Earnings Call: Q2 2021

Aug 16, 2021

Good afternoon, everyone, and thank you for participating in Porch Group's 2nd quarter 2021 conference call. My name is Walter Ruddy, Porch's new Head of Investor Relations and Treasury. Joining us today are Matt Ehrlichman, Porch Group's CEO, Chairman and Founder Marty Heinbigner, Porch Group CFO Matthew Nagel, Porch Group COO and Adam Kornick, President of Porch Group's InsurTech Division. 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 do. 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 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 items discussed under the risk factors in Porch's recent 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 and may cause actual results or performance to differ materially from those indicated by such statements. 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 will 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. Asian. Also for a reconciliation of these non GAAP financial measures to most directly comparable GAAP measures, Please refer to the tables beginning on Slide 25 of the presentation. We also refer you to such legal disclaimers for such additional information. I would like to remind everyone that this webcast will be available for replay shortly after the conclusion of this presentation on the company's website atporchgroup.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 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 website. And with that, let me turn it over to Matt Ehrlichman, CEO, Chairman and Founder of Porch Group. Matt? Thank you, Walter. Good afternoon, everybody. It's great to be here with you. Thank you for joining us for our Q2 2021 earnings conference call. Certainly, I'm excited to cover off our strong second quarter performance is executing across our business, which is driving growth and delivering value for our shareholders. Porch is performing against Our ambitious plan, including expansion of our SaaS suite into adjacent home service verticals, and I'll get into these highlights shortly. To begin, our 2nd quarter performance was excellent with $51,300,000 in Q2 revenue, which is up 2 35% year over year versus Q2 2020 adjusted for past divestitures. As compared to the previous quarter, Q1 2021, revenue almost doubled. We left Q1 at around $100,000,000 annual revenue run rate, And now we exit Q2 well north of a $200,000,000 annual revenue run rate. Marty will share more about these results shortly, But we are exceeding expectations and are again raising revenue guidance for the year. As you'll see in our KPIs, the catalysts Our outperformance are driven by our ability to sell our software to more companies, selling more software modules into these companies, Increasing our B2B software revenue, helping more of the consumers we get access to with important services for their home And the execution of our acquisition strategy. Insurance in particular is growing rapidly with us now guiding to $300,000,000 of gross written premium for the 2021 year, up from the $275,000,000 that we had guided to last quarter. To date, we are not seeing softening in our business from any macro changes, whether from the housing market slowing or COVID-nineteen variance, Which gives us confidence in the performance and growth we expect for the balance of 2021 and for the 2022 year. After completing the previously announced Homeowners of America or HOA acquisition at the start of Q2, We're also very excited to profile today our acquisition of Rhino, a SaaS company that provides software for title companies. This is an acquisition that expands our footprint into an important industry. We'll talk more about this here later on. So before I hand it over to Marty to go through our financial performance in more detail, let me first revisit our previously articulated company strategy and 2021 priorities. So looking here at Slide 5, we've been executing on our unique strategy in the home services industry. It allows us to provide software and services to home inspection, moving, roofing and now title companies to help them grow. By doing so, we generate B2B software revenues as well as gain early access to homebuyers, who we help save time, stress and money during a move. From this, we generate consistent and recurring B2B2C transactional revenues by helping customers facilitate the purchase of important services like insurance. Certainly, by now, many of you are familiar with our strategy, which has positioned us as a leading vertical software company in the massive industries we're going after. Starting from the top of Slide 6, our priorities at Porch are to 1, sell software and additional modules to more companies We're become deeply embedded. 2, have more of these companies provide access to their consumers, Which then leads to 3, providing more of these services, providing more services of all kinds to these consumers, in particular, move related services. As we help with more services, the consumer is happier with our experience, helping companies like home inspectors look good. Boro, we focus on insurance as a managing general agent, full stack carrier and agency, where 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 use strategic M and A to continue to expand our platform. Rhino is the latest example We're a threat software for title companies. They help manage more than 30% of all U. S. Home purchases And more than 30% of all U. S. Home refinance transactions in Q1 of this year. So our business is performing well. Against each of these areas, Results are looking very strong. And with that, I'll turn it over to Marty Heimbigner, our CFO, to discuss Q2 and our updated guidance for the remainder of 2021. Marty? Thanks, Matt. Turning now to Slide 8. Our financial results for the quarter ended June 30, 2021. Our total revenue was $51,300,000 compared with $17,100,000 in Q2 2020, An increase of 200% year over year. Adjusting Q2 2020 revenues for past divestitures, Total revenue increased from $15,400,000 to $51,300,000 Which is a 2 35% year over year growth. Rhino is expected to add $4,000,000 in revenue to our full year 2021 and added $1,300,000 in Q2 as was acquired earlier in the quarter. Q2 is Rhino's largest revenue quarter seasonally. We only break out acquisitions as we announce them and do not separate them out is ongoing, namely because our platform has