gross margin – Stormbirds http://stormbirds.net/ Sat, 19 Mar 2022 16:01:22 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://stormbirds.net/wp-content/uploads/2021/07/icon-2021-07-05T151758.466-150x150.png gross margin – Stormbirds http://stormbirds.net/ 32 32 Amcor stock: 4.4% return should be safe as Co. tackles inflation (NYSE:AMCR) https://stormbirds.net/amcor-stock-4-4-return-should-be-safe-as-co-tackles-inflation-nyseamcr/ Sat, 19 Mar 2022 16:01:22 +0000 https://stormbirds.net/amcor-stock-4-4-return-should-be-safe-as-co-tackles-inflation-nyseamcr/ NoDerog/iStock Unpublished via Getty Images introduction of Amcor (New York Stock Exchange: AMCR) the stock price is currently trading at almost exactly the same level as a year ago despite a nice double-digit increase in the stock price throughout the year. The packaging giant is now dealing with the impact of inflation on its profits […]]]>

NoDerog/iStock Unpublished via Getty Images

introduction

of Amcor (New York Stock Exchange: AMCR) the stock price is currently trading at almost exactly the same level as a year ago despite a nice double-digit increase in the stock price throughout the year. The packaging giant is now dealing with the impact of inflation on its profits and although it has been able to maintain a relatively stable net profit, margins are shrinking as it takes some time before the price increases can absorb the impact of rising raw material costs.

Amcor

Yahoo finance

Revenues are growing rapidly, but margins are shrinking

The company’s fiscal year ends in June, which means that the most recent results released by the company cover the first half of fiscal 2022, ending in December. Total revenue grew to exceed $6.9 billion in 2021, but as COGS grew at a faster rate, gross profit actually declined. While Amcor generated gross profit of $1.3 billion on revenue of $6.2 billion in 2020, gross profit was approximately $1.295 billion, or a gross margin of 18 .7%. That still looks good, but it’s a noticeable decrease from gross margin in the first half of fiscal 2021.

income statement

Amcor Investor Relations

The situation was a little worse in the second quarter with a gross margin of only 18.40%, but Amcor also saw a reduction in its SG&A expenses and restructuring expenses and these elements helped Amcor report a slight increase in the result of operating in the second quarter as well as the first half of 2021. Net interest expense is also declining and Amcor reported net income attributable to Amcor shareholders of $427 million, or $0.28 per share. This is a slight increase compared to the same period last year, but it is clear that the improvement was mainly fueled by a decrease in restructuring expenses.

Fortunately, Amcor’s capital expenditures tend to be lower than depreciation expenditures, which generally raises the free cash flow result to a level above reported net income.

In the first half of fiscal 2022, Amcor reported operating cash flow of $323 million, but that includes a $525 million investment in working capital and excludes $2 million in lease payments. . On an adjusted basis, operating cash flow in the first half was approximately $846 million. And with a total capex of $255 million, the underlying free cash flow result was $591 million.

Cash flow statement

Amcor Investor Relations

That’s higher than reported net income thanks to the $80 million difference between depreciation expense and actual capital requirement. Additionally, the income statement also included $31 million of non-cash stock-based compensation.

What does this mean for the dividend?

Amcor currently pays a quarterly dividend of $0.12 per share, which translates to a current dividend yield of approximately 4.4%. It’s very attractive and the dividend yield is fully covered by both earnings and the underlying free cash flow. Based on the current number of shares, total free cash flow per share in the first half of the current fiscal year was approximately $0.39, which means the payout ratio is just over 6 %.

Amcor also continues to repurchase its own shares and over the past six months the company has spent more than $400 million to repurchase and cancel its own shares. During the first half of the financial year, the company repurchased 25 million of its own shares while the Treasury bought an additional 11 million shares to compensate for the exercise of stock options.

Share redemption progress

Amcor Investor Relations

This means that the current net number of shares has fallen from 1.56 billion shares at the end of June 2020 to only 1.51 billion shares at present, Amcor having repurchased 4% of its number of shares. This reduces the need for cash to cover its dividend (the quarterly dividend now costs the company just over $180 million per quarter) and the ongoing buyback and cancellation plan will allow Amcor to increase its quarterly dividend without see its cash outflows increase.

Capital allocation

Amcor Investor Relations

Investment thesis

So while Amcor doesn’t look cheap given the EPS performance, revenue-focused shareholders shouldn’t worry about the dividend as it’s still largely covered by both earnings and cash flow. available. Amcor is using its excess free cash flow to buy back its shares, which will further improve the dividend coverage ratio.

I currently don’t have a long position in Amcor but I am watching option premiums to take advantage of higher levels of volatility while waiting for Amcor to pass on its higher operating costs to its customers.

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Investments in skincare offset drop in makeup https://stormbirds.net/investments-in-skincare-offset-drop-in-makeup/ Tue, 15 Mar 2022 01:37:25 +0000 https://stormbirds.net/investments-in-skincare-offset-drop-in-makeup/ The Chinese beauty company announced that total net revenue for 2021 rose 11.6% to RMB 5.84 billion ($916.4 million), while gross profit rose 15.9% to reach 3.90 billion RMB ($611.8 million). This is despite the drop in net sales and gross profit recorded in the fourth quarter (Q4). Total net revenue for the fourth quarter […]]]>

The Chinese beauty company announced that total net revenue for 2021 rose 11.6% to RMB 5.84 billion ($916.4 million), while gross profit rose 15.9% to reach 3.90 billion RMB ($611.8 million).

This is despite the drop in net sales and gross profit recorded in the fourth quarter (Q4).

Total net revenue for the fourth quarter of 2021 decreased by 22.1% to RMB 1.53 billion (US$239.8 million) and gross profit decreased by 23.7% to RMB 993 million ( US$155.8 million).

The drop was mainly due to lower sales of its color cosmetics brands, including Perfect Diary and Little Ondine. Fourth quarter challenges resulted in a 2.3% decline in net sales in 2021.

“The fourth quarter was a challenging quarter, marked by weak consumer demand and intense competition in the color cosmetics segment,”said Huang Jinfeng, Founder, Chairman and CEO of Yatsen.

However, this was partially offset by the 327.7% increase in total net revenue from its skincare brands, which include Abby’s Choice, Galénic, DR.WU and Eve Lom​.

“Despite the challenges, we increased our full-year revenue and gross margin, driven by significant growth in our skincare brands,” Huang said.

Over the past two years, Yatsen has expanded its skincare portfolio in anticipation of the easing of the color cosmetics category in China.

The company debuted in skincare with the launch of Abby’s Choice in June 2020. The brand was developed using data and insights gathered from its existing consumer base.

The company followed up with the acquisition of French skincare brand Galénic in October of the same year.

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Hypebeast Limited (0150.HK) – A profitable growth stock on the cutting edge of the latest fashion trends https://stormbirds.net/hypebeast-limited-0150-hk-a-profitable-growth-stock-on-the-cutting-edge-of-the-latest-fashion-trends/ Sun, 13 Mar 2022 00:30:39 +0000 https://stormbirds.net/hypebeast-limited-0150-hk-a-profitable-growth-stock-on-the-cutting-edge-of-the-latest-fashion-trends/ According to Merriam Webster, the word, Hypebeast, generally refers to a person who is dedicated to acquiring trendy items, especially luxury clothes and shoes. Typically, they will carry a mix of streetwear names such as Supreme, Off-white, Antisocial Social Club and Bape. In a 2019 article by Strategy&, he mentioned that streetwear has become one […]]]>


According to Merriam Webster, the word, Hypebeast, generally refers to a person who is dedicated to acquiring trendy items, especially luxury clothes and shoes. Typically, they will carry a mix of streetwear names such as Supreme, Off-white, Antisocial Social Club and Bape.

In a 2019 article by Strategy&, he mentioned that streetwear has become one of the most striking retail and fashion trends in recent years. Consumers have often rallied through social media to be the first to buy products from a particular brand, either in-store or online. The anticipation of a limited-time shopping opportunity helps create a close, almost cult-like relationship between streetwear brands and their consumers.

Source: Strategy&

This helped transform streetwear from an eye-catching fashion phenomenon into a multi-billion dollar retail market today. A company that stands at the forefront of this trend would be Hypebeast Limited (0150.HK).

From a sneaker blog to a publicly traded digital media empire

Hypebeast was founded by Mr. Kevin Ma Pak Wing in 2005, which first started as a sneaker blog. In 2016, Hypebeast was listed on HKEX’s secondary board, Growth Enterprise Market (GEM), and later transferred its listing status to HKEX’s parent board in 2019.

Currently, Ma is the largest shareholder of the company (73.70% stake) and serves as the Executive Chairman and CEO of Hypebeast.

What began as a personal passion project, Hypebeast has since evolved into a digital media and e-commerce group on the cutting edge of fashion and culture. The group comprises three major divisions:

  • HYPEMEDIA (Online editorial and social media platform)
  • HBX (e-commerce platform and offline store)
  • HYPEMAKER (In-house creative production agency)

Achieved awards, cooperation with Avex Entertainment

Hypebeast was named one of “Asia’s Top 200 Under $1 Billion Companies” by Forbes in 2018 and one of “Most Innovative Companies” by Fast Company in 2017. In a maintenance with Forbes in 2018, Ma emphasized that her ultimate goal is to create a brand that lasts beyond her lifetime and that people still gravitate towards 100 years from now.

Kudos to his visionary thinking, Ma has since led Hypebeast to a series of accomplishments. One of them would be Partnership with Avex Entertainment in September 2020.

Founded in 1988, Avex is Japan’s largest entertainment company, with businesses spanning talent management, live event hosting, and music/video streaming subscription services.

Through this partnership, Hypebeast aims to further grow its business segment in Japan with the support of Avex’s strong domestic connection, extensive network of influencers and power in content distribution to propel Hypebeast Japan into the next phase of growth and help Hypebeast penetrate the Japanese market.

With this, Avex became a long-term strategic partner with Hypebeast. In addition, to consolidate this partnership, Avex has agreed to subscribe for a total of 6.53 million shares at a subscription price of HKD 1.05 per share, representing a premium of approximately 14% over the closing price of HKD 0.92 at that time. the agreement.

Read also : The war for Ukraine: 4 stocks likely to be affected – Don Agro; Food Empire; Rusal; yandex

Active on social media with a long list of major clients

Hypebeast reached a monthly pageview of 50 million, with 15.6 million belonging to monthly unique visitors. Their 26.2 million social media followers are also at the top of the industry. This shows the attractiveness and influence of Hypebeast in the industry.

Source: Hypebeast

With such an extensive reach and huge amount of pageviews monthly, Hypebeast has managed to attract a long list of major clients, as seen below. From the list, we can see that Hypebeast’s customers come from different industries, from luxury fashion houses like Louis Vuitton and Gucci to automotive brands like Lexus and Infiniti. These clients will work with Hypebeast using their digital marketing channels to promote their products/services, hoping to capture a wider range of fashion-conscious audiences.

Source: Hypebeast

Record results for 1H FY2022

In the latest 1H2021/2022 earnings, Hypebeast achieved record financial performance, with revenue growing 55% year-over-year to HKD441 million. Its gross and net profit margin shows a significant improvement. In particular, its net profit margin doubled to 14% in the last reporting period. This shows that robust growth is boosting Hypebeast’s bottom line.

Despite the strong performance, we should note that its HY 2022 performance growth is partly benefiting from a weak base effect, as its HY 2020/2021 results declined due to the COVID-19 pandemic.

Nevertheless, comparing the numbers with the pre-pandemic period (1H 2019/2020), Hypebeast managed to perform better than ever, which shows that the company ignored the effects of the pandemic and is back on its way to growth.

Source: Hypebeast

On the other hand, its e-commerce platform, HBX, continues to see its gross margin increase even though revenue remained flat. The higher gross margin was attributed to the higher average unit value and order value during the year. Hypebeast mentioned that this trend was due to customers’ willingness to spend on high-quality products.

Source: Hypebeast

Attractive valuation with decent growth prospects

Hypebeast has grown by leaps and bounds over the years, growing from a simple sneaker blog to a Hong Kong-listed company now worth HKD1.6 billion (S$280 million) in market capitalization.

Without a doubt, Ma is an influential figure within Hypebeast as he brings his idea and philosophy to the company and pushes Hypebeast to greater heights. On top of that, Ma’s majority stake in Hypebeast shows that his interests are aligned with those of other shareholders.

Moreover, the partnership with Avex Entertainment is just one example that shows its ability to guide the company to expand into a new market to ensure future growth. With all of these initiatives in place, it’s not hard to imagine the amount of growth it has in the medium to long term.

At the time of writing, Hypebeast’s share price stood at HKD 0.80, which is down 27% year-to-date. There is no doubt that its share price performance is affected by the broader market decline, which also allows Hypebeast stock to be more attractive in terms of valuation, with a price/earnings ratio below 15 times. With decent financial performance and growth prospects at hand, this could very well be a growth meter for investors to keep on their watch list.

Source: Google Finance

Read also : 9 ETFs you can invest to gain exposure to the China and Hong Kong market

4 actions this week is not a recommendation by us to buy or sell any of these stocks. For investors eager to learn more, you should continue to educate yourself about them before making your investment decisions.


]]> Ascom: publishes an increase in net profit in 2021 and proposes the payment of a dividend https://stormbirds.net/ascom-publishes-an-increase-in-net-profit-in-2021-and-proposes-the-payment-of-a-dividend/ Tue, 08 Mar 2022 05:41:10 +0000 https://stormbirds.net/ascom-publishes-an-increase-in-net-profit-in-2021-and-proposes-the-payment-of-a-dividend/ AD HOC ANNOUNCEMENT PURSUANT TO ART. 53LR Improved 2021 results in line with the guidance provided: Net revenue of CHF 291.5 million, reflecting a growth rate of 3.7% (2.7% at constant exchange rates1) EBITDA2 increased to CHF 28.7 million and EBITDA margin improved to 9.8% Incoming orders of CHF 342.3 million with an increase of […]]]>

AD HOC ANNOUNCEMENT PURSUANT TO ART. 53LR

  • Improved 2021 results in line with the guidance provided:

    • Net revenue of CHF 291.5 million, reflecting a growth rate of 3.7% (2.7% at constant exchange rates1)
    • EBITDA2 increased to CHF 28.7 million and EBITDA margin improved to 9.8%
    • Incoming orders of CHF 342.3 million with an increase of 6.2% (4.9% at constant exchange rates)
    • Backlog increased sharply to CHF 256.1 million as of December 31, 2021
    • Report profit improved to CHF 13.5 million (2020: CHF 6.5 million)
    • Solid bbalance sheet structure with net cash of CHF 29.5 million and an equity ratio up 41.1%

CHF 0.20 per share, with a payout ratio of 53% Ascom targets single-digit revenue growth for fiscal year 2022 and targets EBITDA margin improvement of approximately 100 basis points (bps) compared to 2021

  • Medium-term orientations reiterated

Ascom sees a clear path to double-digit revenue growth over the next few years and expects an annual EBITDA margin improvement of around 100 basis points through 2025.

1Constant currencies are calculated by converting numbers using the average exchange rate of the previous year.
2EBITDA, earnings before interest, income taxes, depreciation and amortization, see also definition in the 2021 annual report on page 71.

Revenue growth in challenging environment
Ascom delivered solid revenue growth in 2021, despite continued challenges from the global Covid-19 pandemic and global component shortages. Net sales increased by 3.7% (2.7% at constant exchange rates) to CHF 291.5 million (2020: CHF 281.0 million).

In 2021, the top performing areas with double-digit revenue growth (at constant currencies) were the UK, France and Spain, as well as the OEM business. The Nordic countries and the Netherlands also posted strong revenue growth rates. In the United States and Canada, revenue increased slightly, while the DACH region as well as the rest of the world decreased mainly due to Covid-19 and component-related challenges also in the corporate sector.

The revenue breakdown by market segment showed a strong healthcare sector representing 68% of total revenue (2020: 67%), the enterprise sector representing 24% (2020: 27%) and the OEM business was 8% (2020: 6%) . Software & Solutions revenue increased while recurring revenue represented 25% of total revenue.

Strong growth in order intake and order backlog
In 2021, incoming orders increased by 6.2% to CHF 342.3 million (4.9% at constant exchange rates). The order book amounted to CHF 256.1 million (2020: CHF 215.6 million) and includes long-term contracts with a magnitude of approximately 48% of the total order book which will be relevant to revenue in 2023 and beyond.

Improved operational profitability
In 2021, gross profit increased compared to the previous year and reached CHF 136.7 million (2020: CHF 133.3 million) with a gross margin of 46.9% (2020: 47.4% ). Gross margin was impacted by higher freight costs, higher component prices in spot markets and a different product mix due to component shortages.

Due to increased volume and lower functional costs, EBITDA improved to CHF 28.7 million (2020: CHF 24.9 million), with an EBITDA margin of 9.8% (2020 : 8.9%) while EBIT increased to CHF 15.8 million (2020: CHF 11.0 million). Ascom ended 2021 with an increased net profit of CHF 13.5m (2020: CHF 6.5m), mainly driven by improved operating results. EPS increased to CHF 0.38 (2020: CHF 0.18).

Solid balance sheet structure
As of 31 December 2021, Ascom had no outstanding borrowings and its net cash therefore increased to CHF 29.5 million (31.12.2020: CHF 12.8 million). Equity amounts to CHF 80.0 million (31.12.2020: CHF 71.1 million), which represents an increase in the equity ratio to 41.1% (31.12.2020: 35.0%).

Ascom aims to become a global leader in real-time communication and collaboration
Ascom is in a unique position to offer a broad portfolio of solutions combining devices, software and services to concretely meet the rapidly changing needs of customers. Ascom aims to become a global leader in real-time communication and collaboration in the acute care, long-term care and enterprise segments.

