UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended | |||||
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
| For the transition period from ____ to ____ | |||||
Commission file number 001-39754
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of Principal Executive Offices) | (Zip Code) | |||||||
(650 ) 419-3827
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | o | x | |||||||||
Non-accelerated filer | o | Smaller reporting company | |||||||||
Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The registrant had outstanding 333,061,830 shares of common stock as of May 5, 2023.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Pages | ||||||||
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Introductory Note
On July 28, 2021 (the “Closing Date”), Capitol Investment Corp. V (“Capitol”) consummated a business combination (the “Business Combination”) with Doma Holdings, Inc., a Delaware corporation (“Old Doma”), pursuant to the agreement and plan of merger, dated March 2, 2021, by and among Capitol, Capitol V Merger Sub, Inc., a wholly owned subsidiary of Capitol (“Merger Sub”), and Old Doma (as amended on March 18, 2021, the “Agreement”). In connection with the closing of the Business Combination, Old Doma changed its name to States Title Holding, Inc. (“States Title”), Capitol changed its name to Doma Holdings, Inc. (“Doma”) and Old Doma became a wholly owned subsidiary of Doma. Doma continues the existing business operations of Old Doma as a publicly traded company.
Unless the context otherwise requires, references herein to “company,” “Company,” “Doma,” “we,” “us,” “our” and similar terms refer to Doma Holdings, Inc. (f/k/a Capitol Investment Corp. V) and its consolidated subsidiaries. References to “Capitol” refer to our predecessor company prior to the consummation of the Business Combination. References to “Old Doma” refer to Old Doma prior to the Business Combination and to States Title, the wholly owned subsidiary of Doma, upon the consummation of the Business Combination.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this Quarterly Report, about our plans, strategies and prospects, both business and financial, are forward-looking statements. Any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “continue,” “goal,” “project” or the negative of such terms or other similar expressions. Moreover, the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report. We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control.
Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:
•our projected financial information, anticipated growth rate and market opportunity;
•our ability to maintain the listing of our common stock on the New York Stock Exchange;
•our ability to raise financing in the future and to comply with restrictive covenants related to long-term indebtedness;
•our success in retaining or recruiting, or changes required in, our officers, key employees or directors;
•the accounting of our warrants as liabilities and any changes in the value of our warrants having a material effect on our financial results;
•factors relating to our business, operations and financial performance, including:
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◦our ability to drive an increasing proportion of orders in both through the Doma Intelligence platform;
◦changes in the competitive and regulated industries in which we operate, variations in technology and operating performance across competitors, and changes in laws and regulations affecting our business;
◦the current and future health and stability of the economy, financial conditions and residential housing market, including any extended downturn or slowdown;
◦changes in general economic and financial conditions (including federal monetary policy, interest rates, inflation, home price fluctuations, housing inventory, labor shortages and supply chain issues) that may reduce demand for our products and services, lower our profitability or reduce our access to financing;
◦our ability to implement business plans, forecasts and other expectations, and identify and realize additional opportunities;
◦the impact of COVID-19 on our business;
◦the impact on the real estate finance market from recent macroeconomic events and conditions that have resulted in a significant increase in interest rates largely due to actions of central banks, including the U.S. Federal Reserve; and
•other factors detailed under the section “Risk Factors” in our periodic filings with the Securities and Exchange Commission (the “SEC”).
Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Additional cautionary statements or discussions of risks and uncertainties that could affect our results or the achievement of the expectations described in forward-looking statements may also be contained in any subsequent periodic report.
Should one or more of the risks or uncertainties described in this Quarterly Report occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements.
