Porch Group, Inc. Q4 FY2021 Earnings Call

Good afternoon, everyone. Thank you for joining Porch Group’s Fourth Quarter and Full Year Conference Call. Today we have Matt Ehrlichman, the Founder, CEO, Chairman, and President of Porch Group; Marty Heimbigner, the CFO; Matthew Neagle, the COO; and Nicole Pelley, the SVP of Product and Technology. Before we continue, I want to share the company’s Safe Harbor statement, which provides important cautions regarding forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Our discussion today, including responses to your questions, reflects management’s perspective as of March 1, 2022, and we are not obligated to update or revise this information. We will also be making forward-looking statements regarding our future financial and business performance, strategy, plans, and expected impacts from acquisitions based on our current expectations and assumptions. These statements carry risks and uncertainties that may result in actual outcomes differing significantly from what is projected. We encourage you to review the risk factors in our SEC filings for more details. For a reconciliation of non-GAAP measures to the most comparable GAAP measures discussed during the earnings call, please refer to the tables in today’s earnings press release on porchgroup.com and filed with the SEC. To ask a question during the presentation, please log into the webinar and use the chat function. Management will aim to address as many questions as possible within the available time. This webcast will be available for replay shortly after the presentation concludes on the Investor Relations section of our website, along with a slide presentation that will follow the commentary. Today, in addition to discussing Q4 and year-end 2021 results, SEC filing information, 2022 guidance, and our KPIs, our team will update you on product performance, M&A activity, forward-looking milestones, and our path to future profitability. Now, I’ll hand the call over to Matt Ehrlichman, CEO, Chairman, and Founder of Porch Group. Matt?

Thanks, Walter. Hello, everybody. Good to be here. It was an exceptional first year as a public company. I want to highlight a handful of things as I kick us off today? First, we solidified our position as a leading software provider to companies in strategic home service verticals including home inspection, mortgage, title, moving and roofing, with market share expected to continue to grow nicely in 2022. Second, we continue to leverage these relationships with companies to meet consumers at advantaged and unique moments in time and provide a differentiated experience to help make moving and homeownership easy. We now offer full digital quotes nationwide, across Insurance, local moving labor, full service moving, TV, internet and more. In 15 states we now offer our own Insurance products and are integrating Home Warranty and maintenance services to create a full home protection plan. Third, our financial results were strong, demonstrating our ability to monetize our platform, improve margins and execute the plan we laid out when we went public in 2020. At the start of 2021, our trailing revenue was $72 million and we provided forward guidance at $120 million for the 2021 year. Our business finished 2021 at $192.4 million in revenue, which was 166% growth year-over-year, 71% revenue less cost of revenue margin, 41% contribution margin and negative 13.8% adjusted EBITDA margin. In terms of revenue, specifically, at our Homeowners of America business, note in our year end closing process, we adjusted how we account for HOA’s claim fee revenue under GAAP from gross revenue, which had been their historical approach to net revenue, which is the correct approach. This was a $7.5 million adjustment to both revenue and cost of revenue that has no impact on HOA’s business fundamentals nor EBITDA and it obviously improves then its revenue less cost of revenue margins. Marty is going to cover this further in his remarks to follow on accounting and financial disclosure. So looking at 2022, the business is performing extremely well and we anticipate continued growth and adjusted EBITDA improvements on both dollar and percentage basis. Revenue guidance for 2022 is $320 million, $302.5 million from the base business, $10 million from the planned CSE acquisition, which we expect to close in mid-2022 and approximately $8 million in revenue expected from the planned acquisition of Residential Warranty Services or RWS, which we signed just yesterday. We expect to deliver better than 400 basis points of adjusted EBITDA margin improvement, as well as an improvement in our actual adjusted EBITDA dollar performance. We are also guiding to $600 million in gross written premium for 2022. Whereas compared to 2021, gross written premium is expected to almost double year-over-year. In our deep dives later in the discussion we are providing for the first time our expected timeline for future profitability, which we expect to manage towards in the second half of 2023 and for the full year 2024, and to reiterate our midterm target of getting $1.5 billion in revenue. So a lot to share. I am looking forward to it. Let’s dig in. So looking here at slide six, we have executed our unique strategy in the home services industry to provide software and services to select strategic verticals to help companies grow. And by doing so, we generate B2B recurring software revenue, as well as gain early and ongoing access to homebuyers, who we helped to improve their home buying home ownership journey and generate consistent B2B2C transaction revenues by helping with the purchase of important services such as Insurance. Starting from the top of slide seven, our priorities for 2022 build on the success we had in 2021. So number one, to sell vertical software in more companies, our core go-to-market. Two, to embed key services and consumer experiences into our software products in a variety of ways to get in front of more consumers and increase our B2B2C transactions. Three, to continue to grow our Insurance business both rapidly and profitably, including launching new products and in new geographies. Four, continue to build out our Data Platform and start to leverage Porch’s unique insights to improve pricing for our Insurance and warranty products. Five, extend our key consumer experiences such as our app to consumers that we get unique early access to in order to increase conversion rates. And then, lastly, to continue to acquire select strategic and accretive companies that deepen our competitive moats and accelerate the growth of these companies. With that, I will turn it over to Marty Heimbigner, our CFO to discuss our Q4 and full year results and guidance for 2022.

