Doma Holdings, Inc. [DOMA] Filings

10-Q 1 doma20240630c_10q.htm FORM 10-Q doma20240630c_10q.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 001-39754

Doma Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware			84-1956909
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

101 Mission Street, Suite 1050 San Francisco, California			94105
(Address of Principal Executive Offices)			(Zip Code)

(650) 419-3827

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

DOMA

The New York Stock Exchange

Warrants, 25 whole warrants exercisable

for one share of common stock at an

exercise price of $287.50 per share

DOMAW

* The warrants are trading on the OTC Pink Marketplace under the symbol “DOMAW”.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Table of Contents

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had outstanding 14,185,669 shares of common stock as of August 9, 2024.

Table of Contents

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Pages
Part I - Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited):	4
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Operations (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive Loss (Unaudited)	6
	Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	63
Item 4.	Controls and Procedures	63

Part II - Other Information		64
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 3.	Defaults Upon Senior Securities	64
Item 4.	Mine Safety Disclosures	64
Item 5.	Other Information	64
Item 6.	Exhibits	65
Signatures		66

Table of Contents

Introductory Note

On March 28, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), with RE Closing Buyer Corp., a Delaware corporation (“Parent”), and RE Closing Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth therein, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger and becoming a wholly owned subsidiary of Parent. Parent and Merger Sub are affiliates of Closing Parent Holdco, L.P., a Cayman Islands exempted limited partnership (“Topco”), the indirect parent company of Parent. Parent is part of the Title Resources Group, which operates a title insurance underwriting business. Under the terms of the Merger, among other things, Parent would acquire our outstanding shares for $6.29 per share in cash.

Unless the context otherwise requires, references herein to “company,” “Company,” “Doma,” “we,” “us,” “our” and similar terms refer to Doma Holdings, Inc. (f/k/a Capitol Investment Corp. V) and its consolidated subsidiaries. References to “Capitol” refer to our predecessor company prior to the consummation of the Business Combination. References to “Old Doma” refer to Old Doma prior to the Business Combination and to States Title, the wholly owned subsidiary of Doma, upon the consummation of the Business Combination.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this Quarterly Report, about our plans, strategies and prospects, both business and financial, are forward-looking statements. Any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “continue,” “goal,” “project” or the negative of such terms or other similar expressions. Moreover, the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report. We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control.

Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

•

our projected financial information, anticipated growth rate and market opportunity;

•

our ability to maintain the listing of our common stock on the New York Stock Exchange;

•

our proposed Merger with Parent, including the likelihood of the satisfaction of the conditions to the completion of the Merger and whether and when the transaction will be consummated;

•

our ability to realize the expected benefits of the Merger;

•

the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement;

•

the outcome of any legal proceedings that may be instituted against us and others relating to the Merger;

•

our ability to raise financing in the future and to comply with restrictive covenants related to long-term indebtedness;

•

our success in retaining or recruiting, or changes required in, our officers, key employees or directors;

•

the accounting of our warrants as liabilities and any changes in the value of our warrants having a material effect on our financial results;

•

factors relating to our business, operations and financial performance, including:

Table of Contents

◦

our ability to drive an increasing proportion of orders in our Enterprise channel through the Doma Intelligence platform;

◦

changes in the competitive and regulated industries in which we operate, variations in technology and operating performance across competitors, and changes in laws and regulations affecting our business;

◦

the current and future health and stability of the economy, financial conditions and residential housing market, including any extended downturn or slowdown;

◦

changes in general economic and financial conditions (including federal monetary policy, interest rates, inflation, home price fluctuations, housing inventory, labor shortages and supply chain issues) that may reduce demand for our products and services, lower our profitability or reduce our access to financing;

◦

our ability to implement business plans, forecasts and other expectations, and identify and realize additional opportunities;

◦

the impact on the real estate finance market from recent macroeconomic events and conditions that have resulted in a significant increase in interest rates largely due to actions of central banks, including the U.S. Federal Reserve; and

•

other factors detailed under the section “Risk Factors” in our periodic filings with the Securities and Exchange Commission (the “SEC”).

Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Additional cautionary statements or discussions of risks and uncertainties that could affect our results or the achievement of the expectations described in forward-looking statements may also be contained in any subsequent periodic report.

Should one or more of the risks or uncertainties described in this Quarterly Report occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements.

You should read this Quarterly Report completely and with the understanding that our actual future results, levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Table of Contents

Part I - Financial Information

Item 1. Financial Statements

Doma Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share information)	*June 30, 2024*			*December 31, 2023*
Assets
Cash and cash equivalents	$	69,098		$	65,939
Restricted cash		3,999			5,228
Investments:
Fixed maturities
Held-to-maturity debt securities, at amortized cost (net of allowance for credit losses of $5 at June 30, 2024 and $125 at December 31, 2023)		7,445			18,179
Available-for-sale debt securities, at fair value (amortized cost $41,978 at June 30, 2024 and $58,516 at December 31, 2023)		41,727			58,032
Mortgage loans		45			45
Total investments	$	49,217		$	76,256
Trade and other receivables (net of allowance for credit losses of $2,024 at June 30, 2024 and $1,802 at December 31, 2023)		23,364			24,452
Prepaid expenses, deposits and other assets		8,613			4,614
Lease right-of-use assets		3,457			4,175
Fixed assets (net of accumulated depreciation of $33,991 at June 30, 2024 and $26,272 at December 31, 2023)		27,902			30,945
Title plants		2,716			2,716
Goodwill		23,413			23,413
Assets held for disposal		1,893			2,563
Total assets	$	213,672		$	240,301

Liabilities and stockholders’ deficit
Accounts payable	$	5,248		$	1,798
Accrued expenses and other liabilities		11,762			12,700
Lease liabilities		7,322			8,838
Loan and Security Agreement, net of debt issuance costs and original issue discount		168,530			154,087
Liability for loss and loss adjustment expenses		74,817			81,894
Warrant liabilities		92			26
Sponsor Covered Shares liability		325			86
Liabilities held for disposal		5,546			6,783
Total liabilities	$	273,642		$	266,212

Commitments and contingencies (see Note 12)

Stockholders’ deficit:

Common stock, 0.0001 par value; 80,000,000 shares authorized at June 30, 2024; 14,074,805 and 13,524,203 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	$	1			1
Additional paid-in capital		600,430			593,772
Accumulated deficit		(660,149	)		(619,201	)
Accumulated other comprehensive income		(252	)		(483	)
Total stockholders’ deficit	$	(59,970	)	$	(25,911	)
Total liabilities and stockholders’ deficit	$	213,672		$	240,301

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

Table of Contents

Doma Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

	*Three Months Ended June 30,*						*Six Months Ended June 30,*
(In thousands, except share and per share information)	*2024*			*2023*			*2024*			*2023*
Revenues:
Net premiums written ⁽¹⁾	$	75,408		$	78,962		$	138,921		$	145,732
Escrow, other title-related fees and other		922			798			1,993			1,762
Investment, dividend and other income		1,316			1,519			2,799			2,597
Total revenues	$	77,646		$	81,279		$	143,713		$	150,091

Expenses:
Premiums retained by agents ⁽²⁾	$	62,172		$	64,770		$	114,563		$	119,307
Title examination expense		1,173			1,241			2,031			1,974
Provision for claims		1,183			5,330			1,913			8,617
Personnel costs		13,174			17,434			27,789			42,842
Other operating expenses		10,992			11,247			21,600			23,215
Long-lived asset impairment		—			441			—			441
Total operating expenses	$	88,694		$	100,463		$	167,896		$	196,396