You should read this Quarterly Report completely and with the understanding that our actual future results, levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
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Part I - Financial Information
Item 1. Financial Statements
Doma Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
| (In thousands, except share information) | March 31, 2023 | December 31, 2022 | |||||||||
| Assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
| Investments: | |||||||||||
| Fixed maturities | |||||||||||
Held-to-maturity debt securities, at amortized cost (net of allowance for credit losses of $ | |||||||||||
Available-for-sale debt securities, at fair value (amortized cost $ | |||||||||||
Mortgage loans | |||||||||||
Total investments | $ | $ | |||||||||
Receivables (net of allowance for credit losses of $ | |||||||||||
Prepaid expenses, deposits and other assets | |||||||||||
| Lease right-of-use assets | |||||||||||
Fixed assets (net of accumulated depreciation of $ | |||||||||||
Title plants | |||||||||||
Goodwill | |||||||||||
Total assets | $ | $ | |||||||||
| Liabilities and stockholders’ equity | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses and other liabilities | |||||||||||
| Lease liabilities | |||||||||||
Senior secured credit agreement, net of debt issuance costs and original issue discount | |||||||||||
Liability for loss and loss adjustment expenses | |||||||||||
| Warrant liabilities | |||||||||||
| Sponsor Covered Shares liability | |||||||||||
Total liabilities | $ | $ | |||||||||
Commitments and contingencies (see Note 12) | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock, | $ | $ | |||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Accumulated other comprehensive income | ( | ( | |||||||||
Total stockholders’ equity | $ | $ | |||||||||
Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
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Doma Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three months ended March 31, | |||||||||||
| (In thousands, except share and per share information) | 2023 | 2022 | |||||||||
| Revenues: | |||||||||||
Net premiums written (1) | $ | $ | |||||||||
Escrow, other title-related fees and other | |||||||||||
Investment, dividend and other income | |||||||||||
Total revenues | $ | $ | |||||||||
| Expenses: | |||||||||||
Premiums retained by Third-Party Agents (2) | $ | $ | |||||||||
Title examination expense | |||||||||||
Provision for claims | |||||||||||
Personnel costs | |||||||||||
Other operating expenses | |||||||||||
| Long-lived asset impairment | |||||||||||
Total operating expenses | $ | $ | |||||||||
Loss from operations | $ | ( | $ | ( | |||||||
| Other (expense) income: | |||||||||||
| Change in fair value of Warrant and Sponsor Covered Shares liabilities | |||||||||||
Interest expense | ( | ( | |||||||||
Loss before income taxes | $ | ( | $ | ( | |||||||
Income tax expense | ( | ( | |||||||||
Net loss | $ | ( | $ | ( | |||||||
| Earnings per share: | |||||||||||
Net loss per share attributable to stockholders - basic and diluted | $ | ( | $ | ( | |||||||
Weighted average shares outstanding common stock - basic and diluted | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
__________________
(1)Net premiums written includes revenues from a related party of $30.0 million and $27.7 million during the three months ended March 31, 2023 and 2022, respectively (see Note 11).
(2)Premiums retained by Third-Party Agents includes expenses associated with a related party of $24.1 million and $22.5 million during the three months ended March 31, 2023 and 2022, respectively (see Note 11).
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Doma Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
| Three months ended March 31, | |||||||||||
| (In thousands) | 2023 | 2022 | |||||||||
Net loss | $ | ( | $ | ( | |||||||
| Other comprehensive loss, net of tax: | |||||||||||
Unrealized gain on available-for-sale debt securities, net of tax | |||||||||||
Comprehensive loss | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
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Doma Holdings, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Stockholders’ Equity | |||||||||||||||||||||||||||||||
| (In thousands, except share information) | Shares | Amount | |||||||||||||||||||||||||||||||||
Balance, January 1, 2022 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Exercise of stock options | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Vesting of RSU awards | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Stockholders’ Equity | |||||||||||||||||||||||||||||||
| (In thousands, except share information) | Shares | Amount | |||||||||||||||||||||||||||||||||
Balance, January 1, 2023 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Vesting of RSU awards | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
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Doma Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three months ended March 31, | |||||||||||
| (In thousands) | 2023 | 2022 | |||||||||
| Cash flow from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Interest expense - paid in kind | |||||||||||
Depreciation and amortization | |||||||||||
Stock-based compensation expense | |||||||||||
Amortization of debt issuance costs and original issue discount | |||||||||||
Provision for doubtful accounts | ( | ||||||||||
Deferred income taxes | |||||||||||
Realized gain on debt securities | ( | ||||||||||
Loss on disposal of fixed assets and title plants | |||||||||||
| Net amortization of premiums and accretion of discounts on fixed maturity securities | ( | ||||||||||
| Change in fair value of Warrant and Sponsor Covered Shares liabilities | ( | ( | |||||||||
| Long-lived asset impairment | |||||||||||
| Change in operating assets and liabilities: | |||||||||||
