Q3 2021 Porch Group Inc Earnings Call
The presentation can be found on the company's website.
With that let me turn it over to <unk>.
CEO chairman and founder of course not.
Matt.
Yeah.
Thank you Walter.
Good afternoon, everybody. Thanks for joining us for our third quarter 2021 earnings conference call.
I'm excited to cover our strong Q3 performance, which is our fifth consecutive beat and raised since going public.
We've expanded our SaaS suite into adjacent home service vehicles and continue to grow our insurance business both topics, we'll get into today.
Our purpose here at porch is to build a truly great enduring company to become the category winner by making the home simple.
We're attacking one of the largest market opportunities with a unique strategy.
So to begin our third quarter performance was excellent with $62 $8 million in revenue, which is up 192% year over year versus Q3 2020.
Marty will share more about these results shortly but we're exceeding expectations and are again raising revenue guidance for full year 2021.
As youll see in our Kpis the catalysts for our Q3 outperformance are driven by our ability to sell our software to more company.
Selling more software modules into these companies, thereby increasing our <unk> software revenue.
Helping more of the consumers, we get access to with important services for their home.
And execution of our M&A strategy.
Insurance in particular is growing rapidly we're increasing guidance for full year 2021, gross written premiums of $305 million.
We are investing aggressively in product and technology to position us for strong continued growth in the future.
We did this to a level that produces consistent adjusted EBITDA margin improvement each year.
Given our strong contribution margins, including a record 45% here in Q3.
We've communicated our confidence in being able to manage to meaningful profitability when we choose.
It's reinforced I believe based on our Q3 results, we recorded our first ever profitable adjusted EBITDA quarter.
We're certainly proud of this achievement, but it doesn't signal a change in philosophy, nor turned to managing the business to consistent profitability in the near term.
We remain focused on our strategy to invest aggressively in high quality growth opportunities and pursuit of winning and our massive greater than $320 billion U S market opportunity.
Based on the quality unexpected returns of the investment opportunities available to us we will select each year the number of points of adjusted EBITDA margin improvement to manage too.
To date in 2021, we are not seeing notable softening in our business from any slowing in the housing market.
We do expect the macro reinsurance market to be challenging in 2022, but believe we are positioned as good as possible given historically strong performance with our reinsurance partners.
Q3 included the announcement of the acquisition of American home protect or HP, which allows us to offer home warranties to homebuyers.
We also announced the acquisition signing of CSC to expand our insurance operation into more states now.
We now expect to close in mid 2022, after a lengthy regulatory approval process in California.
Just recently here in Q4, we announced our acquisition of qualify to provide software to mortgage companies and loan officers.
Setting us up to have an even earlier access to homebuyers and to embed insurance seamlessly into loan application process.
To ensure we have a strong balance sheet for future M&A opportunities. We also closed a $425 million convertible note offering in the third quarter.
Before handing over to Marty to go through our financial performance in more detail. Let me first present revisit our previously articulated company strategy in 2021 priorities.
Looking here at slide five we've been executing on our unique strategy in the home services industry to provide software and services the home inspection company mortgage companies and loan officers title companies moving companies and roofing contractors to help them grow.
By doing so we generate <unk> recurring software revenues as well as gain early access to homebuyers, who we then help save time stressing money during a moat.
From this to generate consistent and recurring b to B to C transaction revenues by helping these homebuyers facilitate the purchase of important services such as insurance.
This quarter, we began to report our business with two operating segments vertical software and insurance.
We're excited to be able to provide this additional an increased level of disclosure to help our shareholders better understand our business.
So I'll start things off the top here on slide six our priorities at 2020 and for 'twenty 'twenty. One for ports are to number one sell software and additional modules to more companies or become deeply embedded with these organizations.
To have more of these companies provide access to their consumers, which leads to three providing more services to these consumers.
As we help them more services to consumers happier with our experience helping companies like home inspectors to look good.
Or are we focus on insurance as a managing general agents 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 are strategic and accretive M&A to continue to expand our platform.
Our business is performing well against each of these areas and the results are strong and with that I'll turn it over to Marty Heimbigner, our CFO to discuss Q3 and our updated guidance for the remainder of 2021 Marty.
Thanks, Matt and good afternoon, everyone.
Turning now to our financial results for the quarter ended September 32021, our total revenue was 68 $62 8 million.
Compared with $21 5 million in Q3 2020.
An increase of 192% year over year.
As a reminder of the three recently announced acquisitions only HP impacted Q3.
As the close of the CSC acquisition is pending regulatory approval.
And the flow of Phi acquisition was completed during the current Q4.
HP generated approximately $1 million of revenue in Q3.
