Porch Group, Inc. (PRCH) Earnings Call Transcript & Summary

Hello. Good morning. Welcome to Cantor Fitzgerald's Software Series, a fireside chat with Porch Group's CEO, Matt Ehrlichman. I'm Robert Harrington, and I'm joined by my colleague, Justin Martos. And before we start today and before we introduce Matt, I just want to remind you, as always, these are public events. Matt will not be sharing any material public information. So when you ask questions of him, which we want you to do, please just respect the nature of that. [Operator Instructions] If you prefer to just e-mail myself or Justin Martos, you can please do that. My e-mail is [email protected]. That's [email protected]. We won't have a specific Q&A section. I'm going to have some questions I have ask myself. So please, just we want us to be informal. So please just throw your questions in there, and we'll try and kind of bring them up at the relevant point. Just quickly in terms of some of the important Cantor TMT events we got coming up in March and April. 4 events just to highlight for you. CrowdStrike. Our [ fourth look at ] CrowdStrike will be on Tuesday, the 6th of April, where we will be looking at what comes with CrowdStrike beyond their core market of endpoint. So 2 really good speakers [ we've used ] over the last 15 months to really try to unlock that story for investors. On Thursday, the 8th of April, we'll have our regularly monthly security channel trends from 2 key channel partners. That's 11 a.m. on the 8th of April. And then 2 new events. We'll be looking at Oracle's database and OCI infrastructure on Tuesday, the 4th of May. We're very constructive on this name. It's one of the few legacy players. We actually think it's an interesting theme to talk about. And then finally, Dynatrace. We think this is probably the cleanest and purest way of playing APM for enterprise over the next 12 months. And so we would like to share our thoughts on that with 2 key speakers, and that will be on Tuesday, the 18th of May at 11 a.m. So moving to the event today, Porch. Very excited to have Matt Ehrlichman, the Founder, CEO and President of porch.com. It's a $1.5 billion market cap company, a vertical software company focused on home. They completed a successful SPAC in December of 2020, not 2021. The focus we're going to really have here today with Matt is really just getting our arms around this very interesting model of SaaS fees and SaaS model plus transaction fees, the real key to the story and why I think it's a very exciting platform not just in the next 12 months but over the next 5 years. We'll hear from Matt today about very low monthly churn and very high Net Promoter Scores. Some of the key verticals in the home market that we'll talk about and discuss with Matt will be home inspection, where they clearly have a very big moat; insurance, where they've been very acquisitive recently with HOA; and obviously, the moving vertical as well. So last night, they just reported their first quarter out of the gate post the de-SPAC. Very important for us in SPAC land for companies to be not only in good command of the 5-year vision, but very much having their arms around the numbers. Clearly, the Porch team did that and showed that in the space last night, a very clear beat and raise story. They're essentially closing out their first quarter as well. So they gave us an update on that, which Matt will talk about. They raised the 2021 guide to, I think, about $175 million. Again, that's key for these new names as they're establishing credibility to investors. We want to see numbers moving up. Clearly, we saw that from Porch last night. If you exclude the M&A contribution in the 2021 guide, predominantly from HOA, you're still looking at north of 70% growth excluding M&A for 2021, which I think is a very interesting growth profile. Some of the metrics we're going to really focus on today and try to understand a little bit more in detail is really on the revenue per customer metric and also getting our arms around the number of businesses they touch both today and what that potentially is in the future. And overall, just a really exciting decentralized platform where you've got industry leading software and a very clear focus M&A. There's obviously a lot of de-SPACs that have come to the market, and there's more coming. We will deal with near-term volatility. But what I think is really important is companies that have their arms around the 12 months and the first 4 quarters out of the gate. We've got a very good start from Porch Group. I also think it's going to be critical for companies to come out and show their real intent when it comes to M&A. We've seen that already basically in October last year and then again in January of this year where Porch came out and did 4 acquisitions, which Matt will talk about. I think that's absolutely a critical ingredient for a SPAC not just to de-SPAC but to actually come out and raise numbers and do something with the capital in a productive way for investors that they've raised during the SPAC process. And so with that, there's a couple of slides just from -- we put together, which we're happy to share with you. And with that, I'm very happy to introduce Matt Ehrlichman, as I said, the Founder. Maybe he will give us some insight. He founded the company, I believe, in his basement. He's been the CEO, Founder and President of the company. Before that, Matt created his first technology start-up, Thriva, in his dorm at Stanford, and then successfully sold that business that he created at the university to ACTIVE Network for $60 million and then went on to become the Chief Strategy Officer of ACTIVE Network. And so with that, good morning, Matt. Congratulations on a strong quarter out of the gate last night. And welcome to us, and we look forward to discussing not only the next 12 months of you, but what's really exciting for you as you grow your business over the next 1, 2, 3 and 4 and 5 years. So good morning.

