Stewart Reports Fourth Quarter 2022 Results
Stewart Information Services Corporation (NYSE: STC) reported a significant decline in financial performance for Q4 2022, revealing total revenues of $655.9 million, down from $961.7 million in the prior year. Net income dropped to $13.3 million ($0.49 per diluted share) compared to $85.5 million ($3.12 per diluted share) in Q4 2021. The title segment saw a 30% reduction in operating revenues, reflecting low transaction volumes in the housing market. The company plans to invest strategically amidst these challenges, recently welcoming BCHH into its operations. Despite decreased revenues, investment income increased by 85% due to higher interest rates.
- Investment income rose by 85% due to increased interest rates.
- The company is expanding its operations by integrating BCHH, enhancing its service offerings.
- Total revenues decreased by 31.8% year-over-year.
- Net income fell by 84.4% from the previous year, impacting EPS significantly.
- Title segment operating revenues dropped 30% due to a decline in transaction volumes.
- Total revenues of
($655.9 million on an adjusted basis) compared to$643.2 million ($961.7 million on an adjusted basis) in the prior year quarter$955.2 million - Net income of
($13.3 million on an adjusted basis) compared to$16.3 million ($85.5 million on an adjusted basis) in the prior year quarter$83.7 million - Diluted EPS of
($0.49 on an adjusted basis) compared to prior year quarter diluted EPS of$0.60 ($3.12 on an adjusted basis)$3.05
Fourth quarter 2022 results included
"Our fourth quarter results were impacted by historically low transaction volumes due to the current economic environment and its impact on the housing industry. We have continued to manage our operations during this challenging environment with a reasonable balance of cost discipline and investment in capabilities that we expect will have a positive impact on our business over the long term," commented
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 | Year Ended | ||||
2022 | 2021 | 2022 | 2021 | ||
Total revenues | 655.9 | 961.7 | 3,069.3 | 3,305.8 | |
Pretax income before noncontrolling interests | 20.8 | 114.1 | 232.7 | 434.0 | |
Income tax expense | (2.5) | (23.4) | (50.9) | (94.0) | |
Net income attributable to noncontrolling interests | (4.9) | (5.1) | (19.5) | (16.8) | |
Net income attributable to Stewart | 13.3 | 85.5 | 162.3 | 323.2 | |
Non-GAAP adjustments, after taxes | 3.0 | (1.8) | 17.8 | (14.1) | |
Adjusted net income attributable to Stewart* | 16.3 | 83.7 | 180.1 | 309.1 | |
Net income per diluted Stewart share | 0.49 | 3.12 | 5.94 | 11.90 | |
Adjusted net income per diluted Stewart share* | 0.60 | 3.05 | 6.58 | 11.38 | |
* Adjusted net income and adjusted net income per diluted share are non-GAAP measures. See |
Title Segment
Summary results of the title segment are as follows (dollars in millions, except pretax margin):
Quarter Ended | |||||||
2022 | 2021 | % Change | |||||
Operating revenues | 581.6 | 836.4 | (30 %) | ||||
Investment income | 6.9 | 3.7 | 85 % | ||||
Net realized and unrealized gains | 10.3 | 4.9 | 110 % | ||||
Pretax income | 26.9 | 118.6 | (77 %) | ||||
Non-GAAP adjustments to pretax income | 8.0 | 2.6 | |||||
Adjusted pretax income* | 35.0 | 121.1 | (71 %) | ||||
Pretax margin | 4.5 % | 14.0 % | |||||
Adjusted pretax margin* | 5.9 % | 14.4 % | |||||