consistently shown to create significant incremental organic growth. Looking at Slide 9, in Q2, we outperformed our revenue guidance In the range above $45,000,000 by $6,300,000 Margins performed in line with our internal expectations At the revenue less cost of revenue margin, contribution margin and adjusted EBITDA loss margin levels at 62%, 33% and negative 20%, respectively. For our insurance business, Q2 is a period in which Significant weather events have a higher probability of occurring. As such, we take a conservative approach in our planning for this quarter. And as it turned out, there were a series of major storms in Texas between February April that led to higher volumes of Catastrophe related loss for the insurance industry as a whole as compared to the 4 years prior. However, given our reinsurance system, the impact to our financial results is muted. In Q2, we incurred $7,200,000 in cost of revenue related to catastrophe related loss, which is approximately $4,000,000 higher than if weather had been in line with historical averages. Thus, in a normal weather quarter, each of these three margins would have been 700 basis points higher. Given we plan for some variability in catastrophe related loss in Q2, our full year 2021 margins remain in line with previous guidance as you'll see on the next slide. As a reminder, there is some seasonality in revenue for our business as well. Q2 and Q3 are typically higher in revenue because companies service more homebuyers in those two quarters, Which increases our transaction revenue per company. While we don't set quarterly guidance, we are noting that Q3 revenue is trending nicely above Q2 And Q4 is expected to be seasonally lower than Q3. As you see here on Slide 10, Given the momentum of our business and the Rhino acquisition, we are raising our previously stated revenue guidance From $178,000,000 to $184,000,000 for the full year. This would be 155% year over year growth. This is our 4th consecutive raise of guidance in our 8 months as a public company, from $120,000,000 at our IPO to now 184,000,000 We are pleased with the continued momentum we are seeing. We are reiterating our full year 2021 margin guidance Revenue less cost of revenue at approximately 72%, contribution margin at approximately 40% and are tightening our full year adjusted EBITDA loss guidance to a range of negative 13% to negative 16 We have chosen to invest further in key growth opportunities such as insurance expansion, our data platform in sales and marketing and R and D within the inspection industry. As a note, adjusted EBITDA margin is expected to be almost 2x improvement versus 2020, even as we invest aggressively for long term growth. Of our updated guidance of $184,000,000 in 2021 revenue, dollars 54,000,000 was layered in from HOA, B12 and Rhino Acquisitions. Overall, year over year growth is is expected to be 155%. On the right side of Slide 11, you can see our anticipated 2021 revenue distribution has not changed. 90% of our business is from SaaS platform and the corresponding move related services. Only 10% of revenues are expected to be from post move services. The distribution in Q2 2021 revenue was Very similar to this. We had 23% of revenue coming from B2B software and service subscriptions, 66 percent coming from move related services, which also includes insurance and 11% of revenue coming from post move services. As you can see here on Slide 12, we continue to track to meet our 2021 margin targets and anticipate approximately Eximally 40% contribution margin in a range of negative 13% to negative 16% for adjusted EBITDA loss margin for the year. I'll now turn the call over to our Chief Operating Officer, Matthew Nagel, to provide an update on our key performance indicators for Q1 2021. Thanks, Marty, and hello, everyone. I'll jump in with our public KPIs and commentary. First, though, a quick Comment on this slide and how we are managing the business. As you can see, we have made substantial improvements in our contribution margin and also our adjusted EBITDA margins over time. In fact, we're already approaching our long term contribution margin targets, which includes all variable expenses. This means that we are clear in our ability to consistently progress toward our long term adjusted EBITDA margin target, Primarily by managing our fixed expenses to the right level each year, in particular R and D, which is substantial today. As we have previously discussed, each year we will manage our business to a specific adjusted EBITDA percentage Target. So as revenue continues to perform ahead of guidance, we will use a portion of the increased revenue to fund further key investments in sales and marketing and R and D to drive continued growth. We plan to manage to and not ahead of our adjusted EBITDA loss margin targets, Given the investments in front of us are sufficiently attractive, given our massive TAM and given our ambition to build a very large business. With that, let's go to the next slide and you can see progress in our KPIs. If you look here, our KPIs this quarter were very strong. Beginning with companies on the left, we saw strong growth in the average number of companies in the quarter to more than 17,000, which is up 63% year over year. And also on the right, strong growth in the average revenue per company to $999.70 per month, which I'll call 1,000, which is up 80% year over year. We continue to generate more revenue per company in a number of ways. We sell in more B2B SaaS modules. We help these companies to grow. We get access to more transaction volume. We help consumers with more services and we roll out our insurance offering to more states where we generate more revenue per sale. Certainly, what we are doing within our InsurTech division has a meaningful impact here. Should we add additional high value services for homebuyers, It will only continue to make our software customers more valuable. Of the approximately 17,000 companies we provide software and services to, 1099 are from our Q2 Rhino acquisition. Other than this, the number of companies are growing due to strong software sales, Home inspectors continuing to come back online after pausing their business during the pandemic and continued success outside of the home inspection industry. We believe growth in new companies will continue to look good, but given the one time