Q2 2021 Porch Group Inc Earnings Call
Execution across our business, which is driving growth and delivering value for our shareholders.
Purchased performing against our ambitious plan.
Including expansion of our SaaS suite into adjacent home service vertical.
And I will get into these highlights shortly.
To begin our second quarter performance was excellent with $51.3 million in Q2 revenue, which is up 235% 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 million annual revenue run rate.
And now we exit Q2, well north of a $200 million annual revenue run rate.
Mario will share more about these results shortly but we are exceeding expectations and are again raising revenue guidance for the year.
And Youll see in our Kpis the catalysts for our outperformance are driven by our ability to sell our software to more companies.
Selling more software software modules into these companies, increasing our <unk> 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 million of gross written premium for the 2021 year up from the $275 million 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 our COVID-19 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 for HOA acquisition at the start of Q2. We're also very excited to provide 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 that 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 in 2021 priorities.
So looking here at slide five we've been executing on our unique strategy in the home services industry that allows us to provide software and services to home inspected inspection moving roofing and our title companies to help them grow.
By doing so we generate <unk> software revenues as well as gain early access to homebuyers, who helped save time stress and money during a moat.
From this we generate consistent and recurring <unk> transaction 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.
So starting from the top of slide six our priority the porch or to one sell software and additional modules to more companies or become deeply embedded.
To have more of these companies provide access to their consumers, which then leads to three 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.
Or are we focused on insurance as a managing general agent full stack carrier and agency, where we can leverage our unique customer acquisition and property data advantages.
Five we're bringing in brands and advertisers to connect with homebuyers earlier, and lastly, we use strategic M&A to continue to expand our platform.
<unk> is the latest example.
We're thread 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 alright.
Thanks, Matt.
Turning now to slide eight our financial results for the quarter ended June 32021, our total revenue was $51.3 million.
Paired with $17.1 million.
In Q2, 2020, an increase of 200% year over year.
Adjusting Q2.2020 revenues for past divestitures.
Total revenue increased from $15.4 million to.
<unk> to $51.3 million, which is a 235% year over year growth.
<unk> is expected to add $4 million in revenue.
Through our full year 2021, and added $1.3 million in Q2 as was acquired earlier in the quarter.
Q2 is Ryan knows largest revenue quarter seasonally.
We only breakout acquisitions as we announce them and do not separate them out.
Ongoing, namely because our platform has consistently shown to create significant incremental organic growth.
Looking at slide nine.
Q2, we outperformed our revenue guidance.
And the range above $45 million by $6.3 million.
Margins performed in line with our internal expectations at the revenue less cost of revenue margin cons.
Contribution margin and adjusted EBITDA loss margin levels at 62%, 33% and negative 20% respectively.
Brian <unk> business Q2 is the 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 and April that led to higher volumes of catastrophe related loss for the insurance industry as a whole as compared to the four years prior.
However, given our reinsurance system.
The impact to our financial results is muted and <unk>.
Q2, we incurred $7.2 million in cost of revenue related to catastrophe related loss, which is approximately $4 million 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 and catastrophe related loss in Q2.
Our full year 2020 earnings margins remain in line with previous guidance as Youll 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.
We don't set quarterly guidance, we are noting that Q3 revenue is trending nicely above Q2 and.
In Q4 is expected to be seasonally lower than Q3.
Yeah.
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 million to $184 million for the full year.
This would be 155% year over year growth.
This is our fourth consecutive raise guidance and our eight months as a public company from $120 million at our IPO to now a $184 million.
We are pleased with the continued momentum we are seeing.
We are reiterating our full year 2021 margin guidance of 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 and sales and marketing and R&D within the inspection industry.
As I know adjusted EBITDA margin is expected to be almost <unk> improvement versus 2020, even as we invest aggressively.
For long term growth.
Of our updated guidance of $184 million in 2020 when revenue <unk>.
<unk> $54 million was layered in from HOA, B 12, and Rhino acquisition.
Overall year over year growth 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 a 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 <unk> software and service subscriptions 60.
66% coming from move related services, which also includes insurance and.
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 40% contribution margin.
And 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 of all 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.
