

Loss from discontinued operations, net of taxes

 

 

1,077

 

 

 

10,890

 

Stock-based compensation

 

 

4,703

 

 

 

4,993

 

Severance and interim salary costs

 

 

64

 

 

 

6,481

 

Change in fair value of Warrant and Sponsor Covered Shares liabilities

 

 

239

 

 

 

(15

)

Change in fair value of Local Sales Deferred Earnout

 

 

(179

)

 

 

?

 

Adjusted EBITDA

 

$

(5,562

)

 

$

(12,785

)

The following table reconciles our continuing operations adjusted gross profit to our adjusted EBITDA, for the periods indicated:

 

 

Three Months Ended March 31,

 

 

2024

 

2023

 

 

(Unaudited - in thousands)

Adjusted Gross Profit

 

$

7,093

 

 

$

4,963

 

Minus:

 

 

 

 

 

 

Customer acquisition costs

 

 

1,475

 

 

 

2,336

 

Other indirect costs (1)

 

 

11,180

 

 

 

15,412

 

Adjusted EBITDA

 

$

(5,562

)

 

$

(12,785

)

__________________

(1)

Includes corporate support, research and development, and other operating costs.

Doma Holdings, Inc.

Consolidated Statements of Operations

 

 

 

Three Months Ended March 31,

(Unaudited - in thousands, except share and per share information)

 

2024

 

2023

Revenues:

 

 

 

 

 

 

Net premiums written (1)

 

$

63,513

 

 

$

66,770

 

Escrow, other title-related fees and other

 

 

1,071

 

 

 

964

 

Investment, dividend and other income

 

 

1,483

 

 

 

1,078

 

Total revenues

 

$

66,067

 

 

$

68,812

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

Premiums retained by agents (2)

 

$

52,391

 

 

$

54,537

 

Title examination expense

 

 

858

 

 

 

733

 

Provision for claims

 

 

730

 

 

 

3,287

 

Personnel costs

 

 

14,615

 

 

 

25,408

 

Other operating expenses

 

 

10,608

 

 

 

11,968

 

Total operating expenses

 

$

79,202

 

 

$

95,933

 

 

 

 

 

 

 

 

Operating loss from continuing operations

 

$

(13,135

)

 

$

(27,121

)

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

Change in fair value of Warrant and Sponsor Covered Shares liabilities

 

 

(239

)

 

 

15

 

Interest expense

 

 

(6,604

)

 

 

(3,971

)

Loss from continuing operations before income taxes

 

$

(19,978

)

 

$

(31,077

)

 

 

 

 

 

 

 

Income tax benefit (expense)

 

 

504

 

 

 

(156

)

Loss from continuing operations, net of taxes

 

$

(19,474

)

 

$

(31,233

)

 

 

 

 

 

 

 

Loss from discontinued operations, net of taxes

 

 

(1,077

)

 

 

(10,890

)

 

 

 

 

 

 

 

Net loss

 

$

(20,551

)

 

$

(42,123

)

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

Net loss from continuing operations per share attributable to stockholders - basic and diluted

 

$

(1.42

)

 

$

(2.37

)

Net loss per share attributable to stockholders - basic and diluted

 

$

(1.50

)

 

$

(3.19

)

Weighted average shares outstanding common stock - basic and diluted

 

 

13,736,176

 

 

 

13,194,859

 

__________________

(1)

Net premiums written includes revenues from a related party of $34.1 million and $30.0 million during the three months ended March 31, 2024, and 2023, respectively.

(2)

Premiums retained by agents includes expenses associated with a related party of $27.5 million and $24.1 million during the three months ended March 31, 2024, and 2023, respectively.

Doma Holdings, Inc.

Consolidated Balance Sheets

 

(Unaudited - in thousands, except share information)

 

March 31, 2024

 

December 31, 2023

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

61,467

 

 

$

65,939

 

Restricted cash

 

 

3,985

 

 

 

5,228

 

Investments:

 

 

 

 

 

 

Fixed maturities

 

 

 

 

 

 

Held-to-maturity debt securities, at amortized cost (net of allowance for credit losses of $123 at March 31, 2024 and $125 at December 31, 2023)

 

 

16,582

 

 

 

18,179

 

Available-for-sale debt securities, at fair value (amortized cost $50,800 at March 31, 2024 and $58,516 at December 31, 2023)

 

 

50,395

 

 

 

58,032

 

Mortgage loans

 

 

45

 

 

 

45

 

Total investments

 

$

67,022

 

 

$

76,256

 

Trade and other receivables (net of allowance for credit losses of $1,812 at March 31, 2024 and $1,802 at December 31, 2023)

 

 

21,897

 

 

 

24,452

 

Prepaid expenses, deposits and other assets

 

 

7,113

 

 

 

4,614

 

Lease right-of-use assets

 

 

3,827

 

 

 

4,175

 

Fixed assets (net of accumulated depreciation of $31,287 at March 31, 2024 and $26,272 at December 31, 2023)

 

 

29,697

 

 

 

30,945

 

Title plants

 

 

2,716

 

 

 

2,716

 

Goodwill

 

 

23,413

 

 

 

23,413

 

Assets held for disposal

 

 

2,062

 

 

 

2,563

 

Total assets

 

$

223,199

 

 

$

240,301

 

 

 

 

 

 

 

 

Liabilities and stockholders' deficit

 

 

 

 

 

 

Accounts payable

 

$

1,698

 

 

$

1,798

 

Accrued expenses and other liabilities

 

 

12,072

 

 

 

12,700

 

Lease liabilities

 

 

8,078

 

 

 

8,838

 

Senior secured credit agreement, net of debt issuance costs and original issue discount

 

 

160,692

 

 

 

154,087

 

Liability for loss and loss adjustment expenses

 

 

76,155

 

 

 

81,894

 

Warrant liabilities

 

 

29

 

 

 

26

 

Sponsor Covered Shares liability

 

 

321

 

 

 

86

 

Liabilities held for disposal

 

 

5,835

 

 

 

6,783

 

Total liabilities

 

$

264,880

 

 

$

266,212

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, 0.0001 par value; 80,000,000 shares authorized at March 31, 2024; 13,887,772 and 13,524,203 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

$

1

 

 

$

1

 

Additional paid-in capital

 

 

598,475

 

 

 

593,772

 

Accumulated deficit

 

 

(639,752

)

 

 

(619,201

)

Accumulated other comprehensive income

 

 

(405

)

 

 

(483

)

Total stockholders' deficit

 

$

(41,681

)

 

$

(25,911

)

Total liabilities and stockholders' deficit

 

$

223,199

 

 

$

240,301

 

 


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