Thanks, Matt, and good afternoon, everyone. Thank you for joining the call today. Let’s turn to our business and the results. As was mentioned our business is performing very well. We entered 2021 looking to exceed our $120 million start of the year guidance. Ending the year at $192.4 million of revenue and 166% growth certainly was more than we anticipated at the beginning of the year and a testament to the great work by the Porch Group teams. As you can see, on slide nine, the year-over-year comparison of our fourth quarter results were strong by every measure. Revenue less cost of revenue was 79%, contribution margin was 44% and adjusted EBITDA margin was a negative 15%. All improved nicely from the fourth quarter of 2020. Revenue growth in Q4 2021 versus the prior year was up 172% to $51.6 million. As we look at the comparison to previous guidance here on slide 10, our guidance number of $195 million of revenue included the assumption of HOA’s claims fee revenue continuing to be booked on a gross basis as it had historically been. Instead, this estimate of $7.5 million should have been reflected as a contract claims expense and not as revenue, because of our reinsurance ceding. Thus, our guidance number would have been $187.5 million of revenue had we reflected this change in guidance. The actual financial results of $192.4 million of revenue for the year ended December 31, 2021, have appropriately accounted for this issue with no net impact on adjusted EBITDA loss as reported. We finished the year at $192.4 million in revenue, with each of our margin lines performing better than previous guidance. Adjusted EBITDA finished at negative 13.8% for the year, an improvement from negative 25% in 2020. Here on slide 11, we show the substantial improvements and performance of the business over the last four years, a 75% compound annual growth rate and a 5x improvement in adjusted EBITDA margin. 2021, our first as a public company was a transformative year. Before we move to 2022 a few quick comments on the status of our annual report for the end of 2021, earlier today, we released our unaudited financial results for the quarter ended December 31, 2021. As further detailed in our earnings press release and our Form 12B-25 filing from earlier today, we expect to publish and file our audited financial results in our annual report on form 10-K by March 16, 2022. Of note, Porch Group became the large accelerated filer as of December 31, 2021, and due to the expanded requirements associated with Sarbanes Oxley and the reduced filing time from 90 days to 60 days after year end, we could not file the form 10-K today without unreasonable effort or expense, particularly given the added complexity of being our first year as a public company, the Sarbanes Oxley regulations and the acquisitions Porch has completed. We do expect to determine that we have material weaknesses related to our internal controls over financial reporting. We expect the financial results reported in the unaudited financial statements included with our press release will not significantly change when we file our Form 10-K. Rest assured we understand the issues here and have solid plans to address our internal control environment in 2022. Now, let’s turn to 2022 in which we fully expect the momentum to continue. As Matt mentioned, at the start, we are guiding to $320 million in revenue and $210 million in revenue less cost of revenue, what we use as a measure of gross profitability. These figures and the following guidance take into consideration the announced but not closed acquisitions of CSE and RWS. We expect our revenue less cost of revenue margin percentage to be close to what we saw in 2021, with two slight impacts, the planned CSE and RWS acquisitions together do have a lower margin profile, and we expect some slight mix shift in services sold to consumers as we continue to convert better with movers, a bit lower margin service. In terms of adjusted EBITDA, we are guiding to more than a 400 basis points year-over-year margin improvement, which produces close to negative 9% adjusted EBITDA margin. We would also like to note that even if revenue performs well and exceeds guidance, we are also guiding to improved year-over-year adjusted EBITDA dollar performance. We want to be clear that we are marching towards our long-term adjusted EBITDA margin targets. Related to our Insurance segment, we are also providing 2022 guidance for gross written premium of $600 million, approximately doubling from 2021. We are excited about the ongoing performance and momentum we are seeing here. Turning to slide 14, you can see the strong year-over-year growth we expect, 66% revenue growth, 53% growth in revenue less cost of revenue and 95% growth in gross written premium. During our Q3 2021 earnings call, we noted $226 million as our estimation of 2021 pro forma revenue inclusive full year impact of announced acquisitions. With the adjustment to HOA’s revenue recognition that figure would have been $220 million. On all measures, we are pleased with the growth we are seeing. Porch is growing rapidly and accelerating with strategic and accretive M&A. You can see that here on slide 15, where in four years the business is expected to grow from $36 million in revenue to $320 million in revenue, a 73% compound annual growth rate. At the same time, the business has made consistent and significant strides towards our long-term 25% target adjusted EBITDA margins. We expect 2022 will represent another nice step forward in our adjusted EBITDA margins improvement in our adjusted EBITDA dollar loss and importantly set us up to target profitable operations for the second half of 2023 and the full year of 2024, which we will discuss later in the call. With that, I will turn it over to our Chief Operating Officer, Matthew Neagle to discuss our operating segments and KPIs.

