Acquisition

Sep 9, 2021

Good afternoon, everyone, and thank you for participating in today's Porch Group Business Update and M and A Conference Call. Joining us today are Porch Group's Founder, CEO, Chairman, Marty Heimigner, Porch Group's CFO Adam Kornick, President of Porch Group's InsurTech Division Malcolm Connor, VP, Group General Manager of Porch Group's Home Services Division Marcus Linden, CEO of CSE Insurance I'm Walter Reddy, Head of Investor Relations for Porch. 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, including the acquisitions we will discuss today. Forward looking statements are inherently subject to risks, uncertainties and assumptions, and they are not guarantees of future performance. You should not put undue reliance on these statements. You should understand that such forward looking statements involve risks and uncertainties, including 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 will be available on the SEC's website and may cause actual results or performance to differ materially from those indicated by such statements. Porsche is under no obligation and expressly disclaims any obligation to update, alter or otherwise revise any forward looking statement, whether as a result of changed circumstances, new information, future events or otherwise, except as required by law. In today's remarks, we also refer to certain non GAAP financial measures. Definitions of these non GAAP financial measures are available in the legal disclaimers found on Slide 3 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 after the conclusion of the presentation on the Investor Relations portion of Porch's website atporchgroup.com. For those of you that would like to submit a question during today's presentation, please log in to the webinar and submit it through the chat function on the Zoom platform. Management will do its best to take all questions within the allotted time. Porch Group has also made available a slide presentation that will follow along with the presenters' commentary. The presentation can be found on the company's website. And with that, let me turn it over to Matt Ehrlichman, CEO, Chairman and Founder of Porch Group. Matt? Thanks, Walter. I appreciate it. It's great to be here with you guys. Excited to talk to you today certainly about some exciting updates at Porch. Our purpose here is to build a truly great enduring company that becomes a category winner of making the home simple. We're attacking one of the largest market opportunities with a unique strategy. Today, we're announcing 2 exciting acquisitions, which strengthen our platform and further increase our already large addressable market. These acquisitions are also driving an increased 2021 revenue outlook and add to our already exciting 2022, both of which Marty will cover shortly. So, the first acquisition we're announcing accelerates our strategy and expansion of our InsurTech division. We've just signed the definitive agreements to acquire CSE Insurance Group, or CSE, from Covea, a large French mutual insurer. This expands our reach as an insurance carrier, most notably in the key state of California and by adding new insurance products such as auto and umbrella. Like Homeowners of America or HOA, we believe CSE will be an excellent fit and a business that's going to accelerate as part of Porch. Over the last 2 years, its new leadership team has already begun a transition to position the company for profitable growth. CSE wrote approximately $130,000,000 of gross written premium the trailing 12 months ending Q1 2021. As we move CSE under Porch ownership, we expect to adjust the reinsurance coverage in order to be in line with our capital light strategy that we run. This acquisition does require regulatory approval to close, and we anticipate currently a Q222 closing. Secondly, as you can see on this slide, we've also just completed the acquisition of American Home Protect, or AHP, which is a whole home warranty provider. We have talked previously about how offering warranties to our large base of homebuyers will be a natural and exciting fit, particularly given the unique data we know about properties, an example being the make, model, serial numbers of appliances. This can help us to price more effectively over time. HP has a footprint across much of the United States, And the trailing 12 month revenues have been $12,000,000 as of Q2 2021. With Porch's unique Early access to movers, we believe AHP will be poised for future growth as part of our company. So with the geographic and product expansion of our insurance business Along now with the ability to offer warranties to consumers, Porch is uniquely positioned and I'm really excited how we can help We provide a whole home protection for our customers. Before we dig in more deeply into these acquisitions, I do want to take a few here to provide a quick strategy refresh for those that are newer to our business. We're excited for these announcements as it provides a great catalyst and moment with our upcoming Q3 results to provide more visibility into what will be our 2 core segments, vertical software and insurance, insurance which will include our carrier, MGA, agency and now warranty revenue. We do believe I firmly believe that providing this additional visibility will make it simpler for investors to understand our business and benchmark each segment to respective software and InsurTech peers. And given how we're performing and how we compare, We believe this can be very beneficial. As you see here on Slide 6, as part of this, our strategy is simple and clear. We provide software and services to key home service companies in high value verticals such as home inspection, title, moving and roofing to help these companies grow. By doing so, we generate strong B2B software revenues as well as gain low cost and early access to homebuyers as well as unique property data. From this, we strive to generate consistent B2B2C Recurring consumer subscription revenues by helping customers facilitate the purchase of important services such as insurance and now warranty. Here on Slide 7, our priority supports are consistent with what they've been and are clear. Number 1 is to sell software and additional modules to more companies where we become deeply embedded. 