Q2 2022 Porch Group Inc Earnings Call
Which I anticipate will be the final M&A deal for the foreseeable future.
Josh will provide more of an update on this acquisition later.
So a few thoughts before I pass the baton.
I want to start by acknowledging the continued pressure on the stock market reports and other growth software insurance and housing related companies like ours.
We certainly understand the shift that's happened in the market environment toward an increasing focus on near term EBITDA profitability.
We're continuing to make thoughtful decisions designed to create long term shareholder value, but with acknowledgement of this new market reality.
We're very confident in our strategy and the progress we're seeing.
Our team and what's ahead for porch.
Has it been disclosed previously and given my conviction I personally have purchased a meaningful amount of port stock over the last several months as have other directors on our board members and management.
The most timely update for today is that we have executed a mutual termination agreement on the acquisition of CSC insurance effective immediately with the CSE parent company Kabam.
While we're disappointed that we won't be working with the team at CSC.
Given the current economic and regulatory environments and given the importance of the capital light aspect of our business model. We're confident that this is the correct path forward.
The capital markets I'm Heartened since we first announced this acquisition agreement in Q3, 2021, and the cost of capital has increased.
Our management team is now able to consider other attractive ways to deploy the approximately $50 million of capital previously allocated to the CSC acquisition.
No we will continue to operate in California, but now solely via our insurance agency.
Our plans to bundle auto insurance with homeowners insurance in 2022 will be delayed past. This year as we had planned to leverage csc's auto products to launch rapidly.
Given our confidence at the time of signing the CSC acquisition that it would be close by the middle of 2022. We've included the revenue from both the CSC business and revenue synergies from bundling auto insurance with an HOA into our previous 2022 financial guidance.
And so as a result of removing this from guidance and other factors will discuss we are adjusting both our full year revenue and EBITDA targets for 2022.
So you can see here the updated guidance on slide six.
That's adjusting our full year 2022 revenue guidance from $320 million to $290 million, which would represent 51% year over year growth.
We now expect adjusted EBITDA to be negative $30 million for the year, assuming no severe weather events.
Mobile of CSC and corresponding auto insurance revenue represents the majority of these adjustments.
Also included in our updated guidance is the latest forecast declines in the housing market.
A reduction in spending on new growth initiatives, including the elimination of approximately 80 open roles in order to pull forward, our adjusted EBITDA profitability.
And lastly, it also includes one time Sox control and testing related costs in the mid single digit millions this year.
We've seen really good progress to date and are ahead of where we had anticipated related to the second half of 2023 profitability guidance, we communicated last quarter.
So with the increase in unrestricted cash by approximately $50 million given the CSE termination.
Reinforces the opportunity to strategically deploy capital for the benefit of shareholders.
We're continuing to look at this very closely and continue including both share or convertible note repurchase opportunities and more.
And looking to do that and consider that at the right time in the right manner to create the most value.
In the meantime, we will continue to focus our energies on what we can control, which is execute and building our business and demonstrating over time with performance how the company should be valued.
And we believe and I believe our long term value of our business will be significant.
As we fully rollout the app to inspection consumers.
And as we embed insurance into our mortgage software qualifier.
We expect to gain more access to many more homebuyers to grow our business or insurance warranty anymore.
As we expand our insurance operations into more states as we use more of our proprietary data to price more effectively and find ways to make our insurance products, even more capital light.
We believe we can build one of the fastest growing and most advantaged insurance companies.
We really are just getting started.
So those are the parts slide seven outlines our unique strategy that I'll hit on quickly.
We provide software and services to select strategic verticals health companies grow and.
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 the homeownership journey and generate consistent revenues with their purchase of important services, such as insurance and warranty.
Starting from the top of slide eight are.
Our priorities for 2020 to remain the same as presented at the end of the first quarter.
One cell vertical software to more companies, our core go to market, where it become deeply embedded.
Two.
<unk> services and consumer experiences into our software products and a variety of ways to get in front of more consumers and increase our <unk> transactions.
Which leads to three extending our experiences our digital tools and our app to consumers.
The more we can support homeowners with our unique services. The happier we are with our experience.
Or continue to grow our insurance and warranty businesses, both rapidly and profitably and Canadian launching new products and new geographies.
Five continued building out our data platform and leveraging Fortunately unique insights to improve pricing for our insurance and warranty products.
And then lastly related to M&A, our focus over the next year will be on the continued integration and growth of past acquisitions.
So with that I'll turn it over to Marty Heimbigner, our CFO to discuss our second quarter results already to you.
Thanks, Matt and good afternoon, everyone.
