Porch Group, Inc. ("Porch” or “the
Company") (NASDAQ: PRCH), a leading vertical software
company reinventing the home services industry, is announcing four
strategic acquisitions that strengthen the Company’s rapidly
expanding platform for home service companies and homeowners.
Homeowners of America (HOA) Acquisition
Porch and Homeowners of America (HOA) have executed a definitive
merger agreement for Porch to acquire HOA and all related
subsidiaries. The transaction, which is pending only regulatory
approval, is expected to close in the second quarter of 2021.
HOA is a Managing General Agent (MGA) and insurance carrier
hybrid with high margins and a capital efficient reinsurance
strategy which limits retained risk. HOA operates in six states,
including Texas, Arizona, North Carolina, South Carolina, Virginia,
and Georgia. The company was founded in 2006 in Texas, a $10
billion homeowners insurance market, and was the 12th largest home
insurer in Texas in 2019. HOA is licensed to operate in 31 states,
positioning it for nationwide expansion as part of Porch.
HOA has a business-to-business-to-consumer (B2B2C) revenue model
with all revenues recurring in nature. It generates new policy
sales through an independent network of more than 800 independent
agency partners.
HOA Strategic Rationale
- Fits squarely with Porch’s
strategy of going deeper into the insurance value chain.
Home insurance is the highest value service in the home and a key
growth opportunity for Porch. Porch will be able to feature and
prioritize HOA to its large, recurring base of homebuyers.
Combining an MGA and insurance carrier hybrid with Porch’s
insurance agency business will allow Porch to attract the highest
lifetime value (LTV) potential customers through a comprehensive
insurance offering.
- Porch will now be one of the
largest “InsurTech” companies. When looking at Porch and HOA
combined for the full year 2021, Porch expects over $270 million of
pro forma Gross Written
Premium1. Combining
Porch’s vast access to homebuyers and unique property data with
HOA’s strong pricing and claims experience, Porch will become one
of the largest InsurTech companies with significant advantages to
driving rapid, long-term growth.
- Profitable InsurTech platform with long-term
competitive and economic advantages.
Through its vertical software platform used by more than 10,500
home service companies, Porch acquires homebuyers who need
insurance for little-to-no customer acquisition cost (CAC). Given
Porch’s unique access to property data (such as roof quality and
age of major home systems), it expects to have long-term pricing
advantages. This is in addition to HOA’s strong pricing and claims
technologies and insurance operations producing gross loss ratios
of 57%2.
“HOA is a great business with a deep and experienced leadership
team who have spent more than a decade building a growing,
profitable, and innovative MGA and insurance company hybrid,” said
Matt Ehrlichman, Porch founder, chairman and CEO. “We have spent
significant time assessing a large number of companies in the
insurance industry to identify the right fit for Porch and we can
confidently say that HOA is exceptionally unique. Leveraging our
property data platform, self-serve consumer technologies, and
no-cost homebuyer demand stream with our own line of homeowner’s
insurance alongside our existing agency positions us to build the
largest, fastest growing, and most profitable InsurTech business.
In addition to Porch’s existing agency operations, Porch remains
committed to HOA’s independent agent distribution channel who will
over time see an enhanced product offering and expanded
opportunities driven by the combination of HOA’s sophisticated
underwriting and claims processes with Porch’s proprietary
technology and data and analytics.”
Andrew Lerner, managing partner of IA Capital Group and largest
shareholder of HOA, said: “We are grateful for the efforts of HOA’s
Founder, President and CEO Spence Tucker and his team for building
this company into a highly efficient Managing General Agent and
full stack insurer. As the longest tenured and most experienced
venture capital firm predominantly focused on InsurTech, IA Capital
is pleased to sell HOA to Porch.”
1 Gross Written Premium (GWP) represents the total dollars of
insurance premium sales based on date of contract execution. The
expectation of greater than $270 million of pro forma GWP for 2021
represents combined estimated premium sales for the full 2021 year
between HOA and Porch’s existing insurance agency, including the
time period before the transaction has been completed with HOA.2
Gross Loss Ratio is all losses and loss adjustment expense divided
by Gross Earned Premium without any reinsurance. Gross Earned
Premium is defined as the earned portion of the Gross Written
Premium.
V12 Acquisition
V12 is a fully scaled Software-as-a-Service (SaaS) marketing and
data platform with tools to help brands connect with and engage
consumers at key purchasing decision points, such as moving. The
platform leverages billions of buyer intent signals and has 330
million U.S. consumer records that small-to-medium-sized businesses
(SMB) and enterprise brand customers like Jordan’s Furniture, a
Berkshire Hathaway company, use in data-driven marketing. V12’s
rapidly expanding customer base generates approximately 90%
recurring or reoccurring revenue.
