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

Good afternoon, everyone, and thank you for participating in today's Porch Group Business Update and M&A Conference Call. Joining us today are Porch Group's Founder, CEO and Chairman; Matt Ehrlichman; Marty Heimbigner, Porch Group's CFO; and Joshua Steffan, VP and Group GM of Inspection and Real Estate for Porch. Before we go further, I'd like to read the company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Today's discussion may contain forward-looking statements, including, but not limited to, statements regarding Porch's expectations or predictions of future financial or business performance or conditions, business strategy and plans and anticipated impacts from pending or completed acquisitions, including acquisitions that we will discuss today. The forward-looking statements are inherently subject to risks, uncertainties and assumptions, and they are not guarantees of future performance. You should not put undue reliance upon these statements. You should understand that such forward-looking statements involve risks and uncertainties, including the Risk Factors in Porch's recent public filings with the SEC. Such factors may be updated time to time in Porch's subsequent filings with the SEC, which will be available on the SEC website, and may cause actual results or performance to differ materially from those indicated by such statements. Porch is under no obligation and expressly disclaims any obligation to update, alter or otherwise revise any forward-looking statement, whether as a result of changed circumstances, new information, future events or otherwise, except as required by law. In today's remarks, we'll also refer to certain non-GAAP financial measures. Definitions of these non-GAAP financial measures are available on the legal disclaimers found on Slide 3 of the presentation. We also refer you to such legal disclaimers for additional information. I'd like to remind everyone that this webcast will be available from replay shortly after the conclusion of this presentation on the Investor Relations portion of the company's website at porchgroup.com. [Operator Instructions]. Management will do its best to take all questions within the allotted time. Porch Group has also made available a slide presentation that will follow on with the presenters' commentary. The presentation that can be found on the company's website. And with that, let me turn the call over to Matt Ehrlichman, CEO, Chairman and Founder of Porch Group. Matt?

Thank you, Walter, and good afternoon, everybody. It's great to be back with you. I appreciate you joining the day for this exciting Porch update. As you've heard me say before, our purpose here at Porch is to build a truly great and enduring company that becomes a category winner by making the home simple. We're serving one of the largest market opportunities, the home, with this unique strategy. Today, we're announcing an exciting and strategic acquisition that strengthens our platform and further increases our already large addressable market. And so with that, I'm excited to be able to welcome Floify to Porch Group. I'm very pleased to announce this acquisition of Floify, who is one of the very few mortgage point-of-sale software companies. This acquisition establishes Porch's entrance into providing software to mortgage companies and loan officers as we continue to expand our vertical software platform to more of the fragmented home service industries that work with consumers at key moments in time. Mortgage companies and loan officers are a very natural place for Porch to expand into, and Floify offers a fantastic opportunity to bring a powerful SaaS platform into the Porch ecosystem. The company helps mortgage loan officers manage their client loan process and their sales pipelines. So through each month of 2021, approximately 77,000 mortgage transactions and approximately $32 billion in loan volume ran through the Floify system, with approximately 70% of volume being home purchases. Floify delivers a best-in-class experience for borrowers to simplify their mortgage application process. And this has resulted in high growth and recurring revenue model. So today, Floify is at a $10 million ARR, and it expects $15 million of incremental B2B SaaS revenue that would get layered into Porch's 2022 year. We'll talk more about the underlying KPIs and the reasons we're impressed. But to start, Floify is already at 130% annual net revenue retention with a 10.5x LTV to CAC. And this is before we implement the expected revenue synergies that include layering in Porch's moving concierge and our transaction revenue, specifically, including helping homebuyers with insurance. Let's take a minute here on Slide 6 and discuss how Floify fits into Porch's strategy. I think it's probably obvious for those who know our business well. But taking a look at our flywheel, Floify immediately becomes an additional core part of our vertical software segment, alongside other key home service verticals such as home inspection, title and moving. Similar to Porch's existing B2B SaaS fees, Floify generates revenue from companies paying these recurring monthly software fees. And so now as part of Porch, we also have the opportunity to gain low cost and early access to additional home buyers by helping mortgage companies provide a better purchasing and moving experience to their clients. So from this, we expect to generate consistent and recurring B2B2C transaction revenues by helping consumers with the purchase of insurance, warranty, cable and Internet, home security and more. Here on Slide 7, Floify becomes one of the pieces of Porch's software solution along with ISN, Rynoh and HireAHelper. These offerings help our customers run their businesses more efficiently and drive growth. So in these fragmented markets where we operate, we are already a leading provider of solutions to small- and medium-sized businesses, such as home inspection companies and title companies. We intend to continue to layer in more software modules for these companies to grow our B2B SaaS revenue and the revenue we generate per company per month. Because of our SaaS-plus transaction monetization model, each of these verticals represents a massive opportunity for us. And given these home service companies are particularly valuable to Porch, we have a very strong unit economics that allow for continued investment in sales and marketing as well as product development. As we've discussed, and as shown here on Slide 8, we have early access to consumers via our inspection, title and moving verticals. And now with Floify, we're introduced even earlier in the home-buying journey. This introduction to consumers comes at a low or no cost and at this key moment. So mortgage officers are often engaged right when that home-buying process begins. Once we're introduced to the consumer, we're now able to help them work through that stressful process of moving and setting up a new home. As homeowners insurance is a required purchase for all borrowers, this is an opportune time to be introduced to the consumer in a natural entry point for this service in particular. Now I'd like to introduce Joshua Steffan, our VP and Group GM of our inspection and Real Estate Group. You've not met Joshua yet, but this division includes our real estate software business units, including ISN and Rynoh. He brings unique experience scaling technology businesses along with deep real estate industry knowledge. So Joshua if you can just take a moment to perhaps introduce yourself a little bit further and then dive in and let's talk more about Floify. I appreciate it.

