Porch Group Inc (PRCH) 2020 Q4 法說會逐字稿

Joining us today are Matt Ehrlichman, Porch Group's CEO, Chairman and Founder; Martin Heimbigner, Porch Group's CFO; and Matthew Neagle, Porch Group's COO.

Before we go further, I'd like to read the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Today's discussion may contain forward-looking statements, including, but not limited to, statements regarding Porch's expectations or predictions of future financial or business performance or conditions, business strategy and plans, and anticipated impacts from pending or completed acquisitions.

Forward-looking statements are inherently subject to risks, uncertainties and assumptions, and they are not guarantees of performance. You should not put undue reliance on these statements. You should understand that such forward-looking statements involve risks and uncertainties, including the items discussed under the Risk Factors in Porch's recent public filings with the SEC. Such factors may be updated from time to time in Porch's subsequent filings with the SEC, which are available on the SEC website, may cause actual results or performance to differ materially from those indicated by such statements. Porch is under no obligation and expressly disclaims any obligation to update, alter or otherwise revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

Today's remarks will also refer to certain non-GAAP financial measures. Definitions of these non-GAAP financial measures are available in the legal disclaimers on Slide 2 of the presentation. We also refer you to such legal disclaimers for additional information.

I'd like to remind everyone that this webcast will be available for replay shortly after the conclusion of the presentation on the company's website at porchgroup.com. For those of you that would like to submit a question during today's presentation, please log into the webinar and submit it through the Q&A function on the Zoom platform. Then we'll do our best to take your questions within the allotted time. Porch Group has also made available slide presentation that will follow along the presenters' commentary. The presentation can be found on the company's website.

With that, let me turn the call over to Matt Ehrlichman, CEO, Chairman and Founder of Porch Group. Matt?

Thank you, Matt. Appreciate it. Good afternoon to everybody on the call. We are excited to be with you today for our first quarterly earnings call as a public company. Our purpose here, of course, is to build a truly great and enduring company that becomes a category winner for making the entire journey of a home simple. We're attacking one of the largest markets with a unique and defensible strategy.

I couldn't be more pleased about our seamless transition into operating as a public company. The entire Porch team is executing extremely well, and we're all excited about the traction we're seeing in a number of key strategic areas.

Today, we'll be providing an overview of our financial and operational results for the fourth quarter and for the full year 2020 as well as an updated outlook for Q1 and the full year 2021, which is off to a great start.

First, I do want to provide a brief refresher on our strategy, which is outlined here on Slide 4. Porch is a vertical software company for the home. We provide ERP and CRM software to home service companies, such as inspectors, moving companies, et cetera, who we help to grow. We monetize our software with a SaaS plus transaction fee revenue model. So while these businesses pay us SaaS fees, they can alternatively pay us by way of B2B2C transactions, where they provide access and introductions to their customers, and we monetize these relationships by delivering high-value home services, such as insurance, moving, TV, Internet and others.

It's a similar flywheel to OpenTable, where they would provide software to restaurants, through those relationships get access to the consumer, monetize the transactions and then drive demand back to these restaurants. However, unlike OpenTable, we play in a massively larger addressable market. And where they might make approximately $1 per transaction, we can generate at times approximately $1,000 per transaction, and in the case of insurance, recurring revenues from each sale.

With our software platform providing us unique, deep and early access to homebuyers with low acquisition costs and aggregating proprietary data about residential properties, we're continuing to go deeper into a select set of services, particularly insurance.

As a reminder, during our call in mid-January when we announced 4 acquisitions, we provided an early look at 2020 results. At that time, we projected $72 million in revenue and a minus 25% adjusted EBITDA margin. At that time, we also increased our 2021 guidance from $120 million in revenue to $170 million in revenue to account for revenue from our acquisitions of Homeowners of America, or HOA, and V12.

We'll share today how 2020 results came in ahead of previous top and bottom line guidance, how we're seeing faster than expected growth in Q1 2021. And while the previous 2021 guidance of 134% year-over-year growth is strong, we'll be further increasing our 2021 forecast and expect even faster growth.

So the performance is driven by 6 key pillars of our unique strategy that I'll walk through here on Slide 5. First, similar to other vertical software company peers, we continue to ramp software sales to more companies and upsell additional modules to these companies to grow revenues, while we continue to maintain very low monthly churn rates. As a result of our efforts to invest in increased growth, we're starting to see record numbers of new company sales and continue to see extremely high Net Promoter Scores.

Second, we continue to increase access to valuable consumers and B2B2C transaction revenue by successfully converting more companies to our pay with Customer Access pricing model. When companies buy our software and receive initial onboarding and training, we're seeing the vast majority of them choose to pay for transactions and Customer Access. And when they do so, we generate significantly more revenue and that they paid only with SaaS fees.

We also unlocked a much larger TAM of being able to help their consumers with [high-value] recurring and reoccurring services needed for their homes. As we integrate transaction, monetization and newer software solutions like PalmTech or iRoofing, which we acquired earlier this year, we expect to see this trend continue.