Typically we only breakout acquisitions as we announce them and do not separate them out ongoing, namely because our platform has consistently created significant incremental organic growth once target companies joined porch.
<unk> point acquisitions from this last year accelerated from approximately 7% annual growth for the year prior to being acquired by porch to approximately 32% growth in the year following the acquisition.
Looking at slide nine.
In Q3, we clearly performed well with significant upswings in the top line as well as margin revenue.
Increased from $51 3 million in Q2, 2021 to $62 8 million in Q3.
Or a 22% increase quarter over quarter.
Margins were also strong as Matt mentioned, we believe that given our strong contribution margins, we could make choices to allow us to be profitable near term as demonstrated in Q3 with our first quarter of adjusted EBITDA profitability.
I would reiterate that we do not expect nor desire. This to continue short term there are just too many attractive investments to make.
Above the adjusted EBITDA line. The business continues to demonstrate that is very high margin was 69% revenue less cost of revenue margin.
And 45% contribution margin.
And as you see here on slide 10.
Given the organic growth of our business and.
And a $2 million revenue from the <unk> acquisition expected in Q4.
We are raising our previously stated revenue guidance from $187 5 million.
$195 million for the full year.
This would be 170% year over year growth.
This is our fifth consecutive raise of guidance and our 11 months as a public company.
From a 120 $120 million at our IPO to now 195.
If you were to pro forma the closed 2021 acquisitions, we have discussed throughout the year as if they had been acquired on January one of 2021.
I'd anticipate our full year 2021 pro forma revenue to be $226 million.
This is our baseline to grow from as we look ahead to 2022.
As a reminder, there is some seasonality in revenue for our business.
Q2, and Q3 are typically higher revenue as company's 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 based on our annual guidance and nine months to date performance, we expect Q4 to be approximately $54 million in revenue.
Which would be our typical seasonal decline.
In terms of margins, we are adjusting guidance for revenue less cost of revenue.
Which we use instead of gross margin to approximately 70%.
To account for mix shifts at certain transactional revenue some of which like mover services.
Our slightly lower margin.
Not a meaningful impact to the business as it had no bearing on our contribution margin our profitability targets we are.
We are reiterating our full year 2012 guidance of contribution margin at approximately 40%.
Depending on mix, we expect this to finished plus or minus 1% of this guidance, we set out at the start of the year.
We also reiterate full year adjusted EBITDA loss guidance of negative 14% to negative 16%.
Which implies approximately.
<unk> negative, 20% adjusted EBITDA margin in Q4, which factors and growth investments we are making.
Yes.
Of our updated guidance of $195 million in 2021.
We expect a $134 million from vertical software segment and.
$61 million from the insurance segment.
Overall year over year growth is expected to be 170%.
On the right side of Slide 10, you can see our anticipated 2021 revenue distribution is largely in line with previous guidance.
Approximately 90% of our revenue is expected from our recurring and reoccurring revenue streams from our vertical software platform and insurance, which only approximately 10% of revenues from non reoccurring post move transactional revenue.
<unk> SaaS revenue a subset of our vertical software pricing and monetization has.
<unk> has increased from our.
Anticipated approximately 25%.
To approximately 28% of total 2021 rabbit.
We continue to see strong growth in <unk> SaaS revenues by up selling additional modules to companies.
Expansion into new verticals and software the pricing increase.
Okay.
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 negative 14% to negative 16% adjusted.
Adjusted EBITDA loss margin for the year.
I'll now turn the call over to our Chief operating Officer Matthew Nagel.
And update on our key performance indicators for Q3 2021.
Thanks Marty.
Hello, everyone.
Jumping with Republic Kpis.
Here on Slide 14, Q3, Kpis were strong beginning with companies we saw growth in the average number of companies in the quarter to more than 20000.
Which is up 90% year over year.
And also growth in the average revenue per company to $1022 per month, which is up 54% year over year.
We continue to generate more revenue per company in a number of ways. We sell in more <unk> SaaS modules. We help these companies grow we get access to more transaction volume, we help their homebuyers with more services and we rollout our insurance offerings to more states, where we generate more revenue per sale.
We believe growth in new companies will slow down in Q4 and moving forward.
There were unusual positive impacts in 2021 gear.
As inspectors coming back online after Covid.
Seasonal fluctuations will naturally drive faster growth rate in Q3, and the upcoming Q4.
We also saw a nice increase in companies from our marketing services Division, which is anchored with the 12.
That division has ramped up a move of marketing product for small businesses and is adding more companies.
With a smaller revenue per company.
In Q4, <unk> is expected to add approximately 500 companies, but their revenue per company is lower than our average. In addition, we expect seasonally lower revenue in Q4 as such we expect revenue per company to be lower in Q4 than in Q3.