Starting things up with our second quarter financials, you can see here on slide 10, the year over year comparison of our results.
For the second quarter of 2022, Orange group recorded revenues of $70 8 million, a 38% increase from the prior year's $51 3 million.
Our seasonality look different than years past and we saw a strong ramp occurring between may and June instead of the April may ramp we have seen historically.
Overall June financial results look strong and we feel good about how we are set up for the balance of the year.
In particular in April and May we saw fewer consumers hiring movers, an optional service, while our core services, such as insurance and home warranty continuing to perform well.
Margins at the revenue less cost of revenue margin and adjusted EBITDA loss margin levels were 60% and negative 20% respectively.
Compared to the prior year, 62% and negative 20%.
As a reminder, our second quarter results.
<unk> expected higher insurance loss costs in Q2 due to typical seasonal weather patterns, primarily in Texas, which was in line with our expectations as well as a pull forward of certain one time Sox related expenses.
Moving to slide 11, you can see our vertical software segment results for the quarter on the left hand side.
We reported $42 8 million in revenue.
An increase of 25% from the prior year.
Most of which is <unk> software fees as we provide software to more companies.
The balance of which is transactional revenue we generate from the increased volume of consumers. We made from the companies we serve adjusted.
Adjusted EBITDA margins for this segment are 14%.
On the right hand side, you can see that our insurance business continues to grow quickly.
<unk> segment reported revenues of 28.0 million for the quarter.
A 66% increase from the prior year.
This year over year increase reflects contributions from the warranty operations acquired in the prior 12 months and growth in our insurance operations as we add more policies holders in more states and increased prices.
Adjusted EBITDA for this segment was a negative 18% in the second quarter compared to negative 15% in the prior year.
As I mentioned typically the second quarter is where our HOA insurance business is a higher volume of claims which increases the cost of revenue and thats lowered adjusted EBITDA margins.
This year's margins were impacted by a number of small weather events that took place in the quarter. In contrast to 2021, we do not see any severe weather events that would impact reinsurance renewals our pricing in 2023, which.
Which is a good news as we look ahead.
I am moving to slide 12, you can see our updated guidance for the full year 2022 as.
As Matt said this adjusted revenue guidance of 290 million now excludes the CSC acquisition.
And related our same branch revenue synergies from launching bundled auto insurance midyear 2022, with our unrestricted cash now approximately $50 million higher.
Not moving forward with the CSC acquisition was a cause of nearly the entire change in these adjustments to guidance.
Also in comparison to what we originally forecast this updated guidance now assumes a more conservative year over year decline in existing home sales for the balance of the year in line with the most updated market data.
As a reminder, we expect home sale declines to continue to impact only a minority of our revenue.
Insurance warranty and much of our <unk> software is largely insulated.
Even with a depressed housing market, our updated guidance will still reflect a 51% year over year revenue growth in 2022.
We are excited about what this means for the long term success of the business.
In terms of profitability I would also note that we are being more selective in our no new growth investments.
While focusing on internal efficiencies in order to drive to adjusted EBITDA profitability faster in 2023.
We feel optimistic and even ahead of where we expected versus our age to 2022 profitability guidance from last quarter.
We will continue to work with a focus on this timeline as we note tipping over into adjusted EBITDA profitability will be a catalyst for our business.
Adjusted EBITDA loss guidance for 2022 has been adjusted from $26 5 million loss, so a $30 million loss given the pull down in revenue and expected profitability from the auto insurance business.
And finally I would note that we previously guided to a gross written premium annualized run rate at the end of 2022 year to incorporate the impact of CSC, We will now switch to guiding the gross written premium year over year, which is now $529.
Okay.
As you can see from slide 12, our revenue contributions by business segment also remain unchanged.
We expect 40% of total revenues come from insurance and the balance from our vertical software segment.
Note that 70% of our revenue is expected to come from recurring revenue business segments like <unk> software fees and insurance.
After factoring factoring in slowing growth investments to drive faster near term profitability and a more conservative estimate of the housing market.
We now expect vertical software revenues of $175 million in 2022.
A 28% increase year over year.
Now without incremental M&A or assumed auto insurance synergies insurance revenues are expected to be $115 million in 2022.
An increase of 108% from the prior year is $55 million.
And with that I'll turn it over to Matthew Nagel, our Chief operating officer to discuss our operating segment Kpis.
Hello, everyone I'll jump in with public Kpis and commentary.
We had strong.
We have next slide we had strong kpis performance this quarter.
Beginning with companies on the left we saw strong growth in the average number of companies in the quarter to more than 28700 <unk>.
Which is up 67% year over year and a nice step up from Q1 2022.
