Q4 2021 Porch Group Inc Earnings Call
Yeah.
Good afternoon, everyone and thank you for participating in parts group's fourth quarter and full year conference call.
Joining us today are Matt Erlichman parts group's founder CEO Chairman.
In Germany.
Marty Heimbigner parts group CFO , Matthew Nagel parts group, and Nicole Pelley punch groups SVP of product and technology.
Before I go further I'd like to read from the Companys Safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995 that provides important cautions regarding regarding forward looking statements.
Today's discussion includes including the responses to your questions reflects management's views as of today March one 2022, only we do not undertake any obligations to update or revise this information.
Finally, we will make forward looking statements about our future financial or business performance or conditions business strategy and plans and anticipated impacts from pending or completed acquisitions based on current expectations and assumptions.
These statements are subject to risks and uncertainties, which could cause our actual results to differ materially from those forward looking statements.
We encourage you to consider the risk factors described in our SEC filings for additional information.
A reconciliation of non-GAAP measures the most comparable GAAP measures discussed during the earnings call. Please refer to tables included in today's earnings press release, located Portugal, Dot com and on file with the SEC.
To submit a question during today's presentation, please log into the webinar and submitted through the chat function.
Management will do its best to take all questions with within the allotted time.
As a reminder, this webcast will be available for replay shortly after the conclusion of this presentation on the Investor Relations section of the company's website at <unk> Dot com.
And the slide presentation will also follow up on the presenters commentary can be found on the company's website as well.
Today in addition to covering Q4 and year end 2021 results SEC filing information 2022 guidance and our Kpis. Our team will provide an update on productivity performance forward looking milestones, including future profitability.
And with that let me turn the call over to Matt Erickson, CEO , Chairman and founder Patrick Matt.
Thanks Walter.
Or are they going to be here.
It was an exceptional first year as a public company.
I want to highlight a handful of things.
Talking today.
First we solidified our position as a leading software provider to companies in strategic home service verticals, including home inspection mortgage title moving in roofing with market share are expected to continue to grow nicely in 2022.
Secondly continue to leverage these relationships with companies to meet consumers at advantaged and unique moment in time and provide a differentiated experience to help make moving in homeownership EDI.
We now offer full digital quotes nationwide.
Crop insurance local moving labor full service moving TV Internet and more.
In 15 States, we now offer our own insurance products and are integrating home warranty and maintenance services to create a full home protection plan.
Third our financial results were strong demonstrating our ability to monetize our platform.
Improved margins and execute the plan, we laid out when we went public in 2020.
At the start of pleasantly one our trailing revenue was $72 million and we provided forward guidance of $120 million for the 2021 year.
Our business finished 2021 and $192 $4 million in revenue, which was 166% growth year over year.
71% revenue less cost of revenue margin.
41% contribution margin.
And negative 13, 8% adjusted EBITDA margin.
In terms of revenue specifically.
Our homeowners of America business note in our year end closing process, we adjusted how we account for HOA. Its claim fee revenue under GAAP from gross revenue, which had been their historical approach to net revenue, which is the correct approach.
This was a $7 5 million adjustment to both revenue and cost of revenue that has no impact to HOA business fundamentals nor EBITDA.
And it obviously improves then its revenue less cost of revenue margins.
Mark is going to cover this further in his remarks, a bowl on accounting and financial disclosure.
So looking to 2022, the business is performing extremely well and we anticipate continued growth in adjusted EBITDA improvements on both a dollar and percentage basis.
Revenue guidance for 2022 is $320 million.
$302 5 million from the base business.
$10 million from the planned CSC acquisition, which we expect to close in mid 2022, and approximately $8 million in revenue expected from the planned acquisition of residential warranty services or our Ws, which we signed just yesterday.
We expect to deliver better than 400 basis points of adjusted EBITDA margin improvements.
As well as an improvement in our actual adjusted EBITDA dollar performance.
We're also guiding to $600 million in gross written premium for 2022 so.
So as compared to 2021 gross written premium is expected to almost double year over year.
And our deep dives later in the discussion we are providing for the first time, our expected timeline for future profitability, which you expect to manage towards in the second half of 2023 and for the full year of 2024.
And to reiterate our midterm target of getting a $1 $5 billion of million. So lots of sure looking forward to it let's let's begin.
So looking at slide six we are executing our unique strategy in the home services industry to provide software and services to select strategic verticals to help companies grow.
And by doing so we generate b to be recurring software revenue as well as gain early and ongoing access to homebuyers, who we hope to improve their home buying homeownership journey and generate consistent b to b to C transaction revenues by helping with the purchase of important services such as insurance.