To lead and implement the next stage of Ascom’s strategy, the Board of Directors has appointed Nicolas Vanden Abeele as the new CEO of Ascom effective February 1, 2022. Drawing on his extensive experience and background successful professional, he will continue to strengthen Ascom’s position in the market. in the areas of communication, collaboration and workflow orchestration, while improving the company’s financial performance.

Outlook
The market environment for 2022 remains challenging, but Ascom is confident that the improvements implemented and the focus on revenue and backlog conversion will result in positive business development in 2022.

Ascom is targeting single-digit revenue growth for fiscal year 2022 and targets an EBITDA margin improvement of around 100 basis points compared to 2021.

Ascom sees a clear path to double-digit revenue growth over the next few years and expects an annual EBITDA margin improvement of around 100 basis points through 2025.

Proposals to the 2022 Annual General Meeting
The Board of Directors proposes to the shareholders the payment of a dividend of CHF 0.20 per share, representing a distribution rate of 53% of the Group’s profit.

All current board members will stand for re-election. The Board of Directors has also decided to renew the audit mandate and proposes KPMG as a new auditor.

Due to the expiry of the existing authorized capital, the board of directors will propose to the shareholders to adapt the articles of association in order to renew the authorization of the authorized capital for a new period of two years.

KEY FIGURES FISCAL YEAR 2021

In millions of CHF

Ascom Group
exercise 2021

S2 2021

S1 2021

FISCAL YEAR 2020
Incoming orders

342.3

176.1

166.2

322.4

Net revenue 291.5

151.4

140.1

281.0
Gross profit 136.7

69.3

67.4

133.3
EBIT 15.8

12.4

3.4

11.0
EBIT margin in % 5.4% 8.2% 2.4% 3.9%
EBITDA 28.7

18.6

10.1

24.9
EBITDA margin in % 9.8% 12.3% 7.2% 8.9%
Group profit 13.5 6.5

Employees (FTE) as of 31.12.

1,306

1,282

The full 2021 Ascom Group annual report and the presentation of the 2021 annual results are available in English and can be downloaded online at: https://www.ascom.com/investors/reports-and-presentations/

the online 2021 Eall-Yeshear C-resultsconference starts at 10:00 CET on Tuesday8 march 2022.

Financial analysts and media representatives can join Ascom conference call in which questions can be asked during the Q&A session after the presentation.

Compose:Link the conference call
(for financial analysts and media representatives only)

Additionally, a live audio webcast which will be provided. This is a non-interactive live audio webcast showing the presentation slides. However, the webcast does not allow questions to be asked. The Q&A session will be broadcast.

Webcast:Live Audio Webcast Link

Attachments

This document does not constitute an offer or solicitation to subscribe, buy or sell securities. This document is not published in the United States of America or the United Kingdom and must not be distributed in any jurisdiction in a manner where such distribution would not comply with regulatory requirements. In particular, this document may not be distributed in the United States, to United States persons, or to publications of general distribution in the United States. Further, Ascom securities have not been and will not be registered in any jurisdiction outside of Switzerland. Securities of Ascom may not be offered, sold or delivered and no solicitation to buy such securities may be made in the United States or to US Persons absent an applicable exemption from the registration requirements of securities laws or in any other jurisdiction and in a manner where such offer, sale, delivery or solicitation may not comply with regulatory requirements (including in the United Kingdom).

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DOMA HOLDINGS, INC. – 10-K – Management report and analysis of the financial situation and operating results https://stormbirds.net/doma-holdings-inc-10-k-management-report-and-analysis-of-the-financial-situation-and-operating-results/ Fri, 04 Mar 2022 22:00:40 +0000 https://stormbirds.net/doma-holdings-inc-10-k-management-report-and-analysis-of-the-financial-situation-and-operating-results/ The following discussion and analysis of the financial condition and results of operations of Doma should be read together with the audited consolidated financial statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020, and 2019 together with the related notes thereto, contained in this Annual Report on […]]]>
The following discussion and analysis of the financial condition and results of
operations of Doma should be read together with the audited consolidated
financial statements as of December 31, 2021 and 2020 and for the years ended
December 31, 2021, 2020, and 2019 together with the related notes thereto,
contained in this Annual Report on Form 10-K (this "Annual Report").
Management's Discussion and Analysis of Financial Condition and Results of
Operations generally includes tables with 2 year financial performance,
accompanied by narrative for 2021. For further discussion of prior period
financial results, please refer to our Registration Statement on Form S-1 (No.
333-258942), as amended, filed with the SEC on September 3, 2021 and declared
effective on September 8, 2021. This discussion may contain forward-looking
statements based upon current expectations that involve risks and uncertainties
and should be read in conjunction with the disclosures and information contained
in "Cautionary Note Regarding Forward-Looking Statements" in this Annual Report.
Our actual results may differ materially from those projected in these
forward-looking statements as a result of various factors, including those set
forth under Part I, Item 1A "Risk Factors" or in other parts of this Annual
Report. Certain amounts may not foot due to rounding. All forward-looking
statements in this Annual Report are based on information available to us as of
the date hereof, and we assume no obligation to update any such forward-looking
statements to reflect future events or circumstances, except as required by law.

Unless the context otherwise requires, references 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 Holding, Inc. ("States Title"), the
wholly owned subsidiary of Doma, upon the consummation of the Business
Combination.

Our business model

Today, we primarily create, underwrite and provide title, escrow and
settlement services for the two most common types of transactions in the
residential real estate market: purchase and refinancing operations. We operate
and report on our activity through two complementary reporting segments,
Distribution and subscription. See “-Presentation Base” below.

Our Distribution segment reflects the sale of our products and services, other
than underwriting and insurance services reflected in our Underwriting segment,
that we provide through our captive title agents and agencies ("Direct Agents").
We market our products and services through two channels to appeal to our
referral partners and ultimately reach our customers, the individuals purchasing
a new home or refinancing their existing mortgage:

•Doma Enterprise - we target partnerships with national lenders and mortgage
originators that maintain centralized lending operations. Once a partnership has
been established, we integrate our Doma Intelligence platform with the partner's
production systems, to enable frictionless order origination and fulfillment.
Substantially all Doma Enterprise orders are underwritten by Doma.

•Local Markets ("Local") - we target partnerships with realtors, attorneys and
non-centralized loan originators via a 103-branch footprint across ten states as
of December 31, 2021. For the year ended December 31, 2021, approximately 90% of
our lender and owner policies from our Local channel were underwritten by Doma,
while the remaining share was underwritten by third-party underwriters.

Our Underwriting segment reflects the sale of our underwriting and insurance
services. These services are integrated with our Direct Agents channel and other
non-captive title and escrow agents in the market ("Third-Party Agents") through
our captive title insurance carrier. For customers sourced through the
Third-Party Agents channel, we retain a portion of the title premium
(approximately 16%) in exchange for underwriting risk to our balance sheet. The
Third-Party Agents channel includes the title underwriting and insurance
services we provide to Lennar, a related party, for its home builder
transactions.

The financial results of our Direct Agents channel impact both our Distribution
and Underwriting reporting segments, whereas the results from the Third-Party
Agents channel impact only the Underwriting reporting segment.

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Our expenses generally consist of direct fulfillment expenses related to closing
a transaction and insuring the risk, customer acquisition costs related to
acquiring new business, and other operating expenses as described below:

•Direct fulfillment expenses - comprised of direct labor and direct non-labor
expenses. Direct labor expenses refer to payroll costs associated with employees
who directly contribute to the opening and closing of an order. Some examples of
direct labor expenses include title and escrow services, closing services, and
customer service. Direct non-labor expenses refer to non-payroll expenses that
are closely linked with order volume, such as provision for claims, title
examination expense, office supplies, and premium and other related taxes.

•Customer acquisition costs - this category is comprised of sales payroll, sales
commissions, customer success payroll, sales-related travel and entertainment,
and an allocated portion of corporate marketing.

•Other operating expenses - all other expenses that do not directly contribute
to the fulfillment or acquisition of an order or policy are considered other
operating expenses. This category is predominately comprised of research and
development costs, corporate support expenses, occupancy, and other general and
administrative expenses.

We expect to continue to invest in our Doma Intelligence platform as well as
organic and inorganic growth opportunities in order to remain competitive with
existing large-scale industry incumbents who are well financed and have
significant resources to defend their existing market positions. Over time, we
plan to use our cash flows to invest in customer acquisition, research and
development, and new product offerings, to further improve revenue growth and
accelerate the elimination of the friction and expense of closing a residential
real estate transaction.

Basis of Presentation

We present the results of our two operating segments:

•Distribution - our Distribution segment reflects our Direct Agents operations
of acquiring customer orders and providing title and escrow services for real
estate closing transactions. We acquire customers through our Local and Doma
Enterprise customer referral channels.

•Underwriting - our Underwriting segment reflects the results of our title
insurance underwriting business, including policies referred through our Direct
Agents and Third-Party Agents channels. The referring agents retain
approximately 84% of the policy premiums in exchange for their services. The
retention rate varies by state and agent.

Costs are allocated to the segments to arrive at adjusted gross profit, our
segment measure of profit and loss. Our accounting policies for segments are the
same as those applied to our consolidated financial statements, except as
described below under "-Key Components of Revenues and Expenses." Inter-segment
revenues and expenses are eliminated in consolidation. See Note 7 in our
consolidated financial statements for a summary of our segment results and a
reconciliation between segment adjusted gross profit and our consolidated loss
before income taxes.

Important events and transactions

Business combination

On the Closing Date, Capitol consummated the Business Combination with Old Doma,
pursuant to the Agreement. In connection with the closing of the Business
Combination, Old Doma changed its name to States Title Holding, Inc., 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. Refer to Note 3 to the consolidated financial
statements for additional details on the Business Combination.

As a result of the Business Combination, we became the operating successor to an
SEC-registered and New York Stock Exchange-listed shell company. Becoming public
has required us to hire additional personnel and implement procedures and
processes to address public company regulatory requirements and practices. Also,
we

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have incurred additional annual expenses as a public company for, among other
things, directors' and officers' liability insurance, director fees, and
additional internal and external accounting, legal, and administrative
resources.

Impact of COVID-19 and other macroeconomic trends

On March 11, 2020, the World Health Organization declared COVID-19, the disease
caused by the novel coronavirus, a pandemic. COVID-19 has resulted in
significant macroeconomic impacts and market disruptions, particularly as
federal, state, and local governments enacted emergency measures intended to
combat the spread of the virus, including shelter-in-place orders, travel
limitations, quarantine periods and social distancing. In response, we took
appropriate measures to ensure the health and safety of our employees, customers
and partners, including work-from-home policies. Depending on the location and
timing, some of these measures still remain in place today.

We operate in the real estate industry and our business volumes are directly
impacted by market trends for mortgage refinancing transactions, existing real
estate purchase transactions, and new real estate purchase transactions,
particularly in the residential segment of the market. Responses to the COVID-19
pandemic initially led to a material decline in purchase transactions.
Subsequent U.S. federal stimulus measures, including interest rate reductions by
the Federal Reserve, and local regulatory initiatives, such as permitting remote
notarization, led to a quick recovery for the real estate industry and resulted
in an increase in mortgage refinancing and purchase volumes, which we believe
benefited our business model. These initiatives have also led to a greater
demand for homes, higher home prices, and record low home inventories. While
real estate transactions have largely returned to or exceeded pre-pandemic
levels, we continue to monitor economic and regulatory developments closely as
we navigate the volatility and uncertainty created by the pandemic.

Demand for mortgages tends to correlate closely with changes in interest rates,
meaning that our order trends are likely to be impacted by future changes in
interest rates. However, we believe that our current, low market share and
disruptive approach to title insurance, escrow, and closing services will enable
us to gain market share, which in turn should mitigate the risk to our revenue
growth trends relative to industry incumbents.

The acquisition of the North American title

At January 7, 2019we acquired from Lennar Corporation (“Lennar”) its
subsidiary company, North American Title Insurance Companywho used his title
insurance underwriting company and its third party title insurance agency
business, which operated under its North American Title Company brand
(collectively, the “Acquired Business”), for the aggregate of shares and deferred cash
consideration of $171.7 million (the “Acquisition of North American Securities”),
including $87.0 million in the form of a seller’s financing note.

The North American Title Acquisition provided us with insurance licenses and an
agency network across the United States, as well as a substantial data set to
accelerate our machine intelligence technology. This acquisition marked a
significant milestone for Doma in achieving national scale and licensure in
pursuit of our long-term growth strategy. Whereas we generated minimal revenue
prior to the North American Title Acquisition, following its consummation we
began to operate our business with a broad distribution footprint and data that
enabled us to accelerate the rollout of our Doma Intelligence platform. The
North American Title Acquisition also resulted in our recording of $111.5
million in goodwill and $61.4 million in acquired marketable securities.

Since the North American Title Acquisition, we have implemented several
initiatives to integrate and realign the operations of the Acquired Business.
This includes transforming the Acquired Business's retail agency operations by
streamlining our physical branch footprint, consolidating branch back office
functions into a common corporate operation, and implementing a common
production platform across all our branches. We continue to invest in the
development and rollout of the Doma Intelligence platform across our Local
branch footprint. We expect to realize significant cost savings over time as
manual processes are replaced with our proprietary machine learning platform and
data science-driven approach to title and closing services. The benefits of this
effort, particularly on margin growth, are likely to be realized gradually in
future reporting periods. As a result, our recent results of operations,
including for the years ended December 31, 2021, 2020, and 2019 may not be
indicative of our results for future periods.

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Key Operating and Financial Indicators

We regularly review several key operational and financial indicators to assess
our performance and trends and inform management budgets,
projections and strategic decisions.

The following table presents our key operating and financial indicators, as well
as the relevant generally accepted accounting principles ("GAAP") measures, for
the periods indicated:

                                                                         Year Ended
                                                                 2021                     2020
                                                          (in thousands, except for open and closed
                                                                       order numbers)
Key operating data:
Opened orders                                                    178,689                  136,873
Closed orders                                                    136,428                   92,389
GAAP financial data:
Revenue(1)                                               $       558,043            $     409,814
Gross profit(2)                                          $       103,261            $      85,830
Net loss                                                 $      (113,056)           $     (35,103)
Non-GAAP financial data(3):
Retained premiums and fees                               $       259,598            $     189,671
Adjusted gross profit                                    $       113,582            $      91,645
Ratio of adjusted gross profit to retained premiums and
fees                                                                  44    %                  48  %
Adjusted EBITDA                                          $       (71,592)           $     (18,986)


_________________

(1) Revenue includes (i) net premiums written, (ii) escrow, other
security and other costs, and (iii) investments, dividends and other income.
Net loss is made up of the revenue and expense components. For more
information about the measures included in our consolidated income statements,
see “-Key Components of Income and Expenses-Income” below.

(2)Gross profit, calculated in accordance with GAAP, is calculated as total
revenue, minus premiums retained by Third-Party Agents, direct labor expense
(including mainly personnel expense for certain employees involved in the direct
fulfillment of policies) and direct non-labor expense (including mainly title
examination expense, provision for claims, and depreciation and amortization).
In our consolidated income statements, depreciation and amortization is recorded
under the "other operating expenses" caption.

(3)Retained premiums and fees, adjusted gross profit and adjusted EBITDA are
non-GAAP financial measures. Refer to "-Non-GAAP Financial Measures" below for
additional information and reconciliations of these measures to the most closely
comparable GAAP financial measures.

Open and closed orders

Opened orders represent the number of orders placed for title insurance and/or
escrow services (which includes the disbursement of funds, signing of documents
and recording of the transaction with the county office) through our Direct
Agents, typically in connection with a home purchase or mortgage refinancing
transaction. An order may be opened upon an indication of interest in a specific
property from a customer and may be cancelled by the customer before or after
the signing of a purchase or loan agreement. Closed orders represent the number
of opened orders for title insurance and/or escrow services that were
successfully fulfilled in each period with the issuance of a title insurance
policy and/or provision of escrow services. Opened and closed orders do not
include orders or referrals for title insurance from our Third-Party Agents. For
avoidance of doubt, a closed order for a home purchase transaction typically
results in the issuance of two title insurance policies, whereas a refinance
transaction typically results in the issuance of one title insurance policy.

We review opened orders as a leading indicator of our Direct Agents revenue
pipeline and closed orders as a direct indicator of Direct Agents revenue for
the concurrent period, and believe these measures are useful to investors for
the same reasons. We believe that the relationship between opened and closed
orders will remain relatively consistent over time, and that opened order growth
is generally a reliable indicator of future financial performance. However,
degradation in the ratio of opened orders to closed orders may be a leading
indicator of adverse macroeconomic or real estate market trends.

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Retained premiums and fees

Retained premiums and fees, a non-GAAP financial measure, is defined as total
revenue under GAAP minus premiums retained by Third-Party Agents. See "-Non-GAAP
Financial Measures" below for a reconciliation of our retained premiums and fees
to gross profit, the most closely comparable GAAP measure, and additional
information about the limitations of our non-GAAP measures.

Our business strategy is focused on leveraging our Doma Intelligence platform to
provide an overall improved customer and referral partner experience and to
drive time and expense efficiencies principally in our Direct Agents channel. In
our Third-Party Agents channel in contrast, we provide our underwriting
expertise and balance sheet to insure the risk on policies referred by such
Third-Party Agents and, for that service, we typically receive approximately 16%
of the premium for the policy we underwrite. As such, we use retained premiums
and fees, which is net of the impact of premiums retained by Third-Party Agents,
as an important measure of the earning power of our business and our future
growth trends, and believe it is useful to investors for the same reasons.