Thank you, Marty. Hello, everyone. I will first jump in and share 2022 guidance for our operating segments and then we will look at our KPI performance for Q4. As you can see on slide 17, the most valuable, strategic and recurring elements of our revenues are growing the fastest. We generate revenue from our software through B2B SaaS fees and transactions. Overall, our vertical software segment is expected to be approximately $190 million in revenue in 2022. Of this, B2B software and services fees is the largest portion and is expected to be nearly $100 million, an increase of almost 2x from 2021. The other high retention and recurring portion of our business is Insurance segment revenue, expected to be 40% of overall revenue in 2022. This too is growing rapidly, 132% year-over-year growth to approximately $130 million in revenue, which is approximately 21% of our expected $600 million gross written premium. This is particularly important as it demonstrates our expectation in being one of the fastest growing InsurTech companies. Considering the scale, growth and competitive advantages of our insurance operation, we believe our Insurance business is highly valuable in its own right and it only represents 40% of our revenue. Turning to slide 18 and our KPIs. It is clear our business continues to perform well. Beginning with companies, we saw growth in the average number of companies in Q4 to more than 24,600, which is up from approximately 11,000 last year or 121% year-over-year growth. If you look at revenue per company per month, in Q4 is approximately $700 per month, which is up 26% from the same quarter prior year. Just as a reminder, and as you can see in prior years, revenue per company is lower in Q4 versus Q3, as there’s typically less transactional revenue due to fewer homebuyers in the offseason. We have seen strong growth in new companies with certain verticals, namely mortgage being lower revenue per company. We expect the growth rate of net new company ads to slow somewhat in 2022, which is something we have discussed previously. If you go to slide 19, we are excited to celebrate the milestone of having 1 million monetized services in the 2021 year. In Q4, we continue to see strong growth across all types of monetized services, with us recording 260,000 for the quarter, which represents 53% year-over-year growth. We saw $132 per monetized service, which is a 35% increase year-over-year. Insurance is still the fastest growing service with moving as a next and with a lot of momentum. Let’s now jump into additional disclosure related to our two operating segments. First, our vertical software segment, you have seen here on slide 20. We realized $35.5 million in revenue in Q4, which is a $142 million run rate. Of this, the majority of B2B SaaS fees with the balance transactional revenue we generate from consumers who work with companies we serve. Adjusted EBITDA margins for this segment generally are lower in Q4 and Q1, given the seasonal aspect of this business. If you look on slide 21, our Insurance business continues to grow rapidly and demonstrate strong margins. In Q4 2021, grocery and premiums were $101 million, representing more than a $400 million annualized run rate, as we ended the year. Segment revenue was $16.1 million. This represents approximately 16% of gross written premium. As a reminder, there is less, but still some seasonality in this part of our business, with Q4 and Q1, typically being slower quarters, while conditions are prorated across the year, fee revenue is recognized when policies are sunk. We drive the significant majority of our Insurance segment revenue from insurance carrier commissions, reinsure ceding commissions and fees. Thus, as you see, we had strong underlying margins, including 21% adjusted EBITDA margin. Briefly on insurance KPIs, at the end of Q4, we had approximately 304,000 policyholders and we are generating an average of $211 of revenue per customer per year on a rolling 12-month basis as of December 2021, we had an 89% customer retention. We will now kick off the deep dives for this quarter. First, you will hear from Nicole Pelley, who leads our Product and Technology at Porch to provide a product update. And then Matt will update on M&A, including past performance, as well as longer term goals and milestones. Nicole over to you.