Accounts receivable | |||||||||||
Prepaid expenses, deposits and other assets | |||||||||||
| Lease right-of-use assets and lease liabilities | ( | ||||||||||
Accounts payable | ( | ||||||||||
Accrued expenses and other liabilities | ( | ( | |||||||||
Liability for loss and loss adjustments expenses | ( | ||||||||||
Net cash used in operating activities | $ | ( | $ | ( | |||||||
| Cash flow from investing activities: | |||||||||||
Proceeds from calls and maturities of investments: Held-to-maturity | $ | $ | |||||||||
Proceeds from sales and principal repayments of investments: Mortgage loans | |||||||||||
Purchases of investments: Held-to-maturity | ( | ( | |||||||||
| Proceeds from sales of fixed assets | |||||||||||
Purchases of fixed assets | ( | ( | |||||||||
Proceeds from sale of title plants and dividends from title plants | |||||||||||
Net cash provided by (used in) investing activities | $ | $ | ( | ||||||||
| Cash flow from financing activities: | |||||||||||
Exercise of stock options | ( | ||||||||||
Net cash provided by (used in) financing activities | $ | $ | ( | ||||||||
Net change in cash and cash equivalents and restricted cash | ( | ||||||||||
| Cash and cash equivalents and restricted cash at the beginning period | |||||||||||
Cash and cash equivalents and restricted cash at the end of period | $ | $ | |||||||||
| Supplemental cash flow disclosures: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
| Supplemental disclosure of non-cash investing activities: | |||||||||||
Unrealized gain on available-for-sale debt securities | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
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Doma Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(Amounts in thousands, except share and per share information or unless otherwise noted)
1. Organization and business operations
On July 28, 2021 (the “Closing Date”), Capitol Investment Corp. V (“Capitol”) consummated a business combination (the “Business Combination”) with Doma Holdings, Inc., a Delaware corporation (“Old Doma”), pursuant to the agreement and plan of merger, dated March 2, 2021, by and among Capitol, Capitol V Merger Sub, Inc., a wholly owned subsidiary of Capitol (“Merger Sub”), and Old Doma (as amended on March 18, 2021, the “Agreement”). In connection with the closing of the Business Combination, Old Doma changed its name to States Title Holding, Inc. (“States Title”), Capitol changed its name to Doma Holdings, Inc. (“Doma”) and Old Doma became a wholly owned subsidiary of Doma. Doma continues the existing business operations of Old Doma as a publicly traded company. See Note 3 for additional information on the Business Combination.
Unless the context otherwise requires, references herein to “company,” “Company,” “Doma,” “we,” “us,” “our” and similar terms refer to Doma Holdings, Inc. (f/k/a Capitol Investment Corp. V) and its consolidated subsidiaries. References to “Capitol” refer to our legal predecessor company prior to the consummation of the Business Combination. References to “Old Doma” refer to Old Doma prior to the Business Combination and to States Title, the wholly owned subsidiary of Doma, upon the consummation of the Business Combination.
Headquartered in San Francisco, California, Doma is a real estate technology company that is architecting the future of real estate transactions. Using machine intelligence and our proprietary technology solutions, we are creating a vastly more simple, efficient, and affordable real estate closing experience for current and prospective homeowners, lenders, title agents and real estate professionals. We are licensed to underwrite title insurance in 47 states and the District of Columbia.
Old Doma was initially formed as a wholly-owned subsidiary of States Title Inc. (“Legacy States Title”) to combine the operations of Legacy States Title and the retail agency and title insurance underwriting business (the “Acquired Business”) of North American Title Group, LLC (“NATG”), a subsidiary of Lennar Corporation (“Lennar”).
We conduct our operations through two reportable segments, (1) Distribution and (2) Underwriting. See further discussion in Note 7 for additional information regarding segment information.
2. Summary of significant accounting policies
Basis of presentation
The accompanying condensed consolidated balance sheet as of March 31, 2023 and the condensed consolidated statements of operations, condensed consolidated statements of comprehensive loss, and condensed consolidated statements of changes in stockholders’ equity for the three months ended March 31, 2023 and 2022 and the condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022 are unaudited.
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s balance sheet as of March 31, 2023 and its results of operations, including its comprehensive loss, and stockholders’ equity for the three months ended March 31, 2023 and 2022 and cash flows for the three months ended March 31, 2023 and 2022. All adjustments are of a normal recurring nature. The results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, 2023. These unaudited interim
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consolidated financial statements should be read in conjunction with the annual consolidated financial statements and related notes.
References to the Accounting Standard Codification (“ASC”) and Accounting Standard Updates (“ASU”) included hereinafter refer to the Accounting Standards Codification and Updates issued by the Financial Accounting Standards Board (“FASB”) as the source of authoritative U.S. GAAP. The accompanying condensed consolidated financial statements include the accounts of the Company and the accounts of the Company’s wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from the estimates made by management. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.