The third key pillar to our strategy is increasing the B2B2C transaction revenue we earn per consumer. By offering additional services these consumers need by increasing conversion rates and growing revenue per service sold, we expect to continue to see revenue per consumer growth. This, in turn, continues to increase the value of each company, which then further improves already strong unit economics.

Fourth, the pillar of the services we provide consumers that core service really is insurance. And our focus is to continue to scale our InsurTech business with its unique advantages. Insurance is one of the most valuable services and one of the largest TAMs related to the home, and it creates strong recurring revenue per consumer. Our vertical software and consumer access pricing model provides our InsurTech division with this reoccurring stream of low-CAC homebuyers who are required to buy insurance for their new home.

In addition, our software platform provides us very unique property details, which creates significant advantages in underwriting and pricing. We're excited about the pending acquisition of HOA, which is expected to close in Q2, which will extend from operating as an insurance agency as we do today to a managing general agent and carrier. We believe we'll be able to dramatically improve the value proposition for our insurance customers and make the purchasing of insurance easier than it's ever been before.

Fifth, we're helping brands and advertisers to improve their mover marketing advertising by connecting them with homebuyers uniquely early in the moving process. In early days of bringing V12 into the Porch umbrella, we're already seeing exciting opportunities and strong results in pilot programs.

And lastly, we continue to identify strategic and accretive acquisitions that are able to grow faster at higher margins once plugged into the Porch platform.

So with that, I'll turn it over to Martin Heimbigner, our CFO, to discuss our financial results for the fourth quarter and for the full year 2020.

Thanks, Matt, and good afternoon, everyone. Turning now to our financial results for the fourth quarter and the full year ended December 31, 2020. In our last update in mid-January, we shared preliminary guidance for the full year 2020. As Matt commented on in his opening remarks, our final results came in better than this guidance, with us achieving more than $73 million in revenue and a $17.5 million adjusted EBITDA loss, which is a negative 24% adjusted EBITDA margin for the full year.

On Slide 7, you can see that our total revenue in the fourth quarter saw a year-over-year increase of 34% to $19.5 million, up from $14.5 million in Q4 2019 on a pro forma basis to account for the removal of past divestitures. For the full year 2020, on a pro forma basis, adjusting for the removal of past divestitures, our total revenue increased 28% to $73.2 million, ahead of the $72 million guidance we had previously provided. In Q4, we saw growth improving as compared to Q2 and Q3 2020. And shortly, Matt will update on what we have seen in Q1 2021 thus far. We are seeing even more acceleration in our growth rate than we had anticipated.

Our cost of revenue percentage for the fourth quarter 2020 was 22%. For the full year 2020, cost of revenue percentage was 24%, which was in line with our guidance. As a vertical software company, our margin profile is very strong, whether we monetize with SaaS fees, transactions or both. We expected our cost of revenues to fluctuate slightly from the mid- to high-20s. Our adjusted EBITDA margin for the fourth quarter improved to negative 17% from negative 56% the prior year. For the full year 2020, adjusted EBITDA margin improved to negative 24% from negative 57% in 2019 pro forma and ahead of our recent guidance of negative 25% for the year.

The net loss for 2020 was a negative $51.6 million, which was better than the range that we had provided between negative $53 million to negative $55 million. With the primary difference between adjusted EBITDA and net income related to interest expense, noncash expenses such as stock-based compensation, acquisition-related items, SPAC merger transaction bonuses and depreciation. Overall, in every measure, we are pleased with our Q4 and 2020 performance.

Now let's turn to the balance sheet and the capital structure on Slide 8. Going through with SPAC, in addition to the common shares issued, can bring with it earn-out shares, management incentive pool, public and private warrants. And for Porch, we quickly executed on acquisitions, the largest of which, Homeowners of America, is expected to close in Q2 subject to customary closing conditions and regulatory approval. So we'll take a moment to ensure clarity.

As we look forward, there are 2 upcoming events that will have a meaningful impact on cash: first, the warrants, which will have a positive impact as part of the SPAC IPO and corresponding merger with PropTech Acquisition Corp., Porch inherited a total of 14.3 million warrants. Under the warrant agreement that PropTech entered into at the time of its IPO, Porch issued notice to redeem all outstanding public warrants on April 16, since our stock traded above $18 per share for 20 days in a 30-day consecutive period. We expect holders of these warrants will exercise them for cash prior to the redemption date. If they do so, it would increase our cash position by a total of approximately $165 million versus 2020 year-end. This assumes that all warrants are cash exercise, but holders of the private warrants could choose not to exercise their warrants, which reduce the amount of cash received by us and reduce the number of expected shares of our stock outstanding.

Second, we anticipate completing the Homeowners of America acquisition in Q2, subject to customary closing conditions and regulatory approval with a purchase price of $80 million in cash and $20 million in stock. So after accounting for all of this as well as the Q1 acquisitions, such as V12, we anticipate having approximately $230 million in cash and $40 million of long-term debt upon the exercise of all warrants and the closing of the HOA transaction. We are expected -- we are excited about how this cash position will allow us to execute against our M&A pipeline.