Operating loss from continuing operations	$	(11,048	)	$	(19,184	)	$	(24,183	)	$	(46,305	)

Other (expense) income:
Change in fair value of Warrant and Sponsor Covered Shares liabilities		(66	)		108			(305	)		123
Interest expense		(7,838	)		(5,021	)		(14,442	)		(8,992	)
Loss from continuing operations before income taxes	$	(18,952	)	$	(24,097	)	$	(38,930	)	$	(55,174	)

Income tax benefit (expense)		(56	)		(156	)		448			(312	)
Loss from continuing operations, net of taxes	$	(19,008	)	$	(24,253	)	$	(38,482	)	$	(55,486	)

Loss from discontinued operations, net of taxes		(1,389	)		(11,624	)		(2,466	)		(22,514	)

Net loss	$	(20,397	)	$	(35,877	)	$	(40,948	)	$	(78,000	)

Earnings per share:
Net loss from continuing operations per share attributable to stockholders - basic and diluted	$	(1.36	)	$	(1.82	)	$	(2.78	)	$	(4.18	)
Net loss per share attributable to stockholders - basic and diluted	$	(1.46	)	$	(2.69	)	$	(2.95	)	$	(5.88	)
Weighted average shares outstanding common stock - basic and diluted		13,992,669			13,324,215			13,864,422			13,259,894

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

(1)

Net premiums written includes revenues from a related party of $38.0 million and $33.5 million during the three months ended June 30, 2024 and 2023, respectively. Net premiums written includes revenues from a related party of $72.1 million and $63.5 million during the six months ended June 30, 2024 and 2023, respectively (see Note 11).

(2)

Premiums retained by agents includes expenses associated with a related party of $30.7 million and $27.1 million during the three months ended June 30, 2024 and 2023, respectively. Premiums retained by agents includes expenses associated with a related party of $58.2 million and $51.2 million during the six months ended June 30, 2024 and 2023, respectively (see Note 11).

Table of Contents

Doma Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

	*Three Months Ended June 30,*						*Six Months Ended June 30,*
(In thousands)	*2024*			*2023*			*2024*			*2023*
Net loss	$	(20,397	)	$	(35,877	)	$	(40,948	)	$	(78,000	)
Other comprehensive loss, net of tax:
Unrealized gain (loss) on available-for-sale debt securities, net of tax		153			(483	)		231			(149	)
Comprehensive loss	$	(20,244	)	$	(36,360	)	$	(40,717	)	$	(78,149	)

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

Table of Contents

Doma Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity

(Unaudited)

										*Accumulated*
					*Additional*					*Other*
	*Common Stock*				*Paid-in*		*Accumulated*			*Comprehensive*			*Stockholders’*
(In thousands, except share information)	*Shares*		*Amount*		*Capital*		*Deficit*			*Loss*			*Equity*
Balance, January 1, 2023		13,165,919	$	1	$	577,515	$	(494,787	)	$	(937	)	$	81,792
Exercise of stock options		16,120		—		182		—			—			182
Vesting of RSU awards		37,338		—		—		—			—			—
Stock-based compensation expense		—		—		5,697		—			—			5,697
Net loss		—		—		—		(42,123	)		—			(42,123	)
Other comprehensive income		—		—		—		—			334			334
Balance, March 31, 2023		13,219,377	$	1	$	583,394	$	(536,910	)	$	(603	)	$	45,882
Exercise of stock options		2,569		—		1		—			—			1
Vesting of RSU awards		128,787		—		—		—			—			—
Stock-based compensation expense		—		—		1,130		—			—			1,130
Net loss		—		—		—		(35,877	)		—			(35,877	)
Other comprehensive loss		—		—		—		—			(483	)		(483	)
Balance, June 30, 2023		13,350,733	$	1	$	584,525	$	(572,787	)	$	(1,086	)	$	10,653

											*Accumulated*
					*Additional*						*Other*
	*Common Stock*				*Paid-in*			*Accumulated*			*Comprehensive*			*Stockholders’*
(In thousands, except share information)	*Shares*		*Amount*		*Capital*			*Deficit*			*Loss*			*Deficit*
Balance, January 1, 2024		13,524,203	$	1	$	593,772		$	(619,201	)	$	(483	)	$	(25,911	)
Vesting of RSU awards		363,569		—		—			—			—			—
Stock-based compensation expense		—		—		4,703			—			—			4,703
Net loss		—		—		—			(20,551	)		—			(20,551	)
Other comprehensive income		—		—		—			—			78			78
Balance, March 31, 2024		13,887,772	$	1	$	598,475		$	(639,752	)	$	(405	)	$	(41,681	)
Vesting of RSU awards		187,033		—		(2,175	)		—			—			(2,175	)
Stock-based compensation expense		—		—		4,130			—			—			4,130
Net loss		—		—		—			(20,397	)		—			(20,397	)
Other comprehensive income		—		—		—			—			153			153
Balance, June 30, 2024		14,074,805	$	1	$	600,430		$	(660,149	)	$	(252	)	$	(59,970	)

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

Table of Contents

Doma Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	*Six Months Ended June 30,*
(In thousands)	*2024*			*2023*
Cash flow from operating activities:
Net loss	$	(40,948	)	$	(78,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Interest expense - paid in kind		12,519			5,228
Depreciation and amortization		6,072			6,146
Stock-based compensation expense		8,833			6,827
Amortization of debt issuance costs and original issue discount		1,923			2,354
Provision for doubtful accounts (reduction for expected credit losses)		217			(116	)
Deferred income taxes		(513	)		294
Loss (gain) on disposal of fixed assets and title plants		(49	)		796
Loss on sale of business		—			11,591
Gain on sale of title plant		—			(3,825	)
Net amortization of premiums and accretion of discounts on fixed maturity securities		(214	)		(495	)
Change in fair value of Warrant and Sponsor Covered Shares liabilities		305			(123	)
Long-lived asset impairment		—			1,471
Change in operating assets and liabilities, net of effects from sales of discontinued operations:
Trade and other receivables		813			6,994
Prepaid expenses, deposits and other assets		(2,444	)		2,586
Lease right-of-use assets and lease liabilities		(1,621	)		(1,147	)
Accounts payable		2,839			(787	)
Accrued expenses and other liabilities		(1,305	)		(10,449	)
Liability for loss and loss adjustments expenses		(6,881	)		1,589
Net cash used in operating activities	$	(20,454	)	$	(49,066	)
Cash flow from investing activities:
Proceeds from calls and maturities of investments: Held-to-maturity		11,802			110,486
Proceeds from calls and maturities of investments: Available-for-sale		16,875			1,493
Proceeds from sales and principal repayments of investments: Mortgage loans		1			251
Proceeds from sale of business, net of costs to sell and working capital adjustments		—			6,765
Purchases of investments: Held-to-maturity		(1,072	)		—
Purchases of investments: Available-for-sale		—			(61,464	)
Proceeds from sales of fixed assets		—			90
Purchases of fixed assets		(2,829	)		(5,610	)
Proceeds from sale of title plants, net of costs to sell, and dividends from title plants		—			7,241
Net cash provided by investing activities	$	24,777		$	59,252
Cash flow from financing activities:
Exercise of stock options		—			183
Repayments on Loan and Security Agreement		—			(9,208	)
Payment of debt issuance costs		(218	)		—
Employee taxes paid on withholding shares		(2,175	)		—
Net cash used in financing activities	$	(2,393	)	$	(9,025	)
Net change in cash and cash equivalents and restricted cash		1,930			1,161
Cash and cash equivalents and restricted cash at the beginning period		71,167			81,383
Cash and cash equivalents and restricted cash at the end of period	$	73,097		$	82,544
Supplemental cash flow disclosures:
Cash paid for interest	$	—		$	4,814
Supplemental disclosure of non-cash investing activities:
Unrealized gain (loss) on available-for-sale debt securities	$	231		$	(149	)
Supplemental disclosure of non-cash financing activities:
Unpaid debt issuance costs	$	1,204		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

