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Hello and thank you for joining the Stewart Information Services First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. Instructions will be given at that time. Please note that today's call is being recorded. [Operator Instructions]. It is now my pleasure to turn the conference over to Kath Bass, Director of Investor Relations. Please go ahead.

Thank you for joining us today for Stewart's first quarter 2025 earnings conference call. We will be discussing results that were released yesterday after the close. Joining me today are CEO Fred Eppinger and CFO David Hisey. To listen online, please go to the stewart.com website to access the link for this conference call. This conference call may contain forward-looking statements that involve a number of risks and uncertainties. Please refer to the company's press release and other filings with the SEC for a discussion of the risks and uncertainties that could cause our actual results to differ materially. During our call, we will discuss some non-GAAP measures. For reconciliation of these non-GAAP measures, please refer to the appendix in today's earnings release, which is available on our website at stewart.com. Let me now turn the call over to Fred.

Thank you for joining us today for Stewart's first quarter 2025 earnings conference call. Yesterday, we released the financial results for the quarter, which Dave will review with you shortly. Given the current macro environment, I'd like to open today's call with our perspective on the housing market conditions, followed by a review of our first quarter results and some insight into the progress we are making on our strategic growth initiatives. I am pleased with the quarter as we continue to improve and grow financially in a difficult housing market. The housing market remains challenging in the first quarter, with interest rates remaining in the range of 6.6% to 7% during the quarter. Existing home sales continue to bounce along the bottom in the quarter, with sales slightly worse than last year's historically weak numbers. While final existing home sales for March are not out yet, the pending home sales for February were down 3.6% from last year, indicating a weaker number for the quarter. As we look forward, we do see positive signs in both improved housing inventories and market activity trends in early April. For those that monitor the housing market trends closely, it is clear to see that we have an educated consumer base sitting on the sidelines, poised and ready to take advantage of a quick rate drop or changes to market conditions that make buying a home more accessible. And unlike last year, the housing inventory is at a higher level of both quality and volume. And while the current market uncertainty makes it difficult to predict, given this activity, we expect to see improved second half of the year relative to '24. With all these challenging market dynamics, I'm proud to say that in the first quarter, we continue to grow our business, with the title segment growing 11% and our real estate solutions growing 17%. In our title segment, our commercial services business continues to grow nicely, driven by thoughtful investment and talent as we deepen our capabilities and more geographies and asset classes. Our domestic commercial business grew 39% in the first quarter of 2025, relative to the Q1 of 2024. We benefited from strong growth in the majority of our asset classes, with retail, mixed-use and energy as the biggest winners for the quarter across our largest asset classes. We expect domestic commercial activity to improve year-over-year and look forward to continuing to capture our fair share of that market. In our direct business, we remain focused on growth in our target MSAs. We expect acquisitions will be a key component of our growth plan in this business and maintain a warm pipeline of targets and believe activity will increase with the improving market. And while the business is impacted by suppressed residential housing market, we saw strong progress in our strategic priority of growing small commercial within our direct operations, as we saw 16% growth this quarter in that important segment. In agency services, our team remains focused on expansion through shared gains and attractive markets by adding new agent partners and by growing our share with existing agents. We are pursuing growth across all our existing markets, but are targeting shared growth at 15 important states. Preliminary industry share data show that in '24, we grew our share in these 15 states and our momentum continues as we grew gross agency revenue by 11% year-over-year and net revenue by 14%. We attribute this solid momentum to increasing penetration of our agency partners and an increase in commercial transactions. Our improved support services and enhanced abilities around servicing commercial agents allow us to stand out to our agents. We will continue to build on this momentum that we have made in recent years for our agents in order to differentiate our services and better our offerings for our agent partners. Our real estate solution business segment had strong revenue results for the first quarter as well, growing 17%. Our margins were up sequentially, but down relative to the Q1 in 2024. Our strong revenue gains came with higher expenses, primarily due to increased costs of credit data from our informative research business. We expect margins in our lender services to normalize in the low-teens range for the remainder of the year. We expect to grow the real estate solutions business line by gaining share with the top lenders and cross-selling our products as we leverage our improved portfolio of services. Cross-selling in the current market conditions poses some challenges. However, we continue to see share gains from both existing clients and new client introductions. We expect continued momentum in this space as the market improves. Our international business is pursuing a growth agenda as well, focused on broadening our geographical presence in Canada. In the first quarter of 2025, we grew non-commercial international revenue by 16% compared to the year prior. We also intend to increase our penetration of commercial business in our international unit. We are closely monitoring the impact of trade negotiations on both our domestic and global customer bases. From an expense perspective, our significant growth in real estate solutions and commercial services has resulted in an increase in our other operating expense ratios. In real estate solutions, other operating expenses are higher percentage of mix due to the use of outside services and data, and commercially encounter higher outside data and service fees. We will expect these two trends to continue as we continue to grow these lines of business. We are dedicated to growing share in all lines of business and remain focused on positioning ourselves well for both near and long-term growth and sustainability. Stewart's current position can be described as a tale of two cities. While the challenging market improvement has been stubbornly slow, Stewart has never been in a better position to grow and improve our top and bottom lines. One thing that I can say with certainty is that we have assembled a strong team of leaders that are focused on working together to execute our strategic plan. This group wakes up every morning thinking about how we can improve the company and we're better for it. Our charge remains immovable to be the top destination for talent in this industry. For these reasons and more, we were again awarded the Top Workplace Award by USA Today. And while it has been a very challenging market for the last three years, I have never been more confident in our ability to capitalize on what I see as an improving market in the second half of '25 and into '26. I want to thank all our employees for their dedication and to our customers for trusting us to deliver with consistency and excellence. David, I will now turn it over to you to provide the update on results.