Thank you, Matthew. Good afternoon, everyone. I’m excited to provide an update on our Porch Platform and our consumer app, as well as share our vision for enhancing the consumer experience. We see significant opportunities in streamlining various aspects of home ownership, from moving to renovations, and I am proud of the efforts our teams are putting into this initiative. To start, our vision for the Porch Platform consists of two key components: firstly, a centralized consumer experience that works alongside our various software products to generate revenue and enhance customer satisfaction by simplifying their move and home maintenance. Secondly, we are developing a Data Platform that collects unique and proprietary data about properties, people, and home products, which we leverage to enhance consumer experience and set pricing for essential services such as insurance and home warranties. Our consumer experience also integrates APIs, enabling software companies to seamlessly incorporate specific services. For instance, we are close to finalizing the integration of insurance into the mortgage completion process, which can be presented as a comprehensive digital and concierge service for companies to offer to their homebuyers. We introduced our consumer app in the fourth quarter of 2021 to better engage users, improve conversion rates, and boost transaction revenue while strengthening our relationships. Currently, the app is in a closed beta phase and is available exclusively to clients of home inspection companies. Now, let's take a quick look at a demo. On slide 24, when a consumer schedules a home inspection, we can prompt them to download the app by providing helpful information that streamlines home management. Our aim is to assist users with all the necessary services for their new home, and we believe that our app will increase the number of consumers we assist during their move, expand the range of services we offer, and cultivate lasting relationships with homeowners. Consumers can oversee their entire home-related tasks on slide 26, and we ensure this remains relevant by tracking their moving dates and upcoming needs. Here, you can see that we prioritize insurance, and our goal is to simplify the purchasing process over time. We also support a variety of services including movers, TV and internet setup, security systems, address changes, handyman services, and more. Next is the My Home section of our app, which allows users to access their Home Inspection Report and view home details that are automatically filled in based on this report. Most inspection reports detail appliance information and any included systems, with information such as model numbers being imported into the app so consumers can easily monitor their home details. This feature allows us to notify users about recalls and remind them to maintain their appliances, linking them to purchase the appropriate filters for their systems. I must say, it’s been gratifying to witness the positive reactions from consumers regarding this feature of the app, which highlights our unique capabilities because of our proprietary insights. On slide 28, our goal is to make the Porch app the go-to solution for homeowners managing their properties. As we roll out the app to more consumers through our software products, we will gather and store contact information related to the home buying process as well as ongoing professional services utilized by consumers. We’re just at the beginning of this journey with our app, and we foresee significant opportunities to enhance conversion rates in the coming years. What lies ahead? Here’s a brief preview. Although this is still in the planning stages, we envision Porch becoming the app that simplifies moving and ongoing home management. With our mortgage point-of-sale software, title software, and inspection software, we are uniquely positioned to offer a complete mortgage and closing process alongside essential services like booking inspections and handling payments at closing, all while providing immediate insurance options at competitive prices. With that, I will hand it back to you, Matt.