Table of Contents

Doma Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except share and per share information or unless otherwise noted)

1. Organization and business operations

On July 28, 2021 (the “Closing Date”), Capitol Investment Corp. V (“Capitol”) consummated a business combination (the “Business Combination”) with Doma Holdings, Inc., a Delaware corporation (“Old Doma”), pursuant to the agreement and plan of merger, dated March 2, 2021, by and among Capitol, Capitol V Merger Sub, Inc., a wholly owned subsidiary of Capitol (“Merger Sub”), and Old Doma (as amended on March 18, 2021, the “Agreement”). In connection with the closing of the Business Combination, Old Doma changed its name to States Title Holding, Inc. (“States Title”), Capitol changed its name to Doma Holdings, Inc. (“Doma”) and Old Doma became a wholly owned subsidiary of Doma. Doma continues the existing business operations of Old Doma as a publicly traded company. See Note 3 for additional information on the Business Combination.

Unless the context otherwise requires, references herein to “company,” “Company,” “Doma,” “we,” “us,” “our” and similar terms refer to Doma Holdings, Inc. (f/k/a Capitol Investment Corp. V) and its consolidated subsidiaries. References to “Capitol” refer to our legal predecessor company prior to the consummation of the Business Combination. References to “Old Doma” refer to Old Doma prior to the Business Combination and to States Title, the wholly owned subsidiary of Doma, upon the consummation of the Business Combination.

Old Doma was initially formed as a wholly-owned subsidiary of States Title Inc. (“Legacy States Title”) to combine the operations of Legacy States Title and the retail agency and title insurance underwriting business (the “Acquired Business”) of North American Title Group, LLC (“NATG”), a subsidiary of Lennar Corporation (“Lennar”).

Doma is a real estate technology company that is architecting the future of real estate transactions. Using machine intelligence and our proprietary technology solutions, we are creating a vastly more simple, efficient, and affordable real estate closing experience for current and prospective homeowners, lenders, title agents and real estate professionals.

Starting in the second quarter of 2023 and finalized in the third quarter of 2023, the Company sold its assets used in or related to the Company’s title insurance agency business operated through local retail title offices (the Company’s “Local Component”). With the execution of the final agreements in the third quarter of 2023, the Company no longer has operations related to our previous Local retail branch footprint ("Local Component Direct Agents"). The Company determined that the execution of these agreements and the exiting of the Local Component represented a strategic shift that had a major effect on the Company’s operations and financial results, which triggered discontinued operations presentation, in accordance with ASC 205-20-45. We have historically reported our operations in two business segments: "Distribution," which included our divested Local Component as well as our Doma Enterprise channel and corporate support services, and "Underwriting." See Note 3 for additional details on the divestiture.

Subsequent to the finalization of the sale of the Local Component in the third quarter of 2023, our continuing operations continued to be reported as two business segments but whose designations have changed to: “Underwriting” and “Corporate and Other”. Corporate and Other contains our Doma Enterprise channel, our growth area offering technology solutions, and our centralized corporate support services. All current and prior periods reflected in this Form 10-Q have been presented as continuing and discontinued operations, unless otherwise noted. Refer to Note 7 and Note 18 for additional information regarding segment information and discontinued operations, respectively.

Going Concern

We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including our working capital and capital expenditure needs and other commitments. Our recurring working capital requirements relate mainly to our cash operating costs. Our capital expenditure requirements consist mainly of software development related to our Doma Intelligence platform.

We had $73.1 million in cash and cash equivalents and restricted cash, $7.4 million in held-to-maturity debt securities, and $41.7 million in available-for-sale debt securities as of June 30, 2024. The restricted net assets of Doma Title Insurance, Inc. (“DTI”), our title insurance subsidiary, are a significant proportion of the Company’s consolidated net assets. DTI and our other insurance subsidiaries are subject to regulations that restrict their ability to pay dividends or make other distributions of cash or property to their immediate parent company without prior approval from the Departments of Insurance of their respective states of domicile. As of December 31, 2023, $49.9 million of our statutory net assets are restricted from dividend payments without prior approval from the Departments of Insurance of their respective states of domicile. During 2024, our title insurance subsidiary could pay or make distributions to us of approximately $5.2 million, without prior approval. On April 26, 2024, the South Carolina Department of Insurance approved an extraordinary dividend of $17.5 million from Doma Title Insurance, Inc., our title insurance subsidiary, to the Company. Doma Title Insurance, Inc. paid the $17.5 million extraordinary dividend to the Company in the three months ended June 30, 2024.

During our financial close and forecasting process for the year ended December 31, 2023, the Company identified conditions and events such as sustained cash outflows, operating losses and insufficient cash balances that, when considered in the aggregate, raised substantial doubt about our ability to continue as a going concern. However, that doubt was alleviated through management's plans, including the HSCM Fourth Amendment and the Senior Term Facility as defined in Note 8 "Debt." The Company believes its unrestricted assets and the additional funding provided by the HSCM Fourth Amendment and the Senior Term Facility will be sufficient to meet our working capital and capital expenditure requirements for a period of at least 12 months from the date of this Quarterly Report.

Proposed Merger

On March 28, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), with RE Closing Buyer Corp., a Delaware corporation (“Parent”), and RE Closing Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth therein, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger and becoming a wholly owned subsidiary of Parent. Parent and Merger Sub are affiliates of Closing Parent Holdco, L.P., a Cayman Islands exempted limited partnership (“Topco”), the indirect parent company of Parent. Under the terms of the Merger, among other things, Parent would acquire our outstanding shares for $6.29 per share in cash.

Table of Contents

The Company’s board of directors, acting on the unanimous recommendation of a special committee comprised of independent and disinterested directors formed for the purpose of considering the transaction, unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, the Voting and Support Agreement (as defined in Note 3) and the other agreements contemplated by the Merger Agreement and the transactions contemplated thereby are fair, advisable and in the best interests of the Company and the disinterested stockholders and (ii) approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and the Voting and Support Agreement and the other agreements contemplated by the Merger Agreement and the transactions contemplated thereby, and (iii) resolved to submit and recommend the Merger Agreement to the Company’s stockholders for approval and adoption thereby.

Assuming the satisfaction of the conditions set forth in the Merger Agreement, the Company expects the transactions contemplated thereby to close in the second half of 2024.

The foregoing description of the Merger Agreement and the transactions contemplated thereunder is not complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which is filed as an exhibit to the Current Report on Form 8-K, filed with the SEC on March 29, 2024, and incorporated herein by reference.

For more information, refer to Note 3 "Business combinations and divestitures."