Roughly in line with our typical seasonal decline.
On slide 15.
Second on Slide 15, we continue to see strong growth across all types of monetize services, we increased to almost 330000 monetize services for Q2, representing 66% year over year growth and saw a $144 per monetize.
Service of 48% increase year over year.
Importantly, the growth in monetize services is coming from key services, we are focused on.
Such as insurance, which results in higher revenue per monetize service.
As we continue to expand our insurance offerings and a more states and grow home warranty. We expect the average revenue per monetize service to continue to increase overtime.
We expect a seasonal decline across these two metrics in Q4 as is consistent with previous years.
Let's now jump into additional disclosure related to our two operating segments.
First I'll update on vertical software and then Adam Cornick will talk about the insurance segment.
Turning to slide 16, as you know we are a leading provider of software to small and medium sized home service companies across a variety of strategic and fragmented vertical.
This includes our ISN software, which serves home inspectors.
Flow of Phi in the mortgage space Rhino.
Brian I'll entitle higher helper and moving.
And I roofing.
These are offerings helps small and medium size home services companies grow and run their businesses more efficiently.
As we invest in product development, we are able to layer in more modules and offer more products and services, improving our value proposition and growing our <unk> SaaS revenue.
Because our SaaS plus transaction monetization model. These companies are particularly valuable to us.
As such we have strong unit economics.
Which allow us to continue to invest in sales and marketing and product and technology to drive continued rapid growth.
Turning to slide 17, we see why our offerings are popular with our customers first we offer best in class solutions tailored to the specific vertical and because of our SaaS post transaction economic model, we're able to invest more than others and product development.
Second we help these companies stand out provide a better experience for their customers and improve their own NPS scores. We allow these companies to help with more than just their particular service, but to provide our co chairs service to their customers to make the entire move easy.
Third part of our strategy and operating across multiple home service industries is how we link them together when.
When we meet consumers from a home inspection company, we're able to drive demand to moving Capex now but were introduced at the point of the home loan.
We can help the consumer schedule, an inspection or find the right title agent Baidu.
By driving demand to our software companies not only does it generate more revenue. It also makes our software very sticky.
I'd now like to turn to slide 18, and discuss the financial performance of the vertical software segment for the third quarter of vertical software contributed $42 3 million in revenue.
This revenue on the 13% is nonrecurring post move transaction rather clear.
Clearly the revenue in this segment is predominantly recurring and reoccurring revenue.
As a reminder, <unk> will be layered into the vertical software segment fourth quarter financials and as noted in our announcement, we expect <unk> to contribute approximately $2 million.
<unk> SaaS revenue in Q4.
The margin profile of the segment is also strong with a healthy 42% contribution margin in Q3, highlighting the strong unit economics of the business.
In Q3 vertical software had an 18% adjusted EBITDA margin.
As we look to 2022, we may allocate more corporate cost based on G&A utilization to each segment.
Based on our preliminary work, including these costs would have produced a low double digit adjusted EBITDA margin in Q3 four vertical software.
Despite aggressive product and technology investments.
As a reminder, our revenue has a seasonal element, where we would expect lower segment revenue in Q4 versus Q3.
And as we continue to make investments the combination of these two factors would point to a lower adjusted EBITDA margin in Q4.
Overall, we are very pleased with performance of the segment, which highlights our strength as a vertical software company with rapidly growing predictable and recurring revenues.
I'll now turn it over to Adam Cornick, President of our insure Tech Division.
Thanks, Matthew with this segment view I'm excited to be able to share more detail about our insurance business as we believe in one of the fastest growing companies in the insurance industry.
With durable and unique competitive moats and high margins that confirm what we've been communicated at.
We generate revenues largely through distribution commissions and fees.
Here on slide 19, let's revisit our insurance business and strategy.
As you know porch. There are vertical software platform has a low cost and early access to home buyers as well.
Always unique property in household data for.
Fortunately for us the business in insurance is largely won or loss based on timely and low cost access to demand plus unique and important data for my understanding with.
You leverage these fundamental advantages to the fast growing insurance business with a capital light structure.
In addition to our insurance agency I believe across all 50 states.
Happily our own insurance products under the whole life insurance back in 10 states today.
We have recently layered in American home per Se.
Warranty company to help fully protect our customers' homes similar.
Similar to insurance, we have the ability to leverage proprietary data about the properties some pricing warranties more effectively over time.
Additionally, a brief update on TLC the regulatory process is progressing.
The pace, we are seeing we expect the acquisition to receive regulatory approval and close in mid 2022 to date no material issues have been raised during the process.
Turning to slide 20.
During Q3, the insurance segment had strong financial performance.
Gross written premiums were $108 million, representing more than $400 million annualized run rate setting.
