Doma Holdings, Inc.

Thank you for standing by, and welcome to the Donovan Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Chris Mimona, Head of Investor Relations. Please go ahead, sir.

Thank you, Operator. Good afternoon, everybody, and thank you for joining DOMA's second quarter 2021 earnings conference call. Earlier today, DOMA issued a press release announcing its second quarter results, which is also available at investor.doma.com. Leading today's discussion will be DOMA's founder and chief executive officer, Max Simcoe, and chief financial officer, Noman Ahmed. Following management's prepared remarks, we will open up the call to questions. Before we begin, I would like to remind you that our discussion will retain predictions, expectations, forward-looking statements, and other information about our business that is based on management's current expectations as of the date of this presentation. Forward-looking statements include, but are not limited to, family's expectations or predictions of financial and business performance and conditions and competitive and industry outlook. Forward-looking statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from historical results and or from our forecasts, including those set forth in DOMA's Form 8K filed today. For more information, please refer to the risks, uncertainties, and other factors discussed in DOMA's SEC filings. All cautionary statements that we make during this call are applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks and uncertainties and other factors discussed in DOMA's SEC filings. Do not place undue reliance on forward-looking statements as DOMA is under no obligation and expressly disclaims any responsibility for updating, altering, or otherwise revising any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Running through some of the technicalities associated with the recent public listing event, the transaction was accounted for as a reverse capitalization, and Capital Investment Corporation 5 will be treated as the acquired company for financial statement reporting purposes. DOMA, prior to the business combination, was deemed the predecessor of and DOMA after the business combination will be the successor SEC registrant, meaning that DOMA's financial statements for periods prior to the consummation of the business combination will be disclosed in DOMA's future periodic reports. No goodwill or other intangible assets were recorded in accordance with GAAP. For more details, please see our filings with the SEC. Additionally, during this conference call, we will also refer to non-GAAP financial measures, including retained premiums and fees, adjusted gross profit, and other measures described in our earnings release. Our GAAP results and description of our non-GAAP financial measures with a full reconciliation to GAAP can be found in the second quarter 2021 earnings release, which has been furnished to the SEC and available on our IR website. With that, I'll turn the call over to Max Simcoe, CEO of Doma Holdings, Inc.

Thanks, Chris, and good afternoon, everybody. Thank you for joining us today. This is our first quarterly earnings call as a public company, and I'm excited to start today's call talking through our demonstrated results in Q2, the continued expectations for top-line performance that we have in the future, and additionally, the core drivers of this growth that enable us to deliver a much-needed solution for a very large market that is long overdue for disruption by modern-day technology. After I've talked through our Q2 highlights, the drivers of our growth, and our vision for how we will build on this with the new proceeds we've recently brought to the balance sheet via GoingPublic, I will hand it over to Noamad Ahmed, our CFO, to provide more detail on our Q2 financial results, as well as a more detailed update regarding our near-term expectations. So first, on our growth. Our results in the second quarter were a testament to how successfully we've been able to execute on our mission of delivering differentiated value to customers and consumers alike, leveraging the power of machine learning. These efforts have driven significant market share gains. We opened and closed substantially more orders than we did during the same quarter last year, allowing us to grow our retained premiums and fees, which is a reminder as our primary top line metric by 46% versus Q2 of 2020. Most importantly, we drove share gains and another quarter of over 500% year over year closed order growth in our enterprise channel, which is where we have fully deployed our Doma intelligence platform and technology differentiated offerings. This growth was principally fueled by two factors. First, the addition of new customers. We signed seven key new enterprise customers, including Wells Fargo and Fairway Independent Mortgage, two more of the top 15 largest mortgage originators in the country. Second, by expanding wallet share with existing enterprise customers, such as Chase, HomePoint, and PennyMac. Some of these wallet share gains were driven by DOMA expanding into four more states, bringing our geographic footprint up over 75% coverage of the U.S. mortgage market by volume. Our local division grew over the same period last year in large part due to a significant shift in our transaction mix toward purchase transactions. Purchase transactions have the benefit of being much less susceptible to macroeconomic swings and also yield higher average retained premiums and fees per transaction. We also prepared to begin fulfilling purchase volume via our domain intelligence platform later this year, on track with the timing expectations we've communicated in the past. Finally, we accelerated the refinance volume in our local business that is now being serviced through our domain intelligence platform. enabling us to offer differentiated capabilities for more of the smaller regional lenders and credit unions that will help us