- Total revenues of $601.7
million ($603.7 million on an
adjusted basis) compared to $716.4
million ($722.8 million on an
adjusted basis) in the prior year quarter
- Net income of $14.0 million
($23.9 million on an adjusted basis)
compared to $29.4 million
($43.3 million on an adjusted basis)
in the prior year quarter
- Diluted EPS of $0.51
($0.86 on an adjusted basis) compared
to prior year quarter diluted EPS of $1.08 ($1.58 on an
adjusted basis)
HOUSTON, Oct. 25,
2023 /PRNewswire/ -- Stewart Information Services
Corporation (NYSE: STC) today reported net income attributable to
Stewart of $14.0 million
($0.51 per diluted share) for the
third quarter 2023, compared to $29.4
million ($1.08 per diluted
share) for the third quarter 2022. On an adjusted basis, Stewart's
third quarter 2023 net income was $23.9
million ($0.86 per diluted
share) compared to $43.3 million
($1.58 per diluted share) in the
third quarter 2022. Third quarter 2023 pretax income before
noncontrolling interests was $27.1
million ($40.0 million on an
adjusted basis) compared to pretax income before noncontrolling
interests of $45.5 million
($63.9 million on an adjusted basis)
for the third quarter 2022.
Third quarter 2023 and 2022 results included $1.9 and $6.4
million, respectively, of pretax net realized and unrealized
losses primarily driven by net unrealized losses on fair value
changes of equity securities investments in the title segment.
"Our third quarter results reflect the continuing slowdown in
real estate market activity due to the higher interest rate
environment coupled with the normal seasonality of late summer. As
we expect that higher interest rates will continue for several
quarters before beginning to moderate, we will continue to balance
thoughtful cost discipline with investment in long-term enterprise
initiatives," commented Fred
Eppinger, chief executive officer. "Our focus remains on
these long-term strategies that will create a stronger and more
resilient company, and I am pleased with the significant progress
on these important enterprise initiatives this quarter."
Selected Financial Information
Summary results of
operations are as follows (dollars in millions, except per share
amounts, and amounts may not add as presented due to rounding):
|
Quarter
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
2023
|
2022
|
|
2023
|
2022
|
|
|
|
|
|
|
Total
revenues
|
601.7
|
716.4
|
|
1,675.2
|
2,413.4
|
Pretax income before
noncontrolling interests
|
27.1
|
45.5
|
|
42.1
|
211.9
|
Income tax
expense
|
(9.1)
|
(10.8)
|
|
(9.6)
|
(48.4)
|
Net income attributable
to noncontrolling interests
|
(3.9)
|
(5.3)
|
|
(10.9)
|
(14.5)
|
Net income attributable
to Stewart
|
14.0
|
29.4
|
|
21.6
|
149.0
|
Non-GAAP adjustments,
after taxes*
|
9.9
|
13.9
|
|
27.7
|
33.3
|
Adjusted net income
attributable to Stewart*
|
23.9
|
43.3
|
|
49.4
|
182.3
|
Net income per diluted
Stewart share
|
0.51
|
1.08
|
|
0.79
|
5.45
|
Adjusted net income per
diluted Stewart share*
|
0.86
|
1.58
|
|
1.80
|
6.66
|
* Adjusted
net income and adjusted net income per diluted share are non-GAAP
measures. See Appendix A for explanation
and
reconciliation of non-GAAP adjustments.
|
Effective this quarter, we revised our presentation of non-GAAP
measures related to adjusted net income and adjusted net income per
diluted share by excluding acquired intangible asset amortization
from the calculation. Acquired intangible asset amortization for
the third quarter and first nine months of 2023 was $9.6 million ($0.26
per diluted share) and $27.3 million
($0.75 per diluted share),
respectively, compared to $7.8
million ($0.22 per diluted
share) and $24.7 million
($0.68 per diluted share) for the
third quarter and first nine months of 2022, respectively.
Excluding this adjustment for acquired intangible asset
amortization, adjusted net income per diluted share would have been
$0.60 and $1.05 for the third quarter and first nine months
of 2023, respectively, compared to $1.36 and $5.98 for
the third quarter and first nine months of 2022, respectively.
Acquired intangible asset amortization is a non-cash expense
related to acquisitions that management believes is not indicative
of the ongoing performance of the acquired operations. This revised
presentation also allows us to present our non-GAAP consolidated
results consistent with the presentation of our non-GAAP measures
related to our title and real estate solutions segments. Refer to
Appendix B for the restated non-GAAP consolidated results for all
quarters of 2022 and the first two quarters of 2023.
