Doma sells some California offices to WFG for $24.5M

Doma, the former Lennar-affiliated title insurance underwriting business that went public in July 2021, has sold a chunk of its operations to Williston Financial Group.

Based on year-end American Land Title Association market share numbers, Doma was the 10th largest brand at 1.8% while WFG National Title Insurance was ninth at 2.5% (a title holding company can have more than one brand, with three of the top 10 being units of Fidelity National Financial).

Williston will pay up to $24.5 million, $10.5 million of that was done on May 19 and the rest will be due within 30 days after the first anniversary of the deal, with the exact amount based on certain conditions, a Securities and Exchange Commission filing said.

In return, Williston gets 22 retail title locations and operations centers in Northern and Central California and 123 total employees.

Those branches had GAAP revenue of $37 million and gross profits of $16 million, for 2022. "As a result of the asset sale, Doma expects expense savings in corporate support, lease and administrative expenses related to its remaining 56 local retail title branches," the filing said.

"This strategic transaction is aligned with our mission-driven go-forward strategy and refined focus on our core underwriting and technology business," Max Simkoff, Doma's CEO, said in a press release. "Our West Coast operations are premier locations within their respective real estate communities with a track record of providing excellent customer service."

Doma was at one time known as States Title; Lennar sold its North American Title business to States after which it became and remains its largest shareholder. It went public during the special purpose acquisition company craze and Simkoff had plans to expand into adjacent areas like appraisal and home warranty.

Changing housing market conditions forced it to pull back on those aims.

Furthermore, Doma has yet to be profitable on a GAAP basis as a public company. Its goal is to be profitable on an adjusted EBITDA basis at some point this year.

In the first quarter, it lost $42.1 million.

During the earnings call, the company said it conducted a comprehensive review of its business and as a result developed a "go-forward strategy" by centering on consumers' affordability concerns.

For WFG, the deal helps cement its direct office footprint in a part of California it has targeted since its founding in 2010, Patrick Stone, founder and chairman, said in an interview. The company writes business nationwide, but only has direct operations in seven Western states, with the others covered by a network of agents.

"We are firmly established in Southern California; we have a nice profitable operation on the east side of the bay," Stone explained. "But this allows us to be a player in the San Francisco Bay Area and central California so it's a market we wanted to get into and really a perfect alignment with us."

While it was hard to say how much market share this deal adds to WFG, Stone estimated the additional branches would increase revenue in California by 30% to 35%.

This is the 14th acquisition Williston has done since it entered business. "It's a market we always planned on being in, it finishes our investment in California," said Stone. "We will grow organically from here in California unless something comes along that we like and we find a reasonable price."

He did note that potential sellers are becoming more realistic about valuations.