Doma's q4 results demonstrate significant progress towards achieving profitability in 2023; delivers full year adjusted ebitda within revised 2022 guidance
San francisco--(business wire)--doma holdings, inc. (nyse: doma) (“doma” or the “company”), a leading force for disruptive change in the real estate industry, today reported quarterly financial results and key operating data for the three months and full year ended december 31, 2022(2). doma achieved significant adjusted ebitda loss improvement in the fourth quarter and delivered full year adjusted ebitda within its revised guidance range. the company remains on track to achieve adjusted ebitda profitability in 2023. "we are now seeing the tangible benefits of the significant actions we took last year to protect our bottom line and to achieve our industry transforming vision," said max simkoff, ceo of doma. "given the rapid rise in both mortgage rates and home prices we experienced last year, it's no surprise that we've seen a resultant unprecedented decline in home affordability impacting virtually everyone across the country. as we head into 2023, we are uniquely positioned to provide cost-effective solutions to home owners and prospective home owners via our proven instant underwriting platform, ultimately alleviating home affordability challenges." doma's $14 million adjusted ebitda improvement in the fourth quarter compared to the third quarter was a direct result of key strategic cost saving decisions made throughout 2022. despite a housing market that is likely to remain volatile for the foreseeable future, doma has reiterated its commitment to achieving adjusted ebitda profitability in 2023. margin improvements are expected to continue throughout the year as the full benefit of actions implemented in 2022 are realized, and as the company continues to prioritize profitability contribution from its local branch operations. additionally, doma is finalizing the best strategies for more efficient and more profitable deployment of its proven instant underwriting technology via new partnerships with mortgage originators and the broader lending ecosystems, ultimately making their technology more widely available and most importantly, saving homeowners money. "we are pleased to deliver full year 2022 adjusted ebitda within our revised guidance range and to have made progress towards achieving profitability," said mike smith, chief financial officer of doma. "we made meaningful expense reduction decisions early on in the mortgage market downturn and acted swiftly late last year when we knew continued mortgage market instability meant additional cost reductions were necessary. the team continues to prioritize our investments with profitability and cash generation at the forefront, and we look forward to achieving sustainable profitability in 2023." (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 completed its business combination with capitol investment corp. v ("capitol") on july 28, 2021. the financial results and key operating data included in this fourth quarter release include operating results of doma prior to completion of the business combination and operating results of the combined company subsequent to completion of the business combination. 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 united states generally accepted accounting principles ("gaap"). retained premiums and fees is defined as revenue less premiums retained by third-party 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, depreciation and amortization, and further adjusted to exclude the impact of stock-based compensation, severance costs, goodwill impairment, long-lived asset impairment, the change in fair value of warrant and sponsor covered shares liabilities and accelerated contract expense. 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. conference call information doma will host a conference call at 5:00 pm eastern time on tuesday, february 28, to present its fourth quarter 2022 financial results. dial-in details: to access the call by phone, please go to this link (registration link), and you will be provided with dial-in details. to avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time. the live webcast of the call will be accessible on the company’s website at investor.doma.com. approximately two hours after conclusion of the live event, an archived webcast of the conference call will be accessible from the investor relations section of the company’s website for twelve months. 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. 