Stewart Information Services' (STC) CEO Matt Morris on Q1 2016 Results - Earnings Call Transcript

| About: Stewart Information (STC)

Stewart Information Services Corporation (NYSE:STC)

Q1 2016 Earnings Conference Call

April 21, 2016, 08:30 AM ET

Executives

Nathaniel Otis - Director of Investor Relations

Matthew W. Morris - Chief Executive Officer

J. Allen Berryman - Chief Financial Officer

Analysts

Chas Tyson - Keefe, Bruyette & Woods , Inc.

Geoffrey Dunn - Dowling & Partners Securities LLC

Ryan Byrnes - Janney Montgomery Scott LLC

John Campbell - Stephens Inc.

Patrick Kealey - FBR Capital Markets & Co.

Kevin Kaczmarek - Zelman Associates, LLC.

Operator

Good day and welcome to the Stewart Information Services’ First Quarter 2016 Earnings Conference Call and Webcast. Today’s call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation.

I would now like to turn the call over to Nat Otis, Director of Investor Relations. Please go ahead.

Nathaniel Otis

Thank you Keith. Good morning. Thank you for joining us for our first quarter 2016 earnings conference call. We will be discussing results that were released earlier this morning. Joining me today are CEO, Matt Morris and CFO, Allen Berryman. To listen online, please go to the stewart.com website to access the link for this conference call.

I will remind participants that this conference call may contain Forward-Looking Statements that involve a number of risks and uncertainties, because of such statements are based on an expectation of future financial operating results and are not statements of fact, actual results may differ materially from those projected.

The risk and uncertainties with forward-looking statements are subject to include, but are not limited to the risks and other factors detailed in our press release published this morning and in the statement regarding forward-looking information, risks factors and other sections of the Company’s Form 10-K and other filings with the SEC.

Let me now turn the call over to Matt.

Matthew W. Morris

Thank you Nat and good morning. We appreciate everyone joining us today. This morning, we reported first quarter 2016 earnings with our title segment delivering another quarter of solid results, with our corporate and other segment remains challenged by the delinquent loan servicing operations.

As of the end of the first quarter and on-schedule, we have completed the exit of those operations allowing greater focus on growth and efficiencies and our remaining business line specifically our title business. At the consolidated level, our first quarter 2016 revenues fell 2% with total title revenues increasing 2% and mortgage services related revenue declining 46%, principally due to the delinquent loan servicing revenue runoff.

Overall, operating revenues declined 3%, we did report a pre-tax loss of $15.7 million in the first quarter, while last year’s first quarter reported a pre-tax loss of $18.9 million. Relative to last year’s first quarter, we did benefit from our cost management program completed in third quarter 2015 with total employ costs declining at a much higher rate than the decline in operating revenues. Both quarters include non-operating charges, which Alan will describe more thoroughly in a moment.

First, however, let me describe the change to our segment reporting. A change which more closely aligns our public reporting with changes at our underlying lines of business and which better provides comparability with industry participants. Effective this first quarter 2016, we are revising the presentation of our operating segment to reflect two segments title and corporate and other. We previously had three segments, separately reporting our various mortgage services related operations with that segment including the results of our centralized title services.

During the first quarter, we restructured and streamlined the management team over the mortgage services business lines and as a results, we’re able to adopt a more appropriate segment structure. Our centralized title services business is now included in the title segment, thereby aligning all title related revenues into a single segment. The remaining business lines within the former mortgage services segment, principally valuation services, government services and loan file review and audit are now included in the corporate and other segments as they are not material for separate disclosure.

Also costs of our centralized internal services departments previously only partially allocated out of the corporate segment are now fully charged to the respective operating businesses. Corporate operations now consist principally of the parent holding company and certain other enterprise-wide overhead costs.

Our title segment results for the quarter continued to show year-over-year improvement in pre-tax margin, generating positive operating earnings in what is traditionally the weakest revenue quarter of the year. In addition, such facing headwinds stemming from declining refinance volume and continued industry-wide challenges related to the new integrated disclosure requirements. Our residential revenue, which are by far the majority of our direct revenue were us about 1%.

