Margin Guidance Outlook
Q: Can you explain your margin outlook and its drivers?
A: Mark Seaton explained that margins are expected to be comparable to last year, with positives like increased open orders signaling growth in core businesses, and tailwinds from lower loss rates and cost-cutting efforts. However, headwinds include about $20 million more in depreciation due to past capital expenditures, benefits resets, and investment income headwinds. While Q2 will be challenging compared to last year, margins in the second half are expected to be better, resulting in margins in line with last year. "

Investment Income Outlook
Q: What's the outlook for investment income this year?
A: Mark Seaton stated that investment income in the title segment is expected to be between $120 million and $125 million per quarter, likely at the higher end in Q2 and slightly lower later in the year. This assumes normal seasonality, the exit of Home Point balances reducing investment income by $5 million per quarter, and two Fed rate cuts. A shift of deposits to third-party banks, now at 30% from 18% a year ago, poses a headwind. If this trend continues, it could risk the investment income guidance, but plans are underway to reverse it by paying more at their bank. " " "

CapEx Outlook
Q: What are your expectations for CapEx this year?
A: Mark Seaton indicated that CapEx has peaked, with last year's spending at $260 million. This year, CapEx is expected to decline by 15% to 20%, due to winding down of major initiatives and increased efficiency from hiring in-house tech talent instead of relying on third parties. Despite the reduction, they will continue making necessary strategic investments. "

Confidence in Revenue Growth and Margins
Q: How confident are you in achieving revenue growth and margin guidance?
A: CEO Kenneth DeGiorgio expressed confidence that while challenging conditions will persist, 2024 will be slightly better than 2023. Indicators such as open orders in the commercial business are up 1% in the quarter and 5% in April, suggesting improvements. The Average Revenue per Order (ARPO) in commercial is up 1% over the prior year, indicating price discovery may have concluded. In the purchase market, open resale orders are up 5% in March and 2% in April, providing cautious optimism. "

Regulatory Changes Impact
Q: How might potential regulatory changes affect your business?
A: Kenneth DeGiorgio addressed the CFPB's request regarding prohibiting lenders from passing through title insurance costs. He believes such changes are unlikely to materialize due to lack of transparency concerns, as policymakers prefer borrowers to know what they're paying for. Even if costs are bundled, borrowers would still pay for lender’s title insurance. He does not anticipate significant impact on their business or the industry. "

Home Point Loans Transition Impact
Q: What's the impact of Home Point loans transitioning out?
A: Mark Seaton explained that approximately $380 million in deposits related to Home Point will leave, with $50 million departing around May 1 and $330 million on July 1. This will reduce investment income by about $20 million annually, but also reduce interest expense by the same amount, making it neutral on a net basis. There are deboarding fees, but they're minimal, less than $1 million, and not material. " "

Margin Drag from Tech Initiatives
Q: What's causing the margin drag from Endpoint and instant decision?
A: The margin drag increased to 150 basis points this quarter from 130 basis points last quarter due to lower revenue at Endpoint and higher expenses at both Endpoint and instant decision initiatives. Mark Seaton expects the drag to lessen going forward as revenue improves because Q1 is typically the lowest revenue quarter. "

Commercial ARPO Trends
Q: Is the commercial ARPO stabilizing due to larger deals?
A: Mark Seaton noted that larger deals, including four mega deals with premiums over $1 million in the recent quarter, always impact ARPO. After several quarters of decline, commercial ARPO has finally leveled off, which is a positive sign and mirrors the bottoming observed on the residential side. "

Purchase ARPO Trends
Q: What's driving the current purchase ARPO trends?
A: The 2% increase in purchase ARPO is primarily driven by rising housing prices. Mark Seaton expects a fee per file increase of around 2% due to this. Geographic mix, such as increased business in California where fees are higher, can also influence ARPO, but it's mainly linked to housing price movements. "

April Refi Orders
Q: How are April refinance orders trending?
A: Mark Seaton reported that April refinance orders are running at about 371 per day, roughly the same as last year, and up 6% compared to last month. This suggests some stabilization in refinance activity. "