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 estimates and forecasts of financial and performance metrics, projections of market opportunity, total addressable market ("tam"), market share and competition. 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 for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. 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 the projected financial information with respect to doma; future global, regional or local economic, political, market and social conditions, including due to the covid-19 pandemic; 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; 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, 2021 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 three months ended december 31, year ended december 31, 2022 2021 2022 2021 (unaudited - in thousands, except for open and closed order numbers) key operating data: opened orders 11,602 43,247 93,534 178,689 closed orders 10,505 37,042 71,953 136,428 gaap financial data: revenue (1) $ 96,374 $ 137,679 $ 440,181 $ 558,043 gross profit (2) $ 9,197 $ 22,031 $ 30,829 $ 103,261 net loss (3) $ (109,418 ) $ (43,729 ) $ (302,209 ) $ (113,056 ) non-gaap financial data (4): retained premiums and fees $ 35,279 $ 66,349 $ 178,705 $ 259,598 adjusted gross profit $ 13,982 $ 24,646 $ 46,848 $ 113,582 ratio of adjusted gross profit to retained premiums and fees 40 % 37 % 26 % 44 % adjusted ebitda $ (16,387 ) $ (36,303 ) $ (134,914 ) $ (71,592 ) _________________ (1) revenue is comprised of (i) net premiums written, (ii) escrow, other title-related fees and other, and (iii) investment, dividend and other income. net loss is made up of the components of revenue and expenses. (2) gross profit, calculated in accordance with gaap, is calculated as total revenue, minus premiums retained by third-party 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 retained premiums and fees to our gross profit, the most closely comparable gaap financial measure, for the periods indicated: three months ended december 31, year ended december 31, 2022 2021 2022 2021 (unaudited - in thousands) (unaudited - in thousands) revenue $ 96,374 $ 137,679 $ 440,181 $ 558,043 minus: premiums retained by third-party agents 61,095 71,330 261,476 298,445 retained premiums and fees $ 35,279 $ 66,349 $ 178,705 $ 259,598 minus: direct labor 14,665 26,787 86,573 89,616 provision for claims 1,154 4,594 16,740 21,335 depreciation and amortization 4,785 2,615 16,019 10,321 other direct costs (1) 5,478 10,322 28,544 35,065 gross profit $ 9,197 $ 22,031 $ 30,829 $ 103,261 __________________ includes title examination expense, office supplies, and premium and other taxes. adjusted gross profit the following table reconciles our adjusted gross profit to our gross profit, the most closely comparable gaap financial measure, for the periods indicated: three months ended december 31, year ended december 31, 2022 2021 2022 2021 (unaudited - in thousands) (unaudited - in thousands) gross profit $ 9,197 $ 22,031 $ 30,829 $ 103,261 adjusted for: depreciation and amortization 4,785 2,615 16,019 10,321 adjusted gross profit $ 13,982 $ 24,646 $ 46,848 $ 113,582 adjusted ebitda the following table reconciles our adjusted ebitda to our net loss, the most closely comparable gaap financial measure, for the periods indicated: three months ended december 31, year ended december 31, 2022 2021 2022 2021 (unaudited - in thousands) (unaudited - in thousands) net loss (gaap) $ (109,418 ) $ (43,729 ) $ (302,209 ) $ (113,056 ) adjusted for: depreciation and amortization 4,785 2,615 16,019 10,321 interest expense 4,800 4,519 18,080 16,861 income taxes (1,988 ) 421 (1,242 ) 927 ebitda $ (101,821 ) $ (36,174 ) $ (269,352 ) $ (84,947 ) adjusted for: stock-based compensation 6,293 11,040 33,687 20,046 severance costs 11,218 — 19,613 — goodwill impairment 31,461 — 65,207 — long-lived asset impairment 32,027 — 32,027 — change in fair value of warrant and sponsor covered shares liabilities (786 ) (11,169 ) (21,317 ) (6,691 ) accelerated contract expense 5,221 — 5,221 — adjusted ebitda $ (16,387 ) $ (36,303 ) $ (134,914 ) $ (71,592 ) the following table reconciles our adjusted gross profit to our adjusted ebitda, for the periods indicated: three months ended december 31, year ended december 31, 2022 2021 2022 2021 (unaudited - in thousands) (unaudited - in thousands) adjusted gross profit $ 13,982 $ 24,646 $ 46,848 $ 113,582 minus: customer acquisition costs 6,324 18,251 47,926 55,208 other indirect costs (1) 24,045 42,698 133,836 129,966 adjusted ebitda $ (16,387 ) $ (36,303 ) $ (134,914 ) $ (71,592 ) __________________ includes corporate support, research and development, and other operating costs. doma holdings, inc. consolidated statements of operations year