Let’s conclude the call. I am genuinely excited about the upcoming years. To clarify, everything you saw, except for the final slide, reflects what the team is working on, and everything else is currently live, which has been encouraging due to the positive feedback we've received. I’d like to finish this earnings call with two final in-depth discussions. First, I’ll cover our M&A performance. On slide 31, we’re sharing more specific data related to our previous comments. We have shown a strong and consistent ability to accelerate the growth of acquisitions when integrating them into the Porch Platform. Companies acquired by Porch in the first half of 2021 had an average revenue growth of 6% in the year preceding their acquisition and achieved an average growth of 28% in 2021. Additionally, we thought it would be beneficial to provide specific information about our five largest acquisitions: ISN, Homeowners of America, Rynoh, American Home Protect, and Floify. The data on the slide speaks volumes. ISN has experienced tremendous growth post-acquisition, with a 45% increase in the year following the acquisition and continued strong growth, driven by strategic integration and monetization. Homeowners of America, acquired in early Q2 2021, saw their gross written premium grow at a compounded rate of 19% before the acquisition, but that nearly doubled to 35% in 2021, with positive momentum into 2022. Rynoh, acquired in the middle of last year, saw revenue growth jump from 15% over the previous three years to 41% in 2021. American Home Protect grew policies at a 26% CAGR for three years prior to 2021 and improved their growth to 41% in 2021. We are enthusiastic about the growth we are seeing after Porch took ownership and believe there is significant potential to scale our warranty businesses quickly. Floify, acquired in Q4 2021, had a history of 50% compounded annual growth in the three prior years, although it's still too early to show the impact of Porch for 2022. We anticipate integrating Insurance into the Floify experience shortly, enhancing the closing process for consumers and loan officers. This represents a substantial opportunity and we expect it will serve as another strong testament to our platform and strategy. I’m also pleased to announce our latest acquisition, Residential Warranty Services or RWS. We signed the acquisition agreement yesterday, and we expect it to close in early Q2 2022, pending regulatory approval for certain aspects of the business. RWS is a key player in the home inspection space, offering CRM software and specialized inspection-centric warranties for over 1,000 home inspection companies. They also provide full annual Home Warranty products through real estate agents nationwide, which advances our Warranty business strategy. For Porch, this acquisition is a perfect fit after years of partnership and enhances our leading position in the home inspection industry. RWS’s unique and valuable products in the inspection and warranty sectors will integrate well with other changes we plan to align with our vision and values. On slide 34, we anticipate RWS to generate approximately $8 million in revenue impact in 2022 based on an annualized revenue of $10 million. This revenue will recur and will come from B2B software fees and warranty, part of our Insurance segment. RWS has a three-year CAGR of about 6.5%. Due to its unique and strategically important products, we expect to boost the growth rate of this business. Finally, we expect it to be slightly profitable in 2022, with a purchase price of $33 million, of which $29 million is in cash, representing just over a 3x multiple. As we conclude, I want to share updates on our journey to profitability and mid-term revenue goals. In 2021, we achieved robust revenue growth, showcased M&A capabilities, and maintained a steady execution track record. In 2022, we plan to leverage our platform advantages while continuing to grow our vertical software sectors and our high-margin, capital-light insurance business. This is reflected in our guidance today of $320 million in revenue and $600 million in gross written premium.