It is great to be here, and thanks for that intro. I appreciate it. Yes. I am the Founder and CEO and Chairman of Porch Group. We are quite the story to tell. We're just 3 months in to being a public company. As Robert said, going public through a SPAC. It sounded like a little more than half of the folks on this call are newer to the story. And so what we talked about doing is taking probably just 10 minutes and walking through the Porch story, a quick version, just to be able to orient this group on who we are, what we're building, what our unique strategy is. And then we'll take the bulk of the time for Q&A. So let's just start there. Porch is a vertical software company, like Robert was mentioning. We provide -- and I would say actually 5.5 years ago when we really started pushing this model, it was less common for software companies to monetize both SaaS fees and transactions. I'd say that's become increasingly common, not in the home space, but in a variety of other industries where software companies have layered on top transaction monetization to be able to just accelerate growth and margin profile. That's what we do. So the way our flywheel works is we provide software, ERP and CRM software, to a variety of types of home services companies like home inspection companies, moving companies, roofing companies, et cetera. These companies can pay us with typical SaaS fees, B2B SaaS fees. They also pay us with transactions where they give us access and introductions to their consumers. And then we monetize that consumer relationship with B2B2C transactions, helping these consumers and who are typically homebuyers that we meet very early on in the move journey when the consumer is the most valuable they'll ever be. And we help them with these really key, really high-value services like insurance or like moving or TV/Internet or security setup for their home where there's a tremendous amount of value during that move in stage of the journey. Very similar flywheel to an OpenTable where they would provide software to restaurants, get access to the consumer through those restaurants, monetize the transactions and drive demand back. It's a corollary we talk about. But where OpenTable would make $1 per transaction, we generate $1,000 per transaction sometimes given how high-value services we focus on. And in the case of insurance, that becomes that recurring revenue with that consumer. We have a number of different brands. So you have to go to porchgroup.com to really get a sense for the platform that we're building. [ Some people ] just go to porch.com and aren't aware of ISN, for example, our brand in the home inspection space. We are the dominant provider of software in the home inspection industry. 28% of all home inspections in the U.S. are managed through our software system. HireAHelper is our brand in the moving space, provide software to moving companies and demand back to those moving companies. We have a bit more than 11,000 companies right now that we provide software and services to, and that's across these verticals here. So home inspection is our largest, then moving, then roofing. We work with major utilities around the country, warranty companies, et cetera. When we provide software to these companies, it's the entire ERP and CRM software that helps them run every aspect of their business. So in the inspection industry, as an example, all of the calendaring and scheduling and dispatch and routing optimization and online booking and payment processing, all of these tools to help these businesses grow. Again, we can monetize with SaaS fees or with transactions. We're now increasingly both, and which we've gotten better and better at being able to get access to the transactions, which is really where the deep pockets are. It's not like a home inspector. These are small businesses. They're never going to be able to pay a huge amount of dollars. But there are huge pockets and huge dollars available through their consumer because we can meet that consumer at the perfect time and be able to help them with these really important services. But we do want to be able to generate revenue in both ways, both with transactions and with SaaS fees, and we're getting increasingly good there. We have very strong unit economics on the home inspection industry, 30x LTV to CAC as an example. And the reason is, is that we have typical SMB software sales in the go-to market. So that CAC is fairly consistent with what you'd see. But these companies are so valuable to us because not only do they pay us with SaaS fees, but we also monetize their consumers through transactions. As I mentioned, our industry is, like home inspection industry, gives us access to a huge number of homebuyers, and it gives us access to these homebuyers very early. So we know who these people are that are moving and where they're moving 6 weeks before anyone else. So we have this real greenfield opportunity when these consumers have to purchase things like insurance for their new home, or they have to get movers or TV/Internet setup before they're actually moved in. And so through that, we have this really nice opportunity to help them with key services. These are the services that we help those consumers with: insurance, moving, security and TV/Internet. We'll layer in more services as we go each year, like electricity or warranty or solar, other really high-value services that people purchase as they're moving in to their new home. Insurance is the core pillar of these services. It's not only the largest TAM for us and is the most valuable service in the home, but it also is a service where when we sell that into the consumer, that becomes that recurring revenue with that consumer, which is a large opportunity. We can talk more about M&A. We've been operating as an insurance agency to date, a nationwide agency selling insurance of third-party carriers. In mid-January, we announced the acquisition of Homeowners of America, or HOA, which is set to close here early Q2. And that acquisition gives us a positioning where we can go deeper in the value chain as the -- as an MGA, or a managing general agent, and carrier, hybrid, where we could be able to monetize these consumers at a much higher rate. But we like how HOA has done that where they don't have to carry a meaningful amount of the underwriting risk. They push that out to third-party reinsurers, but again, capture meaningfully more of the value. Once the consumers have gone through their move, we continue to help them with projects. We call it contractor services post move. But here, we partner with the home service marketplaces out there like Angie and HomeAdvisor, like YP, Dex and a bunch of other marketplaces. So we don't have to go and compete and build up this huge network of contractors and a huge sales team there. We partner and we drive our demand into those companies. We're not at all competitive with an Angie. In fact, we're nothing like them. We are a software company who focus on things like insurance, and then we partner downstream to be able to continue to monetize those consumers. So 2 last quick slides. This is the revenue curve of the business. And so we're running at a 69% growth rate. We did update our guidance yesterday to $175 million in revenue for 2021. So we had just provided guidance of $170 million a couple of months before. We feel very good about how the business is progressing and performing so far. So 140% year-over-year growth anticipated. In that $175 million, that does include the $50 million guidance increase when we announced those acquisitions, HOA and V12, which we can talk more about. And then you see on the right-hand side of the slide, the distribution of that revenue. So 10% of our revenues are these true transactional revenues, these post move services. So that's a fairly small portion of the revenue. The balance, 90%, is directly tied to our software platform where it's recurring or reoccurring transactions. So 25% of our revenue are B2B SaaS fees, companies paying us directly those fees. 65% is when the companies are paying us with transactions. Again, the core of that transactions is insurance, which is that recurring revenue. And so lastly, just to kind of update on yesterday, for those that weren't able to make the earnings call. The business is growing quickly. We did give a sneak peek here into Q1. So we expect 85% year-over-year growth in Q1. If you would actually normalize Q1 to include the acquisitions that we had announced, including HOA, again, which is set to close here very, very shortly, it's 170% year-over-year. Those acquisitions had closed January 1. Just to give you a sense for the balance of the year here and how the business is tracking and growing. So with that, let's turn it over to Q&A.

Perfect. Thank you for that introduction, Matt. So a couple of sort of bigger picture questions have come in so far. One focusing on the -- you said a couple of times that you think you're doing an increasingly good job at getting both the SaaS revenue and also the transaction fee. So maybe sort of step backing, it's a very interesting model where you're going for both. What did you learn about this model? And what particularly do you think you've done right that's enabling you to say we're doing a better job of getting both now?