Of this growth and companies.
500 comes from the recent inspection software acquisition.
On the right you can see we reported average revenue for a company of $821 per month.
Slower than the prior year, giving fewer consumers for company due to shifts in the housing market as well as new companies from recent M&A being smaller revenue on average given the arent yet integrated into the <unk> platform and monetization engine.
Despite the headwinds seen across the housing industry, where companies we serve primarily offering we believe we have substantial opportunity in front of us to drive revenue growth for our company in several ways.
We can sell and more <unk> SaaS modules like our recently released <unk> close.
Now Ashish.
We can gain access to more consumers and help them with more services.
And we continue to expand our insurance offerings and a number of ways generating more revenue and margin per customer.
Let's move to slide 16 throughout the second quarter, we continued to see strong growth.
Both organically and through prior year acquisitions across all types of monetize services.
We recorded approximately 332000 monetize services in the quarter and we saw a $158 per monetize service for the second quarter of <unk>.
34% increase year over year.
As we continue to expand insurance offerings into more states and build out the suite of high value services. We can offer to homeowners. We expect average revenue per monetize service to continue to increase overtime.
On Slide 17, you can see our insurance business ended the second quarter with approximately 379000 policies and.
And we are generating an average of $286 of revenue per policy per year.
On a rolling 12 month basis as of June 32022, we had an approximately 88% retention rate at our HOA business.
And with the recently announced expansions in Oklahoma, Delaware in Indiana, We now offer our own insurance products in 20 states.
I want to highlight the capital light nature of our insurance operations today with our carrier business, we cede almost 90% of the premiums and risk to reinsurance partners.
Which means.
System remains capital light and lower volatility with an expected risk levels.
We continue to make progress on structuring our proprietary data to utilize it for insurance pricing and we will update on this progress periodically.
Additionally, our management teams continue exploring opportunities to move our business to or closer to a 100% capital light model.
If we can do so we believe it would be a catalyst for the business not only because of the increased predictability and simplicity, but also higher margins.
With that I'll hand, it over to Joshua for our quarterly deep dive.
Thanks, Matthew nice to be here with you all and I'm excited to provide an update on some of the key metrics and progress we've made in the home inspection industry since going public.
We have continued to make fantastic progress and building out our platform.
We connect and sectors with complete toolset, they need to run every aspect of their business.
We also provide a variety of products that help inspector stand out.
Our inspectors can grow faster by spending more time in the field completing inspections and less time on administrative tasks.
Our platform offers CRM tools calendar functionality online bookings payment processing report, writing and much much more giving our inspectors of reliable and scalable set of tools that help automate parts of their business to drive growth add services and generate more revenue.
As our inspectors are loving it and our inspectors are loving it and continue to see much less than 1% monthly churn rate as well as strong NPS.
I'll share momentarily.
Our inspection platform now works with more than 10000 home inspection companies and monetize is over $2 2 million infections annually or by our estimate about 40% of all home inspections across the country.
As a point of comparison, our last previous public data point on monetization was in early 2021.
We're in 28% of the country's home inspections flowed through our platform.
We have made a lot of progress over the past couple of years.
This growth is due to the expansion of our sales and marketing efforts, introducing new products that fit a variety of types and sizes of inspectors.
Adding new modules that improve our value proposition and most recently M&A.
As a reminder.
Early in the quarter, we announced the completion of our acquisition of the home warranty and inspection services business from residential warranty services.
Which provides CRM and recall check software and inspection centric warranties to more than a thousand home inspection companies.
As Matt mentioned earlier, we also completed the acquisition of home Inspector Pro or hip in Q2 2022.
Hip is a smaller operation, but is considered a leading inspection report writing software tool and brings approximately 1500 home inspectors of varying sizes to our total company count.
We believe in addition to ISN hip is another leading software system used in the <unk>.
Section industry.
We expect this acquisition to be meaningfully accretive in 2023 once we have finalized the completion of synergy work, which includes integration into ISN Porsche moving <unk> in both payment processing and pay at close.
Here on slide 22, and 23 I want to provide an update on a couple of strategic initiatives. We are focused on.
We continue to invest in several exciting growth opportunities, including the delivery of our porch app.
So all infection customers, which is scheduled to begin rolling out more broadly at the end of Q3 2022.
We want to make the porch app.
The app to help consumers move and manage their home and.
And our infection data will help us make the app, a unique and powerful tool for homeowners homeowners.
Our inspector spend three to four hours in the home and recorded all sorts of detail about the home such as appliance model numbers roof, and furnace condition and key areas that need repair.