Thanks, Matt. First question is from Jason Helfstein from Oppenheimer.

Thank you. I have two questions. First, regarding InsurTech, it seems the market is currently skeptical of InsurTech companies due to concerns about risk and whether these companies have the right systems in place to evaluate that risk, which is a key part of their offering. Since your InsurTech business primarily sells off most of that risk, how do you convey to investors that your model is different from other InsurTech models? Second, while we appreciate the multi-year details, could you clarify the organic pro forma growth rates for this quarter, or should we wait for the 10-K for that information? Thank you.

Matthew, do you want to take the first one, and then I can take the second?

Sure. We are pursuing a capital-light strategy with our Insurance business. One of the topics we need to address is how to communicate this effectively to the investor community. In the next quarter, we will conduct a thorough analysis and provide more detailed information about our reinsurance strategy. We are confident in continuing with our capital-light and low-volatility approach. I can share that we renewed some of our reinsurance programs in January and will renew more in April, so there’s still work to be done. As we finalize these details, we'll update you on our plans for 2022. It’s worth noting that the reinsurance market has become tougher, leading to higher charges from reinsurers, which affects everyone, including us. However, due to our business operations, access to proprietary data, and our strong track record in managing attritional loss ratios, we remain an attractive partner. This reinforces our belief that our strategy is sound. In terms of reaching out to investors, Matt, would you like to add anything regarding InsurTech?

Yes, sure. The final point I'd like to mention before addressing the organic growth question is that the results we are seeing are significantly different from those of our peers. The underlying margins, calculated as revenue less the cost of revenue, show a fundamental difference in our business model, particularly in how much we transfer to reinsurers. This distinction is part of our ongoing effort to educate investors, as our actual loss performance further illustrates these differences. Regarding organic growth, we don't specifically break that out since one of our growth strategies involves accelerating the companies we have acquired. We attribute part of this growth to Porch and our platform. Today, we shared the acceleration we've observed from our largest past acquisitions for clear data. Additionally, these acquisitions not only grew at a faster rate but also contributed to the growth of our other businesses. To clarify the data, if we consider the 2021 acquisitions as if they had been made on January 1, 2021, our pro forma revenue for 2021 would have been $220 million based on that assumed initial revenue. This can be compared to $320 million in revenue for 2022, representing a 45% growth, or $302.5 million for 2022 without CSE and RWS, which indicates a 37% growth. We are sharing these various data points to ensure clarity.

Thank you.

Next question is from James Holly from Stephens.

Hey everyone. How's it going? I appreciate the opportunity to ask a question. First off, regarding the improvements in gross margins, could you discuss our expectations for margin progression moving forward? Are we still looking at the same 100 basis points improvement each year or have we reached a new higher baseline? You previously mentioned aiming for 25% EBIT margins over time; should we still consider that as a long-term target?

Yeah. Sure. And we put that out there today in terms of the 25% adjusted EBITDA target for our long-term. We continue to feel confident in the underlying profitability of the business. As you can see from not only that gross margin metric, but the contribution margin metric from last year as well, so yeah, we continue to feel. I am confident in that 25% long-term sort of.

Okay. Got you. And then just one more here on the American Home project and then plus RWS now, can you talk to us about kind of what you are envisioning there and the warranty business and how it’s progressing and any synergies between the two that they are going to kind of go forward from here?

Yeah. We think that the warranty opportunity is significant strategically for the business, not only because we need so many homebuyers early in the home buying process, then it’s a natural time to buy warranty, but also because of the data that we get from our homes, right? We know the make model serial number of appliances and systems. Clearly, that gives us opportunity over time to be able to assess risk more effectively there and be able to price warranties more effectively. I’d also say though, as I noted, we do think there is an opportunity to be able to bundle warranties with insurance, but we think that the future of how one can protect your home and be able to maintain your home more easily is different than what it is today. We see insurance and warranty and then handyman tech services, maintenance services as just completely bespoke. We think there are opportunities and I am really excited about some of the work. The team is going to start bringing those together and making it easier for consumers. So, yeah, as I mentioned, we are very excited about the growth that we had there.