In terms of our capital structure, we assume that when all these transactions are completed, there will be approximately 97 million shares outstanding. This includes 4 million earn-out shares that are included in current shares outstanding but are not yet achieved. The full exercise of 14.3 million warrants, which may end up lower, depending on the number of unexercised private warrants and slightly more than 1 million shares for the HOA acquisition. When team RSUs vest or team options both vest in our exercise, it will be added to the total shares outstanding. This relates to the pre-SPAC Porch options and RSUs which rolled over and the 11 million share management incentive pool from the SPAC merger agreement, some of which will be granted soon with long-term vesting and some of which will be granted over the next number of years.

This completes my financial summary. And now I'd like to turn the call over to Matthew Neagle, our Chief Operating Officer, who will provide an update on our key performance indicators for Q4 2020 and Q1 2021. Matthew?

Thank you, Marty. It's great to be here with you all. As COO, I'm responsible for the day-to-day operations of Porch Group in helping our leaders build successful and rapidly growing businesses. Porch is organized in a decentralized operating model, where we have divisions that our business units report into. Our businesses are able to move quickly and entrepreneurially with the playbook and infrastructure to benefit from best practices as we scale.

When we acquire a company, our decentralized operating model helps us manage the costs and risks associated with integration. We generally look to integrate acquisitions, firstly, into our central data platform, and then secondly, into our homeowner experience in order to monetize B2B2C transactions. This, in turn, allows our businesses to quickly increase the value of each company using our vertical software, thus unlocking improved unit economics and thus accelerating growth substantially.

Overall, our vertical software platform with SaaS and transaction monetization is working extremely well. We have significant and deep competitive moats, a massive TAM and more growth levers than traditionally priced SaaS companies, which we expect to allow us to continue to grow rapidly for a long period of time.

I'll now provide an update on our KPIs for Q4 and full year 2020 as well as provide a preview into the strong performance we are seeing through Q1, which at this point has good visibility. Starting in mid-March 2020, we saw headwinds in terms of the number of companies using our software due to COVID-19, in particular, in the home inspection industry where the community is often sold proprietors over 60 years old. While home sales bounced back by the end of June and were strong, we saw companies putting their business on pause until COVID vaccines were distributed. In Q4 2020, the average number of companies was approximately 11,150, up from 10,800 in Q3 2020. In Q1, we have seen acceleration of this metric with more than 12,000 companies active as of the end of February.

Looking at the average revenue per month on Slide 10, we have seen significant growth year-over-year in our ability to provide more value and generate more revenue from each company. Revenue per company increases as we help companies using our software to grow; as we launch and upsell additional modules, where we charge B2B SaaS fees; as we have more of these companies paying us with transactions; and as we then generate more [B2B2C] revenue from each consumer we are introduced to.

In Q4 2020, we saw approximately $583 in revenue per company per month on average, up from approximately $450 in Q4 2019, a 32% year-over-year increase. For Q1 2021 through February, we are seeing approximately $600 in revenue per company per month, which would be up from approximately $460 in Q1 2020.

Now on Slide 11, we'll look at transaction revenue only, which is predominantly B2B2C move-related services with only approximately 10% of 2021 revenues expected to be post-move services. As you can see, we saw approximately 170,000 monetized services in Q4 2020, which is approximately flat with the number of services from Q4 2019. As a reminder, and as we've discussed in the past, it is not apples-to-apples to compare this metric in 2020 to 2019, as late December 2019 is when we launched our in-house insurance agency, moving us to monetizing insurance on a per-lead or per-quote basis to then monetizing insurance on a per-sale basis.

Correspondingly, we saw an average revenue per monetized service of $103 in Q4 2020 versus $78 in Q4 2019. We continue to have success, generating more revenue per monetized service as we focus on higher value services. After the closing of the pending HOA transaction, which we expect in Q2, we plan to start expanding HOA from the 6 states it operates in today, a process that will take some time given insurance regulatory approvals. HOA generates approximately 2x higher commission rates than our in-house insurance agency. And so with this ongoing state expansion, we are excited about the opportunity to continue to show significant increases in the value per monetized service.

This completes my summary of our KPIs. I'd now like to turn the call back over to Matt to provide an update on guidance for 2021 and the operational initiatives that Porch will be spearheading during the year.

Thanks, Matthew. Thanks, Marty. So we're certainly pleased with the positive results. The momentum has certainly continued into 2021. As you'll be able to see on the next set of slides, we're raising our full year 2021 outlook based upon this momentum. Typically, I will say in our quarterly earnings calls ongoing, we'll not provide guidance for the current quarter. However, since Q1, obviously, ending tomorrow, we would also like to make some high-level comments about the Q1 outlook.

At this time, we expect to record approximately $23 million in revenue in Q1 2021, which is approximately 85% year-over-year growth versus Q1 2020 pro forma revenue, excluding past divestitures. This rapid growth exceeded our internal expectations. And as we look forward to the rest of 2021, this growth rate is only expected to improve once HOA closes and as we begin to compare our year-over-year performance to the 2020 quarters that were impacted by COVID.