Title Segment
Summary results of the title segment are
as follows (dollars in millions, except pretax margin):
|
Quarter Ended September
30,
|
|
|
|
2023
|
2022
|
% Change
|
|
|
|
|
|
|
|
|
Operating
revenues
|
522.1
|
647.9
|
(19 %)
|
|
|
Investment
income
|
13.4
|
5.2
|
159 %
|
|
|
Net realized and
unrealized losses
|
(1.8)
|
(6.4)
|
72 %
|
|
|
Pretax
income
|
35.4
|
51.8
|
(32 %)
|
|
|
Non-GAAP adjustments to
pretax income*
|
6.6
|
12.7
|
|
|
|
Adjusted pretax
income*
|
42.0
|
64.5
|
(35 %)
|
|
|
Pretax
margin
|
6.6 %
|
8.0 %
|
|
|
|
Adjusted pretax
margin*
|
7.8 %
|
9.9 %
|
|
|
|
* Adjusted
pretax income and adjusted pretax margin are non-GAAP financial
measures. See
Appendix A for explanation and reconciliation of
non-GAAP adjustments.
|
|
Title segment operating revenues in the third quarter 2023
decreased $125.8 million, or 19
percent, compared to the third quarter 2022, due to transaction
volume declines in our direct and agency title businesses. Total
segment operating expenses in the third quarter 2023 decreased
$96.5 million, or 16 percent,
primarily driven by lower operating revenues. Agency retention
expenses in the third quarter 2023 decreased $61.5 million, or 22 percent, in line with lower
gross agency revenues of $74.8
million, or 22 percent, while the average independent agency
remittance rate in the third quarter 2023 was comparable to the
prior year quarter.
Total employee costs and other operating expenses in the third
quarter 2023 decreased $33.8 million,
or 12 percent, compared to the prior year quarter, while as a
percentage of operating revenues, these expenses were 47.4 percent
in the third quarter 2023 compared to 43.4 percent in the third
quarter 2022. Title loss expense in the third quarter 2023
decreased $3.2 million, or 13
percent, compared to the prior year quarter, primarily as a result
of lower title revenues. As a percentage of title revenues, title
loss expense was 4.3 percent in the third quarter 2023 compared to
3.9 percent in the third quarter 2022, which benefited from last
year's favorable claims experience.
Investment income in the third quarter 2023 increased
$8.2 million compared to the third
quarter 2022, primarily due to higher interest income resulting
from earned interest from eligible escrow balances and increased
interest rates and higher short-term investment balances in the
third quarter 2023. Non-GAAP adjustments to pretax income primarily
included $1.8 million and
$6.4 million of net realized and
unrealized losses and $4.8 million
and $6.3 million of acquisition
intangible asset amortization and other expenses in the third
quarters 2023 and 2022, respectively.
Direct title revenues information is presented below (dollars in
millions):
|
Quarter Ended September
30,
|
|
2023
|
2022
|
% Change
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
Domestic
|
167.6
|
204.4
|
(18 %)
|
|
International
|
29.1
|
33.8
|
(14 %)
|
|
|
196.7
|
238.2
|
(17 %)
|
|
Commercial:
|
|
|
|
|
Domestic
|
51.9
|
61.0
|
(15 %)
|
|
International
|
7.8
|
8.2
|
(5 %)
|
|
|
59.7
|
69.2
|
(14 %)
|
|
Total direct title
revenues
|
256.4
|
307.4
|
(17 %)
|
Total non-commercial domestic revenues in the third quarter 2023
decreased $36.8 million, or 18
percent, primarily driven by a 17 percent decline in residential
purchase and refinancing transactions compared to the prior year
quarter. Domestic commercial revenues in the third quarter 2023
declined $9.1 million, or 15 percent,
primarily resulting from 18 percent lower commercial closed orders
compared to the third quarter 2022. Average domestic commercial fee
per file in the third quarter 2023 was $14,200, or 3 percent better compared to
$13,700 in the third quarter 2022,
while average residential fee per file in the third quarter 2023
was $3,000, which was 10 percent
lower compared to $3,300 in the prior
year quarter due to a lower purchase mix in the third quarter 2023.
Total international revenues in the third quarter 2023 decreased by
$5.1 million, or 12 percent,
primarily due to lower transaction volumes in our Canadian
operations compared to the third quarter 2022.
Real Estate Solutions Segment
Summary results of the
real estate solutions segment are as follows (dollars in
millions):
|
Quarter Ended September
30,
|
|
|
2023
|
2022
|
% Change
|
|
|
|
|
|
|
Operating
revenues
|
68.2
|
69.7
|
(2 %)
|
|
Pretax
income
|
2.6
|
3.4
|
(22 %)
|
|
Non-GAAP adjustments to
pretax income*
|
6.3
|
5.8
|
|
|
Adjusted pretax
income*
|
8.9
|
9.1
|
(3 %)
|
|
Pretax
margin
|
3.8 %
|
4.8 %
|
|
|
Adjusted pretax
margin*
|
13.0 %
|
13.1 %
|
|
|
* Adjusted pretax
income and adjusted pretax margin are non-GAAP financial measures.