We can pull that data into the app. So the homeowner has all of the important details and to dues at their fingertips.
Our plan right now is to offer the app at the point of inspection download as the primary way to access the full inspection report.
Details about systems and appliances in their home and ready made to do lists of important repairs.
And with the acquisition of our Ws completed we can now offer consumers a recall check alerts.
So let them know if there is a future issue with appliances and systems in their home.
Strategically this helps us in three ways.
<unk> from getting introduced to a subset of consumers to being able to get in front of all consumers being able to help consumers with more services through another touch point and extending the relationship with consumers over time.
Our platform helps them sectors look good to their customers certainly the consumer App and are moving concierge help with this but so does our new products pay a close.
We are seeing good early adoption of this product as inspectors start to see how interested real estate agents and consumers are to be able to not pay for their inspection upfront, but roll it into the cost of closing.
Importantly for inspectors by offering this they are seeing between 20 and 60% increase in revenue per inspection by allowing cash strapped consumers to purchase more of their add on services.
Since the introduction of this module at the end of 2021, we have seen virtually no churn once onboarding is complete and these inspectors are seeing good growth as they attract more agents in more consumers.
Before I wrap up I would like to take a broader look at our vertical software companies, including <unk> in the mortgage space and Rhino and the title industry and of course, ISI and home inspection all of which are showcase here on slide 24.
These industry, leading offerings help small and medium sized home services companies grow and run their businesses more efficiently.
Because of our SaaS fee plus transaction monetization model. These companies are particularly valuable to us.
As such we have strong unit economics, which allow us to continue investing in sales marketing product and technology to drive growth. Despite the headwinds seen throughout the mortgage and title industries.
It is evident that.
Our investments across our platform results and happy customers demonstrated by our NPS scores of 64 60 to 87 for ISI and clarify on Rhino respectively.
All significantly higher than the average SaaS company.
In addition to strong customer service metrics, we continue to see low churn and strong growth in new companies across our platform. We will continue to share more on upcoming deep dives, including results of insurance integrated tightly into our mortgage software.
With that I'll turn it back over to Matt.
Thanks, Joshua and good update I appreciate it.
Certainly proud we've been able to have already aggregate approximately 40% home inspections, we monetize across our platform.
So huge upside ahead as we get to introduce some more of these consumers to help make their move easy provide more modules to these companies and continue to create advantages and insurance pricing.
Overall, we're pleased with our performance throughout the first half of the year.
Our focus at <unk> group is to produce significant long term value and continue to grow revenue and margins rapidly on our way to becoming a truly great generational company.
Well it would have been great through the CSC acquisition to provide our own insurance product in California and launch auto insurance. This year, we will continue to operate our agency and look for opportunities to out of bundled auto solution in the future.
Simply we believe the most important thing to do with the approximately $50 million would be purchase price is to retain it so if and when it's time to take advantage of the market we have ample firepower.
We believe <unk> 2022 we will continue to be an exciting time with several catalysts ahead, including the integration of insurance and qualify for a lot of the consumer App like Joshua talked about.
Our teams will continue to explore options to move our insurance segments to an even more capital light and shrunk system and opportunities to accelerate our path to EBITDA profitability.
As we move into the second half of this year in 2023 Im excited to demonstrate very clearly that our strategy is working organically and the wall M&A has been and will will be successful for us. It is additive to our engine will share more on that as we finish up the year.
With that the management team will now take your questions <unk>.
Can you. Please open up the line for Q&A.
We have approximately 30 minutes for questions, we'll start by taking questions. Unfortunately sell side analysts and attempt to respond to any other questions submitted through the hand off swaps all time permit this afternoon and our first question from me and today is from Cory Carpenter with Jpmorgan.
Hey, Matt Thanks for the questions.
I had two just first could you expand a bit on how you were thinking about potentially redeploying that $50 million of capital you've mentioned.
Prioritizing stock and convert buybacks and pursuing it but what about other options like maybe accelerating the geographic expansion of homeowners in America, even potentially to California.
Maybe I'll wait I'll, let you answer that and I'll come back with my follow up sure. Yes, I would say a couple a couple of thoughts around that one not ready to make any announcements today in terms of what we're going to go but we did make a note I mean certainly.
10 months ago doing a buyback stock or convertible note was not at all on our radar now clearly it's something that you have to discuss just given kind of where the market is and so so we are discussing clearly we want to deploy capital in ways that are going to drive the best returns overall and that's what we're evaluating on an ongoing basis.
I did also note that.
We are.
I would say being really thoughtful in terms of what the additional investments, we're making a new growth initiatives. We are very focused on making sure we get the business to profitability and the timeline that we had communicated in the second half of next year and so there's certainly obviously initiatives that we're pushing forward and we mentioned a number of those today, but.