Significant items subject to such estimates and assumptions include, but are not limited to, reserves for incurred but not reported claims, the useful lives of property and equipment, accrued net premiums written from Third-Party Agent (as defined in Item 2) referrals, the fair value measurements, valuation of goodwill impairment, the valuations of stock-based compensation arrangements and the Sponsor Covered Shares liability (as defined below).
Goodwill
Goodwill represents the excess of the acquisition price over the fair value of assets acquired and liabilities assumed in a business combination. Goodwill is assigned to one or more reporting units on the date of acquisition. We review our goodwill for impairment annually on October 1 of each year and between annual tests if events or circumstances arise that would more likely than not reduce the fair value of any one of our reporting units below its respective carrying amount. In performing our annual goodwill impairment test, we first perform a qualitative assessment, which requires that we consider macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in the Company’s stock price, changes in management or key personnel, changes in strategy, changes in customers, changes in the composition or carrying amount of a reporting unit or other factors that have the potential to impact fair value. If, after assessing the totality of events and circumstances, we determine that it is more likely than not that the fair values of our reporting units are greater than the carrying amounts, then the quantitative goodwill impairment test is not performed. If the fair value of the reporting unit is less than its carrying amount, a non-cash impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the loss not exceeding the total amount of goodwill allocated to that reporting unit. Any impairment is charged to operations in the period that the impairment is identified.
Reinsurance
The Company utilizes excess of loss and quota share reinsurance programs to limit its maximum loss exposure by reinsuring certain risks with other insurers. The Company has two reinsurance treaties: the Excess of Loss Treaty and the Quota Share Treaty. Under the Excess of Loss Treaty, we cede liability over $15.0 million on all files. Excess of loss reinsurance coverage protects the Company from a large loss from a single loss occurrence. The
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Excess of Loss Treaty provides for ceding liability above the retention of $15.0 million for all policies up to a liability cap of $500.0 million.
Under the Quota Share Treaty, effective February 24, 2021, the Company cedes 25 % of the written premium on our instantly underwritten policies.
Payments and recoveries on reinsured losses for the Company’s title insurance business were immaterial during the three months ended March 31, 2023 and 2022.
Ceding commission from reinsurance transactions are presented as revenue within the “Escrow, other title-related fees and other” revenue line item in the consolidated statements of operations.
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Gross premiums earned | |||||||||||
| Ceded premiums | ( | ( | |||||||||
| Net premiums earned | |||||||||||
| Percentage of amount assumed to net | % | % | |||||||||
Leases
The Company determines if a contract contains a lease at inception of the contract. The Company's inventory of leases primarily consists of operating office space and office equipment leases which are recorded as a lease obligation liability and as a lease right-of-use asset on the accompanying condensed consolidated balance sheet. The lease right-of-use asset represents the Company's right to use each underlying asset for the lease term and the lease obligation liability represents the Company's obligation over the lease term. The Company's lease obligation is recorded at the present value of the lease payments based on the term of the lease. The Company applies an incremental borrowing rate of interest as of the effective date of adoption or the lease effective date equivalent to a collateralized borrowing rate with similar terms. The discount rate used to calculate the present value of our future minimum lease payments is based, where appropriate, on the Company's incremental borrowing rate of its current loan and security agreement.
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Concentration of credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in financial institutions and our investment portfolio. The Company has not experienced losses on the cash accounts and management believes the Company is not exposed to significant risks on such accounts.
Additionally, we manage the exposure to credit risk in our investment portfolio by investing in high quality securities and diversifying our holdings. Our investment portfolio is comprised of corporate debt, foreign government securities, certificates of deposit, single-family residential mortgage loans, and U.S. Treasuries.