* Adjusted pretax income and adjusted pretax margin are non-GAAP financial measures. See |
Operating revenues for the title segment decreased
Total employee costs and other operating expenses in the fourth quarter 2022 decreased
The title segment's net realized and unrealized gains in the fourth quarters 2022 and 2021 included net unrealized gains of
Direct title revenues information is presented below (dollars in millions):
Quarter Ended | ||||
2022 | 2021 | % Change | ||
Non-commercial: | ||||
Domestic | 171.3 | 251.0 | (32 %) | |
International | 24.0 | 38.3 | (37 %) | |
195.3 | 289.3 | (32 %) | ||
Commercial: | ||||
Domestic | 66.9 | 93.1 | (28 %) | |
International | 7.7 | 9.4 | (18 %) | |
74.6 | 102.5 | (27 %) | ||
Total direct title revenues | 269.9 | 391.8 | (31 %) |
Total non-commercial revenues decreased
Real Estate Solutions Segment
Summary results of the real estate solutions segment are as follows (dollars in millions):
Quarter Ended | ||||
2022 | 2021 | % Change | ||
Operating revenues | 54.7 | 83.7 | (35 %) | |
Net realized and unrealized gains | - | 3.3 | (100 %) | |
Pretax income | 0.4 | 5.3 | (93 %) | |
Non-GAAP adjustments to pretax income | 6.6 | 2.3 | ||
Adjusted pretax income* | 7.0 | 7.6 | (7 %) | |
Pretax margin | 0.7 % | 6.1 % | ||
Adjusted pretax margin* | 12.8 % | 9.1 % | ||
* Adjusted pretax income and adjusted pretax margin are non-GAAP financial measures. See |
Operating revenues for the real estate solutions segment decreased in the fourth quarter 2022 compared to last year's fourth quarter primarily due to lower transaction volumes influenced by the current high interest rate environment. Combined employee costs and other operating expenses decreased 36 percent in the fourth quarter 2022, consistent with the reduced operating revenue. Net realized and unrealized gains during the fourth quarter 2021 were primarily driven by net gains related to acquisition contingent liability adjustments. Included in the total non-GAAP adjustments to pretax income were total acquired intangible asset amortization expenses in the fourth quarters 2022 and 2021 of
Corporate and Other Segment
The corporate and other segment recorded
Expenses
Consolidated employee costs in the fourth quarter 2022 decreased
Total other operating expenses in the fourth quarter 2022 decreased
Other
Net cash provided by operations in the fourth quarter 2022 decreased to
Fourth Quarter Earnings Call
Stewart will hold a conference call to discuss the fourth quarter 2022 earnings at
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, subscribe to the Stewart blog at http://blog.stewart.com or follow Stewart on Twitter® @stewarttitleco.
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
ST-IR
| |||||
Quarter Ended | Year Ended | ||||
2022 | 2021 | 2022 | 2021 | ||
Revenues: | |||||
Title revenues: | |||||
Direct operations | 269,894 | 391,778 | 1,246,258 | 1,390,921 | |
Agency operations | 311,697 | 444,617 | 1,466,243 | 1,582,640 | |
Real estate solutions and other | 54,697 | 115,043 | 335,850 | 291,055 | |
Total operating revenues | 636,288 | 951,438 | 3,048,351 | 3,264,616 | |
Investment income | 6,903 | 3,728 | 22,421 | 16,855 | |
Net realized and unrealized gains (losses) | 12,718 | 6,505 | (1,476) | 24,321 | |
655,909 | 961,671 | 3,069,296 | 3,305,792 | ||
Expenses: | |||||
Amounts retained by agencies | 256,752 | 364,570 | 1,208,307 | 1,300,431 | |