Are we going to deploy that capital into pursuing our own insurance products in California, right now now that wouldn't make sense for us. So we want to get the business across our profitability line. I think that then opens up a lot of lot of opportunities for us to continue to invest.
Okay, and then just as a follow up could you help us a bit with some of where the primary areas are that you are pulling back on hiring and expenses and where we should expect that to flow through and see the benefits in the P&L.
Yes, Sir I can go.
Yes, no. The first point I'd want to remind folks we have.
Pretty high underlying margins and so the game is to not scale.
Fixed costs as fast as the top line revenue and so if you look back we do have we have been able to show a significant margin improvements over time.
But to your question, we are constraining fixed costs Mountain mentioned about 80 planned higher eliminations were being more selective in our product and technology investments. So youll see some there and we're also committed to keeping our corporate costs flat year over year, which is actually something we did.
The prior year and then some of it to we have certain cost centers as you think about <unk>.
Third party costs for Sox controls D&O.
Certain G&A areas, where we think we can get efficiencies over the next year that will help to drive profitability next year.
Thank you.
And our next question, we have coming from Jason Hoffman with Robinson.
Hi, everyone, Steve here on for Jason.
So just a quick question on costs in terms of.
Wanted to know how rising costs are impacting both close rates and profitability for insurance.
Summers and then secondly, I know you.
It did put on the slide a little info on the number of home inspections annually just wanted to get a sense of <unk> versus <unk>. If you can comment on what it looked like sequentially and then also last year to Q and if it's impacting your funnel for selling other products through that and thank you.
No.
Sure I'll take that and now you can add in if you like.
I think the first question was how are costs impacting claims are housing inflation impacting our insurance claims.
We will certainly have some impact as everywhere, we're seeing increase in costs. The thing that I would highlight though is we have had a concerted effort to do premium increases across our insurance business and so we are working aggressively to be ahead of those cost.
<unk>.
Now, even though we're working aggressively to be ahead of those costs. Some of those pricing increases do take effect over the course of the year, where we may experience some of the.
Higher claims costs.
Immediately.
Net answer yes, some impact that there's ways that we can mitigate that going forward.
And then I think on the second question, maybe if you could repeat it I think it related to.
Inspections.
For over a quarter.
Alright, exactly so you had put on the slide a previous slide.
Kind of a number of home.
Home inspections annually, just wanted to get a sense of this quarter versus last quarter, if you're seeing any sort of difference in terms of the number of home inspections overall and then.
Kind of how that's.
Affecting your ability to sell other products through that.
Thank you.
Yes, I can take that Matt.
So we've shared in the past that the inspection industry.
Did not see an increase in inspections at the same rate as the housing market saw a spike in home sales and so there is we've talked a little bit about kind of a natural hedge.
The home inspection space.
And the reason that this happens is that buyers may choose to waive the inspection contingency in a competitive market.
And as markets cool down homebuyers have more power to get more inspections.
And so what we're seeing is that some markets are starting to normalize while others are still.
Pretty hot and competitive and thus.
Fewer home inspections and so.
Overall.
Given our platform expansion.
<unk>.
Good progress on the metrics however.
Certainly a tougher environment and and Thats reflected in our guidance.
Okay.
So I think it kind of goes without saying in a more normal market, we would be growing faster.
And anything you would care to add onto that map.
I think thats right.
To summarize.
There is a natural hedge that we're seeing.
Our inspection business is clearly growing quickly look back the last couple of years and a quarter over quarter I mean, clearly it's Brian and then start question you that yes, we are able to continue to get access to more consumers and they will help more of them with services that continue to be able to increase conversion rates certainly that's happening as we noted in the call. There are these opportunities to yodlee is real step function.
Changes in terms of the level of access we can get the consumers and we've been spending a good amount of time there.
Just before we go to next question I want to loop back to Matthew to answer I think goes it's a good question and an important thing to note. We have been really pleased that the filings we've put forward the price increase filings for our insurance businesses. We put forward into important states have gotten approved at the levels that have been requested.
But like Matthew noted the cost impact to inflation, it's right away and then the price increase even as you have prices that you start selling at the higher price we recognize revenue over the next 12 months and so that will start showing up as we look for that helps topline and bottomline as that flows through.
But we are pleased with both the work our team has done to get the right pricing bonds in place and the approvals.
Great. Thank you.
And the next question comes with John Campbell with Stephens John .
Hey, guys good afternoon, Hey, John .