On Slide 14, to give you a sense for what Q1 growth would have looked like had we assumed HOA, V12 and other announced acquisitions had all closed on January 1, 2021, we would have expected approximately $34 million in revenue for Q1 or 170% year-over-year growth. This would have been even better if not for the unique cold weather events in Texas in February. As we think about the full year, Q1 is always the quarter that contributes the least to overall annual revenue due to seasonality. In 2019 and 2020, Q1 accounted for 15% and 20% of full year revenue, respectively.

So turning to the full year on Slide 15. As a result of this outperformance, what we're seeing in underlying metrics across the business and based on our expectations for the rest of the year, we are increasing our 2021 revenue guidance to $175 million, which represents 140% year-over-year growth. If you set aside the $50 million guidance increase due to HOA and V12, we're still seeing revenue growth of more than 70% for the year.

With this increased revenue guidance, this shows that our business is expected to grow at a 4-year CAGR of 69%, as illustrated here on Slide 16. The growth is coming from each area of our strategy: selling software to more companies, upselling more modules to companies, generating higher B2B SaaS fees, getting access to transactions from our companies and then generating more revenue per consumer we're introduced to. Of the $175 million in revenue expected in 2021, we reiterate our expectation around the revenue distribution, with approximately 25% from B2B SaaS fees, approximately 65% of the revenue from B2B2C move-related services, which includes recurring insurance revenue, and approximately 10% of revenues from post-move services.

Our business is a very high-margin software business. Here on Slide 17, we continue to see cost of revenues in the mid- to high-20% range. We're reiterating the guidance we've previously provided in January, with contribution margins for 2021 expected to be 40%, up from 31% in 2020. In terms of contribution margin, which we define as revenues less all variable expenses, our year-end close process identified certain 2020 expenses to move from below the contribution margin to above the CM line. These were already factored into 2021, so there's no changes in the 40% 2021 guidance.

In terms of adjusted EBITDA, as stated, we'll continue to operate our adjusted EBITDA margin to show really meaningful improvement each year. So from 2019 to 2020, our adjusted EBITDA margin improved from negative 57% to negative 24%. For 2021, we're reiterating our guidance and expect to operate our adjusted EBITDA margin to negative 10% to negative 16% for the year. Q1 and Q4 are always our lowest adjusted EBITDA margin quarters given seasonality, with Q2 and Q3 strongest. We remain very confident in our long-term 25% adjusted EBITDA margin targets while still being able to invest aggressively in R&D as we go.

So in summary, Porch Group is growing very well. Q4 came in ahead of guidance on the top and bottom line. Our increased revenue guide of $175 million for 2021 projects 140% year-over-year growth. Our business is consistent and predictable, with a vast majority of revenue recurring or reoccurring. Projected Q1 2021 revenue of approximately 85% year-over-year growth versus 2020 pro forma is a great start to the year. And again, like I mentioned, if our announced acquisitions had been closed effective January 1, we would have projected around 170% growth for this quarter. We're demonstrating the ability to continue to show meaningful improvement each year with our adjusted EBITDA as a percentage of revenue while still investing aggressively in the business to deepen our long-term competitive moats.

So before I conclude, I just want to provide a few final thoughts in a handful of notes. First, I want to express my sincere thanks to the entire team at Porch Group, who've been working diligently in the wake of the pandemic. We're very pleased with the operational performance, and it's a testament to their skill and ability and our company core values.

As Marty mentioned, earlier this month, we announced that we'll be redeeming all outstanding public warrants, which will occur on April 16. Yes, we are excited about how this could help fund our M&A efforts. We're laser-focused on capital allocation and deploying capital in the places that will drive the strongest long-term returns, whether through organic investments or through M&A.

As we mentioned, the HOA acquisition remains on track to close in Q2, subject to customary closing conditions and regulatory approval. We're positioned to move quickly and execute our plan, which includes expanding the states that HOA operates in, which can meaningfully increase our effective take rate and recurring revenue. Given the regulations around insurance, this process will take a year or more. Right after closing, we will be making meaningful improvements to the HOA value proposition, though, such as providing a co-branded moving concierge and fantastic handyman services for maintenance.

Longer term by combining Porch's vast, early and our low-CAC access to homebuyers with our unique property data and with HOA's strong pricing and claims experience, we do believe Porch has the potential to become one of the largest InsurTech and insurance companies with significant and durable advantages that will help us drive rapid, long-term and profitable growth.

Gross written premium, or GWP, has continued to be forecasted at $270 million for the full year 2021 between HOA and Porch combined. And looking back at 2020, for the full year, final accident year gross loss ratio was a very strong 59%.

It's been a great first quarter as a public company. We're tackling one of the largest markets that exists. We are in the early stages and feel like we just started the second chapter of this journey, and as we say here at Porch, onward.

So with that, we're happy to turn the call over for questions. Matt Glover, to you.

Thanks, Matt. It looks like we have about 25-or-so minutes for Q&A. (Operator Instructions) All right. We've got a lot of good questions here. Our first question is from Daniel Kurnos from Benchmark. How much V12 revenue is embedded in the Q1 guide?

I can start this off, Marty. Layer in if there's anything else. We had communicated before when we closed the V12 acquisition that company represented $20 million in revenue. That business does not have a lot of seasonality. That's $20 million for the year 2021. That acquisition closed middle of January. So that kind of gives you a sense for how much we saw. It's fairly small. Obviously, HOA did not close in Q1 as we talked about. And then the other 2 acquisitions, PalmTech and iRoofing, are extremely small, so immaterial to the results.