Yes. Let me pull up the slide so the group can see how the monetization works. But yes, when we charge SaaS fees for the core software module, these companies pay us a monthly fee. And that monthly increases as we help those companies to grow because we're really good at helping these companies grow. But it comes to around $4 per inspection or $4 for each of their customers. When these companies flip the switch and say, "Hey, I want to pay you with transactions for the core software," the company at that point isn't paying out-of-pocket for the core software. The company gives us introductions and access to all of their consumers. All of their consumers, when we have access, are worth $25 on average. This is the last public metric that we have provided. We won't update this every quarter, but we will periodically. So those consumers are very valuable, which means the company is 6x more valuable when they pay with transactions. But to Robert's question there, what we have done is, yes, we want to get access to the transactions for the core software. But we've layered in more and more modules for these companies that we charge B2B SaaS fees for. And so during onboarding, while the vast majority of companies, between 75% and 95% of new companies, choose to pay with transactions, they're getting set up in our software, we still are able to very effectively upsell these other modules to get really nice B2B SaaS fees also from those companies. And we'll continue to do that, launching new modules, to be able to monetize in both ways. You can see on the right-hand side, one of the reasons that we certainly like getting paid with transactions is not only are the companies worth 6x more to us right now, but we will just continue to increase the value of the consumer as we go, which makes it even more valuable for us to get paid with transactions from those companies. Right now, if we were to help the consumer with all of these services that they're going to purchase anyway, it would be a $2,300 revenue opportunity for us. And obviously, we'll never get every service for every consumer. But certainly, we're at about 1% of that total capture right now. All -- obviously many -- a much higher percentage of consumers monetize [ that lead one ] service. But -- and you don't -- we don't have every service. If we [ pull up our vision ] and it feels like a corporate relocation, the consumers were, "Hey, we'll just take care of everything for you and make it easy for free," we'll just continue to march up that dollar per consumer, and the company just continue to become more and more valuable to us, further improving the already strong unit economics.

Perfect. A couple of questions have come in, in relation to just kind of the underlying software and just like what you can tell us anecdotally to -- in terms of how robust, category leading within those different segments. You obviously referenced, I think, your, I don't know, from a point of view, the strongest moat or the deepest penetration is in home inspection. So maybe that's a good place to start in terms of why does your software being the software winner?

That's a great question. Let me pull up this slide because I think that it can help. But it's just a very hard value proposition, [ I'll call it ] value proposition, for any other software company to compete with. Because we are able to talk to them about how, hey, we have the best-in-class pure software, and we can talk more about that in terms of why it is. But the reality is the companies are more valuable to us than anyone else, which means we can invest more deeply in R&D than all these very small, undercapitalized, undermonetized software companies that compete in these different fragmented and vertical markets. We're able to go and say, hey, best software. Hey, by the way, you're the inspector. You can get that software for free. In addition to getting it for free, we're going to provide you this solution that's moving concierge solution and moving dashboard that you can provide to your customers to be able to help your customers make that move easy. And when you provide that, you actually get a 20-point lift in your own NPS score on average. And by the way, not only is it free to you, but because we work across many different verticals, so for example, we work across the real estate industry, we embed our inspection booking tool in major real estate brands like Keller Williams, for example, who's the #1 largest brokerage brand. And so we drive demand and jobs back to these inspection companies. Or in the case of moving companies, we say, hey, look, we've got 28% of all the home inspections going through our software. We drive a huge amount of demand in the moving companies to really lock them into our platform. And so that's a very hard value proposition to compete with because that, what I just talked about, can be free for these companies, so they don't buy more of these B2B modules, these SaaS modules. And yet, these companies are worth more to us than anyone else by far. And so therefore, we can deploy more go-to-market tactics than other software companies could afford to. You see some of the metrics here as it relates to the home inspection industry, but we have a 73 NPS in terms of those companies, and that's been quite consistent. So they really like the software and the value proposition. We see 134% annual net revenue retention from these companies. So these companies just continue to grow in value for us, and that's both by us helping these companies to grow, which you can see just in this little case study here where we've kind of more than doubled up -- like we drive massive acceleration to businesses like this one. Because we modernize their business, we also give them more demand. We help them differentiate themselves with the solutions that we can provide for them. And so through that, we see very strong revenue growth by just helping them grow by layering in more SaaS modules and by having more and more of these companies pay with transactions where, again, they become more valuable.

Perfect. So one question says, looking at your investment material, you make a number of references during the road show and so forth to strong moats, right? So when -- as CEO and Founder of this company, when you step back and look at the Porch Group's capital today and going forward in the next few years, walk us through -- bring to life where those moats really ring true and your ability to really not only defend those moats, but quite frankly, make them even stronger.

Yes. Great question. So what we talked about there is think about our opportunity in the insurance space with our InsurTech division, which is a core focus for us. Right now in 2021, we've communicated we expect more than $270 million of gross written premium this year between HOA and Porch for the full year. Very attractive, very effective gross/loss ratio, 59% for the 2020 year. So it's really good risk. But imagine other insurtech companies. Already on a stand-alone basis, we blow other insurtech companies out of the water there. Imagine if those insurtech companies had this CAC-free stream, this reoccurring stream of demand of homebuyers who have to purchase insurance. Or imagine if like from the inspection report, they had the stream of property data where we know everything about the home. Like we know if the roof is old or there's a big crack in the foundation or all the make/model serial numbers of all the appliances, if the hot water system is going to go bad soon. Like all of that data is being stored and collected. And so what we talk about in terms of moats is core to our strategy is providing software and deeply embedding ourselves in these businesses with a value proposition that other companies -- other software companies just can't compete with. We see extremely low churn because of that, much less than 1% monthly churn. But now because we're deeply embedded in these companies, we get this reoccurring stream and flow of consumers. We don't have to go out and compete and we don't go out and compete in these direct-to-consumer channels and paid marketing or all those types of things with other insurtech companies or people that want to offer moving or people who want to sell TV/Internet. We get -- we go and sell software into businesses, and we just get introduced to the consumer at this really early point in time. Again, 6 weeks earlier than others know about this consumer. So we meet the consumer before they start going to Google and starting to look in Google and shop around for insurance, right? So we're able to lay all the options for them out on a silver platter. And one thing we're, again, we're excited about, I mentioned it briefly, but because we know so much data about the property that nobody else knows about, it just gives us this forever advantage as we go deep in services like insurance to be able to better price and better understand risk. And so that just creates this really durable, competitive moat, a really durable economic advantage at the end of the day. And the fact that we meet these consumers in this CAC-free model, it gives us this really durable advantage. So that's what we're referring to when we talk about those competitive moats.