2 is to have more of these companies provide access to their consumers, which leads to 3 providing more services to these consumers. As we help with more services, the consumer is happier with our experience, helping companies like home inspectors to look good. 4, we focus on insurance as a managing general agent, full stack carrier and agency and now offer additional protection products such as home warranty. In all of these products, we can leverage our unique customer acquisition and property data advantages. 5, we're bringing in brands and advertisers to connect with homebuyers earlier. And lastly, we used strategic M and A to continue to expand our platform such as we're doing today with CSE and AHP. On Slide 8, we can see where the flywheel begins and at core of what we are, which is providing home service providers quality software solutions to help them run their business more effectively and efficiently and to help them drive growth. In these fragmented markets where we operate, we're a leading provider of solutions to small and medium sized businesses such as inspectors, where our last reported metrics have been beat 28% of all inspections in the U. S. Being managed through our software title companies with more than 30% while U. S. Home purchases through our software now, movers and more. So we continue to layer in more software modules for these companies. And I want to stress that, that these companies continue to pay us stronger B2B SaaS fees. We layer in more of these software modules, which continues to grow that and we expect will continue to grow our B2B software revenue over time. In addition to these SaaS fees, as you know, we also generate transactional revenues by helping their consumers with key services such as insurance. Because of this SaaS plus transaction monetization engine, these companies are very valuable to us, creating strong unit economics that allow us to continue to add more companies. Thus, our go to market to reach consumers is not through expensive and undifferentiated direct to consumer marketing, but by selling software to companies who then introduce us to their consumers. This thing gives us this low cost or no cost early access to homebuyers as the home inspector and title company, in particular, are engaged right when the home buying process begins. So based on some questions we've gotten, let's just take a moment. How does this work in practice? An offer on a home is made. It's accepted and almost always contingent on a home inspection. An inspector typically spends 3 or 4 hours in the home documenting everything. So now instead of providing this 40 to 60 page report to a stressed out homebuyer and saying good luck, Inspector is able to also provide a free porch concierge solution to facilitate the move process. So imagine the consumer as a CEO getting a corporate relocation where everything is just handled for them. Porsche has built out that technology platform to allow these consumers to set all their key and high value services through us, insurance, moving, TV, Internet, security, and now we'll introduce warranty. So, they're not sold off as a lead. They don't get called by other companies. We help manage and make that moving process very simple for them. In addition to early insights in who's buying a home, we also get unique property data that can help us price insurance warranty products more effectively than others as we look forward. And so just imagine how powerful that is for insurance pricing to know if there's a massive water risk a home such as an old hot water system located upstairs. Or imagine if knowing if the HVAC system is old and going to be upgraded or replaced shortly. Lowering the price for good risk and raising the price for bad risk will drive significant growth, we believe, and margin advantages long term. More recently, with our move into providing software to title companies, we now also have the visibility into disbursements for large portion U. S. Home purchases, Knowing which insurance company a consumer chose and what they're paying or if they purchased a warranty, that's going to be very valuable for us over time. Now let's dive into M and A and the announcements from today. Before I turn over to my team, a moment on our M and A engine and process. We've gotten some questions on this and thought it might be helpful just to take one slide here. So here on Slide 12, as we communicated previously, we think about M and A somewhat akin to enterprise sales. We maintain a pipeline of companies who should grow faster as part of Porch. We have a very strong team and credit to them for the announcements today, but a strong team and process for evaluating and executing opportunities. We organize our company in a decentralized operating model that doesn't require deep integration of acquisitions. We integrate only by layering transactional monetization onto software companies and our data platform, as well as the key reporting functions such as finance, of course. Our track record is consistent. It's strong. It's very clear. We've acquired companies at good and fair valuations with an average revenue multiple now of 2.3x revenue multiple in 2021. So the key then for us, of course, is to accelerate growth of these businesses, which we have done. So on average, These businesses have seen 7% have been at a 7% annualized growth rate pre Porch, and we've been able to accelerate them to 29% in the 1st year post close. So we're certainly very strong about that early performance and certainly so much ahead for us. Our M and A pipeline does remain strong, I would note, in addition to these two acquisitions. And so we'll continue to make sure we are well capitalized to take advantage of the opportunities that are in front of us. Okay. So with that, I'd like to introduce you to the business leaders responsible for insurance and warranty. And when the acquisition has closed, a new addition to the team, Marcus Linden, the CEO of CSE Insurance. So first, Adam Kornick, who leads Porch's InsurTech division, will introduce CSE. And Marcus? Thanks, Matt. I'm excited to be speaking with all of them today. As Some of you have already met me know I've spent almost 2 decades at property and casualty insurance forms. Most recently prior to ports, I was the chief data technologist at Allstate. Prior to that, I was the chief analytics officer at Veeva. And prior to that, I spent about a decade at Progressive and product leading large call center operations. And finally, as an SVP of big data and analytics with our team, I've been working on the acquisition that mentioned CSE. I'm very excited today to share how this will accelerate