pandemic bounce back We felt in Q1 and Q2, we do not expect this metric to continue to grow at this rate. Let's go to the next slide, Slide 14. We continue to see strong growth across all types of monetized services. This quarter, we crossed 300,000 Monetized services for the quarter in Q2, which represents 66% year over year growth, and we saw $129 per monetized service, a 50% increase year over year. Importantly, The growth in monetized services is coming from key services we are focused on, such as insurance, which result in higher revenue per service. We are seeing higher conversion rates as we lead with our own insurance offering, which we think bodes well for the future. So as we expand our insurance offerings into more states as well as introduce other high value services such as perhaps home warranty or solar, We expect the average revenue per monetized service to continue to increase over time. With that, I'll hand it back over to Matt to discuss our deep dives for the quarter. Thanks, Matthew. Thanks, Marty. We'll update first on our insurance business and then we'll wrap up M and A. So I'd like to introduce Adam Kornick, is the President of our InsurTech division, leading all aspects of our insurance and AGT business. Adam? Thanks, Matt. Very nice to join you today. I worked for a decade at Progressive in a variety of leadership roles and then as Chief Analytics Officer at AVEVA and more recently the Chief Data Technologist at Allstate, leading teams focused on data and analytics. So turning to Slide 16, let's revisit our insurance business and strategy. As you know, Porch has low cost and early access to homebuyers as well as unique property data through our vertical software systems. We leverage this to build what is a fast growing and we believe will be a massive full stack insurtech business. When we sell a policy to a homeowner, We currently see approximately 90% of the policy premium for 3rd party reinsurers and then we're paid a commission that is recognized over the following 12 month period In the states, we don't yet operate our in house carrier in MGA. We sell only 3rd party carrier policies through our agency and get paid a lower commission. Overall, we hold about 10% of the premium and expected risk, which means our system is capital light And with lower volatility within expected risk limits. There are small amount of premium we do hold, we have excess of loss or XOL reinsurance to limit expected losses. When there are large weather events, our retention limits are around $2,000,000 in most geographies before reinsurance provides coverage. This means that even in a period with worse than typical catastrophe and weather or a large event like Storm Yuri, hits as it did in Q1 before our HOA acquisition. Our overall results are less impacted and we remain in a more favorable financial position. While we may increase somewhat the amount of premium you hold over time In order to increase profits, we will continue to operate in the same general structure, capital light and high margin revenue that sits on top of our vertical software platform. Insurance continues to be the core service we live with on top of our software platform. Our InsurTech division has shown strong growth and now we're guiding to $300,000,000 of gross written premium for the 2021 year, up from the $275,000,000 guidance from last quarter. We continue to expand our in house insurance offerings in some of the more states, Launching Illinois and recently receiving regulatory approval for both Utah and Tennessee, meaning that these states will launch shortly. We remain on track to launch 10 to 15 incremental stakes within 1 year of the HLA acquisition. We only report gross loss ratio for the full prior year given that insurance there is variation by quarter. I will note that data science teams are performing very well and we're seeing strong performance in unknown cat losses. This can improve even further As we layer in our proprietary data over time, this is a substantial opportunity for us. As Marty had mentioned earlier, In Q2, we incurred about $4,000,000 more in cost of revenue expense than would be expected in a historically typical Q2. After high catastrophe years, there should be the expectation of rates across both reinsurers and carriers to increase. And we have already filed rate increases based on events such as storm Yuri to ensure that returns for Reinsurance Partners and Porch are both appropriate, that consumers can be well serviced into the future and to ensure profitable growth for our shareholders. Matt? Thank you, Adam. Okay. So let's discuss M and A. So as I mentioned, we are excited to profile A small but strategic acquisition that we closed in mid Q2, which is Rhino. Rhino is a leading provider did SaaS solutions for title companies and other settlement agents. It's located in Virginia. Their applications help protect real estate closings By providing continuous end to end account auditing, daily reconciliation, transaction monitoring, fraud detection and reporting. So title and escrow companies can easily add Rhino Software to their closing processes. It's an open solution that integrates with 20 different closing software platforms. All the details of a closing transaction flows through the Rhino software, Which then validates funds flows correctly through integrations with banks. This means that right now has visibility Into the mortgage company and the rate the consumer is paying. It has visibility into the homeowners insurance company selected And the amount the consumer is paying for their premium, and as this billing to the warranty company and all the other disbursements that are made, It's certainly very valuable insights for our InsurTech division. Since its inception, Rhino has monitored, Get this, over $16,500,000,000 transactions worth more than $5,000,000,000,000 During Q1 2021, as I mentioned before, more than 30% Of all U. S. Residential purchases and 30% of U. S. Home refinances were protected by RYANO Technology. This is another strategic acquisition for Porch that demonstrates our ability to execute M and A in the home services software space. Similar to what we've done in the inspection industry with ISN, Porch now immediately becomes a leader in providing software to title companies. Title agents meet homebuyers at a very similar time to home inspectors, expanding