Next question. It's a follow to that also from Daniel from Benchmark. How is V12 handling or planning to handle the upcoming IDFA changes?

Marty, do you want to take it?

Matt, I am not sure what the IDFA changes, so...

Matt, if you can ask him to clarify, that would be great.

Yes. Daniel, if you can send us a clarifying message, that would be great. We'll take another question from Jason Kreyer from Craig-Hallum. You mentioned the desire to expand HOA beyond 6 states. Can you give any color on what resources are needed to do that? And how quickly you can deploy another today? Or perhaps how many states you can deploy this year?

Sure. Happy to take that. So HOA is currently operating in 6 states today, and upon closing, we will be actively seeking to expand into new states. That said, rolling out across states does take time. Our goal is to have launched an additional 10 to 15 additional states by the end of 2021 with continued expansion occurring in 2022. One thing to note is, most of these will be late in the year and then ramping up the business in the state does take time. So we expect little impact in 2021. But through these 2021 expansion efforts, we have stated we do think HOA's growth will be in line and accretive to our target 30% growth rates the following year. There are certain states, as you can imagine, that will be harder or takes longer, such as California because it's more regulated and complicated, with other states like Florida that are fairly unique, and so we may continue to operate those as an independent agency for a while.

In terms of resources, when we announced the HOA acquisition, we had built in the investments for state expansion into the earnings guidance. So HOA's historic margins will absorb the state expansions' efforts. And so from a Porch perspective, the net is there's not an incremental cost this year due to state expansion.

Thanks, Matthew. We have a question from Ben Sherlund from Cantor Fitzgerald. You saw some nice sequential acceleration on revenue per company, but it looks like as though average number of companies have been lower to return to normalized growth. Can you walk us through how you are seeing -- how you see growth in a number of companies using Porch in a post-vaccine world?

I can take that one, too. We are seeing an increase in the number of companies. As I mentioned in Q1, we had over 12,000 in February. We've started to make investments to increase the number of companies, including seeing record sales on a monthly basis in key parts of our business. We're also seeing businesses come back online in anticipation post COVID. We have very strong unit economics, and we expect to continue to invest in growth of the number of new companies. And I'd say we're very encouraged by the trends we're seeing right now.

Thanks, Matthew. We have a question from Mike Grondahl from Northland. Any update on mover marketing?

Sure. Happy to take that, Mike. The -- a couple of different things. So we're early days, obviously, with V12 getting plugged into the Porch system and be able to utilize our really unique early insights to mover. So as a reminder, V12 would provide mover solutions for brands and advertisers, but it would be post-move. And so they're able to bring now a mover product that gives brands and advertisers the ability to access those consumers earlier.

I will say, we're not going to make any announcements now, but there are some really exciting things happening in early pilots as that data is being used jointly, the Porch and the V12 data, some top brands running pilots to be able to see how effective that is. We've gotten comments that it's, by far, the most effective mover marketing that they have seen. And so we're excited. I mean we're seeing the thesis certainly playing out. It is early days, but like we've commented when we announced the V12 acquisition, we felt like we were going to be able to accelerate that business and have it be a strong growth business for us going forward in 2022 and on.

Thanks, Matt. We've got a question here from Jason Helfstein from Oppenheimer. Can you talk about how the mix by vertical you are currently seeing in Q1 compared to the second half of 2020?

Sure. There's 2 different ways we think about that, Jason, in terms of verticals. So I'm not sure which angle you're asking, so I'll answer both. One is, when we go and sell software into different vertical markets like home inspection, moving, now roofing, go after utility companies, a variety of others, we are continuing to -- Matthew commented how we're deploying more sales and marketing. That really is the primary way that we deploy sales and marketing to go sell software into these companies.

We are investing across the board. I will say that some of our core verticals like home inspection, where we have very strong unit economics, they're seeing some of the best results. That's one way we think about it. The other is when we get access to the consumer, which types of services are we having the most success with? So between insurance or moving, TV, Internet, security. And again, we'll layer in more services for consumers as we go, electricity or warranty or solar, et cetera.

We're seeing good growth across them. I will say, obviously, we talked about insurance as being the big focus. Clearly, we're seeing very strong growth there, and we expect to continue to, particularly as we layer in HOA. Moving also, though, is something that we have put a lot of energy into, to be able to help consumers with really any type of move, whether it's just labor-only, whether it's coordinating a full-service move for them, including the trucks or storage units. And so we are seeing very strong growth with that particular service also.

Matt, we've got a question here from an investor. What is baked into guidance in terms of revenue synergies in contribution from HOA and V12?

Basically, because our entities operate decentralized, we did not bake into our guidance any synergies from either HOA or V12 in 2021. We do expect that as the interaction on our platform that we will be able to accelerate the growth of both of those companies through 2022 and beyond.

Marty, we have a question here from Ryan Tomasello from KBW. Can you discuss the M&A pipeline in more detail? What types of deals are most attractive, accretive to the Porch platform? Do you expect continued investment in the InsurTech space?