Starting from the top of slide seven our priorities for 2020 to build on the success, we had in 'twenty 'twenty. One so number one to sell vertical software to more companies our core go to market.
Two to embed key services and consumer experiences into our software products and a variety of ways to get in front of more consumers and increase our <unk> to see transactions.
Three to continue to grow our insurance business, both rapidly and profitably, including launching new products and in new geographies.
Fourth continue to build out our data platform and start to leverage <unk> unique insights to improved pricing for our insurance and warranty products.
Five extend our key consumer experiences such as our App to consumers. If we get unique early access to in order to increase conversion rates and then lastly to continue to acquire select strategic accretive companies that deepen our competitive moats and accelerate the growth of these companies.
With that I'll turn it over to Marty Heimbigner, our CFO to discuss our Q4 and full year results and guidance for 2022 alright.
Thanks, Mac and good afternoon, everyone. Thank you for joining the call today.
Let's turn to our business and the results.
As we as we've mentioned our business is performing very well, we entered 2021 looking to exceed our 120 million started the year guidance.
Ending the year at $192 $4 million of revenue and 166% growth certainly was more than we anticipated at the beginning of the year.
And a testament to the great work by the porch group teams.
As you can see on slide nine the.
The year over year comparison.
Fourth quarter results were strong by every measure.
Revenue less cost of revenue was 79%.
Contribution margin was 44%.
And adjusted EBITDA margin was a negative 15%.
All improved nicely from the fourth quarter of 2020.
Revenue growth in Q4 2021 versus the prior year was up 172%.
The $1 6 million.
As we look at the comparison to previous guidance here on slide 10, our guidance number of 190 $595 million of revenue included the assumption of HOA as claims fee revenue continuing to be booked on a gross basis as it has historically been.
Instead, this estimate of $7 $5 million should have been reflected as a contract claims expense and not as revenue because of our reinsurance ceding.
That's our guidance number would have been $187 $5 million of revenue.
Had we reflected this change in guidance the actual financial results of $192 4 million of revenue for the year ended December 31, 2021 have appropriately accounted for this issue with no net impact on adjusted EBITDA loss is reported.
We finished the year at $192 4 million in revenue.
With each of our margin lines performing better than previous guidance.
Adjusted EBITDA finished at a negative 13, 8% for the year.
And an improvement from negative 25% in 2020.
Here on Slide 11, we show the substantial improvements in performance of the business over the last four years.
A 75% compound annual growth rate.
The <unk> improvement in adjusted EBITDA margin.
2021, our first as a public company was a transformative year.
Before we move to 2022, a few quick comments on the status of our annual report for the end of 2021.
Earlier today, we released our unaudited financial results for the quarter ended December 31 2021.
As further detailed in our earnings press release, and our form <unk> 25 filing from earlier today we.
We expect to publish and file our audited financial results in our annual report on Form 10-K by March 16 2022.
Of note ports group became a large accelerated filer as at December 31, 2021, and due to the expanded requirements associated with Sarbanes Oxley.
And the reduced filing time from 90 days to 60 days after year end.
We cannot file the Form 10-K today without unreasonable effort or expense, particularly given the added complexity of being our first year as a public company.
<unk>.
Regulations and the acquisitions porch is completed we.
We do expect to determine that we have material weaknesses related to our internal controls over financial reporting we expect the financial results reported in the unaudited financial statements included with our press release will not significantly change when we file our Form 10-K .
Rest assured we understand the issues here and have solid plans to address our internal control environment in 2022.
Now, let's turn to 2022, and which we fully expect the momentum to continue.
As Matt mentioned at the start we are guiding to $320 million in revenue and $210 million in revenue less cost of revenue.
What we use as a measure of gross profitability.
These figures in the following guidance take into consideration the announced but not closed acquisitions of CSC and <unk>.
We expect our revenue less cost of revenue margin percentage to be close to what we saw in 2021 with two slides impacts the plan CSC and <unk> acquisitions together do you have a lower margin profile and we expect some slight mix shift in services sold to consumers as we continue to be.
Convert better with movers, a bit lower margin service.
In terms of adjusted EBITDA, we are guiding to more than 400 basis points year over year margin improvement, which produces close to negative 9% adjusted EBITDA margin.
I'd also like to note that even if revenue performed well and exceeded guidance. We are also guiding to improved year over year adjusted EBITDA dollar performance.
We want to be clear that we are marching towards our long term adjusted EBITDA margin targets.
Related to our insurance segment. We are also providing 2022 guidance for gross written say about the ongoing performance and momentum we are seeing here.
Slide 14, you can see the strong year over year growth, we expect 66% revenue growth.
