Doma's q1 2022 results show continued market share gains fueled by tech-driven value creation in refinance, despite mortgage market headwinds
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 ended march 31, 2022(3). doma’s results demonstrate further market share gains led by the continued adoption of its proprietary, machine intelligence-driven technology, despite the us mortgage industry's dramatic shift into an environment of rapidly rising interest rates and extraordinarily low housing supply. "doma's mission is, and always has been, to make it easier for people to buy a home," said max simkoff, ceo of doma. "the recent shifts in the mortgage industry have only emphasized the need to deliver a better, faster, and more affordable home closing experience, and doma's market share gains are continued proof that the industry sees value in our proprietary, machine learning-driven technology that is transforming the closing process. our q1 2022 results reflect the downturn we are seeing in the broader market, but this also gives us the conviction that our investment in moving purchase transactions onto the doma intelligence platform is absolutely one that will benefit home buyers and sellers, real estate professionals, and lenders in a unique and differentiated way." doma's year over year decline in retained premiums and fees reflects the challenges faced by the overall mortgage market, which saw a steep decline in refinance transactions in q1 2022 and a tightening purchase market. doma's market share gains were driven by outperformance in refinance transactions which were down 20% year over year, compared to the industry's 63% decline. in anticipation of further market challenges throughout the remainder of the year, doma took steps in q1 2022 to protect its path to achieve ebitda profitability in 2023 by reducing costs and refocusing resources on a narrower set of strategic initiatives which will allow the company to aggressively focus on the transition of additional purchase transactions onto the doma intelligence platform. "while we believe the mortgage market will continue to face significant challenges this year, we are confident in our ability to continue to drive market share gains in both the refinance and purchase markets," said mike smith, chief accounting officer and future acting chief financial officer at doma. "in an environment of rising interest rates and low housing inventory, doma's value proposition becomes even more attractive to lenders and real estate professionals who are looking to close loans faster and minimize costs for home buyers and sellers." (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) to calculate market share, doma's purchase and refinance closed orders are divided by total industry purchase and refinance closed order statistics as published by the mortgage bankers association. (3) 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 first 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. first quarter 2022 growth drivers and recent business highlights market share growth of 40% year over year, climbing to 1.4% in q1 2022 vs. 1.0% in q1 2021 strong outperformance in refinance order volume in our enterprise segment, representing closed order growth of 38% year over year, driven by the continued adoption of our doma intelligence technology among lender referral partners, including by 11 new bank and non-bank mortgage originators and the expansion of existing enterprise business into new states a refocusing of resources to a narrower set of strategic initiatives that will allow the company to target investment almost exclusively within the home purchase market and drive differentiated, tech-led value to home buyers and sellers in a time when interest rates have risen at a rate not seen in 28 years and where housing inventory remains at historic lows, including: the exploration of a doma intelligence-driven purchase offering for existing and new lender referral partners. significant reductions in cost structure across the company to align with reduced refinance volume and investment in moving additional purchase transactions onto the doma intelligence platform. this includes the recent workforce reduction that will result in approximately $4 million of second quarter charges but an overall annualized compensation expense savings of approximately $30 million. a re-scoped and streamlined investment plan across efforts to expand into home warranty and appraisal; and optimization of customer acquisition strategies and geographic expansion within the home purchase market that facilitate faster and more cost-effective growth. the exploration of a doma intelligence-driven purchase offering