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SI

STEWART INFORMATION SERVICES CORP (STC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue beat on strong Title and credit information activity; EPS undershot consensus as mix and higher data/service costs pressured margins. Revenue was $612.0M vs $595.5M S&P consensus*, while S&P “Primary EPS” was $0.25 vs $0.34 consensus*; GAAP EPS was $0.11 . The beat was driven by 39% y/y domestic commercial title growth and 11% y/y agency revenue, while EPS was weighed by higher outside search/service costs and lower investment income on escrow balances .
  • Management reiterated an improving 2H25 setup and upgraded commercial outlook to double‑digit growth for 2025 (from “5–6%” last quarter), citing robust pipelines across retail, mixed‑use and energy asset classes .
  • Real Estate Solutions revenue +17% y/y with sequential margin improvement; management expects margins to normalize to low‑teens for the remainder of 2025 as data cost increases are repriced into contracts .
  • Risk/tailwinds to watch: proposed 10% Texas title fee cut (effective July 1) is being challenged; management plans to mitigate via other service fees if needed . Dividend of $0.50/share declared for Q2 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • Commercial title strength: Domestic commercial revenue +39% y/y on 13% higher average fee per file ($15.8k) and 23% higher closed transactions; CEO now sees double‑digit commercial growth in 2025 vs “5–6%” view last quarter .
    • Agency momentum: Gross agency revenue +11% y/y and net +13% on slightly better remittance rate; share gains in 15 targeted states continued into Q1 .
    • Cost discipline in people: Employee cost ratio improved to 31.2% of operating revenue from 32.3% y/y as revenue scaled .

  • What Went Wrong

    • EPS miss vs S&P consensus as other operating expenses rose to 27.0% of operating revenue (from 25.6%) on higher credit data costs and commercial outside search fees; investment income was lower on escrow balances .
    • Real Estate Solutions margins still below prior‑year levels (adjusted pretax margin 9.9% vs 14.8% y/y) as higher vendor data costs preceded contract repricing; management expects normalization in the coming quarters .
    • Macro residential softness persisted: residential closed orders fell y/y; fee‑per‑file rose 13% to $3.3k but volumes remained weak amid 6–7% mortgage rates .

Financial Results

Headline results and trend

MetricQ3 2024Q4 2024Q1 2025
Revenue ($M)$667.9 $665.9 $612.0
GAAP EPS$1.07 $0.80 $0.11
Adjusted EPS$1.17 $1.12 $0.25
GAAP Pretax Margin6.4% 5.3% 1.0%
Adjusted Pretax Margin7.1% 7.1% 1.8%

Q1 2025 vs S&P Global consensus

MetricConsensus*Actual
Revenue ($M)$595.5*$612.0
Primary EPS ($)$0.34*$0.25*

Values marked with * retrieved from S&P Global.

Segment performance

Segment MetricQ3 2024Q4 2024Q1 2025
Title Operating Revenues ($M)$553.3 $562.7 $499.2
Title Pretax Income ($M)$45.0 $45.2 $11.8
Title Pretax Margin7.9% 7.8% 2.3%
Title Adjusted Pretax Margin7.7% 8.8% 2.2%
Real Estate Solutions Op. Rev. ($M)$96.3 $87.0 $97.1
Real Estate Solutions Pretax ($M)$7.4 $0.9 $4.1
Real Estate Solutions Adj. Pretax Margin13.4% 7.4% 9.9%

KPIs

KPIQ3 2024Q4 2024Q1 2025
Avg domestic commercial fee/file ($)$17,700 $19,600 $15,800
Avg domestic residential fee/file ($)$3,000 $2,900 $3,300
Title loss ratio3.8% 3.7% 3.5%
Domestic commercial revenue ($M)$67.4 $84.1 $69.3
Total closed orders (units)59,375 59,425 45,673

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Title loss ratioFY 2025—“Low 4%” average expectedIntroduced
Real Estate Solutions margin (adj. pretax)Remainder of 2025—Normalize to low‑teensIntroduced/clarified
Commercial title revenue outlook2025~5–6% growth (prior view)Double‑digit growth potentialRaised
DividendQ2 2025—$0.50/share declaredShareholder return update