53% growth in revenue less cost of revenue.
And 95% growth and growth.
During our Q3 2021 earnings call.
We noted $226 million is our estimation of 2021 pro forma revenue includes a full year impact.
The announced acquisition with.
With the adjustment to <unk> revenue recognition on all measures. We are pleased with the growth we are seeing.
<unk> is growing rapidly and accelerating with strategic and accretive M&A.
You can see that we're in four years the business is expected to grow from $36 million in revenue to $320 million in revenue.
I mean, 3% compound annual growth rate.
At the same.
Okay and significant strides.
Percent target adjusted.
EBITDA margins.
We.
Another nice step forward in our <unk>.
Adjusted EBITDA margin improvement in our adjusted importantly, set us up to target profitable operations for the second half of 2023 and.
And a full year of 2020 for which we will discuss later in the call.
With that I'll turn it over to our Chief operating officer, Matthew Nagel to discuss our operating segments and Kpis.
Thank you Marty Hello, everyone.
I'll first jump in its share 2022 guidance for operating.
Segments, and then we'll look at our <unk> performance for Q4.
As you can see on slide.
Slide 17.
Most valuable strategic and recurring elements of our revenues are growing the fastest we generate revenue from our software through <unk> SaaS fees and transactions overall our vertical.
Revenue in 2022.
Of this <unk> software in circuit that could be nearly $100 million.
An increase of almost two weeks from 2021.
The other high retention and recurring portion of our business is insurance segment revenue is.
We expect it to be 40% of overall revenue in 2022.
This too is growing rapidly.
32% year over year growth to approximately $130 million in revenue.
Revenue, which was approximately 21% of our expected $600 million gross written premium.
This is particularly important as it demonstrates our expectation and being one of the fastest growing insure tech companies.
Considering the scale of our insurance business is highly valuable in its own right.
And it only represents 40% of our revenue.
Turning to slide 18, and our Kpis.
It is clear our business continues to perform well.
With companies, we saw growth in the average number of companies in Q4 to more than $24600, which is up from approximately 11000 last year or 121% year over year growth. If you will.
Four was approximately $700 per month, which is up 26% from the same quarter prior year.
And as you can see in prior years.
Phase III is there is typically less.
Transactional revenue due to fuel.
Through our homebuyers in the off season.
We've seen strong growth goals, namely mortgage.
We expect the growth rate of net new company, Alex to slow somewhat in 2022.
Previously.
So we go to slide.
19, we're excited to celebrate the milestone of having 1 million monetize services in the 2021 year in Q4, we continue monetize services with us.
<unk> 260000 for the quarter, which represents 53% year over year growth.
We saw $132 per monetized service, which is a 35% increase year over year.
Insurance is still the fastest growing service with moving essent matched and with a lot of momentum.
Let's now jump into additional disclosure related to our two operating segments.
Our vertical software segment state here on slide 20, we realized $35 $5 billion in revenue in Q4, which was $142 million run rate of this the majority of the <unk> SaaS fees.
Companies we serve.
Yeah.
EBITDA margins for this segment generally.
Our lower in Q4 and Q1, given the seasonal aspect of this business.
If you look on slide 21, our insurance business continues to grow rapidly and demonstrates strong margins in Q4 2021.
Written premiums were $101 million, representing more than a $400 million annualized run rate as we ended the year.
Segment revenue was $16 1 million. This represents approximately 16% of gross written premium.
As a reminder, there is less but still some seasonality in this part of our business with Q4 or Q1, typically being slower quarters, while commissions are prorated across the year fee revenue is recognized.
When policies are.
We derived a significant majority of our insurance segment revenue from insurance carrier commissions reinsurer.
Sure ceding commissions and fees. Thus as you see we have strong underlying margins, including 21% adjusted EBITDA margin.
Briefly on insurance Kpis at the end of Q4, we had approximately 304000 policyholders and we're generating an average of $211 of revenue per customer per year.
On a rolling 12 month basis as of December 2021, we had 89% customer retention.
We will now kick off the <unk> show this quarter first you'll hear from Nicole Kelly, who leaves our product and technology of Parch she'll provide a project update and then Matt will update on M&A include past performance as well as longer term goals and milestones Nicole over to you.
Thanks, Marc Good afternoon, everyone I'm excited to share an update on our <unk> platform, our consumer App and give a sense for where we're heading with our consumer experience. There is so much opportunity to help simplify the home are moving to improving and everything in between.
First I'll take a moment to share our vision for the <unk> platform.
Which is comprised of first the centralized consumer experience that integrates with our vertical software products.
<unk> transactional revenue.