for existing and new lender referral partners. significant reductions in cost structure across the company to align with reduced refinance volume and investment in moving additional purchase transactions onto the doma intelligence platform. this includes the recent workforce reduction that will result in approximately $4 million of second quarter charges but an overall annualized compensation expense savings of approximately $30 million. a re-scoped and streamlined investment plan across efforts to expand into home warranty and appraisal; and optimization of customer acquisition strategies and geographic expansion within the home purchase market that facilitate faster and more cost-effective growth. management affirmation that the company remains on its previously communicated timeline to achieve adjusted ebitda profitability in 2023 named as one of inc.'s best workplaces of 2022, for the second year in a row 2022 full year outlook (1): gaap financial measures for the full year, doma expects gross profit of between $71 million and $86 million for the full year, doma expects gross profit of between $71 million and $86 million non-gaap financial measures doma expects retained premiums and fees of between $220 million and $240 million doma expects ratio of adjusted gross profit to retained premiums and fees between 39% and 42% doma expects adjusted ebitda between negative $120 million and negative $100 million doma intends to reach adjusted ebitda positive in 2023 doma expects retained premiums and fees of between $220 million and $240 million doma expects ratio of adjusted gross profit to retained premiums and fees between 39% and 42% doma expects adjusted ebitda between negative $120 million and negative $100 million doma intends to reach adjusted ebitda positive in 2023 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, plus depreciation and amortization. adjusted ebitda is defined as net loss before interest expense, income taxes, depreciation and amortization, stock-based compensation and 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. conference call information doma will host a conference call at 5:00 pm eastern time on tuesday, may 10, to present its first quarter 2022 financial results. the telephonic version of the call can be accessed by dialing: participant toll free dial-in number: (844) 615-6508 participant international dial-in number: (918) 922-3146 conference id: 5534256 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 the "risk factors" section of the documents filed by doma from time to time with 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 march 31, 2022 2021 (in thousands, except for open and closed order numbers) key operating data: opened orders 35,192 41,084 closed orders 27,347 32,650 gaap financial data: revenue (1) $ 112,207 $ 127,796 gross profit (2) $ 7,134 $ 26,414 net loss (3) $ (50,026 ) $ (11,758 ) non-gaap financial data (4): retained premiums and fees $ 51,605 $ 57,458 adjusted gross profit $ 10,370 $ 29,121 ratio of adjusted gross profit to retained premiums and fees 20 % 51 % adjusted ebitda $ (44,905 ) $ (3,277 ) _________________ (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 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 march 31, 2022 2021 (in thousands) revenue $ 112,207 $ 127,796 minus: premiums retained by third-party agents 60,602 70,338 retained premiums and fees $ 51,605 $ 57,458 minus: direct labor 27,798 17,979 provision for claims 4,611 3,249 depreciation and amortization 3,236 2,707 other direct costs (1) 8,826 7,109 gross profit $ 7,134 $ 26,414 __________________ (1) 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 march 31, 2022 2021 (in thousands) gross profit $ 7,134 $ 26,414 adjusted for: depreciation and amortization 3,236 2,707 adjusted gross profit $ 10,370 $ 29,121 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 march 31, 2022 2021 (in thousands) net loss (gaap) $ (50,026 ) $ (11,758 ) adjusted for: depreciation and amortization 3,236 2,707 interest expense 4,207 3,360 income taxes 185 125 ebitda $ (42,398 ) $ (5,566 ) adjusted for: stock-based compensation 11,393 2,289 change in fair value of warrant and sponsor covered shares liabilities (13,900 ) — adjusted ebitda $ (44,905 ) $ (3,277 ) the following table reconciles our adjusted gross profit to our adjusted ebitda, for the periods indicated: three months ended march 31, 2022 2021 (in thousands) adjusted gross profit $ 10,370 $ 29,121 minus: customer acquisition costs 15,925 9,895 other indirect costs (1) 39,350 22,503 adjusted ebitda $ (44,905 ) $ (3,277 ) __________________ (1) includes corporate support, research and development, and other operating costs. outlook