Thanks, Matt. It's really great to have the opportunity to share this exciting news today. I have over 20 years of experience building technology businesses at companies such as Quest Software, CCC Intelligence Solutions and Experian. And over the last decade, I have focused on real estate where I led product at Hubzu, where we became one of the largest online real estate auction houses in the U.S. and grew revenue by 6x in 4 years to several hundred million dollars. And in addition to auction, I was the COO at a leading tech brokerage focused on closing and escrow and mortgage businesses and create a SaaS products for both consumers and real estate professionals. I've been with Porch for over a year now, and I'm thrilled to be part of this leadership team. So let's now talk about Floify and the mortgage industry. The loan application and mortgage process for consumers is antiquated. And many of their approximately 184,000 loan officers are part of small or medium businesses that need help providing modern solutions in order to compete and win. Floify has established itself as a differentiated provider of point-of-sale software to solve this problem. And we are very excited it is now part of the Porch, giving us access to this large market. Let's turn to Slide 10 and dive into the Floify product and value it drives for its customers. As anyone who's gone through a mortgage application knows, it includes a dawning amount of documentation and process during a stressful time. Floify helps loan officers and borrowers manage the process and progress of the loan in simple and easy-to-use experience. Borrowers are able to easily manage their tasks from doing an initial mortgage preapproval to completing the loan applications to uploading documents to tracking their progress in the checklist and e-signing disclosure documents through the Floify platform. With a few clicks and help along the way, borrowers can easily complete their necessary tasks. By making the application easier and less frustrating, Floify helps increase loan close rates and increase customer satisfaction. Likewise, on Slide 11, we see how loan officers simplify the experience for borrowers and significantly improve loan officer efficiency compared to using e-mail and phone. They can create customized landing pages to optimize the borrower experience and build their connections with borrowers. Further, rather than forcing customers to adopt new ways to process loans, customers have the flexibility to configure the Floify solution at the corporate level and the loan officer level to create operational efficiencies. Further, loan officers can manage their pipeline of loans, making sure that nothing falls through the cracks and increasing the number and rate of closed loans while lowering costs. The increased customer satisfaction is not limited to just the borrower, but also the borrower's real estate agent who is off to the point of referrals for the loan officer and can be given visibility into the status of the loan.