our strategy and specifically our geographic and product expansion. So with that, I'd like to introduce Marcus Linden, CSE's CEO. Marcus has a proven track record in leading successful insurance businesses and particularly in a complex State of California. Very excited to welcome you Marcus and the team's approach as soon as we receive regulatory approval and officially close. Why don't you take us to Slide 14 and give an introduction to CEC? Sure. Thanks, Adam and Matt. It's great to be with you today to this exciting transaction and all we believe we can accomplish together. And I speak for the entire CSC team when I say we're looking very forward the next phase of CSC's journey as a porch company. As a little background on myself, prior to joining CSC as the CEO in 2018, I led Countrywide Product Management and Distribution at CSAA Insurance, managing a $4,000,000,000 auto and home insurance P and L covering 23 states, in California. I began my insurance career at Progressive Insurance after working as a strategy consultant with Bain and Company. And I'd like to give a brief overview of the CSE organization and hit on a few areas where we see opportunities to take the company to the next level together. CSE was founded over 70 years ago in 1949 to provide insurance at equitable rates to clients and this remains true today. In every way, we strive to do right by customers and protect them with well made insurance products. Today, we write business in California, Arizona, Nevada and Utah through over 300 independent agencies who have an average of 17 years writing insurance with CSE. The bulk of our business is in California, which is a massive $40,000,000,000 home and auto insurance market, where we have significant experience and data writing property, auto and umbrella products. As of the Q1 of 21, we had about $130,000,000 of gross written premium on a trailing 12 months basis and more than 100,000 policies in force. The management team and I joined CSE over the past 2 to 3 years and together we've made significant changes and improvements in pricing and operations. We've managed the portfolio to focus on key target areas and reduced exposure to wildfire and improved profitability. This has put CSE in a strong position for 2021 results and accelerated future growth as part of Porch. And under Porch, we look forward to furthering the transition to a capital light model, plugging into the demand stream of movers to whom Porch has early access, while continuing our commitment to policyholders. Adam, you're on mute. Yes, I was. I was going to say thanks, Marcus. It's great to get a chance to work together again. So a few things I'd like to know. First, we shift we expect to shift CSEs at the similar capital light reinsurance model we operate today with Homeowners America. And as we do so, we would expect CSE to generate approximately 25,000,000 and higher margin annualized revenue. Given the Q2 2022 expect to close, we anticipate approximately $15,000,000 revenue impact to 22 and to run the business at approximately breaking. 2nd, the new CSE management team has done a tremendous job reducing wildfire risk in the last 2 years from February 2019 to February 2021, CSEs have reduced policies in the highest risk zones by 80%. We'll be working with CS and E to continuing, continuing to focus on the large majority of California, but it is not affected by 5. 3rd, we consider how long it would have taken to expand organically into key states such as California and likely we have taken at least 2 years. For an attractive purchase price, CEC allows us to rapidly move into additional key states with a base of historical data, capabilities and with strong genes available. In addition, we get the benefits that CSC also has audio and umbrella products that we will be able to layer into our portfolio over time in order to offer bundled insurance solutions for consumers with this preference. Lastly, I believe the percentages with porch are obvious, but as we have seen with HOA, we expect to be able to accelerate the growth of CSE with Portia's early access to homebuyers. Further, as we integrate our unique data platform into our underwriting capabilities, we'll be able to price risk more accurately across our entire insurance division. Finally, by combining purchasing across HOA and CSC by increasing our scale in insurance and diversifying geographies, we expect to achieve group cost savings with XOL reinsurance, Matt. Oh, and before I turn back over to Matt, I do want to take the opportunity to highlight what we mean, thanks, when we talk about our capital light approach to insurance. Our HOA insurance carrier and MGA operates a capital light model that includes seeding the vast majority of premiums to third party reinsurance. In 2020, we retained only 7.9% of premiums after taking into account the ceding of our approximately 90% quota share and the excess of loss program. As you can see, this is significantly less than the traditional national and regional carriers and even below InsurTech teams. This means that we not only have lower capital requirements allowing us to scale the business rapidly, but that our revenues are higher margin and that we have lower variability in our costs. Given our historically very strong gross loss ratios, We have strong relationships with the insurers as we provide them profitable business as part of this relationship. For the small portion of the premiums we retain, The excess of loss of insurance reduces our exposure meaningfully. As an example, generally we have a $2,000,000 attachment or deductible per major revenue. As I've mentioned, we intend to migrate CSE to a capital light insurance model that aligns with the approach we've all seen with Asia. Now I'll give it back to you. That's great. Thanks, guys. And Marcus, welcome aboard here soon. We're excited to get through the regulatory approval and get cranking. We'd like to introduce you now to one of our business unit leaders, Malcolm Connor. Malcolm has a deep background in growing warranty businesses, having been the President of American Water Resources, or AWR, a home warranty company for 5 years. Under Malcolm's leadership, we're excited to be expanding our capabilities in the warranty space through the acquisition of AHP. So Malcolm, if you could, why don't you take a moment to my introduction and then take us through the AHP business. Paul? Paul Yeager Thanks, Matt, and happy to. It's really good to be with