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The Biden administration’s push to lower closing costs for borrowers presents an opportunity for title technology provider Doma as it shutters retail title operations nationwide to focus on serving more lenders and mortgage platforms , striving to return to profitability this year.
That was the message from Doma founder and CEO Max Simkoff on Tuesday, as the San Francisco-based gaming technology innovator reported a net loss of $124.4 million in 2023.
That was an improvement from last year’s net loss of $302 million, as Doma’s revenue fell 22% to $302 million, but operating expenses slashed 35% to $486 million.
Max Simkov
Simkov said in a report that last year was “a year of transformation for Dome.” Profit Announcement. “As we continue to respond to challenging market conditions, we have successfully executed significant cost reduction actions, divested non-core local agency operations and streamlined our operations to focus on our core strengths and support our valuable customer of.”
Founded in 2016, Doma develops a machine learning platform, Doma Intelligence and other technologies to automate the title and escrow process. Doma raised less than expected when it went public in 2021 through a merger with a special purpose acquisition company (SPAC), before rising mortgage rates limited the ability of Doma customers to refinance their mortgages, forcing the company to downsize.
Last year, Doma announced it was selling 22 retail title locations and operations centers in California to title insurance company Williston Financial Group (WFG) and exiting the business entirely.
During the first quarter, Doma launched a new pilot program, “Upfront Title,” which it said provides lenders with “near-instant title certainty” and the ability to offer borrowers “well below current industry standard fees for title insurance.” rate price”.
Simkoff said Doma has partnered with one of the country’s largest mortgage technology platforms and a major national lender to launch Upfront Title, but does not expect to generate significant revenue from the pilot program in the first half of this year.
He said that based on early results, Doma will be able to expand partnerships and offer “more enhanced configurations of prepaid equity products to more lenders and mortgage technology platforms” in the second half of this year.
Doma is “well-positioned” to help lenders take advantage of a pilot program announced by the Biden administration last week that will allow lenders to sell low-risk mortgages they refinance to Fannie Mae and Freddie Mac without having to make a loan The person’s title insurance policy or attorney’s opinion.
“We believe Doma is one of the only companies in our space with the proven technology and underwriting capabilities to participate in the pilot program,” Simkoff said.
While the plan has drawn the ire of the American Land Title Association, an industry group, Simkoff said Doma is “excited about the action the administration is taking, and we all share a desire and a sense of urgency to reduce borrowing costs through some level of Checkout costs for people”. The profit margins are high compared to traditional non-tech solutions. “
Simkoff said that based on the information provided so far, “over time, most people in the refinance space will likely be eligible for our more innovative approach to quantifying and helping (Fannie Mae and Freddie) (U.S.) assesses and underwrites title risk, and we look forward to further exploring this opportunity.”
Doma sees a path to profitability
Source: Doma earnings reports.
As Doma adapts its technology to process purchase mortgages, the company continues to lose money, accumulating a deficit of $615.8 million as of Dec. 31.
But Doma has reduced its net loss for four consecutive quarters, from $109.4 million in the fourth quarter of 2022 to $20.8 million in the fourth quarter of 2023.
Revenue in the final three months of 2023 rose 11% quarterly to $85 million, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved to a loss of $3 million, down from $11 million a year ago.
“While our results were slightly below our ambitious target of achieving Adjusted EBITDA profitability in the fourth quarter, primarily due to the continued deterioration in the interest rate environment, we are encouraged by the significant improvement in our cost structure, which allowed us to We are still a long way from our goal,” Simkov said.
Doma executed a 25-for-1 reverse stock split last summer to prevent delisting from the New York Stock Exchange, but it still has to convince investors it’s on the right path.
Doma shares have traded between a low of $3.86 and a high of $11.50 over the past 12 months, Down 15% on Wednesday The closing price was $4.64 after earnings were released after the close on Tuesday.
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