So I was excited to be able to talk through this slide here on Slide 12. Because with the strong platform, Floify has built a business that's set to grow rapidly as we look forward. And it's just very clear as you look at the metrics here. So with the recurring revenue model and strong retention rates, the company was able to achieve a robust 10.5x LTV to CAC as of the first half of 2021. All of net revenue retention in Q2 was 130%. And if you look specifically at customers generating $10,000 or more in annual recurring revenue, which makes up the majority of revenue, net revenue retention was 143% in Q2 2021. Gross retention rates for these customers is also strong at 90% annually. So that strong retention rates has led to significant growth, 71% year-over-year in Q2 2021. From the current $10 million of ARR, Floify is expected to generate $15 million in revenue in 2022, which we'll now layer in Porch's financials next year. The annual recurring revenue has grown at a 72% CAGR since Q1 of 2017. So Floify's team has done all of this, these impressive results, and I know they've done it without having to raise additional outside capital. The majority of the focus on Floify has been selling solutions to smaller loan officers and mortgage companies who focus on home purchase transactions. So approximately 10,000 loan officers use the Floify software system across more than 1,500 companies. Of the 77,000 transactions a month in 2021 through the Floify system, like I mentioned before, approximately 70% of those are related to the home purchase, not refinancings. Thus, we're well positioned with Floify for the revenue synergies that can be created as part of Porch. The opportunity for growth in the years ahead is wide open, in our view, with significant market share growth available for the business. Floify has paired its strong product offering with auto renewing contracts and the pricing structure. It's very attractively positioned versus the competition. The SaaS fee is structured on a per seat basis rather than per transaction. This provides a clear value proposition to potential Floify customers and positions the company with an opportunity to increase market share while maintaining a more consistent revenue stream even in a changing loan environment. So net, we expect Floify will continue to grow rapidly over time and to be in line or accretive to Porch's long-term 30% to 35% expected growth rates. Joshua, why don't you talk about the revenue growth the company has seen here over time here on Slide 13.

Thanks. So here on Slide 13, 2021 has been a very strong year for Floify with approximately $10 million in revenue estimated for the year, approximately 64% year-over-year and approximately $1 million of EBITDA. Floify is a high-margin business with 76% gross margins anticipated in 2021, generally consistent with Porch overall. We anticipate $15 million of revenue and $1.5 million of EBITDA in 2022. This addition to EBITDA factors in the additional expected investments. Similar to our other vertical software offerings, Floify continues to add additional modules in order to enhance the offering and drive retention and growth. Here on Page 14, we highlight a few of the growth drivers of the business that will help us to continue to ramp revenue in years to come. As part of the Porch ecosystem, we will be able to monetize via not only SaaS fees, but also through transactions by embedding insurance into the digital loan process and helping our loan officer customers provide their consumers with our moving -- Porch moving concierge to help with all key move-related activities. There are additional investments that we can make in order to accelerate growth by expanding sales and marketing efforts, launching new software modules and expanding functionality of the product, including the recently launched mobile app. As mentioned, Floify has seen exciting initial success with the introduction of 2 modules, Floify TPO and Floify Plus. And we believe it is well positioned for additional growth as a member of the Porch family. We anticipate Floify to contribute $2 million of revenue to Porch in the balance of 2021. And we expect Floify to operate at a positive adjusted EBITDA in 2022 and with similar underlying long-term margins as the Porch businesses. Here on Slide 15, we thought it would be helpful to highlight the positive impact Floify has had on their customers. Last year, Floify conducted a survey of customers to better understand how the solution improved their operations. The results were impressive. Loan officers and their teams reported significant efficiencies with virtually all stating they had improved time savings and half able to reduce their time spent per loan by 20% or more. Further, 91% reported reduced workload, allowing them to process more loans in the same amount of time. Additionally, Floify customers saw significant reductions in the number of days that it took to close a loan, with some improving as much as 10 days and over 90% reported improved communication during the loan process, including with third parties such as real estate agents. A great example of these improvements can be found with My Mortgage. In order to drive more effective communication, both internally and with borrowers and referral partners, they use the Floify solution. The results were clear. And My Mortgage saw improved customer satisfaction, faster time to loan application completion and gave the company scale efficiencies as a group. We are super excited to bring this offering within Porch as it clearly aligns with our value proposition of driving best-in-class tools to help companies better operate their businesses. I'll now turn it over to Marty Heimbigner, our CFO, to talk about the TAM and transaction details.