And delight customers by helping make their move in homecare and number two a data platform that <unk> unique and proprietary insights about properties people and home products, which we used to improve the consumer experience and pricing a key services, such as insurance and home warranty.
Yes.
Our consumer experience includes Apis, so our software companies can integrate very specific services in a seamless native way.
For example, we've nearly completed embedding insurance and a flow.
We launched our consumer App in Q4 2021, as another way to engage consumers increased conversion rates and transaction revenue and extend our relationship.
Today's date.
The active in a closed data only available to consumers of home inspection company. So let's go ahead and jump into a quick demo.
Turning to slide 24, when a consumer can get the home inspection, we can encourage them to download the app by providing supplementary information that makes managing their home.
When a consumer get started with that we want to help them accomplish all of the services they need for their new home.
We believe our App will help increase the number of consumers we help with their move increase the number of services, we help them with and build a long term relationship with the homeowner.
The consumer is able to manage their entire home related chocolate here on slide 26.
We keep it contextually relevant.
When the consumer is moving in and what the next needs to complete here.
Here you can see that insurance is prioritized it doesn't seem to address any anti services anymore.
Yeah.
Protection of our App, where consumers connect.
Access to our home inspection report and find their home details pre populated based on this report.
Majority of inspection reports include appliance and other system information.
With detailed we already know about that system.
<unk>.
This is <unk>.
Easy for the consumer to keep track of their home.
Details and take care of their homes.
Looking ahead by knowing the model number of a furnace, we will be able to notify the use of a recall and reminding you that are in place different filter regularly with a length of purchased the right play filter, but their specific furnace.
I will say that it's been fun to see consumer reaction to this area of the App very high consumer delight and you need to what parts can provide given our proprietary insights.
But I think the port at <unk>.
To help consumers manage their home.
As we make the app available to consumers across more of our software products. We will track in store all the contacts involved in their homes.
Purchase and all the professionals the consumer uses ongoing.
We're just getting started on our App and have so much ahead in the coming years across our digital experiences. We are early days in terms of the opportunity to drive higher conversion rates.
So what's next here's a quick preview not yet this has not yet been built but its where were headed.
Yeah.
Only ports.
Has mortgage point of sale software.
Title software and inspection software.
This means that we can provide the end to end mortgage and closing process.
Complete with key services, such as booking inspection and paying at close.
Instantly attaching insurance with differentiated pricing and facilitating what consumers need for their new homes with that I'll turn it back over.
And because of the goal.
Certainly.
Cited about the next few years looks like and again to be clear everything that you saw there except for that very last line, but some of the divisions, what Nicole and her team are building everything else is live and it has been exciting to get that that early early very positive feedback for the day with two final deep dives.
As related to our M&A performance here on slide 31, we are providing more concrete data related to what we have mentioned in the past week.
We've demonstrated significant and.
And consistent ability to accelerate the growth of acquisitions, when layering them into the <unk> platform.
So companies acquired by ports in the first half of 2021 grew revenue on average of 6% in the year prior to the acquisition and an average of 28% growth in 2021.
In addition to this overall performance measure we thought it would be useful quite useful on a onetime basis to provide specific information on the five largest acquisition <unk> ever done.
In homeowners of America, Rhino American home protect and Portland.
As you can see on the slide the data largely speaks for itself.
<unk> has grown explosively over the year as post acquisition was 45% growth during the year after the acquisition with strong growth continuing.
And this is through a combination of layering in transactional monetization Amar.
Marketing strong unit economics, and scaling our go to market.
Yeah.
Homeowners of America was acquired in early Q2 2021.
Prior to <unk> the business had grown gross written premium at a 19% compounded rate in.
In 2021 growth almost doubled to 35% with strong momentum into 2022.
<unk> was acquired middle of last year with a similar story revenue growth has increased from 15% over the prior three years to 41% in 2021.
American home protect and then growing policies nicely at 26% CAGR for the three years prior to 2021 and is a prove that growth of 41% in 2021.
I'll say, we're thrilled about the growth, we're seeing post porch ownership and believe theres, a large opportunity for us to rapidly scale, our warranty businesses.
<unk> was acquired in Q4 of 2021 with a track record of 50% compounded annual growth in the three prior years as.
It's yet too early to show results reported in back to 2022, and we expect to embed insurance into the bulk buy experienced very soon and make the closing process better for consumers and loan officers.
This.
Well no. It is a substantial opportunity and we expect will be another strong proof point and the power of our platform and strategy.
I'm also excited today to announce the newest acquisition residential warranty services are arguably to us.
The <unk> acquisition was signed yesterday as I noted with the closing expected in early second quarter of 2022 approval.