ended december 31 (unaudited - in thousands, except share and per share information) 2022 2021 2020 revenues: net premiums written (1) $ 385,253 $ 475,352 $ 345,608 escrow, other title-related fees and other 52,008 79,585 61,275 investment, dividend and other income 2,920 3,106 2,931 total revenues $ 440,181 $ 558,043 $ 409,814 expenses: premiums retained by third-party agents (2) $ 261,476 $ 298,445 $ 220,143 title examination expense 18,261 22,137 16,204 provision for claims 16,740 21,335 15,337 personnel costs 259,939 238,134 143,526 other operating expenses 93,219 79,951 43,285 goodwill impairment 65,207 — — long-lived asset impairment 32,027 — — total operating expenses $ 746,869 $ 660,002 $ 438,495 loss from operations $ (306,688 ) $ (101,959 ) $ (28,681 ) other (expense) income: change in fair value of warrant and sponsor covered shares liabilities 21,317 6,691 — interest expense (18,080 ) (16,861 ) (5,579 ) loss before income taxes $ (303,451 ) $ (112,129 ) $ (34,260 ) income tax benefit (expense) 1,242 (927 ) (843 ) net loss $ (302,209 ) $ (113,056 ) $ (35,103 ) earnings per share: net loss per share attributable to stockholders - basic and diluted $ (0.93 ) $ (0.64 ) $ (0.56 ) weighted average shares outstanding common stock - basic and diluted 326,042,708 177,150,914 62,458,039 __________________ net premiums written includes revenues from a related party of $134.9 million, $114.2 million, and $88.6 million for the years ended december 31, 2022, 2021, and 2020, respectively. premiums retained by third-party agents includes expenses associated with a related party of $108.4 million, $92.5 million, and $71.2 million during the years ended december 31, 2022, 2021, and 2020, respectively. doma holdings, inc. consolidated balance sheets december 31 (unaudited - in thousands, except share information) 2022 2021 assets cash and cash equivalents $ 78,450 $ 379,702 restricted cash 2,933 4,126 investments: fixed maturities held-to-maturity debt securities, at amortized cost (net of allowance for credit losses of $440 at december 31, 2022 and $0 at december 31, 2021) 90,328 67,164 available-for-sale debt securities, at fair value (amortized cost of $59,191 at december 31, 2022 and $0 at december 31, 2021) 58,254 — mortgage loans 297 2,022 other invested assets — 325 total investments $ 148,879 $ 69,511 receivables (net of allowance for credit losses of $1,488 and $1,082 at december 31, 2022 and 2021, respectively) 21,292 15,498 prepaid expenses, deposits and other assets 8,124 15,692 lease right-of-use assets 18,634 — fixed assets (net of accumulated depreciation of $24,532 and $19,543 at december 31, 2022 and 2021, respectively) 39,383 45,953 title plants 14,533 13,952 goodwill 46,280 111,487 total assets $ 378,508 $ 655,921 liabilities and stockholders’ equity accounts payable $ 2,909 $ 6,930 accrued expenses and other liabilities 28,892 54,149 leases liabilities 27,489 — senior secured credit agreement, net of debt issuance costs and original issue discount 154,790 141,769 liability for loss and loss adjustment expenses 82,070 80,267 warrant liabilities 347 16,467 sponsor covered shares liability 219 5,415 total liabilities $ 296,716 $ 304,997 stockholders’ equity: common stock, 0.0001 par value; 2,000,000,000 shares authorized at december 31, 2022 and 2021; 329,147,979 and 323,347,806 shares issued and outstanding as of december 31, 2022 and 2021, respectively 33 33 additional paid-in capital 577,483 543,070 accumulated deficit (494,787 ) (192,179 ) accumulated other comprehensive income (937 ) — total stockholders’ equity $ 81,792 $ 350,924 total liabilities and stockholders’ equity $ 378,508 $ 655,921 quarterly results of operations and other data the following tables set forth our selected unaudited quarterly consolidated statements of operations data for each of the quarters indicated. the information for each quarter has been prepared on a basis consistent with our audited consolidated financial statements, and reflect, in the opinion of management, all adjustments, which consist only of a normal, recurring nature that are necessary for a fair statement of the financial information contained in those financial statements. our historical results are not necessarily indicative of the results that may be expected in the future. the following quarterly financial data should be read in conjunction with our consolidated financial statements. consolidated statements of operations three months ended (unaudited - in thousands) december 31, 2020 march 31, 2021 june 30, 2021 september 30, 2021 december 31, 2021 march 31, 2022 june 30, 2022 september 30, 2022 december 31, 2022 revenues: net premiums