Segment revenue was $20 5 million to approximately 19% versus the premium and now over an $80 million annualized run rate.
Again, we derived a significant majority of this insurance segment revenue from either an insurance carrier or reinsurance partner commissions and fees.
We aren't providing further breakdown revenue below the segment.
We also arent providing year over year segment growth as it isn't a clean comparison.
In 2020, and you are still expanding our agency in that time. Some revenue there is still per lead.
Into the different operating segments in 2020.
As of Q3 2021, those legacy revenue streams are de Minimis.
As you see we had a strong 77% revenue less cost of revenue in Q3.
Which means you said gross margin.
Contribution margins were 54% and adjusted EBITDA margins were 27% in the quarter.
As things normalize and adjust for potential official corporate allocations. This quarter would have been closer to 22% adjusted EBITDA margins as these metrics clearly show. This segment is capable of producing significant value support.
I'd also note that our insurance business has some seasonality.
While conditions are currently across the year fee revenue is recognized when policies are sold.
This will show lower revenue less cost of revenue and contribution margin in certain corridors, such as Q4 with Q3 being the seasonally.
Our modeling strategy designed to minimize volatility these capital requirements and we'll continue down that path.
As we layer in CSE accurate inventory approval, our intent is to move it towards purchased reinsurance.
Depending on the reinsurance market is possible that we will only be able to see a portion of the premiums during the stub period.
This could create a short term couple of point drag on revenue less cost of revenue and contribution margin to late next year.
Our efforts will be towards moving <unk> into our reinsurance system day, one close.
Briefly on insurance Kpis at the end of Q3 EBITDA.
Approximately 293000 policyholders and regions you can average at $208 million of revenue per customer per year.
On a rolling 12 month basis as of September 2021.
Had an 88% customer retention.
Now in 10 states with our insurance products and continues to be on track to meet our expansion targets within a year. After the completion of the HMA acquisition.
Turning to page 21, we want to highlight again, the capital light nature of our insurance operations.
Overall today with our carrier business, we see approximately 90% of the premium VR quota share.
Our system is capital light.
With lower volatility with unexpected risk levels in <unk>.
<unk>, we had excess of loss reinsurance to when the expected losses.
This model allows us to have more control over the insurance.
Insurance products, while still generating distribution revenues and your capital light approach Dr strong reinsurance partnerships.
Having control of the product generates higher performance higher conditions in faster growth over time.
Also important so we can use our proprietary property data to improve pricing.
Turning to slide 22.
Gotten questions about the impact our proprietary data to have over time and I'm excited to share the size of the opportunity as.
As we've discussed before data as the engine with the highest quality pricing and underwriting when we anticipate having preliminary data integrated into the underwriting process for select states in late 2022.
You can see that in the mid handle.
Why does antigen freezing and finally firing might need to account for over 90% of industry homeowners' losses in systems and compliance failure account for nearly all the time.
Once your losses.
Each we have a clear path to improve their segmentation and better pricing.
When the hail losses, primarily driven by roofing that correlation to responsibly.
Wider damages, most often tied to one or two of your family here.
There is often do you foresee appliances wiring and warranty loss to appliance for system build.
We have proprietary data that helps each of these areas for these quality make model aging appliances and systems et cetera.
Yeah.
We are investing our data platform and pricing teams with the goal better personalizing policies for each customer this.
This can improve margins and allow us to lower prices for the right customers accelerating.
I am excited about our meaningful progress and the size of the opportunity.
Vaccine.
Thanks, Todd and thanks, guys.
So I will recap us, but again the excellent third quarter, we delivered strong financial performance.
<unk> costs and delivering our first profitable quarter, while also growing nearly 200% year over year.
We raised our full year revenue outlook as we've talked about continued momentum with our kpis that are making strong progress strategically.
We've announced three acquisitions, expanding our vertical software footprint, adding home warranty services and positioning for continued fast insurance expansion.
We're creating significant strategic financial and shareholder value through these acquisitions and are able to effectively absorb them given how our organization platform is designed.
We will continue to evaluate and execute on our M&A pipeline for the right opportunities.
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 key competitive advantages and lots of levers to drive growth in this massive market we're going after.
So with that the management team will now take your questions. Walter If you can please open up the line for Q&A.
Thanks, Matt first question comes from John <unk>.
Yes. Good afternoon, congrats on the excellent results and John I'm going to say, yeah. Likewise I just wanted to check on the vision behind the nationwide inspection tour I thought that was a pretty interesting announcement for you guys. Just curious how you define success. There I think last you guys said was maybe 30% penetration. So is there a certain kind of market share number you're targeting and then separate.