reconciliations the following tables reconcile the ranges of expected retained premiums and fees to expected gross profit and the ranges expected adjusted gross profit to expected gross profit, which, in each case, is the most comparable gaap measure, for the full year ended december 31, 2022. year ended december 31, 2022 low high (in thousands) retained premiums and fees $ 220,000 $ 240,000 minus: estimated adjustments (1) 149,000 154,000 gross profit $ 71,000 $ 86,000 year ended december 31, 2022 low high (in thousands) gross profit $ 71,000 $ 86,000 adjusted for: depreciation and amortization 15,000 15,000 adjusted gross profit $ 86,000 $ 101,000 outlook for other key operating indicators ratio of adjusted gross profit to retained premiums and fees 39 % 42 % adjusted ebitda $ (120,000 ) $ (100,000 ) with respect to our guidance on adjusted ebitda, the company is not able to provide a quantitative reconciliation without unreasonable efforts to the most directly comparable gaap financial measure, which would be net loss, due to the high variability, complexity and low visibility with respect to certain items such as income taxes and changes in the fair value of warrant and sponsor covered shares liabilities. we expect the variability of these items to have a potentially unpredictable and potentially significant impact on future gaap financial results, and, as such, we also believe that any reconciliations provided would imply a degree of precision that would be confusing or misleading to investors. __________________ (1) estimated adjustments include direct labor, provision for claims, depreciation and amortization, and other direct costs (which includes title examination expense, office supplies, and premium and other taxes). doma holdings, inc. consolidated statements of operations three months ended march 31, (in thousands, except share and per share information) 2022 2021 revenues: net premiums written (1) $ 95,666 $ 107,992 escrow, other title-related fees and other 16,113 18,575 investment, dividend and other income 428 1,229 total revenues $ 112,207 $ 127,796 expenses: premiums retained by third-party agents (2) $ 60,602 $ 70,338 title examination expense 5,981 4,853 provision for claims 4,611 3,249 personnel costs 77,793 43,464 other operating expenses 22,754 14,165 total operating expenses $ 171,741 $ 136,069 loss from operations $ (59,534 ) $ (8,273 ) other (expense) income: change in fair value of warrant and sponsor covered shares liabilities 13,900 — interest expense (4,207 ) (3,360 ) loss before income taxes $ (49,841 ) $ (11,633 ) income tax expense (185 ) (125 ) net loss $ (50,026 ) $ (11,758 ) earnings per share: net loss per share attributable to stockholders - basic and diluted $ (0.15 ) $ (0.17 ) weighted average shares outstanding common stock - basic and diluted 323,890,562 67,418,142 __________________ (1) net premiums written includes revenues from a related party of $27.7 million and $24.7 million during the three months ended march 31, 2022 and 2021, respectively. (2) premiums retained by third-party agents includes expenses associated with a related party of $22.5 million and $19.9 million during the three months ended march 31, 2022 and 2021, respectively. doma holdings, inc. consolidated balance sheets (in thousands, except share information) march 31, 2022 december 31, 2021 assets cash and cash equivalents $ 319,436 $ 379,702 restricted cash 2,784 4,126 investments: fixed maturities held-to-maturity debt securities, at amortized cost (net of allowance for credit losses of $382 at march 31, 2022 and $0 at december 31, 2021) 62,416 67,164 mortgage loans 1,141 2,022 other long-term investments 325 325 total investments $ 63,882 $ 69,511 receivables (net of allowance for credit losses of $1,226 at march 31, 2022 and $1,082 at december 31, 2021) 12,496 15,498 prepaid expenses, deposits and other assets 10,844 15,692 lease right-of-use assets 26,701 — fixed assets (net of accumulated depreciation of $22,323 at march 31, 2022 and $19,543 at december 31, 2021) 52,801 45,953 title plants 13,952 13,952 goodwill 111,487 111,487 total assets $ 614,383 $ 655,921 liabilities and stockholders’ equity accounts payable $ 3,891 $ 6,930 accrued expenses and other liabilities 35,477 54,149 lease liabilities 27,659 — senior secured credit agreement, net of debt issuance costs and original issue discount 144,858 141,769 liability for loss and loss adjustment expenses 82,534 80,267 warrant liabilities 6,067 16,467 sponsor covered shares liability 1,916 5,415 total liabilities $ 302,402 $ 304,997 stockholders’ equity: common stock, 0.0001 par value; 2,000,000,000 shares authorized at march 31, 2022; 324,348,254 and 323,347,806 shares