See
Appendix A for an explanation and reconciliation of non-GAAP
adjustments.
|
|
The segment's operating revenues in the third quarter 2023
decreased $1.5 million, or 2 percent,
compared to the third quarter 2022, primarily as a result of lower
valuation services revenues resulting from lower transaction
volumes tied to the continuing elevated interest rate environment,
partially offset by higher credit information services revenues. In
line with the revenue decline, combined employee costs and other
operating expenses in the third quarter 2023 decreased $1.6 million, or 3 percent. Non-GAAP adjustments
to pretax income in the third quarters 2023 and 2022 were related
to acquisition intangible asset amortization expenses of
$6.3 million and $5.8 million, respectively.
Corporate and Other Segment
The segment's results for
the third quarter 2023 and 2022 were driven by net expenses
attributable to corporate operations which were $10.8 million and $9.7
million, respectively.
Expenses
Consolidated employee costs in the third
quarter 2023 were $13.6 million, or 7
percent, lower primarily due to lower salaries and benefits
expenses and incentive compensation driven by reduced transaction
volumes and lower average employee count compared to the prior year
quarter. As a percentage of total operating revenues, consolidated
employee costs were 30.7 percent in the third quarter 2023 compared
to 27.2 percent in the prior year quarter, primarily due to lower
third quarter 2023 revenues.
Total other operating expenses in the third quarter 2023
declined $20.8 million, or 14
percent, compared to the prior year quarter, primarily as a result
of lower costs tied to lower title and real estate solutions
revenues, and reduced third-party outsourcing, office closures and
marketing expenses. As a percentage of total operating revenues,
consolidated other operating expenses for the third quarter 2023
were 22.1 percent compared to 21.1 percent in the third quarter
2022.
Other
Net cash provided by operations in the third
quarter 2023 improved to $59.5
million compared to net cash provided by operations of
$48.9 million in the prior year
quarter, primarily driven by lower payments on claims and accounts
payable, partially offset by the lower net income during the third
quarter 2023. Income tax expense for the third quarter 2023 was
higher than our normal tax rate of 24 percent, due to annual
federal return adjustments recorded during the quarter primarily
related to lower foreign tax credits.
Third Quarter Earnings Call
Stewart will hold a
conference call to discuss the third quarter 2023 earnings at
8:30 a.m. Eastern Time on Thursday,
October 26, 2023. To participate, dial (800) 343-4849 (USA) or (203) 518-9843 (International) -
access code STCQ323. Additionally, participants can listen to the
conference call through Stewart's Investor Relations website at
http://investors.stewart.com/news-and-events/events/default.aspx.
The conference call replay will be available from 11:00 a.m. Eastern Time on October 26, 2023 until midnight on November 2, 2023 by dialing (877) 856-8966 or
(402) 220-1610 (International).
About Stewart
Stewart (NYSE:STC) is a global real
estate services company, offering products and services through our
direct operations, network of Stewart Trusted Providers™ and family
of companies. From residential and commercial title insurance and
closing and settlement services to specialized offerings for the
mortgage and real estate industries, we offer the comprehensive
service, deep expertise and solutions our customers need for any
real estate transaction. More information can be found at
http://www.stewart.com.
Cautionary statement regarding forward-looking
statements. Certain statements in this earnings release
are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, as amended. Such
forward-looking statements relate to future, not past, events and
often address our expected future business and financial
performance. These statements often contain words such as "may,"
"expect," "anticipate," "intend," "plan," "believe," "seek,"
"will," "foresee" or other similar words. Forward-looking
statements by their nature are subject to various risks and
uncertainties that could cause our actual results to be materially
different than those expressed in the forward-looking statements.
These risks and uncertainties include, among other things, the
volatility of economic conditions; adverse changes in the level of
real estate activity; changes in mortgage interest rates, existing
and new home sales, and availability of mortgage financing; our
ability to respond to and implement technology changes, including
the completion of the implementation of our enterprise systems; the
impact of unanticipated title losses or the need to strengthen our
policy loss reserves; any effect of title losses on our cash flows
and financial condition; the ability to attract and retain highly
productive sales associates; the impact of vetting our agency
operations for quality and profitability; independent agency
remittance rates; changes to the participants in the secondary
mortgage market and the rate of refinancing that affects the demand
for title insurance products; regulatory non-compliance,
fraud or defalcations by our title insurance agencies
or employees; our ability to timely and cost-effectively respond to
significant industry changes and introduce new products and
services; the outcome of pending litigation; the impact of changes
in governmental and insurance regulations, including any future
reductions in the pricing of title insurance products and services;
our dependence on our operating subsidiaries as a source of cash
flow; our ability to access the equity and debt financing markets
when and if needed; our ability to grow our international
operations; seasonality and weather; and our ability to respond to
the actions of our competitors. These risks and uncertainties, as
well as others, are discussed in more detail in our documents filed
with the Securities and Exchange Commission, including our Annual
Report on Form 10-K for the year ended December 31, 2022, and if applicable, as
supplemented by any risk factors contained in our Quarterly Reports
on Form 10-Q, and our Current Reports on Form 8-K filed
subsequently. All forward-looking statements included in this
earnings release are expressly qualified in their entirety by such
cautionary statements. We expressly disclaim any obligation to
update, amend or clarify any forward-looking statements contained
in this earnings release to reflect events or circumstances that
may arise after the date hereof, except as may be required by
applicable law.