2. Summary of significant accounting policies

Basis of presentation

The accompanying condensed consolidated balance sheet as of June 30, 2024 and the condensed consolidated statements of operations, condensed consolidated statements of comprehensive loss, and condensed consolidated statements of changes in stockholders’ (deficit) equity for the three and six months ended June 30, 2024 and 2023 and the condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023 are unaudited.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s balance sheet as of June 30, 2024 and its results of operations, including its comprehensive loss, and stockholders’ (deficit) equity for the three and six months ended June 30, 2024 and 2023 and cash flows for the six months ended June 30, 2024 and 2023. All adjustments are of a normal recurring nature. The results for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, 2024. These unaudited interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements and related notes.

Certain prior year amounts have been reclassified to conform to the current year presentation under Accounting Standard Codification 205-20-45, “Discontinued Operations."

References to the Accounting Standard Codification (“ASC”) and Accounting Standard Updates (“ASU”) included hereinafter refer to the Accounting Standards Codification and Updates issued by the Financial Accounting Standards Board (“FASB”) as the source of authoritative U.S. GAAP. The accompanying condensed consolidated financial statements include the accounts of the Company and the accounts of the Company’s wholly-owned subsidiaries. All intercompany balances and transactions related to continuing operations have been eliminated in consolidation.

Table of Contents

Reverse stock split

On June 29, 2023, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation (the “Charter Amendment”) to effect a 1-for-25 reverse stock split of the Company’s common stock (the “Reverse Stock Split”) and a corresponding adjustment to its authorized capital stock, effective as of 11:59 p.m. Eastern Daylight Time on June 29, 2023 (the “Effective Time”). All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, and discussions, in this Quarterly Report, unless otherwise indicated.

As a result of the Reverse Stock Split, every 25 shares of the Company’s issued and outstanding common stock were automatically converted into one share of issued and outstanding common stock. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders who otherwise would have been entitled to receive fractional shares of common stock were entitled to receive cash in an amount equal to the product obtained by multiplying (a) the closing price per share of the common stock as reported on the New York Stock Exchange as of the first trading day following the Effective Time, by (b) the fraction of one share owned by the stockholder.

Proportionate adjustments were made to the number of shares issuable upon the exercise or vesting of all stock options, restricted stock awards, restricted stock units, performance restricted stock units or market-based awards (the “Stock-Based Awards”) and warrants outstanding at the Effective Time, which resulted in a proportional decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such Stock-Based Awards and warrants. In the case of stock options and warrants, proportionate adjustments also included a proportional increase in the exercise price of such stock options and warrants. In addition, the number of shares reserved for issuance under the Company’s 2021 Omnibus Incentive Plan were proportionately reduced.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from the estimates made by management. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

Significant items subject to such estimates and assumptions include, but are not limited to, reserves for incurred but not reported claims, the useful lives of property and equipment, accrued net premiums written from Third-Party Agent (as defined in Item 2) referrals, the fair value measurements, valuation of goodwill impairment, the valuations of stock-based compensation arrangements and the Sponsor Covered Shares liability (as defined below).

Trade and other receivables, net

Trade and other receivables include the following:

	*June 30,*			*December 31,*
	*2024*			*2023*
Trade receivables	$	6,188		$	9,170
Accrued net premiums written from Third-Party Agent referrals		2,376			2,418
Trade receivables, gross	$	8,564		$	11,588
Allowance for credit losses		(2,024	)		(1,802	)
Trade receivables, net	$	6,540		$	9,786
Local Sales Deferred Earnout receivable		12,086			12,497
Investment trade receivables		3,510			—
Miscellaneous other receivables		1,228			2,169
Other receivables	$	16,824		$	14,666
Trade and other receivables, net	$	23,364		$	24,452

Trade receivables are generally due within thirty to ninety days and are recorded net of an allowance for credit losses. Our receivables represent premiums, escrow and related fees due to us as a result of the closing of real estate transactions, investment trade receivables, and other miscellaneous receivables. The Company determines the allowance for credit losses by considering a number of factors, including the length of time receivables are past due, previous loss history and a specific customer’s ability to pay its obligations to the Company. Amounts deemed uncollectible are expensed in the period in which such determination is made. The Local Sales Deferred Earnout receivable relates to the aggregate earnouts from the Local Sales discussed further in Note 3.

Title plants

Title plants are carried at cost, with costs incurred to maintain, update and operate title plants expensed as incurred. Because properly maintained title plants have indefinite lives and do not diminish in value with the passage of time, no provision has been made for depreciation or amortization. The Company analyzes the title plants for impairment when events or circumstances indicate that the carrying amount may not be recoverable. This analysis includes, but is not limited to, the effects of obsolescence, duplication, demand and other economic factors. There were no impairments of title plants for the three and six months ended June 30, 2024 and 2023.

Goodwill

Goodwill represents the excess of the acquisition price over the fair value of assets acquired and liabilities assumed in a business combination. Goodwill is assigned to one or more reporting units on the date of acquisition. We review our goodwill for impairment annually on October 1 of each year and between annual tests if events or circumstances arise that would more likely than not reduce the fair value of any one of our reporting units below its respective carrying amount. In performing our annual goodwill impairment test, we first perform a qualitative assessment, which requires that we consider macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in the Company’s stock price, changes in management or key personnel, changes in strategy, changes in customers, changes in the composition or carrying amount of a reporting unit or other factors that have the potential to impact fair value. If, after assessing the totality of events and circumstances, we determine that it is more likely than not that the fair values of our reporting units are greater than the carrying amounts, then the quantitative goodwill impairment test is not performed. If the fair value of the reporting unit is less than its carrying amount, a non-cash impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the loss not exceeding the total amount of goodwill allocated to that reporting unit. Any impairment is charged to operations in the period that the impairment is identified.

Table of Contents

Reinsurance

The Company utilizes reinsurance programs to limit its maximum loss exposure by reinsuring certain risks with other insurers. The Company has three reinsurance programs: the 2024 Excess of Loss Treaty, the Facultative program and the Quota Share Treaty. Previously, the Company had been a party to an excess of loss treaty which expired per its terms on September 30, 2023. Under the former excess of loss treaty, we ceded liability over $15.0 million on all files. The excess of loss treaty provided for ceding liability above the retention of $15.0 million for all policies up to a liability cap of $500.0 million.

Effective January 1, 2024, the Company implemented the 2024 Excess of Loss Treaty. Under the 2024 Excess of Loss Treaty, we cede liability in two layers: 1) $10 million above the retention of $10 million up to a liability cap of $20.0 million for all policies and 2) $10 million above the retention of $20 million in losses up to a liability cap of $30.0 million for all policies. The 2024 Excess of Loss Treaty will be in place through June 30, 2025. Excess of loss reinsurance coverage protects the Company from a large loss from a single loss occurrence.

Effective October 1, 2023, the Company implemented its Facultative program. Under this program, on files above $30 million, the Company retains the next $5 million, and thereafter cedes additional liability over $35.0 million and up to $150.0 million on a facultative basis. This Facultative arrangement protects the Company from a large loss from a single loss occurrence.

Under the Quota Share Treaty, effective February 24, 2021, the Company cedes 25% of the written premium on our instantly underwritten policies.

Payments and recoveries on reinsured losses for the Company’s title insurance business were immaterial during the three and six months ended June 30, 2024 and 2023.

Ceding commission from reinsurance transactions are presented as revenue within the “Escrow, other title-related fees and other” revenue line item in the condensed consolidated statements of operations.