Employee costs | 191,715 | 221,517 | 802,001 | 776,968 | |
Other operating expenses | 145,056 | 210,898 | 648,022 | 626,762 | |
Title losses and related claims | 21,628 | 33,556 | 102,733 | 126,243 | |
Depreciation and amortization | 15,075 | 13,992 | 57,178 | 36,386 | |
Interest | 4,932 | 3,071 | 18,403 | 5,031 | |
635,158 | 847,604 | 2,836,644 | 2,871,821 | ||
Income before taxes and noncontrolling interests | 20,751 | 114,067 | 232,652 | 433,971 | |
Income tax expense | (2,488) | (23,442) | (50,864) | (93,989) | |
Net income | 18,263 | 90,625 | 181,788 | 339,982 | |
Less net income attributable to noncontrolling interests | 4,949 | 5,127 | 19,483 | 16,766 | |
Net income attributable to Stewart | 13,314 | 85,498 | 162,305 | 323,216 | |
Net earnings per diluted share attributable to Stewart | 0.49 | 3.12 | 5.94 | 11.90 | |
Diluted average shares outstanding (000) | 27,276 | 27,405 | 27,347 | 27,168 | |
Selected financial information: | |||||
Net cash provided by operations | 24,820 | 132,974 | 191,860 | 390,291 | |
Other comprehensive income (loss) | 13,465 | (4,524) | (51,596) | (16,769) |
Fourth Quarter Domestic Order Counts: | |||||||||||
Opened Orders | Oct | Nov | Dec | Total | Closed Orders | Oct | Nov | Dec | Total | ||
Commercial | 1,243 | 1,124 | 1,807 | 4,174 | Commercial | 1,242 | 1,141 | 2,058 | 4,441 | ||
Purchase | 15,591 | 13,400 | 11,562 | 40,553 | Purchase | 12,560 | 11,480 | 11,340 | 35,380 | ||
Refinancing | 4,858 | 4,549 | 3,682 | 13,089 | Refinancing | 3,866 | 3,231 | 3,151 | 10,248 | ||
Other | 1,844 | 1,428 | 1,219 | 4,491 | Other | 1,403 | 964 | 926 | 3,293 | ||
Total | 23,536 | 20,501 | 18,270 | 62,307 | Total | 19,071 | 16,816 | 17,475 | 53,362 | ||
Opened Orders | Oct | Nov | Dec | Total | Closed Orders | Oct | Nov | Dec | Total | ||
Commercial | 1,292 | 1,315 | 1,871 | 4,478 | Commercial | 1,341 | 1,264 | 2,191 | 4,796 | ||
Purchase | 22,331 | 21,281 | 18,759 | 62,371 | Purchase | 18,578 | 18,507 | 20,047 | 57,132 | ||
Refinancing | 18,377 | 17,310 | 15,100 | 50,787 | Refinancing | 15,651 | 15,752 | 13,863 | 45,266 | ||
Other | 674 | 412 | 413 | 1,499 | Other | 449 | 438 | 357 | 1,244 | ||
Total | 42,674 | 40,318 | 36,143 | 119,135 | Total | 36,019 | 35,961 | 36,458 | 108,438 |
| ||
| | |
Assets: | ||
Cash and cash equivalents | 248,367 | 485,919 |
Short-term investments | 24,318 | 17,650 |
Investments in debt and equity securities, at fair value | 710,083 | 679,214 |
Receivables – premiums from agencies | 39,921 | 45,428 |
Receivables – other | 85,111 | 81,623 |
Allowance for uncollectible amounts | (7,309) | (7,711) |
Property and equipment, net | 81,539 | 72,456 |
Operating lease assets, net | 127,830 | 134,578 |
Title plants | 73,358 | 76,859 |
1,072,982 | 924,837 | |
Intangible assets, net of amortization | 199,084 | 229,804 |
Deferred tax assets | 2,590 | 3,846 |
Other assets | 80,005 | 68,859 |
2,737,879 | 2,813,362 | |
Liabilities: | ||
Notes payable | 447,006 | 483,491 |
Accounts payable and accrued liabilities | 196,541 | 287,326 |
Operating lease liabilities | 148,003 | 149,417 |
Estimated title losses | 549,448 | 549,614 |
Deferred tax liabilities | 26,616 | 48,779 |
1,367,614 | 1,518,627 | |
Stockholders' equity: | ||
Common Stock and additional paid-in capital | 324,344 | 309,622 |
Retained earnings | 1,091,816 | 974,800 |
Accumulated other comprehensive (loss) income | (51,343) | 253 |
(2,666) | (2,666) | |