We're already approaching our long term contribution margin targets, which includes all variable expenses. This means that we are clear on 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&D, which is substantial today.
As we've previously discussed each year, we will manage our business to a specific adjusted EBITDA percentage targets.
So as to so as revenue continues to perform ahead of guidance. We will use a portion of the increase revenue to fund further key investments in sales and marketing and R&D to drive continued growth.
We plan to manage too and not ahead of our adjusted EBITDA loss margin targets given.
Given the investments in front of us are sufficiently attractive given our massive tam and given our ambition to build a very large business.
Let's go to the next slide 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 17000, 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, a thousand which is up 80% year over year.
We continue to generate more revenue per company in a number of ways, we sell in more <unk> SaaS modules with.
We help these companies to grow we get access to more transaction volume, we help consumers with more services and we rollout our insurance offering to more states, where we generate more revenue per sale.
Certainly what we are doing within our insurance Tech 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 17000 companies, we provide software and services to 1099 are from our Q2 Rhino acquisition.
Other than that the number of companies that are growing due to strong software sales home inspectors continuing to come back online after pausing their business during the contaminant.
And continued success outside of the home inspection industry.
We believe growth in new companies will continue to look good.
But given the onetime pandemic bounce back we felt in Q1 and Q2, we do not expect this metric to continue to grow at this rate.
Go to the next slide Slide 14, we continue to see strong growth across all types of monetize services. This quarter, we crossed 300000 monetize services for the quarter in Q2, which represents 66% year over year growth and we saw $129 per monetize served.
As a 50% increase year over year.
Importantly, the growth in monetize 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.
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 monetize service to continue to increase over time.
With that I'll hand, it back over to Matt to discuss our deep dive for the quarter.
Thanks, Matthew Thanks, Marty.
Dave first on our insurance business and then we'll wrap up M&A, so I'd like to introduce Adam Cornet Who's the president of our insure Tech Division, leading all aspects of our insurance agency business Adam.
Matt very nicely joining me today.
I will try a decade at progressive and a variety of leadership roles in the Chief analytics officer out of data and more recently, the chief data technology difficulty, losing teams focused on data and analytics.
So turning to slide 16.
Our insurance business and strategy as you know portion of its low cost and early access to home buyers as well as unique property data through our vertical software systems.
We leverage this to build what is a fast growing what we believe will be a massive full fac and sure tech business.
When we sell a policy to a homeowner we currently see approximately 90% of the policy premium for third party reinsurers and we're paid a commission data recognized over the following 12 month period.
In this stage, we don't operate our in house carrier and MGA, we sell only third party carrier policies through our agency.
Pay a lower commission overall globally.
About 10% of the premium and expected rates machined our systems capital late.
And with lower volatility within expected risk limits.
A small amount of premium do hold we had excess of loss of actual reinsurance to limit expected losses.
Many of our large weather events on retention Linux around $2 million in most geographies before reinsurance provides coverage.
This means that even in a period with worse can typical catastrophe and weather or a large event like Sam Gary hates aggregating Q1, before our HOA acquisition. Our overall results are less impacted.
<unk> and a more favorable financial position.
While we may increase somewhat the amount of premium quarter over time in order to increase profit.
Continue to operate at 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 services on top of our software.
Our insurance activation has shown strong growth.
And now we're guiding for $300 million gross written premium for the 2000 tons a year.
From the 275 million guidance from last quarter.
We continue to expand our in house insurance onshore using some of our states launching Illinois.
We received regulatory approval for both Utah, and Tennessee, meaning that these states will launch shortly.
We remain on track to launch 10 to 15 incremental facings within one year of Gateway acquisition.
We only reported gross loss ratio for the full prior year given the insurance there is variation by quarter and we don't know their actuarial and data science teams are performing very well.
We're seeing strong performance in our non cat losses.
This can improve even further as we layer in our proprietary data over time, we see a substantial opportunity for us as Marty had mentioned earlier in Q2, we incurred about $4 million more in cost of revenue expense and with the expected historically typical pizza.
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 formulary to ensure VAT returns for reinsurance partners in porch are both appropriate and.
That consumers can be well servicing to the future and can ensure profit of those for our shareholders.
Thank you Adam.