Perfect. There's a couple of questions that have come in on e-mail that I'm trying to kind of bring together, which are basically getting to the kind of your vision for and where you see yourself in the landscape of vertical software companies. You've obviously got this, as we talked about, an in-depth, both transaction fees and SaaS, revenue. But both in terms of what's come before you, but in terms of who do you look at from a -- not a direct comp perspective, but who do you kind of look at broadly in terms of the pioneers of these vertical software players that you think in a few years' time you can move towards becoming the [ ideal investors ]?

Yes. No, there's a variety of companies that we look at. I had mentioned just from a pure kind of flywheel perspective, OpenTable is a company that had a similar flywheel. Now again, there's other challenges in terms of just their TAM and the way the [ bulk, the ] amount that you can monetize for consumer be more like $1. And so -- but we run the same type of flywheel just going after a much bigger kind of pools of dollars, like insurance, that are really valuable services and these recurring services. But the flywheel, there were some really good things about that flywheel that we like. I think that you can look at certain platform plays like Zillow actually, premove, pre to the person finding their home, where they've been able to provide a variety of solutions, extend their offering, be able to provide software for agents. Like they continue to build out this platform to really own that stage of the journey. And obviously, we're meeting consumers at this massive scale, once they have found that home and the inspection is really the last clearing gate for the consumer, once you found the home and everything is checked out, there's nothing catastrophic and okay, I can start getting my move plan, getting things set up. So we meet the consumers at this really important moment, and then our job is to continue to build that platform out and there's just massive TAM, both moving and then ongoing, to make their home really easy and that's what our focus is. I think that if you look at some of the other vertical software companies that are out there, they monetize not only with SaaS fees but with transactions, and there's a variety of these types of players now. I think those companies, and you're going to see how they're valued, but they're valued really well. And we -- we're a new company, and so we haven't yet maybe earned that right. But there's a huge gap in how we're valued to other SaaS companies. There's even a bigger gap in terms of how we're valued versus SaaS companies with transaction monetization. And so that will just continue to correct itself. I mean we're growing faster than that lot of companies. But we do look at a number of those folks as well.

Perfect. I'm going to now move from e-mail and go to some of the questions we have in the chat. So I guess a 2-part question. How strategic is this part of the funnel versus competitors? And in the B2B2C leads post inspection, how do you target and market to the customer and what kind of conversion rate do you see?

So in terms of the -- can you ask the first one again, Robert? First part of the question.

Yes. So how strategic is this part of the funnel versus your competitors?

Thank you. Yes, so there are no more valuable consumers than people who are moving. The amount of concentrated spend that happens in this particular kind of 2-month window of time once they've found that home, made the offer [ and said ], "Okay, great. Now I'm going to go get prepped," it's the ideal time, candidly, to meet consumers. And so we do meet these customers at the very start of that journey. Again, like I mentioned, inspection is the last clearing gate before you know this home was going to be your home. And virtually, every home in the U.S. gets an inspection when you're making an offer to buy a home. So it is, I would say, the ideal moment. Now we've not only -- obviously, we monetize directly with these services we provide to the consumer in this concierge experience or in our moving dashboard and checklist that we give to these consumers to self-serve. But there's lots of other spend that these homebuyers make. They are more likely to buy a car. They're more likely to buy life insurance. Obviously, people spend huge amounts of money on the big home improvement retailers. People buy -- spend lots of money on furniture for their new home, all these types of things. So one of the acquisitions that we announced is a company called V12 to really anchor what we call our mover marketing opportunity where we're now able to bring brands and advertisers into the platform and help those brands and advertisers connect with homebuyers and with movers earlier than they can today. These companies spend huge amounts of money on mover marketing. I mean massive amount of money. But today, that mover marketing is post move. So if anybody has moved into your home, you remember you changed your address with the USPS and you just get flooded with direct mail. Well, that's mover marketing today. These brands and advertisers would love to be able to reach those consumers 6 weeks earlier before they've made such a major portion of their spend. So 71% of the purchases that happen happened during that 6-week premove period when we have this unique early access to the consumer. Now the second part of the question, how does the experience work to the consumer? Let me just talk through that for a moment. So let's say in the inspection industry, the inspector is paying us with transactions. And so historically, the inspector would go [indiscernible]. They spend 3 or 4 hours in the home. They document everything in the home. They come back to the consumer a day later, drop this 40- to 60-page inspection report on the consumer's lap. And historically, they would say, good luck. And this is the start of a very stressful time for consumers. Moving is the third most stressful time in life, which is amazing, behind death of a family member and divorce, then moving, which is, again, [ can't be ] the future. There's too much dollars there where it has to be that stressful. But that's what it is today, and the inspection just adds to that process. Now the inspector is able to say, "Great. Here's your inspection report. As part of my service, you get complementary moving concierge solution where we're going to be able to help answer any questions you have about your inspection report and be able to help you with this upcoming move, this next 6 to 8 weeks." And so right then, we e-mail the consumer saying, "Hey, I'm the Porch moving concierge with ABC inspector. Great to meet you. Here's a link to your moving dashboard where you can be able to see everything coming up for your move, all the prices for insurance, all the prices for movers, all the prices for TV/Internet. And you can activate those services and book those right now. Or alternately, I'll give you a call tomorrow. Click here if you don't want me to." Because all the consumers have to go through our software to sign up for their inspection, to pay for their inspection, to download their inspection report, they're all going through our software. That means that when companies pay us with transactions, we are able to get all of the rights directly from the consumer that we need. So we get all the TCPA rights directly from the consumer, but we still let the consumer opt out if they don't want us to follow up with them. And about 1% to 2% of the consumers will opt out, and then we give the consumer a ring. And so they can use our self-service tools. We give them a ring. One of the first things we do is we bring one of our licensed insurance agents into that call to be able to help, again, show all the different pricing for the consumer. One thing I would note, we never sell that consumer off as a lead. So that consumer is never bombarded with calls by insurance companies or moving companies or TV/Internet companies. We have done all this integration work across these different industries, and we've integrated with thousands of moving companies and all the major moving truck companies and storage companies. So we can actually show the consumer, as an example, here's all of the pricing. So if you have a P&L, depending on the square footage, here's all the different movers locally. Here's what the pricing is going to be. If you want us to coordinate a full-service move, we can have a truck show up at your home on the state. We can get it loaded/unloaded, dropped off at your new home. All that is seamless for the consumer. Or if they want to go into the moving dashboard, they can see all the different pricing and promotions and packages for all the TV and Internet options for their home. And so they can go ahead and they can just activate that service, and they don't [ have to go and wait on hold ] with Comcast or anything like that. We just make that whole journey really easy for the consumer, and that's our job. And then once they're in their home, they can continue to extend with life cycle marketing to the consumer to be able to help them as they need other things in their home. And that's right now 10% of revenue. But clearly, given how many homebuyers we meet, extending that relationship and that LTV with those consumers both as their insurance carrier and other services, we can create recurring revenue where that consumer is part of the future as we look forward.