Or this is one of the key company.
Operating the home inspection space, providing CRM software recall check software and specific inspection centric warranties to more than 1000 home inspection company.
They also distribute full annual home warranty products through real estate agents across the country, which helps us move our warranty business and strategy forward.
Reports it is clearly a great fit after working with partners together for many years and strengthens our market leading position in the strategic home inspection industry.
Our unique and great products and the inspection.
And warranty industries will plug right into our offerings with other changes will make to align with our vision and values.
Here on slide seven.
34 as mentioned, we expect RBS to contribute approximately $8 million of revenue impact in 2022 based on annualized $10 million in revenue.
This revenue is recurring and will be split between BTB software fees and warranty, which is part of our insurance segment.
Regarding growth our diverse has a three year CAGR of approximately six 5%.
If it is very unique and strategically relevant products and we fully expect to accelerate the growth rate of this business.
And lastly, we expect the business to be slightly profitable in 2022 and purchase price of <unk> was $33 million $29 million, which is in cash or slightly more than a <unk> revenue multiple.
So before we wrap I want to take a moment to share updates on our path to profitability and midterm revenue targets.
In 2021, we demonstrated strong revenue growth M&A capabilities and consistent ability to execute.
In 2022, we expect to leverage the advantages of our platform to continue to grow our vertical software businesses in our high margin and capital light insurance business as demonstrated by our guidance and gross written premium.
On the next slide I will provide some additional disclosure related to the target milestones.
Of getting to profitability in the second half of 2023 and 24.
And then on the following side provide an update on our $1 $5 billion midterm revenue target, we shared at our IPO.
So here on slide 37, and 2021 <unk> operated at 41% contribution margins, demonstrating our very high underlying profit potential.
At the 2022 guidance of negative 9% adjusted EBITDA margin, we are very far away from getting to operate profitably and.
As you can see in Blue and the Pie chart on slide 37, the majority of our 74 million.
Million of sales and marketing expense in 2021 is related to <unk> software and services, selling onboarding, supporting scenting and retaining and up selling to companies.
Approximately 41% of sales and marketing is tied to consumers. So they are moving concierge team all of our insurance agent teams and more limited direct to consumer spend such as by American home protects direct mail programs.
Here is the continued to create more self service capabilities, such as the ability to bind insurance online it creates opportunity for margin expansion.
As for fixed expenses, we have historically invest aggressively in product and technology and other fixed expenses as we build out our platform and invest for long term growth.
Yeah.
These investments include.
Key strategic bets such as the integration of data across our businesses into the <unk> platform.
Yes.
Proprietary pricing.
Improvements for insurance and the development and integration of systems for the <unk>.
<unk> and operating at scale.
As we look ahead, there is opportunity to slow fixed expense growth rates and continue to see margins improve.
So lastly here on slide 38, we wanted to revisit our previous midterm revenue target of $1 5 billion.
We remain confident in our progress towards this target in the midterm number of years and are ahead of our internal schedule. After a strong 2021.
As we discussed during the process of becoming a public company. We believe we are on the path to substantial revenue growth the growth in our existing software verticals entrants into new verticals likely through M&A and the corresponding impact the demand in the data creates for our expanding insurance business.
Lastly, scaling mover marketing for brands as well.
We have the right strategy and levers to build a large and enduring business and with our massive $320 billion Tam at $1 5 billion in revenue, we will be less than 1% penetrated against our opportunity.
In other words, we are just getting started.
To recap, we had a great year I'm fired up for 2022 and with that management team will now take your questions. Walter If you can please open it up for Q&A.
Thanks first question is from Jason <unk> from Oppenheimer.
Hey, guys. Thanks, I'll ask two so wanted to insure tech the market does not seem to like insurance tech lately because of risk and the view that these company. It may not really have the systems to properly assess risk, which is part of the offering.
The way you run your insured Tech business, you do sell the majority of that risk.
And so I guess.
How do you get that message out there to the investment community that.
While its insurance and it's not the same type of insure Tech model that others are looking at and then the second.
While we do appreciate the.
Multiyear kind of.
Kind of detail can you help us understand maybe organic or pro forma growth rates in the quarter and is or is that just something we need maybe to wait for the 10-K for thanks.
Not that you want to take the first one and then I can take the second.
Sure so.
The reality is we are operating a capital light.
Our strategy with our insurance business and I think some of your question. Jason is how do we get that out to the investor community.
One of the things that I can point to is in the next quarter, we will do a deeper dive and so we'll be able to share in more detail, what our insurance or reinsurance strategy looks like holistically.