So let's discuss M&A. So as I mentioned, we are excited to profile.
A small but strategic acquisition that we closed in mid Q2, just right now right.
Brian is a leading provider of patented SaaS solutions for title companies and other settlement agents.
It's located in Virginia.
Their applications helped protect real estate closings by providing continuous and Ed 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 is an open solution that integrates with 20 different closing software platforms.
All of the details of a closing transaction flows through the Rhino software, which then validate funds flows correctly through integrations with banks.
This means that <unk> has visibility into the mortgage company and the rate the consumer spend and as visibility into the homeowners insurance company selected and the amount the consumer is paying for their premium.
As visibility to the warranty company and all the other disbursements are made it is certainly very valuable insights for our <unk> Division.
Since its inception Rhino has monitored gets us over $16.5 million transactions worth more than five trillion.
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 radar technology.
This is another strategic acquisition for sports that demonstrates our ability to execute M&A and the home service and software space.
Similar to what we've done in the inspection industry with ISN courts, now immediately becomes a leader in providing software to title companies.
Title agents meet homebuyers at a very similar time, the home inspectors, expanding unfortunate early and low cost of access strategy.
We will partner with these title companies to help them grow and create a better moving experience for their customers for example by helping to self insurance for their new home.
As the title company becomes more valuable we can then invest more into R&D and into sales and marketing to grow faster.
In terms of the details we acquired Rhino for $31.5 million in cash at closing and $3.5 million in cash due in April of 2023.
We expect <unk> to generate $8 million in revenue for the full year 2021 with $4 million of that occurring the purchase of 2021 year post close.
As Marty mentioned Rhino contributed $1.3 million to <unk> 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 a title company and scaling sales and marketing to expand the customer base.
The gross margins and contribution margin profile of the business is very similar to <unk>.
So we're thrilled to welcome the royalty.
True.
As I wrap the M&A deep dive I will say that M&A remains an important part of our strategy and then our pipeline remained strong.
So to recap books, we had an excellent second quarter we.
We delivered strong financial performance.
We raised our full year revenue outlook, we acquired <unk> to expand and to providing software for title companies and demonstrated strong growth across our kpis.
We've just recently added to our board and governance, both aiming Javier <unk> as lead independent director and now welcoming Rachel Lam and Maurice Tulloch as two new independent directors, who provide experience with M&A and insurance.
We're very excited about the remainder of the year in 2020, Jill as well as our future growth potential.
We have a predictable business with deep competitive moat.
Lots of levers to drive growth in this massive market we're going after.
So that the management team will now take your question Walter can you. Please open up the line for Q&A.
Thank you, Matt we have approximately 30 minutes for questions. We'll start by taking questions from Cortez as sell side analysts are our first question comes from Jason <unk> from Oppenheimer.
Yeah.
Jeremy Hey, Jason RF area I was just out of the panelists, okay surprised to hear that.
Three two quick I guess two questions to start just of the 6 million upside where did it come from just maybe generally insurance inspections and movies or post move services and then you called out the $4 million higher Cogs because the cat second quarter are you going to do that each quarter. So we can kind of make that <unk>.
Mint because periods of cat Nat cat.
Then with Roy no to be clear, you're not actually providing title insurance.
It's software to help the title agents.
So maybe kind of so it's actually less similar to the insurance business right and more like the inspection and moves software. So that's like three questions I guess, yeah, no great great questions, maybe I'll start with that last one.
Provide some color on Marty layer, an unpopular as anything you want to add on those first two but yes, Jason Rhino is thinking 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 at home inspection companies so not.
Not similar to our insurance business, we're not talking about title insurance. It's just another vertical that we are now deeply penetrated and to be able to help these businesses grow and then through those businesses. When you can be able to do to help their consumers have a better moving experience.
Yes.
Quickly on the first two and then again Marty answer anything you'd add but.
The beat came from a few areas. Obviously, we noted that Rhino contributed $1.3 million into the Q2 quarter and so outside of that.
Obviously insurance is growing quicker you can see that show up in our gross written premium guidance, increasing that to $300 million guide that certainly is a big driver I would also say you can kind of see it show up in that first kpis side. The Matthew talked earlier, which is we're seeing the number of companies. We provide software to grow really nicely and then both of them.