Lee is there a certain level of conversion you are looking to move people all SaaS Bay and on the customer access.
Yes, so for folks are aware we announced.
And the inspection industry.
100 pop up conferences over the course of this this year and so that team is well underway one of the thing. The math you had referenced is because of our SaaS plus transaction monetization model. It opens up unit economics and allow us to go and deploy dollars into different go to market tactics that other purple.
Software company, just wouldn't be able to afford and so front John what we look at it it's across every one of these different go to market tactics, but the other day what is what's the LTV to CAC and what's the return on capital that we deploy against it. So we can not only prioritize across our whole all ports group, but within each business and prioritize.
Protos deploying money at the right the right way so what we look for and as we scale up of motion like that.
Just making sure that we sustain the unit economics and return on capital. So we can just keep going we would like to be able to learn to see if we can take that type of tactic into other verticals as well.
There were in the CF, it's just a scalable program, we haven't chartered talked publicly about the number of inspectors that were looking to add but certainly expect to continue to grow share in that in that space.
And then sorry, John what was your second question.
Just the conversion moving over to customer access fee.
I would imagine there is some kind of educational element probably baked into these pop up stores. What's great is that when you are together with these companies the small businesses in person and you're able to spend time educating them and building relationships. Both you cannot make a really big impact and how you are able to help these companies growth and so we invest that.
By doing so you are able to not only help them get set up with our software because it clearly can help these companies grow youre able to upsell all of these different modules into these companies, including helping them to be able to provide a better experience to their customers. The removing <unk> and so you are right now whatever tactic, we're using when we saw it in that sector.
The vast majority of those new companies are paying with transaction and SaaS fees, 75% to 95% of new companies still you are turning on.
Turning on transaction transactional pay.
And part and so I wouldn't say, we're beating that through bumper conferences is just that we were able to continue continue that motion. Okay. That's helpful. And then one follow up here just quickly on flow of Phi.
You are having the insurance.
Part of that fulfillment process I guess, the closing process for the mortgages you have to have obviously insurance tied into that.
To us about how that handoff Lux.
Basically what that process looks like for consumers going to fortify.
I I I am we are very excited about.
Not only getting earlier access to homebuyers.
But in all perfectly positioned we believe we are now with qualified to be able to layer in insurance because of the qualified software is as point of sale software for these mortgage companies and loan officers to help digitize that loan application process and help those consumers with homebuyers go through this complicated.
Thats been a very easy digital way one of the things you have to do when youre going through a loan a process to get insurance.
Acquirements and so right now you can upload upload insurance records bill to kind of check one of the boxes and application.
But for US it's obvious as the consumer if they already have insurance.
Celebrate uploaded but most don't at that point in time, and so we want to do is to be able to just make that.
That's very easy for them to say great.
As we continue to build forward eventually with homeowners of America, we'll have that ready to bind quotes. This is available for them. So hey, here's your price.
And make it easiest possible, but it's simply check a box and be all set and so as you start to link those together and Theres a lot of work for us.
Certainly to be able to bring that to life, but as we do.
That will create a very seamless process, which would be very in our view very highly converting overtime.
That's great. Thanks.
Thanks, Matt.
Sure.
Thanks, John next question Gunther again at benchmark.
Great. Thanks.
How are you doing.
Obviously, an excellent quarter.
Year, I guess, maybe I'll just start.
With you have bought a few things not this year.
So I hope my math is right here, but it actually if you look at <unk>.
Your updated guidance is basically implying that the guidance. This year all of the improvements have been entirely organic so can you just talk through kind of.
The underlying trends sort of what youre seeing going into next year sort of how you see that that growth continuing and then I have a follow up.
Yes, so we'll provide next quarter or 2022 numbers and formal guidance. So.
We're still kind of finalizing right now a few different things what investments do we want to make across all of the different different businesses. Both in terms of sales and marketing in terms of product and technology.
And so some of the choices that we make each year is okay. How many points of margin improvement do we want to manage the business too.
Offset versus what kind of investments do we want to make.
Growth versus profitability trade off now we talked about we want to continue to certainly we're going to show continued and very consistent progress in our adjusted EBITDA margin each year, but then we're going to invest aggressively as we can up to that constraint. So we will be able to share more in terms of kind of the specific numbers here next quarter.
Okay Fair enough and then just kind of a follow up to John's question.
The other perhaps incentive till you might have is just around pricing, it's something we've talked before about before and given the strength of the underlying platform and some of the education youre not putting in the marketplace. It feels like that is a lever that you now have potentially across multiple verticals.
So.
Talk about that a little bit would be helpful.
Yes.
Sure.
Okay.
Say that again, you'll have taken Matthew beforehand.