on Porch's early and low cost access strategy. We'll partner with these title companies to help them grow and create a better moving experience for their customers, for example, by helping to set up insurance for their new home. As the title company becomes more valuable, we can then invest more into R and D and into sales and marketing to grow faster. In terms of the details, we acquired Ryno for $31,500,000 in cash at closing and $3,500,000 in cash due in April of 2023. We expect Rhino to generate $8,000,000 in revenue for the full year 2021, With $4,000,000 of that occurring to Porch's 2021 year post close. As Marty mentioned, Rhino contributed $1,300,000 to Porch's revenue in Q2. We expect to operate the Rhino business at approximately breakeven over the next couple of years As we invest in expanding the products we provide to title companies and scaling sales and marketing to expand the customer base. The gross margins and contribution margin profile of the business is very similar to Porch's. So we're thrilled to welcome the Rhino team to Porch Group. As I wrap the M and A deep dive, I will say that M and A remains an important part of our strategy and that our pipeline remains strong. So to recap, folks, we had an excellent second quarter. We delivered strong financial performance. We raised our full year revenue outlook. We acquired Rhino to expand into providing software for title companies and demonstrated strong growth across our KPIs. We've just recently added to our Board and governance, both naming Javier Sade as Lead Independent Director And now welcoming Rachel Lam and Morris Tullock as 2 new independent directors who provide experience with M and A and insurance. We're very excited about the remainder of the year in 2022 as well as our future growth potential. We have a predictable business with deep competitive moats and Lots of levers drive growth in this massive market we're going after. So with that, the management team will now take your questions. Walter, can you please open up the line for Q and A? Thank you, Matt. We have approximately 30 minutes for questions. We'll start by taking questions from Porch's sell side analyst. Our first question comes from Jason Helfstein from Oppenheimer. Can you hear me? Hey, Jason, how are you? There we go. I was just added as a panelist. Okay. Surprised, is it? I guess, two questions to start. Just of the $6,000,000 upside, where did it come from? Just maybe Generally insurance inspections and moves and or post move services. And then you called out $4,000,000 or higher COGS because of cat in 2nd quarter. Are you going to do that each quarter so we can kind of make that adjustment because period is cat not cat? And then with Rhino, to be clear, you're not actually providing title insurance. You are it's software to help the title agents, Right. So maybe kind of so it's actually less similar to the insurance business, right, and more like The inspections and moves software. So that's my kind of 3 questions, I guess. Yes. No, great questions. Maybe I'll start with that last one, provide some color and Marty layer in on top if there's anything you want to add on those first two. Yes, Jason. Rhino is think about it very much like ISN or one of our other software systems Where we sell software to title companies now, just like we sell software to home inspection companies. So Not similar to our insurance business, we're not talking about title insurance. It's just another vertical that we are now deeply penetrated in to be able to help these businesses Ro. And then through those businesses, we can be able to help their consumers have a better moving experience. Quickly on the first two and then again, Marty, if there's anything you'd add. But the beat came from a few areas. Obviously, we noted that Ryno contributed $1,300,000 into the Q2 quarter. And so, Side of that, obviously, insurance is growing quickly. You can see that show up in our gross written premium guide, increasing that to $300,000,000 guide. That certainly is a big driver. I would also say you can kind of see it show up in that first KPI slide that Matthew talked through, which is We're seeing the number of companies we provide software to grow really nicely. And then both from insurance and services revenue, Also just by selling in more B2B software modules into these companies, like we're just seeing the B2B SaaS revenue grow nicely. Last question was just around cat losses, will we break it out? We do not plan on specifically breaking it out unless, like Q2, there's something that's It's more unusual, more atypical. Q2 was a bit atypical. And I will note that even though it was atypical, that's that I think is a really attractive thing about the system And the design of the insurance system that we operate, where it really wasn't that big of an impact overall, even though it was a very for the industry, a very atypical Q2. So when occasionally there are some kind of strange weather performance in Q2, I would expect us to call it out as we go, but not on a typical quarter. Thanks. Thank you. The next question comes from John Campbell from Stephens. Hey, Congrats on the continued M and A. You guys are making some It appears to be pretty smart tuck in deals. But on Rhino, I think Marty you hit on this. This was definitely mentioned in the press release, but Rhino is expected to do, I guess, on a standalone basis, dollars 8,000,000 this year and just $4,000,000 contributed to you guys just on the stub year. Is that right? That's correct. It's $8,000,000 for the full year and then $4,000,000 that will fall into our Year from the date of the acquisition. And also pointed out that Q2 was their seasonally strongest quarter. So that can help you figure out Q3 and Q4. Okay. And that's all going into post move? So Rhino is a software company. So it provides B2B subscription revenue. So it goes into that B2B software is off the line. Okay. Got it. That's helpful. And then on the KPIs, really good results there. The average companies served, that was a You guys saw a really good pop there. I think Matthew mentioned maybe a little over 1,000 companies, but that metric is, I think it's Average, right, of the start of the quarter and end of the quarter. So I'm guessing you guys probably exited the quarter at a pretty good jumping off point for 3Q. I don't am I thinking