What I can say, though is we felt confident in our ability to collate approach so long volatility approach.
Somebody details I can share now.
We renewed some of our reinsurance program Sharon January will renew another part in April so.
So we have a little bit of work to do and so as we get all of that wrapped together, we will share it with you guys.
What we're thinking about for 2022, the only thing I'll share is the reinsurance market has generally hardened.
And so it doesn't mean reinsurers are charging more and thats impacting pretty much everybody, including us, but even with that backdrop because of the way we operate our business, where we are going to have access to and we have access to proprietary data.
And we have historically done well from an attritional loss ratio perspective, we are an attractive partner and so it just it gives us confidence that the strategy we have employed.
Is the right one.
And then in terms of getting out to investors.
Maybe Matt I don't know if you want to add anything I am sure well nothing to add on the organic growth question I think at the end of the day, Jason just comes down to the results and our results are just dramatically different than the peers that youre talking about.
The the margin underlying margins revenue less cost of revenue margin is just dramatically different it's just a fundamentally different business. The amount that we seed out to reinsurers is fundamentally different and so part of this is just an investor education.
Story for us because it is significantly different and the underlying results in terms of the actual loss performance is just fundamentally different and so we'll just show that over time.
In terms of the organic growth question I will take that as we've talked about we don't break out organic growth specifically is one of the ways. We grow our business is through the acceleration of companies that we've acquired and we do believe that credit goes to porch and our platform. Obviously, we share today the acceleration we've seen of both largest math.
<unk> to just really provide.
The beta there.
I'd also note that there is an added benefit not only those acquisitions broke after they are also helping other businesses grow.
<unk> faster, but just to make sure that the data is super clear.
Mark already talked about.
If you assume that 2021 acquisitions, we had done last year had been admired as of January one 2021, or 'twenty, one pro forma revenue would have been $220 million based on our assumed revenue acquired at the time.
So you can compare that to $320 million in revenue for 2022, which is 45% growth or even compare it to $302 5 million, which would be 23 revenue with so we're just making the different data points available. So the best clear.
Thank you.
Next question is from James Hollins from Stephens.
Hey, guys. How are you thanks for taking my question.
So first one here just just given the improvements in gross margins can you talk to US again about some of the expectations around margin progression from here is it still kind of the same hundred bip improvement each year or are we kind of seeing a new higher jumping point, so you've talked about 25% EBIT and EBIT margins.
Overtime is that still kind of something to think about as far as long term target.
Yes sure.
Put that out there today in terms of the 25% adjusted EBITDA target for our long term, we continue to feel confident in the underlying profitability of that business. As you can see from not only that gross margin metric but.
The contribution margin metric from last year as well. So yes, we continue to feel confident in that 25% long term target.
Got you and then just one more here on the American home projects.
And then plus our Ws now can you talk to us about kind of what Youre envisioning there in the warranty business and how it is progressing and any synergies between the two that are going to kind of go go forward from there.
The warranty opportunity is significant strategically for the business.
Not only because we meet so many homebuyers early time to buy a warranty.
Yes.
Some of them at home.
That's right we know the make model serial number of appliances and systems clearly that gets to be able to assess risk more effectively.
And be able to price warranties more effectively.
I would also say.
Okay, though as I noted, we do think theres, an opportunity to be able to bundle warranties with insurance like we think that the future of how one can protect your home and be able to maintain your home more easily is different than what it is today, where insurance and warranty and then hany men Tech services maintenance services or just completely.
Bespoke, we think theres opportunities and I'm really excited about some of the work. The team is doing to start bringing those together and making it easier for consumers. So yes as I mentioned, we're very excited about the growth on the head there.
Gotcha Alright. Thank you guys appreciate it thank you.
Next question comes from Dan <unk> from benchmark.
Thanks, just a quick housekeeping I guess maybe for Marty.
So $7 5 million impact to HOA is that all does that annualized or did most of that flow through in the quarter.
The seven 5 million was for that the nine month period that.
Uh huh.
The HOA was part of our group we acquired them in early April .
And so it impacts all three quarters.
Okay got it.
Alright.
Two questions one.
I mean look you kind of laid out the premise that you haven't included anything from <unk> launch all of this other stuff in your forward outlook. So.
I know that you are talking about going to market in the back half of this year to the regulators.
Just help us think through order of magnitude of benefit from those kind of initiatives with DTC actually contribute meaningfully in 2000.
2023, just help us kind of think through that a little bit more I was going to say I wouldn't count on much ride. Those do you think 2022 because of the timing what our plans are b as we look ahead I mean, we are it's a big opportunity for us clearly as we rebrand some of our properties.