That’s it. All right. Thank you, guys. Appreciate it.

Thank you.

Next question comes from Daniel Kurnos from Benchmark.

Thanks. Just a quick housekeeping, I guess maybe for Marty the $7.5 million impacts to HOA, is that all does that annualized or did most of that flow through in the quarter?

The $7.5 million was for the nine-month period that HOA was part of our Group after we acquired them in early April, which affects all three quarters.

Okay. Got it. All right. Matt two questions, one just I mean looking you kind of laid out the premise that you haven’t included anything from data usage, B2C launch, all this other stuff in your forward outlook. So I know that you are talking about going to market in the back half of this year to the regulators and just help us think through, order of magnitude of benefit from those kinds of initiatives, B2C exit contribute meaningfully in 2023. Just help us kind of think through that a little bit more?

Yeah. I was going to say I wouldn’t count on much from those in 2022. Because I have the timing of what our plans are. But, yeah, as we look ahead, I mean we are, it’s a big opportunity for us. Clearly as we rebrand some of our properties into Porch. And it gives us the ability to start opening up new ways to reach consumers, that’s obviously a big opportunity. It won’t change our core focus of going and selling software to businesses and creating this unique early access to consumers, but clearly it’s another lever that will have at that point in time. So, and the same with pricing as we think about leveraging the data as I noted in our priorities for 2022, it is one of our top priorities is to start to be able to see that come through and we are looking forward to demonstrating proof points in a future earnings call and is laying out very definitively how that can help us over time. So again, the way that you recognize revenue for insurance, I wouldn’t expect to have a material impact in 2022, but as we look ahead yes for 2023, yeah, certainly that will help us.

And then on RWS and you actually kind of mentioned this a little bit in your response second ago and I know I have asked you this off the cuff. But now that for example Exela has moved to an asset-light model and you have got something that has unique products that is sold through real estate agents. How do you think about like expanding your partnership opportunities given that you had sort of a unique dataset that a lot of other asset-light verticals similar to Exela might be interested in?

Yeah. I will take this one also, because the reality is our business is based on partnerships in some respect. Right? We sell software, it’s now 24,000 companies who we then are partnered with and use as a way to be able to meet their consumers and to help now your point question. Yeah, there are larger partners out there, where there are very significant partnership opportunities. And as we have gone deep into insurance and deep into home warranty and all these integrations across the moving landscape that clearly is an opportunity for us to plug those experiences in into different partners and we have a lot of proof points historically of doing that really well. So I mean some more to come there certainly over time.

Thanks, Matt.

Thanks Dan.

Thank you. The next question is from Ben Sherlund from Cantor.

Hey guys. Thanks for taking my questions. So going back to the, sorry here one second, looking at your initial 2022 guidance. This implies 312 million RWS contribution, which will be roughly at the midpoint of your framework for how we should think about the 2022 revenues that you issued on the 3Q guide our framework you laid out. And so if you have been estimating 7.5 million in HOA claims fee revenue? I assume you are including that into 2022 guidance framework. So my question is, now you are including this you are not including as revenue in your updated guidance is roughly at the midpoint of your 3Q framework and how should we be thinking about this should we think about you are increasing the prior range by $10 million or however much you were originally having in there? Thank you.

To clarify, we had already provided guidance for 2022 prior to today. If we had maintained the historical revenue recognition approach for HOA moving forward, the revenue guidance would have been $10 million or more. However, just to ensure clarity, the revenue guidance for 2022 is projected to be $302.5 million, plus $10 million from CSE and $8 million from RWS, totaling $320 million.

Okay. And so, I am little bit confused so you said that the or $7.5 million impact was spread through the nine months, it wasn’t just in the fourth quarter.