V12 Strategic Rationale
- Fits squarely with Porch’s
strategy of going deeper in mover marketing. V12
accelerates the capabilities and infrastructure to help Porch
achieve its target across many verticals where the move drives
economic activity.
- Combining Porch and V12 SaaS
and data creates a unique and winning offering for brands.
V12 provides Porch with full spectrum, enterprise-grade
capabilities to take advantage of the pre-mover marketing
opportunity Porch uniquely possesses.
- Strong leadership and industry expertise. V12
is led by Andrew Frawley, the former CEO of Epsilon, a $2 billion
revenue business with approximately 9,000 employees. He has
assembled a strong and experienced team with deep expertise in
product, data science, data engineering, enterprise/SMB sales and
consumer privacy.
Ehrlichman said: “With this acquisition, V12 immediately becomes
the anchor in our strategy to attack the highly-attractive mover
marketing opportunity. Together, we expect to provide unique and
compelling products to brands given proprietary data both companies
possess. The strong SaaS platform, data products and leadership
team from V12 positions us to win in mover marketing.”
PalmTech and iRoofing Acquisitions
Porch also announced two smaller and equally strategic
acquisitions in PalmTech and iRoofing. Both acquisitions are
consistent with Porch’s strategy to go deeper into existing
industries and expand its vertical software platform into new home
service categories.
PalmTech is a software company for home inspectors, historically
targeted to smaller home inspectors, which complements Porch’s
strong adoption across medium and large inspection companies. Porch
expects to execute its playbook by providing PalmTech the ability
to help its consumers with key move-related transactions such as
insurance.
iRoofing provides an all-in-one SaaS application for roofing
contractors bundled in a monthly or annual subscription. Its
software provides remote measurement and quoting, contract
management and materials ordering. iRoofing currently processes
more than 485,000 jobs on its platform annually. Porch expects to
accelerate iRoofing’s growth by providing its contractors the
ability to help consumers save money on home insurance after
completing their new roof installation project.
HOA and V12 Transaction Highlights
Porch is acquiring HOA and V12 for a combined $122 million. This
includes $97 million in cash and $25 million in cash or equity (at
Porch’s election) based on Porch’s share price at the time of the
HOA acquisition close. This equates to a purchase price multiple of
2.0 times combined estimated 2021 HOA and V12 revenue. With these
acquisitions, Porch is increasing its 2021 revenue guidance from
$120 million to $170 million.
Porch CFO Marty Heimbigner said: “Porch’s business model
produces a highly recurring or reoccurring stream of homebuyers
that are candidates for HOA and V12 services. Over time, we believe
we will be able to accelerate the revenue growth of the newly
acquired companies to our long-term target of 30% and believe these
acquisitions are synergistic and accretive for our
shareholders.”
Preliminary 2020 Financial Results
While fourth quarter and full year 2020 financial results are
expected to be reported in March, Porch is providing a preliminary
update on selected financial information. Porch expects 2020
revenue to be slightly better than $72 million.
Heimbigner continued: “We executed well to plan and achieved our
first month of positive Adjusted EBITDA earlier in the third
quarter. However, during the quarter we made the decision to invest
more aggressively in sales teams and marketing, R&D—such as
self-service insurance and data platforms—and public company
expenses as our SPAC merger and corresponding capital raise became
more certain. A consistent recommendation we heard from our SPAC
and PIPE investors was for us to invest more aggressively given our
strong LTV/CAC unit economics and the size of the market in front
of us.
“In addition to investing further in sales and marketing to
accelerate future growth, the R&D spend includes fully
tech-enabling our insurance experience. This includes instant and
self-service quoting for homebuyers, expanding self-service moving
experiences, such as moving and TV/Internet, and deepening our
value proposition to home inspectors, among others. With the $220
million in cash on our balance sheet at the close of our SPAC
merger and our increased 2021 revenue outlook, we believe this is a
prudent strategy.”
Given these incremental investments, Porch expects net loss in
2020 to range between $(53) million to $(55) million and Adjusted
EBITDA loss in 2020 to range between $(18) million to $(19)
million, or approximately (25)% of revenue, compared to its
previous target of $(10) million. The Company’s revised preliminary
net loss and Adjusted EBITDA loss ranges represent an improvement
from $(103.3) million net loss and $(36.8) million of Adjusted
EBITDA loss in 2019, respectively, or approximately (47)% of
revenue.
Updated 2021 Financial Outlook
Porch is raising its 2021 revenue outlook from $120 million to
$170 million, representing 134% year-over-year revenue growth.