you all today, talking about this exciting step for Porch. By way of further introduction, I've spent more than 15 years managing various businesses and companies ranging from start up to over 400,000,000 and revenues. I've spent the last decade specifically in the home services market. Before joining Porch, I was CEO of a PropTech startup. And prior to that, as Matt said, I spent 5 years as President of AWR, a home warranty company. There we were able to scale the home warranty into one of the larger warranty companies in the country. I joined Porch for the opportunity to significantly scale home service businesses by leveraging the company's immense assets. And I've been very excited about getting to today when we get to now Build a large and profitable home warranty company. Let's take a look at HP on Slide 18. So American Home Protect is a skilled provider with an experienced team of marketing, sales, and claims handling professionals. With a nationwide presence in 45 states, HP will be able to plug in the demand stream of Porch for early access customers. So today, Porch does not offer home warranties to its homebuyers, but it is a natural product for consumers to purchase as they are preparing for a new home. In addition to getting low cost access to demand, I'm particularly excited about how We can reinvent pricing in the home warranty industry over time. Today, prices of warranties are often static and not very sophisticated, primarily because of the lack of or little data that's available. But let's see, if we are able to lower prices when appliances are newer and increased prices, let's say, when an HVAC system is about to go bad. This will be better for consumers broadly and certainly an advantage for us. The last thing I'll note here is how we work together closely with our insurance products. We believe together we can fully protect a home And we're excited to start testing new ways to enhance the customer experience and cross sell a lot more effectively. So, AHP is currently a $12,000,000 recurring revenue business. From close through the balance of this year, we expect HP to add approximately $3,500,000 in revenues To Porch's 2021 P and L, HP operated at approximately 2,500,000 negative EBITDA loss in 2020. So there will be a slight incremental loss during the balance of 2021. We do expect to operate the business at approximately breakeven in 2022. So AHP has an effective product and pricing model in which they provide a 3 year warranty product that consumers pay over the first 18 months, which moves cash flow generation forward and lowers, attrition over time. We will be moving quickly to enhance and differentiate the value proposition we can offer to warranty customers. By adding certain things, covered items, and certain services, Porch can execute at a low cost. For example, if our warranty provides a dryer vent cleaning, gutter cleaning, or TV melting, For only the cost of the $65 deductible in the policy, this will help consumers get more use and value from this subscription. The reality is that given Portia's low cost demand of homebuyers and our unique data, We should now be able to build a large and profitable warranty business. So I'm excited to get going and demonstrate really strong performance in 2022 years to come. With that, I'll turn it back over to Matt. Right on, Malcolm. Thanks. I'm excited about it too. So to wrap this section and the M and A announcement in a few slides, Clearly, we're excited about how these acquisitions are going to further our ability to protect the home fully, and through this to become the partner for the home. So you can see here, we now protect the full home with bundled solutions with Autumn and Umbrella and insurance and now help to secure the inside of the home, including appliances and other systems. There's more that we'll be able to do as we continue to look ahead. Turning to Slide 21. If you think back to the company's flywheel, it's clear these two acquisitions fit perfectly and will experience strong growth by, as we mentioned, getting low cost access to homebuyers and consumers who are ready to purchase insurance and warranties by being able to utilize unique property data to offer high value products with more effective pricing over time, to be able by being able to increase the value proposition to the end consumers through fulfillment of service such as dryer vent cleaning or gutter cleanings at low prices. And then there's significant room to grow geographic expansion as well. And every time we open up a new state, consumers become more valuable to us, which in turn makes our software companies more valuable. And thus further improves our unit economics of our B2B software sales go to market. I'll wrap with the terms of the deals and then can quickly turn it over to Marty. But both these deals we believe are very attractive for our As Slide 22 here states, we're acquiring CSE for $48,600,000 of cash at closing, which again is expected in Q2 2022. So this is less than a 2x revenue multiple after the full conversion to that capital light operating model that Adam had discussed. It also equates to a 0.6 ex multiple statutory capital and surplus as of year end 2020. So thus, CSE is actually expected to be immediately and meaningfully accretive to Porch's balance sheet at close. The purchase price for AHP was $38,600,000 upfront, dollars 3,000,000 of deferred cash consideration held back and paid in 24 months and $4,250,000 of transaction expense to key employees. So, this is approximately 3x revenue multiple based on the $15,000,000 in pre synergy revenue that's anticipated next year or a 3.8x revenue multiple based on the trailing 12 month revenues of $12,000,000 If we look at the acquisitions together, the businesses add approximately $40,000,000 of annualized revenue. So, it represents a combined 2.4x revenue multiple that's paid. Again, given the time between signing and closing for CSE due to that regulatory approval requirement, Porsche anticipates an impact to our 2022 revenue of approximately $30,000,000 combined next year. And again, both businesses we expect to operate at approximately breakeven in 2022. Independently, both are low or slow growth companies. But as we've demonstrated with other acquisitions, We certainly expect to show meaningful acceleration in the revenue growth. And so now we do believe these acquisitions will align with our long term margin targets are certainly they're synergistic and will be