Domestic commercial revenues continued to show year-over-year growth and our independent agency operations reported solid increases in both gross revenues and remittance rates. International revenue continue to face the challenges of strong U.S. dollar, but were up on a local currency basis. However, our centralized title operations were strongly affected by 28% decline in revenues.

Revenues generated by our corporate and other segment declined 40% relative to last year’s first quarter due to the runoff of revenues in the delinquent loans servicing business. The other lines of business in this segment generated modest revenue growth and we continue to generate new sales opportunities to these businesses while focusing on enhancing production systems to lower operational cost. Our goal here remains a return to profitability in the second quarter with margin growth on-track for further improvement in the back half of the year.

Looking forward, we are mindful of falling refinance volume and we are investing in operational improvement to lower unit production cost and enhance contribution margins. Specifically in our centralized title operations. We are also investing in revenue growth including high quality sales associates as well as the supporting infrastructure and we are encouraged by the results so far in our targeted markets.

As we have previously stated, a changing regulatory environment and its impact on customer requirements may also enable highly accretive acquisitions in our core title business. Coupled with our successful cost management program, further centralization, off shoring and technology rationalization over the next few years will help us move towards our ultimate goal at the 10% pretax margin upon a return to a more normalized origination market.

With that, I’ll now it over to Allen for more detail on our financial results.

J. Allen Berryman

Thank you Matt and good morning everyone. Total operating revenues decreased 3% in the first quarter of 2016 compared to the year-ago quarter with title revenues increasing 2% and mortgage services revenues decreasing as expected about 46% due to the wind down of the default servicing business. We recorded several non-operating charges during the quarter and I want to summarize them here, so that’s in context for the quarter’s overall results.

We incurred approximately $2.8 million of COGS in the corporate and other segment relating to the exit of the delinquent loan servicing operations, consisting principally of early lease termination charges, severance and accelerated amortization expense. We recognized approximately $6.4 million of charges in total related to the exit of these operations in line with our previously disclosed estimate of $5 million to $7 million.

We also incurred in the corporate and other segment $2.2 million of expense related to the pending Class B common stock conversion and the previously disclosed life insurance settlement. We realized a net $1.6 million gain due to the changes in estimated contingent consideration associated with certain prior year acquisitions, with a realized gain of $3.6 million recorded in the corporate and other segment and a realized loss of $2 million recorded in the title segment.

First quarter 2015 results included approximately $8.5 million of aggregate cost recorded primarily in the corporate and other segment related to the cost management program and shareholder settlement and $11.8 million of reserves strengthening charges in the title segment related to the large losses on prior year title policies.

So with that background, let me turn to our business unit results. Our title segment revenues which now include revenues from our centralized title services were $413.3 million for the first quarter 2015 an increase of 2%. In the first quarter of 2016, the title segment generated a pre-tax loss of $1 million or a negative 0.2% margin including the previously described $2 million realized loss.

First quarter 2015 recorded a pretax loss of $11.4 million or a negative 2.8% margin, excluding the impact of the aforementioned reserves strengthening charge, first quarter 2015 title segment results were essentially breakeven. With respect to our direct title operations, revenues decreased 2% from first quarter of 2015. Centralized title revenues fell 28% compared to the prior year quarters.

Revenues from purchase transactions increased approximately 1% compared to the prior year quarter. U.S. only commercial revenues increased 5% to $38.7 million compared to the first quarter of 2015. Total worldwide commercial revenues for the quarter were $42.7 million, an increase of 4%.

International commercial revenue unfavorably impacted by a strengthening U.S. dollar were comparable with the first quarter of 2015. Total title orders opened in the first quarter declined 21% from the prior year quarter with opened refinanced orders decreasing 39% and opened commercial orders decreasing 22%. Overall, title orders growth declined 13% from first quarter of 2016 with a drop primarily due to declines of 24% in both refinancing and commercial orders closed.

Purchase orders close were essentially unchanged from the prior year. Residential fee profile in the quarter was 1918 up from 1771 in the first quarter of 2015 due principally to the shifting mix for more purchase transactions. First quarter of 2016 total international revenues increased on a local currency basis, but were unfavorably impacted by a stronger U.S. dollar. On a U.S. dollar basis, revenues were $18.8 million comparable to the $18.7 million generated in the first quarter 2015.