So we do have a strong value proposition to our companies we have very high customer satisfaction, we can offer things that others aren't able to do so we have started to move pricing in certain verticals. So some of the growth that we're seeing.
And revenue per revenue is from that and I think we also have a few more opportunities out there and then obviously given our ability to invest aggressively in product and development.
Have opportunities to add modules and expand our value prop to where we think price can be one of those one of those levers over time to help us to grow.
Great. Thanks, very much guys I appreciate it thanks.
Yeah.
Thanks. The next question comes from Jason <unk> from Oppenheimer.
Thanks, maybe just follow up and then just a question around insurance. So I think if you do the math and tell me this is right.
On a full year basis organic growth would be about 27%.
And just as that as that Ryan just I.
I mean, any reason and kind of.
Early in this year, you didn't see as much home inspection.
As you would've liked because of that market. So maybe just talk about how that 20%. This year could have been influenced by.
The lack of home inspection of what that means going into next year for top of funnel and then second I appreciate the added disclosure.
Do you think you'll be able to help us kind of get from on the insurance side from gross written premium kind of like down to revenue. So I think you told US 180 minor revenue.
I think reinsurance is 93% that implies like Cogs of 87, but yet you don't get to 'twenty one so if.
If you can help us on this quarter that'd be great otherwise.
If we can get to step through a few in a future period that'd be super helpful. Thanks.
I'll take the first and then.
Adam or Martin do you want to take the second on insurance.
That's good.
Great.
Real quick on the organic side, we don't break, Jason the or organic quarter by quarter because again.
As we acquire and our growing much that was full year to 27, the math for the full year off of the base of 85, yes. So so on on that.
Yeah. It depends on what what number you want to use for 2020, obviously, we did $72 million of revenue in 2020.
We think that 85 is a reasonable pegged for last year, because obviously 2020 was such a strange year with with Covid.
Over the last year was 72. This is the best slide here to be able to break out kind of highlight here is the revenue that we have layered in from you see on the right inside <unk> America HP up in the insurance segment were $33 five of that $61 million with layered in from those acquisitions.
And then $26 million of the 134 from vertical software layered in from D 12, Brian on <unk>. So that the disclosure was we do next quarter, we will be highlighting not only just year over year growth all up but also off of our 2021 pro forma so if all the acquisitions that closed January.
<unk> 2021 what we're looking at from a growth to next year and we feel good about how the business is set up for strong underlying organic growth.
Marty do you want to take the second question.
Yeah, sure, Matt decided and I can talk about that.
So we don't we don't break down any of the details and insurance below the segment level.
And obviously at the different businesses are slightly different but I believe Matt mentioned about 20%.
Our revenue was about 20% of gross written premium and obviously very that's a combination of both commission and fees, but I think that's a good way to think about it is that with the way we operate around 20% of their sugar premium is what tends to flow through as revenue premium plus the SaaS and paas.
Does that tie back to reinsurance.
That's why I'm asking so right now when we sell as an agency. So in terms of the agency we've talked about how we get around 13% to 14% commissions. So part of our members on the 40 states that we're not operating our own insurance products today will sell third party carrier insurance products and Thats, Our average commission.
Right when in the 10 states that we sell our own insurance product here, we get about twice that in terms of our commitment towards mixed the point is that virtually all of our reinsurance segment.
And it shakes out and that also all of our insurance segment were getting around 20% of gross written premium flowing through revenue and the reason Jason Thats something we just wanted to highlight is occasionally we still get questions on the.
The revenue and the economic model tied to insurance and the key thing we want to stress and highlight is.
Our revenue is this distribution commission and fee revenue. This high margin revenue that flows through from that gross written premium that ends up on our P&L.
Hey, Jason.
Jason <unk> from Craig Hallum.
Okay.
Two questions for me on just the segment disclosure so while it doesn't have a contribution margin can you talk about warehouse, both possibly Asian margin goes up over time, how does that impact or the two segment vertical top line right.
You also gave the disclosure on EBITDA margin on each segment curious if you can talk about where those two figures can go over the long term.
Yes, you bet you can actually get a sense for the two segments right now that the the contribution margin for both is fairly similar.
No insurance in this particular quarter as Adam talked about in the third quarter tends to have a bit higher margin just from seasonality. So this would be a higher kind of the higher point from a margin perspective for the insurance segment, but all up we expect both of them to continue to be strong obviously as a company we are guiding to 40% contribution.
Margins for the full year and that thorough.
Fairly well balanced across those two segments from.
From an EBITDA margin perspective, our long term guide is 25% long term EBITDA margin targets.
That could have an opportunity for us to start even a higher bar, but what we're trying to communicate.
Based on those those long term targets is that we want to even long term continue to invest aggressively in product and technology to be able to drive growth and to win at the end of the day.