Obviously soft housing is kind of what it is you guys arent alone in feeling that pressure, but getting closer to that kind of sustainable point of free cash flow growth I think that would be obviously, a really important development kind of amidst this backdrop. So I don't want to go back to that EBITDA inflection comment.
Matt You had mentioned that you guys are ahead of schedule.
Again that really stood out to me I'm just I'm curious if you could shed a little bit more light on maybe the expected timing as well as to what extent that's kind of in your control.
Yes, well, we feel very much its in our control.
Get to the profitability just again, what Matthew said just to stress the point, you'll look back at 2021, when we last talked about contribution margins were up 40% contribution margin, which is net of all variable expenses. So the underlying margins of the business are really positive and we have been investing aggressively for growth obviously at the end of <unk>.
One world shifts a bit.
Getting to profitability that much faster is important and so theres a lot of things that we are doing.
New hires focus on key areas are going to drive more margin faster.
But yes, we did make a note John certainly consciously that.
We communicated last quarter second half of 'twenty 'twenty, three we will be profitable.
Feel like we're in a really good spot there.
We're far enough away from it.
We didn't need to change that milestone, yes, we built like we're making really good burst no against that against that goal and not to mention <unk> looks and more to come obviously as we as we go throughout this year.
Okay. That's helpful and then on the guidance I wanted to drill down on one part in the past you guys had said $190 million for the vertical software revenue.
<unk>.
Housing pressures kind of stiffening. There. So you are saying 175 now but in the past 190, you had said at one point I think Matt had.
Matthew had called this out last earnings call about $100 million of that was the <unk> SaaS revenue.
I'm curious with the guide from one nine to 175 was in that 175 is that $100 million kind of still steady or how is that holding up relative to the market share.
Sure, Yes, I mean, the good thing about the 100 million is recurring revenue with sticky software products that have very high NPS.
And so I think what Youre seeing is as we highlighted there is less transactions happening in the housing market. So we have less add backs to go and sell our services.
So we are incorporating that into future guidance and the point I would just come back to that even though it's a hard housing market.
The vertical software segment is still growing 28%. So we're still growing amidst a hard market just not as fast as if it were a normal market.
One thing that Marty had mentioned, though just to emphasize the point John is.
The specific service and the vertical software segment that.
That was the biggest.
Impact from the housing market was the number of movers that consumers hired during the during the second quarter and so that really falls into that transactional revenue within that vertical software segment. That's an optional service as things are more expensive people didn't purchase as much and we just have fewer consumers that we're obviously moving.
Versus what it would have been during that time. So that was that's on that transaction revenue side not on that be Samsung.
And Matthew to your point last earnings call, whether it's 90 or $100 million that is your true true SaaS revenue recurring SaaS revenue and putting a half of a SaaS revenue multiple on that I think is equating to about where the stock is today. So I hear you there alright, thanks guys.
Ill give you just a quick follow up to that just because you open the door, which is.
Ed.
I think we are.
Our belief is that we are so far past the point in which the market makes any sense because you're right. You can just look at our <unk> SaaS revenue and it doesn't make any sense just in this relatively small portion of our revenue and so again, that's what the name of the game Brussels for heads down execute build a great business.
We will take care of itself over overtime here.
Hi.
Guys. Thank you.
The next question comes from Jeff fan.
Jefferson.
Hi, Thanks for taking the questions.
Just a quick first one on guidance.
Given the change in an acquisition can you help us dig down into understanding kind of quote unquote organic outgrowth versus not because it seems like with the lack of.
Acquisitions that were a lot more just from growing the business.
Yes, I'm happy to take that so we don't report organic growth quarterly as part of our growth comes from accelerating.
Accelerating the growth of past acquisitions, which we view as a fortress contribution to the business performance, but we do provide them you did mentioned on last quarter the pro forma.
Number so.
21 of $192 million in revenue.
In 2021 acquisitions, we've noted over the course of last year. Those had been closed January one 2021, we talked last quarter about how that would've been around $220 million in revenue pro forma last year.
So we will go to $290 million in revenue this year with little M&A.
So backing out <unk>.
Paul.
It was around $8 million in revenue. We noted is expected for this year. So the full 2022 pro forma revenue down $282 million.
So really any way you look at it.
Very very solid growth, even in a harder housing market, but that that would be the data points that we communicated previously.
Okay perfect. Thanks for helping us frame late on that and then just one more on guidance I know you mentioned that the vast majority of the reduction was based on no longer including Cfe, but can you help us quantify you know macroeconomic changes versus.
CSC no longer being part of that.
Yes, the we haven't broken it down specifically.
Obviously, when we go into a year, we build in contingency and we.