Into porch and that gives us the ability to start opening up new ways to reach consumers. That's obviously, a big opportunity it won't change our core focus of going and selling software to businesses and creating a unique early access to consumer but clearly that's another lever that we'll have at that point in time, So and then and the same with pricing.
As we think about leveraging the <unk>.
The data as I noted in our priorities for 2022. It is one of our top priorities to start to be able to see that come through and we're looking forward to demonstrating proof points in a future earnings call and is laying out very definitively how can how they can help us over time, so again the way that <unk>.
Recognize revenue for insurance I wouldn't expect it to have a material impact in 2022, but as we look ahead to FY 'twenty 'twenty three yes, certainly that will that will help us.
And then on our Ws and you actually kind of mentioned this a little bit in your response, a second ago and I know I've asked you this off the cuff, but know that.
So for example, like Zillow this move to an asset light model and you've got something that has a unique product that is sold through real estate agents. How do you think about like expanding your partnership opportunities given that you had sort of a unique data set that a lot of other asset light verticals in some respect right. We sell a software it's now 24000.
Companies, who are then are partnered with and use as a way to be able to meet their consumers and to help now to your point and question. Yes, there are larger partners out there.
Sure, where there are a very significant partnership opportunities and as we've gone deep into insurance and deepen home warranty and all these integrations across the moving landscape that clearly is an opportunity for us to plug those experiences into different partners and we have a lot of proof points historically are doing that really well so.
So more to come there certainly overtime.
Tactical Thanks, Pat Thanks, David.
Thank you and the next question is from Ben Sherman from.
Okay.
Hey, guys. Thanks for taking my question.
Eric.
Looking at your initial 'twenty two guidance this implies $312 million ex R. W.
Contribution.
It should be roughly at the midpoint of your framework for how we should think about the 22 revenues that you issued on the <unk> Guide.
Got it.
Kind of framework you laid out.
So have you been estimating $75 million in HOA claims.
Revenue I assume youre, including that some of the 'twenty two guidance framework.
So my question is now that you're including that Youre, not including those revenue in Europe , where the guidance is roughly at the midpoint of our <unk> framework.
How should we be thinking about this should we be thinking about your youre, increasing the prior range by <unk>.
$10 million or how the months you were originally having in there. Thank.
Thank you.
Yeah.
Yes, I mean, just to be clear, we haven't actually provided 2022 guidance before today, but.
The historical revenue recognition approach of HOA.
Going forward, yes revenue guidance.
Cars on higher.
But just to make sure the point that we included in the script was clear revenue guidance for 2020 to $302 five.
Hi.
<unk> 10 million from CSE, plus $8 million from from <unk>, which builds up about $320 million number.
Okay, and so and one of the.
Confused so you said that the $775 million impact was with spread through the nine months it wasn't.
Just in the fourth quarter.
Yes so.
At issue impacted our guidance for the entire nine months.
And we changed the accounting in the fourth quarter.
Quarter.
So that the full year is properly stated at $192 4 million of total revenue.
Okay excellent.
Thanks Ben.
Thanks. The next question is from Ken Wong from Guggenheim.
Okay, great. Thank you for taking my question My question.
Okay.
You guys have me okay. Okay yeah.
Hum.
Hello.
We've got an echo.
Okay.
<unk>.
[laughter].
Give me one second.
Why don't we go.
And well now go to micro <unk> for Northland and I will come back again.
Yeah.
Thanks, guys.
The average number of companies increased from roughly 11000 to 24 and a half thousand about 13500 can you breakout between organic and in organic.
And.
That number really didn't slowdown much this year and you've been saying, it's going to slow for a while how do we think about it for 'twenty two.
Yeah, I can take that out first of all we don't we don't report out on in organic versus acquisition acquisition by quarter, but we generally when we acquired.
That number.
So we have continued to see growth across our businesses just because of our focus.
Not only selling but also improving our product offerings.
For our software businesses.
We have been pleased with the success so far but we have indicated we don't expect the growth rate to continue at the same rate and so that is guidance we continue to give.
This quarter, we have the benefit of a full five which was <unk> hundred and that business has accelerated some.
Did better than we expected this quarter.
So we continue to see growth or we'll continue to see growth as we expected at a lower rate but.
But we're not.
Guiding towards a specific rate at this time.
Got it.
And then maybe Matt.
The porch app and some of the demos that you were described could you talk a little bit about that.
Go to market strategy for that is that going to be through the moving concierge with the email contacts how is the consumer going to find out about the ports yet.
I'll start the call.
You to layer in as well, but the same thing approach today, Mike that we have for interacting with consumers. So we're focused on meeting consumers' needs unique proprietary moments through the companies, we provide software to and that those companies give us very early access and so Nicole theme is focused on it.