highly accretive for our shareholders. So Marty, if you could then update on our revised 2021 guidance, factoring in only AHP, obviously, given CSC doesn't close until 2022. Thanks, Matt. We just released our Q2 earnings 3 weeks ago, during which time we raised our guidance for the year for the 4th consecutive time since going public in December of 2020. Today, we are further increasing our 2021 revenue guidance to include the AHP acquisition, which closed this week. We are continuing to see strong performance thus far in Q3 that continues to demonstrate excellent execution by the Porch team. On Slide 24, You can see that we are raising our 2021 revenue guidance by 3,500,000 anticipate from AHP during the balance of the year. As CSE is not expected to close until Q2 next year, It has no impact on our 2021 guidance. As Matt mentioned, together with both CSC and AHP, We expect an additional $30,000,000 revenue impact in 2022 based on CSC's anticipated close date. On an annualized basis, if CSE would have closed on January 1, we would have anticipated $40,000,000 of revenue for the 2022 year. So the current 2021 revenue guidance is now $187,500,000 which is 159% year over year growth. We are also reiterating our revenue less cost of revenue margin percentage of 72% and contribution margin percentage of 40% guidance for 2021. As Malcolm had mentioned, AHP was a negative 2 point $5,000,000 EBITDA business in 2020 and we are adjusting our 2021 adjusted EBITDA margin guide to negative 14% to negative 16% to account for the incremental loss in the back 4 months of this year. As Matt mentioned, we expect both businesses to operate at approximately breakeven adjusted EBITDA in 2022 with similar underlying margins as the Porch business. As Matt noted, our balance sheet will only be marginally impacted by these two given the excess and surplus we received from CSE as part of the acquisition terms. Now I'll turn it back to Matt. Thanks, Marty. So again, I'll wrap here. As we layer in a new service and warranty and as we continue to expand new verticals, we are growing our already massive TAM to now approximately $325,000,000,000 We mentioned to you guys before, but it bears repeating that one of our core values is to be ambitious. These announcements today in my mind are a testament to the opportunity ahead and our focus on moving rapidly and smartly, of course, but moving rapidly to build a very large company, all for the purpose of making a home truly simple. So we're excited about these acquisitions for sure. And I will say, we are just getting started. So with that, Walter, you please go ahead and open up the call for questions. That would be great. Thanks, Matt. As we have folks joining, the first question would come from John Campbell from Stephens. Sorry about that. Can you guys hear me okay? Hey, John. How are you doing? Doing well. Doing well. Congrats on acquisitions. These look to be very, important strategic deals. So nice work there. I just wanted to touch on maybe it's a little early for this, but the high level kind of impact to the main KPIs. If you can maybe talk to kind of how this influences the company served and then the revenue per modified service? Yes. It really won't impact the number of companies served that neither of these are software companies here. These are both improving and increasing the monetization that we can get both per consumer and therefore per company. So it really wouldn't impact the number of companies served. But as we immediately now, AHP is close. So right now, we can go and start offering warranties to consumers that, you know, increases the number of monetized services and the value. These are valuable services. Obviously, it makes the companies more valuable. So it will here in an opportunistic future be able to start showing up in the revenue we can generate per company. But no, it doesn't impact the number of companies. Okay. Makes sense. And then as a follow-up to that, The home warranty play seems super exciting. It's a perfect fit for you guys, obviously. But, I don't know how much you can talk to this, but If you can maybe just talk to the average revenue per home warranty and then the 3 year home warranty product is kind of unique. If you can get any kind of sense of what that is as a percent of the mix? Malcolm, do you want to take that? You're on mute, Malcolm. Yes, sure. So, yes, in terms of sort of the percentages you asked about In terms of the 3 year, sort of pretty innovative product offering that HP has, that is actually primarily all of the warranty offerings that they're selling today, so well over 95%. Okay. And this is again maybe too far in the weeds, but any sense for how that waterfall looks, if it's broken out between the 1, 2 3 years, kind of where we sit today? Yes. We're not giving too specific information on sort of those types of details. But what we will say is that HP with the 3 year innovative offering does have very strong fundamentals. So we're really looking forward to really leveraging sort of those fundamentals as we accelerate into the home warranty market. I will give 2 more things here, John, that I think are useful and interesting. So they have innovated around this 3 year product. It does a couple of different things. So one, The consumer actually pays for that 3 year warranty product over that 1st 18 months. And so that means that the cash flows of the business versus the P and L are actually very strong just because the cash flows are front loaded. It also, therefore, obviously increases and drives really good retention if not warranty product. And so we see, like Mike Malcolm said, some really attractive things that we can be able to help scale that much further. But there are some really good bones here that are exciting for us in terms of how they've gone to market. Undoubtedly, yes. Thanks, guys. Appreciate it. Thanks, John. The next question is from Dan Kurnos from Benchmark. Great. Thanks. Long time no see you, Matt. Dan and I were in a conference earlier today. So, we were he was on a call just hours ago. So, hey, just hint, hint, we might do something in warranty. So congratulations anyway. Good deal for you guys. Couple of questions. Just first, can you just talk about, I know you don't break out by geography, but just of the magnitude of overlap you have with already the existing inspection business in California, just so we have a sense of kind of the upside there. And then as we think It's early. I