So for both of those I mean, you can get a sense for the insurance segment right now.
It was 27% adjusted EBITDA margin.
We talked about how we will have some additional kind of shared expense flow through as we look to 2022, but even adjusted or normalized for that would've been around 22% adjusted EBITDA margin, we haven't broken out and kind of broken up our long term margin targets yet from each of those two segments, perhaps something will do over time, we haven't done that yet.
Okay.
And then a follow up for me, maybe this is better for Adam but.
Six seven months in the HOA now just curious if you can talk about kind of what the findings of the first couple of quarters with HOA now into all of them and I know you talked about layering in a lot of the data kind of exiting 2022, but curious if you can give us.
Hi, good to what data youre already leveraging in that insurance football.
Yes, I can talk about that.
So yes.
So we are really excited about the data. So first I'd say the acquisition has been going great. It's wonderful to have the HOA team on board and you can see that come out in the geographic expansion as well as the growth rate.
In our grocery and premium that's probably the most east coast topline metric to think about for that business.
And I think about the data.
One thing to keep in mind is that you use the data and pricing.
Need to file it in every state with the regulator and get regulatory approval to use it which is something we're very familiar with doing it.
So we have some exciting data I think one of the examples we talk a lot about when we talked about was you talked about both roofing price of a roof is on the surface of the home is a common way that apparel anchors. The home then we have a loss the average escape of water and water heaters can often be the cause of escape of water and so we have.
It offers are really excited about using them, but we're not using them yet because we have to go through that process to work with the regulator to get that approved and implemented in the state. So those are some examples of things we're excited about and we want to get to market as quickly as we can.
Thanks. The next question comes from Mike.
Hey, guys congrats on the quarter and progress two questions one.
I think it was slide 14 that the average number of companies.
Really up nicely year over year again.
Anything to call out there.
And then secondly, Matt.
<unk> done some acquisitions clearly.
Is there any acquisitions, that's not integrated with moving concierge, yet that you are kind of excited about it and looking forward to getting that integrated.
Yes, why don't you take the first part and I'll take the second part yes. Thanks, Mike.
We are seeing the acceleration of a number of companies.
Obviously exciting that growth is exciting to us we talk a lot about how we're able to invest in sales and marketing to acquire new companies.
And I did mention one of the areas. We did see a nice increase in company is engaging with our marketing group.
And we do expect good.
Ongoing growth.
We do expect as an example qualify we'll bring on another 500 companies in Q4.
But as we have.
Said before we don't expect to see the same rate.
We have been saying there's been a number of tailwind for us this quarter, but we do expect it to continue to grow and we are.
Excited about it.
And then in terms of some of the acquisitions, Mike Yes. There are a few things where we have not yet launched the kind of the key revenue synergies. So for the Rhino software acquisition in the title space, we have not yet turned on transactional monetization. The teams are working on that to be able to layer in.
Closing checklist and to be able to be able to connect with those homebuyers, but thats not yet launched but still has in front of us obviously the floor by acquisition just closed recently and so we have not yet launched.
Insurance into that loan application, but the teams are already starting to kick off in the planning process there.
From a from a services perspective American home protect in the home warranty that is something that we will be integrating as another offering to the home buyers who have not yet launched warranties, but again teams. Our teams are working on working through that.
Great. Thank you, yes, you bet.
Thanks, Mike next question is from Ben from Canada.
Hi, guys. Thanks for taking my question.
Thanks for the segment disclosures Super helpful.
So maybe I was wondering if you could help us walk through the revenue ramp and the expense rollout.
As you break into new states on HOA.
Should we be expecting any significant revenue in 2022 from the states that have already launched in 2021.
Maybe I'll take I'll take it briefly Adam if you want to layer anything. Please please do.
But it's a great question, Ben So I just want to set expectations. When we do launch a new state.
<unk> business.
Business, we will start in that state with conservative pricing.
And so we want to be able to get flow coming through at the right pace. So we can learn and then as we are getting that kind of data feedback loop, we start to build a normalize the pricing down to where we think is the expected an optimal place to be able to price based on our based on our models and that then starts to turn on turn on more.
And when you start to grow that I would say generally that process takes six months or so after relaunch, but it's no it's not black and white, that's based on when you get appropriate learnings and to make sure that the <unk>.
<unk> are correct for that particular state before you really increased the pace. So it will vary I would say on state by state. Yes, we do expect some of those new states that we launched last year have certainly helped and impact 2022. So yes, certainly I would say that would be the case and additional states.
Some of those dates.
Talked about we'll continue to launch more states here as we wrap up this year and we look into next year.
So depending on how quick quick.
Feedback loop is we'll see an impact from some of those new states awesome.