Adjusted gross profit

Adjusted gross profit, a non-GAAP financial measure, is defined as gross profit
(loss) under GAAP, adjusted to exclude the impact of depreciation and
amortization. See "-Non-GAAP Financial Measures" below for a reconciliation of
our adjusted gross profit to gross profit, the most closely comparable GAAP
measure and additional information about the limitations of our non-GAAP
measures.

Management views adjusted gross profit as an important indicator of our
underlying profitability and efficiency. As we generate more business that is
serviced through our Doma Intelligence platform, we expect to reduce fulfillment
costs as our direct labor expense per order continues to decline, and we expect
the adjusted gross profit per transaction to grow faster than retained premiums
and fees per transaction over the long term.

Adjusted gross margin ratio on premiums and fees withheld

Ratio of adjusted gross profit to retained premiums and fees, a non-GAAP
measure, expressed as a percentage, is calculated by dividing adjusted gross
profit by retained premiums and fees. Both the numerator and denominator are net
of the impact of premiums retained by Third-Party Agents because that is a cost
related to our Underwriting segment over which we have limited control, as
Third-Party Agents customarily retain approximately 84% of the premiums related
to a title insurance policy referral pursuant to the terms of long-term
contracts.

We view the ratio of adjusted gross profit to retained premiums and fees as an
important indicator of our operating efficiency and the impact of our
machine-learning capabilities, and believe it is useful to investors for the
same reasons.

We expect improvement to our ratio of adjusted gross profit to retained premiums
and fees over the long term, reflecting the continued reduction in our average
fulfillment costs per order.

Adjusted EBITDA

Adjusted EBITDA, a non-GAAP financial measure, is defined as net income (loss)
before interest, income taxes and depreciation and amortization, and further
adjusted to exclude the impact of stock-based compensation, COVID-related
severance costs and the change in fair value of Warrant and Sponsor Covered
Shares liabilities. See "-Non-GAAP Financial Measures" below for a
reconciliation of our adjusted EBITDA to net loss, the most closely comparable
GAAP measure and additional information about the limitations of our non-GAAP
measures.

We look at Adjusted EBITDA as an important measure of our recurring revenue and
underlying financial performance, and we believe it is useful for investors to
same reason.

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Key Components of Revenues and Expenses

Revenue

Net premiums written

We generate net premiums by underwriting title insurance policies and recognize
premiums in full upon the closing of the underlying transaction. For some of our
Third-Party Agents, we also accrue premium revenue for title insurance policies
we estimate to have been issued in the current period but reported to us by the
Third-Party Agent in a subsequent period. See "-Critical Accounting Policies and
Estimates- Accrued net premiums written from Third-Party Agent referrals" below
for further explanation of this accrual. For the years ended 2021 and 2020, the
average time lag between the issuing of these policies by our Third-Party Agents
and the reporting of these policies or premiums to us has been approximately
three months. Net premiums written is inclusive of the portion of premiums
retained by Third-Party Agents, which is recorded as an expense, as described
below.

In order to reduce the risk associated with our insurance policies underwritten, we
use reinsurance programs to limit our maximum exposure to loss. under our
reinsurance treaties, we cede the premiums of the underlying policies
exchange for a ceding commission from the reinsurer and our net written premiums
exclude these ceded premiums.

Our principal reinsurance quota share agreement covers instantly underwritten
policies from refinance and home equity line of credit transactions under which
we historically ceded 100% of the written premium of each covered policy during
2019, 2020, and during the period from January 1, 2021 through February 23,
2021. Pursuant to a renewed agreement, which became effective on February 24,
2021, we cede only 25% of the written premium on such instantly underwritten
policies, up to a total reinsurance coverage limit of $80.0 million in premiums
reinsured, after which we retain 100% of the written premium on instantly
underwritten policies. This reduction in ceding percentage has resulted in
higher net premiums written per transaction when compared to prior period
results. Refer to Note 2 to the consolidated financial statements above for
additional details on our reinsurance treaties.

Escrow, other title fees and other

Escrow fees and other title-related fees are charged for managing the closing of
real estate transactions, including the processing of funds on behalf of the
transaction participants, gathering and recording the required closing
documents, providing notary services, and other real estate or title-related
activities. Other fees relate to various ancillary services we provide,
including fees for rendering a cashier's check, document preparation fees,
homeowner's association letter fees, inspection fees, lien letter fees and wire
fees. We also recognize ceding commissions received in connection with
reinsurance treaties, to the extent the amount of such ceding commissions
exceeds reinsurance-related costs.

This revenue item is most directly associated with our Distribution segment. For
segment-level reporting, agent premiums retained by our Distribution segment are
recorded as revenue under the "escrow, other title-related fees and other"
caption of our segment income statements, while our Underwriting segment records
a corresponding expense for insurance policies issued by us. The impact of these
internal transactions is eliminated upon consolidation.

Investments, dividends and other income

Investment, dividends and other income are mainly generated from our investment
portfolio. We primarily invest in fixed income securities, mainly composed of
corporate debt obligations, U.S. government agency obligations, certificates of
deposit, U.S. Treasuries and mortgage loans.

Expenses

Premiums retained by third-party agents

When customers are referred to us and we underwrite a policy, the referring
Third-Party Agent retains a significant portion of the premium, which typically
amounts to approximately 84% of the premium. The portion of premiums retained by
Third-Party Agents is recorded as an expense. These referral expenses relate
exclusively to

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our Underwriting segment. As we continue to grow our Direct Agents channel
relative to our Third-Party Agents channel, we expect that premiums retained by
Third-Party Agents will decline as a percentage of revenue over time.

For segment-level reporting, premiums retained by our Direct Agents (which are
recorded as Distribution segment revenue) are recorded as part of "premiums
retained by agents" expense for our Underwriting segment. The impact of these
internal transactions is eliminated upon consolidation.

Title examination fees

Title examination costs are incurred as part of the search and
review of public information prior to issuance of title insurance
Strategies.

Provision for claims

The provision for claims expenses is considered by management to be made up of three
components: IBNR reserves, known claims and claims adjustment expenses
escrow reserves and losses.

IBNR is a loss reserve that primarily reflects the sum of expected losses for
unreported claims. The expense is calculated by applying a rate (the loss
provision rate) to total title insurance premiums. The loss provision rate is
determined at the beginning of each year based in part upon an assessment
performed by an independent actuarial firm utilizing generally accepted
actuarial methods. The assessment also takes account of industry trends, the
regulatory environment and geographic considerations and is updated during the
year based on developments. This loss provision rate is set to provide for
losses on current year policies. Due to our long claim exposure, our provision
for claims periodically includes amounts of adverse or positive claims
development on policies issued in prior years, when claims on such policies are
higher or lower than initially expected.

Based on the risk profile of premium vintages over time and on the basis of
projections from a firm of independent actuaries, we build up or release reserves
related to our old policies. Our IBNR may increase in proportion to our
revenues as we continue to increase the proportion of our businesses served
through our Doma Intelligence platform, although we believe it will decrease over time
in the long term, because our predictive artificial intelligence technology produces
improved results.

Known claims loss and loss adjustment expense reserves is an expense that
reflects the best estimate of the remaining cost to resolve a claim, based on
the information available at the time. In practice, most claims do not settle
for the initial known claims provision; rather, as new information is developed
during the course of claims administration, the initial estimates are revised,
sometimes downward and sometimes upward. This additional development is provided
for in the actuarial projection of IBNR, but it is not allocable to specific
claims. Actual costs that are incurred in the claims administration are booked
to loss adjustment expense, which is primarily comprised of legal expenses
associated with investigating and settling a claim.

Escrow-related losses are primarily attributable to clerical errors that arise
during the escrow process and caused by the settlement agent. As the proportion
of our orders processed through our Doma Intelligence platform continues to
increase, we expect escrow-related losses to decline over time.

Personnel costs

Personnel costs include base salaries, benefits, bonuses paid to
employees and social charges. This expenditure is mainly due to the average
number of employees and our hiring activities during a given period.

In our presentation and reconciliation of segment results and our calculation of
gross profit, we classify personnel costs as either direct or indirect expenses,
reflecting the activities performed by each employee. Direct personnel costs
relate to employees whose job function is directly related to our fulfillment
activities, including underwriters, closing agents, escrow agents, funding
agents, and title and curative agents, and are included in the calculation of
our segment adjusted gross profit. Indirect personnel costs relate to employees
whose roles do not directly support our transaction fulfillment activities,
including sales agents, training specialists and customer success agents,
segment management, research and development and other information technology
personnel, and corporate support staff.

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Other operating expenses

Other operating expenses are comprised of occupancy, maintenance and utilities,
product taxes (for example, state taxes on premiums written), professional fees
(including legal, audit and other third-party consulting costs), software
licenses and sales tools, travel and entertainment costs, and depreciation and
amortization, among other costs.

Change in fair value of liabilities related to Warrants and Sponsors Covered Shares

Change in fair value of Warrant and Sponsor Covered Shares liabilities consists
of unrealized gains and losses as a result of recording our Warrants and Sponsor
Covered Shares to fair value at the end of each reporting period.

income tax expense

Although we are in a consolidated net loss position and report our federal
income taxes as a consolidated tax group, we incur state income taxes in certain
jurisdictions where we have profitable operations. Additionally, we incur
mandatory minimum state income taxes in certain jurisdictions. Also, we have
recognized deferred tax assets but have offset them with a full valuation
allowance, reflecting substantial uncertainty as to their recoverability in
future periods. Until we report at least three years of profitability, we may
not be able to realize the tax benefits of these deferred tax assets.

Operating results

We discuss our historical results of operations below, on a consolidated basis
and by segment. Past financial results are not indicative of future results. As
previously mentioned, our results of operations include tables with two years of
financial performance, accompanied by narrative for 2021 as compared to 2020.
For further discussion of prior period financial results, refer to our
Registration Statement on Form S-1 (No. 333-258942), as amended, filed with the
SEC on September 3, 2021 and declared effective on September 8, 2021.

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Contents
Year ended December 31, 2021 Compared to the year ended December 31, 2020

The following table presents a summary of our consolidated results of
transactions for the periods indicated and changes between periods.

                                                                   Year Ended December 31,
                                           2021                2020              $ Change               % Change
                                                             (in thousands, except percentages)
Revenues:
Net premiums written                   $  475,352          $  345,608          $  129,744                        38  %
Escrow, other title-related fees and
other                                      79,585              61,275              18,310                        30  %
Investment, dividend and other income       3,106               2,931                 175                         6  %
Total revenues                         $  558,043          $  409,814          $  148,229                        36  %

Expenses:

Premiums retained by Third-Party
Agents                                 $  298,445          $  220,143          $   78,302                        36  %
Title examination expense                  22,137              16,204               5,933                        37  %
Provision for claims                       21,335              15,337               5,998                        39  %
Personnel costs                           238,134             143,526              94,608                        66  %
Other operating expenses                   79,951              43,285              36,666                        85  %
Total operating expenses               $  660,002          $  438,495          $  221,507                        51  %
Loss from operations                     (101,959)            (28,681)            (73,278)                      255  %
Other (expense) income:
Change in fair value of Warrant and
Sponsor Covered Shares liabilities          6,691                   -               6,691                            *
Interest expense                          (16,861)             (5,579)            (11,282)                      202  %
Loss before income taxes                 (112,129)            (34,260)            (77,869)                      227  %
Income tax expense                     $     (927)         $     (843)         $      (84)                       10  %
Net loss                               $ (113,056)         $  (35,103)         $  (77,953)                      222  %

* = Not shown because previous period amount is zero

Income

Net premiums written. Net premiums written increased by $129.7 million, or 38%,
for the year ended December 31, 2021 compared to the same period in the prior
year, driven by a 46% increase in premiums from our Direct Agents channel and a
35% increase in premiums from our Third-Party Agents channel.

For the year ended December 31, 2021, Direct Agents premium growth was driven by
closed order growth of 48%. Closed order growth overall increased due to new
customer and referral partner acquisitions, increased wallet share with existing
referral partners, an expanding geographical footprint, and market conditions
resulting in the higher volume of refinance orders. Closed order growth was
offset by lower average premiums per Direct Agent order of 2%, due to a higher
share of refinance orders during the course of the year.

Third-Party Agent growth reflects the results of management's continued efforts
to increase wallet share capture from existing Third-Party Agents as well as
efforts to generate new agent relationships to accelerate growth. The rise in
premiums was also driven by an overall increase in market activity due to the
low interest rate environment.

Escrow, other title-related fees and other. Escrow, other title-related fees and
other increased $18.3 million, or 30%, for the year ended December 31, 2021
compared to the same period in the prior year, driven by the corresponding
closed order growth, offset by the higher mix of Doma Enterprise closed orders,
which carry a lower price point as compared to the Local channel.

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Investment, dividend and other income. Investment, dividend and other income
increased $0.2 million or 6% for the year ended December 31, 2021 compared to
the same period in the prior year, primarily due to one-time realized gains on
investments from portfolio rebalancing.

Expenses

Premiums Withheld by Third-Party Agents. Premiums withheld by third-party agents
increased by $78.3 millionor 36%, for the year ended December 31, 2021
compared to the same period of the previous year. The increase was drawn
mainly by the growth of written policies referred by third parties
Agents, and there has been no material change in the average commissions paid to our
Third Party Agents.

Title examination expense. Title examination expense increased by $5.9 million,
or 37%, for the year ended December 31, 2021 compared to the same periods in the
prior year, principally due to growth in Direct Agent closed orders and premiums
written.

Provision for claims. Provision for claims increased by $6.0 million, or 39%,
for the year ended December 31, 2021 compared to the same period in the prior
year primarily due to new business written premiums from the corresponding
periods. The provision for claims, expressed as a percentage of net premiums
written, was 4.5% and 4.4% for the year ended December 31, 2021 and 2020,
respectively. The reported loss emergence in both periods on policies issued in
prior years was lower than expected.

Personnel costs. Personnel costs increased by $94.6 million, or 66%, for the
year ended December 31, 2021 compared to the same period in the prior year, due
to investments in direct labor and customer acquisition, the expansion of our
corporate support functions to enhance public company readiness, and an increase
in operations and management staff supporting the direct agents channel as the
organization invests in driving growth of Doma Intelligence-enabled closings.

Other operating expenses. Other operating expenses increased by $36.7 million,
or 85%, for the year ended December 31, 2021 compared to the same period in the
prior year, driven by 116% higher corporate support expenses to operate as a
public company, higher operating expenses to support revenue growth such as
hardware and software purchases, higher amortization expenses related to
investments in the development of the Doma Intelligence platform, and higher
amortization of intangibles related to our rebranding to "Doma." Depreciation
and amortization increased by $4.5 million, or 77%, respectively, for the year
ended December 31, 2021 compared to the same period in the prior year.

Change in fair value of Warrant and Sponsor Covered Shares liabilities. The
change in the fair value of Warrant and Sponsor Covered Shares (as defined in
Note 2) liabilities increased by $6.7 million for the year ended December 31,
2021 compared to the same period in the prior year due to the addition of these
liabilities from the Business Combination in 2021.

Interest expense. Interest expense increased by $11.3 million, or 202%, for the
year ended December 31, 2021 compared to the same period in the prior year, due
to a higher amount of debt outstanding as well as a higher effective interest
rate in 2021, which is a result of the funding of the new $150.0 million Senior
Debt facility during the first quarter of 2021.

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Supplemental Segment Results Discussion - Year Ended December 31, 2021 Compared
to the Year Ended December 31, 2020

The following table sets forth a summary of the results of operations for our
Distribution and Underwriting segments for the years indicated. See "-Basis of
Presentation" above.

                                                         Year Ended December 31, 2021                                                          

Year ended December 31, 2020

                               Distribution           Underwriting           Eliminations           Consolidated           Distribution           Underwriting           Eliminations           Consolidated
                                                                                                              (in thousands)
Net premiums written         $           -          $     476,328          $        (976)         $     475,352          $           -          $     345,608          $           -          $     345,608
Escrow, other title-related
fees and other (1)                 177,069                  3,520               (101,004)                79,585                129,590                  2,099                (70,414)                61,275
Investment, dividend and
other income                           205                  2,901                      -                  3,106                    699                  2,232                      -                  2,931
Total revenue                $     177,274          $     482,749         

($101,980) $558,043 $130,289 $349,939 ($70,414) $409,814
Premiums withheld by agents
(2)

                                      -                400,425               (101,980)               298,445                      -                290,557                (70,414)               220,143
Direct labor (3)                    81,204                  8,412                      -                 89,616                 55,334                  6,820                      -                 62,154
Other direct costs (4)              23,726                 11,339                      -                 35,065                 16,912                  3,623                      -                 20,535
Provision for title claim
losses                               2,257                 19,078                      -                 21,335                  1,415                 13,922                      -                 15,337
Adjusted gross profit (5)    $      70,087          $      43,495          $           -          $     113,582          $      56,628          $      35,017          $           -          $      91,645



__________________

(1)Includes revenue from closing costs, escrow, title examinations, sales commission
income, as well as bonuses withheld by direct agents.

(2)This expense represents a deduction from the net premiums written for the
amounts that are retained by Direct Agents and Third-Party Agents as
compensation for their efforts to generate premium income for our Underwriting
segment. The impact of premiums retained by our Direct Agents and the expense
for reinsurance or co-insurance procured on Direct Agent sourced premiums are
eliminated in consolidation.

(3) Includes all compensation costs, including salaries, bonuses, incentives
payments and benefits for staff involved in the direct performance of
title and/or escrow services.

(4) Includes title examination fees, office supplies, bonuses and other
taxes.

(5)See “-Non-GAAP Financial Measures-Adjusted Gross Profit” below for a
reconciliation of consolidated adjusted gross margin, which is a non-GAAP
measure, to our gross profit, the most comparable GAAP financial results
measure.