mean, you're just adding these to the portfolio. And I don't want to sort of distract from the bundling opportunity, which you can get into. But you now have theoretically 3 established brands besides if you count Porch, right, with HOA and now potentially a warranty business that you're going to drive here. You've talked before about the ability to put kind of go direct to consumer and sort of expand beyond. I know the initial playbook is obviously going to be, Hey, lump us in with insurance. We've got a whole bunch of data that we can sell this to. But at what point do you start thinking about, hey, we've got a really good portfolio we can start using each of these brands to drive recognition of 1 or the other. I think that's great. Adam, why don't I take the inspection volume and brand question and then perhaps you can just take a moment on bundling and how you're thinking about the opportunity there. So our inspection, given the share that we have in the home inspection industry, and this is actually true for the most part and some of the other verticals we provide software into, we just have such share that we don't see geographic density in certain areas other than just where population centers are. And so that 28% of all inspections we talk about, That's pretty evenly distributed actually based on where there are population centers. And that's why California is important for us. And so as we've been thinking about, okay, and Adam and team has been thinking So how are we going to expand geographically? Well, some of the states, California being 1, it just would take much longer to expand into California organically, it would take a long time. And even when you are in California, you need a lot of time to build up the historical data set to be able to then be really successful in a state like that. And so that's why CSE one of the many reasons that CSE makes a lot of sense for us is because clearly, we have a lot of volume of demand in the California market just because it's such a large population center. But now we just get to go and tremendously accelerate it, given all that historical data that CSE brings along. In terms of branding, yes, we have talked about before, we're not focused on that really this year or next year. But as you just play forward and you your insurance products across the country and now warranty products across the country and to be able to offer this fully protected home, For us, it certainly can make a great deal of sense to be able to rebrand into Porch over time. And that's not even necessarily, Dan, about going and doing direct to consumer marketing. We love our go to market of selling software to companies and kind of having this deeply embedded flow of consumers at these low cost levels. So it's not really necessarily changing that. But having that brand certainly will allow us to further extend that relationship with the consumer. So as we launch an app and as we launch more services that we can help the consumer with over time, we do think there's opportunities to increase the LTV of that consumer and really be their partner for their home, which is what we talk about internally. And so yes, that is some things we'll work on here over these next several years, which we think is going to be a really meaningful, again, catalyst for just that next level of growth in the future. Adam, will you take a moment on bundling and how you're thinking about implementing that and how it can help us? Yeah, absolutely. So Matt mentioned that with CSE, we get access to California licensing capital and we get a strong team. In addition, we get an auto product to add to our platform. So now we'll use the time between the signing close to think through the exact tactical way we want to do this, But almost all homeowners in the US have a car that requires insurance. And so it's the number one product that's bundled with home insurance. And so for us, it's just a natural fit to be able to do that. And then we do that. We solve more needs. We increase retention and we just build more value for our shareholders and our customers. And I will say that one thing that we run into why it's relevant is sometimes we just straight lose being able to sell our own insurance product to the consumer because we don't we can't offer this tightly bundled offering. And so sometimes consumers just want that specifically. So the opportunity to offer that to the consumer is helpful. And then there's also a lot of data that if you offer a bundled solution, the consumer retains even that much better. And as we go forward here, we'll be able to start providing more information, especially as we break the business and show it in 2 segments. Will start providing some more metrics. But our retention rates are already exceptionally high in terms of how these consumers, these insurance customers retain. But bundling is only going to bundling is only going to help us certainly. And so if we just play ahead, that's just something we really feel like we have to be able to offer if we're going to go to the scale that we're looking to grow to. Got it. Super helpful. And based on our earlier conversation that Certainly feels like you should work on incentivizing that access switch now. Yes. Thanks, Dan. Thanks. Next question from Mike Grondahl from Northland. Hey, thanks guys and congratulations. Two questions. The first one, a little bit of a follow-up on the bundling question you just had. But can you describe the go to market strategy a little bit that you're going to have for AHP. I mean, I would assume that this is pushed through the moving concierge And it's going to be there in an email and it's going to be part of the verbal pitch That when the phone calls made to the customer, but that's one, if you could shed a little bit of light on that. And then 2, With CSC, did you break out how much of their business is property, auto and umbrella, just so we can understand those 3 buckets. Sure. I'll take the first. Adam, you can provide we're not providing full disclosure here, but provide what you can just direction Happy to, Mike. So yes, we will now be able to offer warranties to the consumers that Porch gets this early access to, these homebuyers Porch gets early access to. Both, yes, through our moving concierge. So it's another thing that we can help those consumers with. But we'll also build it into our technology, our technology partners. So build it into our moving dashboard, our moving checklist as