Porch Group, Inc.

Good afternoon, everyone, and thank you for participating in Porch Group's fourth quarter and full year conference call. Joining us today are Matt Ehrlichman, Porch Group's founder, CEO, chairman, and chairman. Marty Heidenbegner, Porch Group's CFO. Matthew Nagel, Porch Group's COO. And Nicole Pelley, Porch Group's SVP of Product and Technology. Before we go further, I'd like to read from the company's safe harbor statement within the meeting of the Private Securities Litigation Reform Act of 1995 that provide important cautions regarding forward-looking statements. Today's discussion, including the responses to your questions, reflects management's view of, as of today, March 1st, 2022 only, We do not undertake any obligations to update or revise this information. Additionally, we will make forward-looking statements about our future financial or business performance or conditions, business strategy and plans, and anticipated impacts from pending or completed acquisitions based on current expectations and assumptions. These statements are subject to risks and uncertainties, which could cause our actual results to differ materially from those forward-looking statements. And we encourage you to consider the risk factors described in our SEC filings for additional information. For reconciliation of non-GAAP measures, the most comparable GAAP measure is discussed during the earnings call. Please refer to tables included in today's earnings press release located at porchgroup.com and on file with the SEC. To submit a question during today's presentation, please log into the webinar and submit it through the chat function. Management will do its best to take all questions within the allotted time. As a reminder, this webcast will be available for replay shortly after the conclusion of this presentation on the investor relations section of the company's website at porchgroup.com. And the slide presentation will also follow on the presenter's commentary and can be found on the company's website as well. Today, in addition to covering Q4 and year-end 2021 results, SEC filing information, 2022 guidance, and our KPIs, our team will provide an update on product M&A performance, forward-looking milestones, including future profitability. And with that, let me turn the call over to Matt Ericman, CEO, Chairman, and Founder of Purge 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 here 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 home ownership 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 of $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 to HOA's business fundamentals nor EBITDA. And it obviously improves then its revenue less cost revenue margins. Marty's gonna 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 a 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're also guiding to $600 million in gross written premium for 2022. So as 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. Looking forward to it. Let's dig in. So looking here at slide six, we've been executing our unique strategy in the home services industry to provide software and services to select strategic verticals to help companies grow. And by doing so, we generate B2B recurring software revenue, as well as gain early and ongoing access to home buyers who we help to improve their home buying home ownership journey and generate consistent B2B to C transactional 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 to 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 on our data platform and start to leverage Ports' 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'll turn it over to Marty Heinbigner, our CFO, to discuss our Q4 and full year results and guidance for 2022. Marty.

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, 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 seeding. 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 a negative 13.8% for the year and 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 end of 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 a 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 400 basis points year-over-year margin improvement, which produces close to negative 9% adjusted EBITDA margin. We'd 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 to 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'll discuss later in the call. With that, I'll turn it over to our Chief Operating Officer, Matthew Nagel, to discuss our operating segments and KPIs.