And is it a little early to think about sort of setting where you think you are in terms of the conversion rate post inspection and converting those leads?

Yes. The things I would probably point to, we don't have specific public data on the direct conversion rate, but we can triangulate on probably 3 things. One, we mentioned here on this slide, right now, when a company is paying us with transactions, all of their consumers on average, whether or not one of those consumers actually went to the moving dashboard or certainly not -- they bought a service, they're all worth on average $25 to us in the last reported metric. So that's point one. Point two, we talk about when consumers, you can see on the right side of the slide, when they do purchase a service for us, it's worth a little more than $100 per monetized service. Now this includes not only those move-related services that are very valuable. This also includes the post-move services, which are much less valuable. And so certainly, it's not as easy as just saying, okay, $25, $100 per monetized service, 25% conversion rate during the move, because that includes these post-move services. But I would say -- I'll give you one more data point, would be probably helpful. When you think about the services that we help consumers with, let me just walk through how we monetize there. So with insurance today, as the insurance agency, we get 13% to 14% commissions from the insurance carriers, and that's year 1 and ongoing each year. As we complete the HOA acquisition, we'll get about 2x higher commission rates by being deeper in the value chain, right, by being our own insurance product. So it's a very significant impact in terms of how we can monetize those consumers. So certainly, that $25 will go up as we collect and capture more of the value from insurance. Moving -- for small moving jobs when it's labor only, we get 30% to 35% take rates. For large moving jobs with moving trucks, we get 10% to 20% take rates. Security and TV/Internet, they pay us upfront bounties, pays really well. Security is $900 to $1,000 paid upfront when we have a new customer get set up with security, which is worth more than 43 months of service fees. TV/Internet ranges between $50 and $350 we get paid upfront depending on the provider and the geography, so it's quite a range. But again, we get paid well for these services.

Perfect. So just -- you referenced V12 before. There's a couple of questions came on that. And V12 talked about testing pilots with Porch data. So one is asking like how much better is the conversion rate to clients. In reference to saying that it was second to only their own e-mail loyalty program, so is there anything you can help quantify or any anecdotal stuff you can say in terms of looking at the improvement in ROI? And how should we think about potential pricing power over time from V12?

Yes. Just for the group's benefit [ that weren't ] on the call yesterday, what's being asked there in reference is something that I noted in the discussion yesterday where V12, which was acquired in middle of January, we've been able to bring in -- start combining V12's system. They -- V12 had helped brands and advertisers previously with mover marketing, just with the post-move marketing. By bringing in Porch's data in that signal in terms of helping them see who is moving earlier, we've been able to run some pilots with some of the biggest brands actually who are out there, and just the results have been exceptionally strong. The comment is exactly right. Some of these brands are saying that it is by far the best-performing mover marketing outside of their own kind of own e-mail [ opt-in ] list. So that's great. I mean that validates a lot of what we believe to be true, but we're certainly seeing that show up in the numbers. We've not yet communicated publicly like what the specific conversion rates are. But I did note that in Q2, I'd expect to produce a case study and make an announcement just about an example brand who's using that solution. And through that case study, we'll be able to provide more conversion rates. There are opportunities to be able to provide consumers really compelling offers, discounts, et cetera, early through these brands just to kind of further improve that consumer experience. So we're excited about the start certainly with V12.

Perfect. So a couple of questions just going back to inspection. So obviously, you're well entrenched there. I think you said that [ throughout the ] figure, like 28% of all home inspections come through you guys and so forth. But there's a number of questions. Like what's next for inspections? Like what can you do from this point onwards given you're so strong already? Like is there still a good runway ahead of you on inspections? And then a derivative of that, another one is coming on the chat. Can you ask these inspectors to basically bring more technology to their inspections? And I fully map out interiors, appliances to monetize sort of future upgrades, remodeling and so forth. So how broad can you add some of these other services as well?