ST-IR
STEWART INFORMATION
SERVICES CORPORATION
CONDENSED STATEMENTS
OF INCOME (Unaudited)
(In thousands of
dollars, except per share amounts and except where
noted)
|
|
|
Quarter
Ended
September
30,
|
|
Nine Months Ended
September 30,
|
|
2023
|
2022
|
|
2023
|
2022
|
Revenues:
|
|
|
|
|
|
Title
revenues:
|
|
|
|
|
|
Direct
operations
|
256,377
|
307,408
|
|
722,242
|
976,364
|
Agency
operations
|
265,700
|
340,470
|
|
723,476
|
1,154,546
|
Real estate solutions
and other
|
68,190
|
69,737
|
|
202,169
|
281,152
|
Total operating
revenues
|
590,267
|
717,615
|
|
1,647,887
|
2,412,062
|
Investment
income
|
13,393
|
5,158
|
|
32,114
|
15,519
|
Net realized and
unrealized losses
|
(1,946)
|
(6,374)
|
|
(4,829)
|
(14,194)
|
|
601,714
|
716,399
|
|
1,675,172
|
2,413,387
|
Expenses:
|
|
|
|
|
|
Amounts retained by
agencies
|
218,983
|
280,517
|
|
596,498
|
951,555
|
Employee
costs
|
181,493
|
195,057
|
|
534,710
|
610,286
|
Other operating
expenses
|
130,455
|
151,208
|
|
380,530
|
502,966
|
Title losses and
related claims
|
22,251
|
25,486
|
|
59,727
|
81,105
|
Depreciation and
amortization
|
16,414
|
14,067
|
|
46,848
|
42,103
|
Interest
|
5,054
|
4,553
|
|
14,777
|
13,471
|
|
574,650
|
670,888
|
|
1,633,090
|
2,201,486
|
Income before taxes and
noncontrolling interests
|
27,064
|
45,511
|
|
42,082
|
211,901
|
Income tax
expense
|
(9,134)
|
(10,783)
|
|
(9,588)
|
(48,376)
|
Net income
|
17,930
|
34,728
|
|
32,494
|
163,525
|
Less net income
attributable to noncontrolling interests
|
3,931
|
5,294
|
|
10,870
|
14,534
|
Net income attributable
to Stewart
|
13,999
|
29,434
|
|
21,624
|
148,991
|
|
|
|
|
|
|
Net earnings per
diluted share attributable to Stewart
|
0.51
|
1.08
|
|
0.79
|
5.45
|
Diluted average shares
outstanding (000)
|
27,650
|
27,371
|
|
27,445
|
27,359
|
|
|
|
|
|
|
Selected financial
information:
|
|
|
|
|
|
Net cash provided by
operations
|
59,533
|
48,853
|
|
43,578
|
167,040
|
Other comprehensive
loss
|
(13,295)
|
(24,606)
|
|
(7,278)
|
(65,061)
|
Third Quarter
Domestic Order Counts:
|
|
|
|
|
|
|
|
Opened Orders
2023:
|
July
|
August
|
Sept
|
Total
|
|
Closed Orders
2023:
|
July
|
August
|
Sept
|
Total
|
Commercial
|
913
|
1,208
|
1,199
|
3,320
|
|
Commercial
|
1,036
|
1,320
|
1,305
|
3,661
|
Purchase
|
17,446
|
19,674
|
16,386
|
53,506
|
|
Purchase
|
13,532
|
14,200
|
12,697
|
40,429
|
Refinancing
|
5,077
|
5,807
|
5,148
|
16,032
|
|
Refinancing
|
3,367
|
3,760
|
3,252
|
10,397
|
Other
|
2,976
|
3,161
|
2,493
|
8,630
|
|
Other
|
2,891
|
1,206
|
2,269
|
6,347
|
Total
|
26,191
|
29,850
|
25,226
|
81,267
|
|
Total
|
20,300
|
20,486
|
19,523
|
60,309
|
|
|
|
|
|
|
|
|
|
|
|
Opened Orders
2022:
|
July
|
August
|
Sept
|
Total
|
|
Closed Orders
2022:
|
July
|
August
|
Sept
|
Total
|
Commercial
|
1,356
|
1,556
|
1,544
|
4,456
|
|
Commercial
|
1,316
|
1,594
|
1,534
|
4,444
|
Purchase
|
19,799
|
22,217
|
18,630
|
60,646
|
|
Purchase
|
15,436
|
16,394
|
14,762
|
46,592
|
Refinancing
|
6,629
|
7,257
|
6,161
|
20,047
|
|
Refinancing
|
4,674
|
5,200
|
4,469
|
14,343
|
Other
|
405
|
670
|
750
|
1,825
|
|
Other
|
419
|
468
|
532
|
1,419
|
Total
|
28,189
|
31,700
|
27,085
|
86,974
|
|
Total
|
21,845
|
23,656
|
21,297
|
66,798
|
STEWART INFORMATION
SERVICES CORPORATION
CONDENSED BALANCE
SHEETS (Unaudited)
(In thousands of
dollars)
|
|
|
September 30,
2023
|
December 31,
2022
|
Assets:
|
|
|
Cash and cash
equivalents
|