Our independent agency operations generated strong results with first quarter of 2016 growth revenues increasing to $224.6 million or 5%. The overall average remittance rate improved 18.2% in the first quarter of 2016 from 17.5% in the prior year quarter resulting in net independent agency revenues increasing 9%. We anticipate our ongoing remittance rates to be in the mid 18% range.

With respect to title losses, we incurred $23.1 million in the first quarter of 2016 or 5.6% of title revenues compared to $33.1 million or 8.2% of title revenues in the prior year quarter. The decrease in title loss expense was primarily the result of an $11.8 million title policy loss reserve strengthening charge relating to several large prior year policies recorded in first quarter of 2015.

We expect to maintain an accrual rate in the 5% to 5.5% range on a full-year basis going forward. Our total balance sheet policy loss reserves were $466.4 million at quarter end and remained above the actuarial at midpoint of total estimated policy loss reserves.

Looking at our corporate another segment, revenue decreased 40% to $25.1 million compared to a year-ago quarter. First quarter of 2016 revenues include net realize gains of $2.5 million, while the comparable number for first quarter 2015 was $1 million. Relative to the first quarter 2015, the revenue decline is primarily attributable to expect to declines within our delinquent loan servicing operations.

The segment reported a pre-tax loss of $14.7 million in the first quarter of 2016 as compared to pre-tax losses of $7.5 million in the first quarter of 2015. Included in the pre-tax loss for the first quarter of 2016 is approximately $5.6 million of expense attributable to parent company corporate overhead, as well as approximately $5 million in non-operating charges described earlier. First quarter of 2016 results, also include litigation related expense of approximately $3.6 million as well as approximately 800,000 of operating losses associated with the delinquent loan servicing operations.

Going forward, the revenues related to valuation services will be predominantly aligned with the mortgage origination cycle. This business [belong] (Ph) with loan file review and audit and government services generated modest revenue growth in the quarter and generated positive EBITDA for the quarter on a run rate basis.

As Matt mentioned earlier, the restructuring of our management team were focused on improving business fundamentals and new sales opportunities for these businesses, while enhancing production systems to lower operational costs. Our goal continue to be for each of these business lines return to profitability in the second quarter with margin growth in the back half of the year.

With respect to operating expenses as a result of our cost management program as well reductions in workforce due to lower revenue employee costs for the first quarter of 2016 increased 8% from first quarter of 2015, while average employee counts decreased approximately 7%. Excluding the impact in severance in both periods, employee costs fell 7% compared to 3% decline in operating revenues.

As a percentage of total operating revenues, employee cost were 34.7%, an improvement of 190 basis points compared to the prior year quarter. Other operating expenses for the first quarter of 2016 decreased 1%. During the quarter, we incurred other operating expenses of $2.2 million consistent a professional fees associated with the pending conversion of Class B common stock as well as the previously reported life insurance settlement.

First quarter of 2016 other operating expenses, the majority of which are fixed in nature and now include outsourcing fees incurred in lieu of employee expense were also unfavorable influenced by litigation related expenses of $3.6 million.

Other operating expenses for first quarter of 2015 increased $7.4 million in non-operating charges related to the cost management program and shareholder settlement. Excluding such charges in both periods as well as the first quarter litigation expenses, other operating expenses as a percentage of operating revenues were 18.9% and 18.3% in first quarter’s 2016 and 2015 respectively.

With the first quarter 2016 ratio being unfavorably influenced by the new outsourcing costs as well as lower operating revenues. Depreciation and amortization expense increased $8.3 million in the first quarter of 2016, from $7.1 million in the first quarter of 2015 mainly due to $1.1 million of accelerated depreciation charges related to exit the delinquent loan servicing operations.

Lastly, a couple of comments on other matters. Cash used to operations was $31.8 million in the first quarter 2016 compared to $26.9 million for the same period in 2015. The increase in cash used by operations was due to an increase in payment to claims and other liabilities, partially offset by increased collections on accounts receivable and the lower net loss for the first quarter.