Porch expects approximately 25% of 2021 revenue to be from B2B SaaS
fees, approximately 65% of revenue from B2B2C move-related
services, which includes recurring insurance revenue, and
approximately 10% of revenues from post-move services.
Porch expects to aggressively invest while still showing an
approximate 2x improvement in Adjusted EBITDA as a percentage of
revenue like it did in 2020. Thus, Porch now expects Adjusted
EBITDA loss to range between $(17) million to $(27) million (or
-13% of revenue at the mid-point).
Ehrlichman concluded: “These strategic acquisitions accelerate
our already fast-growing business and have expanded our U.S. TAM by
almost $100 billion to more than $320 billion. This includes the
creation of a new addressable market in mover marketing. While we
estimate property & casualty insurance to represent an $84
billion increase to our total insurance addressable market, there
is massive potential for future additional market expansion as we
seek to add additional insurance product lines and capture even
more of the economics. We remain confident in our long-term 25%
Adjusted EBITDA margin target while still being able to invest
aggressively in R&D and believe this is only the beginning of
our journey to build a truly great company.”
Advisors
Sidley Austin LLP is acting as legal advisor to Porch in the HOA
acquisition. Davis & Gilbert is acting as legal advisor to
Porch in the V12 acquisition. R. L. Viton & Co., LLC was the
financial advisor to HOA, and Willkie Farr & Gallagher LLP was
HOA’s legal advisor. BrightTower, an investment banking advisory
firm focused on software, information, marketing, and business
services, served as exclusive advisor to V12 in its sale to
Porch.
Conference Call and Webcast Information
Porch management will host a conference call and webinar to
discuss these transactions and its business update today, January
14, 2021, at 5:00 p.m. Eastern time (2:00 p.m. Pacific time). The
presentation will be accompanied by a slide presentation available
on the Investor Relations section of the Company’s website. A
question-and-answer session will follow management’s prepared
remarks.
All are invited to listen to the event by registering for the
webinar here.
To access the webinar by telephone, please see below:
iPhone one-tap:US: +14086380968,,84485648638# or
+16699006833,,84485648638#
Or Telephone:Dial (for higher quality, dial a number based on
your current location):US: (408) 638 0968 or (669) 900-6833 or
(253) 215-8782 or (346) 248-7799 or (646) 876-9923 or (301) 715
8592 or (312) 626-6799
Webinar ID: 844 8564 8638 Passcode: 984787International numbers
available: https://gatewayir.zoom.us/u/k9nmX9v3r
If you have any difficulty connecting with the conference call
or webcast, please contact Porch’s investor relations team at (949)
574-3860 or PRCH@gatewayir.com.
A replay of the webinar will also be available in the Investor
Relations section of Porch’s corporate website.
About Porch Group
Seattle-based Porch Group, the vertical software platform for
the home, provides software and services to more than 10,500 home
services companies such as home inspectors, moving companies, real
estate agencies, utility companies, and warranty companies. Through
these relationships and its multiple brands, Porch provides a
moving concierge service to homebuyers, helping them save time and
make better decisions on critical services, including insurance,
moving, security, TV/internet, home repair and improvement, and
more. To learn more about Porch, visit porchgroup.com and
porch.com.
Forward-Looking Statements
Certain statements in this press release may be considered
“forward-looking statements” within the meaning of the “safe
harbor” provisions of the United States Private Securities
Litigation Reform Act of 1995. Forward-looking statements generally
relate to future events or Porch’s future financial or operating
performance. For example, projections of future revenue, Adjusted
EBITDA and other metrics, business strategy and plans, and
anticipated impacts from pending or completed acquisitions, are
forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “may,” “should,”
“expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,”
“predict,” “potential” or “continue,” or the negatives of these
terms or variations of them or similar terminology. Such
forward-looking statements are subject to risks, uncertainties, and
other factors which could cause actual results to differ materially
from those expressed or implied by such forward looking statements.
These forward-looking statements are based upon estimates and
assumptions that, while considered reasonable by Porch and its
management, are inherently uncertain. Factors that may cause actual
results to differ materially from current expectations include, but
are not limited to: (1) the ability to recognize the anticipated
benefits of Porch’s December 2020 business combination (the
“Merger”) with PropTech Acquisition Corporation (“PropTech”), which
may be affected by, among other things, competition and the ability
of the combined company to grow and manage growth profitably,
maintain key commercial relationships and retain its management and
key employees; (2) expansion plans and opportunities, including
future and pending acquisitions or additional business
combinations; (3) costs related to the Merger and being a public
company; (4) litigation, complaints, and/or adverse publicity; (5)
the impact of changes in consumer spending patterns, consumer
preferences, local, regional and national economic conditions,
crime, weather, demographic trends and employee availability; (6)
privacy and data protection laws, privacy or data breaches, or the
loss of data; (7) the impact of the COVID-19 pandemic and its
effect on the business and financial conditions of Porch; and (8)
other risks and uncertainties set forth in the sections entitled
“Risk Factors” and “Forward-Looking Statements” in the definitive
proxy statement/consent solicitation statement/prospectus filed by
PropTech (n/k/a Porch) with the Securities and Exchange Commission
(the “SEC”) on December 3, 2020 and other documents of Porch filed,
or to be filed, with the SEC.