Distribution segment revenue increased by $47.0 million, or 36%, for the year
ended December 31, 2021 compared to the same period in the prior year driven by
the closed order growth of 48% discussed above. Revenue from closed order growth
was somewhat offset by the higher mix of Doma Enterprise closed orders, which
carry a lower price point as compared to the Local channel. Underwriting segment
revenue increased by $132.8 million, or 38%, for the year ended December 31,
2021 compared to the same period in the prior year, reflecting significant
growth in title policies underwritten from both Direct and Third-Party Agents.

Distribution segment adjusted gross profit improved $13.5 million, or 24%, for
the year ended December 31, 2021 compared to the same period in the prior year,
driven principally by closed order growth offset by the higher mix of Doma
Enterprise closed orders, which carry a lower margin as compared to the Local
channel. Underwriting segment adjusted gross profit increased by $8.5 million,
or 24%, for the year ended December 31, 2021 compared to the same period in the
prior year, reflecting increased demand across all channels of the business
offset by increases in direct expenses.

Discussion of the results of the additional key operational and financial indicators – Year
Ended December 31, 2021 Compared to the year ended December 31, 2020

The following table presents our key operating and financial indicators,
including our non-GAAP financial measures, for the periods indicated, and the
changes between periods. This discussion should be read only as a supplement to
the discussion of our GAAP results above. See "-Non-GAAP Financial Measures"
below for important information about the non-GAAP financial measures presented
below and their reconciliation to the respective most closely comparable GAAP
measures.

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                                                                 Year Ended December 31,
                                         2021                 2020              $ Change               % Change
                                          (in thousands, except percentages and open and closed order numbers)
Opened orders                           178,689              136,873              41,816                        31  %
Closed orders                           136,428               92,389              44,039                        48  %
Retained premiums and fees          $   259,598           $  189,671          $   69,927                        37  %
Adjusted gross profit                   113,582               91,645              21,937                        24  %
Ratio of adjusted gross profit to
retained premiums and fees                   44   %               48  %             (4) p.p                     (8) %
Adjusted EBITDA                     $   (71,592)          $  (18,986)         $  (52,606)                      277  %


Opened and closed orders

For the year ended December 31, 2021, we opened 178,689 orders and closed
136,428 orders, an increase of 31% and 48%, respectively, over the same period
in the prior year. Closed orders increased 387% year over year in our Doma
Enterprise channel due to new customer and referral partner acquisitions,
increased wallet share with existing referral partners, and an expanded
geographical footprint. Closed orders decreased slightly by 1% in our Local
channel in the year ended December 31, 2021 compared to the same period in the
prior year due to the contracting refinance market that occurred during the
second half of 2021, which was partially offset by growth in purchase orders.

Premiums and fees withheld

Retained premiums and fees increased by $69.9 million, or 37%, for the year
ended December 31, 2021 compared to the same periods in the prior year, driven
by strong closed order and title policy growth across Direct and Third-Party
Agents, respectively.

Adjusted gross profit

Adjusted gross profit increased by $21.9 million, or 24%, for the year ended
December 31, 2021 compared to the same period in the prior year, due to growth
in retained premiums and fees of $69.9 million in the same period. The growth in
retained premiums and fees was partially offset by investments in fulfillment
infrastructure to support future growth.

Adjusted gross margin ratio on premiums and fees withheld

The ratio of adjusted gross profit to retained premiums and fees decreased 4
percentage points for the year ended December 31, 2021 compared to the same
period in the prior year due to the higher mix of Doma Enterprise closed orders,
which carry a lower price point as compared to the Local channel. Contributing
to the decrease in the ratio was higher direct labor expenses of $27.5 million,
or 44%, for the year ended December 31, 2021 compared to the same period in the
prior year. The rise in direct labor expenses exceeded retained premium and fees
growth as fulfillment labor was hired in advance of future volume growth, and
the organization experienced redundancies in fulfillment staff as it migrated
Local volume to Doma Intelligence.

Adjusted EBITDA

Adjusted EBITDA decreased by $52.6 million, or 277%, to negative $71.6 million
for the year ended December 31, 2021, driven by $74.6 million of higher
operating costs from investments in corporate support functions to successfully
operate as a public company, research and development, and operations and
management staff to support growth and the transformation of the Direct Agents
channel. This was offset by a $21.9 million improvement in adjusted gross
profit.

Non-GAAP Financial Measures

The non-GAAP financial measures described in this prospectus should be
considered only as supplements to the results prepared in accordance with GAAP and
should not be considered substitutes for GAAP results. these

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measures, retained premiums and fees, adjusted gross profit, and adjusted
EBITDA, have not been calculated in accordance with GAAP and are therefore not
necessarily indicative of our trends or profitability in accordance with GAAP.
These measures exclude or otherwise adjust for certain cost items that are
required by GAAP. Further, these measures may be defined and calculated
differently than similarly-titled measures reported by other companies, making
it difficult to compare our results with the results of other companies. We
caution investors against undue reliance on our non-GAAP financial measures as a
substitute for our results in accordance with GAAP.

Management uses these non-GAAP financial measures, in conjunction with GAAP
financial measures to: (i) monitor and evaluate the growth and performance of
our business operations; (ii) facilitate internal comparisons of the historical
operating performance of our business operations; (iii) facilitate external
comparisons of the results of our overall business to the historical operating
performance of other companies that may have different capital structures or
operating histories; (iv) review and assess the performance of our management
team and other employees; and (v) prepare budgets and evaluate strategic
planning decisions regarding future operating investments.

Premiums and fees withheld

The following presents our retained premiums and fees and reconciles the measure
to our gross profit, the most closely comparable GAAP financial measure, for the
periods indicated:

                                                Year Ended December 31,
                                                  2021               2020
                                                    (in thousands)
Revenue                                   $     558,043           $ 409,814
Minus:
Premiums retained by Third-Party Agents         298,445             220,143
Retained premiums and fees                $     259,598           $ 189,671

Less:

Direct labor                                     89,616              62,154
Provision for claims                             21,335              15,337
Depreciation and amortization                    10,321               5,815
Other direct costs(1)                            35,065              20,535
Gross Profit                              $     103,261           $  85,830


________________

(1) Includes title examination fees, office supplies, bonuses and other
taxes.

Adjusted gross profit

The following table reconciles our adjusted gross profit to our gross profit,
the most closely comparable GAAP financial measure, for the periods indicated:

                                       Year Ended December 31,
                                         2021                2020
                                           (in thousands)
Gross Profit                     $     103,261            $ 85,830
Adjusted for:
Depreciation and amortization           10,321               5,815
Adjusted Gross Profit            $     113,582            $ 91,645


Adjusted EBITDA

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The following table reconciles our adjusted EBITDA to our net loss, the most
closely comparable GAAP financial measure, for the periods indicated:

                                                                       Year Ended December 31,
                                                                      2021                    2020
                                                                            (in thousands)
Net loss (GAAP)                                                $    (113,056)            $   (35,103)
Adjusted for:
Depreciation and amortization                                         10,321                   5,815
Interest expense                                                      16,861                   5,579
Income taxes                                                             927                     843
EBITDA                                                         $     (84,947)            $   (22,866)
Adjusted for:
Stock-based compensation                                              20,046                   2,495
COVID-related severance costs                                              -                   1,385
Change in fair value of warrant and sponsor covered shares
liabilities                                                           (6,691)                      -
Adjusted EBITDA                                                $     (71,592)            $   (18,986)

Cash and capital resources

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 $383.8 million in cash and cash equivalents as of December 31, 2021. We
believe our operating cash flows, together with our cash on hand, and the cash
proceeds from the Business Combination and the related private placement, 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 Annual Report.

We may need additional cash due to changing business conditions or other
developments, including unanticipated regulatory developments and competitive
pressures. To the extent that our current resources are insufficient to satisfy
our cash requirements, we may need to seek additional equity or debt financing.

Debt

Financing note from seller Lennar

As part of the North American Title Acquisition, Lennar issued us a note for
$87.0 million on January 7, 2019 with a maturity date of January 7, 2029. Cash
interest on the note accrued at one-month LIBOR plus a fixed rate of 8.5% per
annum on a "pay-in-kind" ("PIK") basis. Old Doma repaid the note in full in
January 2021, after making several principal prepayments in 2019 and 2020.

Senior Secured Credit Agreement

In December 2020, Old Doma entered into a loan and security agreement with
Hudson Structured Capital Management Ltd. ("HSCM"), providing for a $150.0
million senior secured term loan ("Senior Debt"), which was fully funded by the
lenders, which are affiliates of HSCM, at its principal face value on January
29, 2021 (the "Funding Date") and matures on the fifth anniversary of the
Funding Date. The Senior Debt bears interest at a rate of 11.25% per annum, of
which 5.0% is payable in cash in arrears and the remaining 6.25% accrues to the
outstanding principal balance on a PIK basis. Interest is payable or compounded,
as applicable, quarterly. Principal prepayments on the Senior Debt are
permitted, subject to a premium, which declines from 8% of principal today to 4%
in 2023 and to zero in 2024.

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The Senior Debt is secured by a first-priority pledge and security interest in
substantially all of the assets of our wholly owned subsidiary States Title
(which represents substantially all of our assets), including the assets of any
of its existing and future domestic subsidiaries (in each case, subject to
customary exclusions, including the exclusion of regulated insurance company
subsidiaries). The Senior Debt is subject to customary affirmative and negative
covenants, including limits on the incurrence of debt and restrictions on
acquisitions, sales of assets, dividends and certain restricted payments. The
Senior Debt is also subject to two financial maintenance covenants, related to
liquidity and revenues. The liquidity covenant requires States Title to have at
least $20.0 million of liquidity, calculated as of the last day of each month,
as the sum of (i) our unrestricted cash and cash equivalents and (ii) the
aggregate unused and available portion of any working capital or other revolving
credit facility. The revenue covenant, which is tested as of the last day of
each fiscal year, requires that States Title's consolidated GAAP revenue for the
year to be greater than $130.0 million. The Senior Debt is subject to customary
events of default and cure rights. As of December 31, 2021, States Title is in
compliance with all Senior Debt covenants.

Upon financing, Old Doma issued penny warrants to HSCM affiliates equivalent to
1.35% of the fully diluted shares of Old Doma. The warrants were exercised net on
Closing Date and such HSCM Affiliates have been granted the right to receive
approximately 4.2 million shares of our common stock.

Other commitments and contingencies

Our commitments for leases, related to our office space and equipment, amounted
to $37.8 million as of December 31, 2021 of which $9.4 million is payable in
2022. Refer to Note 15 to our consolidated financial statements for a summary of
our future commitments. Our headquarters lease expires in 2024. As of
December 31, 2021, we did not have any other material commitments for cash
expenditures. We also administer escrow deposits as a service to customers, a
substantial portion of which are held at third-party financial institutions.
Such deposits are not reflected on our balance sheet, but we could be
contingently liable for them under certain circumstances (for example, if we
dispose of escrowed assets). Such contingent liabilities have not materially
impacted our results of operations or financial condition to date and are not
expected to do so in the near term.

Cash flow

The following table summarizes our cash flows for the periods indicated:

                                                  Year Ended December 31,
                                                    2021                

2020

                                                      (in thousands)
Net cash used in operating activities       $     (56,329)           $ 

(9,274)

Net cash used in investing activities             (23,128)            

(63,033)

Net cash provided by financing activities         351,263              42,661


Operating Activities

In 2021, net cash used in operating activities was $56.3 million driven by the
net loss of $113.1 million, cash paid for prepaid expenses of $6.2 million and
non-cash costs relating to the change in the fair value of warrant and Sponsor
Covered Shares liabilities of $6.7 million. This was offset by increases of
accrued expenses and other liabilities of $17.7 million, increases of the
liability for loss and loss adjustment expenses of $10.5 million, non-cash
stock-based compensation expense of $19.7 million and non-cash depreciation and
amortization of $10.3 million.

In 2020, net cash used in operating activities was $9.3 million driven by the
net loss of $35.1 million and cash paid for prepaid expenses of $2.3 million.
This was offset by increases of accrued expenses and other liabilities of $5.1
million, increases of the liability for loss and loss adjustment expenses of
$7.0 million, non-cash paid in kind interest expense of $6.5 million and
non-cash depreciation and amortization of $5.8 million.

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Investing Activities

Our capital expenditures have historically consisted primarily of costs incurred in
the development of the Doma Intelligence platform. Our other investments
activities generally consist of transactions in investments with fixed maturities
securities to provide regular interest payments.

In 2021, net cash used in investing activities was $23.1 million, and reflected
$36.2 million of purchases of investments offset by $44.3 million of proceeds
from the sale of investments. Cash paid for fixed assets was $32.2 million in
the same period, largely consisting of technology development costs related to
the Doma Intelligence platform.

In 2020, net cash used in investing activities was $63.0 million and reflected
$66.4 million of purchases of investments offset by $18.8 million of proceeds
from the sale of investments. In the same period, cash paid for fixed assets was
$17.0 million, largely consisting of technology development costs related to
Doma Intelligence. We also received $1.6 million from the sale of a title plant
in the same period.

Financing Activities

Net cash provided by financing activities was $351.3 million in 2021, reflecting
$625.0 million in proceeds from the Business Combination and PIPE Investment (as
defined in Note 3) and $150.0 million of proceeds from the Senior Debt. This
increase was offset by $294.9 million in redemptions of redeemable common and
preferred stock and $66.0 million in payment of costs directly attributable to
the issuance of common stock in connection with Business Combination and PIPE
Investment. The net cash provided by financing activities was also offset by the
$65.5 million repayment of the Lennar seller financing note.

Net cash provided by financing activities was $42.7 million in 2020, reflecting
$70.7 million in proceeds from the issuance of Series C preferred stock, offset
by a $28.4 million payment on the Lennar seller financing note.

Significant Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with
GAAP. Preparation of the financial statements requires management to make
several judgments, estimates and assumptions relating to the reported amount of
revenue and expenses, assets and liabilities and the disclosure of contingent
assets and liabilities. We evaluate our significant estimates on an ongoing
basis, including, but not limited to, liability for loss and loss adjustment
expenses, goodwill and accrued net premiums written from Third-Party Agent
referrals, and the Sponsor Covered Shares liability. We consider an accounting
judgment, estimate or assumption to be critical when (1) the estimate or
assumption is complex in nature or requires a high degree of judgment and (2)
the use of different judgments, estimates and assumptions could have a material
impact on our consolidated financial statements. Our significant accounting
policies are described in Note 2 to our annual audited consolidated financial
statements. Our critical accounting estimates are described below.

Liability for claims and claim settlement expenses

Our liability for loss and loss adjustment expenses include mainly reserves for
known claims as well as reserves for IBNR claims. Each known claim is reserved
based on our estimate of the costs required to settle the claim.

IBNR is a loss reserve that primarily reflects the sum of expected losses for
unreported claims. The expense is calculated by applying a loss provision rate
to total title insurance premiums. With the assistance of a third-party
actuarial firm, we determine the loss provision rate for the policies written in
the current and prior years. This assessment considers factors such as
historical experience and other factors, including industry trends, claim loss
history, legal environment, geographic considerations and the types of title
insurance policies written (i.e., real estate purchase or refinancing
transactions). The loss provision rate is set to provide for losses on current
year policies, but due to development of prior years and our long claim
duration, it periodically includes amounts of estimated adverse or positive
development on prior years' policies. The provision rate on prior year policies
will continue to change as actual experience on those specific policy years
develop. As the Company's claims experience matures, we refine estimates on
prior policy years to put more consideration to the Company's actual claims
experience as compared to industry experience. Changes in the loss provision
rate for recent policy years are considered likely and could result

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in a material adjustment to the IBNR reserves. For example, a 50 basis point
increase or decrease in the current estimated 2021 loss provision rate would
result in a $2.8 million corresponding increase or decrease to IBNR.

The estimates used require considerable judgment and are established as
management's best estimate of future outcomes, however, the amount of IBNR
reserved based on these estimates could ultimately prove to be inadequate to
cover actual future claims experience. We continually monitor for any events
and/or circumstances that arise during the year which may indicate that the
assumptions used to record the provision for claims estimate requires
reassessment.

Our total loss reserve as of December 31, 2021 amounted to $80.3 million, which
we believe, based on historical claims experience and actuarial analyses, is
adequate to cover claim losses resulting from pending and future claims for
policies issued through December 31, 2021.

A summary of the Company’s provisions for losses is as follows:

                                  Year Ended December 31,
                                 2021                      2020
                                      ($ in thousands)
Known title claims    $     7,578           9  %    $  4,727      7  %
IBNR title claims          72,621          90  %      64,390     92  %
Total title claims    $    80,199          99  %    $ 69,117     99  %
Non-title claims               68           1  %         683      1  %
Total loss reserves   $    80,267         100  %    $ 69,800    100  %

We continually review and adjust our reserve estimates to reflect losses
experience and any new information that becomes available.

Good will

We have significant goodwill on our balance sheet related to acquisitions as
goodwill represents the excess of the acquisition price over the fair value of
net assets acquired and liabilities assumed in a business combination. Goodwill
is tested and reviewed annually for impairment 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 addition, an interim impairment test may be
completed upon a triggering event or when there is a reorganization of reporting
structure or disposal of all or a portion of a reporting unit. As of
December 31, 2021, we had $111.5 million of goodwill, relating to the North
American Title Acquisition, of which $88.1 million and $23.4 million was
allocated to our Distribution and Underwriting reporting units, respectively.