As of quarter end, cash at the parent holding company is $5.1 million. With regards to continued cost management, our focus is on those actions that will lower unit cost to production that’s improving margins. And as we have said, our goal is to achieve a 10% pretax margin in a more normalized origination market whenever that maybe.

Our plan to improve margins includes further outsourcing, additional automation and manual processes and further consolidation of our various systems and production operations. We are currently investing in the technology necessary to accomplish these goals. As this multi-year effort is deployed, the company expect to begin achieving a lower cost profile starting in 2017 further improvement through 2019.

We expect to provide additional information as to the percent of savings achieved on a cost per file basis in the first quarter of 2017. And with that I will turn it back over to the operator to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we can take our first quarter from Bose George with KBW. Please go ahead.

Chas Tyson

Hey guys good morning. This is actually Chas Tyson on for Bose. First question is on the commercial results, it looks like the opened and closed orders were down a fair amount year-over-year, but revenues were fairly flat. I was just wondering if you could give some color there and also what you are seeing in the commercial market.

Matthew W. Morris

Yes. Great question. Q1 was a tough comp hurdle to overcome and we are seeing a little weakness in order trends to start of the year, but we remain pretty comfortable with our expectations for growth in the commercial business at 2016. And I would also point out that our commercial revenues were up even though orders were down materially.

So looking forward beyond 2017, we remain positive on the commercial business, certainly refinancing plays a role on this view, although we understand it will begin to slow down at some point, we will also move to a more normalized mix of business then as well. So we continue to see growth in commercial moving forward.

Chas Tyson

Okay. And was the higher revenue for order in this quarter, was that just due to larger transaction is closing or?

J. Allen Berryman

You are talking about the higher fee profile?

Chas Tyson

Yes, yes, yes.

J. Allen Berryman

I think it was…

Matthew W. Morris

I don’t think it was high.

J. Allen Berryman

Yes.

Chas Tyson

I just wonder if orders are down year-over-year, but revenues really flat.

J. Allen Berryman

I mean our commercial team did note that pricing held up pretty well in the first quarter moving out of the fourth quarter it held up really well in the first quarter so upon the closings and...

Matthew W. Morris

Yes. The closings,, we’re still strong, that was more than order count. So different quarter matching at your closing to order counts.

Chas Tyson

Okay. And then do you guys have an estimate on the margins of the commercial revenues versus just margins overall in the title segment?

J. Allen Berryman

We’ve said before, there are about double what we would expect on a residential transaction. You know obviously we can have a given deal being much, much higher or a given deal being in that sort of twice the margin range. So it all really - a lot of it is a function of what level of liability you are taking on, because the incremental pricing on the higher liability deals just drives high incremental margins.

Chas Tyson

Okay and then last one, I think my calculation is always just had liquidity ratio look like at the end of the year it was over your 100% target. Can you talk about how that affects your go-to-market offering on the commercial side as well as how that makes you think about your capital priorities going forward?

Matthew W. Morris

Well I mean it was barely over right, I think it is at the 103%, so it wasn’t a big leap over 100%. It does help on the marketing front in the sense of that just one last thing that can be used against us. Going forward I don’t see us thinking it has to be materially higher than that 103%, although we have to be mindful of what our competitors are doing, so that we don’t end up in a disadvantage position again.

Chas Tyson

Okay. Thank you.

Operator

We will take our next question from Geoffrey Dunn with Dowling & Partners.

Geoffrey Dunn

Thank you. Good morning. I wanted to revisit the commercial, the fee profile has been climbing pretty steadily on a year-over-year basis for the last few quarters. So is it just that you are taking on higher liability deals or is the deal size or is it a combination of both, because that seems to be the real driver her of the revenue gains that you have been posting in that segment?

J. Allen Berryman

Yes, I would say it’s a combination of both, the progress in geography in there as well. So I mean I think you are accurate. I think that one has driven it more than the other, let’s just put it that way. I think it’s as you said its probably the higher liability amounts that we’re able to take on which drives higher pricing.

Matthew W. Morris

And I will say Geoff just on that. I mean this is not one-time transactions, since we are not seeing that this is being driven by huge commercial transactions, but overall transactions are out. So we don’t see it as -it’s not one-timers that are driving that as much the overall commercial market.