Note: No formal revenue/EPS guidance provided in Q1 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
Commercial titleQ3: strong domestic commercial, +30% y/y rev, higher fees ; Q4: continued strength, +50% y/y domestic commercial +39% y/y domestic commercial; CEO now sees double‑digit growth for 2025 Strengthening outlook
Residential housing macroQ3/Q4: macro difficult; employee cost ratio improved with scale Rates 6–7%; existing home sales at multi‑decade lows; improving inventories; 2H25 better vs 2024 Cautiously improving 2H
Real Estate Solutions marginsQ3: adj margin 13.4% ; Q4: down to 7.4% on data/vendor cost timing 9.9% with sequential improvement; expect low‑teens through 2025 as repricing takes hold Recovering
Cost structure mixQ3/Q4: higher other opex from RES/commercial search fees Other opex up to 27.0% on higher credit data/services; employee cost ratio improved y/y Mix shift persists
Investment incomeQ3: benefited from escrow balances Lower in Q1 on reduced escrow balances Soft near term
Title loss ratioQ3: 3.8% ; Q4: 3.7% 3.5% in Q1; guide to low‑4% FY25 (conservative, mix volatility incl. international) Favorable but cautious
Regulatory (Texas fees)—Proposed 10% fee cut in TX from July 1 being challenged; mitigation levers via service fees Monitor risk

Management Commentary

  • CEO strategic message: “We continue to improve and grow financially in a difficult housing market… we expect to see improved second half of the year relative to '24… Commercial Services… grew 39%… we expect domestic commercial activity to improve year‑over‑year” .
  • Commercial outlook pivot: “I think this year is going to be more double‑digit potential growth… we haven't seen a material change in orders yet” .
  • Real Estate Solutions margin path: “We expect margins in our lender services to normalize in the low teens range for the remainder of the year… we had robust cost increases to our data… worked those rate increases into our contracts by April” .
  • Capital and liquidity: “Total cash and investments were approximately $320 million in excess of statutory premium reserve requirements… fully available $200 million line of credit facility… book value of $50 per share” .
  • Regulatory stance (Texas): “It is being challenged… we feel pretty good about that challenge… there are other fees and service fees… we can try to manage” .

Q&A Highlights

  • Commercial pipeline resilience: Despite market volatility, orders remained robust; 2025 commercial growth view raised to double‑digits from 5–6% prior .
  • Investment income: Lower in Q1 driven by lower escrow balances, pressuring EPS vs. consensus .
  • Title losses: Guide to low‑4% FY25 is conservative given mix/international exposure; no adverse trend seen currently .
  • Residential fee per file: Up 13% y/y to $3.3k, driven by mix toward purchase transactions and regional mix (e.g., California) .
  • Texas 10% fee cut: Company supports challenge; plans to mitigate via other service fees if implemented .
  • “Other orders” volatility: Timing of batch/syndication and reverse/institutional flows; expected to be slightly better in 2025 vs 2024 but choppy .

Estimates Context

  • Q1 2025 vs S&P consensus: Revenue beat ($612.0M vs $595.5M*) while S&P “Primary EPS” missed ($0.25 vs $0.34*). EBITDA slightly below ($26.2M actual vs $28.1M*) reflecting mix and higher data/service costs in RES and commercial search fees; lower investment income also weighed .
  • Prior quarters context: Q3 2024 beat both revenue and Primary EPS (actual $1.17 vs $0.925*), Q4 2024 beat both revenue and Primary EPS (actual $1.12 vs $0.97*) on seasonal strength and commercial performance .
  • Revisions risk: Upward revisions to commercial revenue assumptions plausible; margin trajectories in RES and Title (loss ratio low‑4% guide) temper EPS until mix normalizes and data pass‑throughs flow through.

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Commercial title is the bright spot; upgraded to double‑digit 2025 growth with resilient pipelines—positive for revenue momentum and mix .
  • Near‑term EPS leverage is constrained by higher data/search costs and reduced escrow‑driven investment income; however, RES margins are set to normalize to low‑teens through 2025 as repricing completes—supportive for 2H25 EPS recovery .
  • Title loss ratio trending better (3.5%) but guided conservatively to low‑4% for FY25 given business mix and international volatility—limits downside surprise risk .
  • Regulatory watch: Texas fee cut outcome is a swing factor for 2H; management has mitigation levers via other service fees .
  • Balance sheet/liquidity are solid (>$320M excess to statutory reserves; $200M undrawn revolver), sustaining dividend ($0.50 declared) and optionality for targeted M&A in growth MSAs .
  • Setup: revenue beats can continue on commercial/agency momentum; EPS inflection needs opex mix normalization and better residential activity—management signals improved 2H25 housing backdrop .

Appendix: Additional Q1 2025 Detail (from 8-K/Press Release)

  • Consolidated: Revenues $612.0M; GAAP pretax income $5.9M; GAAP EPS $0.11; adjusted EPS $0.25; net cash used by operations $(29.9)M .
  • Title segment: Operating revenues $499.2M; pretax income $11.8M; adjusted pretax margin 2.2%; loss ratio 3.5% .
  • Real Estate Solutions: Operating revenues $97.1M; pretax income $4.1M; adjusted pretax margin 9.9% .
  • Orders: Q1 domestic closed orders 45,673 vs 50,459 y/y; purchase closed orders 26,780 vs 29,744 y/y .