From insurance and services revenue, but also just by selling in more BW software modules into these companies like we're just seeing the BW SaaS revenue grow nicely.
And last question was just around cat losses, when we break it out we do not plan on specifically breaking it out unless I Q2, there is something that.
It's more unusual more atypical Q2 was a bit atypical and I will note that even though it was atypical.
I think as early 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 I don't know the very for the industry a very atypical Q2. So one occasionally there are some strange weather performance in Q2, I would expect us to call. It out as we go but but not in a typical quarter.
Sure.
Okay. Thanks.
Thank you. The next question comes from John Campbell from Stephens.
Hey, guys. Good afternoon, How're you doing it appear that good to see you.
Congrats on the continued M&A you guys are making some appears to be pretty smart tuck in deals, but on Rhino I think Marty you had on us.
This was definitely in Michigan, a press release, but right now it was expected to do I guess on a standalone basis $8 million. This year and just $4 million contributed you guys just from a stub year is that right.
That's correct, it's eight 8 million for full year.
And then the 4 million that will fall into our <unk>.
Year from the date of the acquisition and also pointed out that Q2 was their seasonally strongest quarter.
So that that can help you figure out Q3, and Q4, okay, and that's all going into postman.
So right now as a software company.
So it provides.
<unk> subscription revenue so it goes into that BBB suffer rooftop alone.
Yes.
Got it that's helpful and then on the Kpis are really good results there the average companies serve that was.
I saw a really good pop there I think Matt you mentioned, maybe a little over 1000 companies, but you know that metric is I think it's an average right at the start of the quarter end of the quarter.
So I'm guessing you guys, probably exited the quarter at a pretty good jumping off point for <unk>.
Thinking about that right and I don't know if you can maybe provide but it was at the end of the quarter.
Yes, we don't.
We don't share what it was at the end of the quarter, we did see a strong acceleration in the number of companies. We remain excited about the growth there on a lot of it's 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 second ago, Matt, but the but the $25 million left on our gross written premiums is there a way to suss out kind of what how much of that is HOA versus the legacy.
Yeah in terms of are going to full stack carrier slash MGA versus the versus our agency. We don't we don't break it out between how much of the agency tighter agency versus.
Obviously those are at this point very connected entities in terms of how you know how the gross written premium is sold and outflows through as we don't split it out I will say that both are growing really nicely.
Certainly our agency driven sales growing nicely, obviously, you can see the overall results in our HOA.
<unk>, we're able to plug into our system. It is growing at a much faster rate.
So yes, we feel good about the overall performance of that group.
Thanks, guys.
Thanks Joel.
Thank you. The next question comes from Jason Prior from Craig Hallum.
Okay perfect.
A few for me.
So just wondering if you can disclose how much of an overlap if you will.
Right.
And the existing.
What youre seeing right now with IL <unk> is there any way to kind of quantify you've talked about ISN touching about 30% of all transactions today.
Paul Wogan Rhino, how much does that increase it.
Yeah, It's a great question so given.
The.
Given the reach that both the ISN platform has and the Rhino platform.
Certainly you can just you know.
Apply those two and kind of get a good sense for the estimate we're not going to breakout like here's the number of consumers. We're now reaching overall and certainly it's a recent deal. So theres still work for our team to do to be able to make sure that that data gets fully integrated but but you can do some pretty easy back of the monacan math and get a sense for what whats the ballpark.
Overlap will be there.
I will say you know the reach we're not breaking out specifically, but the reason the porch as homebuyers.
As you know.
Really exciting.
And unique.
This acquisition displays so squarely to our strategy of embedding ourselves in company as you know that.
You can have unique moments, where they meet homeowners at the right time.
Like I mentioned before our title company, that's 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 got to go and expand into and sell into adult adult offering to so lots of room to run now in the title space.
And the overall metrics are pretty pretty unique very unique I would say in terms of the actions we have the homebuyers.
Got it.
There will be integration timeframe.
How long does it take to integrate within the operation at what point do you think you can start to leverage the data.
<unk> utilized the Rhino data that you talked about and kind of become 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 the data platform.