Geoffrey Dunn

Okay. And then when you look at the open and close on the commercial there has been a trend over the last year of the decline although it bounces around. So I know every time a company has been talking about that we’re approaching a slow down to a more reasonable growth levels, but as we think to not this year and next year, but into 2018 and 2019 when you start getting the 10-year bullet resets off the 2008 and 2009 books. How do we think about the impact of a drop in the refi market impacting the overall growth profile of commercial? Well what percent of commercial right now is refi and how do you think about how that impacts your growth in 2018 2019?

Matthew W. Morris

Yes. I mean we its think about 25% refi at the moment, I haven’t seen anything that’s more specific than that but obviously you are right. We have all seen as an industry sort of a deceleration of growth in the commercial business, but at the same time we think it’s pretty strong relative to historical standards and will be for the next couple of years.

Geoffrey Dunn

And in terms of 2018 and 2019 though, I mean how do we think about the refi volume dropping there?

Matthew W. Morris

No I don’t know that I have a view on that at the moment. I think we kind of expect an ongoing certain level of refi in the commercial world, not as high as we’re seeing today, but there is always some level of refinancing activities in the commercial world.

Geoffrey Dunn

Okay. And then my final question…

Matthew W. Morris

Remember that you should get better pricing on resale transactions in the commercial world just as you do in the residential world. So even if the refinancing transaction fall, the fee profile should be going up.

Geoffrey Dunn

Okay. Great. And then obviously reshuffled around corporate and mortgage services. Can you revisit how we think about I guess run rate revenue from here, you got potential deceleration if it’s linked to volume, but the prior kind of margin expectation, I'm not sure if they still hold because you have other corporate expense mix. So can you just give us a little bit update on how to think about the revenue and margin normalized run rate looking forward?

Matthew W. Morris

Let me address it backwards. Let me start from the back. So in the corporate and other segment, the corporate cost that are included in that are really now just sort of a public company cost and those probably are in the $20 million to $25 million a year range. So on a ongoing basis on the revenue side, it’s really just our loan file review and audit, government services and the valuation services business. So I think the valuation services kind of ebbs and flows essentially as the origination cycle does.

So on that basis, I think what you will see in Q2 is probably a much more normalized run rate on a revenue perspective. From a margin perspective as we said, we think that that business needs to improve its margins, with solid improvement in Q1 and kind of the ongoing businesses they were operating going forward and we’re just going to drive to a higher margin in those businesses from second quarter onwards.

Geoffrey Dunn

Alright. So maybe to think about it upper single-digit margin on the revenue line plus $20 million to $25 million expense rate for corporate?

Matthew W. Morris

I would say, it’s sort of our near-term goal.

Geoffrey Dunn

Okay. Alright, thank you.

Operator

We’ll go next to Ryan Byrnes with Janney. Please go ahead.

Ryan Byrnes

Thanks. Good morning everybody. Again, just thinking with the re-segment piece. So the title segment under the previous accounting had I guess 12.5% margin. Now under the new re-segmenting it’s a 4% margin and I think the only thing that really changed the title segment was adding the centralized refi. So is it fair to say that the centralized refi is running on a materially lower margin and I guess than the…

Matthew W. Morris

There were two changes. The first change to the title segment was adding decentralized refi, but the second change was the allocation of the centralized internal services departments to that title segment. So that was both changes obviously had an impact on the margin of the title segment.

Ryan Byrnes

Okay. And then secondly again in terms of where we think, we can get this to in a normal market or I guess where should we expect these margins to go?

Matthew W. Morris

I think to answer that question is what we’ve said repeatedly that we’re driving towards a consolidated margin of 10% on a normalized market and that’s our objective.

Ryan Byrnes

So 10% for the title segment or actually consolidated, just want to make sure you have it consolidated.

Matthew W. Morris

Right.

Ryan Byrnes

Okay. Great. Sorry, that’s all I had. Thanks guys.

Matthew W. Morris

Thank you.

Operator

We’ll go next to John Campbell with Stephens.

John Campbell

Hi guys. Good morning.

Matthew W. Morris

Good morning, John.