Good morning, everyone, and thank you, Fred. I appreciate our employees and I'm grateful for our customers. The real estate market continues pacing with existing single-family home sales at multi-decade lows and mortgage rates in the 7% area. Recent tariff news has created great volatility. Yesterday, Stewart reported first quarter net income of $3 million or $11 per diluted share on total revenues of $612 million. Appendix A of our press release shows adjustments primarily related to net realized and unrealized gains and acquired intangibles amortization that we use to measure operating performance. On an adjusted basis, net income for the quarter was $7 million or $0.25 per diluted share compared to $5 million or $0.17 in the first quarter of 2024. In the title segment, operating revenues include $48 million or 11% driven by our domestic, commercial, and agency title operations. This resulted in $2 million higher title pre-tax income. After adjustments for purchase and tangible amortization, the segment's first quarter adjusted pre-tax income improved to $12 million or $5 million higher than last year, with adjusted pre-tax margins slightly improved to 2% compared to 1% last year. On our direct title business, total open orders in the first quarter were comparable to last year, while total closed orders were down 9% primarily due to lower residential transactions. Domestic residential fee per file improved 13% to $3,300 compared to $2,900 in the prior year, primarily due to higher share of purchase transactions. Higher fee per file offset lower closed orders, resulting in relatively flat residential revenue. Our domestic commercial revenues improved $20 million or 39% driven by higher transaction size and volume. As Fred noted, we saw growth in several asset classes, multifamily, industrial, mixed-use, and retail, along with energy. Domestic commercial average fee per file increased 13% to $15,800 compared to $13,900 in the prior year quarter. Total international revenues increased $2 million or 9% primarily due to improved volumes from our Canadian operations. With our agency operations, first quarter gross agency revenues improved $27 million or 11%, also held by commercial activity with agents, while net agency revenues improved $5 million or 13% due to slightly better remittance rate. On title losses, total title loss expense in the first quarter was comparable to last year primarily due to overall favorable claim experience, offsetting higher title revenues. The title loss ratio for the first quarter improved to 3.5% compared to 3.9% in the prior year quarter. We expect our title losses to average in the low 4% range for the full year 2025. Regarding the real estate solution segment, operating revenues increased $14 million or 7%, primarily driven by additional revenues from credit information services. However, segment pre-tax income decreased as we continue to work through the matters discussed in the fourth quarter, higher credit information cost of services, and increased employee costs as we grow customer relationships. Adjusted pre-tax margin improved to approximately 10% from Q4 7%, and we expect to be in the low-teens' margins as these relationships mature. Excluding acquisition and tangible amortization, adjusted pre-tax income was $10 million in the first quarter compared to $12 million last year. On our consolidated operating expenses, our employee cost ratio in the first quarter improved to 31% from 32% last year primarily due to higher operating revenues, our other operating expense ratio as Fred covered increased to 27% in the first quarter compared to 25.6% last year, as we saw the higher costs in real estate solutions and commercial operations that Fred described from outside data and service costs. Our financial position remained solid to support our customers, employees, and the real estate market during this environment. Our total cash and investments were approximately $320 million in excess of our statutory premium reserve requirements, while we also have a fully available $200 million line of credit facility. Total stockholder's equity at March 31, 2025 was approximately $1.4 billion with a book value of $50 per share. Net cash used by operations in the first quarter 2025 was $30 million, which was similar to last year's first quarter. Again, thank you to all of our customers and employees, and we remain confident in our service to the real estate markets. I'll now turn the call over to the operator for questions.