Total premiums ceded in connection with reinsurance are netted against the written premiums in the condensed consolidated statements of operations. Gross premiums earned and ceded premiums are as follows:

	*Three Months Ended June 30,*						*Six Months Ended June 30,*
	*2024*			*2023*			*2024*			*2023*
Gross premiums earned		75,564			79,038			139,193			145,953
Ceded premiums		(156	)		(76	)		(272	)		(221	)
Net premiums earned		75,408			78,962			138,921			145,732
Percentage of amount net to gross		99.8	%		99.9	%		99.8	%		99.8	%

Income taxes

Our effective tax rate for the six months ended June 30, 2024 and 2023 was 1% and (1)%, respectively, as a result of a full valuation allowance recorded against the deferred tax assets. In determining the realizability of the net U.S. federal and state deferred tax assets, we consider numerous factors including historical profitability, estimated future taxable income, prudent and feasible tax planning strategies, and the industry in which we operate. As of June 30, 2024 and December 31, 2023, the Company carried a valuation allowance against deferred tax assets as management believes it is more likely than not that the benefit of the net deferred tax assets covered by that valuation allowance will not be realized. A net deferred tax liability has been recorded as of June 30, 2024 and December 31, 2023 of $0.1 million and $0.8 million, respectively, and is included in accrued expenses and other liabilities within the accompanying condensed consolidated balance sheets. Management reassesses the realization of the deferred tax assets each reporting period. The Company has approximately $0.2 million of pre-2018 federal net operating losses subject to expiration beginning in 2036. The remainder of the federal net operating losses have no expiration. The Company’s state net operating losses are subject to various expirations, beginning in 2030. The Company’s 2020 through 2023 tax years remain open to federal examinations. The Company’s 2019 through 2023 tax years remain open to state tax examinations. The Company believes that as of June 30, 2024 it had no material uncertain tax positions. Interest and penalties related to unrecognized tax expenses (benefits) are recognized in income tax expense, when applicable. There were no material liabilities for interest and penalties accrued as of June 30, 2024.

Leases

The Company determines if a contract contains a lease at inception of the contract. The Company's inventory of leases primarily consists of operating office space and office equipment leases which are recorded as a lease obligation liability and as a lease right-of-use asset on the accompanying condensed consolidated balance sheet. The lease right-of-use asset represents the Company's right to use each underlying asset for the lease term and the lease obligation liability represents the Company's obligation over the lease term. The Company's lease obligation is recorded at the present value of the lease payments based on the term of the lease. The Company applies an incremental borrowing rate of interest as of the effective date of adoption or the lease effective date equivalent to a collateralized borrowing rate with similar terms. The discount rate used to calculate the present value of our future minimum lease payments is based, where appropriate, on the Company's incremental borrowing rate of its current loan and security agreement.

Lease expenses for lease payments, where appropriate, are recognized on a straight-line basis over the lease term. Short-term leases of 12 months or less are recorded in the condensed consolidated balance sheet and lease payments are recognized on the condensed consolidated statement of operations. The Company accounts for agreements with lease and non-lease components as a single lease component. For more information on leases, refer to Note 17 of this Quarterly Report.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in financial institutions and our investment portfolio. The Company has not experienced losses on the cash accounts and management believes the Company is not exposed to significant risks on such accounts.

Additionally, we manage the exposure to credit risk in our investment portfolio by investing in high quality securities and diversifying our holdings. Our investment portfolio is comprised of corporate debt, foreign government securities, certificates of deposit, single-family residential mortgage loans, and U.S. Treasuries.

Table of Contents

Emerging Growth Company and Smaller Reporting Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Additionally, the Company is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.

Recently issued and adopted accounting pronouncements

No new accounting policies were recently issued and adopted in the three or six months ended June 30, 2024.

Recently issued but not adopted accounting pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. This ASU is effective for public companies with annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact of the ASU on its disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures. The ASU includes requirements that an entity disclose the title of the chief operating decision maker (CODM) and on an interim and annual basis, significant segment expenses and the composition of other segment items for each segment's reported profit. The standard also permits disclosure of additional measures of segment profit. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the ASU on its disclosures.

In August 2018, the FASB issued ASU 2018-12, Financial Services-Insurance (Topic 944), Targeted Improvements to the Accounting for Long-Duration Contracts, effective for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. In June of 2020, the FASB deferred the effective date of ASU 2018-12 for one-year in response to implementation challenges resulting from COVID-19. This update requires insurance companies to annually review and update the assumptions used for measuring the liability under long-duration contracts. The amendments in this ASU may be early adopted as of the beginning of an annual reporting period for which financial statements have not yet been issued, including interim financial statements. As an emerging growth company, we currently anticipate adopting this standard on January 1, 2025. Although we have long-duration contracts, this specific guidance is not expected to impact our title insurance operations; therefore, we do not expect this standard to have a material impact on our condensed consolidated financial statements.

Table of Contents

3. Business combinations and divestitures

Capitol Business Combination

As described in Note 1, on March 2, 2021, Old Doma entered into the Agreement with Capitol, a blank check company incorporated in the State of Delaware and formed for the purpose of effecting a merger. Pursuant to the Agreement, a newly formed subsidiary of Capitol was merged with and into Old Doma, and the Business Combination was completed on July 28, 2021. The Business Combination was accounted for as a reverse recapitalization and Capitol was treated as the acquired company for financial statement reporting purposes. Old Doma was deemed the predecessor for financial reporting purposes and Doma was deemed the successor SEC registrant, meaning that Old Doma’s financial statements for periods prior to the consummation of the Business Combination are disclosed in the financial statements included within this Quarterly Report and will be disclosed in Doma’s future periodic reports. No goodwill or other intangible assets were recorded, in accordance with GAAP.

Immediately after the Closing Date, 53,026 shares of common stock held by the Sponsor became subject to vesting, contingent upon the price of Doma’s common stock, par value $0.0001 (“Doma common stock”) exceeding certain thresholds (the “Sponsor Covered Shares”). As of June 30, 2024, there were 14,074,805 and 0 shares of common stock and preferred stock issued and outstanding, which excludes the 53,026 of Sponsor Covered Shares. All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, and discussions, in this Quarterly Report, unless otherwise indicated.

On December 4, 2020, Capitol consummated its initial public offering, which included the issuance of 11,500,000 redeemable warrants (the “Public Warrants”). Simultaneously with the closing of the initial public offering, Capitol completed the private sale of 5,833,333 warrants (the “Private Placement Warrants”). These Warrants remain outstanding following the Business Combination and 25 whole warrants entitles the holder to purchase one share of our common stock at a price of $287.50 (see Note 16 for additional information).

Immediately after the Closing Date, 20% of the aggregate of our common stock held by certain investors (collectively, the “Sponsor”) became subject to vesting, contingent upon the price of our common stock exceeding certain thresholds. The Sponsor Covered Shares will vest in two tranches: (i) one-half of such shares shall vest if the last reported sale price of the common stock equals or exceeds $375.00 for any 20 trading days within any 30-day trading period ending on or before the tenth anniversary of the Closing Date, and (ii) one-half of such shares shall vest if the last reported sale price of the common stock equals or exceeds $437.50 for any 20 trading days within any 30-day trading period ending on or before the tenth anniversary of the Closing Date. The Sponsor is also entitled to the Sponsor Covered Shares if a covered strategic transaction or change in control, as defined by the sponsor support agreement dated as of March 2, 2021 (the “Sponsor Support Agreement”) by and among the sponsors named thereto, Capitol and Old Doma, occurs prior to the ten (10)-year anniversary of the Closing Date. As of June 30, 2024, the Sponsor Covered Shares were legally outstanding; however, since none of the conditions were met, no related shares are included in the Company's condensed consolidated balance sheets and condensed consolidated statement of changes in stockholders’ deficit or for the purposes of calculating earnings per share.