John Campbell

So congrats on the successful wind down of the default related business, I know that’s been kind of long and arduous path, but just looking for two things related to that shift. Allen, I think somebody just asked this question, but can you help us out a little bit on the margin, just the remaining origination related business under that former mortgage services segment. I think it was maybe kind of high single-digits maybe low double-digits pretax margin, does that still hold?

J. Allen Berryman

Yes.

John Campbell

Okay. And I don’t know if you have this…

J. Allen Berryman

That includes their share of the corporate allocation.

John Campbell

Okay. That makes sense. I don’t know if you have this on hand, but what would have the total mortgage services margin been under the former reporting structure in the quarter?

J. Allen Berryman

You know, I don’t have that.

John Campbell

That’s fine, that’s fine.. And then just one more back in the commercial growth, I mean 4% growth of that 20% plus type comp last year, that was a pretty good result in review. Could you guys provide a little bit of sense for the strength and weakness by geographies? Just mainly looking or just kind of curious about Texas or New York maybe just Manhattan?

J. Allen Berryman

We don’t know that we have that right now. I mean there are some anecdotal, but we do have great evidence on the geographic mix of that order is coming any differently that has in the past so.

John Campbell

Okay. I guess there is just some concern that Manhattan a particular might be slowing down and then you have got some potential order, energy pressure in Texas. So maybe just anecdotally, if you can just maybe start with Texas, what you guys seen commercial and residential side as well?

J. Allen Berryman

Well as to the residential side, I mean there has been slowing of transactions in the Houston area, but the other metro areas of Texas being Austin, San Antonio, Dallas have held up pretty well on the residential side. And even within Houston you have a different outcome depending on where you are. The Northern side of the city seems to have had the more pronounced slowdown whereas the southern half of the city down along the coast line where there is a lot of expansion petrochemical complexes are seeing pretty good residential activity. On the commercial front, clearly there is a slowdown in the Houston area, but I don’t have any specific numbers on that.

Matthew W. Morris

And John not to be too resi with the picture, but for a while we really haven’t had this very impression where commercial prices are heading and now you have that. So again, anecdotally you are starting to see some conversation take place, because you do have people with different impressions about how commercial is going to grow and I think that’s starting to drive at least some conversations on commercial transactions just giving differing opinions out there, which really we haven’t seen in the market for a few years.

John Campbell

Got it. And then just last one here on TRID, I saw in the press release you guys think that is going to kind of dissipate I guess in the TRID related call. So we will roll-off a little bit for the back-half of the year, but can you just talk kind of conceptually about what type of costs are coming off that you guys can isolate? What was maybe TRID related in the quarter and then any kind of commentary on the normal vision of the closing cycle?

J. Allen Berryman

Yes, and I think a lot of it - I mean it’s hard to calculate because a lot of the cost remaining are labor, the industry is still experiencing some challenges on the technology and integrations overall. But what that is yielding for us, I mean most of our technology changes are complete, continue to update those, but the training is out there, our hard costs are done, it’s basically the extension of the closing time that we do see continuing to fall. I don’t expect to have that be remaining impact, I think it would be nominal in Q2 and beyond, but it has been a factor in slowing down closing times and also kind of extending your labor cost and getting us close to complete.

John Campbell

Okay. Great. Thanks guys.

Operator

We’ll go next to Patrick Kealey from FBR.

Patrick Kealey

Good morning, thanks for taking my questions. So first off, I think Matt you talked about your prepared remarks that the regulatory backdrop and actually create some opportunities for consolidation within the industry. So maybe if you could give us kind of your thoughts on you as an acquirer, what you would be looking for in a potential deal and then also when you think of timeline? How long should we think of that before we could start just seeing maybe deals coming to market?

Matthew W. Morris

Yes. We look at - obviously we’ve done pretty significant transformation of our title operations and there are certain segments of geographies that could have some market share gains that would be highly accretive overall. So we haven’t published our target externally for obvious reasons, but we do think it could be highly accretive and we think it can start taking place within the next 12-months to 18-months going forward.

So we think we’re in a solid position with a solid platform, again some of your kind of business we talked about with increased regulation, increased cost, some smaller players make that more challenging and so leveraging platform allowed us to be much more accretive in any potential acquisition. So we hope to start seeing some of that in the next 12-months.