Thank you. [Operator Instructions]. Thank you. Our first question will come from Bose George with KBW. Your line is open.

Good morning, Bose.

Good morning. Actually, I wanted to just ask about commercial. Fred, you noted that you expect commercial to remain strong in the back half of the year. Just curious, in April, given the volatility of the last few weeks, has there been any indication of sort of a slowdown in activity or just delays in loans that are already in the pipeline or just any color on changes that you might have seen?

Yes. So it's remained relatively robust. And I would say that there is some money on the sidelines, but it's a lot. So, it feels still relatively robust, and my expectation is a little bit better than last quarter when I was talking about kind of a five, six. I think this year is going to be more double-digit potential growth. It could be a little bit bumpy because of some of the news. Yes, but we haven't -- to tell you the truth, we haven't seen a material change in kind of orders yet, so, so far, so good, to be honest.

Perfect, great, thanks. And then, actually, on investment income, was the lower 1Q just on lower escrow balances? The decline was just a little more pronounced than we've seen in the past?

Yes, that's right, Bose. It was primarily off of balances. Yes.

Okay, great. Thanks.

Thank you. [Operator Instructions]. Our next question will come from John Campbell with Stephens, Inc. Your line is open.

Hey, guys. Good morning.

Good morning, John.

Good morning, John.

Hey, so, David, on the low 4% loss provision rate for the full year, you guys are at 3.5 this quarter. You have to see a pretty big step up throughout the balance of the year. It seems like you've been pretty cautious or conservative in the commentary about loss provision rate over the last couple of quarters. So, I'm just curious if there is something that you are potentially seeing or that's just an area of conservatism that you're kind of continuing, just kind of any kind of commentary there in which you maybe view as the key swing factors this year?

Yes, no, John, it's a great question. I mean, we really are closely focused on some of the loss development trends and what you always have to be monitoring is sort of the large claims that could be out there. And keep in mind our mix of international business relative to revenue is a little bit bigger than our competitors and international tends to have a higher claim rate and can be more volatile. So, I would say it's mainly the volatility of our mix of business. And if that breaks for us, we'll see sort of what we saw in the first quarter. And if it breaks against us, it gets to be a little higher.

Yes. So I wouldn't say, John, there's any trend that we see that's worse, it just that we tend to be conservative on this. But there's nothing developing that we see that's different than what's been, if that's really your question.

Yes, that's exactly it. I appreciate that. And then, David, I apologize if I missed this during your prepared remarks on the fee per file, but what was the growth out of just residential purchase fee per file?

Well, that was really what drove the overall increase is that we just had out of our total mix of orders, like others were down and that tends to bring down fee per file, whereas the purchase was a higher percentage. And so it's just a higher percentage of that purchase mix that caused the fee per file to go up.

Okay. And I don't know if you isolated just the residential purchase fee per file. I'm just -- the reason I'm asking is one of your competitors reported, obviously last night as well, and they had, I think, 8% growth at a resi-purchase fee per file. That's obviously much faster than national trends. I was curious if you guys are kind of seeing that same dynamic?

Well, our residential fee per file was up 13 from 3,300 to 2,900. And so, yes, I mean, I think -- and the other thing relative to that person you're referencing is that there's probably a higher California mix of business, so fee per file is naturally going to be a little higher there.

Okay, so just mainly regional mix shift?

Right. I mean, transaction size there is bigger in California than most market. So you could see some of that dynamic.