Also following the Closing Date, the Sellers have the contingent right to receive up to an additional number of shares equal to 5% of the sum of (i) the aggregate number of outstanding shares of our common stock (including restricted common stock, but excluding Sponsor Covered Shares), plus (ii) the maximum number of shares underlying our options that are vested and the maximum number of shares underlying warrants to purchase shares of Doma common stock issued as replacement warrants for Old Doma warrants, in each case of these clauses (i) and (ii), as of immediately following the Closing Date (the “Seller Earnout Shares”). The Seller Earnout Shares are contingently issuable to the Sellers in two tranches: (i) one-half of such shares shall be issued if the last reported sale price of the common stock equals or exceeds $375.00 for any 20 trading days within any 30-day trading period ending on or before the fifth anniversary of the Closing Date, and (ii) one-half of such shares shall be issued if the last reported sale price of the common stock equals or exceeds $437.50 for any 20 trading days within any 30-day trading period ending on or before the fifth anniversary of the Closing Date. Since none of the conditions of the Seller Earnout Shares were met as of June 30, 2024, no related shares are included in the Company’s condensed consolidated balance sheets and condensed consolidated statements of changes in stockholders’ deficit as of June 30, 2024 or for purposes of calculating earnings per share.

Unless the context otherwise requires or otherwise indicates, share counts of Doma common stock provided in this Quarterly Report exclude both the Sponsor Covered Shares and the Seller Earnout Shares.

North American Title Acquisition

On January 7, 2019, we acquired from Lennar its subsidiary, North American Title Insurance Company, which operated its title insurance underwriting business, and its third-party title insurance agency business, which was operated under its North American Title Company brand (collectively, the “Acquired Business”), for total stock and deferred cash consideration of $171.7 million (the “North American Title Acquisition”), including $87.0 million in the form of a seller financing note. Goodwill of $111.5 million resulted from the North American Title Acquisition.

Table of Contents

Local Retail Branch Sales

On May 19, 2023, Doma Title of California, Inc. (the “Seller”) and Doma Corporate LLC, both subsidiaries of the Company, entered into and closed an asset purchase agreement (the “WFG Asset Purchase Agreement”) with Williston Financial Group LLC (“WFG”). Pursuant to the terms and subject to the conditions set forth in the WFG Asset Purchase Agreement, the Seller agreed to sell to WFG certain assets used in or related to the Company’s title insurance agency business operated through retail title offices located in the State of California (the “WFG Asset Sale”) for an aggregate purchase price of up to $24.5 million, subject to certain adjustments set forth in the WFG Asset Purchase Agreement. The gross purchase price for the WFG Asset Sale consists of $10.5 million paid by WFG to the Seller on May 19, 2023 (the “WFG Sale Closing Date”) and a deferred payment of up to $14.0 million payable by WFG to the Seller within 30 days after the 12-month anniversary of the WFG Sale Closing Date ("WFG Deferred Payment"). The amount of the WFG Deferred Payment is subject to an earnout based on the retention of specified employees hired by WFG or an affiliate of WFG after the WFG Sale Closing Date. The sale included 22 retail title locations and operations centers in the Northern and Central California regions and 123 total employees. On the WFG Sale Closing Date, the Seller and a WFG affiliate, WFG National Title Insurance Company, entered into a customary transition services agreement.

In separate transactions, on July 14, 2023, the Company entered into and closed asset purchase agreements to sell certain assets used in or related to the Company’s title insurance agency business operated through retail title offices located in the Midwest and Texas to Hamilton National Title LLC d/b/a Near North Title Group and Capital Title of Texas, LLC, respectively. Additionally, on July 28, 2023, the Company closed an asset purchase agreement to sell certain assets used in or related to the Company’s title insurance agency business operated through retail title offices located in Florida to Hamilton National Title LLC d/b/a Near North Title Group. The Company entered into customary transition services agreements in conjunction with these sales.

Unless the context otherwise requires, references herein to “Q3 Local Sales” refers to the transactions entered into with Hamilton National Title LLC d/b/a Near North Title Group and Capital Title of Texas, LLC, and references herein to the “Local Sales” refers to the Q3 Local Sales and the WFG Asset Sale, collectively. References herein to “Deferred Earnout” refers to the WFG Deferred Payment and deferred payments of up to $2.1 million payable by Hamilton National Title LLC d/b/a Near North Title Group to the Company subject to revenue targets over the 12-month period subsequent to the related sales.

In conjunction with the Local Sales, we recognized the following:

	*WFG Asset Sale*		*Q3 Local Sales*		*Total Local Sales*
Pre-tax loss on sale of business	$	10,313	$	635	$	10,948

Cash consideration	$	10,500	$	2,645	$	13,145
Deferred Earnout receivable		10,928		1,556		12,484
Total purchase consideration	$	21,428	$	4,201	$	25,629

Total transaction costs, including legal fees, professional fees and other	$	3,487	$	767	$	4,254

The Deferred Earnout is recorded in trade and other receivables in the condensed consolidated balance sheets. The fair value of the Deferred Earnout is based on the specified employees hired by WFG or an affiliate of WFG after the WFG Sale Closing Date that were retained through the 12-month anniversary of the WFG Sale Closing Date, a level 3 input. During the three and six months ended June 30, 2024, we recognized $0.6 million and $0.4 million of net losses, respectively, in our condensed consolidated statement of operations primarily related to changes in retention assumptions on the WFG Deferred Payment and partially offset by the accretion of the discount recorded for the Deferred Earnout.

The following table presents the net assets sold and the goodwill associated with the Local Sales:

	*WFG Asset Sale*		*Q3 Local Sales*		*Total Local Sales*
Goodwill	$	19,270	$	3,597	$	22,867
Title plants		8,806		—		8,806
Fixed assets		549		717		1,266
Other assets		129		148		277
Total assets	$	28,754	$	4,462	$	33,216

Accrued expenses and other liabilities	$	-	$	392	$	392
Total liabilities	$	-	$	392	$	392

Net assets	$	28,754	$	4,070	$	32,824

Merger Agreement

On March 28, 2024, the Company entered into the Merger Agreement with Parent and Merger Sub. The Merger Agreement provides that, subject to the terms and conditions set forth therein, Merger Sub will merge with and into the Company, with the Company surviving the Merger and becoming a wholly owned subsidiary of Parent. Parent and Merger Sub are affiliates of Topco, the indirect parent company of Parent. Capitalized terms used but not otherwise defined herein have the meaning set forth in the Merger Agreement, a copy of which is filed as an exhibit to the Current Report on Form 8-K, filed with the SEC on March 29, 2024, and incorporated herein by reference.

Table of Contents

The Company Board, acting on the unanimous recommendation of a special committee comprised of independent and disinterested directors formed for the purpose of considering the transaction, unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, the Voting and Support Agreement (as defined below) and the other agreements contemplated by the Merger Agreement and the transactions contemplated thereby, are fair, advisable and in the best interests of the Company and the Disinterested Stockholders and (ii) approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and the Voting and Support Agreement and the other agreements contemplated by the Merger Agreement and the transactions contemplated thereby, and (iii) resolved to submit and recommend the Merger Agreement to the Company’s stockholders for approval and adoption thereby.

Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), and as a result of the Merger:

●

each share of common stock, par value $0.0001 per share, of the Company (“Common Stock”) outstanding immediately prior to the Effective Time (subject to certain exceptions, including for shares of Common Stock owned by stockholders of the Company who have not voted in favor of the adoption of the Merger Agreement and have properly exercised appraisal rights in accordance with Section 262 of the General Corporation Law of the State of Delaware) will, at the Effective Time, be cancelled and extinguished and automatically converted into the right to receive $6.29 in cash (the “Merger Consideration”), subject to applicable withholding taxes;

●

each warrant to purchase shares of Common Stock that is outstanding immediately prior to the Effective Time will, in accordance with its terms, automatically and without any required action on the part of the holder thereof, cease to represent a warrant to purchase shares of Common Stock and become a warrant exercisable for Merger Consideration;

●

each option to purchase Common Stock (each, a “Company Option”) that is outstanding and unexercised immediately prior to the Effective Time, whether vested or unvested, will automatically be cancelled and terminated as of immediately prior to the Effective Time and converted into the right to receive an amount in cash, less applicable tax withholdings, equal to the product obtained by multiplying (i) the aggregate number of shares of Common Stock subject to such Company Option by (ii) the excess, if any, of the Merger Consideration over the exercise price per share of such Company Option;

●

each unvested award of restricted shares of Common Stock (each, a “Company RS Award”) that is outstanding immediately prior to the Effective Time will automatically be cancelled and terminated as of immediately prior to the Effective Time and converted into the right to receive an amount in cash, less applicable tax withholdings, equal to the product obtained by multiplying (i) the aggregate number of shares subject to such Company RS Award by (ii) the Merger Consideration;

●

each award of restricted stock units of the Company (each, a “Company RSU Award”) that is outstanding immediately prior to the Effective Time, whether vested or unvested, will automatically be cancelled and terminated as of immediately prior to the Effective Time and converted into the right to receive an amount in cash, less applicable tax withholdings, equal to the product obtained by multiplying (i) the aggregate number of shares subject to such Company RSU Award by (ii) the Merger Consideration; and

●

each award of performance-based or market-based restricted stock units of the Company (each, a “Company PRSU Award”) that is outstanding immediately prior to the Effective Time, whether vested or unvested, will automatically be cancelled and terminated as of immediately prior to the Effective Time and converted into the right to receive, an amount in cash, less applicable tax withholdings, equal to the product obtained by multiplying (i) the aggregate number of shares subject to such Company PRSU Award (if any) that would satisfy the performance conditions applicable to such Company PRSU Award measured as of immediately prior to the Effective Time (in accordance with the applicable award agreement governing such Company PRSU Award) by (ii) the Merger Consideration.

Assuming the satisfaction of the conditions set forth in the Merger Agreement, the Company expects the transactions contemplated thereby to close in the second half of 2024.

The stockholders of the Company will be asked to vote on the adoption of the Merger Agreement and the Merger at a stockholder meeting that will be held on August 27, 2024. The consummation of the Merger is not subject to a financing condition, but is subject to certain conditions to Closing, including (i) approval of the Company’s Disinterested Stockholders, (ii) consent, approval or authorization from relevant insurance regulatory agencies without the imposition of a Burdensome Condition, (iii) absence of any order or injunction prohibiting the consummation of the Merger, (iv) subject in certain cases to customary materiality qualifiers, the accuracy of the representations and warranties contained in the Merger Agreement and compliance with the covenants contained in the Merger Agreement, (v) no Company Material Adverse Effect having occurred since the date of the Merger Agreement that is continuing, (vi) the completion of certain specified transactions as contemplated by the Merger Agreement, (vii) the repayment of the Company’s outstanding indebtedness with Hudson pursuant to the terms described below and (viii) the investment by Len FW (defined below) into Topco.

Table of Contents

The Merger Agreement contains customary representations, warranties and covenants, including, among others, covenants by the Company to conduct its businesses in the ordinary course between the execution and completion of the Merger Agreement, not to engage in certain kinds of transactions during such period (including payment of dividends outside of the ordinary course or as otherwise permitted under the Merger Agreement), to convene and hold a meeting of its stockholders to consider and vote upon the Merger, to cooperate with Parent in connection with obtaining financing for the transaction, to implement the reorganization of certain assets and liabilities of the Company relating to its technology solutions into a newly formed or selected subsidiary of the Company, to use reasonable best efforts to obtain regulatory consents, and, subject to certain customary exceptions, for the Company Board to recommend that its stockholders approve and adopt the Merger Agreement. The Merger Agreement also contains customary representations, warranties and covenants of Parent and Merger Sub, including a covenant to use reasonable best efforts to obtain the debt financing described below. The Merger Agreement contains a 50-day “go-shop” provision (which by its terms expired on May 17, 2024) that allowed the Company to, among other things, solicit, initiate, propose, induce, encourage, or facilitate discussions or negotiations with respect to Acquisition Proposals (as defined in the Merger Agreement). The Company has ceased such activities, and is subject to a customary “no-shop” provision that restricts the Company’s ability to, among other things, solicit Acquisition Proposals from third parties and to provide non-public information to, and engage in discussions or negotiations with, third parties regarding Acquisition Proposals after the “go-shop” period. The “no-shop” provision allows the Company, under certain circumstances and in compliance with certain obligations set forth in the Merger Agreement, to provide non-public information to any person and its representatives that has made a bona fide Acquisition Proposal that either constitutes, or would reasonably be expected to lead to, an Acquisition Proposal.

Parent and Merger Sub have represented that they will have sufficient cash at the Closing regardless of third-party financing, though have also secured committed debt financing to be provided by certain lenders (collectively, the “Lenders”) on the terms and subject to the conditions set forth in a debt commitment letter. The obligations of the Lenders to provide debt financing under the debt commitment letter are subject to a number of customary conditions.

The Merger Agreement contains certain termination rights for both the Company and Parent. If the Merger Agreement is terminated (1) by Parent as a result of the Company’s breach of its representations, warranties or covenants in a manner that would cause the related conditions to Closing to not be met and Company subsequently enters into an Alternative Acquisition Agreement and such transaction is subsequently consummated, or (2) as a result of the Company Board changing its recommendation and entering into an Alternative Acquisition Agreement and such transaction is subsequently consummated, or (3) if the Merger Agreement is terminated by Company in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal, the Company will be required to pay Parent a termination fee to Parent of $3,188,734. The Merger Agreement also provides that either party may specifically enforce the other party’s obligations under the Merger Agreement. In addition to the foregoing termination rights, and subject to certain limitations, the Company or Parent may terminate the Merger Agreement if the Merger is not consummated by September 28, 2024 (the “End Date”), provided that if all of the conditions to Closing other than the obtainment of the certain specified Insurance Regulatory Approvals have been satisfied or waived on or prior to the End Date, then the End Date shall automatically be extended to October 28, 2024 (“First Extension Date”), provided, further, that if all of the conditions to Closing, other than the receipt of approval from the requisite South Carolina Department of Insurance or requisite approval from the California Department of Insurance, have been satisfied or waived on or prior to the First Extension Date, then the First Extension Date shall automatically be extended to November 28, 2024. In the event that (a) the Agreement is terminated in accordance with the prior sentence and at the time of termination, all of the conditions to Closing have been satisfied or waived except for (i) any condition that is not satisfied due to breach by the Company of any representation, warranty, covenant or agreement in the Merger Agreement, (ii) the completion of certain specified transactions as contemplated by the Merger Agreement and (iii) conditions that by their nature can only be satisfied at or immediately prior to the Closing; (b) certain specified transactions have not been completed by June 26, 2024; and (c) the Company has not agreed to terminate the Agreement within five (5) days of Parent’s written notice to terminate, then the Company shall reimburse Parent for its reasonable and documented out-of-pocket expenses incurred between June 26, 2024 and the date of termination.