Stockholders' equity attributable to Stewart | 1,362,151 | 1,282,009 |
Noncontrolling interests | 8,114 | 12,726 |
Total stockholders' equity | 1,370,265 | 1,294,735 |
2,737,879 | 2,813,362 | |
Number of shares outstanding (000) | 27,130 | 26,893 |
Book value per share | 50.21 | 47.67 |
| |||||||||
Quarter Ended: | |||||||||
Title | Real | Corporate | Total | Title | Real | Corporate | Total | ||
Revenues: | |||||||||
Operating revenues | 581,591 | 54,697 | - | 636,288 | 836,395 | 83,675 | 31,368 | 951,438 | |
Investment income | 6,891 | 12 | - | 6,903 | 3,728 | - | - | 3,728 | |
Net realized and unrealized gains | 10,262 | - | 2,456 | 12,718 | 4,877 | 3,273 | (1,645) | 6,505 | |
598,744 | 54,709 | 2,456 | 655,909 | 845,000 | 86,948 | 29,723 | 961,671 | ||
Expenses: | |||||||||
Amounts retained by agencies | 256,752 | - | - | 256,752 | 364,570 | - | - | 364,570 | |
Employee costs | 177,371 | 11,860 | 2,484 | 191,715 | 203,850 | 12,457 | 5,210 | 221,517 | |
Other operating expenses | 107,118 | 36,293 | 1,645 | 145,056 | 116,821 | 63,279 | 30,798 | 210,898 | |
Title losses and related claims | 21,628 | - | - | 21,628 | 33,556 | - | - | 33,556 | |
Depreciation and amortization | 8,617 | 6,182 | 276 | 15,075 | 7,648 | 5,917 | 427 | 13,992 | |
Interest | 338 | - | 4,594 | 4,932 | - | - | 3,071 | 3,071 | |
571,824 | 54,335 | 8,999 | 635,158 | 726,445 | 81,653 | 39,506 | 847,604 | ||
Income (loss) before taxes | 26,920 | 374 | (6,543) | 20,751 | 118,555 | 5,295 | (9,783) | 114,067 |
Year Ended: | |||||||||
Title | Real | Corporate | Total | Title | Real | Corporate | Total | ||
Revenues: | |||||||||
Operating revenues | 2,712,501 | 296,673 | 39,177 | 3,048,351 | 2,973,524 | 259,724 | 31,368 | 3,264,616 | |
Investment income | 22,392 | 29 | - | 22,421 | 16,855 | - | - | 16,855 | |
Net realized and unrealized | (1,149) | - | (327) | (1,476) | 12,570 | 5,773 | 5,978 | 24,321 | |
2,733,744 | 296,702 | 38,850 | 3,069,296 | 3,002,949 | 265,497 | 37,346 | 3,305,792 | ||
Expenses: | |||||||||
Amounts retained by agencies | 1,208,307 | - | - | 1,208,307 | 1,300,431 | - | - | 1,300,431 | |
Employee costs | 735,747 | 50,462 | 15,792 | 802,001 | 728,318 | 34,528 | 14,122 | 776,968 | |
Other operating expenses | 401,724 | 204,053 | 42,245 | 648,022 | 386,265 | 203,947 | 36,550 | 626,762 | |
Title losses and related claims | 102,733 | - | - | 102,733 | 126,243 | - | - | 126,243 | |
Depreciation and amortization | 29,715 | 25,563 | 1,900 | 57,178 | 21,227 | 14,071 | 1,088 | 36,386 | |
Interest | 386 | - | 18,017 | 18,403 | 3 | - | 5,028 | 5,031 | |
2,478,612 | 280,078 | 77,954 | 2,836,644 | 2,562,487 | 252,546 | 56,788 | 2,871,821 | ||
Income (loss) before taxes | 255,132 | 16,624 | (39,104) | 232,652 | 440,462 | 12,951 | (19,442) | 433,971 |
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 (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, office closure, severance and regulatory settlement and litigation expenses, and other adjustments. Adjusted diluted earnings per share (adjusted diluted EPS) is calculated using adjusted net income divided by the diluted average weighted outstanding shares. In addition to these adjustments, acquired intangible asset amortization and other expenses are excluded in the calculation of adjusted pretax income for the title and real estate solutions segments. 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.