about that right? And I don't know if can, but maybe provide what it was at the end of the quarter? Yes. We don't share what it was at the end of the quarter. We did see strong acceleration in a number of companies, we remain excited about the growth there. A lot of it, we're starting to invest in sales and marketing. Obviously, Rhino helped. We saw a lot of companies kind of come back full strength over the last couple of quarters. So we do feel like Q1 and Q2 has higher growth than what we expect to trend, but we do expect good ongoing growth, just not at the rate we saw in Q1 and Q2. Okay. And I think you might have hit on this a second ago, Matt, but the $25,000,000 lift on the gross written premiums, Is there a way to suss out kind of what how much of that is HOA versus the legacy? Yes. In terms of Our kind of full stack carrierMGA versus the versus our agency, we don't break it out between How much is agency, federal agency versus HOA? Obviously, those are, at this point, very connected entities in terms of How the gross written premium is sold and how it flows through. As we don't split it out, I will say that both are growing really nicely. So certainly, our agency driven sales are growing nicely. Obviously, you can see in the overall results, HOA, as we expected, we're able to plug into our system and just grow it at a much faster rate. So, yes, we feel good about the overall performance of that group. Good stuff. Thanks, guys. Thanks, John. Thank you. The next question comes from Jason Kreyer from Craig Hallum. Perfect. Thanks, guys. 2 for me, sticking with the Rhino topic. So just wondering if you can disclose how much of an overlap There is between Rhino and the existing kind of footprint that you're seeing right now with ISN. And then is there any way to kind of quantify You've talked about ISN touching about 30% of all transactions today. If you fold in Rhino, how much does that increase it? Yes, it's a great question. So given the reach That both the ISM platform has and the Rhino platform has, certainly, you can just apply those 2 and And kind of get a good sense for the estimate. We're not going to break out like here's the number of consumers we're now reaching overall. And certainly, it's a recent deal. So there's still work for our team to do to able to make sure that that data gets fully integrated. But you can do some pretty easy back of the napkin map and get a sense for what the ballpark You overlap, we'll be there. I will say the reach, we're not breaking out specifically, but the reach that Porch has at homebuyers is really exciting and unique. This acquisition just plays So squarely to our strategy of embedding ourselves in companies that have these kind of unique moments where they meet homeowners at the right time. Like I mentioned before, our title company is very similar moment to inspection companies, very early on in the home buying journey. And so now we have a whole new vertical that we get to go and expand into and sell into and sell software into. So, lots of room to run now in the title space. And the overall metrics are pretty unique, very unique, I would say, in terms of the access we have to homebuyers. Got it. In terms of the integration timeframe, how long does it take to integrate this into operations? At what point do you think you can start to leverage these data sets and utilize the Rhino data that you talked about and kind of becomes smarter about your business operations. Yes. Let me take a crack and then Adam, if there's anything you want to layer just in terms of timing with the data Broadly and how it impacts your business, feel free to layer in. But the team is already off and running, Jason, in terms of being able to start working with the Rhino team as we deal with software systems across other industries. As we mentioned before, one of the big investment areas, there's a number of these big R and D bets that we're making, but one of those is with our data platform to be able to break down and structure this large proprietary data set around properties, So that it can then be used across our business in a variety of ways, one of which is to help Adam in his business, be able to assess risk, be able to price most effectively for the consumer. Just like that work we're doing with property data, it is not a short term situation where it's going to impact 2021 certainly. This is a good year plus of work to be able to get that data built into our data platform and then start to be able to see that make a meaningful impact On our insurance or other parts of our business? So I guess I would just add Matt while we're on the topic of the data platform. It really helps Insurance business is in a couple of important ways. So the number one factor for consumers in the U. S. Is price. And so we can lower our price because we have a better view into people's risk and we can offer safer consumers at lower price. And because our CAC to acquire the consumer is lower, that just creates a significant durable growing advantage. And then the second one, especially with something like Rhino, Really having that unique data that not only helps us predict losses, but helps us create that effortless experience where we know what Going through and we can make it just frictionless for our consumer during their move. And those are really the 2 key things I think come out of all the data that we're collecting. I guess I'd add it's not insurance specific. So I'm really excited about doing it in insurance. But if you think about something we could do in the future, like we could do home warranty or So we actually know what's inside the home. I think it comes straight back to that. We can price better. We've got acquisition economics And we can really take the friction out. So those are some things I talked about with data generally. No, it's a great call. If you know the make, model, serial number of the appliances for home warranty, that's obviously A really incredible opportunity. And I mentioned before one of the data sets that comes through title companies, if you know Who the consumer chose for their home insurance company and what they paid in premium, it's not hard to imagine the type of application There in terms of how we can offer the right insurance product at the right price to the consumers, we're going to be able to save money. And Yes, lots that's