202,985
|
248,367
|
Short-term
investments
|
37,238
|
24,318
|
Investments in debt
and equity securities, at fair value
|
660,739
|
710,083
|
Receivables – premiums
from agencies
|
40,509
|
39,921
|
Receivables –
other
|
82,854
|
85,111
|
Allowance for
uncollectible amounts
|
(8,652)
|
(7,309)
|
Property and
equipment, net
|
83,426
|
81,539
|
Operating lease
assets, net
|
123,698
|
127,830
|
Title
plants
|
73,359
|
73,358
|
Goodwill
|
1,072,022
|
1,072,982
|
Intangible assets, net
of amortization
|
201,539
|
199,084
|
Deferred tax
assets
|
2,554
|
2,590
|
Other
assets
|
96,799
|
80,005
|
|
2,669,070
|
2,737,879
|
Liabilities:
|
|
|
Notes
payable
|
445,158
|
447,006
|
Accounts payable and
accrued liabilities
|
177,180
|
196,541
|
Operating lease
liabilities
|
142,044
|
148,003
|
Estimated title
losses
|
521,395
|
549,448
|
Deferred tax
liabilities
|
24,094
|
26,616
|
|
1,309,871
|
1,367,614
|
Stockholders'
equity:
|
|
|
Common Stock and
additional paid-in capital
|
337,924
|
324,344
|
Retained
earnings
|
1,075,224
|
1,091,816
|
Accumulated other
comprehensive loss
|
(58,621)
|
(51,343)
|
Treasury
stock
|
(2,666)
|
(2,666)
|
Stockholders' equity
attributable to Stewart
|
1,351,861
|
1,362,151
|
Noncontrolling
interests
|
7,338
|
8,114
|
Total stockholders'
equity
|
1,359,199
|
1,370,265
|
|
2,669,070
|
2,737,879
|
|
|
|
Number of shares
outstanding (000)
|
27,355
|
27,130
|
Book value per
share
|
49.42
|
50.21
|
STEWART INFORMATION
SERVICES CORPORATION
SEGMENT
INFORMATION
(In thousands of
dollars)
|
|
Quarter
Ended:
|
September 30,
2023
|
|
September 30,
2022
|
|
Title
|
Real
Estate
Solutions
|
Corporate
and Other
|
Total
|
|
Title
|
Real
Estate
Solutions
|
Corporate
and Other
|
Total
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Operating
revenues
|
522,077
|
68,190
|
-
|
590,267
|
|
647,878
|
69,737
|
-
|
717,615
|
Investment
income
|
13,368
|
25
|
-
|
13,393
|
|
5,157
|
1
|
-
|
5,158
|
Net realized and
unrealized
(losses) gains
|
(1,821)
|
-
|
(125)
|
(1,946)
|
|
(6,428)
|
-
|
54
|
(6,374)
|
|
533,624
|
68,215
|
(125)
|
601,714
|
|
646,607
|
69,738
|
54
|
716,399
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Amounts retained by
agencies
|
218,983
|
-
|
-
|
218,983
|
|
280,517
|
-
|
-
|
280,517
|
Employee
costs
|
165,829
|
12,361
|
3,303
|
181,493
|
|
179,911
|
12,357
|
2,789
|
195,057
|
Other operating
expenses
|
81,625
|
46,217
|
2,613
|
130,455
|
|
101,343
|
47,813
|
2,052
|
151,208
|
Title losses and
related claims
|
22,251
|
-
|
-
|
22,251
|
|
25,486
|
-
|
-
|
25,486
|
Depreciation and
amortization
|
9,196
|
6,820
|
398
|
16,414
|
|
7,467
|
6,204
|
396
|
14,067
|
Interest
|
355
|
191
|
4,508
|
5,054
|
|
46
|
|
4,507
|
4,553
|
|
498,239
|
65,589
|
10,822
|
574,650
|
|
594,770
|
66,374
|
9,744
|
670,888
|
Income (loss) before
taxes
|
35,385
|
2,626
|
(10,947)
|
27,064
|
|
51,837
|
3,364
|
(9,690)
|
45,511
|
|
Nine Months
Ended:
|
September 30,
2023
|
|
September 30,
2022
|
|
Title
|
Real
Estate
Solutions
|
Corporate
and Other
|
Total
|
|
Title
|
Real
Estate
Solutions
|
Corporate
and Other
|
Total
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Operating
revenues
|
1,445,718
|
202,169
|
-
|
1,647,887
|
|
2,130,910
|
241,975
|
39,177
|
2,412,062
|
Investment
income
|
32,033
|
81
|
-
|
32,114
|
|
15,501
|
18
|
-
|
15,519
|
Net realized and
unrealized
(losses) gains
|
(1,658)
|
-
|
(3,171)
|
(4,829)
|