Thanks, Joshua, and good afternoon, everyone. On Slide 16, we see the opportunity ahead of Floify. One of the reasons we are so excited about Floify is both how much they have achieved as well as the large opportunity for the business. Whether by origination volume, number of loan officers or by revenue potential, it is clear that Floify is poised to grow rapidly even in a changing mortgage industry. Given the revenue model that is focused around the loan officer, we would want to draw your attention to the opportunity there. With approximately 10,000 loan officers served today across the Floify's more than 1,500 companies, there is clearly a fantastic opening to use Floify's differentiated value proposition and pricing to achieve significantly greater share. Of course, the strategic importance here is how Floify opens up another channel to penetrate Porch's greater than 320 billion U.S. TAM by providing valuable home services purchased during the move, including insurance. We look forward to plugging Floify into the Porch ecosystem and driving profitable growth in the years to come. Now turning to Page 17. As discussed, Floify has a fast-growing recurring revenue model. We believe that we have ample opportunity to further increase the trajectory of the company within the Porch ecosystem, which creates an attractive opportunity to add value to our shareholders. We are acquiring Floify for $86.5 million in unprime consideration, representing approximately 5.75x 2022 expected revenue. We believe this represents a fair price for the strategic and fast growth company and will be accretive to Porch shareholders. $76.5 million of the consideration was provided in cash and $10 million in stock at close. Porch is guaranteeing the sellers of the $10 million of Porch common stock will double in value by the end of 2024 with respect to any Porch shares retained by the sellers throughout that period. Now I'll turn it back to Matt for further comments and to wrap it up.

Thanks, Marty. Okay. So to wrap, as we layer in this new software vertical, we continue to grow our already massive TAM. And we're unlocking additional introductions to consumers who need to purchase key services such as homeowners insurance, really, in that home-buying process. Hopefully, you can see that we are diligently executing against our strategic plans. We are very confident we have substantial opportunity ahead and are laser-focused on continuing to move rapidly to build a truly great company. We look forward to providing additional updates to the company during our upcoming Q3 earnings announcement, including updated guidance. With that, Walter, can you please open up the call for questions.

Thanks, Matt. The first question will come from Dan Kurnos from Benchmark.

Great. Maybe just a point of clarification. The $15 million that you're calling for next year, is that from Floify's organic initiatives and their own internal growth? Or are you embedding any revenue synergy, maybe not the B2B CCAR, but maybe some of your own module layering in there?

That is Floify on essentially a stand-alone basis in terms of what is expected from that business given its current trajectory. It does not include any of the revenue synergies such as -- in particular, which would be those B2B2C transactional revenues that will layer on top of this offer.

Got it. And then so Floify, I guess, has 3 pricing buckets, it looks like. Is there any more kind of color? I know you've talked sort of looking to pricing over time. And you've talked about the first [indiscernible] model. I'm assuming that your -- that's sort of the base and then you layer in incremental fees on top of that. Is there any way to get, like I said, kind of maybe some more color on how many of the LOs fall into each of those buckets?