Emerging Growth Company and Smaller Reporting Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Additionally, the Company is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
Recently issued and adopted accounting pronouncements
In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). The amendments in this and the related ASUs introduce broad changes to accounting for credit impairment of financial instruments. The primary updates include the introduction of a new current expected credit loss (“CECL”) model that is based on expected rather than incurred losses for instruments measured at amortized cost and amends the accounting for impairment of held-to-maturity securities and available-for-sale securities. This model incorporates past experience, current conditions and reasonable and supportable forecasts affecting collectability of these instruments. The amendments in this update are effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, the amendment is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The early adoption of this new guidance on January 1, 2022 required the Company
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to record an allowance for credit losses for the Company’s held-to-maturity investment portfolio, which resulted in an allowance of $0.4 million and a corresponding $0.4 million adjustment for the cumulative effect of a change in accounting principle, net of income taxes. For more information on the held-to-maturity allowance for credit losses, refer to Note 4 of this Quarterly Report. Prior to the adoption of the new guidance, the Company utilized an aging model to estimate credit losses on accounts receivable. As this aging model is allowed under the new guidance, there is no impact to the Company’s allowance for credit losses for accounts receivable. The adoption of this new standard did not have a significant impact on the condensed consolidated statements of operations or the condensed consolidated statements of cash flows. The guidance also requires additional disclosures regarding the Company’s held-to-maturity allowance for credit losses, which have been included within Note 4.
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which provides guidance for accounting for leases. ASU 2016-02 requires lessees to classify leases as either finance or operating leases and to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or on a straight-line basis over the term of the lease. Modified or new leases subsequent to the effective date will follow ASC 2016-02. Accounting for lessors remains largely unchanged from current U.S. GAAP. Under ASU 2020-05, the effective date for adoption of ASU 2016-02 is fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. We early adopted this new guidance on January 1, 2022 under a modified retrospective transition approach using the cumulative-effect adjustment transition method approved by the FASB, which results in reporting for the comparative periods presented in accordance with the previous lease guidance under ASC 840. We elected the package of practical expedients but did not adopt the hindsight practical expedient as of January 1, 2022. The package of practical expedients allowed the Company not to reassess whether the arrangement contains a lease, lease classification and whether previously capitalized costs qualify as initial direct costs. The practical expedients allowed the Company to continue classifying all of its leases as operating leases as they were previously classified under ASC 840. The Company recognized lease liabilities of $24.4 million and corresponding right-of-use assets of $23.8 million in our consolidated balance sheet on January 1, 2022. The difference between the lease liabilities and corresponding right-of-use assets related to prepaid rent and deferred lease obligations recognized in prepaid expenses, deposits and other assets and accrued expenses and other liabilities, respectively, in our consolidated balance sheet on January 1, 2022, resulting in no cumulative-effect adjustment to opening equity. The new standard did not have a significant impact on the condensed consolidated statements of operations or the condensed consolidated statements of cash flows. The guidance also requires additional disclosures regarding the Company’s lease portfolio, which have been included within Note 17.
In January 2020, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. Specifically, ASU 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 is effective for annual periods beginning after December 15, 2020, and interim periods beginning after December 15, 2020. ASU 2019-12 is effective for private entities for annual periods beginning after December 15, 2021, and interim periods beginning after December 15, 2022, with early adoption permitted. The Company adopted ASU 2019-12 under the private company transition guidance beginning January 1, 2022, and the adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements or disclosures given the Company has a full valuation allowance and the scenarios for which the guidance offer simplification are not significant for the Company.
Recently issued but not adopted accounting pronouncements
In August 2018, the FASB issued ASU 2018-12, Financial Services-Insurance (Topic 944), Targeted Improvements to the Accounting for Long-Duration Contracts, effective for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. In June of 2020, the FASB deferred the effective date of ASU 2018-12 for one-year in response to implementation challenges resulting from COVID-19. This update requires insurance companies to annually review and update the assumptions used for measuring the liability under
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3. Business combinations
Capitol Business Combination
As described in Note 1, on March 2, 2021, Old Doma entered into the Agreement with Capitol, a blank check company incorporated in the State of Delaware and formed for the purpose of effecting a merger. Pursuant to the Agreement, a newly formed subsidiary of Capitol was merged with and into Old Doma, and the Business Combination was completed on July 28, 2021. The Business Combination was accounted for as a reverse recapitalization and Capitol was treated as the acquired company for financial statement reporting purposes. Old Doma was deemed the predecessor for financial reporting purposes and Doma was deemed the successor SEC registrant, meaning that Old Doma’s financial statements for periods prior to the consummation of the Business Combination are disclosed in the financial statements included within this Quarterly Report and will be disclosed in Doma’s future periodic reports. No goodwill or other intangible assets were recorded, in accordance with GAAP.
Immediately after the Closing Date, 1,325,664 shares of common stock held by the Sponsor became subject to vesting, contingent upon the price of Doma’s common stock, par value $0.0001 (“Doma common stock”) exceeding certain thresholds (the “Sponsor Covered Shares”). As of March 31, 2023, there were 330,484,417 0 1,325,664 of Sponsor Covered Shares.