In performing our annual goodwill impairment test, we first perform a
qualitative assessment, which requires that we consider significant estimates
and assumptions regarding macroeconomic conditions, industry and market
considerations, cost factors, overall financial performance, 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, as goodwill is not
considered to be impaired. However, if we determine that the fair value of a
reporting unit is more likely than not to be less than its carrying value, then
a quantitative assessment is performed. For the quantitative assessment, the
determination of estimated fair value of our reporting units requires us to make
assumptions about future discounted cash flows, including profit margins,
long-term forecasts, discount rates and terminal growth rates and, if possible,
a comparable market transaction model. If, based upon the quantitative
assessment, the reporting unit fair value is less than the carrying amount, a
goodwill impairment is recorded equal to the difference between the carrying
amount of the reporting unit's goodwill and its fair value, not to exceed the
carrying value of goodwill allocated to that reporting unit, and a corresponding
impairment loss is recorded in the consolidated statements of operations.

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We conducted our annual goodwill impairment test as of October 1, 2021. We
determined, after performing a qualitative review of each reporting unit, that
the fair value of each reporting unit exceeded its respective carrying value.
Accordingly, there was no indication of impairment and the quantitative goodwill
impairment test was not performed. We did not identify any events, changes in
circumstances, or triggering events since the performance of our annual goodwill
impairment test that would require us to perform an interim goodwill impairment
test during the year.

Accumulated net premiums issued from third party agent referrals

We recognize revenues on title insurance policies issued by Third-Party Agents
when notice of issuance is received from Third-Party Agents, which is generally
when cash payment is received. In addition, we estimate and accrue for revenues
on policies sold but not reported by Third-Party Agents as of the relevant
balance sheet closing date. This accrual is based on historical transactional
volume data for title insurance policies that have closed and were not reported
before the relevant balance sheet closing, as well as trends in our operations
and in the title and housing industries. There could be variability in the
amount of this accrual from period to period and amounts subsequently reported
to us by Third-Party Agents may differ from the estimated accrual recorded in
the preceding period. If the amount of revenue subsequently reported to us by
Third-Party Agents is higher or lower than our estimate, we record the
difference in revenue in the period in which it is reported. The time lag
between the closing of transactions by Third-Party Agents and the reporting of
policies, or premiums from policies issued by Third-Party Agents to us has been
approximately three months. In addition to the premium accrual, we also record
accruals for the corresponding direct expenses related to this revenue,
including premiums retained by Third-Party Agents, premium taxes, and provision
for claims.

Responsibility for actions covered by the sponsor

The Sponsor Covered Shares, as described in Note 3, will become vested
contingent upon the price of our common stock exceeding certain thresholds or
upon some strategic events, which include events that are not indexed to our
common stock.

We obtained a third-party valuation of the Sponsor Covered Shares as of July 28,
2021 (i.e., the Closing Date) and December 31, 2021 using the Monte Carlo
simulation methodology and based upon market inputs regarding stock price,
dividend yield, expected term, volatility and risk-free rate. The share price
represents the trading price as of each valuation date. The expected dividend
yield is zero as we have never declared or paid cash dividends and have no
current plans to do so during the expected term. The expected term represents
the vesting period, which is 9.6 years years. The expected volatility of 55.0%
was calculated based on the average of (i) the Doma implied volatility
calculated using longest term stock option. (ii) the Doma implied warrant
volatility using the term of the Public and Private Warrants and (iii) median
leverage adjusted (asset) volatility calculated using a set of Guideline Public
Companies ("GPCs"). Volatility for the GPCs was calculated over a lookback
period of 9.6 years years (or longest available data for GPCs whose trading
history was shorter than 9.6 years years), commensurate with the contractual
term of the Sponsor Covered Shares. The risk-free rate utilizes the 10-year U.S.
Constant Maturity. Finally, the annual change in control probability is
estimated to be 2.0%.

From December 31, 2021the liabilities of the actions covered by the sponsor amounted to $5.4
million
.

New accounting statements

For more information on recently published accounting pronouncements, refer to note 2
to our consolidated financial statements included elsewhere in this file.

Accounting Election for Emerging Growth Companies

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (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

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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 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.
]]>
strongest annual results ever with strong organic growth and record earnings https://stormbirds.net/strongest-annual-results-ever-with-strong-organic-growth-and-record-earnings/ Thu, 03 Mar 2022 17:09:00 +0000 https://stormbirds.net/strongest-annual-results-ever-with-strong-organic-growth-and-record-earnings/ H+H International A/S Today, the Board of Directors of H+H International A/S (hereinafter referred to as “H+H” or “the Group”) adopted the annual report for 2021. CEO Michael T Quote from Andersen “I’m proud to report the strongest financial results ever in H+H’s history, with strong organic growth and record earnings. These results were largely […]]]>

H+H International A/S

Today, the Board of Directors of H+H International A/S (hereinafter referred to as “H+H” or “the Group”) adopted the annual report for 2021.

CEO Michael T Quote from Andersen

I’m proud to report the strongest financial results ever in H+H’s history, with strong organic growth and record earnings. These results were largely due to a rapid recovery in European property markets following the Covid-19 pandemic, creating high demand and activity across our footprint. I am also proud to report that H+H has delivered on the promises we made in last year’s sustainability report by committing to an ambitious 1.5 degree emissions reduction target, which has been verified by the Science Based Target initiative. In doing so, H+H has become the leading manufacturer of AAC and CSU some products and one of only six building products companies in Europe with the sciencetarget baseds approved in accordance with 1.5degree scenario.

Selected financial highlights for the full year 2021 and the fourth quarter of 2021

2021

2020

Q4 2021

Q4 2020

Income

million DKK

3,020

2,654

731

642

Gross profit before special items

million DKK

905

836

216

196

EBITDA before special items

million DKK

591

521

139

125

EBIT before special items

million DKK

408

332

94

74

Profit after tax

million DKK

321

251

91

66

Cash flow from operating activities

million DKK

454

425

77

120

Cash flow from investing activities

million DKK

(427)

(206)

(195)

(67)

Free movement of capital

million DKK

27

219

(118)

53

Organic growth

Percent

13%

(6%)

11%

4%

Gross margin before special items

Percent

30%

28%

7%

6%

EBITDA margin before special items

Percent

20%

17%

5%

4%

EBIT margin before special items

Percent

14%

11%

3%

2%

Return on invested capital

Percent

20%

18%

20%

18%

Financial gearing

GNDI to EBITDA ratio

0.6x

0.4x

0.6x

0.4x

Financial analysis (2020-numbers in parentheses)

Total turnover increased by 14% to DKK 3,020 million (DKK 2,654 million). Revenue growth before acquisitions and divestitures measured in local currencies (“organic growth”) was 13% (minus 6%).
Organic growth of 13% was mainly driven by a recovery in the UK market following the national lockdown in 2020 in response to the Covid-19 pandemic. Outside the UK, organic growth was 6%, driven by strong demand and selling price increases, particularly in the Central and Western Europe region.

Gross profit before special items was DKK 905 million in 2021 (DKK 836 million), corresponding to a gross margin before special items of 30% (31%).

EBITDA before exceptionals amounted to DKK 591 million (DKK 521 million), corresponding to an EBITDA margin before exceptionals of 20% (20%).

EBIT before exceptionals amounted to DKK 408 million (DKK 332 million), corresponding to an EBIT margin before exceptionals of 14% (13%).

Profit for the period increased by DKK 321 million (DKK 251 million) in 2020.

Cash flow from operating activities amounted to DKK 454 million (DKK 425 million), mainly due to higher EBITDA and positive working capital development partially offset by taxes paid.

Free cash flow amounted to DKK 27 million (DKK 219 million). Excluding acquisitions and divestments, free cash flow amounted to DKK 265 million (DKK 291 million).

The return on invested capital (“ROIC”) was 20% (18%).

Financial outlook for 2021

  • Revenue growth before acquisitions and divestitures measured in local currencies (organic growth) is expected to be between 10% and 15%.

  • EBIT before exceptional items expected to be between DKK 420 and 500 million

Expectations for H+H’s financial performance in 2022 are based on the following specific assumptions:

  • The exchange rates, mainly the pound sterling (“GBP”), the euro (“EUR”) and the Polish zloty (“PLN”) remain at the levels of mid-February 2022.

  • Inflation rates related to the cost of energy and raw materials are stabilizing at mid-February 2022 levels.

Increased long-term financial goals

Over the past few years, H+H has consistently exceeded its long-term financial targets for EBIT margin before special items and return on investment. Supported by underlying market trends of insufficient structural housing supply, population growth, urbanization and government support for increased housing production, it was decided to increase targets long-term performance of the Company in terms of EBIT margin and ROIC as follows:

  • The long-term financial target for the EBIT margin before special items is increased to 12% (previously 11%).

  • The long-term financial target for return on investment is increased to 16% (previously 14%).

  • The long-term financial objective for financial debt is unchanged at 1-2 times EBITDA before exceptional items

The long-term financial targets reflect the ambition to maintain minimum average levels over a full economic cycle.

Share buyback program

The board of directors has decided to launch a share buyback program of up to DKK 150 million. This corresponds to a total of 828,729 shares, or 4.6% of the current total share capital, based on the closing price on March 2, 2022. The decision is supported by continued strong earnings and cash flow generation available, which resulted in a financial leverage significantly lower than the Group’s long-term financial objective of 1 to 2 times EBITDA.

The Board of Directors continues to carefully balance further investments in growth while returning value to the Company’s shareholders. Given the relatively low financial leverage, there is an opportunity to return capital to shareholders of the Company while retaining the ability to potentially pursue further investments in organic and inorganic growth opportunities.

The share repurchase program is carried out with the aim of adjusting the capital structure of H+H, and it is expected that the shares repurchased under the program, which are not used to meet obligations relating to the The Company’s share incentive program will be proposed canceled at the 2023 General Meeting.

Announcement of new CEO

With reference to company announcement no. 467 of February 28, 2022, the Board of Directors announced that Dr. Jörg Brinkmann will be appointed as the new CEO, replacing Michael T. Andersen who will leave the H+H Group. The changes will become effective no later than March 1, 2023, and Michael T. Andersen will remain in his role as CEO until Dr. Jörg Brinkmann joins the company.

Dr. Jörg Brinkmann, 42, is a German national and is currently Managing Director of James Hardie Europe GmbH and a member of the management team of James Hardie Industries plc. Prior to his role at James Hardie, he was CEO of Fermacell GmbH and a member of the Xella Group Executive Committee. He holds a master’s degree from the University of Duisburg-Essen as well as a doctorate from the University of Hohenheim in Stuttgart, Germany.

Fthe whole year 2021 conference call

As part of the publication of the annual report for 2021, a conference call for investors and analysts is scheduled for March 4, 2022, at 10:00 a.m. CET. During the call, CEO Michael T. Andersen and Chief Financial Officer Peter Klovgaard-Jørgensen will present the annual report. The presentation will be followed by a question and answer session. Investors and analysts are invited to participate by telephone:

DK: +45 78150107
UK: +44 3333009267
USA: +1 8335268347

Other participants can follow the conference call via a live webcast here. The presentation slides of the conference call will be made available beforehand here. A replay of the conference call will then be available on the H+H Investor Relations website. here.

Other annual publications

In addition to the 2021 annual report, the following documents are now published and made available on the Group’s website:

Kent Arentoft Michael T. Andersen Peter Klovgaard-Jørgensen
Chairman of the Board of Directors Chief Executive Officer Chief Financial Officer

Contact information

For more information, please contact:

Andreas Holkjaer
Head of Investor Relations and Treasury
+45 24 48 03 67
aho@HplusH.com

H+H International A/Sthe main business of is the manufacture and sale of wall building materials, with sales in 2021 by DKK 3,020 mmillion. The main product lines are aerated concrete blocks and calcium silicate units used for the new residential construction segment. H+H a 31 factories in Northern and Central Europe with a total production of near 4.5 million cubic meters of product per year and holds a leading position in most of its markets. H+H a more … than 1,600 employees and is listed on the Nasdaq Copenhagen stock Exchange.

Attachments

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KADANT INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K) https://stormbirds.net/kadant-inc-managements-discussion-and-analysis-of-financial-condition-and-results-of-operations-form-10-k/ Tue, 01 Mar 2022 23:43:06 +0000 https://stormbirds.net/kadant-inc-managements-discussion-and-analysis-of-financial-condition-and-results-of-operations-form-10-k/ Management's Discussion and Analysis of Financial Condition and Results of Operations should be read together with the consolidated financial statements and related notes set forth in Item 8, "Financial Statements and Supplementary Data." The following discussion also contains forward-looking statements, including the outlook for our business, that involve a number of risks and uncertainties. See […]]]>
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read together with the consolidated financial statements
and related notes set forth in Item 8, "Financial Statements and Supplementary
Data." The following discussion also contains forward-looking statements,
including the outlook for our business, that involve a number of risks and
uncertainties. See Part I, "Forward-Looking Statements," for a discussion of the
forward-looking statements contained below and Part I, Item 1A, "Risk Factors,"
for a discussion of certain risks that could cause our actual results to differ
materially from the results anticipated in such forward-looking statements.

Overview


Company Background
We are a global supplier of technologies and engineered systems that drive
Sustainable Industrial Processing. Our products and services play an integral
role in enhancing efficiency, optimizing energy utilization, and maximizing
productivity in process industries while helping our customers advance their
sustainability initiatives with products that reduce waste or generate more
yield with fewer inputs, particularly fiber, energy, and water. Producing more
while consuming less is a core aspect of Sustainable Industrial Processing and a
major element of the strategic focus of our businesses.
Our financial results are reported in three reportable operating segments: Flow
Control, Industrial Processing, and Material Handling. The Flow Control segment
consists of our fluid-handling and doctoring, cleaning, & filtration product
lines; the Industrial Processing segment consists of our wood processing and
stock-preparation product lines; and the Material Handling segment consists of
our conveying and vibratory, baling, and fiber-based product lines. See   Note
  1    2  , Business Segment and Geographical Information, in the accompanying
consolidated financial statements for a description and financial information of
our reportable operating segments.

Industry and business overview


We had record consolidated bookings of $893.2 million for 2021 as our businesses
rebounded from the impact of the COVID-19 pandemic, which adversely affected our
bookings and revenue for a substantial part of 2020. Our consolidated 2021
bookings included $36.9 million attributable to acquisitions and $27.0 million
from a favorable foreign currency effect, and consisted of record orders for
both parts and consumables products and capital equipment. See Acquisitions
below for further details. We ended the year with record consolidated backlog of
$309.9 million, increasing 61% from the end of 2020. An overview of our business
by segment is as follows:

•Flow Control - Our Flow Control segment ended a strong year with record
bookings for both parts and consumables products and capital equipment. In 2021,
we acquired The Clouth Group of Companies (Clouth), which contributed $23.2
million of bookings. Orders for both parts and consumables products and capital
equipment at our existing Flow Control businesses have been bolstered by growth
in the industries we serve, particularly the packaging and tissue markets. Our
bookings in the earlier part of 2021 were also boosted by pent-up demand from
depressed levels encountered during most of 2020.

•Industrial Processing - Strong quarterly bookings, particularly in the latter
half of 2021, contributed to record orders in 2021 for our Industrial Processing
segment. Orders for our wood processing business products continue to be fueled
by a robust U.S. housing market and high demand for lumber, oriented strand
board and plywood, which has driven new capital equipment investment and high
parts consumption by our customers. During the second half of 2021, maintenance
requirements at many of our customers have augmented demand for our parts
products, which we expect to continue into the first half of 2022. In the fourth
quarter of 2021, wood processing capital equipment bookings were exceptionally
strong, resulting in a backlog that will be fulfilled primarily through
mid-2023. Bookings at our stock-preparation business increased 28% in 2021
largely due to a rebound in capital equipment orders compared with the depressed
capital spending environment for most of 2020 and due to steady demand for our
parts and consumables products. We expect the demand for our Industrial
Processing segment products to moderate somewhat in 2022 compared to the record
level in 2021.

•Material Handling - Our Material Handling segment also ended the year with
record bookings. In August 2021, we acquired East Chicago Machine Tool
Corporation (Balemaster) and certain assets of affiliated companies, which
contributed $13.2 million of orders. Bookings for baling products at our
European operations continue to be bolstered by improved business conditions,
including the recovery of recycled commodity prices. Bookings for parts and
consumables at our conveying and vibratory equipment business have rebounded
from depressed 2020 levels due to the relaxation of pandemic-related
restrictions and an increased demand from our mining customers, while bookings
for capital equipment have moderated.
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In 2021, many of our operations were impacted by labor availability and supply
chain constraints, the latter of which resulted in inflationary pressure on
material costs, longer lead times, and increased freight costs, as well as
customer-requested delays in shipments. We believe these challenges will
generally persist into 2022. Our businesses are alleviating supply chain
constraints through various measures, including advance purchases of raw
materials to prevent potential manufacturing disruptions and mitigating
increased material and freight costs through price adjustments, when possible.
We believe that the fundamentals of our business will remain positive,
particularly given our high backlog levels, continued strong bookings, and
ongoing strength in the markets we serve as we enter 2022. Despite this
optimism, we expect our operating environment to continue to be challenging as a
result of the factors impacting our business discussed above and the
uncertainties and risks surrounding the COVID-19 pandemic. For more information
on risks related to health epidemics to our business, including COVID-19, and
other factors impacting our business discussed above, please see   Part I, Item
1A  , "Risk Factors."

International Sales

More than half of our sales are to customers outside the United States, mainly
in Europe, Asia, and Canada. As a result, our financial performance can be
materially affected by currency exchange rate fluctuations between the U.S.
dollar and foreign currencies. To mitigate the impact of foreign currency
fluctuations, we generally seek to charge our customers in the same currency in
which our operating costs are incurred. Additionally, we may enter into forward
currency exchange contracts to hedge certain firm purchase and sale commitments
denominated in currencies other than our subsidiaries' functional currencies. We
currently do not use derivative instruments to hedge our exposure to exchange
rate fluctuations created by the translation into the U.S. dollar of our foreign
subsidiaries' results that are in functional currencies other than the U.S.
dollar.