The -- we aren't yet providing that detail. We certainly could consider over time. I think the best way to think about how this will layer into our KPIs, though, clearly, 1,500 companies here in Q4 in terms of Porch's kind of total number of companies. The revenue per company per month for Floify is a little bit lower than Porch's current revenue that we see, mainly because we've not yet layered in transactional monetization. In terms of the B2B SaaS fees, Floify actually generates more revenue per company per month. So the detail that I would use as you're working through that is, right now, Floify is at a $10 million ARR. And so in the balance of this year for us, it will add about $2 million in revenue to our 2021 year. And so you can kind of build that into the additional kind of -- the revenue per company per month that we'll get here from these new customers.

Great. And if I could sneak just one in more -- just a quick one. Obviously, they're bringing -- it looks like native eSign. I know there's some DocuSign in there. Are you taking up any digital capabilities with this that will help across your own portfolio?

That's actually is one of them. So they integrate with other eSign technology systems where they have actually, and it makes sense given where they've been focused, but have invested so that it's into that capability. So it is very tightly connected into the system for those customers that wants to use it. So that would be one example. I would say that the Floify, just tech stack in general, like much of Porch's tech stack is very modern, well architected, well executed. And so there will be some opportunities for certain modules that are built to span across different verticals. So more to come on that.

The next question will come from John Campbell from Stephens.

Congrats on the deal. Very interesting one. So I guess it really depends on the consumer, but mortgage feels like it could be kind of the first stop of the process for a lot of folks. You've got 1.5 million realtors. You got 1 million listings. So leads are obviously very valuable in the space. But I'm curious, is there any potential to drive maybe like some kind of marketplace or like a lead for agents in the early part of the process? Is that part of the process -- is that part of the consideration for you guys in time?

I would say it's not built into kind of the core investment thesis here, like it's not part of the underwriting model as we build up our expectations. We know very clearly how we can layer in key services that we already offer today, like homeowners insurance and these other key services that we talk about and be able to create acceleration of growth and value. But we agree, and that's some of the things we are talking about being this much earlier in that flow, in the homebuying flow, it does open up other opportunities. We want to make this process as easy as possible for a consumer, right? And so that's the same mission that Floify has just -- they're solving this particular loan application. But their product is specifically designed and built for the purpose of making it easier for these consumers so the loan officers can look good. That's why we think they are such a nice match. This process -- this homebuying process is more than just the mortgage application and then all the services that Porch held today. There are such as finding a real estate agent and other opportunities to be able to help the consumer. And so it does open up, yes, I do think, John, does open up more monetization opportunities over time for us.

Makes sense. And then just from your past experiences with ISN and then you did obviously HireAHelper, a couple of years ago, when you acquired those businesses, how -- just generally, how long does it take for you to kind of turn on that customer access, start to see the ramp in marketplace revenues? Like how long does that process typically take? And then if you look at those businesses, I think you took them multiple times higher in the revenue base. So just from a broad sense, how much of that was driven by just kind of accelerating that core SaaS revenue versus the moving kind of related services when you turn on those transactions?

Yes. I think the reality is that it's connected. And that's the thing I want to communicate is that by layering in the transactional monetization, all of a sudden, the company has now become more valuable. And that lets us then go and invest more aggressively, both in R&D and in sales and marketing, which then drives acceleration of the B2B SaaS fees. And so it ends up being both. We both accelerate the B2B SaaS fees and the transactional revenue. But the flywheel helps to unlock the unit economics and then drives growth for both of those 2 revenue streams. That's what we've seen in the past, that's what would expect here with Floify. In terms of the time, it does vary. Generally, if I were to kind of pick a number of 6 months, but it's probably 3 months to 12 months realistically. We would expect kind of later part of 2022 to have done the work to start being able to unlock some of the revenue synergies.

Next question we have is from Jason Helfstein from Oppenheimer.

So I think you said the gross margins are in the 70s. Just help us understand what other costs kind of need to be below. And when you leverage your existing cost structure, this was a $25 million business or a $30 million business, what would the margins be?