Okay. And then last one for me, obviously, I think that the Texas Department of Insurance, I mean, that was a pretty surprising cut. I think it was 10% cut to fees starting July 1. You guys, I think in your filings, maybe set 15% or so of total revenues tied to Texas. So I'm curious about, first, your initial impressions of that fee cut, whether you can work around that in any way, and then kind of broad strokes, expectations for the impact on the business?

Yes. So a couple points on that. So we are -- it is being challenged, and we think it's appropriate to be challenged because of just the odd timeframes we're talking about, right? So, you've got timeframes, the greatest years in history and the worst years in history. And so, to me, the level of the recommendation is inappropriate and would actually challenge some agents' existence, frankly. So we feel pretty good about that challenge, and we think that there could be some adjustment. But we have, we've kind of planned for that, and there are things, obviously, you can do to manage through that. Those are just -- there are other fees and service fees around those transactions, et cetera, that you can try to manage, too. And so we have it built in our plan, and we're going to manage to it. But we are, as I say, it's -- there's a lot of things going on in the process because it kind of surprised most people in the market. I mean, it doesn't really make sense given the current environment.

We tend to agree. Thank you.

[Operator Instructions]. We do have a follow-up from Bose George with KBW. Your line is open.

Hey, Bose.

Yes, thanks. Just a couple of little follow-ups. The other order's line item obviously bounces around a lot. Is there any good way for us to think about where that could go this year?

Yes. It is very bouncy because it's kind of batch transactions and big syndications and stuff. And we believe that it'll be a tad better this year than last year, but it's bouncy, right? It just -- the timing of those transactions occurs. And I know we had one transaction that slipped from last quarter to the next quarter, so it's going to continue to be like that. But I believe that business is going to be a tad better this year than last. So you will see continued kind of choppiness in the numbers.

And remember, Bose, there's two principal businesses there. There's the reverse business, and then there's the institutional business that Fred was talking about. And so, both of those businesses can have volatility reversed based on capital market situations. And then, as Fred said, the big bulk, SFR and build-to-rent kind of things on the institutional side.

Yes. And both businesses on the side, I liked very well. We're leaders in both those businesses. We're positioned well and just kind of the strategic aspect of both of those -- as those businesses have grown, and we have not only held share, but grown lead share. So I feel really good about those businesses in the future as well.

Okay, great. That's helpful. Thanks. And then just actually switching over to the real estate solutions, I mean, in terms of the margin -- in terms of the margin improvement.

So Bose, this one, again, is my fault, I think, for not being as articulate at our last earnings call. Essentially, that business, as you know, last year, particularly IR, our former research has grown at about 40-plus percent and continues to be kind of a very robust growth, and we've got a lot of new clients. And what happened at the end of the year was a very robust cost increase to our data, the credit, FICA stuff. And we had to work those rate increases into our contracts. And we started in January doing that and finished out kind of around April. So that's kind of a significant hole in kind of both. It understated our revenue growth, obviously, because you're building it into the contracts, and it overstates our expense as we kind of carry those expenses before they're into the contracts. That's why we say it's just a temporary thing. It's just a timing thing. We'll get that -- that'll bounce right back up for lender services. We'll be in that 11.5 range, and we'll end up the year the same as we did last year if the market stays the same, in that 11.5, 12 range of margin. And again, the team has done a wonderful job. We've built all those into the contracts with our clients, but actually created some value-based pricing so that we don't have this kind of challenge next year. So I feel really good about that business. And again, I feel like that's going to be a sustainable growth business for a while for us with nice margins. The other thing I would tell, just like our other business, when I talk about in a normal market, $5 million purchase, where we have 12% kind of margin business, that business is similar, because the appraisal business, the notaries business, all of those businesses are affected by the cycle. And so while we're, say 11.5, 12 now, with the market, it's normal. That's going to go to mid-teen cash margins and going to be from a GAAP total GAAP probably in the 12, just like the rest of our businesses. So it's a good business now, and it's going to be even better as the market improves. And I don't see anything. This was just a timing issue of us working through getting the stuff into the contracts versus any significant change in margin expectations

Okay, great. That's helpful. Thanks a lot.

Thank you. It appears we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.

I want to thank everybody for their interest in Stewart, and thank you for joining the call.