Patrick Kealey

Okay, great. And also just focusing on agency here, you talked about again your improvement in remittance rates. I know in the past, you had talked about push for better remitting states in your mix. So when I think about that improvement this quarter, was that the primary driver or was there anything else we should be thinking about that help drive that improvement for 1Q?

J. Allen Berryman

Yes, I think that’s the primary driver and I mean you really have to think - when I think of the remittance rate I really don’t look at a specific quarter as an indicator of what the trend maybe over the longer term. I kind of always look at it on a trailing 12-months basis. So if I look at the remittance rates based on revenues and agent retention on a trailing 12 basis and then compare that with the prior trailing 12, you get a better picture of the trends.

So in this case when you do that comparison, you do see nice growth in certain states, Pennsylvania, Florida that have had historically had a higher remittance rate. So that just blends the average output and as we’ve said our agency team has been on focused on growing revenues in those states that has the higher remittance rates. In Q1, I think they have the nice traction of that.

Patrick Kealey

Okay. Great. Thanks for the time.

Operator

[Operator Instructions] We will go next to Kevin Kaczmarek of Zelman & Associates.

Kevin Kaczmarek

Hey guys. I was just wondering - I guess maybe you answered this indirectly, but on the commercial side, do you have a sense of the dollar amount of sales in orders and how that’s trended year-over-over versus as seen the order counts obviously, but do you have a sense of the dollar backlog?

J. Allen Berryman

I mean if I just say that based on the trends and average revenue per transaction, I would say that the dollars are probably higher than they would be. I don’t have specific data on this.

Kevin Kaczmarek

Okay. In terms of attempting to gain share within commercial, are there any particular customer types you have been targeting and is there is any - can you give us a sense of who you have been gaining traction with any type of buyer, whether it’s private equity or some other type of buyer, any particular progress there?

Matthew W. Morris

Yes, I mean we had different teams targeting different segments. Obviously, I mean we have seen yet some success on the renewable side again with the stronger ratings, with the stronger liquidity ratio. I think we’ll start to see more improvements in some of the life insurance companies that has been more constraint for. So overall, I’m looking right now, I can’t think one segment is necessarily putting us over the top going forward but I look at two areas which I have seen some growth just anecdotally that would be them.

Kevin Kaczmarek

Okay and in terms of M&A, are you mostly thinking about when you talk about the accretive acquisition. Are we talking mostly local title agents or do you consider smaller title insurers or maybe other businesses such as appraisal?

Matthew W. Morris

We would be focusing more on title business. That’s where we see we can be most accretive than potential acquisitions. Obviously the title agents probably are the most apt to - have better piece on the platforms, so that’s probably the most feasible model, but I think we would be open to looking at various options.

Kevin Kaczmarek

Okay. And I guess one last one. On the purchase order trend, it seems like, especially on the open side it’s been kind of flattish to negative for you and it seems to be the title industry overall. But application service indicates that they are growing like high single, double-digit percent growth year-over-year. And I know the difference is there is a cash sale component within your purchase orders. But it seems like a little too large of a split to be explained by that. Do you know why you guys would be trending lower in terms of open purchase orders versus some of the other metrics that people are looking at in the market?

Matthew W. Morris

No. Not really.

Kevin Kaczmarek

Do you know the percent of cash sales versus mortgage purchases roughly and whether how that’s trended?

Matthew W. Morris

I think the last data I saw was that cash sales were still probably in that 20% to 25% range.

Kevin Kaczmarek

Okay. Alright.

Matthew W. Morris

So a little higher than you would expect by historical standards.

Kevin Kaczmarek

Okay. Thanks a lot. That’s all I had.

Matthew W. Morris

Okay.

Operator

And it appears we have no further questions at this time. I’ll return the floor to Nat Otis for closing remarks.

Nathaniel Otis

Thanks Keith. That concludes this quarter’s conference call. Thank you for joining us today and your interest in Stewart. Our next earnings call will be on July 21. Good-bye.

Operator

Ladies and gentlemen this does conclude today’s program. Thanks for your participation. You may now disconnect and have a great day.

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