issued and outstanding as of march 31, 2022 and december 31, 2021, respectively 33 33 additional paid-in capital 554,552 543,070 accumulated deficit (242,604 ) (192,179 ) accumulated other comprehensive income — — total stockholders’ equity $ 311,981 $ 350,924 total liabilities and stockholders’ equity $ 614,383 $ 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 (in thousands) march 31, 2020 june 30, 2020 september 30, 2020 december 31, 2020 march 31, 2021 june 30, 2021 september 30, 2021 december 31, 2021 march 31, 2022 revenues: net premiums written $ 56,817 $ 86,334 $ 103,587 $ 98,870 $ 107,992 $ 109,271 $ 141,491 $ 116,598 $ 95,666 escrow, other title-related fees and other 13,174 13,382 16,742 17,977 18,575 20,065 20,452 20,493 16,113 investment, dividend and other income 818 707 743 663 1,229 650 639 588 428 total revenues $ 70,809 $ 100,423 $ 121,072 $ 117,510 $ 127,796 $ 129,986 $ 162,582 $ 137,679 $ 112,207 expenses: premiums retained by third-party agents $ 33,102 $ 56,006 $ 67,024 $ 64,011 $ 70,338 $ 65,181 $ 91,596 $ 71,330 $ 60,602 title examination expense 3,865 3,322 4,624 4,393 4,853 5,500 5,289 6,495 5,981 provision for claims 1,783 3,040 5,242 5,272 3,249 6,807 6,685 4,594 4,611 personnel costs 35,718 32,737 36,197 38,874 43,464 53,954 62,410 78,306 77,793 other operating expenses 10,640 10,286 10,210 12,149 14,165 17,181 21,693 26,912 22,754 total operating expenses $ 85,108 $ 105,391 $ 123,297 $ 124,699 $ 136,069 $ 148,623 $ 187,673 $ 187,637 $ 171,741 loss from operations $ (14,299 ) $ (4,968 ) $ (2,225 ) $ (7,189 ) $ (8,273 ) $ (18,637 ) $ (25,091 ) $ (49,958 ) $ (59,534 ) other income (expense): change in fair value of warrant and sponsor covered shares liabilities — — — — — — (4,478 ) 11,169 13,900 interest expense (2,112 ) (1,123 ) (1,193 ) (1,151 ) (3,360 ) (4,451 ) (4,531 ) (4,519 ) (4,207 ) loss before income taxes $ (16,411 ) $ (6,091 ) $ (3,418 ) $ (8,340 ) $ (11,633 ) $ (23,088 ) $ (34,100 ) $ (43,308 ) $ (49,841 ) income tax expense (175 ) (241 ) (204 ) (223 ) (125 ) (211 ) (170 ) (421 ) (185 ) net loss (16,586 ) (6,332 ) (3,622 ) (8,563 ) (11,758 ) (23,299 ) (34,270 ) (43,729 ) (50,026 ) 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 (in thousands) march 31, 2020 june 30, 2020 september 30, 2020 december 31, 2020 march 31, 2021 june 30, 2021 september 30, 2021 december 31, 2021 march 31, 2022 revenue $ 70,809 $ 100,423 $ 121,072 $ 117,510 $ 127,796 $ 129,986 $ 162,582 $ 137,679 $ 112,207 minus: premiums retained by third-party agents 33,102 56,006 67,024 64,011 70,338 65,181 91,596 71,330 60,602 retained premiums and fees $ 37,707 $ 44,417 $ 54,048 $ 53,499 $ 57,458 $ 64,805 $ 70,986 $ 66,349 $ 51,605 minus: direct labor 16,314 13,898 14,892 17,050 17,979 20,902 23,948 26,787 27,798 provision for claims 1,783 3,040 5,242 5,272 3,249 6,807 6,685 4,594 4,611 depreciation and amortization 1,116 899 1,221 2,579 2,707 3,021 1,978 2,615 3,236 other direct costs(1) 5,137 4,898 6,314 4,186 7,109 7,561 10,073 10,322 8,826 gross profit $ 13,357 $ 21,682 $ 26,379 $ 24,412 $ 26,414 $ 26,514 $ 28,302 $ 22,031 $ 7,134 __________________ (1) includes title examination expense, office supplies, and premium and other taxes. adjusted gross profit three months ended (in thousands) march 31, 2020 june 30, 2020 september 30, 2020 december 31, 2020 march 31, 2021 june 30, 2021 september 30, 2021 december 31, 2021 march 31, 2022 gross profit $ 13,357 $ 21,682 $ 26,379 $ 24,412 $ 26,414 $ 26,514 $ 28,302 $ 22,031 $ 7,134 adjusted for: depreciation and amortization 1,116 899 1,221 2,579 2,707 3,021 1,978 2,615 3,236 adjusted gross profit $ 14,473 $ 22,581 $ 27,600 $ 26,991 $ 29,121 $ 29,535 $ 30,280 $ 24,646 $ 10,370 adjusted ebitda three months ended (in thousands) march 31, 2020 june 30, 2020 september 30, 2020 december 31, 2020 march 31, 2021 june 30, 2021 september 30, 2021 december 31, 2021 march 31, 2022 net loss (gaap) $ (16,586 ) $ (6,332 ) $ (3,622 ) $ (8,563 ) $ (11,758 ) $ (23,299 ) $ (34,270 ) $ (43,729 ) $ (50,026 ) adjusted for: depreciation and amortization 1,116 899 1,221 2,579 2,707 3,021 1,978 2,615 3,236 interest expense 2,112 1,123 1,193 1,151 3,360 4,451 4,531 4,519 4,207 income taxes 175 241 204 223 125 211 170 421 185 ebitda $ (13,183 ) $ (4,069 ) $ (1,004 ) $ (4,610 ) $ (5,566 ) $ (15,616 ) $ (27,591 ) $ (36,174 ) $ (42,398 ) adjusted for: stock-based compensation 308 282 355 1,550 2,289 3,713 3,004 11,040 11,393 covid-related severance costs — 1,385 — — — — — — — change in fair value of warrant and sponsor covered shares liabilities — — — — — — 4,478 (11,169 ) (13,900 ) adjusted ebitda $ (12,875 ) $ (2,402 ) $ (649 ) $ (3,060 ) $ (3,277 ) $ (11,903 ) $ (20,109 ) $ (36,303 ) $ (44,905 )