Broadly and how it impacts your business feel free to layer in.
But on the team is already off and running Jason in terms of being able to start working with with the <unk> team as we do it with software system across other industries as we mentioned before one of the big investment areas.
A number of these big R&D best.
Best that we're making but one of those is with our data platform to be able to break down on structure.
This large proprietary dataset around properties. So that they can then be used across our business in a variety of ways, one of which is to help Adam and his business be able to assess risk. If you will the price most effectively for the consumer yes.
Just like that work, we're doing with property data it is not a short term situation.
A situation where it can 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 make a meaningful impact on our insurance or other parts of our business.
Okay. So I guess I would just add that while we're on the topic of the data platform that really helps the insurance businesses in a couple of important ways.
The number one factor for consumers in the U S is price.
And so we can lower the price because there's a better view into people's risk and can offer a safer consumers at a lower price and.
And because our CAC to acquire the consumers lower that just creates a significant durable growing advantage.
And then the second one and especially with something like right now really having that unique data that not only helps us predict losses, but it helps us create that effortless experience, where we know what someone's going through and we can make it just friction less for a consumer during their move and those are really the two key things I think come out of all the data that we're collecting.
And I guess I'd add it cannot insurance specifics I'm really excited about doing it in reassurance, but you're talking about something we could do in the future like we could see home warranty or something else, where we actually know what's inside the home I think it comes straight back to that we can price down here, We've got acquisition economics, and we can really take the friction out. So those are the things I talked about it with data generally.
No. It's a great golf would make models during the robbery appliances for home warranty. That's obviously, a really a really incredible.
Credible opportunity and I mentioned before one of the datasets that comes through title companies. If you know who the consumer who 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 products at the right price to the consumers, where we're going to save money and so lots of its opened up through this acquisition.
Alright, thanks for the color.
Yep.
Thank you. The next question comes from Dan <unk> from benchmark.
Hey, guys How're you doing.
I don't just say, let's say with Jason junk unrealized regarding the panelist routes. 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.
At first but we get a lot of questions right with guys looking at the housing market and what's going on it would be super helpful. Just to remind people just about kind of the growth trajectory of the underlying business in case of kind of the macro backdrop, if we're kind of at peak.
And your home inspections, I think that you still have a good trajectory there so that would be helpful. Refresher and then on Rhino.
Really interesting you know 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 does it historically, you've said when you buy things youre going to have them eventually accelerate to the growth profile of the overlap of the underlying company is that still the case here.
Or is this like a growth profile plus additive to ensure attack and you know be 12 or does it sort of aggregate to kind of company growth rate. When you take all those factors into account.
Yeah, Thanks 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 the summer a meaningful amount of the company's growth.
The we've seen may have been driven by the increase in home sale transactions and the interest rates go down obviously, the number of home sale transactions has gone up significantly but.
But the reality is as it has shifted to that sellers market.
And more homebuyers actually waive their home inspection right. So as home sale transactions went up we actually didn't see the total volume of inspections drop the whole industry change that much and similarly as home sales start to slow down and homebuyers.
Have more power.
More and more of them virtually all typically got a home inspections and so for US you can look at it as glass half full or glass half empty I suppose, but we view it as not as a whole and that we're just not seeing that much of an impact from the macro trends in like Marty said, we're not seeing much if anything from COVID-19 variance or anything like that.
The reality is is that our business is just such a large market and we're so early in the game that it wasn't just you know.
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 one we have shown this slide in the past and I would bring it up and continue to point to it where we have that an internal target of $1.5 billion in revenue in that mid term, we haven't defined a number of years.
But we do highlight there.
The left side, we expect that 30% to 35% from ongoing growth rate for the business and we still feel still feel good about that when we would you would highlight that.
The other point obviously.
I think Marty is that 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 million.
Of this 184, we have layered in from the HOA V 12, and Rhino acquisition and so that's just another data point that you can use to be able to help give us some store.
Yeah.
Got it yeah. It was more around random, 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 on 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.
Yeah.
Yes, I can answer that Matt. So I think again, we don't we don't break it out specifically, but we feel a strong demand from new consumers renewal of existing policies.