Thanks, Ryan. I'll take it. Yes. So there are -- yes, we're excited about the pipeline. Obviously, nothing to announce here today, but we're making good progress we've talked about in the past. And there's 5 primary areas that we are focused on. So vertical software companies in our existing verticals. Vertical software companies in new adjacent verticals in the home services space, particularly where there's latent value in the demand and the data that our platform can unlock, that can't be unlocked independently. Three is, yes, in the InsurTech and insurance category. Obviously, we've made certain investments there, but there's just this massive opportunity for us, given how many homebuyers we have access to very early and given all of this property data that we have. And so there are things we'll continue to look at there. Layering in new services into this reoccurring flow of homebuyers that we have is a very natural thing for us to do just to be able to further monetize and further delight these consumers. And so there's new services that we could look at, and we could build that organically or we could look at M&A. And then lastly, mover marketing. V12 is obviously the anchor of what we're doing there, but there could be other tuck-ins for us.

Matt, follow-up from Daniel Kurnos from Benchmark. How should we think about seasonality for the entire company? Or how should we think about the revenue cadence over the year?

We gave a snapshot in terms of Q1, and we can certainly provide -- obviously, the [historics] are out there in terms of each quarter in the percentage of revenue. But generally Q1, we see it again at 15% to 20% of full year revenue, depending if you look at 2019 or 2020. Q4 is also a bit lower. As we continue to ramp up the recurring revenues like with insurance, if that's growing or like what we're doing in mover marketing, that seasonality will continue to slow down or be slightly depressed overall across the year. But that's what we've seen in the past. So Q2 and Q3 are the strongest quarters for us each year.

Matt, we've got a question from an investor. How do you think about who to compare 4Q?

So -- well, there's a few different things I'd probably comment on there. Sometimes I still talk to investors occasionally and get questions on, are we -- how are you like one of the home services marketplaces? And I just still shake my head because, I mean, I've not done a good enough job, making sure people really understand what we are, which is, again, a vertical software company focused on certain key services like insurance. I will say that, that is getting less and less versus 9 months ago when we started this process, taking the company public.

But our peers are other vertical software companies. There's a variety of companies that are similar to us. Certainly, the vertical software companies that monetize with SaaS fees and transactions. When we launched that model 5-plus years ago, fewer number of software companies had layered on transaction monetization. You can see in other industries, that trend is happening. And you can compare us to these vertical software companies, and there's a huge gap in value and multiples versus where we are in vertical software companies. But if you look at the software companies that monetize with SaaS fees and transactions, there's even a bigger gap.

I think the other set of things to look at is just in the InsurTech space, obviously, we're starting to provide and we'll continue to provide some of the metrics and some of the visibility into where our InsurTech platform is. $270 million of gross written premium, 59% gross loss ratio. I mean it just stands out from the pack, candidly. And imagine if those companies had CAC-free demand or had this reoccurring flow of data that nobody else has about properties, it's just tremendously and very durably unique. So I think they're the other set of companies to compare us to.

Thanks, Matt. Question from Ken Wong from Guggenheim. Previously projected an approximately $12 million of headwind from COVID in 2020. With year now completed, any updates on the potential pandemic impact in 2020? And how are you thinking about timing of any reversal of that headwind?

So yes, most of that headwind. Yes, we think that is about right in terms of what the total impact was. And I think the vast majority of that was in Q2. There's certain graphs that we've provided previously, just showing how volumes of home sales and transactions fell off a cliff. There was really right around kind of mid- to late-March and then had fully recovered -- bottomed by middle of April and it fully recovered by the end of June. So that period of time was where it was the biggest impact.

But like Matthew had talked about, we did continue to see impacts with companies, especially kind of small (inaudible) companies that just kept their businesses on pause, understandably. But we don't generate, obviously, the B2B SaaS fees from those companies when they're not operating. So it has been great here in Q1 to see what we would have expected, seeing those metrics really bounce back and those folks coming back online. But that is about right in terms of the impact.

Matt, a follow-up question from Mike Grondahl. Existing home sales remain robust. How do we know Porch is getting its fair share?

Well, I think, Mike, there's a few things you will be able to look at. Obviously, we'll provide and continue to provide just full year guidance and then some of the underlying metrics, both number of companies and the revenue we're generating per company and then what we're seeing in terms of monetized services and the revenue per monetized service, and that will be able to give you a sense for where we are. We'll occasionally continue to provide an update into just the percentages of home inspections that we're continuing to see.

The last public metric we provided there was 28% of all home inspections running through our software platform. And throughout the year, we'll do a deep dive or 2 in different parts of our business to really go in more deeply for investors and analysts, and we'll be able to give a deeper look at some of those things. But I'll say what the numbers are clearly showing is that we're getting certainly more than our fair share and that it continues to grow. And we expect it will continue to, given our unit economics and our ability to continue to expand the number of companies, and then through that, access to homebuyers.

Follow-up from Jason Kreyer, Craig-Hallum. Can you give more clarity on what segments of the business are driving early outperformance and driving the increasing guidance for the year?