On December 4, 2020, Capitol consummated its initial public offering, which included the issuance of 11,500,000 redeemable warrants (the “Public Warrants”). Simultaneously with the closing of the initial public offering, Capitol completed the private sale of 5,833,333 warrants (the “Private Placement Warrants”). These Warrants remain outstanding following the Business Combination and each whole warrant entitles the holder to purchase one 11.50
Immediately after the Closing Date, 20 % of the aggregate of our common stock held by certain investors (collectively, the “Sponsor”) became subject to vesting, contingent upon the price of our common stock exceeding certain thresholds. The Sponsor Covered Shares will vest in two tranches: (i) one-half of such shares shall vest if the last reported sale price of the common stock equals or exceeds $15.00 for any 20 trading days within any 30-day trading period ending on or before the tenth anniversary of the Closing Date, and (ii) one-half of such shares shall vest if the last reported sale price of the common stock equals or exceeds $17.50 for any 20 trading days within any 30-day trading period ending on or before the tenth anniversary of the Closing Date. The Sponsor is also entitled to the Sponsor Covered Shares if a covered strategic transaction or change in control, as defined by the sponsor support agreement dated as of March 2, 2021 (the “Sponsor Support Agreement”) by and among the sponsors named thereto, Capitol and Old Doma, occurs prior to the (10)-year anniversary of the Closing Date. As of March 31, 2023, the Sponsor Covered Shares were legally outstanding; however, since none of the conditions were met, no related shares are included in the Company's condensed consolidated balance sheets and condensed consolidated statement of changes in stockholders’ equity or for the purposes of calculating earnings per share.
Also following the Closing Date, the Sellers have the contingent right to receive up to an additional number of shares equal to 5 % of the sum of (i) the aggregate number of outstanding shares of our common stock (including restricted common stock, but excluding Sponsor Covered Shares), plus (ii) the maximum number of shares underlying our options that are vested and the maximum number of shares underlying warrants to purchase shares of Doma common stock issued as replacement warrants for Old Doma warrants, in each case of these clauses (i) and (ii), as of immediately following the Closing Date (the “Seller Earnout Shares”). The Seller Earnout Shares are contingently issuable to the Sellers in two tranches: (i) one-half of such shares shall be issued if the last reported sale price of the common stock equals or exceeds $15.00 for any 20 trading days within any 30-day trading period ending on or before the fifth anniversary of the Closing Date, and (ii) one-half of such shares shall be issued if the
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last reported sale price of the common stock equals or exceeds $17.50 for any 20 trading days within any 30-day trading period ending on or before the fifth anniversary of the Closing Date. Since none of the conditions of the Seller Earnout Shares were met as of March 31, 2023, no related shares are included in the Company’s condensed consolidated balance sheets and condensed consolidated statements of changes in stockholders’ equity as of March 31, 2023 or for purposes of calculating earnings per share.
Unless the context otherwise requires or otherwise indicates, share counts of Doma common stock provided in this Quarterly Report exclude both the Sponsor Covered Shares and the Seller Earnout Shares.
North American Title Acquisition
On January 7, 2019, we acquired from Lennar its subsidiary, North American Title Insurance Company, which operated its title insurance underwriting business, and its third-party title insurance agency business, which was operated under its North American Title Company brand (collectively, the “Acquired Business”), for total stock and deferred cash consideration of $171.7 million (the “North American Title Acquisition”), including $87.0 million in the form of a seller financing note. Goodwill of $111.5 million resulted from the North American Title Acquisition.
The Company reviews goodwill for impairment annually on October 1 and more frequently if events or changes in circumstances indicate that an impairment may exist (“a triggering event”). We determined, after performing a qualitative review of each reporting unit as of March 31, 2023, 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.
Accumulated impairment losses to goodwill were $65.2 million as of March 31, 2023, resulting in net goodwill on the condensed consolidated balance sheet of $46.3 million.
4. Investments and fair value measurements
Held-to-maturity debt securities
The cost basis, fair values and gross unrealized gains and losses of our held-to-maturity debt securities are as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||||||||||||||||||||||||||||||
Corporate debt securities(1) | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Foreign government securities | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
_______________
(1)Includes both U.S. and foreign corporate debt securities.
The cost basis of held-to-maturity debt securities includes an adjustment for the amortization of premium or discount since the date of purchase. Held-to-maturity debt securities valued at approximately $4.8 million and $5.9 million were on deposit with various governmental authorities at March 31, 2023 and December 31, 2022, respectively, as required by law.
