Matt Ehrlichman, Founder and CEO of Porch. (Porch group photo)

Porch Group, the Seattle-based home services software company, completed the $ 100 million acquisition of Homeowners of America Inc. on Tuesday morning, the largest transaction since going public in late 2020.

Homeowners of America, based in Irving, Texas, operates in six states but is licensed to operate in 31 states. Porch says it will use the acquisition to build its national presence in the home insurance market.

"The plan is to expand very, very aggressively in the vast majority of states," said Matt Ehrlichman, the founder and CEO of Porch, in an interview this week. At the same time, he admitted that this won't happen overnight, saying that it will "take the better part of a year to make a significant dent in Homeowners of America's expansion plans."

Porch halved its net loss in 2020 to $ 51.6 million, from $ 103 million in 2019, in financial results released last week. The company, founded in 2012, has not yet made a profit. Revenue declined to $ 73.2 million in 2020, from $ 77.6 million in 2019. Adjusted for divestments, including the sale of the online home repairs booking platform formerly known as Serviz, sales increased Revenue up 28% from $ 56 million in 2019.

After posting fourth quarter results last week, Porch raised its total revenue outlook for the current year to $ 175 million, up $ 5 million from its most recent forecast, up from a projected 140% increase 2020 corresponds to the upcoming acquisition of Homeowners of America and was not adjusted on Tuesday with the closing of the transaction.

Porch was founded in 2012 and initially focused on bringing home improvement data to consumers, but then changed its strategy to provide home service companies with enterprise resource planning (ERP) and customer relationship management (CRM) software. These companies can pay traditional license fees or give Porch access to their customers. Porch then uses this access to connect home buyers with moving companies, insurance agents, home security companies, TV / Internet companies and other service providers and to make money with transaction fees.

In the company's conference call with investors and analysts last week, Ehrlichman compared the approach to OpenTable's approach, which provides software to restaurants, gaining consumer access through these relationships, and monetizing the transactions it makes as a result of that access.

"Unlike OpenTable, however, we play in a massively larger addressable market, and where they're making around $ 1 per transaction, we can sometimes get $ 1,000 per transaction and, in the case of insurance, recurring revenue from every sale," said Ehrlichman on the call.

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In addition to that recurring revenue, insurance is a promising market for Porch as it is a required purchase for homeowners, Ehrlichman said in an interview with GeekWire this week. In addition, the company is able to use knowledge from its data on individual houses in order to better understand the risks and thus evaluate and take out insurance more effectively.

The $ 100 million acquisition of Homeowners of America included $ 21.7 million in Porch stock with the remainder in cash. It is the largest of four acquisitions Porch announced in January.

Looking ahead, the biggest business risk for Porch is to execute on its ambitious growth plans, Ehrlichman said this week. "The reality is that I feel really good about how we are set up, where we are and how business is going, but we try a lot," he said. "We're trying to keep being very aggressive."

The company employed 1,000 full-time employees and contractors as of January this year, according to its 10-K annual regulatory filing. The 10-K filing notes that in response to the COVID-19 pandemic, Porch cut some employees' salaries from March 2020 to June 2020 and took others off.

"After this period, we did not bring back certain employees on leave," the file says. "After June 2020 we allowed certain employees to earn part of their compensation instead of their salary in the form of equity."

Porch also had ambitious plans at the beginning of its history as a private company. It was forced to retreat and reinvent itself after it capped its growth in delivering home services technology directly to consumers. Not only is Porch pursuing a bigger opportunity now – the total addressable market is valued at more than $ 320 billion – but this time around, it's focusing on investing in approaches that are difficult to duplicate and offer the highest return on investment, Ehrlichman said.

"We spend time across the company making sure we only make good, thoughtful decisions," he said.

Porch went public on Nasdaq in late December and raised more than $ 322 million through a merger with PropTech Acquisition Corp., a publicly traded special purpose vehicle for acquisitions (SPAC) and a private investment by Wellington Management Company. It had raised more than $ 120 million in venture capital as a private company.

That IPO process has been a lifeline for Porch, which had $ 3.9 million in cash as of June, records indicate. The company received a forgivable $ 8.1 million loan last year. In late 2019, the recurring losses and lack of working capital caused accountants to express "significant doubts" about their going concern, according to their S-4 registration statement.

At the end of 2020, the company's cash on hand was $ 196 million according to its most recent annual financial statements, up from $ 4.1 million a year earlier. Porch shares rose 12% to $ 18.28 on last week's earnings report and closed at $ 17.62 on Monday with a market value of more than $ 1.5 billion.

source https://seapointrealtors.com/2021/07/26/porch-completes-100m-homeowners-of-america-acquisition-doubling-down-on-insurance-market/

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