opened up through this acquisition. Perfect. Thanks for the color, guys. Appreciate it. Good to see you. Thank you. The next question comes from Dan Kurnos from Benchmark. Hey, guys. How are you doing? Just same as Jason jumped on, realized we're going to the panelist route, so trying to get this all set up. Just a couple of things. Maybe, Matt, I know this is going to sound kind of basic at first, but we get a lot of questions, right, with guys looking at the housing market and what's going on. It'd be super helpful just to remind people just Kind of the growth trajectory of the underlying business in case of kind of the macro backdrop if we're kind of at peak under home inspections. Think that you still have a good trajectory there, so that would be a good helpful refresher. And then on Rhino, really interesting, nice also to kind of tease Solar and Home Warranty. So I guess we'll stay tuned there. But just maybe how do we think about the growth profile going forward? Is it historically, you've said when you buy things, you're going to have them eventually accelerate to the growth profile of the underlying company. Is that still the case here? Or is this like a growth profile plus additive to InsurTech and V12 or does this sort of aggregate to kind of company growth rate when you take all those factors into account? Yes. Thanks, Dan, for the questions. In terms of the macro, I do think there is Something that probably is misunderstood, which I think some people believe that some or a meaningful amount of the company's growth That we've seen may have been driven by the increase in home sale transactions, interest rates go down, obviously, the number of home sale transactions has gone up significantly. But the reality is, as it had shifted to that seller's market and more homebuyers actually waive their home inspection, And so as home sale transactions went up, we actually didn't see the total volume of home inspections across the whole industry changed that much. And similarly, as home sales start to slow down and homebuyers have more power, More and more of them, virtually all typically, will get a home inspection. And so for us, you can look at it as glass half full or glass half empty, I suppose, but We view it as MassHealth and that we're just not seeing that much of an impact from the macro trends. And like Marty said, we're not seeing much, If anything from COVID-nineteen variance or anything like that. So the reality is that our business is just such a large market And we're so early in the game that our business is just barely scratching the surface in terms of the opportunity to continue to grow Independent of macro impacts. As you look forward in terms of growth, I think the two things that I would point out and highlight that I think would be useful. 1, we have shown this slide in the past, and I would bring it up and continue to point to it, Where we have that internal target $1,500,000,000 in revenue in that midterm, we haven't defined the number of years. We do highlight there on the left side that we expect that 30% to 35% ongoing growth rate for the business. And we still feel good about that. We would highlight that. The other point, obviously, so again, like Marty said, we don't break out the organic growth. But we do when we layer in new acquisitions highlight, as you can see here, the $54,000,000 Of this 184, we had layered in from the HOA, V12 and Rhino in acquisitions. And so that's just another data point that you can use to be able to help get a sense for Got it. Yes, it's more around Reiner, but we'll kind of maybe touch base offline on that. Just Maybe either for you, Adam, if you don't mind, just a quick follow-up just on the guide and the gross written premium upside. How do we think about that again since you just said you don't break out organic, but between existing penetration versus maybe geographic expansion and then possibly being able to accelerate your footprint? Yes. So I can answer that, Matt. So I'd say, again, we don't break it out specifically, but we see a lot of strong demand from new consumers, Renewal of existing policies and geographic expansion. So the main thing I'd say takeaway is the strategy is working. We see it showing up in our results. And then what we've said is we've recently launched in Illinois. We've received approval in 2 more states. We have other regulatory filings in the pipeline, and so we're on track for about 10 to 15 additional geographies or states From the 1st 12 months post close. So we feel good about all those things and it's showing up. Awesome. Thanks guys. Appreciate it. See you, Dan. Thank you. The next question comes from Mike Grondahl from Northland. Yes, thanks guys. Two questions. 1, ex Rhino and those 1099 companies, When you say your growth in sales and your emphasis in sales had a bigger impact Then home inspectors coming back to your platform and sort of related to that is how many home inspection companies are still Coming back to the platform or potentials? Yes, we don't break out the specific trends. I can't say all of them contributed and it would be hard me to even break it out because we are reaching out to the entire industry. And so it could be they're coming back on because We have that extra sales and customer success person reaching out to them, but we also think part of it is folks coming back to the platform just because they were optimistic about the market. But otherwise, as we said, we do expect good ongoing growth, but we do think Q1 and Q2 will be faster than Q3. Got it. And then just secondly, any update on the moving concierge And any features you've added to that or just any tweaks you've made? We continue to improve. We have Really phenomenal NPS on that experience for people who use our service. We are interested in how do we get more consumers to use it, How do we get more services per consumer? One of the things that we have talked about is consumer app. And so the team is hard at work on our consumer app. As previously communicated, we continue to have our first consumers using the app later this year. And then, of course, one of the other improvements is, as we have acquired an integrated HOA, We're now able to lead with HOA where HOA has state coverage and of course that state coverage is expansion. And we have seen nice uptick in our ability to close insurance customers