CSC is an auto insurance in particular uninsured, it's something that we are I would say quite excited about so when we pull out CSC. Fortunately don't have to just CSD revenue. We also have to pull out auto insurance, which is something that we would have layered in this year and if you think about our over 300000 policyholders.
On the bundle rate we've seen.
To set our agency.
A substantial opportunity for us at the right time, but it won't be this year at this point, we will have to pursue a different path. So we talked about the majority the substantial majority of that.
<unk> is tied to CSC in auto insurance, and then the balance for updating or kind of the most recent.
Most recent forecast we are using as an aside the National Association of Realtors forecast is what's built in and assumed in terms of the housing market for the back out there.
Okay. Thank you very much Matt.
Your next question comes from Mike Grondahl with Northland.
Okay.
Hey, Thanks, guys.
Two question the first one.
The clothes that newer module.
What is <unk>.
Porch make on a close and what sort of the total fee opportunity.
And then secondly for Matt.
Matt on the $2 2 million.
Inspection transactions.
You kind of give us an update how you're thinking about.
The monthly fee tied to those it seems like you have a lot of pricing power at 40%.
Versus sort of the customer referrals, we're getting what's an update there.
Sure Josh the only take the first question and then I'll take the second.
Yes sure thing Matt.
Yes so.
The pricing on the payer closed module.
<unk> is essentially baked into the.
The cost of the home inspection.
And so it is not charged separately to the consumer it's part of the inspection service.
And.
The amount that.
The revenue that we generate.
Her inspection, where a payer close is attached ranges from somewhere between 50 to $75.
And so the key thing here, Mike I would I would say is.
When we.
Providing straight payment processing.
We would make almost 1% almost 100 100 basis points of economics.
And when we provide pay a close you can make.
10 to 15 times more than that and so if you think about that fee.
Ross the universe of home inspections, or you can look at our current universe of home infections or.
For the entire universe.
As a meaningful Pam meaningful opportunity for us and strategically.
We can help that can really move the industry forward.
Another reason that inspectors have to be on our platform.
Something that real estate agents and consumers are certainly going to work.
Yes, it's also.
Really nice timing for pay at close.
Because as we noted in our remarks.
That's allowing home inspectors to add on additional services as part of the inspection and so in a softer home sales environment Goldman.
Goldman sectors are looking for ways to generate more more revenue from.
Smaller flow of inspections.
Sure and then Mike to your second question around with monetization and the home section industry. The thing that I would want to make clear is that when we went public a couple of years ago, we talked about monetizing with either a SaaS fee.
Were transaction of them from a consumer.
And I don't know if it is fully clear, but I would want to use afternoon emphasized as we've added more modules for these companies.
That model has certainly changed where we're monetizing consistently with both SaaS fees and transactional revenue.
So yes, we provide a discount to one of the software module offerings and our inspection platform in exchange for getting introduced to consumers and we've gotten better and better at being able to help those consumers with more services.
Things that we're doing such as the consumer app to be able to help get an introduction to <unk>.
All of our virtually all of those consumers is a really big opportunity because now we can monetize again with SaaS fees and transaction revenue just that much more broadly.
Got it okay. Thank you thanks, Mike.
Your next question comes from Ryan Tomasello Kw right.
Hey, guys. Thanks for taking the questions.
Can you provide an update us broadly on the integration efforts across the platform, particularly the recent acquisitions and.
And the progress online and hitting the material weakness and then maybe you could talk about longer term plans for unifying the broader platform under one core brand and Thats something that you envision longer term.
Sure, Matt I can take that.
First fund.
And Marty.
I'll go through it.
Yes.
Sure.
Integration efforts I would say are going very well.
At a broad general level.
We have a playbook that we use to bring on teams get them integrated into the porch and connect them to some of our capabilities notably.
Our monarch different monetization.
<unk>. So I think overall, we're we're we're.
Right at about that one of our recent ones that we're excited about is embedding insurance into sulphide simplify the mortgage application software where folks have to get insurance before they can close so it's a perfect time and theyre going through the checklists and so the teams are very focused on.
Integrating insurance and the flow of Phi.
<unk> already started to introduce it to some customers.
We're not in a controlled manner. So we can learn as much as we can but the early feedback is very encouraging to good experience for both consumers and our loan officers. So.
We are excited about that.
And Marty you want to take the back office integration, yes, and with respect to our internal control work. It has been and will continue to be a major focus of the company to make sure that.
We are doing everything possible to.
Knit together all of our.
Acquired businesses into it.
And an effective system of internal control it is a year long process.
We'll continue to work through till year end and actually some of it will continue into the first part of that.