Yes. Great. Yes, we're at 28% right now. That's right. And during our IPO process when we first started providing some public information, Q3 we're at 26%. So just giving you a sense for the slope of the curve, I suppose, when we announced 28% in mid-January. Right now, the state of the inspection industry, we have about 5,500 home inspection companies in the last reported metric. There's around 25,000 total inspection companies. So we have a higher percentage of inspections just because the largest inspection companies almost fully use our software. About 50% of the inspection industry doesn't use back-end CRM software at all. Porch right now is 28% of all the inspections, and all the little competitors combined have around 22% market share. And so there's a very significant opportunity for us to continue to grow share given our dominant value proposition. And we certainly would expect to, for a number of years, continue to grow share. Part one. Part two, in terms of what's next, is not only continuing to grow share. We're seeing really strong sales performance. We're excited about the unit economics that allow us to invest aggressively into that. But we are continuing to go deeper with more and more modules and tools we can provide to these companies. So I kind of noted that. But there's a variety of things that we're layering in [ that build ] the communication technology and tools so they can kind of set up their text messages and automate that, or tools that help these inspection companies manage all of their real estate agent relationships to know who are the top-performing agents in their area, when they last met with them to be able to make sure they're building kind of that marketing program [ they will ] engage and talk with that particular channel partner. Just a couple of many examples, layer in payment processing where we can be able to collect transaction fees and revenue from those companies. So there's a variety of things like that, that we're continuing to layer in as we go that will just continue to deepen the relationship with those inspection companies. In terms of how we can transform, in a sense, the inspection or just continue to modernize it, yes, there's a lot that we can do. But I think the question on the data is a really good one. Right now, already that data is flowing through our software around all the appliances and again, all the different facts about home. There is no moment or no time in which more data is being collected about properties. And when a home inspector is in a home for 3 or 4 hours, documenting and taking pictures on everything in the home, and so that data flows through our software. We have made some investments already on being able to break down and structure that data to be able to build that intelligence. But there's a huge amount of work to go really over the next probably forever, but certainly over the next year or 2 to continue to just build the intelligence with our data and data science teams. Combining that with what we're doing in the inspection -- in the insurance industry, excuse me, with HOA to be able to, again, understand risk is a huge, huge opportunity. Also, it's a big investment area for us here this year. So yes, there's a lot of focus there.

Multiple questions, understandably, about kind of your vision basically on insurance, the insurance vertical. You obviously clearly had a big role to play in insurance before the HOA acquisition. You obviously talked about what that brings you the close in Q2 and so forth. But the questions are really kind of more stepping back and saying what's your vision about insurtech and where this goes over the next few years and both with, obviously, HOA now part of the family. But even beyond that, like what do you want to get done when it comes to insurance overall over the next few years?

Yes. Love the question. So I just fundamentally believe that the experience today is -- will not be the experience in the future where if you're a carrier, you sell insurance and you hope the customer never contacts you. We believe, as an insurance carrier, we should be their partner for their home, more than just their carrier. And so you'll actually see some things right out of the gate as we start that with HOA when it closes where we'll provide not only a co-brand moving concierge to all of HOA's customers, so they are going to move, we make it really easy, but also embed our handyman services into all those customers at cost. So you can get $39 dryer vent cleanings and 40 x dollar gutter cleanings. And there's ways that we can be able to just start to transform the relationship and what it means. And the way to think about the business for us is we embed ourselves in these companies by providing software to these businesses. But we believe as we layer on top and get access to the consumers that we can transform that purchasing experience as well. So if you think about insurance, we have all of this data about the home over time. It won't be this year. It's just -- it's a lot of work. But maybe 2022 is certainly ongoing to be able to take that data and provide to all these consumers a ready to bind quote, right, where they can click one button and they're done because we have enough data about them to be able to just provide and make the purchasing experience for insurance easier than it's ever been. And then once you purchase, to be able to really transform the value proposition with this holistic experience we can provide for their home. So some of the things you'll see here that we're investing in is, for example, the consumer app where it's more than just, I think, an app to be able to kind of file a claim, but it's enough to be able to take care of your home with all the to-do lists it need. We can be able to recommend the things to do. We can make that move really easy. We'll continue to layer on, though, key services on top of insurance. Warranty will be something that's very natural for us because, again, people buy warranties during the move. And then we have data that's very unique, right? Think of all the appliance data. So we know if the appliances are reaching the end of their useful life or if they're brand new. So our ability to have kind of intelligence and insights around risk is just -- is really meaningful. And so maybe we enter into warranty with partners, and we'll see if we want to go deeper there over time, but it does create a really nice opportunity for us.

Perfect. And then as a follow up to that really in terms of the revenue opportunity, obviously you've come out and made your commentary about 2021. If it's anything else you want to add there, then please do, on HOA. But beyond 2021, if you think about sort of the time line issues, such as regulatory blocks -- roadblocks as you're trying to expand beyond the 6 states and so forth, question came in, like how long does it take you to get to 40 states? And how do you think about rolling out to additional states over the next few years? So a number of questions that really just go to the, well, how to think about the revenue ramp in insurance beyond '21.

So yes, to the group's questions, HOA today is in -- operating in 6 states. So right out of the gate, we're already integrated with them. So they're already in our agency panel. So we already know how effective they are, and they're very effective at being a core partner for us there. They're licensed, though, in 31 states. It does take time to be able to ramp. So I think realistically, given that time line, launching 10 to 15 additional states by the end of this year is realistic, but also getting the licensing work done this year on the states that HOA is not licensed then so we can be able to continue that expansion there in 2022. We will be moving aggressively as soon as we have that acquisition closed with starting that expansion efforts because obviously, whenever we launch them into each our additional states, we just make meaningfully more revenue from those consumers and we can control that purchasing experience for the consumer. But that's what I would expect in terms of that expansion. But certainly, over the next couple of years, we think that we should be able to expand broadly across the country. There will be some states that we have not yet decided what our approach would be. Florida would be a good example there where it's a very unique insurance market, and we might not want to expand with our own insurance product there and just use our agency like we have been. And so there will be certain choices of unique markets. But generally, we'll want to expand across the country. I'll also say that there are some states, California would be a good example, that are very tightly regulated from an insurance perspective and just takes a lot more time. So even if you start on the licensing process right away, getting the approvals for licensing and [ get ready for ] approvals, takes a long time. And so we just have to start working through that as quickly as possible. In terms of the second part of the question, just the high-level growth plan, this slide perhaps can help. But this is a slide that we've shown that just states very frankly what our internal ambitions look like over that midterm set of years. Certainly not long term in terms of us trying to accomplish this. But we're targeting to try and get to $1.5 billion in revenues through these levers in that midterm. Our core business growth has been growing very fast historically at 50% CAGR. Obviously, we're showing 69% all up CAGR as of our increased guidance, which is just basically selling software to more companies, monetizing those companies with the transactions and making more from the consumers when we have access to them. But in addition to that, we talked about mover marketing. We talked about going deeper in the insurance value chain. We also do expect to use our M&A muscle and capabilities to be able to expand into other vertical markets within the home and around the home. The -- it's a strong set of capabilities that we've shown in the past that companies are just worth more as part of Porch because we can monetize that latent demand and the latent data that sits in the software to make every one of their companies simply worth more, which then unlocks unit economics so those companies can grow much faster. And so that also is part of our expansion plan.