capture additional share and drive more growth in that part of the market going forward. I'm going to talk about our technology solutions in a minute, but first an important reminder. We currently only serve a small percentage of our $23 billion market opportunity and therefore believe that we can continue to grow rapidly, regardless of macroeconomic trends, on the strength of our differentiated offering and the strong track record of customer-obsessed delivery for which we are now known. For this reason, we are raising our 2021 full-year outlook for retained premiums and fees, which is the primary measure we use for assessing the top-line performance of our business, and Noamon will share more details on this shortly. To talk through some of the drivers of this growth, as many of you know, our growth in the $23 billion residential title and escrow market is driven by a unique approach of applying cutting-edge machine learning technology to remove giant chunks of friction, frustration, and expense from the historically tedious process of closing a residential purchase or refinance transaction. In Q2, we demonstrated significant progress in more broadly deploying our technology and seeing ever faster, better, and cheaper outcomes for our clients and end customers. At the core of our technology-first approach to delivering instant homeownership experiences is a platform we call DOMA Intelligence. The DOMA Intelligence Platform utilizes three key elements, DOMA Title, DOMA Escrow, and DOMA Close, to deliver our machine learning capabilities across all aspects of a residential mortgage closing. As many more of you may be new to the DOMA solution given our recent entry into the public markets, I thought it would be beneficial to briefly walk through how these solutions work and who they serve. DOMA Title reduces the typical three- to five-day title underwriting process down to less than a minute using industry-leading, machine-learning-powered underwriting technology. In Q2, all of our DOMA Enterprise customers continued to see significant benefit from DOMA Title, with more than 80% of orders underwritten instantly, regardless of where these orders were being handled and closed across the country. In our DOMA Enterprise channel in the second quarter, we saw quicker transaction close times on average for our customers of between three and five days for instantly underwritten orders within DOMA title versus those handled via a traditional search process. While we launched DOMA title for refinance transactions originally in our DOMA Enterprise business, we extended its use to refinance transactions in our local channel late last year and saw accelerating adoption of it throughout Q2 across a broader set of local refinance transactions in more markets. We are now excited to launch this proprietary technology for purchase transactions by the end of this year on the timeline we communicated earlier this year to bring the same speed, accuracy, and cost savings to an entirely new category of transactions. DOMA escrow is the second core element of DOMA intelligence, and it applies a unique combination of natural language processing and computer vision to cut massive amounts of labor, time, and stress from the cumbersome areas of fee balancing and closing document management. Our Doma Escrow functionality can scan hundreds of pages of documents at a time, extract relevant information, automatically balance and reconcile fees, and identify and correct errors and discrepancies, work that has historically been manually fulfilled in this industry. At one of our largest nationally-serviced Doma Enterprise Lender customers, we saw that in Q2, Doma Escrow was processing and delivering closing documents 33% faster than the fastest competitive alternative in this part of the process that this lender had ever seen. And as the machine learning models that drive this part of the solution process more and more data, we expect for them to get even more accurate and still faster as time grows, providing continuously optimizing benefit to our customers. Across Doma Title and Doma Estro, we have five pending U.S. patent applications, and our data science teams are constantly inventing new first-of-their-kinds machine learning applications to drive more unique intellectual property for the company. In the third key element of DOMA Intelligence, DOMA Close, we are building an unparalleled user experience around a fully remote, fully digital way to instantly close a mortgage by allowing for all of the home buyers' documents to be signed at the tap of a finger. In Q2, we began broadening DOMA Close to address more of the document management process to include pre-closing documents, as well as some post-closing follow-ups, allowing for a larger number of refinance transactions to benefit from DOMA close beginning in Q3. Across these three core product areas, DOMA also applies our built-from-scratch operational service delivery model that augments our proprietary technology with deep human expertise to drive more effective outcomes, better user experiences, faster time to close, and lower costs for everyone involved in the title insurance, escrow, and closing service process. So in summary, Because of our unique full-stack technology-first solution, in Q2, more banks and lenders sent more orders our way across more of the United States, further validating the notion that our approach is resonating across the industry. We deliver faster residential mortgage closings for the likes of Chase, PennyMac, HomePoint, and now new customers like Wells Fargo and Fairway Independent Mortgage. We did so by underwriting title insurance faster, balancing closing statements, and processing complex structured and unstructured data faster. which enables our customers to digitally close residential refinance transactions for their end customers at a record-setting pace, ultimately producing meaningful and more impactful long-term relationships with those