Yes. It's a similar underlying margin profile as what Porch sees broadly. So it's around a 76% gross margin right now. Contribution margins are similar to where Porch is, 40% plus. So it layers right in line with kind of our very high underlying margins. I think the choice, Jason, just like with Porch broadly is how much we want to invest in fixed expenses and in particular, in R&D, to be able to drive future growth. And so there's a choice there for us. And I think generally, we'll make that choice broadly across all the Porch Group, what are the best investment opportunities, how much margin improvement do we want to show each year. But clearly, with the strong underlying contribution margins that Floify has, it could go be very profitable right now. Most of the R&D investments that they're making is not about this year or next year, it's P&L. So it's a similar situation as what we see broadly with Porch.

And then just a follow-up. Do you have bigger aspirations in mortgages? So should we see additional M&A mortgage in [indiscernible]?

I don't think anything is imminently planned, no. Right now, this is clearly the first move for us in this particular space. Sometimes we've seen certain situations where we acquire a business that brings us into a particular space, and then there could be little tuck-ins that we do around it. So I certainly wouldn't say never, although we wouldn't consider certain opportunities if they were the right strategic fits and very accretive for our shareholders. But the first thing is first, get this acquisition done, get the revenue synergies kind of really kick off so we can get the flywheel spinning. And then that should present other potential opportunities in the future.

The next question is from Mike Grondahl from Northland.

Matt, could you kind of describe the sales force at the acquisition and sort of any adjustments or enhancements you think you're going to make? And then maybe secondly, what does the average customer look like? The press release kind of says SMB and enterprise. Can you give us a flavor for like the average customer?

Yes, happy to. And Joshua, feel free if you want to layer in here as well. The go-to-market is very similar to what Joshua does across this division and what we do across Porch. So it's, I would say, a classic SMB software go-to-market, so inside sales teams, coupled with a variety of marketing tactics to drive inbound volumes, whether that's trade show, content-based, digital-based marketing tactics to make that inside sales team more effective. So -- and again, Joshua, you can layer in if you want to update on some of the other tactics you're considering in the inspection industry that might apply here.

Yes. I think the only thing that I would add, Matt, is that certainly, Floify has been focused on acquisition marketing and sales. And so now as we start to really bring new modules to light a business, one of the opportunities is from an account management perspective and just kind of cross-selling and up-selling new products into the existing customer base. So I think that would be an opportunity for expansion as well.

And then the second part of your question, Mike, enterprise is just a label that's attached to the larger customers. But I would put large in quotes. It's defined as $10,000 of ARR or higher. It's just a group of customers that represents the majority of revenue, but obviously, it's not that high of a bar. It's not that large of a number. So they look at that group as well as the entire customer base.

Got it. And then one more real quick. The 77,000 monthly mortgage apps that you referenced, do you think or have you had a chance to look at what kind of overlap you might have had with the home inspection business? I mean that business, I think, caters to like 28% of all inspections out there in the market. So do you think there's some overlap there?

Well, by definition, there are -- certainly, there will be. Of the 77,000, if you look at this kind of industry data, around 2/3 of those applications will become closed loans. And so those would be people that would have gone through that whole process. We've taken just a cursory look at it. But it wouldn't -- I wouldn't expect any surprises there. You'd expect around 1/4 of the consumers that are going through the Floify system to end up being overlapped and Porch would already had access and visibility through our inspection software with those customers. One thing that I would note, though, that I'm not sure is fully appreciated is that even if there is overlap, that creates incremental value by getting introduced to...

Kind of a double touch.

You're exactly right, exactly. Because for example, the consumer very well might have a stronger relationship with that mortgage officer, that loan officer than they do with their home inspection company. And so if we're teed up and introduced this particular, that might help us drive certain conversions that we wouldn't have driven through that home inspection company. And there's so much room and opportunity for us to continue to see this increasing execution in terms of how many services we can help those consumers with. They're getting multiple touch points throughout that journey with them is incrementally valuable for us.

Next question from Ben Sherlund from Cantor.