one of the things that the consumers can do. Now right now, AHP, like most all other warranty companies, has fairly static and fairly unsophisticated pricing right now. And so there's and that's fine. That's, I would say, the norm for the industry. So that's what would be in the moving checklist today. As we begin to be able to bring in our data over time and be able to create more personalized, more sophisticated pricing, obviously, we'll be able to update what that looks like to the consumer and be able to drive that much more volume. So that's how you can think about that. Adam, if you want to take the second question? Yes, sure. So we won't give detailed info, but I think we're comfortable saying that Property is the largest share for CSE. I mean, auto was the 2nd largest. So that'd be a useful way to think about it, but that's a good way to break it down. Got it. And as you move into a little bit more auto here, do you plan on bringing any third party auto options kind of into the mix for insurance? Well, I would say that we do already. I mean, we offer our agency, right, Mike, across all 50 states. And so with that, we partner with Travelers Progressive, name it, 17 carriers, give or take. So we do it today. Okay. I thought it was just property where you were partnering with. No. We Our own product is only property, yes. Then when the customer needs help with auto, the only thing we could do right now is to be able to lean on our agency. And now once GSE closes, we'll be able to offer a more tightly, more effective bundled solution. Perfect. Okay. Thank you. You got it, Mike. Next up, Jason Kreyer from Craig Hallum. Perfect. Thank you. I'll start with a few on AHB. So can you just help understand how you go to market selling the warranty product alongside insurance? It seems like components of that could be complementary and components of that could be a little cannibalistic. So that's one. Just a second one there on if you have any data on what those attachment rates look like as far as attaching a warranty product. And then the third one, AHP having a 45 state footprint but only doing about $12,000,000 in revenue, curious if there's state concentration there or we're just talking about a product that's not really scaled up across that 45 state footprint? That's great. Malcolm, do you want to go ahead and take the first question? And then I can layer in. Yes, sure. Yes, in terms of the go to market, currently AHP is direct to consumer and we would continue that. They are in 45 states. HP is fairly new. They started operations in 2016. So, they are sort of still scaling up as they there's a lot of opportunity as they continue to sort of scale by each state and move around. Yes. And I would add, the complexity, Jason, in warranty, it's easier to be able to expand out into states. There's not the level of regulatory approval. And so they've been able to expand geographically. The opportunity where Port in some ways, it really will be helpful for ports because the constraint there is demand, right? Getting access to consumers And because we can be able to plug it in and already now have license, warranty licensability in these sets of states, That will allow us to just move that much more quickly as we can offer warranties to our customer base. In terms of data around attachment rates, no, we're brand new. And in fact, it was closed today. And so we have not tested it yet. So we don't have any data yet in terms of what we would expect for attachments. Then the last thing that you noted around how it works with insurance, I think it's an interesting question. So We think that there are unique opportunities to be able to present to the consumer not just homeowners insurance, but through that to be able to cross sell warranty, where it can be able to cover the other elements in the home that insurance doesn't yet cover, right? Or vice versa, be able to leave with warranty where customers They're looking for a warranty product and being able to say, hey, by the way, this warranty might cover X percent of the deductible of that you have insurance and if you secure this particular insurance product. So I will say we're obviously early days, but Adam and Malcolm, we're already starting to talk about, okay, how can we be able to link? How can we start our testing and our learning around how we can link those together to be able to cross sell. And at the end of the day, just provide a great solution to the consumer that makes it easy for them to purchase and make sure that their full home is protected. And we I think there are personally, I think there's lots of opportunities there to be able to really innovate around how you can link things together. One more if I can squeeze another one in. Just part of the value you're providing is you've got these massive data sets on the whole. And that's what gives you the ability to give this dynamic pricing that you're talking about. When we think about auto insurance, Just wondering if you can connect the dots there. Are there any data sets that you have right now that you can leverage? Or is that something that potentially you could acquire software capabilities that will give you guidance that's on the auto side? Adam, you want to take that? Yeah, absolutely. So auto insurance, you know, obviously is a huge market in the us and, and there are 2 things that were pointing to One is that over time, there's been a lot of research that shows a lot. We can kind of divide the pricing and the analysis of screens on with respect to insurance products into the asset and the person. And so things about the person carry over from one product to another. So whether it's an annuity life insurance, auto insurance, home insurance facts about the consumer, who is the policy holder carry over. So we'll have those and that's really valuable to them. I think the second thing I think about, Lynn, and in addition to that, we'll go out and figure out the right kind of third party data to get that's useful. The second case is to think about friction. So we have the opportunity to design an audit product that's designed around our homeowner experience. And in doing that, we can really take a lot of the friction out, right? So there are tons of facts that we can either get directly from what we already know about their homes and themselves, or we can even build our pricing models and our product flows around the things that we learn so that we can make it, Hey, Jason, we've got