International trade


The United States imposes tariffs on certain imports from China, which has and
will continue to increase the cost of some of the equipment that we import.
Although we are working to mitigate the impact of tariffs through pricing and
sourcing strategies, we cannot be sure these strategies will effectively
mitigate the impact of these costs. For more information on risks associated
with our global operations, including tariffs, please see   Part I, Item 1A  ,
"Risk Factors."

Acquisitions

We expect that a significant driver of our growth over the next several years
will be the acquisition of businesses and technologies that complement or
augment our existing products and services or may involve entry into a new
process industry. We continue to pursue acquisition opportunities.
In the third quarter of 2021, we acquired Clouth for $92.9 million, net of cash
acquired plus debt assumed. Clouth, which is included in our Flow Control
segment, is a leading manufacturer of doctor blades and related equipment used
in the production of paper, packaging, and tissue. We expect several synergies
in connection with this acquisition, including deepening our presence in the
growing ceramic blade market and expansion of product sales at our existing
businesses by leveraging Clouth's complementary global geographic footprint.
Clouth has three manufacturing facilities in Germany and one in Poland and
generated revenue of approximately 40.5 million euros for the trailing twelve
months ended June 30, 2021 prior to its acquisition by us.
In the third quarter of 2021, we also acquired Balemaster for $53.7 million, net
of cash acquired. Balemaster, which is included in our Material Handling
segment, is a leading U.S. manufacturer of horizontal balers and related
equipment used primarily for recycling packaging waste at corrugated box plants
and large retail and distribution centers. We expect several synergies in
connection with this acquisition, including expanding our presence in the
secondary material processing sector and creating new opportunities for
leveraging our high-performance balers produced in Europe. Balemaster generated
revenue of approximately $22.2 million for the trailing twelve months ended June
30, 2021 prior to its acquisition by us.
In the fourth quarter of 2021, we acquired a business in India, which is
included in our Industrial Processing segment, for approximately $2.9 million.
In 2020, we acquired a business in Canada, which is included in our Industrial
Processing segment, for approximately $6.9 million, net of cash acquired.
See   Note 2  , Acquisitions, in the accompanying consolidated financial
statements for further details.


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Results of Operations

2021 Compared to 2020

Revenue

The following table presents changes in revenue by segment between 2021 and
2020, and those changes excluding the effect of foreign currency translation and
acquisitions which we refer to as change in organic revenue. The presentation of
the change in organic revenue is a non-GAAP measure. We believe this non-GAAP
measure helps investors gain an understanding of our underlying operations
consistent with how management measures and forecasts its performance,
especially when comparing such results to prior periods. This non-GAAP measure
should not be considered superior to or a substitute for the corresponding GAAP
measure.
Revenue by segment in 2021 and 2020 was as follows:
                                                                                                                                                                              (Non-GAAP)
                                                                                                                                                                              Change in
                                                                                                                                                                           Organic Revenue
(In thousands, except         January 1,          January 2,                                                          Currency
percentages)                     2022                2021              Total Increase           % Change            Translation            Acquisitions              Increase              % Change
Flow Control                 $  288,788          $  225,444          $        63,344                  28  %       $       6,425          $      23,221          $       33,698                   15  %
Industrial Processing           328,762             261,577                   67,185                  26  %              13,012                    589                  53,584                   20  %
Material Handling               169,029             148,007                   21,022                  14  %               2,796                  9,038                   9,188                    6  %

Consolidated turnover $786,579 $635,028 $

 151,551                  24  %       $      22,233          $      32,848          $       96,470                   15  %



Consolidated revenue in 2021 increased 24%, while consolidated organic revenue
increased 15%, driven by higher demand for both parts and consumables products
and capital equipment principally at our Industrial Processing and Flow Control
segments as described below.
Revenue at our Flow Control segment increased 28% in 2021, while organic revenue
increased 15% due to higher demand for parts and consumables products and, to a
lesser extent, capital equipment at substantially all locations. Increased
demand for parts and consumables products in 2021 was due in part to customer
maintenance requirements, pent-up demand, and orders in the latter part of the
year to mitigate potential supply chain disruptions. Conversely, revenue during
most of 2020 was depressed as a result of customer downtimes, shutdowns, and
visitation restrictions related to the COVID-19 pandemic. Higher capital
equipment revenue in 2021 resulted from improved market conditions and pent-up
demand, while revenue in 2020 was adversely impacted by customer reductions in
capital spending and deferrals of equipment installations as a result of the
pandemic.
Revenue at our Industrial Processing segment increased 26% in 2021, while
organic revenue increased 20% due to higher demand for both capital equipment
and parts and consumables products. Our wood processing business continues to
experience high demand for its products, driven by near capacity mill rates
resulting in increased capital investment and parts consumption. Additionally,
demand for parts was augmented by maintenance requirements in the latter part of
2021 at many of our wood processing customers. Increased revenue at our
stock-preparation business was led by increased demand for parts and consumables
at our North American stock-preparation operation due to improved market
conditions and pent-up demand coupled with a depressed 2020 period. Capital
equipment revenue also increased as a result of large orders at our Chinese
operation, offset in part by lower shipments at our North American and European
operations due to the timing of orders and curtailed spending by our customers
in 2020, which impacted revenue in the first half of 2021.
Revenue at our Material Handling segment increased 14% in 2021, while organic
revenue increased 6%. Demand for our European baling products was bolstered by
improved business conditions in Europe, including the recovery of recycled
commodity prices. This improvement was partially offset by lower capital
equipment revenue at our conveying and vibratory equipment business in 2021.

Gross margin

The gross profit margin by segment in 2021 and 2020 was as follows:

                                         January 1,        January 2,
                                            2022              2021
Flow Control                                    51.0%             52.9%
Industrial Processing                           40.1%             41.3%
Material Handling                               34.4%             33.7%
Consolidated Gross Profit Margin                42.9%             43.7%


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                                                Kadant Inc.


Consolidated gross profit margin declined to 42.9% in 2021 compared with 43.7%
in 2020. The 2021 period included $4.3 million of amortization of acquired
profit in inventory, which lowered consolidated gross profit margin by 0.5
percentage points, and lower benefits received from government employee
retention assistance programs. Benefits received from these programs were $0.9
million, or 0.1 percentage points of consolidated gross profit margin, in 2021
and $3.7 million, or 0.6 percentage points of consolidated gross profit margin,
in 2020.
Gross profit margin at our Flow Control segment decreased to 51.0% in 2021
compared with 52.9% in 2020 due to the inclusion of $3.1 million of amortization
of acquired profit in inventory, which lowered gross profit margin in 2021 by
1.1 percentage points, and a lower gross profit margin profile for Clouth. We
expect the lower gross profit margin profile for Clouth to continue to have a
negative impact on our Flow Control gross profit margin in 2022.
Gross profit margin at our Industrial Processing segment decreased to 40.1% in
2021 compared with 41.3% in 2020 due principally to lower benefits received from
government employee retention assistance programs. Cost of revenue included
benefits received of $0.7 million in 2021 compared with $2.9 million in 2020
related to these programs. The gross profit margin was also impacted by
lower-margin capital equipment revenue at our Chinese stock-preparation business
offset in part by a higher margin at our wood processing business.
Gross profit margin at our Material Handling segment increased to 34.4% in 2021
compared with 33.7% in 2020 due to a higher gross profit margin profile for
Balemaster and an improvement in gross profit margin for capital equipment at
our existing baler business. This was offset in part by $1.2 million of
amortization of acquired profit in inventory, which lowered gross profit margin
by 0.7 percentage points in 2021.

Selling, general and administrative expenses


Selling, general, and administrative (SG&A) expenses by segment in 2021 and 2020
were as follows:

                                            January 1,                                   January 2,
(In thousands, except percentages)             2022               % of Revenue              2021               % of Revenue           Increase           % Change
Flow Control                               $   76,730                       27  %       $   63,382                       28  %       $ 13,348                  21  %
Industrial Processing                          60,802                       18  %           57,702                       22  %          3,100                   5  %
Material Handling                              38,575                       23  %           33,526                       23  %          5,049                  15  %
Corporate                                      32,680                         N/A           27,295                         N/A          5,385                  20  %
Consolidated SG&A Expenses                 $  208,787                       27  %       $  181,905                       29  %       $ 26,882                  15  %



Consolidated SG&A expenses as a percentage of revenue decreased to 27% in 2021
compared with 29% in 2020 principally due to higher revenue. Consolidated SG&A
expenses increased $26.9 million as a result of the inclusion of $9.7 million of
SG&A expenses from acquisitions, higher incentive compensation resulting from
our improved financial performance, $5.1 million from the unfavorable effect of
currency translation, and an incremental $4.0 million of acquisition-related
costs. SG&A expenses included benefits received from government employee
retention assistance programs of $1.4 million in 2021 and $2.2 million in 2020.
SG&A expenses at our Flow Control segment increased $13.3 million principally
due to the inclusion of $7.0 million of SG&A expenses from Clouth, $3.1 million
of acquisition-related costs, and $1.7 million from the unfavorable effect of
foreign currency translation. The remaining increase is principally attributable
to higher incentive compensation in 2021.
SG&A expenses at our Industrial Processing segment increased $3.1 million
principally due to $2.7 million from the unfavorable effect of foreign currency
translation.
SG&A expenses at our Material Handling segment increased $5.0 million
principally due the inclusion of $2.4 million of SG&A expenses from Balemaster
and an incremental $1.3 million of acquisition-related costs.
SG&A expenses at Corporate increased $5.4 million primarily due to higher
incentive compensation and, to a lesser extent, increased professional service
fees.

Depreciation and other costs, net


Impairments and other costs, net in 2021 included an impairment charge of $0.5
million related to the write down of an intangible asset and restructuring costs
totaling $0.5 million for severance costs and the write down of certain assets
associated with the closure of a redundant business in our Flow Control segment.
Impairments and other costs, net in 2021 also included a gain on the sale of a
building of $0.5 million within our Industrial Processing segment.
Impairments and other costs, net in 2020 included impairment charges of $1.9
million related to the write down of intangible assets associated with our
timber-harvesting products, which are included in our Industrial Processing
segment, as a result of a continued decline in revenue and operating results for
this business. Impairments and other costs, net in 2020 also included
restructuring costs of $1.1 million, which consisted of severance costs of $0.7
million at our Flow Control segment, $0.2 million at our Industrial Processing
segment, and $0.2 million at our Material Handling segment. These restructuring
costs
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                                                Kadant Inc.


represent severance associated with a restructuring plan implemented in response
to the slowdown in the global economy that was largely driven by the impact of
the COVID-19 pandemic.
See   Note 1  , Nature of Operations and Summary of Significant Accounting
Policies, under the heading Impairment of Long-Lived Assets, and   Note 8  ,
Other Costs, Net in the accompanying consolidated financial statements for
further details relating to the items discussed above.

Interest charges

Interest expense decreased to $4.8 million in 2021 from $7.4 million in 2020 due to a lower weighted average interest rate and lower outstanding debt in 2021.

Provision for income taxes


Our provision for income taxes increased to $27.2 million in 2021 from $17.9
million in 2020 and represented 24% of pre-tax income in both periods. The
effective tax rate in 2021 was higher than our statutory rate of 21% primarily
due to the distribution of our worldwide earnings, nondeductible expenses, and
state taxes. These increases in tax expense were offset in part by a decrease in
tax related to the net excess income tax benefits from stock-based compensation
arrangements. The effective tax rate in 2020 was higher than our statutory rate
of 21% primarily due to nondeductible expenses, the distribution of our
worldwide earnings, and state taxes. These increases in tax expense were offset
in part by a decrease in tax related to the net reversal of tax reserves
associated with uncertain tax positions, the net excess income tax benefits from
stock-based compensation arrangements, and a tax benefit for the partial release
of a valuation allowance.

Net Income

Net income increased $29.1 million in 2021 from $55.7 million in 2020 primarily
due to a $35.6 million increase in operating income and a $2.6 million decrease
in interest expense, offset in part by a $9.2 million increase in provision for
income taxes (see discussions above for further details).

Non-GAAP Key Performance Indicators


In addition to the financial measures prepared in accordance with GAAP, we use
certain non-GAAP financial measures, including organic revenue (defined as
revenue excluding the effect of foreign currency translation and acquisitions),
adjusted operating income, earnings before interest, taxes, depreciation, and
amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin (defined as
adjusted EBITDA divided by revenue), and free cash flow (defined as cash flow
provided by operations less capital expenditures).
We use organic revenue in order to understand our trends and to forecast and
evaluate our financial performance and compare revenue to prior periods (see
discussion in Revenue above). Adjusted operating income, adjusted EBITDA, and
adjusted EBITDA margin exclude impairment and restructuring costs, acquisition
costs, amortization expense related to acquired profit in inventory and backlog,
and certain gains or losses. These items are excluded as they are not indicative
of our core operating results and are not comparable to other periods, which
have differing levels of incremental costs, expenditures or income, or none at
all. Additionally, we use free cash flow in order to provide insight on our
ability to generate cash for acquisitions and debt repayments, as well as for
other investing and financing activities.
We believe these non-GAAP financial measures, when taken together with the
corresponding GAAP financial measures, provide meaningful supplemental
information regarding our performance by excluding certain items that may not be
indicative of our core business, operating results, or future outlook. We
believe that the inclusion of such measures helps investors gain an
understanding of our underlying operating performance and future prospects,
consistent with how management measures and forecasts our performance,
especially when comparing such results to previous periods or forecasts and to
the performance of our competitors. Such measures are also used by us in our
financial and operating decision-making and for compensation purposes. We also
believe this information is responsive to investors' requests and gives them an
additional measure of our performance.
  Our non-GAAP financial measures are not meant to be considered superior to or
a substitute for the results of operations or cash flow prepared in accordance
with GAAP. In addition, our non-GAAP financial measures have limitations
associated with their use as compared to the most directly comparable GAAP
measures, in that they may be different from, and therefore not comparable to,
similar measures used by other companies.
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                                                Kadant Inc.

A reconciliation of adjusted operating income, adjusted EBITDA and adjusted EBITDA margin to net income attributable to Kadant is as follows:

                                                            January 1,          January 2,           December 28,
(In thousands, except percentages)                             2022                2021                  2019
Net Income Attributable to Kadant                          $   84,043          $   55,196          $      52,068
Net Income Attributable to Noncontrolling Interest                838                 543                    496
Provision for Income Taxes                                     27,171              17,948                 16,358
Interest Expense, Net                                           4,554               7,242                 12,542
Other Expense, Net                                                104                 195                  6,359
Operating Income                                              116,710              81,124                 87,823
Impairment and Restructuring Costs                                980               2,979                  2,528
Gain on Sale of Building                                         (515)                  -                      -
Acquisition Costs                                               3,655                 485                    843
Acquired Backlog Amortization                                   1,326                 544                  1,323
Acquired Profit in Inventory                                    4,284                   -                  3,549
Adjusted Operating Income                                     126,440              85,132                 96,066
Depreciation and Amortization                                  32,976              30,790                 31,067
Adjusted EBITDA                                            $  159,416          $  115,922          $     127,133
Adjusted EBITDA Margin                                             20.3%               18.3%                  18.0%



As a percentage of revenue, adjusted EBITDA margin increased 200 basis points in
2021 and 30 basis points in 2020. The 2021 increase was primarily due to organic
revenue growth without a proportionate increase in operating expenses. The 2020
increase was primarily due to cost reduction efforts, including the impact of
benefits received from government employee retention assistance programs, to
mitigate lower revenue and an increased proportion of higher margin parts and
consumables revenue.
A reconciliation of free cash flow from cash flow provided by operating
activities is as follows:

                                              January 1,      January 2,       December 28,
(In thousands)                                   2022            2021              2019

Cash flow from operating activities $162,420 $92,884

  $      97,413
Less: Capital Expenditures                      (12,771)          (7,595)            (9,957)
Free Cash Flow                               $  149,649      $    85,289      $      87,456



Free cash flow increased to $149.6 million in 2021 from $85.3 million in 2020
primarily due to improvements in operating assets and liabilities and net
income. See below for further discussion of cash provided by operating
activities. Free cash flow decreased to $85.3 million in 2020 from $87.5 million
in 2019 primarily due to a use of cash for working capital purposes, driven by a
reduction in accounts payable as a result of reduced spending levels in 2020 for
capital equipment orders.

2020 Compared to 2019

A detailed discussion of the year-over-year results of operations for 2020
compared with 2019 can be found in Part II, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of our Annual Report
on Form 10-K for the fiscal year ended January 2, 2021, filed with the SEC.

Cash and capital resources


Consolidated working capital was $162.4 million at January 1, 2022, compared
with $155.1 million at January 2, 2021. Cash and cash equivalents were $91.2
million at January 1, 2022, compared with $65.7 million at January 2, 2021,
which included cash and cash equivalents held by our foreign subsidiaries of
$83.8 million at January 1, 2022 and $63.6 million at January 2, 2021.