Geographic expansion. So the main thing I say takeaway just dragging to working with <unk> showing up in our results and then what we've said is we recently Washington, Illinois. We've received approval in two more states. We have other regulatory filings in the pipeline and so we're on track for about 10 to 15 additional geographies where states from.
The first 12 months post close so we feel good about all those things and it's showing up.
Awesome. Thanks, guys appreciate it.
Hey, Jeff.
Thank you. The next question comes from Mike Grondahl from Northland.
Yeah. Thanks, guys two questions one.
Ex Rhino and those 1099 companies.
When you say Youre your growth in sales and your emphasis in sales had a bigger impact than home inspectors coming back to your platform.
And sort of related to that is how many older inspection companies are still coming back to the platform or a potential.
Yes, we don't we don't break out the specific trends I can say all of them contribute it and it would be hard for me to even break it out because we are reaching out to the entire industry and so it could be theyre coming back on because you know.
We have that extra sales in <unk>.
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.
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.
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 that consumer app and so the team is hard at work on our consumer App as previously.
They communicated we.
We continue to.
Our first consumers using the App later this year.
And then of course, one of the other improvements.
Improvement is as we have acquired and integrated HOA, we're now able to lead with HOA.
Our HOA has state coverage and of course that state coverage 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 Sherlund from Cantor.
Oh, Hey, guys. Thanks for taking my question.
So now if we try to ballpark.
Transactions ex HOA and they're seeing some.
It's kind of nice acceleration here, if we keep revenues flat from <unk> could you maybe help us understand what products are driving that outside or a major what products, you're most excited about going forward.
Are you talking about in reference to a number of services.
In terms of monetization.
The Rev per service.
Yeah got it yeah. So the first place I can take that man you can layer in if there's income where 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 onto 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 improvement across our other services that we're focused on but certainly insurances, where we're focused and is where we're seeing.
<unk> impact on that number.
Okay, Great and then maybe a quick follow up on the insurance post.
<unk> acquisition in the states for you are active with HOA and related insurance group are you seeing any friction from the insurance providers on <unk>.
The insurance group in those states.
I can take that so I'd say, our promise for all of our partners across borders group is that we help them grow their business.
And provide the best customer consumer experience, but we can and so that's the promise we make to everyone, including reinsurers carriers at our agencies in Europe, It's a huge industry with a massive available market. So we think theres a lot of states the partnership with people to partner with people and live into that partnership and show them that can deliver that value. So that's what we are.
Human and Thats, what were communicating and we're hearing back that actually working right.
Okay, great. Thanks, guys. Thanks.
Thanks, Matt.
Thank you. The next question comes from Ken Wong from Guggenheim.
Great. Thanks for taking my question a couple of Rhino of questions for me.
Yes, I think we it sounds like you guys laid out a pretty interesting strategy around <unk>.
Extracting value from this data.
As we look a couple of years out how should we think about the value of Ryan out of parts is it going to be.
<unk> put some software platform do you guys have and we can see that revenue line grow meaningfully or is it or the primary upside from this transaction of <unk> from the incremental data you can extract or drive more services.
I would think about it Ken.
Exactly how we've executed our strategy and the inspection software space.
Where there is a number of levers I mean, 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 of their businesses help them grow and as we do those sell in more BTB software module. So to that question do we expect the software revenue to grow yes, absolutely as we both sell and more software modules to these companies.
And start to be able to offer.
Solutions for their consumers, where we can also generate transaction revenue from both companies what happens what we've seen in the past in a number of cases as those companies will become significantly more valuable than they are prior to the acquisition right and so what happens is you take now a set of unit on unit economics that previously were just okay hard to scale sales and.
And all of a sudden unit economics are really compelling and 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 in R&D and we've got to go invest more in sales and marketing and you 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 that our strategy can work there.
That's part one part two clearly it'll be a channel for us to be able to meet your homebuyers. So as we help these companies with more tools get access to more homebuyers.
And the question previously is will it be overlap between title and inspection, yes, but that that overlaps does not mean, there's zero value creative.
Getting multiple touch points to the consumer through different companies. They may interact with is net income.
Actual results so that that shouldnt 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 there with those consumers and then lastly, yes is the data.