|
(11,411)
|
-
|
(2,783)
|
(14,194)
|
|
1,476,093
|
202,250
|
(3,171)
|
1,675,172
|
|
2,135,000
|
241,993
|
36,394
|
2,413,387
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Amounts retained by
agencies
|
596,498
|
-
|
-
|
596,498
|
|
951,555
|
-
|
-
|
951,555
|
Employee
costs
|
485,690
|
37,333
|
11,687
|
534,710
|
|
558,376
|
38,603
|
13,307
|
610,286
|
Other operating
expenses
|
236,752
|
138,052
|
5,726
|
380,530
|
|
294,606
|
167,760
|
40,600
|
502,966
|
Title losses and
related claims
|
59,727
|
-
|
-
|
59,727
|
|
81,105
|
-
|
-
|
81,105
|
Depreciation and
amortization
|
26,182
|
19,401
|
1,265
|
46,848
|
|
21,098
|
19,381
|
1,624
|
42,103
|
Interest
|
1,063
|
191
|
13,523
|
14,777
|
|
48
|
|
13,423
|
13,471
|
|
1,405,912
|
194,977
|
32,201
|
1,633,090
|
|
1,906,788
|
225,744
|
68,954
|
2,201,486
|
Income (loss) before
taxes
|
70,181
|
7,273
|
(35,372)
|
42,082
|
|
228,212
|
16,249
|
(32,560)
|
211,901
|
Appendix A
Non-GAAP Adjustments
Management uses a variety of financial and operational
measurements other than its financial statements prepared in
accordance with United States Generally Accepted Accounting
Principles (GAAP) to analyze its performance. These include: (1)
adjusted revenues, which are reported revenues adjusted for net
realized and unrealized gains and losses, and other adjustments
(revenues of sold real estate brokerage company), and (2) adjusted
pretax income and adjusted net income, which are reported pretax
income and reported net income after earnings from noncontrolling
interests, respectively, adjusted for net realized and unrealized
gains and losses, acquired intangible asset amortization (see
succeeding paragraph), office closure costs, executive severance
expenses, state sales tax assessment expense (which was related to
an acquisition), and other adjustments (pretax results of sold real
estate brokerage company). Adjusted diluted earnings per share
(adjusted diluted EPS) is calculated using adjusted net income
divided by the diluted average weighted outstanding shares.
Management views these measures as important performance measures
of core profitability for its operations and as key components of
its internal financial reporting. Management believes investors
benefit from having access to the same financial measures that
management uses.
Effective this quarter, we revised our presentation of non-GAAP
measures related to adjusted net income and adjusted net income per
diluted share by excluding acquired intangible asset amortization
from the calculation. Acquired intangible asset amortization is a
non-cash expense related to acquisitions that management believes
is not indicative of the ongoing performance of the acquired
operations. This revised presentation also allows us to present our
non-GAAP consolidated results consistent with the presentation of
our non-GAAP measures related to our title and real estate
solutions segments. Refer to Appendix B for the restated non-GAAP
consolidated results for all quarters of 2022 and the first two
quarters of 2023.
Below are reconciliations of the non-GAAP financial measures
used by management to the most directly comparable GAAP measures
for the quarter and nine months ended September 30, 2023 and 2022 (dollars in millions,
except share and per share amounts, and amounts may not add as
presented due to rounding).
|
|
Quarter Ended Sept.