Yes. The -- it's not one thing specifically. Again, I would -- if you're looking at segments, Jason, I would answer it the same way, which is there's 2 ways to break it up, looking at verticals like home inspection, moving, et cetera, and where we're seeing more penetration. Again, what we're seeing is good growth across these -- again, home inspection is probably the place where it's the strongest performance just because of our deep penetration there and the moats that we have and the unit economics allows us to just invest very aggressively. But we're seeing good performance across each of those verticals we sell software to. On the back end in terms of where we deliver services, insurance, again, is the fastest growing. Moving would be the second fastest growing. Security and TV are good services for us, but insurance and moving would be the 2 largest [impacts].

Now we've got a question from an investor. You previously mentioned you believe peers are valued at higher multiples. Why do you believe Porch is valued at a lower multiple currently?

Well, Marty, I'll take this one maybe, but chime in if you have any other thoughts. Look, I think that there's pros and cons of going public through SPAC. For us, one of the big pros is we were able to get the company public a full year earlier than we could have if we had gone public through a traditional IPO. And the math made great sense because, well, we were able to get those 4 acquisitions that we announced in January, which are really important to our plan and just continuing to be able to be aggressive. We're certainly able to make choices that are the right choices to make as a public company. And so we're excited about that.

But on the flip side, you enter into the public markets, and we didn't have built-in analyst support. And there's a lot of just the awareness in the marketing. And look, I think the reality is, it all takes care of itself. That's the reality. If we continue to invest and execute, it takes care of itself. I do think that some investors are waiting just to see to kind of get a glimpse into Q1 because, obviously, we've stated that the business is going to grow very quickly here in 2021, and just being able to see that the business is growing 85% year-over-year in Q1 or, again, normalized for getting the acquisitions [generate for us] 170% year-over-year. And so I think that can certainly help just to give people that confidence and conviction that the model and the engine is working really well.

We have a follow-up from Ben at Cantor. As a follow-up, it seems like Porch is a long runway to grow the number of home inspections, [manage and support] inspection software. Can you walk us through your thoughts on growing your share in the home inspection market and the value these relationships bring to the platform?

Sure. I can take that one. First of all, our inspection relationships are very valuable. As we've mentioned before, the LTV to CAC is incredibly strong in that part of our business. I mean the great thing is we have a very strong footprint today in the inspection industry, and that's really due to our industry-leading software platform. We continue to make investments this year. We're making investment in sales, marketing, product and M&A, such as the PalmTech report writer. And we can do that because we have the strong unit economics. We have a great position to build from. And as you mentioned, we do still see a lot of growth and opportunity in that part of our business, both in the number of companies that we can bring on board and how much transaction revenue we can generate from those companies. So I'd say we're very excited about the growth prospects of that part of our business.

I would also just say, it's hard -- we have a value proposition that's just hard to compete with when you go out and say, "Hey, it's best-in-class software. You can use the core software for free. We're going to be able to provide you a solution that you can give to your consumers to help make them move easy and raise your NPS by 20 points. And, oh, by the way, we can be able to put jobs back on your calendar because we work across all these different industries."

And not only that, not even that they're paying money for the core software, they're worth dramatically more to us than anybody else that Matthew was talking about, where we can then go to market through a variety of tactics. So that's the engine that we can build on that flywheel. We can build that we've demonstrated across a number of different industries. But obviously, we're furthest along in the home inspection space.

Question from an investor. When did V12, iRoofing and PalmTech close?

Middle of January.

Yes. iRoofing closed on December 31, got it in right at the end of the year there. And then V12 closed on January 12. The HOA deal was also announced on January 13. And you asked about PalmTech, was October 20.

Follow-up from Jason Helfstein at Oppenheimer. You commented at a recent conference, expect revenue growth of 8% to 9% versus 12% Q4. How would you compare what you're seeing for monetized services in Q4 versus Q1 of 2021?

Yes. Thanks for the question. I'm trying to get a sense for what to expect for other people. The -- well, I mean, you can look at certainly the overall growth rates. We haven't provided, obviously, that particular metric yet, but clearly, we're seeing very strong growth here through Q1 across a number of metrics. So more to come, obviously. We'll be announcing Q1 and giving all the details here in short 6 weeks or so. But -- so we'll give you the full visibility. But clearly, you can just kind of extrapolate from the revenue growth that we're seeing. We're seeing goodness in the number of companies, revenue per company and then kind of the underlying transaction details.

We've got a question from [Robert Harrington], Cantor. Congratulations on a superb quarter and fantastic enhancements to your balance sheet. Obviously, HOA is the bigger deal of the 4 recent acquisitions. Looking forward from an operational perspective. What is your willingness to do further M&A during 2021? How should we think about M&A with Porch Group over the next 1 to 2 years?

Yes. We just think we are going to continue to be active where the deals make sense. We're certainly not going to force anything, but where it's a strategic fit, where it's accretive on a stand-alone basis from where we believe it can -- there's a lot of synergies like we've been able to show through past acquisitions, where we can dramatically accelerate the growth of the business, it just makes great sense for our shareholders. We'll always balance, like I mentioned before, deploying capital against M&A versus organic levers, but we've proven that M&A can be very, very accretive for us. And so we'll continue to look where there's good fits. The reality is that some of these businesses are just worth more as part of Porch than it is on a stand-alone basis, which is how we can do deals we've done in the past.