The change in net unrealized gains and losses on held-to-maturity debt securities for the three months ended March 31, 2023 and 2022 was $0.5 million and $(1.2 ) million, respectively.
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Net realized gains of held-to-maturity debt securities are computed using the specific identification method and are included in the condensed consolidated statements of operations.
The following table presents certain information regarding contractual maturities of our held-to-maturity debt securities:
| Maturity | March 31, 2023 | ||||||||||||||||||||||
| Amortized Cost | % of Total | Fair Value | % of Total | ||||||||||||||||||||
One year or less | $ | % | $ | % | |||||||||||||||||||
After one year through five years | % | % | |||||||||||||||||||||
| Total | $ | % | $ | % | |||||||||||||||||||
There were no held-to-maturity debt securities with contractual maturities after five years. Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Net unrealized losses on held-to-maturity debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | U.S. Treasury securities | Foreign government securities | Total | Corporate debt securities | U.S. Treasury securities | Foreign government securities | Total | ||||||||||||||||||||||||||||||||||||||||
Less than 12 months | |||||||||||||||||||||||||||||||||||||||||||||||
Fair value | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Unrealized losses | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
| Greater than 12 months | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Unrealized losses | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Unrealized losses | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
We believe that any unrealized losses on our held-to-maturity debt securities at March 31, 2023 are temporary based upon our current analysis of the issuers of the securities that we hold and current market conditions. We have no intent to sell, and it is more likely than not that we will not be required to sell, these securities until the fair value recovers to at least equal our cost basis or the securities mature.
Under the CECL model, the Company recognizes credit losses for its held-to-maturity debt securities by setting up an allowance which is remeasured each reporting period, with changes in the allowance recorded in the condensed consolidated statements of operations. The Company establishes an allowance for credit losses based on a number of factors including the current economic conditions, management's expectations of future economic conditions and performance indicators, such as credit agency ratings and payment and default history. As of March 31, 2023, credit agency ratings on our U.S. Treasury and corporate debt securities ranged from AAA through B2.
For our held-to-maturity debt securities, the Company's model estimates expected credit loss by multiplying the exposure at default by both the probability of default and loss given default (“LGD”). The probability of default and
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LGD percentages are estimated after considering historical experience with global default rates and unsecured bond recovery rates for horizons aligning to the Company’s held-to-maturity debt security portfolio. The calculated allowance is recorded as an offset to held-to-maturity debt securities in the condensed consolidated balance sheets and in the investment, dividend and other income line on the condensed consolidated statements of operations.
| Rollforward of Credit Loss Allowance for Held-to-Maturity Debt Securities | |||||
Beginning balance, January 1, 2023 | $ | ||||
Current-period provision (reduction) for expected credit losses | ( | ||||
Write-off charged against the allowance, if any | |||||
Recoveries of amounts previously written off, if any | |||||
Ending balance of the allowance for credit losses, March 31, 2023 | $ | ||||
| Rollforward of Credit Loss Allowance for Held-to-Maturity Debt Securities | |||||
Beginning balance, January 1, 2022 | $ | ||||
Current-period provision (reduction) for expected credit losses | ( | ||||
Write-off charged against the allowance, if any | |||||
Recoveries of amounts previously written off, if any | |||||
Ending balance of the allowance for credit losses, March 31, 2022 | $ | ||||
The current-period provision for expected credit losses is due to changes in portfolio composition, the maturity of certain securities, and changes in the credit ratings of certain securities.
Available-for-sale debt securities
The cost basis, fair values and gross unrealized gains and losses of our available-for-sale debt securities are as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||||||||||||||||||||||||||||||
Corporate debt securities(1) | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Foreign government securities | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
(1)Includes both U.S. and foreign corporate debt securities.
The cost basis of available-for-sale debt securities includes an adjustment for the amortization of premium or discount since the date of purchase.
The change in net unrealized gains on available-for-sale debt securities for the three months ended March 31, 2023 and 2022 was $0.3 million and $0.0 million , respectively. Any unrealized holding gains or losses on available-for-sale debt securities as of March 31, 2023 are reported as accumulated other comprehensive gain or loss, which is a separate component of stockholders’ equity, net of tax, until realized.
Net realized gains on disposition of available-for-sale debt securities are computed using the specific identification method and are included in the condensed consolidated statements of operations.