your home, what else help you with your auto? It's only going to take a brief amount of time because we don't need to gather all this new info from you. If you, if we can help you with a 3rd party, but then you're going to have to answer all these new questions. It's really that pricing advantage because we know the consumer. And then how can we take the friction out by building a lab? One thing I would want to make sure is taken away, Jason, that question triggers is, our strategy is not to go and try to compete head to head for pure auto and build unique pricing to go after auto. Like that is not that's not the strategy. Our strategy very much is to be that partner for the home, to lead with home and to be able to bundle when the customer wants to, right? That's clearly something that we're getting pulled into by our customers that they want that ability. And so this gives us the capabilities, the product set from lots of years experience that CSE has to be able to now at least make that available with Umbrella and with auto. But we the strategy has not changed here. These types of software that we would be going after as not software to go and create competitive advantages around auto data. It will continue to be going after other verticals in and around the home that will give us unique home data and unique access to consumers where we have this kind of fundamental CAC advantage and this fundamental underwriting, advantage for products like that. Yes. Makes sense. Great. Thank you. You bet. Thanks for the question. Next, I think we've got Ben Shirland from Cantor. Hey, guys. Thanks for taking my question. Can you give us a sense of what AHV has historically spent on customer acquisition? Just trying to get a sense of the efficiencies they could realize from Purchase CAC free marketing channels? It's a great question. I don't know if we're yet prepped to provide it then. We've not yet chosen what KPIs and data points we're going to make public. I think literally, we closed it a handful of hours ago. So we've not had that meeting yet. So it's good. We'll note it in our backlog in terms of interest there, but let us kind of huddle and decide what we're going to be able to provide as our public data points. Great. Great. And then maybe one more on the insurance acquisition. I know you mentioned you're going to transition on the more capital light model. Could you give us a sense the timeline of that is? Is there going to be a period of time, after the acquisition where you're taking more risk than you would ideally take? Yeah, we got to take, so, so we'll use, remember, it takes a fair amount of time to get regulatory approval and we'll use the time between sign and close to work with our reinsurance partners to work setting that up, essentially those contracts would be on the layer of some date we pick with them or regulatory approval. So our intent This would move as close to that as we can by using the substantial time between the signing close. So then on the first day that porch owns the entities, those treaties will come into force and we'll be seeding premium in a similar way. That will be our desire and what we'll be working towards. Okay, great. Thanks so much, guys. Thanks, Ben. One question from the audience. Can you provide a little bit more clarity on the revenue guidance increase? And is that just driven by AHP? And how should we think about that? Yes. Marty, maybe let me take one quick crack at it and then layer on top. But I just wanted to I was thinking about this actually as you're going through it, Marty. I just want to really emphasize, We in no way are signaling any weakness for Q3, Q4 or anything else. Like literally, All we've done is we've taken the guidance we just provided 3 weeks ago. We're not providing new guidance at this moment for the current quarter. Marty, As you said, things look very good. Like the team is executing really well. We simply took what we just put out 3 weeks ago, and we're layering in the revenue we anticipate from AHP through the balance of the 3.5 months that we'll have that company on our P and L for this year, which is about $3,500,000 So That's it. Nothing really changed from the guidance we provided here recently. Obviously, we're just giving you that color, which is things are going well. Like, we feel good about how we're executing and where the business is trending, certainly. But that's what happening. We took the guidance from $184,000,000 to $187,500,000 with that $3,500,000 being from AHP. Marty, anything else you'd want to add or is that you didn't cover? I think that covers it. We see strong performance in Q3 and we've got new acquisition and we've added that on top to the guidance that was really current from just 3 weeks ago. Thanks. Any more questions for the analysts? We'll go to one more question from the audience. Can you talk a little bit about the state expansion of insurance now that you're adding CSE, where that goes from here? Yeah, sure. I can talk about that, Walter. So really all it does is accelerate our strategy. So we still want to be substantially all states. We have a prioritization process of looking at the states that we want to go into based on the market attractiveness. And we feel great about our goal of 10 to 15 states within 12 months, post close at HLA. So all CSC does is give us a platform to do more and it gets us into California, which Matt already talked about is both a difficult state to get licensed and then a difficult state to operate in because of its complexity. So again, it doesn't change that ambition. It just brings it forward, particularly with respect to California. Okay. That's the final question from the audience. I'll turn it back to you, Matt. Like I said, we're just getting started. So I appreciate everybody's interest. I appreciate the questions. Welcome to the AHP team officially, who joined the Porch Group here today. And we just had our kickoff and our welcome with the CSE team and very excited to be to get the regulatory approval here and to officially close. Hopefully, in the not too distant future, we'll move as quickly as we can, certainly. But as we talked about, they're going to be, we believe, just great fits for our company. Like I mentioned, we've seen very strong performance from previous acquisitions, and I expect nothing different here with what we're announcing today. With that, again, I appreciate the interest, appreciate the support. Have a great night. Take care.