30,
|
|
Nine Months Ended
Sept. 30,
|
|
|
2023
|
2022
|
% Chg
|
|
2023
|
2022
|
% Chg
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
601.7
|
716.4
|
(16 %)
|
|
1,675.2
|
2,413.4
|
(31 %)
|
|
Non-GAAP revenue
adjustments:
|
|
|
|
|
|
|
|
|
Net realized and
unrealized losses
|
1.9
|
6.4
|
|
|
4.8
|
14.2
|
|
|
Other
adjustments
|
-
|
-
|
|
|
-
|
(39.2)
|
|
|
Adjusted total
revenues
|
603.7
|
722.8
|
(17 %)
|
|
1,680.0
|
2,388.4
|
(30 %)
|
|
|
|
|
|
|
|
|
|
|
Pretax
income
|
27.1
|
45.5
|
(41 %)
|
|
42.1
|
211.9
|
(80 %)
|
|
Non-GAAP pretax
adjustments:
|
|
|
|
|
|
|
|
|
Net realized and
unrealized losses
|
1.9
|
6.4
|
|
|
4.8
|
14.2
|
|
|
Office closure
costs
|
1.4
|
3.0
|
|
|
1.4
|
3.0
|
|
|
Executive severance
expenses
|
-
|
1.2
|
|
|
1.7
|
1.2
|
|
|
State sales tax
assessment expense
|
-
|
-
|
|
|
1.2
|
-
|
|
|
Other
adjustments
|
-
|
-
|
|
|
-
|
0.9
|
|
|
|
30.4
|
56.1
|
|
|
51.3
|
231.3
|
|
Acquired intangible
asset amortization
|
9.6
|
7.8
|
|
|
27.3
|
24.7
|
|
|
Adjusted pretax
income
|
40.0
|
63.9
|
(37 %)
|
|
78.6
|
256.0
|
(69 %)
|
|
GAAP pretax
margin
|
4.5 %
|
6.4 %
|
|
|
2.5 %
|
8.8 %
|
|
|
Adjusted pretax
margin
|
6.6 %
|
8.8 %
|
|
|
4.7 %
|
10.7 %
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Stewart
|
14.0
|
29.4
|
(52 %)
|
|
21.6
|
149.0
|
(86 %)
|
|
Non-GAAP pretax
adjustments:
|
|
|
|
|
|
|
|
|
Net realized and
unrealized losses
|
1.9
|
6.4
|
|
|
4.8
|
14.2
|
|
|
Acquired intangible
asset amortization
|
9.6
|
7.8
|
|
|
27.3
|
24.7
|
|
|
Office closure
costs
|
1.4
|
3.0
|
|
|
1.4
|
3.0
|
|
|
Executive severance
expenses
|
-
|
1.2
|
|
|
1.7
|
1.2
|
|
|
State sales tax
assessment expense
|
-
|
-
|
|
|
1.2
|
-
|
|
|
Other
adjustments
|
-
|
-
|
|
|
-
|
0.9
|
|
|
Net tax effects of
non-GAAP adjustments
|
(3.1)
|
(4.5)
|
|
|
(8.8)
|
(10.8)
|
|
|
Non-GAAP adjustments,
after taxes
|
9.9
|
13.9
|
|
|
27.7
|
33.3
|
|
|
Adjusted net income
attributable to Stewart
|
23.9
|
43.4
|
(45 %)
|
|
49.4
|
182.3
|
(73 %)
|
|
|
|
|
|
|
|
|
|
|
Diluted average shares
outstanding (000)
|
27,650
|
27,371
|
|
|
27,445
|
27,359
|
|
|
GAAP net income per
share
|
0.51
|
1.08
|
|
|
0.79
|
5.45
|
|
|
Adjusted net income per
share
|
0.86
|
1.58
|
|
|
1.80
|
6.66
|
|
|
Quarter Ended Sept.
30,
|
|
Nine Months Ended
Sept. 30,
|
|
2023
|
2022
|
% Chg
|
|
2023
|
2022
|
% Chg
|
Title
Segment:
|
|
|
|
|
|
|
|
Revenues
|
533.6
|
646.6
|
(19 %)
|
|
1,476.1
|
2,135.0
|
(32 %)
|
Net realized and
unrealized losses
|
1.8
|
6.4
|
|
|
1.7
|
11.4
|
|
Adjusted
revenues
|
535.4
|
653.0
|
(18 %)
|
|
1,477.8
|
2,146.4
|
(31 %)
|
|
|
|
|
|
|
|
|
Pretax
income
|
35.4
|
51.8
|
(32 %)
|
|
70.2
|
228.2
|
(69 %)
|
Non-GAAP revenue
adjustments:
|
|
|
|
|
|
|
|
Net realized and
unrealized losses
|
1.8
|
6.4
|
|
|
1.7
|
11.4
|
|
Acquired intangible
asset amortization
|
3.4
|
2.0
|
|
|
9.4
|
6.3
|
|
Office closure
costs
|
1.4
|
3.0
|
|
|
1.4
|
3.0
|
|
Severance
expenses
|
-
|
1.2
|
|
|
0.4
|
1.2
|
|
Adjusted pretax
income
|
42.0
|
64.5
|
(35 %)
|
|
83.1
|
250.2
|
(67 %)
|
GAAP pretax
margin
|
6.6 %
|
8.0 %
|
|
|
4.8 %
|
10.7 %
|
|
Adjusted pretax
margin
|
7.8 %
|
9.9 %
|
|
|
5.6 %
|
11.7 %
|
|
|
Real Estate
Solutions Segment:
|
|
|
|
|
|
|
|
Revenues
|
68.2
|
69.7
|
(2 %)
|
|
202.3
|
242.0
|
(16 %)
|
|
Pretax
income
|
2.6
|
3.4
|
(22 %)
|
|
7.3
|
16.2
|
(55 %)
|
Non-GAAP revenue
adjustments:
|
|
|
|
|
|
|
|
Acquired intangible
asset amortization
|
6.3
|
5.8
|
|
|
17.9
|
18.2
|
|
State sales tax
assessment expense
|
-
|
-
|
|
|
1.2
|
-
|
|
Adjusted pretax
income
|
8.9
|
9.1
|
(3 %)
|
|
26.4
|
34.5
|
(23 %)
|
GAAP pretax
margin
|
3.8 %
|
4.8 %
|
|
|
3.6 %
|
6.7 %
|
|
Adjusted pretax
margin
|
13.0 %
|
13.1 %
|
|
|
13.0 %
|
14.2 %
|
|
Appendix B
Restated Non-GAAP Consolidated
Measures
Below are the restated non-GAAP consolidated measures for prior
quarters in 2023 and 2022, which have been revised from the
previously reported measures to adjust for acquired intangible
asset amortization expense (dollars in millions, except share and
per share amounts, and amounts may not add as presented due to
rounding).