Integrating both the <unk> and our other digital experiences into that those software close with those consumers. So for example, somebody gets a home inspection.
Let's go ahead and provide them additional supplementary information that inspection by downloading the app right and so that's a real incentive for the consumer to download that App and then to be able to make that rest of that moving process easier be the same type of approach that we think about with mortgage companies our title companies or others. As we go it will be embedded into that experience or the agenda.
Our approach has been it's been very successful for us.
This reinforced as an example.
Separate from that.
In the floor by the teams.
I'm working on really since we had completed the acquisition of qualify were getting small thing to do right. So as a consumer is completing their loan application and loan process, we'll know insurances.
Built in right. So those are different ways that we use or use our platform use the API is to be able to embed these different experiences.
Engine into those software costs.
Yeah, I'd echo that just.
Our plan is to go to market primarily through the companies that we provide software sale.
We live in a closed beta with inspection companies right now and just like Matt talked about embedding insurance <unk> by we make it really easy through the apps that you're expecting a report and get the details of your interaction with your my home area for infection customers. So just continuing to add more and more value to these customers and then be able to help them with all of the services they need it.
Part of their mills.
So we can build this long term relationship with those consumers.
Going back to Ken.
Great can you guys hear me Okay. This time.
Ken how are you doing okay fantastic.
Great.
So just a quick question. So really appreciate the long term EBITDA targets.
But I think when we think about your business you guys have been very successful on M&A and that remains a key part of the strategy I guess, how should we think about the willingness to prioritize that that those EBITDA targets relative to a strategy somewhat baked on M&A.
Well generally we have acquired companies that are not losing a substantial amount of money of EBITDA and so as we layer those companies and we wouldn't expect it to take us backwards generally and as we showed today as we accelerate the growth of those companies.
We are able to get them in line with generally with our margin targets and so our plan is to continue to do what we've done over this last.
Last year and changed its being a public company, where we're acquiring companies improving those companies and still driving to those same same long term margin targets. We don't think that that part of our strategy impacts with one competitors.
Got it so would that apply to let's say more of the tuck in type acquisitions, you guys have done or just as you think more broadly about just the financial profile of the company you guys prefer.
You probably wouldn't see a step back almost regardless.
B targeting companies that are going to take.
Achieve our long term targets. So we're looking for companies that are competitive advantages and strategic fit accretive.
We're gonna be able accelerate and are going to be aligned with our margin goals.
Got it got it.
And so far so far we are into Google.
It'd be tougher Marty, but you guys haven't been doing well.
Thanks, Ken.
Thanks for taking a quick one from the audience.
What are you seeing in terms of impact of the housing market on your business.
Okay.
So we.
Really not seen a tremendous impact from the Covid.
Covid pandemic impact, yes, there was some during 2020.
Through through about May of 2020, but now we've recovered at Ids.
Been relatively stable.
Back going forward so.
I would also just add that.
That we have a natural hedge.
Given the home inspection history, and the dynamics about home inspection industry works.
And given that's our top of the funnel that does create a hedge when the market was booming last year fewer homeowners as a percentage that we're buying homes got a home inspection and as the volume of general home transactional purchases flows more people are getting their home inspection and so the thing I suppose we should stress of note there.
There is.
We haven't seen a substantial impact and our guidance for 2022 takes into account what we're seeing in the macro housing market.
Thanks, one more from me.
Can you give any thoughts on needs or should the stock price has seen over the last couple of months.
Okay.
We will take care of itself.
I would say that our performance was strong across the business. We believe the results, including the growth in the margins between some of your guidance again speaks for itself.
Sure.
Maybe two more points.
I believe it's <unk>.
Quite clear to me that over these last three four months, we are getting lumped into buckets of companies.
Companies that have gone public, yes back insurance related company to Jason's earlier points real estate related companies.
And the fact of matter is across the different group companies there have been.
Many.
That has not performed and even struggled and.
And so we are getting caught in their underperformance, even though our business is a different model different strategy diversified revenue streams that are completely different margin performance profiles.
That our business is performing so my view is we deliver against our claims maybe a guidance of $600 million of gross written premium and insurance and separately $190 million of vertical software revenue and it's clear to me that the company valuation will take care of itself.
Thanks, Matt next question from Brian Thompson from <unk>.
Hey, guys. Thanks for having me on it for taking the questions like Okay Yep.
Great.
I guess I was hoping you can discuss the pricing power that you see across the vertical software brands more broadly I know that you recently pushed through some price increases there on the inspection side. So curious how that has grown.