Perfect. A couple of questions have come in related to the kind of size the opportunity in terms of the number of companies that can be on the platform. I know it's a very kind of big M&A question. But that dynamic of if you look at the revenue per company, which I think had some good trends in the last 4 years, and then the notion of the number of companies, I know you've had some discussion on the call. I think there was some element of a COVID headwind a part of the year last year in terms of the number of companies, although I know the number of companies did rise last quarter and I think you talked about being around about 12,000 on the call yesterday. But how -- it looks like some investors are struggling with that, how to think about a metric of number of companies and both in terms of the context of this year, but more importantly, how big a game are you playing in terms of the number of companies that can be on your platform?

Yes. So the question is really around this data here, and that's exactly right. On the call yesterday, we talked about how from Q2 certainly through Q4 we saw lots of companies, particularly small inspection companies, really have their businesses on pause. Most of the inspection industry actually is over 60-year-old males is kind of the typical demographic. And so a lot of these people had just -- not operating when they are the sole proprietor, which is, in my view, certainly understandable. The -- so we did see headwinds in terms of the number of companies in those quarters. We had 11,150 companies on average in the fourth quarter. So we started to see some kind of slight return to normalcy. But we did update on Q1 where at the end of February, we had more than 12,000 companies. And so that's great. It's kind of what we'd expect, not only strong sales months, but some of these companies returning to operate. On the right side of the screen, you then see the revenue per company. So we continue to see very strong growth in revenue per company. In Q4, you can see that we're almost at $600 in revenue per company. We did update that in Q1, we have seen north of $600 in revenue per company between January and February. That's a monthly revenue average, which is up from the mid $400 per month in Q1 of last year. And so we are seeing good growth as we create more value. And that comes from helping those companies to grow, upselling modules into those companies where we can generate more B2B SaaS fees, getting access to transactions from more of the companies and then monetizing those consumers at a higher rate. All of those levers help that metric. And that's one of the reasons, I think, that Porch is a really exciting play that one of the reasons I think we're growing faster than those vertical software peers or other vertical software companies with transactions is we just have more levers to pull than typical software companies where we can sell more companies -- sell software to more companies obviously with really good unit economics. We have very low churn. We can upsell modules. But in addition to that, we get to be able to turn on transactions with a higher and higher percentage. We get to be able to generate more revenue from those consumers that we're introduced to, and that continues to make these companies more and more valuable. So for us, that lets us look forward and feel really confident about continuing that growth rate just given the number of levers that we have to pull.

Perfect. I guess a couple of relatively [ kind of quick fire ] questions that [indiscernible] all together. There's been a few questions on the issue, I guess, the comments you made yesterday. I don't want to think you out of context, but referring to you basically said there were no synergies in the guide for acquisitions, the acquisitions for this year. I know you've got a decentralized platform and so forth. But is it [ realistic ] that we know synergies this year? A couple of accounts to try to see is there a kind of a blue sky scenario that -- or can you talk about -- what can you set up the potential synergies that may exist that we might see this year?

Yes. So that's right. We did talk about how we've not built in synergies for HOA or V12. The reality is it's just going to take time, especially if you think about HOA, it is going to take time to expand in the states and to be able to get that approval. And so I don't want people to think that overnight, we're going to be able to just flip on [ 12 ] states. It doesn't work like that in the insurance industry, unfortunately. We are excited about how the business is up. Obviously, we wouldn't raise the guide when we didn't have to unless we felt good about the year. So we feel good about how we're setup, certainly. There are opportunities to be able to see some synergies. It's just -- the question is how long is it going to take for V12 to fully have the data built in, to get past these pilot phases into kind of full-fledged productization and sales of kind of that combined dataset; or for HOA to be able to actually get through regulatory approval and be able to start having our demand flow through HOA where we can be able to generate more economics. Both of those things will take time. But I do think -- and I feel very confident saying as we think about 2022, we have stated that those businesses, we will be able to have gotten the work done to see strong acceleration in growth from those businesses, such that it will be 30%-plus growth type businesses next year. So certainly, we are confident in that.

A comment about fully understanding the competitive advantage you have specifically in -- again, good to see customer acquisitions. So that's the good thing. But the quick follow-up to that is, in that context, an investor's a little surprised that when it comes to sales and marketing, relatively high, $42 million in 2020 on $73 million of revenue. Can you sort of help unpack what's included in that sort of sales and marketing item? Why is that investor -- is it high? Or how do you think about the way they're looking at that?

Yes, you bet. And let's pull up this slide and this will help. So right now, Porch operates as a very high-margin company. So we kind of see in the mid-20%, mid- to high 20%, [ perhaps a little bounce, growing ] slightly; cost of revenues, all up. The next line down in terms of thinking about the margin is the contribution margin. So our contribution margin includes all variable costs. So all sales and marketing costs that go and sell software to more companies, which we have started ramping in late Q3 and are continuing to ramp given how strong unit [ comps ] are. It includes all of the account management, onboarding and training expenses for those companies. It includes all of the downstream costs to be able to support those consumers and monetize those consumers with moving concierge, insurance statements. That's all included in that contribution margin line. As you can see, there's very strong growth here from '19 to '20, 19% to 31%. And then we've provided a 40% guide in contribution margin here for 2021. So point one, yes, we are investing more in sales and marketing. We're also seeing very strong expansion in our contribution margin, starting to approach [ particularly ] our long-term guide of that 50% contribution margin, which we're excited about. Below that line between contribution margin and adjusted EBITDA is largely R&D is the primary expense. It's R&D and G&A expenses. And so each year, what you can expect is that we'll manage the business -- the expenses of the business and our investments and show that really steady, nice progress of improvement in terms of that adjusted EBITDA margin. Right now, obviously, with a 40% contribution margin, clearly, we could invest less in R&D. We're making a number of bets that won't impact 2021 results but will -- are important for just our long-term positioning. We could clearly go and drive profitability with that kind of contribution margin. But it's important for the group to know like we are looking to build a really big number, and we're investing appropriately [ to try and really pin ]. And that includes making some of those key investments. But for this year, 2021, we guided to a minus 10% to a minus 16% adjusted EBITDA range, an improvement from the minus 24% that we saw in 2020, which was ahead of guidance. And then we'll just continue to march each year very steadily toward that 25% long-term EBITDA margin guidance.