when we're able to lead with that integrated HOA offering. Thank you. Thank you. The next question comes from Ben Schirlin from Cantor. Hey, guys. Thanks for taking my question. So if we try to ballpark Transactions ex HOA, you're seeing some kind of nice acceleration here if we keep revenues flat from 1Q. Could you maybe help us understand what products are driving that upside or maybe what products are most excited about going forward? Are you talking about in reference to number of services? No, just in terms of monetization. The rev per service? Yes. Yes. Got it. Yes. So the first place I can take that, and then you can layer in if there's anything more you want to add. I would just come back to our strategy, which is to focus on high value services that are purchased during the move. And so as we put more and more of our energy towards that strategy, it's going to help drive up rev per service. The improvement we saw in this quarter, insurance had a big impact on that. As we go deeper into the insurance value chain with HOA, both kind of as HOA is brought on to the platform, but then also as we get volume going through HOA, we get more revenue per insurance sale than we used to. We are certainly seeing general improvements across our other services that we're focused on, but certainly insurance is where we're focused and is where we're seeing impact on that number. Okay, great. And then maybe a quick follow-up on the insurance Post HOA acquisition. In the states where you are active with HOA and Elite Insurance Group, are you seeing any friction from the insurance providers on Elite Insurance Group in those states. I can take that one, So I'd say our promise for all of our partners across Porch Group is that we help them grow their business and provide the best customer experience that we can. And so that's a promise we make to everyone, including reinsurers, carriers, of our agencies. And it's a huge industry with a massive available market. So we think there's a lot of space to partnership with people, To partner with people and live into that partnership and so I'm looking to deliver that value. So that's what we're doing, that's what we're communicating and we're hearing back that that's working great. Okay, great. Thanks guys. Thanks Matt. Thank you. The next question comes from Ken Wong from Guggenheim. Great. Thanks for taking my question. A couple of rhino questions for me. So I think we it sounds like you guys laid out a pretty Strategy around extracting value from the data. I guess as we look a couple of years out, how should we think about the value of Rhino Porch? Is it going to be It's synergistic with some of the software platforms you guys have and we could see that revenue line grow meaningfully? Or is it or is the primary upside This transaction largely going to be from the incremental data you can extract to drive more services. I would think about it, Ken, Exactly how we've executed our strategy in the inspection software space, where there is a number of levers. Certainly, we expect to add more tools and capabilities to title companies. There's lots of Things that we can provide them to help their business, help them grow. And as we do so, sell in more B2B software modules. So to that question, do we expect the software revenue to grow? Yes, absolutely. As we both sell in more software modules to these companies and starts to be able to offer solutions for their consumers where we can also generate transactional revenue from those companies. What happens, what we've seen in the past in a number of cases is those companies will become significantly more valuable than they are prior to the acquisition. And so what happens is you take now a set of unit economics that previously were just okay, hard to scale sales and marketing, all of a sudden Unit economics are really compelling, right, because of just the additional ways that we can generate revenue and those companies are happier. So now we get to go and invest more R and D, we get to go invest more in sales and marketing and you're able to just grow faster and get more companies on board. And that all takes a little bit of time to get that flywheel working, but it's very clear Our strategy can work there. That's part 1. Part 2, clearly, it will be a channel for us to be able to meet homebuyers. So as we help these companies with more tools, Get access to more homebuyers. And the question previously is, will there be overlap between title and inspection? Yes. But that overlap does not mean there's 0 value, creative. Getting multiple touch points to the consumer through different companies they may interact with Is net impactful to our business and so that shouldn't be underestimated. That is important for us to get multiple touch points with those consumers Because right now, we only help a subset of them with those key services, and there's opportunity to continue to increase conversion rates And then lastly, yes, is the data. And so there's obviously value that we can create to be able to understand the property better, Understand the homeowner better, so we can be able to better serve them as we look forward. So, yes, just like home inspection, our mind is strategic And there's a meaningful opportunity as we look ahead. Got it. Thanks, Matt. And then just a quick follow-up for Marty. So I recognize Q2, you said the most seasonal for Rhino. But I guess as we look at the guide, you've got $4,000,000 if we just kind of generically chop that up in the $3,000,000 it looks like we're you're assuming kind Flattish sequentially through the year. I guess, is that the right way to think about or any kind of other one time issues we should be aware of in the back half? No, I think you're thinking about it correctly there is clearly Q2 and Q3 are heavy homebuyer moving across the country. And so that's why Q2 was Rhino's Heaviest quarter there. The point I was just commenting, Ken, it wasn't on the books for a full Q2. Yes. So you wouldn't do a straight line of the 1.3 Thank you. Next question coming from the line. Can you please give an update on the cash position of the company? Certainly. Thank you, guys. Thanks, Ken. Certainly. We have At June 30, we had $152,000,000 in cash. We believe that positions us well to support the investments that we've talked about here today investing in our vertical software systems, our