If the Merger is consummated, the Common Stock will be delisted from the New York Stock Exchange and deregistered under the Securities Exchange Act of 1934.

As of June 30, 2024, the estimated transaction costs directly attributable to the Merger are approximately $5.6 million, of which $1.0 million have been paid, consisting of advisory, legal, and other professional fees. Certain transaction costs totaling $5.0 million were deferred and are recorded in the prepaid expenses, deposits and other assets line in the condensed consolidated balance sheet.

Voting and Support Agreement

Concurrently with the execution of the Merger Agreement, LENX ST Investor, LLC and Len FW Investor, LLC (“Len FW,” and together with LENX ST Investor, LLC, the “Lennar Stockholders”), the Company and Parent entered into a Voting and Support Agreement (the “Voting and Support Agreement”), pursuant to which the Lennar Stockholders have agreed, among other things and subject to the terms and conditions set forth therein, to vote or cause to be voted all shares of Common Stock beneficially owned by the Lennar Stockholders (the “Voting Agreement Shares”) in favor of adopting the Merger Agreement and the transactions contemplated thereby, including the Merger.

The Lennar Stockholders hold, collectively, approximately 25% of the voting power of the Common Stock. Under the Voting and Support Agreement, the Lennar Stockholders have agreed to, among other things, (a) vote the Voting Agreement Shares in favor of the Merger, the adoption of the Merger Agreement and the transactions contemplated thereby and (b) vote against any Alternative Acquisition Agreement and any other action or agreement (including, without limitation, any amendment of any agreement), amendment of the Company’s organizational documents or other action that is intended or would reasonably be expected to materially prevent or delay the consummation of the Transactions, including the Merger. The Voting and Support Agreement will automatically terminate upon the earliest of (i) written agreement of the parties thereto to terminate the Voting and Support Agreement, (ii) the valid termination of the Merger Agreement in accordance with its terms and (iii) the Effective Time, and each Lennar Stockholder may terminate the Voting and Support Agreement as to itself upon the entry by the Company and Parent without the prior written consent of such Lennar Stockholder into any amendment, waiver or modification to the Merger Agreement that results in (x) a change to the form of consideration to be paid thereunder, (y) a decrease in the amount of Merger Consideration payable to the stockholders of the Company pursuant to the terms of the Merger Agreement as in effect on the date of the Voting and Support Agreement, or (z) an imposition of any material restrictions or additional constraints on the payment of the consideration thereunder.

Table of Contents

4. Investments and fair value measurements

Held-to-maturity debt securities

The cost basis, fair values and gross unrealized gains and losses of our held-to-maturity debt securities are as follows:

	*June 30, 2024*											*December 31, 2023*
	*Amortized*			*Unrealized*		*Unrealized*			*Fair*			*Amortized*			*Unrealized*		*Unrealized*			*Fair*
	*Cost*			*Gains*		*Losses*			*Value*			*Cost*			*Gains*		*Losses*			*Value*
Corporate debt securities⁽¹⁾	$	3,961		$	—	$	(108	)	$	3,853		$	13,786		$	—	$	(400	)	$	13,386
U.S. Treasury securities		3,051			—		(31	)		3,020			4,081			3		(37	)		4,047
Certificates of deposit		438			—		—			438			437			—		—			437
Total		7,450			—		(139	)		7,311			18,304			3		(437	)		17,870
Allowance for credit losses		(5	)		—		—			(5	)		(125	)		—		—			(125	)
Total, net of allowance for credit losses	$	7,445		$	—	$	(139	)	$	7,306		$	18,179		$	3	$	(437	)	$	17,745

(1) Includes both U.S. and foreign corporate debt securities.

The cost basis of held-to-maturity debt securities includes an adjustment for the amortization of premium or discount since the date of purchase. Held-to-maturity debt securities valued at approximately $2.3 million and $2.4 million were on deposit with various governmental authorities at June 30, 2024 and December 31, 2023, respectively, as required by law.

The change in net unrealized gains and losses on held-to-maturity debt securities for the six months ended June 30, 2024 and 2023 was $0.3 million and $0.7 million, respectively.

Table of Contents

Net realized gains of held-to-maturity debt securities are computed using the specific identification method and are included in the condensed consolidated statements of operations.

The following table presents certain information regarding contractual maturities of our held-to-maturity debt securities:

	*June 30, 2024*
Maturity			*% of*					*% of*
	*Amortized Cost*		*Total*			*Fair Value*		*Total*
One year or less	$	3,781		51	%	$	3,753		51	%
After one year through five years		3,669		49	%		3,558		49	%
Total	$	7,450		100	%	$	7,311		100	%

There were no held-to-maturity debt securities with contractual maturities after five years. Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Net unrealized losses on held-to-maturity debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

	*June 30, 2024*									*December 31, 2023*
	*Corporate*			*U.S.*						*Corporate*			*U.S.*
	*debt*			*Treasury*						*debt*			*Treasury*
	*securities*			*securities*			*Total*			*securities*			*securities*			*Total*
Less than 12 months
Fair value	$	—		$	—		$	—		$	—		$	999		$	999
Unrealized losses	$	—		$	—		$	—		$	—		$	(3	)	$	(3	)
Greater than 12 months
Fair value	$	2,914		$	1,709		$	4,623		$	13,386		$	1,736		$	15,122
Unrealized losses	$	(108	)	$	(31	)	$	(139	)	$	(400	)	$	(34	)	$	(434	)
Total
Fair value	$	2,914		$	1,709		$	4,623		$	13,386		$	2,735		$	16,121
Unrealized losses	$	(108	)	$	(31	)	$	(139	)	$	(400	)	$	(37	)	$	(437	)

We believe that any unrealized losses on our held-to-maturity debt securities at June 30, 2024 are temporary based upon our current analysis of the issuers of the securities that we hold and current market conditions. We have no intent to sell, and it is more likely than not that we will not be required to sell, these securities until the fair value recovers to at least equal our cost basis or the securities mature.

Doma Holdings, Inc. [DOMA] Filings
Doma Holdings, Inc. [DOMAW] Filings
10-Q	[2024-08-14]
10-Q	[2024-05-13]
10-K	[2024-04-01]
10-Q	[2023-11-09]
10-Q	[2023-08-08]
10-Q	[2023-05-09]
10-K	[2023-03-08]
10-Q	[2022-11-10]
10-Q	[2022-08-10]
10-Q	[2022-05-11]
10-K	[2022-03-04]
10-Q	[2021-11-10]
S-1	[2021-08-19]
10-Q	[2021-07-27]
10-Q	[2021-05-17]
10-K	[2021-03-01]
S-1	[2020-11-04]

Doma Holdings, Inc. [DOMA] Filings

Doma Holdings, Inc. [DOMAW] Filings