Perfect. Another question from a portfolio manager. He's saying, so it looks like you've effectively trained your customers to use software, many of which were previously using manual processes and so forth. So in a weird way, are you more susceptible to other software platforms in the future basically doing potentially a better job that you've done? And specifically, how do you defend that market share if another platform and software suddenly offers lower transaction fees or a kind of insurance commissions back to the contract of the [ originator ] relationship? How do you defend your market share?

So one is to have that flywheel completed, I think we have, where we're driving demand back to those companies. Because we work across many different verticals, we're able to drive demand to each of those types of companies at a meaningful scale. And so once you're putting jobs on their calendar, it's really hard, it's really hard to leave, part one. Part two, in order for a software company to try to compete with us, it's not like you can just go and provide the software. You have to go and sell the software for the business to be viable. We're able to provide the software for free to these companies, and the companies are more valuable to us than if they're just paying software fees, which we can invest more in the software. So our advantage continues to extend in terms of the capabilities of our software and the modules that we're offering instead of [ contract ]. But again, we're able to provide it for free to these companies, which is very hard for independent software companies to compete with. So for somebody to even try to be competitive, they would have to be able to build out a platform which provides software and links together all of these different vertical markets, like we are, which nobody has even started. You'd also have to be able to provide not only software but go and build out all of these insurance capabilities, like go be the insurance provider, go do all the integrations, all the movers, all the TV/Internet companies in order for these inspection companies to be as valuable as they are to us. And so it's just a hard proposition. We don't see anybody competing right now at all or even trying to, even starting to compete with that type of a model in the home services space.

Perfect. The final question is going to be actually from me. So SPACs as a product have been much discussed over the last 12 plus months, and there's -- it's been volatile in recent weeks. But we speak to a number of people that we truly believe [ at Cantor that ] this asset class was not perfect. It's here to stay. It's fascinating from your point of view, you've come out of the gate, very strong quarter. There have been no negative [ surprises ] in terms of costs. Your revenue has gone up. You've been bold with acquisitions. It looks like you've got an intent in the future to do more. Your stock is, despite a volatile [ tape in small cap ] in particular, you're $18 almost. Things are looking so far so good. From a CEO's perspective, like what have you -- what's worked well for you in the SPAC process? But for investors, as they kind of get their head around this instrument, what also from your point of view, and you can be as candid as you want, do you not like about the SPAC process? What kind of leaves you with some questions versus the traditional IPO route?

Yes. There are pros and cons, I would say, about going public through a SPAC. I agree with you. I think it's here to stay because the pros are strong pros, but there are pros and cons. For us, the reason to go public with a SPAC, the reason that, that made sense, we could get public a full year earlier. So we kind of looked at traditional IPO late 2021. We can go get public with a SPAC late 2020. And the math made sense for us because of that acquisition pipeline. I think that companies need to have a purpose like for the math to really make sense at the core. Like there has to be something you can do with that capital. And so getting within set of weeks those 4 acquisitions announced that we did is a real catalyst for the company, just really helps our positioning [ on where ] we want to take the business. So that's how the math made sense for us. I think that there are cons and there's -- for example, you don't have just as much awareness historically, especially if you're kind of on the earlier side. I think that is becoming less and less true here as SPACs become more and more mainstream. But you also don't have kind of built-in research coverage. And so for us, like there's just a gap in awareness. I talked about the gap in the valuation. You could look at software companies or the other insurtech companies. And I think one of the reasons is -- well, there's probably a few reasons. One is that [indiscernible] SPAC and just didn't have research coverage. And so we're slowly getting research coverage [ started ], which is a big help for us. The other is that we're new. I suppose you always get some kind of discount as you're new [ and seek ] people. I think some of it is just awareness though. Like people just aren't as aware. We occasionally still get questions on if we're like [ indie ] home services, which is we're nothing like them, right? But that -- again, that all takes care of itself, like I say. I think research is one of the biggest cons. I think that you get grouped with a SPAC into -- it is volatile. You see the stock as just a group of SPAC stocks that bounce around together, which doesn't make -- the math doesn't make sense there. Like these are separate independent companies, but you still kind of see this grouping almost. And again, I think that as more and more high-quality companies get public through SPACs and more and more of the companies like Porch is doing are in control of their numbers and are performing or just kind of beating and raising each quarter as you go, I think that you'll see just a separation from those companies and treated independently as a company. So I think there is a little bit of an anchor in a sense there, but more than offset, like I would do it again for sure. Because that stuff all -- again, all takes care of itself over the long term, [ maybe ] over the medium term. But being able to get out, being able to be well capitalized, being able to execute our M&A opportunities, that helps us just position to build a great company that we want to build. And so that was a huge help for us.

Perfect. Well, Matt, I think we're up in terms of time. It's been a really interesting discussion. We've got to most of the questions, although a lot are coming in. I'm trying to multitask here, so I may have missed a few. In which case, we'll make sure that we get it in front of you and very happy to follow up with our investor base certainly as they're getting to know the story, many of which -- and actually, most of which didn't participate or even see you during the SPAC road show. So now you're out of the gate and so forth, we look forward to kind of working with you and following up and having many more discussions. So congratulations on what you've done so far. Keep it up. The market doesn't like negative surprises. Numbers moving higher is a good thing, and bold acquisitions is a good thing. And we look forward to continuing the dialogue. But it's been really interesting this morning. Thank you.

Yes. Thanks, [ everybody ]. Take care. See you soon.

Okay. Thank you.