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The following table presents certain information regarding contractual maturities of our available-for-sale debt securities:
| Maturity | March 31, 2023 | ||||||||||||||||||||||
| Amortized Cost | % of Total | Fair Value | % of Total | ||||||||||||||||||||
One year or less | $ | % | $ | % | |||||||||||||||||||
After one year through five years | % | % | |||||||||||||||||||||
| Total | $ | % | $ | % | |||||||||||||||||||
There were no available-for-sale debt securities with contractual maturities after five years. Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Net unrealized losses on available-for-sale debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | U.S. Treasury securities | Foreign government securities | Total | Corporate debt securities | U.S. Treasury securities | Foreign government securities | Total | ||||||||||||||||||||||||||||||||||||||||
Less than 12 months | |||||||||||||||||||||||||||||||||||||||||||||||
Fair value | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Unrealized losses | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
| Greater than 12 months | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Unrealized losses | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Unrealized losses | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
We believe that any unrealized losses on our available-for-sale debt securities at March 31, 2023 are temporary based upon our current analysis of the issuers of the securities that we hold and current market conditions. We have no intent to sell, and it is more likely than not that we will not be required to sell, these securities until the fair value recovers to at least equal our cost basis or the securities mature.
As of March 31, 2023, the Company did not have an allowance for credit losses for available-for-sale debt securities.
Mortgage loans
The mortgage loan portfolio as of March 31, 2023 is comprised entirely of single-family residential mortgage loans. During the three months ended March 31, 2023, the Company did not purchase any new mortgage loans.
Mortgage loans, which include contractual terms to maturity of thirty years , are not categorized by contractual maturity as borrowers may have the right to call or prepay obligations with, or without, call or prepayment penalties. The change in the mortgage loans during the three months ended March 31, 2023 was the result of principal prepayments and maturities.
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The cost and estimated fair value of mortgage loans are as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||
| Cost | Estimated Fair Value | Cost | Estimated Fair Value | ||||||||||||||||||||
Mortgage loans | $ | $ | $ | $ | |||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Investment income
Investment income from securities consists of the following:
| Three months ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
Available-for-sale debt securities | $ | $ | |||||||||
Held-to-maturity debt securities | |||||||||||
Mortgage loans | |||||||||||
Other | |||||||||||
Total | $ | $ | |||||||||
Accrued interest receivable
Accrued interest receivable from investments is included in receivables, net in the condensed consolidated balance sheets. The following table reflects the composition of accrued interest receivable for investments:
| March 31, 2023 | December 31, 2022 | ||||||||||
Corporate debt securities | $ | $ | |||||||||
U.S. Treasury securities | |||||||||||
| Foreign government securities | |||||||||||
Accrued interest receivable on investment securities | $ | $ | |||||||||
Mortgage loans | |||||||||||
Accrued interest receivable on investments | $ | $ | |||||||||
The Company does not recognize an allowance for credit losses for accrued interest receivable, which is recorded in the receivables line in the condensed consolidated balance sheets, because the Company writes off accrued investment income timely. The Company writes off accrued interest receivables after three months by reversing interest income.
Fair value measurement
ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”) establishes a fair value hierarchy that prioritizes and ranks the level of observability of inputs used to measure financial assets or liabilities at fair value. The observability of inputs is impacted by a number of factors, including the type of asset or liability, characteristics specific to the asset or liability, market conditions and other factors. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy under ASC 820 are as follows:
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| Level 1 | Quoted prices (unadjusted) in active markets for identical asset or liability at the measurement date are used. | |||||||
| Level 2 | Pricing inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 pricing inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |||||||
| Level 3 | Pricing inputs are unobservable and include situations where there is little, if any, market activity for the asset or liability. The inputs used in determination of fair value require significant judgment and estimation. | |||||||
When fair value inputs fall within different levels of the fair value hierarchy, the level in the fair value hierarchy within which the asset or liability is categorized in its entirety is determined based on the lowest level input that is significant to the asset or liability. Assessing the significance of a particular input to the valuation of an asset or liability in its entirety requires judgment and considers factors specific to the asset or liability. The categorization of an asset or liability within the hierarchy is based upon the pricing transparency of the asset or liability and does not necessarily correspond to the perceived risk of that asset or liability.
The following table summarizes the Company’s investments measured at fair value. The Company’s available-for-sale securities in the following table are recorded at fair value on the accompanying condensed consolidated balance sheets.
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||
| Held-to-maturity: | |||||||||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||