same customers. These faster closings are also less error-prone because our machine learning technology gets constantly smarter at making accurate interpretations and decisions. It's also a much better closing experience overall for everyone, better for borrowers, better for mortgage originators, and by the end of this year, better for buyers, sellers, and real estate agents. We are confident that as we continue to build upon our cutting edge technology platform, we can expand our competitive lead and further build on the growth we've already demonstrated for many quarters to come. I want to finish by talking about where we go from here. Now that we have recently taken the company public and added a significant amount of new capital to our balance sheet that we will use to widen our lead. As a reminder, all of our growth in 2021 so far as well as the continued growth we expect for the remainder of the year, is driven by a self-funded plan that does not yet reflect any benefit from the $350 million of new proceeds we just raised when we entered the public markets on July 28th. These proceeds will allow us to expand the scope of our ambition and to accelerate the pace of our execution to deliver upside beyond the self-funded plan we previously outlined. Going public was simply another way of us establishing our place as a growth business being able to expand key markets more quickly and launch new product functionality that extend the advantages of our Doma intelligence platform. In terms of expanding key markets in our core business today, to support continued growth across both Doma Enterprise and Doma Local, we'll now be embarking on a multi-year journey to expand and grow our customer acquisition functions, from new customer sales to account management to service and solution delivery. As we do this, we are confident that the appeal of working to bring the industry into the future will help us attract the best talent in the market, oftentimes getting people from diverse backgrounds at some of the leading tech companies on the planet to consider joining a real estate tech business when they might not have normally given it a second look. With respect to launching new product functionality, We are in the process of finalizing a plan to use some of the proceeds we just raised to build deeper functionality for more rapidly understanding and actioning decisions instantly across every aspect of the mortgage closing process using new proprietary data sources. To drive this expansion in product scope and functionality, we've already started augmenting our overall technology team. The quality and size of this team grew materially even over the last few months. In Q2 alone, we hired top-tier engineers, data scientists, product managers, operational experts, and customer relationship managers from the likes of Box, Carta, LogMeIn, Netflix, Oracle NetSuite, PayPal, and Splunk, among others. And finally, with respect to expanding our focus to new adjacent markets, we plan on putting some of the proceeds we've raised to work against delivering the same cutting-edge technology we've deployed for title and closing to both the $8 billion appraisal market and the $3 billion home warranty market. Appraisal, because it is as manual and full of friction as title and escrow, and our machine learning and insurance expertise presents a clear opportunity to introduce a new approach that will remove a lot of today's labor dependency from the relatively analog old school process. And in the case of home warranty, we believe that the total available market itself could be even bigger if someone delivered a truly enjoyable and impactful instant digital experience for homeowners to protect and add value to many of their most valuable and important home systems. And we see several opportunities for us to establish a foothold in that part of the market as we deliver a more integrated digital mortgage closing platform. Successfully penetrating these adjacencies increases the size of our near-term TAM from $23 billion to $34 billion, representing a 50% increase to our addressable market alone. Not five years after founding the company in a single shared office in San Francisco, we now have over 1,500 associates across 22 states helping us accelerate our pace toward not only owning a leadership position in the $23 billion residential title and closing market, but also in expanding our focus into the $11 billion appraisal and home warranty opportunity. With the new proceeds we've just raised via Going Public, we can not only accelerate the growth in our core business, but we can help deliver a future where you will sign a purchase contract for a home on a Friday afternoon and move in on Monday morning with all the interim processes and documents handled by our proprietary technology in between. Before concluding my prepared remarks, I want to thank the team of people and investors who have partnered with us to support our long-term growth as a public company. In addition to the more than 1,500 strong I mentioned we now have helping us to recognize our long-term vision, I also want to thank our three recently announced new board members, Sharda Cherwoo, formerly a partner at Ernst & Young, Maxine Williams, the Chief Diversity Officer at Facebook, and Serena Wolf, the Chief Financial Officer at Amelie Capital Management, a leading diversified capital manager in the mortgage REIT sector. These phenomenal women will bring diverse perspectives and broad expertise and will be valuable members to our already exceptionally strong board, helping us round out our incredible team. And I also want to make sure to thank our investors, both those who have been with us for a large part of the journey already and those who recently decided to back the company for our long-term success. With that, I'm going to pass it over to Nomon, who can provide more color on our second quarter results and improve financial outlook for the full year. Nomon?