Nothing in this press release should be regarded as a
representation by any person that the forward-looking statements
set forth herein will be achieved or that any of the contemplated
results of such forward-looking statements will be achieved. You
should not place undue reliance on forward-looking statements,
which speak only as of the date they are made. Porch does not
undertake any duty to update these forward-looking statements,
except as may be required by law.
2020 Financial Information; Non-GAAP Financial
MeasuresThe financial information and data contained in
this press release as of and for the year ended December 31, 2020
is preliminary and unaudited and does not conform to Regulation
S-X. Accordingly, such information and data is subject to change
and may be adjusted in or may be presented differently in Porch’s
Annual Report on Form 10-K for the year ended December 31, 2020 to
be filed by Porch with the SEC.
Some of the financial information and data contained in this
press release, such as Adjusted EBITDA, Adjusted EBITDA Margin,
Gross Loss Ratio and Gross Written Premium, have not been prepared
in accordance with United States generally accepted accounting
principles (“GAAP”). Porch defines Adjusted EBITDA as net income
(loss) plus interest expense, net, income tax expense (benefit),
other expense, net, and depreciation and amortization, certain
non-cash long-lived asset impairment charges, stock-based
compensation expense and acquisition-related impacts, including
compensation to the sellers that requires future service,
amortization of intangible assets, gains (losses) recognized on
changes in the value of contingent consideration arrangements, if
any, gain or loss on divestures and certain transaction costs.
Gross Loss Ratio is defined as the ratio of expected losses and
expected loss adjustment expense to the earned portion of Gross
Earned Premium, without any reinsurance, expressed as a percentage.
Gross Earned Premium is defined as the earned portion of the Gross
Written Premium. Gross Written Premium (GWP) represents the total
dollars of insurance premium sales based on date of contract
execution. See the reconciliation table below for more details
regarding Adjusted EBITDA, including the reconciliation of
historical Adjusted EBITDA loss to net loss, the nearest comparable
GAAP measure.
Porch uses these non-GAAP measures to compare Porch’s
performance to that of prior periods for budgeting and planning
purposes. Porch believes that the use of these non-GAAP financial
measures provides an additional tool for investors to use in
evaluating projected operating results and trends in and in
comparing Porch’s financial measures with other similar companies,
many of which present similar non-GAAP financial measures to
investors. Porch's method of determining these non-GAAP measures
may be different from other companies' methods and, therefore, may
not be comparable to those used by other companies and Porch does
not recommend the sole use of these non-GAAP measures to assess its
financial performance. Porch management does not consider these
non-GAAP measures in isolation or as an alternative to financial
measures determined in accordance with GAAP. You should review the
following reconciliation of Adjusted EBITDA loss to net loss, the
nearest comparable GAAP measure, and not rely on any single
financial measure to evaluate Porch’s business:
|
2019 |
2020 Lower Range |
2020 Upper Range |
|
($ millions) |
($ millions) |
($ millions) |
Net loss |
-103 |
-53 |
-55 |
|
|
|
|
Interest expense |
7 |
15 |
15 |
Income tax expense |
0 |
0 |
0 |
Depreciation and amortization |
7 |
7 |
7 |
Other income (loss), net |
8 |
0 |
0 |
Non-cash long-lived asset impairment charge |
2 |
1 |
1 |
Non-cash stock-based compensation |
35 |
8 |
8 |
Revaluation of contingent consideration |
0 |
2 |
2 |
Acquisition and related expense |
8 |
4 |
5 |
|
|
|
|
Adjusted EBITDA (loss) |
-37 |
-18 |
-19 |
|
|
|
|
Porch is not providing reconciliations of projected Adjusted
EBITDA, Gross Loss Ratio or Gross Written Premium to the most
directly comparable measures prepared in accordance with GAAP
because Porch is unable to provide these reconciliations without
unreasonable effort because certain information necessary to
calculate such measures on a GAAP basis is unavailable or dependent
on the timing of future events outside of our control.
Investor Relations Contact:
Gateway Investor RelationsCody Slach, Matt Glover(949)
574-3860PRCH@gatewayir.com
Press contact:
Tailwind Public Relations, LLCJeff Pecor(206)
948-1482jeff@tailwindpr.com
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