Refer to Appendix A for management's discussion of these
non-GAAP adjustments and for the calculations for the quarters
ended September 30, 2023 and 2022. In
addition to the adjustments described on Appendix A, the non-GAAP
consolidated measures for the fourth quarter 2022 also include an
adjustment for regulatory settlement and litigation expenses.
|
Q2
2023
|
Q1
2023
|
|
Q4
2022
|
Q2
2022
|
Q1
2022
|
|
|
|
|
|
|
|
Total
revenues
|
549.2
|
524.3
|
|
655.9
|
844.1
|
852.9
|
Non-GAAP revenue
adjustments:
|
|
|
|
|
|
|
Net realized and
unrealized losses (gains)
|
1.1
|
1.8
|
|
(12.7)
|
11.9
|
(4.1)
|
Other
adjustments
|
-
|
-
|
|
-
|
(5.3)
|
(33.9)
|
Adjusted total
revenues
|
550.3
|
526.1
|
|
643.2
|
850.7
|
815.0
|
|
|
|
|
|
|
|
Pretax income
(loss)
|
25.2
|
(10.2)
|
|
20.8
|
86.8
|
79.6
|
Non-GAAP pretax
adjustments:
|
|
|
|
|
|
|
Net realized and
unrealized losses (gains)
|
1.1
|
1.8
|
|
(12.7)
|
11.9
|
(4.1)
|
Acquired intangible
asset amortization and other
expenses
|
9.0
|
8.6
|
|
8.6
|
8.5
|
8.2
|
Executive severance
expenses
|
1.7
|
-
|
|
2.7
|
-
|
-
|
State sales tax
assessment expense
|
1.2
|
-
|
|
-
|
-
|
-
|
Office closure
costs
|
-
|
-
|
|
7.5
|
-
|
-
|
Regulatory settlement
and litigation expenses
|
-
|
-
|
|
6.5
|
-
|
-
|
Other
adjustments
|
-
|
-
|
|
-
|
(0.4)
|
1.4
|
Adjusted pretax
income
|
38.3
|
0.2
|
|
33.4
|
106.8
|
85.1
|
GAAP pretax
margin
|
4.6 %
|
(1.9) %
|
|
3.2 %
|
10.3 %
|
9.3 %
|
Adjusted pretax
margin
|
7.0 %
|
0.0 %
|
|
5.2 %
|
12.6 %
|
10.4 %
|
|
|
|
|
|
|
|
Net income attributable
to Stewart
|
15.8
|
(8.2)
|
|
13.3
|
61.7
|
57.9
|
Non-GAAP pretax
adjustments:
|
|
|
|
|
|
|
Net realized and
unrealized losses (gains)
|
1.1
|
1.8
|
|
(12.7)
|
11.9
|
(4.1)
|
Acquired intangible
asset amortization and other
expenses
|
9.0
|
8.6
|
|
8.6
|
8.5
|
8.2
|
Executive severance
expenses
|
1.7
|
-
|
|
2.7
|
-
|
-
|
State sales tax
assessment expense
|
1.2
|
-
|
|
-
|
-
|
-
|
Office closure
costs
|
-
|
-
|
|
7.5
|
-
|
-
|
Regulatory settlement
and litigation expenses
|
-
|
-
|
|
6.5
|
-
|
-
|
Other
adjustments
|
-
|
-
|
|
-
|
(0.4)
|
1.4
|
Net tax effects of
non-GAAP adjustments
|
(3.1)
|
(2.5)
|
|
(3.0)
|
(4.8)
|
(1.3)
|
Non-GAAP adjustments,
after taxes
|
10.0
|
7.9
|
|
9.6
|
15.2
|
4.3
|
Adjusted net income
(loss) attributable to Stewart
|
25.8
|
(0.3)
|
|
22.9
|
76.9
|
62.1
|
|
|
|
|
|
|
|
Diluted average shares
outstanding (000)
|
27,444
|
27,201
|
|
22,276
|
27,293
|
27,444
|
GAAP net income (loss)
per share
|
0.58
|
(0.30)
|
|
0.49
|
2.26
|
2.11
|
Adjusted net income
(loss) per share
|
0.94
|
(0.01)
|
|
0.84
|
2.82
|
2.26
|
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SOURCE Stewart Information Services Corporation