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Cash Flows

The cash flow information is as follows:


                                                                      January 1,           January 2,
(In thousands)                                                           2022                 2021
Net Cash Provided by Operating Activities                            $  162,420          $    92,884
Net Cash Used in Investing Activities                                  (154,475)             (14,545)
Net Cash Provided by (Used in) Financing Activities                      22,808              (84,556)

Effect of exchange rate on cash, cash equivalents and restricted cash

                                                                     (3,232)               4,584
Increase (Decrease) in Cash, Cash Equivalents, and Restricted
Cash                                                                 $   27,521          $    (1,633)



Operating Activities

Cash provided by operating activities increased to $162.4 million in 2021 from
$92.9 million in 2020. Our operating cash flows primarily consist of cash
received from customers, offset by cash payments for items such as inventory,
employee compensation, operating leases, income taxes and interest payments on
outstanding debt obligations. The increase in cash provided by operating
activities in 2021 was principally driven by improvements in operating assets
and liabilities and net income.
Cash provided by operating assets and liabilities was $29.3 million in 2021,
including sources of cash of $27.7 million from customer deposits and $26.3
million from accounts payable, reflecting the impact of increased capital
equipment order activity. Other liabilities provided cash of $19.5 million,
which includes a $6.2 million deposit received for the anticipated sale of a
building in China and an increase in our accrued incentive compensation, advance
billings, and accrued income taxes resulting from our improved financial
performance. These sources of cash were offset in part by cash used of $16.7
million for accounts receivable mostly due to revenue growth and timing of
shipments, $15.0 million for other assets due in part to prepayments for raw
materials and a land use right operating lease related to the relocation of our
existing facility in China, and $11.2 million for a buildup of inventories for
capital equipment orders and to mitigate potential supply chain issues.
Cash used for operating assets and liabilities of $8.0 million in 2020 included
cash used of $15.6 million for accounts payable primarily due to reduced
spending levels for capital equipment projects and $8.6 million for other
liabilities due in part to a decrease in advance billings resulting from lower
contract activity and a payment of $2.4 related to the settlement of a
post-retirement benefit plan. These uses of cash were offset by cash provided of
$13.2 million due to a reduction in unbilled revenue and accounts receivable
primarily as a result of lower capital equipment revenue during 2020.

Investing activities


Cash used in investing activities was $154.5 million in 2021 compared to $14.5
million in 2020. Cash used in investing activities included consideration paid
for acquisitions, net of cash acquired, of $144.0 million in 2021 and $7.1
million in 2020. Additionally, cash used in investing activities included
purchases of property, plant, and equipment of $12.8 million in 2021 and $7.6
million in 2020, reflecting depressed capital expenditures in 2020 due to the
impact of the COVID-19 pandemic.

Fundraising activities


Cash provided by financing activities was $22.8 million in 2021 compared with
cash used in financing activities of $84.6 million in 2020. Borrowings under our
revolving credit facility were $151.9 million in 2021, including $140.3 million
to fund acquisitions, and $26.0 million in 2020, including $18.9 million used to
prepay the outstanding principal balance on our real estate loan. Repayment of
short- and long-term obligations was $115.6 million in 2021 and $99.5 million in
2020, including the $18.9 million prepayment of our real estate loan.

Effect of exchange rate on cash, cash equivalents and restricted cash


The exchange rate effect on cash, cash equivalents, and restricted cash
represents the impact of translation of cash balances at our foreign
subsidiaries. The $3.2 million negative exchange rate effect in 2021 was
primarily attributable to the strengthening of the U.S. dollar against the euro
and the Swedish krona, offset in part by the weakening of the U.S. dollar
against the Chinese renminbi. The $4.6 million positive exchange rate effect in
2020 primarily related to the weakening of the U.S. dollar against the euro and
Chinese renminbi.

Borrowing capacity and borrowing obligations


We entered into an unsecured multi-currency revolving credit facility, dated as
of March 1, 2017 (as amended and restated to date, the Credit Agreement). At
year-end 2021, we have a borrowing capacity available under our Credit Agreement
of $149.9 million in addition to a $150 million uncommitted, unsecured
incremental borrowing facility. Under our debt
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                                                Kadant Inc.


agreements, our leverage ratio must be less than 3.75 or, if we elect, for the
quarter during which a material acquisition occurs and for the three fiscal
quarters thereafter, must be less than 4.00. As of January 1, 2022, our leverage
ratio was 1.3 and we were in compliance with our debt covenants. We expect to
renew our Credit Agreement prior to its maturity date of December 14, 2023. See

Note 6, Short-term and long-term obligations, in the accompanying consolidated financial statements for additional information regarding our debt obligations.

Additional cash and capital resources


On May 20, 2021, our board of directors approved the repurchase of up to $20
million of our equity securities during the period from May 20, 2021 to May 20,
2022. We have not repurchased any shares of our common stock under this
authorization or our previous authorization, which expired on May 13, 2021.
We paid cash dividends of $11.5 million in 2021. On November 18, 2021, we
declared a quarterly cash dividend of $0.25 per share totaling $2.9 million that
was paid on February 3, 2022. Future declarations of dividends are subject to
our board of directors' approval and may be adjusted as business needs or market
conditions change. The declaration of cash dividends is subject to our
compliance with the covenant in our revolving credit facility related to our
consolidated leverage ratio.
We plan to make expenditures of approximately $18.0 million during 2022 for
property, plant, and equipment. In addition, one of our Chinese subsidiaries
expects to build a new facility and relocate over the next two years. Capital
expenditures for the new facility are estimated to be approximately $20 million,
which will be offset by the proceeds received from the sale of our existing
facility. See   Note     15  , Subsequent Event, in the accompanying
consolidated financial statements for additional information regarding the
anticipated relocation of our Chinese manufacturing facility.
As of January 1, 2022, we had approximately $245.1 million of total unremitted
foreign earnings. It is our intent to indefinitely reinvest $223.0 million of
these earnings to support the current and future capital needs of our foreign
operations, including debt repayments, if any. In 2021, we recorded withholding
taxes on the earnings in certain foreign subsidiaries that we plan to repatriate
in the foreseeable future. The foreign withholding taxes that would be required
if we were to remit the indefinitely-reinvested foreign earnings to the United
States would be approximately $4.1 million.
We believe that existing cash and cash equivalents, along with cash generated
from operations, our existing borrowing capacity, and continued access to debt
markets, will be sufficient to meet the capital requirements of our operations
for the next 12 months and the foreseeable future.

Important contractual obligations


The following table summarizes our material contractual obligations as of
January 1, 2022 and the timing and effect that such commitments are expected to
have on our liquidity and capital requirements in future periods. Detailed
information concerning these obligations can be found in Notes 6, 7, and 9 in
the accompanying consolidated financial statements.

                                                Less than 1                                                 After 5
(In millions)                                      Year             1-3 Years           3-5 Years            Years            Total
Debt Obligations:
Principal payments (a)                          $    1.2          $    255.2          $      4.4          $    3.8          $ 264.6
Interest payments (b)                                4.3                 4.6                 0.6               0.2              9.7
Operating and Finance Lease Obligations              5.4                 7.0                 4.0               9.8             26.2
Letters of Credit and Bank Guarantees               18.5                 4.4                 0.6                 -             23.5
Total                                           $   29.4          $    271.2          $      9.6          $   13.8          $ 324.0


(a)Excludes $1.5 million related to a net fixed price purchase option
exercisable in 2022.
(b)Includes interest expense on both variable and fixed rate debt assuming no
prepayments. Variable interest rates have been assumed to remain constant
through the end of the term at the rates that existed as of year-end 2021.

Application of critical accounting estimates


Management's discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with GAAP. The preparation of these consolidated
financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of our consolidated financial statements, and the
reported amounts of revenue and expenses during the reporting period. Our actual
results may differ from these estimates under different assumptions or
conditions.
Critical accounting policies and estimates are defined as those that entail
significant judgments and uncertainties and could potentially result in
materially different results under different assumptions and conditions. For a
discussion on the application of these estimates and other accounting policies,
see   Note 1  , Nature of Operations and Summary of Significant
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                                                Kadant Inc.


Accounting Policies, in the accompanying consolidated financial statements. We
believe that our most critical accounting policies and estimates upon which our
financial position depends, and which involve the most complex or subjective
decisions or assessments, are those described below.

Income taxes


We operate in numerous countries under many legal forms and, as a result, are
subject to the jurisdiction of numerous domestic and non-U.S. tax authorities,
as well as to tax agreements and treaties among these governments. Determination
of taxable income in any jurisdiction requires the interpretation of the related
tax laws and regulations and the use of estimates and assumptions regarding
significant future events, such as the amount, timing and character of
deductions, permissible revenue recognition methods under the tax law and the
sources and character of income and available tax credits. Changes in tax laws,
regulations, agreements and treaties, currency-exchange restrictions or our
level of operations or profitability in each taxing jurisdiction could have an
impact upon the amount of current and deferred tax balances and our results of
operations.
We compute our provision for income taxes using the asset and liability method,
and we recognize deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial reporting and tax
bases of assets and liabilities and for tax loss or credit carryforwards. We
measure deferred tax assets and liabilities using the currently enacted tax
rates that are expected to apply to taxable income in the years in which we
expect to realize those deferred tax assets and liabilities. We estimate the
degree to which our deferred tax assets on deductible temporary differences and
tax loss or credit carryforwards will result in an income tax benefit based on
the expected profitability by tax jurisdiction, and we provide a valuation
allowance for these deferred tax assets if it is more likely than not that they
will not be realized in the future. If it were to become more likely than not
that these deferred tax assets would be realized, we would reverse the related
valuation allowance. Should our actual future taxable income by tax jurisdiction
vary from our estimates, additional valuation allowances or reversals thereof
may be necessary. When assessing the need for a valuation allowance in a tax
jurisdiction, we evaluate the weight of all available evidence to determine
whether it is more likely than not that some portion or all of the deferred
income tax assets will not be realized. As part of this evaluation, we consider
our cumulative three-year history of earnings before income taxes, taxable
income in prior carryback years, future reversals of existing taxable temporary
differences, prudent and feasible tax planning strategies, and expected future
results of operations. At year-end 2021, we continued to maintain a valuation
allowance in the United States against certain of our state operating loss
carryforwards due to the uncertainty of future profitability in these state
jurisdictions in the United States, and we maintained valuation allowances in
certain foreign jurisdictions because of the uncertainty of future
profitability. Our tax valuation allowance was $9.2 million at year-end 2021.
In the ordinary course of business there are inherent uncertainties and
judgements required in quantifying our income tax positions. It is our policy to
provide for uncertain tax positions and the related interest and penalties based
upon our assessment of whether a tax benefit is more likely than not to be
sustained upon examination by tax authorities. On a quarterly basis, we evaluate
our uncertain tax positions against various factors, including changes in facts
or circumstances, tax laws, or the status of audits by tax authorities. We
believe that we have appropriately accounted for any liability for unrecognized
tax benefits, and at year-end 2021, our liability for these unrecognized tax
benefits, including an accrual for the related interest and penalties, totaled
$11.4 million. To the extent we prevail in matters for which a liability for an
unrecognized tax benefit is established or are required to pay amounts in excess
of the liability, our effective tax rate in a given financial statement period
may be affected.
We intend to repatriate the distributable reserves of select foreign
subsidiaries back to the United States and, during 2021, we recorded $0.6
million of net tax expense associated with these foreign earnings that we plan
to repatriate in 2022. Except for these select foreign subsidiaries, we intend
to reinvest indefinitely the earnings of our international subsidiaries in order
to support the current and future capital needs of their operations, including
the repayment of our foreign debt.

Revenue recognition


Approximately 90% of our revenue is recognized at a point in time following the
transfer of control of the goods or service to the customer, primarily relating
to our products that require minimal customization for the customer. The
remaining portion of our revenue is recognized on an over time basis using an
input method that compares the costs incurred to date to the total expected
costs required to satisfy the performance obligation. Most revenue recognized on
an over time basis is for large capital products that are highly customized for
the customer and, as a result, would include significant cost to rework in the
event of cancellation. The over time basis of accounting requires significant
judgment in determining applicable contract costs and the corresponding revenue
to be recognized, which could be different if there were to be changes to the
circumstances of the contract. When adjustments to revenue and costs are
required, the adjustments are included in earnings in the period of the change.
Judgment is also required for contracts involving variable consideration and
multiple performance obligations.
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                                                Kadant Inc.

Valuation of Good will and intangible assets


We use assumptions and estimates in determining the fair value of assets
acquired and liabilities assumed in a business combination, including the
determination of the fair value of intangible assets acquired, which represents
a significant portion of the purchase price in many of our acquisitions. We
estimate the fair value of intangible assets primarily based on projections of
discounted cash flows which we expect to arise from identifiable intangible
assets of acquired businesses. The determination of the allocation of the
purchase price for the fair value of intangible assets acquired requires
significant judgment as does the determination as to whether such intangibles
are amortizable or non-amortizable and, if amortizable, the amortization period
of the intangible asset.
We evaluate the recoverability of goodwill and indefinite-lived intangible
assets as of the end of each fiscal year, or more frequently if events or
changes in circumstances indicate that the carrying value of an asset might be
impaired. Estimates of discounted future cash flows arising from intangible
assets acquired require assumptions related to revenue and operating income
growth rates, discount rates, and other factors. Different assumptions from
those made in our analysis could materially affect projected cash flows and our
evaluation of goodwill and indefinite-lived intangible assets for impairment. At
year-end 2021 and 2020, we performed a qualitative impairment analysis (Step 0)
for our reporting units, except for the material handling reporting unit for
which we performed a quantitative impairment analysis (Step 1) at year-end 2020.
Based on these analyses, we determined goodwill and indefinite-lived intangible
assets were not impaired. Goodwill totaled $396.9 million and indefinite-lived
intangible assets totaled $28.9 million at year-end 2021.
Definite-lived intangible assets are evaluated for impairment if events or
changes in circumstances indicate that the carrying value of an asset might be
impaired, such as a significant reduction in cash flows associated with the
assets. Actual cash flows arising from a particular intangible asset could vary
from projected cash flows which could imply different carrying values from those
established at the dates of acquisition and which could result in impairment of
such asset. No indicators of impairment were identified in 2021 and 2020, except
for impairment charges of $0.5 million in 2021 related to the closure of a
business in our Flow Control Segment and $1.9 million in 2020 associated with
our timber-harvesting product line, which is included in our Industrial
Processing segment. Definite-lived intangible assets were $170.4 million at
year-end 2021.
A material adverse change in the business climate including a prolonged economic
downturn and weakness in demand for our products could negatively affect the
revenue and profitability assumptions used in our assessment of goodwill and
intangible assets, which may result in impairment charges. Any future impairment
charges could have a material adverse effect on our results of operations in the
period in which an impairment is determined to exist.
See   Note 1  , Nature of Operations and Summary of Significant Accounting
Policies, under the heading Impairment of Long-Lived Assets, in the accompanying
consolidated financial statements for further details regarding impairment costs
recorded in 2021 and 2020.

Inventories

We value our inventory at the lower of the actual cost (on a first-in,
first-out; or weighted average basis) or net realizable value and include
materials, labor, and manufacturing overhead. The valuation of inventory
requires us to make judgments, based on currently available information, about
the forecasted usage of and demand for each particular product or product line.
Assumptions about future dispositions of inventory are inherently uncertain and,
although we make every effort to ensure the accuracy of our forecasts of future
product usage and demand, any changes in those assumptions may result in a
write-down of inventory in the period in which inventory is deemed excessive or
obsolete, which could adversely affect our results of operations.

Recent accounting pronouncements

See Note 1, Nature of Transactions and Summary of Significant Accounting Policies, under the headings Recently adopted accounting pronouncements and Recent accounting pronouncements not yet adopted, in the accompanying consolidated financial statements for further details.

© Edgar Online, source Previews

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Corning Stock: Consistent Return During Volatile Times (NYSE: GLW) https://stormbirds.net/corning-stock-consistent-return-during-volatile-times-nyse-glw/ Mon, 21 Feb 2022 09:48:00 +0000 https://stormbirds.net/corning-stock-consistent-return-during-volatile-times-nyse-glw/ marsmeena29/iStock via Getty Images In times of volatility like the current situation, it can be particularly important to find stocks that would generate solid value and provide stable returns over the medium term. While there aren’t many companies in today’s market that are profitable, show consistent growth, and are still reasonably valued with moderate valuation […]]]>

marsmeena29/iStock via Getty Images

In times of volatility like the current situation, it can be particularly important to find stocks that would generate solid value and provide stable returns over the medium term. While there aren’t many companies in today’s market that are profitable, show consistent growth, and are still reasonably valued with moderate valuation multiples, Corning (GLW) ticks all the boxes.

Corning Demonstrates Resilience and Steady Growth Despite Current Market Uncertainty

Over the past 3 months, the market has seen a somewhat belated correction, with many top tier stocks falling over 50% and the S&P 500 index dropping around 6%. During the same period, Corning shares rose 8%, significantly outperforming the market.

corning inventory
Data by YCharts

The company’s stock momentum isn’t random – over the past year, Corning has delivered strong fundamental performance and has been able to avoid supply chain issues that create hurdles for many other companies. Here’s what CEO Wendell Weeks said on the latest earnings call:

We have seen steady growth. Sales have increased for six consecutive quarters. Since 2019, we have increased our sales by 21% and our EPS by 18%, with more balanced and consistent contributions across all of our businesses. It all starts with our consistent portfolio.

The company’s product and supplier portfolio is so well-diversified that it has been able to maintain double-digit growth despite the challenges faced by its demand-side partners. For example, as automakers struggle to maintain production due to the chip shortageCorning’s automotive revenue grew 16% in the last quarter, and the company is now pursuing a “$100-per-car content opportunity, driven by trends that are reshaping the automotive industry and reinventing the car.”

In automotive, 2021 sales in our environmental technologies segment increased 16% to a record high of $1.6 billion despite weakness in the automotive market linked to chip shortages… Since 2017, sales environmental technologies increased by more than 40%, while car sales fell by 20%.

As a result, the company continued to grow revenue and cash flow, increase its cash position, and maintain strong dividends, while investing in promising new technologies and industries. And the latest results for the December quarter once again confirmed the bullish thesis.

The company posted exceptional results in the fourth quarter of 2021 and has always remained under the radar of many investors

The last quarter, the fourth quarter of 2021, was another excellent quarter for Corning, as the company demonstrated revenue growth of around 11% and beat both revenue and profit. It was the 5th consecutive quarter that Corning achieved double-digit quarterly revenue growth. The company has also exceeded sales expectations every quarter for the past 5 years.