2023, we feel we've made good good progress on that end.
Do you want to assure.
Investors that our financial statements are materially correct.
We've put an extensive effort and making sure that financials are correct as were working on the system of internal controls.
And I would some of those teams made great progress.
As we noted in the prepared remarks, and then right on the brand question I think.
It's a fun one.
We built our company obviously in a pretty.
Are they pretty unique strategy, Brian would go out with classic direct to consumer channels to bring consumers and obviously, we've built this very sustainable very defensible approach of embedding ourselves with companies to then get access to the consumer to help them with services.
But there is this moments ahead, where we will be able to rebrand our insurance property and our warranty property and are moving properties into board.
Build how courts really be what it is meant to be when I founded the company to be that partner for people in their home. They go through that journey with their home.
And as you do that well, obviously, then opens up a variety of additional ways that we can kind of layer in growth into the business.
So it's something that.
We are prepping for I would say in some of the things we're doing now in terms of the consumer rollout. So you have this cohesive really high satisfaction experience sticks with that consume over time is an important part of that strategy as we look over the course of this next year or 18 months, we'll be we'll be knocking off certain certain properties certain brands.
And one of the time and moving over in the porch.
Unable to again kind of benefit from the growth numbers that little bit it'll be out there.
And in your prepared remarks, you mentioned exploring ways to move to this 100% capitalized.
<unk> business I guess, what would that look like in terms of economics does that change the pace the pace at which you can grow that business and overall I guess, what does the trajectory and strategy and timeline look like to get there.
It's still early.
It's certainly nothing to announce at this point, we don't know I mean, you can see in <unk>.
In that slide we present that shows how much were ceding versus others like we really do believe in running as a very capitalized low volatility insurance operation. We think is the best way to create long term value.
It's not reflected obviously today in the market, but we do believe it will be over time, and so there are opportunities for us whether it would reinsurance or other to be able to continue to move in a more capital light. We think you know again, but still work out ahead of us more update on that as we as we go if we get burn off.
Yes, we think that it can improve margins.
The financial profile of the business overtime.
Alright, thanks for taking the questions. Thanks, Mike.
We have one more question from Mark Chappell with Mark.
Mark.
Hi can you hear me okay.
Sure.
So just wanted to revisit your prepared remarks.
You mentioned that you feel more optimistic about reaching our profitability targets next year and given the lower slower than expected.
Profitability that you expect pressure now could you just review one more time.
Why why do you believe you are.
Youre going to meet your expense reduction initiatives or targets.
Ahead of plan.
I can I can take that and Marty HL.
They're in.
Headline point as we have been under high underlying margin. So then it comes down to how much are we investing in fixed cost the two areas that I.
A couple of things that I'd point to one is we've already had planned.
80 planned elimination of hires.
That's in product and technology some of that is in our focus to keep our corporate costs flat. So if you have slightly slower.
Product and technology investments you have corporate costs remaining flat, but the business is growing materially year over year and you have high underlying margins that gives you. The profitability. There is also certain cost centers. This year that we'd have to put more into notably third party costs for Sox.
And D&O, both of which that we think there'll be savings next year and then.
The market has put a real mindset shift on the company and so we have a variety of initiatives.
Probably 10 to 12 initiatives, where we have owners looking at cost efficiency savings across the business.
My experiences when everybody puts on the half of we need to go and really look at profitability you find a lot in the end.
And a couch questions.
Again, I would just add Mark in addition to our Matthew is talking about and driving there no. The initiatives we've talked about that will both drive the top line.
And the bottom line your are out there in a big focuses for the company. So there is we've talked about many of them today, but clearly these opportunities to grow the business would be very high margin incremental revenue streams and so those are those are the initiatives that we're certainly prioritizing.
Thank you.
Thank you we have a number of questions. Please and the analysts Philadelphia about one too Marty Marty can you give us an update on the cash position of the company.
Yes, So we ended the June quarter with.
$282 million in cash and obviously as we emphasize on this call that $50 million.
Funds that we earmarked for the CSC.
Acquisition are included in that in that number and we will be able to evaluate.
Alternatives for use of that cash going forward.
Thank you and that is all we have for questions.
For today, Matt.
Well I'll just wrap up briefly and say first thanks, all for joining the call I. Appreciate your ongoing interest in porch partnership those are involved.
Like I said, we really are excited about how we're positioned on the progress towards profitability and what's ahead as we continue to build a truly great and enduring company.
Credit to the <unk> team.
That's out there is continued as the northern noise keep our heads down do great work every single day for our customers and with that thank you. We will also use soon take care.