Below are reconciliations of the non-GAAP financial measurements used by management to the most directly comparable GAAP measures for the quarter and year ended
Quarter Ended | Year Ended | ||||||
2022 | 2021 | % Chg | 2022 | 2021 | % Chg | ||
Consolidated Stewart:
| |||||||
Total revenues | 655.9 | 961.7 | (32 %) | 3,069.3 | 3,305.8 | (7 %) | |
Non-GAAP revenue adjustments: | |||||||
Net realized and unrealized (gains) losses | (12.7) | (6.5) | 1.5 | (24.3) | |||
Other adjustments | - | - | (39.2) | - | |||
Adjusted total revenues | 643.2 | 955.2 | (33 %) | 3,031.6 | 3,281.5 | (8 %) | |
Pretax income | 20.8 | 114.1 | (82 %) | 232.7 | 434.0 | (46 %) | |
Non-GAAP pretax adjustments: | |||||||
Net realized and unrealized (gains) losses | (12.7) | (6.5) | 1.5 | (24.3) | |||
Office closure expenses | 7.5 | 4.1 | 10.5 | 6.1 | |||
Regulatory settlement and litigation expenses | 6.5 | - | 6.5 | - | |||
Severance expenses | 2.7 | - | 3.9 | - | |||
Other adjustments | - | - | 0.9 | - | |||
Adjusted pretax income | 24.7 | 111.7 | (78 %) | 256.0 | 415.8 | (38 %) | |
Pretax margin | 3.2 % | 11.9 % | 7.6 % | 13.1 % | |||
Adjusted pretax margin | 3.8 % | 11.7 % | 8.4 % | 12.7 % | |||
Net income attributable to Stewart | 13.3 | 85.5 | (84 %) | 162.3 | 323.2 | (50 %) | |
Non-GAAP pretax adjustments: | |||||||
Net realized and unrealized (gains) losses | (12.7) | (6.5) | 1.5 | (24.3) | |||
Office closure expenses | 7.5 | 4.1 | 10.5 | 6.1 | |||
Regulatory settlement and litigation expenses | 6.5 | - | 6.5 | - | |||
Severance expenses | 2.7 | - | 3.9 | - | |||
Other adjustments | - | - | 0.9 | - | |||
Net tax effects of non-GAAP adjustments | (1.0) | 0.5 | (5.6) | 4.1 | |||
Non-GAAP adjustments, after taxes | 3.0 | (1.8) | 17.8 | (14.1) | |||
Adjusted net income attributable to Stewart | 16.3 | 83.7 | (81 %) | 180.1 | 309.1 | (42 %) | |
Diluted average shares outstanding (000) | 27,276 | 27,405 | 27,347 | 27,168 | |||
Net income per share | 0.49 | 3.12 | 5.94 | 11.90 | |||
Adjusted net income per share | 0.60 | 3.05 | 6.58 | 11.38 |
Quarter Ended | Year Ended | ||||||
2022 | 2021 | % Chg | 2022 | 2021 | % Chg | ||
Title Segment:
| |||||||
Revenues | 598.7 | 845.0 | (29 %) | 2,733.7 | 3,002.9 | (9 %) | |
Net realized and unrealized (gains) losses | (10.3) | (4.9) | 1.1 | (12.6) | |||
Adjusted revenues | 588.5 | 840.1 | (30 %) | 2,734.9 | 2,990.4 | (9 %) | |
Pretax income | 26.9 | 118.6 | (77 %) | 255.1 | 440.5 | (42 %) | |
Non-GAAP revenue adjustments: | |||||||
Net realized and unrealized (gains) losses | (10.3) | (4.9) | 1.1 | (12.6) | |||
Office closure expenses | 6.9 | 4.1 | 10.5 | 6.1 | |||
Regulatory settlement and litigation expenses | 6.5 | - | 6.5 | - | |||
Severance expenses | 2.1 | - | 3.3 | - | |||
Acquired intangible asset amortization and other | 2.8 | 3.3 | 9.1 | 6.0 | |||
Adjusted pretax income | 35.0 | 121.1 | (71 %) | 285.8 | 440.0 | (35 %) | |
Pretax margin | 4.5 % | 14.0 % | 9.3 % | 14.7 % | |||
Adjusted pretax margin | 5.9 % | 14.4 % | 10.4 % | 14.7 % |
Real Estate Solutions Segment:
| |||||||
Revenues | 54.7 | 86.9 | (37 %) | 296.7 | 265.5 | 12 % | |
Net realized and unrealized gains | - | (3.3) | - | (5.8) | |||
Adjusted revenues | 54.7 | 83.7 | (35 %) | 296.7 | 259.7 | 14 % | |
Pretax income | 0.4 | 5.3 | (93 %) | 16.6 | 13.0 | 28 % | |
Non-GAAP revenue adjustments: | |||||||
Net realized and unrealized gains | - | (3.3) | - | (5.8) | |||
Office closure expenses | 0.5 | - | 0.5 | - | |||
Severance expenses | 0.3 | - | 0.3 | - | |||
Acquired intangible asset amortization | 5.8 | 5.6 | 24.0 | 13.0 | |||
Adjusted pretax income | 7.0 | 7.6 | (7 %) | 41.5 | 20.2 | 106 % | |
Pretax margin | 0.7 % | 6.1 % | 5.6 % | 4.9 % | |||
Adjusted pretax margin | 12.8 % | 9.1 % | 14.0 % | 7.8 % |
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FAQ
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