Okay, Great. That's helpful. And then on the insurance revenue. It is clear that you guys are kind of exceeding our initial expectations there.
Do you have anything to add on kind of a lost <unk>.
Revenue in the two quarters since HOA acquisitions close is that still kind of in line with the million dollars a quarter you were expecting initially.
I don't think we ever broken out specifically in terms of what it was going to be.
The first thing, obviously, you actually breaking out insurance revenues.
I would say, it's aig's continues to perform well.
Obviously in 40 states.
<unk> is our insurance agency right, we don't have our own insurance product and so clearly that is the only offering the consumers in those states and even sometimes in states, where we have homeowners America, we want to lead with our own insurance product, but often consumers will still want early sometimes consumers will still want comparison and will use our agency we.
Homeowners America does not offer auto or umbrella or other policies. So when you're trying to offer multiple products, we'll lean on our agency talk for multiple products. So it continues to grow nicely for sure okay, great excellent. Thanks.
Thanks, Bob.
Next question is coming from a moderate activity.
Hey, everyone. Thanks for taking my question and I'll get to see you guys.
So I wanted to touch on.
Some of the softening of the reinsurance market that you guys expect to see next year I guess how.
How do we how should we expect that the impact from the Kpis you guys presented here this quarter on the insurance segment.
Yes.
Yeah, I can take that so as we mentioned I think Matt and I talked about this now we're well positioned reinsurance is an annual negotiation.
And through HOA, we have a long track record.
15 plus years.
Success, one of this nation and strong partnerships, the reinsurers have experienced losses, not less losses that affect us HOA banking.
Zinc hurricanes.
Outside of our footprint floods in Europe, however events.
The stack of the reinsurance market.
Basically what we expect to see is just a hardening of that market, where reinsurers are focused on the exact kind of risks they want what our appetite is.
And so that will take some effort from the team, but we think we're really well positioned to work through that because we have these deep partnerships and we have a track record of growing HOA profitably and that's what we're doing right now as we work through the negotiation process.
So is it too early to fundamentally safety the exact financial outcomes, but we think we're well positioned as we can be and I feel great about the team we have worked out.
And the second part of your question, where could that you see that showing up what we we believe over time that we're positioned to be able to increase our commissions.
From reinsurers, but Thats, where you would see any potential headwinds, it's just what our reinsurers willing to pay for that seating ceded commission and so that's still TBD in terms of how that how that all plays on production.
Thank you and then second part of our I guess also had a question here.
You guys also mentioned that you are acquired companies saw 32% growth year. After the acquisition, how should we think about that year or two.
<unk> and beyond.
After their integrated them and then to the.
B to B to C transaction pipeline, yes.
Yeah. Thanks for that question, because that's a key point that I would want to make sure didn't get missed.
There's.
People asking about a proof point on the model working well I think that's a really great. One these companies again, we're growing 7% annually and the year prior to being acquired by porch, and then 32% year on year after and that's inclusive of some of the acquisition like Rhino I mentioned, we've not yet layered on transactional monetization right. So we havent.
Turn on any revenue synergies yet for a company like that.
We've talked about as we had gone public that 30% to 35% long term growth rate and that has been the growth rate that we would expect to build a sustained I think that.
With respect to expect to be able to sustain that growth.
As expected the one year jump and then kind of settled back into slower growth or anything like that but fundamentally I think we're able to change the revenue curve of those of those businesses as being part of the porch bummer.
Alright, Thats all for me, Thanks, Matt and team. Thank you.
Thank you we have one in from Marty.
Marty can you give an update on the.
Capital of the company as well as the cap table.
Yes, so as Youre all aware, we closed on our 425 million of convertible debt.
Right before the end of the quarter. So we ended the quarter with $415 million in cash.
And then.
We announced the <unk> acquisition on October, 27th, which which used approximately $76 million.
Of cash so we feel we're in a really good position for <unk>.
Continued execution of our organic growth strategy as well as our M&A pipeline into 2022, and that's exactly why we did that.
That debt raise in the third quarter.
With respect.
Back to our share count.
We've got full disclosure of that in our 10-Q, but we ended the quarter with $97 3 million of common shares outstanding.
There still is one 8 million private warrants.
<unk>.
Outstanding and we did see a significant number of the private warrants exercised during the third quarter on a cashless exercise basis.
Yeah.
Okay.
Thanks Marty.
I think we are rock on questions now and you can.
I will do so I just would want to say thanks, everybody for joining the call today again, another great quarter for the company.
The key point is though we feel like we're just getting started.
Everything feels.
Very much in front of us, but the team inspired up we're making great progress.
We appreciate the support and the interest will have a greater and have a great day.
Sure.