So Robert, I'd say, yes, we would expect to continue to be active here as we go in 2021, and I would say ongoing, 2022, if you're looking over a couple of year period and, frankly, ongoing. I just think our platform naturally allows us to be able to look at M&A as one of the additional growth levers of the business. And so as long as we continue to see that being true, which I can't see how that would change, we'll continue to be active there. It's muscle that we've built in our company. We've got strong people and capabilities there. And so it's one of those 6 growth levers that we talked about at the beginning.

We've got a question from an investor regarding HOA. Why does HOA generate a 2x higher commission than your in-house agency?

So it just depends on where you play in the value chain for insurance. So as Matthew had mentioned previously, before December of 2019, we were monetizing insurance on a per-lead or per-quote basis, and then we launched our in-house insurance agency, and we [obtained] license across all 50 states, where we could be able to quote and sell insurance to a consumer. And here, we make generally around 13% to 14% commissions on average, that's 13% to 14% of the total premium. And that's year 1 and ongoing each year, and that's how we've been operating.

HOA is one level deeper in the value chain. They have both an MGA entity, or called Managing General Agent, as well as a carrier entity. That allows them to be able to be deeper, where it's their own insurance product. Right now we sell third-party carrier insurance products. One thing we really like about HOA is, they push virtually all, the vast majority of that risk out to third-party reinsurers, but they're able to get meaningfully higher commissions, around 2x higher commissions than Porch gets today as an agency. So just playing deeper in the value chain is a really meaningful opportunity for us.

A couple of last notes on it. HOA has already been a carrier and a partner of ours in our agency panel. So we already see in the states that it operates how much business we're driving to HOA, and it's substantial. It's very, very competitive. Like we looked at lots of different options in the insurance space where M&A makes sense, and it was just a great, great fit for us. So we already have great visibility into the performance.

As Matthew talked about, one of the big opportunities is now to take HOA, which is only in 6 states today and to be able to expand it across many more states. And that will be a process, but as we do it, that will just be really now an additional growth lever for us where we can be able to generate meaningfully more commissions, again, in year 1 and ongoing each year. So meaningfully higher recurring revenue per consumer as we expand the number of states that they're in.

We've got time for maybe 1 or 2 more questions. Can you please talk about how cookies going to be able to impact the V12 business? Separately, how does the rising mortgage rate environment impact your business?

I can take the first one and also hit on the IFDA question. So first thing is, V12's reliance on mobile data, app or SDK, is minimal, and that's because we get data from multiple sources, omni-channel, and mobile is a small part of the total. As it relates to cookies, V12 has cookie-less clusters that use data science. And so they're actually able to identify identity without cookies. And so there's certainly -- from a competitive scenario, there could be some benefit to us over time.

Of that, of course, IFDA is a changing landscape around privacy policy. We're always evaluating the supply of third-party data. V12 has always been successful at navigating those changes. There's been a lot of changes recently. And they're able to keep their third-party data sets flowing because they use multiple services of data. And so we'll continue to watch that landscape very closely and make sure we're set up to support our customers.

Okay. Question from an investor. Do you see any competitors trying to replicate your vertical software plus marketplace model?

No is a short answer. I mean, I would say, there's a variety of vertical software companies that are layering in transactions and other markets that are out there that we think are great peers. But no, Porch is really unique in the home space.

So we've got time for about one more question, Matt. Any update on progress on the customer paying for SaaS, for transaction and Customer Access? And any update on where SaaS pricing might be tweaked?

Yes. Two comments there. So we will provide updates -- just qualitative updates as we go. It's not specific public metrics that we're reporting on each quarter. I will say that we're getting better and better at being able to generate revenue through both transactions and B2B SaaS fees. And we've talked about this. We're layering in more modules or tools to be able to monetize in both ways, which really is the goal. Obviously, the priority is the transaction monetization, given such deeper pockets and such larger TAMs. But ideally, we can monetize in both ways.

We've talked about how we could increase the price of the B2B SaaS fees for the core software. That's something for some of our businesses that it is in the road map for this year. It is the right thing to let the pandemic get behind us. We don't want to be doing that still in the middle of the pandemic. But assuming things continue to normalize here in the country and the world, that is something that's on their list of initiatives here for this year.

Thanks, Matt. That's all the time we have for Q&A. I'll turn it back over to Matt for closing remarks.

Well, I just want to thank folks for attending. I mean it's -- as we talked about, it's been a great quarter. We're 3 months or so into being a public company, but I think you can start to get a sense for how rapidly we're going to move, how aggressive we're going to be in our ambitions to build something really big and just in our ability to execute. We have a very strong team. I'm excited to be able to introduce you to more of that team as we go throughout the year. Some of the folks that lead our different divisions are incredibly strong. And I think they will continue to provide great confidence. But we feel very good about how we're set up around the growth for this year and how we're set up strategically with our deep competitive moats for building something very big for the long term. With that, we will end the call. Thank you very much and look forward to follow-up conversations.