written $ 98,870 $ 107,992 $ 109,271 $ 141,491 $ 116,598 $ 95,666 $ 108,926 $ 94,488 $ 86,173 escrow, other title-related fees and other 17,977 18,575 20,065 20,452 20,493 16,113 14,366 12,627 8,902 investment, dividend and other income 663 1,229 650 639 588 428 452 741 1,299 total revenues $ 117,510 $ 127,796 $ 129,986 $ 162,582 $ 137,679 $ 112,207 $ 123,744 $ 107,856 $ 96,374 expenses: premiums retained by third-party agents $ 64,011 $ 70,338 $ 65,181 $ 91,596 $ 71,330 $ 60,602 $ 74,638 $ 65,141 $ 61,095 title examination expense 4,393 4,853 5,500 5,289 6,495 5,981 5,146 3,709 3,425 provision for claims 5,272 3,249 6,807 6,685 4,594 4,611 6,310 4,665 1,154 personnel costs 38,874 43,464 53,954 62,410 78,306 77,793 73,233 60,481 48,432 other operating expenses 12,149 14,165 17,181 21,693 26,912 22,754 23,637 20,656 26,172 goodwill impairment — — — — — — — 33,746 31,461 long-lived asset impairment — — — — — — — — 32,027 total operating expenses $ 124,699 $ 136,069 $ 148,623 $ 187,673 $ 187,637 $ 171,741 $ 182,964 $ 188,398 $ 203,766 loss from operations $ (7,189 ) $ (8,273 ) $ (18,637 ) $ (25,091 ) $ (49,958 ) $ (59,534 ) $ (59,220 ) $ (80,542 ) $ (107,392 ) other income (expense): change in fair value of warrant and sponsor covered shares liabilities — — — (4,478 ) 11,169 13,900 5,193 1,438 786 interest expense (1,151 ) (3,360 ) (4,451 ) (4,531 ) (4,519 ) (4,207 ) (4,489 ) (4,584 ) (4,800 ) loss before income taxes $ (8,340 ) $ (11,633 ) $ (23,088 ) $ (34,100 ) $ (43,308 ) $ (49,841 ) $ (58,516 ) $ (83,688 ) $ (111,406 ) income tax benefit (expense) (223 ) (125 ) (211 ) (170 ) (421 ) (185 ) (136 ) (425 ) 1,988 net loss $ (8,563 ) $ (11,758 ) $ (23,299 ) $ (34,270 ) $ (43,729 ) $ (50,026 ) $ (58,652 ) $ (84,113 ) $ (109,418 ) reconciliation of gaap to non-gaap measures the following tables present our reconciliation of gaap measures to non-gaap measures for the historical periods indicated. retained premiums and fees three months ended (unaudited - in thousands) december 31, 2020 march 31, 2021 june 30, 2021 september 30, 2021 december 31, 2021 march 31, 2022 june 30, 2022 september 30, 2022 december 31, 2022 revenue $ 117,510 $ 127,796 $ 129,986 $ 162,582 $ 137,679 $ 112,207 $ 123,744 $ 107,856 $ 96,374 minus: premiums retained by third-party agents 64,011 70,338 65,181 91,596 71,330 60,602 74,638 65,141 61,095 retained premiums and fees $ 53,499 $ 57,458 $ 64,805 $ 70,986 $ 66,349 $ 51,605 $ 49,106 $ 42,715 $ 35,279 minus: direct labor 17,050 17,979 20,902 23,948 26,787 27,798 23,890 20,220 14,665 provision for claims 5,272 3,249 6,807 6,685 4,594 4,611 6,310 4,665 1,154 depreciation and amortization 2,579 2,707 3,021 1,978 2,615 3,236 3,747 4,251 4,785 other direct costs(1) 4,186 7,109 7,561 10,073 10,322 8,826 8,016 6,224 5,478 gross profit $ 24,412 $ 26,414 $ 26,514 $ 28,302 $ 22,031 $ 7,134 $ 7,143 $ 7,355 $ 9,197 includes title examination expense, office supplies, and premium and other taxes. adjusted gross profit three months ended (unaudited - in thousands) december 31, 2020 march 31, 2021 june 30, 2021 september 30, 2021 december 31, 2021 march 31, 2022 june 30, 2022 september 30, 2022 december 31, 2022 gross profit $ 24,412 $ 26,414 $ 26,514 $ 28,302 $ 22,031 $ 7,134 $ 7,143 $ 7,355 $ 9,197 adjusted for: depreciation and amortization 2,579 2,707 3,021 1,978 2,615 3,236 3,747 4,251 4,785 adjusted gross profit $ 26,991 $ 29,121 $ 29,535 $ 30,280 $ 24,646 $ 10,370 $ 10,890 $ 11,606 $ 13,982 adjusted ebitda three months ended (unaudited - in thousands) december 31, 2020 march 31, 2021 june 30, 2021 september 30, 2021 december 31, 2021 march 31, 2022 june 30, 2022 september 30, 2022 december 31, 2022 net loss (gaap) $ (8,563 ) $ (11,758 ) $ (23,299 ) $ (34,270 ) $ (43,729 ) $ (50,026 ) $ (58,652 ) $ (84,113 ) $ (109,418 ) adjusted for: depreciation and amortization 2,579 2,707 3,021 1,978 2,615 3,236 3,747 4,251 4,785 interest expense 1,151 3,360 4,451 4,531 4,519 4,207 4,489 4,584 4,800 income taxes 223 125 211 170 421 185 136 425 (1,988 ) ebitda $ (4,610 ) $ (5,566 ) $ (15,616 ) $ (27,591 ) $ (36,174 ) $ (42,398 ) $ (50,280 ) $ (74,853 ) $ (101,821 ) adjusted for: stock-based compensation 1,550 2,289 3,713 3,004 11,040 11,393 8,255 7,746 6,293 severance costs — — — — — — 3,828 4,567 11,218 goodwill impairment — — — — — — — 33,746 31,461 long-lived asset impairment — — — — — — — — 32,027 change in fair value of warrant and sponsor covered shares liabilities — — — 4,478 (11,169 ) (13,900 ) (5,193 ) (1,438 ) (786 ) accelerated contract expense — — — — — — — — 5,221 adjusted ebitda $ (3,060 ) $ (3,277 ) $ (11,903 ) $ (20,109 ) $ (36,303 ) $ (44,905 ) $ (43,390 ) $ (30,232 ) $ (16,387 )