So kind of thinking about the acquisition longer term, are you looking to use this more of a conversion funnel for some of the other transaction businesses? Or is the goal to really try to grow the actual SaaS revenue? And I have another question.

Yes. No, thanks, Ben. It's a great question because I would say -- I know I just want to make sure it's super clear, which is it is both. And again, I'm not sure if it's fully appreciated how rapidly -- independent Floify is now rapidly Porch's B2B SaaS revenues were growing while also the transaction revenues are growing very quickly. And so -- but it very much is a SaaS fee plus transaction revenue model. And so it's the exact same strategy we'll deploy with Floify. We'll continue to layer in more modules. We'll continue to increase the B2B SaaS fees. And we think there's a significant opportunity in just the B2B SaaS fees within Floify. But clearly, we're also go into layer in that transaction revenue as well. So I would say both.

Okay. Great. And then another question. I noticed on the Floify website, Floify offers custom white label applications for customers. This acquisition going to be beneficial at all to your own consumer app build-out and possibly using that as -- to extend that to other product offerings you have and eventually kind of leave that as a conversion funnel for your own consumer app?

I don't think it'll necessarily accelerate our consumer app just in that, that team is on our side, is making good progress. We're excited about being able to get that out to the initial sets of customers in not too distant future. So not necessarily. I do think, though, there are opportunities to be able to unite some of the experiences for the consumer. So as somebody is going through that loan application process and they've got that checklist, how do we combine those sets of checklist so it's just to be like this native process for a consumer as they're going through this home buying journey. Or in the Porch app, how do we bring some of those experiences into that Porch app for consumers that are working with one of our loan officers. We think there's not only a great way to be able to service consumers wherever they're coming from, but we also think, again, it's just ways that we can help differentiate and create more value for loan officers and that they can really stand out by providing these different experiences for their consumer. So that's how we would see it impacting us.

Next question is from Ken Wong from Guggenheim.

Congratulations. Just a quick question on kind of more of the macro setup, look, I think you guys get a lot of investor questions on how the housing market has impacted ISN. How should we think about what the impact could be on Floify? And to the extent that you guys can comment on what's baked into that $15 million next year? Is there some kind of macro housing conservatism around that trajectory?

I can take that, Matt. So I think there's a few elements here. And so first is just kind of the proportion of refi to purchase transactions. So typically, refis fluctuate a lot more than the purchase transactions. And when you take a look at the Floify business, vast majority of their transactions are on the purchase side. Now I think the second piece, and this is maybe even more important is way that the Floify product is sold to loan officers and to mortgage brokers. And that's on a per seat basis. So whereas others in the industry might charge per transaction, Floify charges for seats and so you're going to see a lot less volatility or variability in revenue because of that. And I guess the other piece is that because of where Floify sits in terms of the value that it creates for loan officers and mortgage brokers is that when they're extraordinarily busy, the Floify product really helps improve their productivity, and they need it in order to be able to add use technology to tap into extra capacity. Or even if things are starting to slow down and maybe they're looking to have to cut back on staff or some of those other sorts of things, they're going to need to rely on the Floify product in order to make sure that they're providing great service to their clients and optimizing their funnel.

Got it. That is super helpful, Josh. And then you guys had that little chart earlier showed how Floify is earlier in the sort of the life cycle. Should we think about any benefits to some of the downstream SaaS businesses you have? I could potentially see maybe funneling mortgage customers down to your ISN network. I'm not sure if that's beneficial to inspectors, but would love to get a sense what kind of benefits to the SaaS businesses there might be rather than just a B2B2C stuff?