And so there's there's obviously value that we can create to build to understand the property better to understand the homeowner about are so we can be able to better serve them as we look forward. So yeah, just like your home inspection.
Our minus strategic and.
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 that the most seasonal for Rhino, but I guess as we look at the guide you've got $4 million and if we just kind of generically chop that up.
And three it looks like Youre, assuming kind of 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.
Youre thinking about it correctly there is.
Clearly Q2, and Q3 are heavy homebuyer moving across the country and so.
That's why Q2 was rhinos heaviest.
Quarter there.
The point I was just kind of man.
It wasn't on the books for a full Q2, yes, you wouldn't do a straight line of the one three.
Yeah.
Okay.
Thanks, Kent.
Thank you.
Question coming from the line can you. Please give an update on the cash position of the company.
Certainly thank.
Thank you guys. Thanks.
Thanks Curt.
Certainly where we have that at June 30, we had $152 million 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 in.
Investments that were currently making we've got very little debt. So we think we're in a good position with the.
The cash on the balance sheet.
Thank you probably have time for about one more.
Can you no noise can you. Please provide an update on the investments youre, making in the product offerings and the consumer experience.
Yeah, I can take that one I think the place I'd start is just with our contribution margins of 40% for 2021.
And adjusted EBITDA in the -13 to -16, it's clear, we're investing investing aggressively into R&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 two <unk> improvement between 2020 one.
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 privilege insights into both our homebuyers and properties that nobody else has so Matt mentioned things like making model number of appliances.
We can learn if theres a huge crack in the foundation an issue with the roof. The hot water system isn't about plays 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 bag at risk and there are other applications that.
Adam and Matt both.
Mentioned throughout this call.
The thing I would add too is with the Rhino acquisition. That's mentioned this we learned 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 was 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 simply.
Simplifying the purchase process and the experience for our members. So overall theres lots of areas, where we are we are investing both for long term growth and improve the consumer experience.
And just one more from the line when do you anticipate being EBITDA breakeven.
Yeah.
I'll take that.
And Joe on the slide.
The reality is that it's a.
Choice.
For us we are.
Haven't set a specific year.
Year target or anything like that but I wouldn't want to just emphasize how we think about about that choice, so clearly with where going to 40% contribution margin. This year. Our contribution margin takes into account all variable expenses. So all of our <unk> software sales of the <unk>.
Talent management teams and implementation Onboarding teams that support those companies and then all of our downstream variable expenses tied to the consumer are moving concierge teams, our insurance agent and in 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&D and G&A, primarily and so what that means is clearly if Europe, 40% contribution margin, we're investing aggressively and most of that R&D investments are significant portion of it is not even really are going to impact this year, where a lot of not going to impact next.
Some of it is the 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 are showing us really consistent progress each year.
We'd expect going forward, we're not going to feel like we have to go make a huge leap in one year and start focusing on driving profit 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 about 25.
5% EBITDA margin easily here on the slide we do feel really.
Really confident about our ability to go generate those long term EBITDA margin over time, but.
But each year again, we'll set setback in strength, which is the EBITDA margins are getting them, we'll invest aggressively as we can Europe to that constraint that again, that's what you should expect ongoing.
Thank you our final question.
In about HOA in the insurance group I originally thought the MGA or HOA took a 20% to 25% for the retention of the business, whereas.
Now seem to be suggesting that youre, taking 10% has something changed or am I missing something.
No nothing has changed 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 of $300 million gross written premium.
And everything we've communicated previously in terms of how we then generate revenue from that gross written premium remains.
<unk> remains consistent lower commission that we get paid from our agency and then a higher commission about two X higher of a commission that we get paid when when we are the carrier, but we cede that commission that premium I should say third party reinsurance company. So no 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 seeded 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 cede off versus but while we retain.
Thank you and that concludes the questions that we have.
For today.
Well then let me wrap up here briefly I just.
To say thank you all for joining the call I do appreciate.
The ongoing interest.
Unfortunately in the partnership for those that are involved you know like I said, we really are excited about.
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 in and build a truly great enduring company.
A credit to the porch team for great continued performance and with that.
You all will see you soon take care.
Yeah.