Corning Earnings History

Corning Earnings History (Looking for Alpha)

With fourth-quarter sales of $3.71 billion and EPS of $0.54, Corning’s annual revenue was $14.08 billion, with $2.07 of EPS not -GAAP. That represented roughly 25% growth in annual sales and 49% growth in EPS, and both are particularly impressive rates considering the company isn’t directly benefiting from the pandemic, unlike most. digital-centric companies.

Corning has also improved its margins over the past year, which is always important for a hardware-first company. Despite potential supply chain issues and additional pandemic-related expenses, the company’s gross margin increased to 36% in 2021 from 31% in 2020 and 35% in 2019.

We are focused on increasing our gross margin and expect improvement in 2022 as our sales growth and pricing actions continue throughout the year.

When it comes to operating margins and cash flow, the picture looks even brighter. Corning’s operating profit grew from $509 million in 2020 to $2.1 billion in 2021, and its operating cash flow grew 57% from $2.2 billion a year ago. is one year old at $3.4 billion in 2021.

With current assets of $7.6 billion, including $2.1 billion in cash and $3.4 billion in annual operating cash flow, Corning easily hedges >100% of its long-term debt term, which stood at less than $7 billion at the end of 2021. shows that the company has great discipline when it comes to spending in volatile times, proving once again that the stock Corning is a safe bet.

Our gross and operating margins will also benefit from volume growth. Our operating leverage is such that additional volume leads to good additional profitability and becomes even more apparent when we compensate for inflation.

Finally, the company provided strong guidance for the first quarter and full year 2022. Corning expects first quarter sales to be between $3.5 billion and $3.7 billion ( against $3.44 billion according to the consensus) and an EPS of 0.48 to 0.53 cents (against $0.48). consensus). Given that the company tends to always beat quarterly expectations, we can expect revenue and EPS to be at the higher end of the range, which would put Corning for 13.5% revenue growth. and 18% year-over-year EPS growth. For 2022, Corning expects revenue “about $15 billion and earnings growth faster than sales.”

Management’s confidence in the company’s future is also bolstered by the 13% dividend increase, meaning the stock’s expected yield is now around 2.55%. Therefore, the stock should provide a strong and secure return over the medium term, even if the general market struggles to rise from current levels.

Corning’s growth potential is promising as the company is exposed to many high-growth sectors

Looking to the medium-term future, Corning has great potential to maintain its significant growth rates through the company’s exposure to many promising high-growth industries.

Corning’s automotive business could continue to see tailwinds thanks to electrification, a focus on infotainment and higher environmental standards. So more screens in cars means Corning can sell more glass for screens. For example, Daimler’s Mercedes-Benz EQS (OTCPK:DDAIF) was launched with the Hyperscreen dashboard displaywhich features a “nearly 5-foot-wide” Gorilla Glass lid, while Hyundai’s (OTCPK:HYMTF) electric crossover, the IONIQ 5, at an augmented reality head-up display enabled by Corning’s curved mirror solution. As more and more cars will include some sort of display solutions in the future, Corning has great potential to grow its business even further.

Mercedes EQS Hyperscreen display

Mercedes EQS Hyperscreen display (Mercedes-Benz)

Additionally, stricter emissions regulations present a solid opportunity for the company’s environmental solutions, such as particle filters. Therefore, although the electrification of the automotive industry may take some time, Corning can continue to benefit from sales of gasoline and diesel vehicles. This is also evident by the fact that sales of Corning’s environmental technologies are up more than 40% since 2017, while global car sales are down 20%, according to Wendell Weeks.

In mobile consumer electronics, Corning could take advantage of the “great cyclewhich is currently driving smartphone sales for many companies, like Apple (AAPL). For example, in the last quarter Apple sold $71.6 billion worth of iPhones, 9% more at the same time last year. Since Corning is an exclusive supplier of iPhone glass (ceramic shield), the company is clearly benefiting from Apple’s success.

Additionally, in May 2021, Corning received an additional $45 million in funding from Apple’s Advanced Manufacturing Fund to continue developing future glass technology for Apple, securing the long-term relationship between the two companies. . It is also reported that Corning is working on flexible glass technology for future foldable phones, including possible foldable models of the iPhone.

Finally, it is worth mentioning Corning’s solar activity. The company mentioned in the latest earnings call that its solar business, led by Hemlock Semiconductor Group, of which Corning owns >80% of the shares, has seen new demand for solar-grade polysilicon. This creates a promising revenue opportunity in the future, as the size of the solar energy market in the United States is expected grow significantly over the next few years.

With increasing business and interest in US-based solar manufacturing, customers have turned to Hemlock, a leader in polysilicon manufacturing… Going forward, solar remains a significant revenue opportunity for Hemlock. In the fourth quarter, we signed long-term supply contracts with customer depots that begin to change in 2022. As a result, we restarted unused capacity with minimal capital investment to meet this demand.

As the Market Favors Value Plays, Corning Offers a Great Investment Opportunity

Overall, Corning continued to demonstrate strong execution in the fourth quarter of 2022, proving that the company is capable of exercising great discipline in times of volatility. With low debt, high revenue growth, growing cash flow and a solid dividend yield, the stock looks like a terrific and secure investment for the near future.

The current valuation offers an excellent entry point, even after the recent jump in the share price. Corning’s 2022 forward PE ratio of ~18 and ~18% EPS growth translates to a PEG ratio of ~1, making GLW reasonably valued by any standard, especially when compared to mid-range numbers Of the industry. This translates into a strong Seeking Alpha valuation rating.

Seeking Alpha GLW Stock Valuation Score

GLW Rating (Looking for Alpha)

With exposure to the automotive, consumer electronics, life science and solar energy sectors, Corning’s business looks poised for success in the near future. And as the market becomes more favorable to value plays, we can expect GLW stock to see additional tailwinds thanks to general market sentiment.

ETF VTV vs. VUG
Data by YCharts

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Opendoor & Offerpad: iBuying is the next step in evolution (OPAD) (OPEN) https://stormbirds.net/opendoor-offerpad-ibuying-is-the-next-step-in-evolution-opad-open/ Sat, 19 Feb 2022 10:25:00 +0000 https://stormbirds.net/opendoor-offerpad-ibuying-is-the-next-step-in-evolution-opad-open/ xijian/E+ via Getty Images Thesis Opendoor Technologies Inc. (OPEN) and Offerpad Solutions Inc. (OPAD) are all pursuing the next stage of the real estate market through their iBuying platforms. The iBuying sector saw a sharp decline in November. One of the main factors for the share price drop was the participation of Zillow Group (ZG) […]]]>

xijian/E+ via Getty Images

Thesis

Opendoor Technologies Inc. (OPEN) and Offerpad Solutions Inc. (OPAD) are all pursuing the next stage of the real estate market through their iBuying platforms. The iBuying sector saw a sharp decline in November. One of the main factors for the share price drop was the participation of Zillow Group (ZG) announcement to exit the iBuying marketplace due to “the unpredictability of home price forecasts”. ZG reported significant losses in this regard, which also turned a pessimistic investor sentiment towards the OPEN stock.

Where one can see a volatile market with downsides, the bull case argues that Zillow’s exit leaves much higher prospects for iBuyers like OPEN and OPAD to become market leaders in the iBuying sector. Businesses can take advantage of rise in the housing market with strategic investments and mitigate volatility through careful risk management. The digitalization of the world is inevitable and the company iBuying is here to disrupt the conventions of the real estate market.

Unlike ZG, OPEN and OPAD have much stronger iBuying strategies to avoid buying at inflated prices and focus on profit margins and business growth to become market leaders and ensure long-term returns for investors. .

Strong fundamental demand for the US housing market in 2022

Statistical projects the U.S. housing market to be worth $350 billion in revenue for 2021 and is expected to grow at a CAGR of 4.21% through 2025. The overall housing market situation has recovered quite drastically since the pandemic, and according to the Urban Land Institute Emerging Trends in Real Estate 2022 report, “the global economy has rebounded far beyond expectations. Not only has economic output already returned to pre-pandemic levels, but growth is also expected to reach its highest rate in decades in 2021 and 2022.”

Forbes reported that they expected a 6.6% increase in home sales and a 2.9% rise in home prices for 2022. This will be further complemented by a 3.3% increase in income on the labor market and 45 million “millennials between the ages of 26 and 35 who are the first-tier homebuyer age.” The National Association of Realtors reinforces this fact by reports that home resale transactions reached nearly 6.5 million for 2021, with a median increase in the selling price of existing homes of 13.9% year-over-year to $353,900. With the increase in resale home transactions, the demand for real estate is higher than ever.

Market opportunity: digitization of the real estate market

The world was already on the path to digitalization, but the pandemic has accelerated nearly every industry to challenge conventional norms and shift radically towards digitalization. The same is true for the real estate industry, as iBuying has reduced the costs and challenges associated with home sales transactions. This digitalization goes hand in hand with millennial consumers and Gen Z, the next generation of American homeowners. Additionally, the remote work environment has given consumers a lot of flexibility to achieve their dream of owning a home in the United States, without worrying about the commute.

Jarred Kessler, CEO of real estate technology company EasyKnock, noted they expect to see unmet demand for new home construction as the United States grapples with ongoing supply chain issues and labor shortages caused by the pandemic. This could lead to record home sales prices in 2022.

All of this perpetuates the need for alternative buying and selling methods and supports the growth of businesses that allow American homeowners to convert the equity they’ve worked hard to build.

The next generation of owners want end-to-end services with on-demand solutions that can only be delivered through digitization. Paul Ryll, Chartered Residential Appraiser, very well said,

The need for digital platforms and tools will be greater than ever, and much of the industry’s ability to meet demand will rely on the latest apps and offerings.

Opendoor: company presentation

Opendoor is a leading digital platform for the residential real estate market. A year ago, it went public through a Special Purpose Acquisition Company (SPAC) agreement through Social Capital Hedosophia Holdings II. Opendoor is engaged in a particular service called “iBuying”, allowing homeowners to sell their home to OPEN at a reduced price but without a real estate broker or agent. Thus, saving them money and time while avoiding the cost and hassle of conventional real estate transactions. In this way, the company adds liquidity to the housing market as a market maker by buying and selling houses.

The company’s “Opendoor Complete” mobile app provides end-to-end service to prospective and current owners. The app automates the sales process, integrates title and escrow to remove multiple touchpoints, and offers Opendoor home loans and Opendoor backed offers to help buyers with their home purchases.

Leading Opendoor’s Road to Market

Opendoor said it bought 15,181 homes and sold 5,988 homes in the third quarter of 2021, making it the nation’s largest iBuyer since. Zillow left the game. Another major Opendoor competitor in the iBuying marketplace is Offerpad (NYSE:OPAD)which acquired 2,753 homes and sold 1,673 homes in the same neighborhood.

The problem with Zillow was that it focused too much on volume and not enough on the monetary aspects of its transactions, which led Zillow to buy too many properties at an inflated price which it is now trying to unload on the market. And although Offerpad has higher margin percentages than Opendoor, the company is significantly outperformed by OPEN in terms of growth metrics.

Opendoor has struck the right balance between growth and profitability, leading the company to leverage its pioneering technology to dominate the market. This rapid growth is essential for the company to penetrate the larger market and make the most of the more than 6.5 million home resale transactions over the coming year. Opendoor’s continued market leadership looks highly likely as the company has already doubled its market from 21 to 44 in 2021 and grown its customer base by an average of 90% per quarter.

Opendoor initially offered a forecast of $3.5 billion for 2021, however, its revenue for the nine months has already reached nearly $4.2 billion and is expected to exceed $7 billion, more than double what was originally planned. A die promising aspects of the business is that it is still aggressively investing in its internal operations, supplier network, tools and automation “to lay the foundation for another very strong year of growth in 2022.”

In terms of pure numbers, the housing market has 6.46 million home resale transactions for 2021, and OPEN sold 11,931 of those homes in the 9 months ending September 30. That’s less than 0.2% of the housing market. With aggressive innovation and market penetration, even if the company gains 1% market share, it will mean over 64,000 sales transactions. At an average selling price of $353,900 and a gross margin of approximately 9% (current margin), this translates to nearly $23 billion in revenue and over $2 billion in gross profit.

Being a market leader has a significant advantage, and the company’s investment strategy and performance figures reflect Opendoor’s suitability for being a market leader in the industry.

Offerpad: Company Overview

Shares of Offerpad recently began trading on NYSE at $9 per share and a valuation of around $2.7 billion after a SPAC deal with Supernova Partners Acquisition Partners. The PSPC agreement was led by Spencer Rascoff, co-founder and former CEO of Zillow. It should also be noted that Zillow and Offerpad were the partners until 2018.

The company operates similarly to Opendoor but has a few strategic differences, such as being relatively picky with its purchases to ensure higher profit margins. The company’s ability to close a sale in as little as 10 days is a big plus. It attracts customers who have more money than time, allowing customers to get a quick and convenient close and Offerpad enjoying higher profit margins.

Offerpad’s road to success

Offerpad typically enjoys higher margins on its sales due to its focus on renovations, which allows homes to fetch a higher price in the market. The company also offers services in a cross methodology between iBuying and the traditional method, known as “Flex”. This allows customers to get used to old ways and easily switch to the digital platform. Geographically, Offerpad has yet to spread its wings as it currently operates in almost half of the jurisdictions compared to Opendoor.

Offerpad acquired 2,753 homes in its most recent quarter, representing a 258% annual growth in purchases, and sold 1,673 homes with a 30% year-over-year increase in average revenue per home. The strong performance led Offerpad to raise its full-year 2021 guidance. It now expects to have sold 5,900 homes mid-term with a gross margin of 9.6% for the full year, if amounting to $180 million. The company thus displays promising and sustainable long-term growth prospects in addition to holding more than $110 million in cash.

What remains to be seen is the company’s ability to sell its inventory of more than $900 million over the next few quarters without losing purchase growth. Following in the footsteps of Opendoor, the company could enjoy maximum profitability with the highest possible growth rate for a stronger foothold in the real estate market.

The market opportunity is there and ready to be exploited with a solid strategy, and OPAD appears to be on the right path to positive share value.

Conclusion

The entire iBuying market was shaken by Zillow’s announcement to exit the game. This decline is bound to reverse as the notion of fear deters the market and investors value it out of company stocks. Assuming a linear trajectory, OPEN and OPAD should be the iBuying sector leaders, which will likely boost investor confidence after their annual results announcement. The stocks seem to incorporate an inherent rise in their value due to the “Zillow effect”, making them all a good addition to his portfolio.

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Dingdong Maicai’s fourth quarter revenue grew 72% YoY in 2021 – Pandaily https://stormbirds.net/dingdong-maicais-fourth-quarter-revenue-grew-72-yoy-in-2021-pandaily/ Wed, 16 Feb 2022 05:21:29 +0000 https://stormbirds.net/dingdong-maicais-fourth-quarter-revenue-grew-72-yoy-in-2021-pandaily/ Your browser does not support HTML5 audio On Tuesday, China’s fresh produce logistics and delivery company Dingdong Maicai published its results for the fourth quarter ended December 31, 2021. The published data indicates a 72% year-over-year increase to $5.48 billion in revenue for the fourth quarter. Total 2021 revenue was $20.12 billion, up 77.5% year-over-year. […]]]>

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On Tuesday, China’s fresh produce logistics and delivery company Dingdong Maicai published its results for the fourth quarter ended December 31, 2021. The published data indicates a 72% year-over-year increase to $5.48 billion in revenue for the fourth quarter. Total 2021 revenue was $20.12 billion, up 77.5% year-over-year.

In the fourth quarter, Dingdong Maicai recorded a net loss of 1.096 billion yuan ($173 million), while in the fourth quarter of 2020 it was 1.246 billion yuan. Calculated under GAAP, the net loss was about 1.034 billion yuan, while in 2020 it was 1.239 billion yuan. Both developments indicate a reduction in losses.

In addition, the company announced that it made a profit in December in Shanghai and oversaw a positive UEM (unit economic model) in the fourth quarter in the Yangtze River Delta region.

In response to the fourth quarter results, Liang Changlin, Founder and CEO of Dingdong Maicai, said the company had the best fourth quarter performance since its inception and will drive growth mainly through consumption upgrades. and commodity energy.

Financial results indicate a gross margin of 27.7% in the fourth quarter of last year, up 9.5% sequentially from the third quarter. The increase in gross margin is attributable to the increase in merchandising power. Dingdong Maicai said in its earnings report that its scale advantage and production and processing capabilities contributed to the profit margin on the production side. In addition, it continues to optimize the category structure of its merchandise, which gradually increases the GMV share of high-quality merchandise.

In terms of commodity data, the financial report shows that Dingdong Maicai now has more than 20 OBMs and will further increase investment in research and development, especially in infrastructure construction, supply chain systems. supply, agricultural technology and food R&D.

As of the fourth quarter of 2021, Dingdong Maicai had 10 R&D and food processing factories, about 60 sorting centers and about 1,400 front warehouses with an area of ​​500,000 square meters. In addition, it plans to build three large-scale and modern fresh produce preservation complexes this year, to ensure more efficient development, production and transportation of commodities.

Yu Le, chief strategy officer of Dingdong Maicai, said in a conference call that the biggest hurdle for 3R dishes is the sales channel, while it is Dingdong’s most important core competitiveness. Mayai. In the fourth quarter of 2021, its GMV exceeded 900 million yuan.

SEE ALSO: Dingdong Maicai releases annual consumption report: 3R sales volume increased by 300%

Liang Changlin also debunked rumors during a conference call that the company laid off 10,000 employees, adding that Shanghai labor inspection authorities conducted an on-the-spot investigation and found no changes. major in the flow of company employees compared to previous years.

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