Yeah. So that issue impacted our guidance for the entire nine months and we changed the accounting in the fourth quarter so that the full year is properly stated at $192.4 million of total revenue.

Okay. Thanks to all you guys.

Thanks, Ben.

Thanks. The next question is from Ken Wong from Guggenheim.

Hey. Great. Thank you for taking my question. Okay. Can you guys hear me okay. Hear an echo.

Yes.

Okay. Let me see just give me one second no I think…

Ken Wong, maybe we go to Mike Grondahl from Northland and then we will come back to Ken.

Yeah. Thanks guys. The average number of companies increased from roughly 11,000 to 24,500 about 13,500. Can you break out between organic and inorganic and that number really didn’t slowdown much this year and you have been saying it’s going to slow for a while? How do we think about it for 2022?

We do not report our organic growth versus acquisitions on a quarterly basis, but when we acquire companies, we share the relevant numbers. Our main focus is on accelerating growth, and we've seen continued growth across our businesses due to our commitment to not only selling but also enhancing our product offerings in our software segment. While we are satisfied with our current success, we have indicated that we do not anticipate maintaining the same growth rate moving forward. This remains our guidance. This quarter, we benefited from our 1500 business, which performed better than we expected. We will continue to see growth, as anticipated, but at a lower rate, and we are not providing a specific growth rate at this time.

Got it. And then maybe Matt the Porch app in some of the demos that you were describing, could you talk a little bit about the go-to-market strategy for that is that going to be through the moving concierge with the email and contact. And how is the consumer going to find out about the Porch app?

I will start and then Nicole layer in as well. But the same approach today make that we have for interacting with consumers. So we are focused on meeting consumers and as unique proprietary moments through the companies we provide software to and those companies give us early access and so in the calls team is focused on integrating both the app and our other digital experiences into that. For example, somebody gets a home inspection. Let’s go ahead and provide them additional supplementary information that inspection by downloading the app right. And so that’s the real incentive to the consumer to download that app and then to be able to make that risk that moving process easier be the same type of approach that we think about with mortgage companies or title companies or others, as we go.

I’d echo that just our plan is to go-to-market, primarily through the companies that we have right software sale. We are live in a closed beta with inspection companies right now. And just like Matt talked about embedding insurance into Floify. We make it really easy through the apps your inspection report and get the details of your inspection with your my home area for customers. So just continuing to add more and more value to these customers and then be able to help them with all the services they need as part of their mails. So we can build this long-term relationship with those consumers ongoing.

So it will be embedded into that experience or that..?

Our successful approach has been to integrate various experiences for consumers utilizing the companies we partner with. I want to emphasize that, as an example apart from the app, we are working on embedding insurance into Floify. This has been in progress since we completed the acquisition of Floify, and we are nearing the launch. As consumers complete their loan applications, insurance will be seamlessly integrated into the process. These are the different ways we leverage our platform and APIs to incorporate these experiences into the software.

Thanks, Matt. Good afternoon, everyone. I am excited to share an update on our Porch Platform, our consumer app and give a sense for where we are heading with our consumer experience. There’s so much opportunity to help simplify the home from moving to improving and everything in between, and I am really proud of the work that our teams are doing here.

We will, let’s get back to Ken.

Yes. Thank you for your patience. One final follow up, I guess I am just curious about how you think about the portfolio of companies now? Do you think it is fairly well diversified or are you kind of still looking for gaps that you want to fill as you think about M&A over the next year or two?

I think our portfolio looks really strong and we are going to focus on continuing to drive growth across all of our key pillars, some things we haven’t been in the past, and so I think we feel like we have a strong foundation now. With that said, there will always be new opportunities that we were going to evaluate but what we have been able to do has been very effective.

Thank you. That concludes the portion of the call related to Q&A. Matt for your last comments.

No. I just appreciate the interest and the questions. Thanks everybody for the time. We are, as I said, just excited about where we are positioned and what this next year is going to look like. So we are looking forward to seeing you all on the next call coming up. With that, have a great.