Yes, I think it's a great question because part of our strategy by playing across these different verticals is to be able to create this value proposition that's very hard to compete with because it's not just providing the best software and be able to provide a very attractive price point for these companies, it's not just that we can help them to differentiate their consumer experience by making an easier move, It's also that we can drive demand back to these companies, right, and put jobs on their calendar. And when you start putting jobs in their calendar, it's just a very hard for companies to leap. And so it is really this 3-pronged value proposition. You're exactly right. And some of the things we're thinking about in the home inspection industry is, okay, Floify clearly gets us access to consumers as much earlier, one of the things we can now do is to help make sure that we can get their inspection booked and drive demand in this huge, huge base of inspectors that we work with, where we know their calendar and their availability and their price points and everything else, right? So we can make it really easy and embedded into that experience to get that inspection booked. We see this today in example with moving companies. We meet so many consumers from home inspectors, we drive huge amounts of volume into moving companies in terms of new jobs. And so then, of course, you're committed to Porch at the end of the day, you're committed to the platform because we're a key part of how they grow the business.

Got it. Fantastic. And if I could just squeeze in one more. I think in the past, you've talked about payments being a longer-term opportunity. I guess when I see POS, I just immediately just naturally think payments. Is there some sort of a transactional component here that we might be missing? Or is that just more than naming of the product than anything else?

Yes. That's good thinking. Currently, Floify doesn't support payment processing, but that's something that we'll look at as a potential future opportunity. I do think, I mean, naturally, consumers are paying for the mortgage through this. And so they're not going to -- there's different ways that they're naturally go pay for that versus like home inspections are going to much more naturally pay with credit card. I think it will be a different type of opportunities, different ways that we can be able to potentially play deeper in the value chain over time to be able to capture more of the opportunity there. But that's for a bit of the future for us.

One question in from the audience. Can you provide an update on the cash balance post financing and acquisitions that you've announced?

Yes. So we closed out the second quarter with $150 million in cash. And as I think most of you know, we did close on a convertible debt offering in September, raising $425 million. And then today's cash outlay of $76.5 million puts us in a really good position for our continued operations and our M&A pipeline. So we feel we're in a good position after all of those events here in the third and fourth quarter.

And next question is from the audience. This acquisition is one of the highest multiples you paid so far since you went public at 5.75x. Can you talk a little bit about how that fits into your overall strategy and whether or not we should think about that strategy is changing?

Yes. Certainly, no changes. We'll evaluate companies based on a variety of criteria. We certainly believe that the acquisition of Floify is highly strategic and great acquisition for Porch given the growth rates, the revenue synergies and just the opportunity that's ahead. As a reminder though, the acquisitions from this last year, we previously recently disclosed, we've averaged a 2.5x revenue multiple. And those companies on average were growing 7% annually pre-acquisition. Within that first year, post-acquisition, we've accelerated the growth to an average of 29% in the first year post-acquisition. But clearly, Floify is growing at a much faster rate than where these other companies were prior to acquisition.

Next question is from the audience is on margins or on EBITDA. I understand the comments about margins in general being similar to Porch overall. It looks like EBITDA margin today is around 10% to 15%. How do you see that trending? And what are the key drivers?

Yes, that's correct that Floify is in that 10% to 15% range today. We are looking at how we can expand and continue the rate of growth with further investments in sales and marketing efforts and R&D related to their product and technology. So we believe this business is in line with the rest of Porch's vertical software business and our long-term 25% EBITDA margin targets. So in the short run, we're going to continue to be focused on growing the top line revenue.

It looks like that may be all the questions we have in from the audience. With that, I'll turn it back over to you, Matt, to close with any final remarks.

Well, thanks for the questions, for joining today. I appreciate it. Again, we're just getting started in building out the platform that we're building out. As we talked about, just huge, huge TAM in front of us. And I'm just very pleased with how the team is executing against the opportunity. We'd like to just say, welcome to the Floify team. The values that the cultural fit with Floify, from the start-up when we began discussions with them was clearly very strong and so I think it's going to just be a fantastic match. So welcome, certainly to the team. We'll be getting back together here with investors in the fairly near future, obviously, for our Q3 earnings announcement. So we'll be back together looking forward to providing updates on just kind of underlying business performance and guidance. And until then, we'll see you soon. Take care.