insurance business, expansion, data platforms And the consumer experience, those are all investments that we're currently making. We've got very little debt, so we think we're in a good position with The cash on the balance sheet. Thank you. Probably have time for about one more. Can you another one from the line, can you please provide an update on the investments you're making in the product offerings and the consumer experience? Yes, I can take that one. I think the place I'd start is just with our contribution margins at 40% for 2021 And adjusted EBITDA in the minus $13,000,000 to minus $16,000,000 it's clear we're investing aggressively into R and D and other areas. And we're doing that because we think it can lead to long term growth. As we have stated, we will make progress against adjusted EBITDA percentage each year, and we are showing almost 2x improvement between 2020 2021. We're actually making a variety of investments. I'll briefly highlight a few. We've talked a little bit about investing about our data platform. We are investing in our data platform because we have unique and privileged insights into both homebuyers and properties that nobody else has. So Matt mentioned things like make and model number of appliances. We can learn if there's a huge crack in the foundation, an issue with the roof, The hot water system is in a bad place such as the attic. All of those things can be impactful to understanding the risk and pricing for homeowners insurance, so that we can best price for good risk and increase the rights for bad risk. And there are other applications that Adam and Matt have both mentioned throughout this call. The thing I would add to is with the Rhino acquisition, Matt has mentioned this, We learn other things such as the insurance company the consumer chooses. So all of those things lead us to believe that We need to make a continued and long term investment in our data platform. The other quick one I'll highlight, which I mentioned is just the consumer app. We're excited To get that into consumers' hands by the end of the year, we'll invest deeply into SaaS solutions, so functionality for companies, building out new modules. And then the last one is just we are investing in our insurance business and that shows up in a number of ways, geographic expansion, simplifying the purchase process and the experience for our members. So overall, there's lots of areas where we are investing both for long term growth and to improve the consumer experience. Thanks. One more from the line. When do you anticipate being EBITDA breakeven? I'll take that. I'll pull up this slide. The reality is, is that It's a choice for us. We haven't set a specific year or target or anything like that, but I would want to just emphasize how we think about that choice. So clearly, with we're guiding to 40% contribution margin This year, our contribution margin takes into account all variable expenses. So all of our B2B software sales, The account management teams and implementation and onboarding teams to support those companies and then all of our downstream variable expenses tied to the consumer, Our moving concierge teams, our insurance agents, any of the claims handling support teams, all of that is burdened into that contribution margin line. So below contribution margin to adjusted EBITDA is largely fixed expenses. So R and D, G and A primarily. And What that means is clearly, if you're at 40% contribution margin, we're investing aggressively. And most of that R and D investments, a significant portion of it, is not even really going to impact this year, right? A lot of it is not going to impact next year even. Some of it is these big building blocks That will allow us to go build a really big company. So the way to think about it, you can see in our adjusted EBITDA how we're showing this really consistent progress Each year, I would expect going forward, we're not going to feel like we have to go make this huge leap in 1 year and start focusing on driving profits overnight. But you should expect that we will continue to show nice progress. So that it's very clear that we're in control of the business. It's very clear that we're just continuing to step toward that long term target of that 25% EBITDA margin you see here on the slide. We do feel really confident about our ability to go generate those long term EBITDA margins over time. But this year, again, we'll set that constraint, which is the EBITDA margin target, and then we'll invest aggressively as we can, feel up to that constraint. And that, again, that's what you should expect ongoing. Thank you. I believe our final question in about HOA and the insurance group. I originally thought the MGA or HOA took a 20% to 25% retention of the business, whereas you now seem to be suggesting you're taking 10%. Has something changed? Or am I missing something? No, nothing has changed. We just we don't break out how much of our revenue comes from insurance at this point. So obviously, we guide to the gross written premium, the $300,000,000 gross written premium. And everything we've communicated previously in terms of how we then generate revenue From that gross written premium remains consistent. A lower commission that we get paid from our agency And then a higher commission, about 2x higher of a commission that we get paid when we are the carrier, but we seed that commission, that premium, I should The 3rd party reinsurance companies. So nothing has changed there. I think on Slide 16, it's Highlighting that point that you just made there, Matt, that 90% of the insurance premiums are ceded off and 10% is what HOA retains. So it's not the commission rate that is being earned, but the magnitude of the business That we seed off versus what we retain. Thank you. And that concludes the questions that we have for today. Well, let me wrap us here briefly. I'd just like to say thank you all for joining the call. I do appreciate the ongoing interest And Porch and the partnership for those that are involved. Like I said, we really are excited about just what we're seeing in terms of Q2 performance, 2021 performance and the investments that we're making to allow us to continue to go and build a truly great enduring company. Credit to the Porch team for great continued performance. And with that, thank you all and we'll see you soon. Take care.