Three weeks after its stock market debut, Seattle-based home services technology company Porch Group announced four acquisitions, including an agreement to buy Irving, Texas-based insurance company Homeowners of America for $100 million in cash and stock, expanding its footprint in the insurance tech market.
Porch also disclosed its preliminary financial results for 2020, saying that it expects a net loss between $53 and $55 million for the year, about $20 million further into the red than previously projected in its public filings.
The company attributed the larger-than-expected loss to factors including higher spending on sales and marketing, and research and development. Investors have been encouraging the company to spend more aggressively in pursuit of its growth opportunities, Porch executives said.
Following the acquisition announcements, Porch boosted its revenue outlook for 2021 to $170 million, from $120 million previously. That would be an increase of more than 130% from the $72 million in revenue that Porch said it expects for its recently completed year.
After rising more than 12% in after-hours trading on Thursday, Porch Group stock was up more than 6% from its Thursday closing price, trading around $17 per share at the time of publication Friday morning.
The company’s status as a publicly traded company is “putting us on a different trajectory to be able to execute against our strategy,” said Matt Ehrlichman, the Porch founder and CEO, in an interview.
Porch raised more than $322 million in conjunction with its stock market debut on Dec. 24 by merging with PropTech Acquisition Corp., a publicly traded special purpose acquisition corporation, and landing a private investment from Wellington Management Company.
The injection of capital was critical for the company, which had a cash balance of $3.9 million as of June, filings show. At the end of last year, its recurring losses and working capital deficiency prompted its accountants to raise “substantial doubt” about its ability to continue as a going concern, according to its S-4 registration statement.
Porch provides enterprise resource planning (ERP) and customer-relationship management (CRM) software to home services companies. It makes money from software licenses and transaction fees that it receives when connecting homebuyers to movers, insurance agents, home automation and security firms, TV/internet companies and other service providers.
The company is now using a portion of its cash and equity to continue building its business through acquisitions. Here are the four deals announced by Porch on Thursday afternoon:
- An agreement to acquire Homeowners of America (HOA) for $100 million, including $75 million in cash and an additional $25 million that the company may choose to fund in stock when the deal closes. HOA operates as a home insurer in six states and is licensed to operate in another 24 states, expanding Porch’s national footprint in the insurance sector. The deal is expected to close in the second quarter of this year.
- The acquisition of marketing data platform V12 for $22 million in cash, plus up to $6 million in additional consideration if V12 is able to reach certain financial targets in the next two years.
- Two smaller acquisitions for undisclosed sums: PalmTech home inspection software and iRoofing technology company.
Porch said the deals increase its total addressable market in the U.S. to $320 billion from about $228 billion previously.
Ehrlichman said the company’s position as a public company is also boosting its ability to recruit executives, including new senior leaders expected to be announced soon.
