Part I. Financial Information Financial Statements Unaudited statements show significant growth in assets, liabilities, and revenue driven by acquisitions, alongside a wider net loss and negative operating cash flow Condensed Consolidated Balance Sheets Balance Sheet Highlights | Balance Sheet Highlights | June 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Assets | $777,624 | $268,387 | | Cash and cash equivalents | $150,201 | $196,046 | | Goodwill | $120,961 | $28,289 | | Intangible assets, net | $84,670 | $15,961 | | Total Liabilities | $548,854 | $161,062 | | Deferred revenue | $162,627 | $5,208 | | Losses and loss adjustment expense reserves | $115,500 | $— | | Total Stockholders' Equity | $228,770 | $107,325 | - Total assets increased by 190% from December 31, 2020, to June 30, 2021, primarily due to acquisitions which significantly increased Goodwill, Intangible Assets, and Reinsurance balances9 - Total liabilities grew by 241% over the same period, largely driven by increases in deferred revenue and insurance-related liabilities resulting from the acquisition of Homeowners of America (HOA)9 Condensed Consolidated Statements of Operations Income Statement | Income Statement (in thousands) | Q2 2021 | Q2 2020 | YoY Change | H1 2021 | H1 2020 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $51,340 | $17,122 | +200% | $78,083 | $32,196 | +143% | | Cost of revenue | $19,500 | $3,792 | +414% | $25,429 | $7,891 | +222% | | Total operating expenses | $74,283 | $22,101 | +236% | $130,658 | $50,561 | +158% | | Operating loss | ($22,943) | ($4,979) | +361% | ($52,575) | ($18,365) | +186% | | Net loss | ($16,296) | ($6,258) | +160% | ($81,398) | ($24,625) | +231% | | Net loss per share, basic | ($0.17) | ($0.18) | - | ($0.89) | ($0.70) | - | - Stock-based compensation expense increased significantly to $6.6 million in Q2 2021 from $0.4 million in Q2 2020, and to $23.5 million in H1 2021 from $1.0 million in H1 202010 Condensed Consolidated Statements of Cash Flows Cash Flow Summary | Cash Flow Summary (in thousands) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($30,772) | ($9,742) | | Net cash used in investing activities | ($131,298) | ($1,633) | | Net cash provided by financing activities | $107,040 | $11,063 | | Change in cash, cash equivalents, and restricted cash | ($55,030) | ($312) | - Cash used in investing activities surged to $131.3 million in H1 2021, primarily due to $127.9 million used for acquisitions, net of cash acquired16 - Financing activities provided $107.0 million in cash, largely from $126.8 million in proceeds from the exercise of warrants, which was partially offset by $22.1 million paid for income tax withholdings on vested restricted stock units16 Notes to Unaudited Condensed Consolidated Financial Statements - The company operates as a single reportable segment, with all revenue generated in the United States3233 - On April 5, 2021, the Company acquired Homeowners of America Holding Corporation ("HAHC"), an insurance holding company, which significantly expanded its insurance operations22 Revenue Disaggregation | Revenue Disaggregation (in thousands) | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Core services revenue | $28,684 | $11,709 | $39,708 | $20,837 | | Managed services revenue | $9,669 | $3,698 | $14,314 | $7,833 | | Software and service subscription revenue | $12,987 | $1,715 | $24,061 | $3,526 | | Total revenue | $51,340 | $17,122 | $78,083 | $32,196 | - In H1 2021, the company completed several acquisitions for total consideration of $185.9 million, adding $92.7 million in goodwill, with key acquisitions including V12 Data, Homeowners of America (HOA), and Rynoh149150 - In June 2021, the company's $8.1 million Paycheck Protection Program (PPP) loan was forgiven in whole, resulting in a gain on extinguishment of debt116 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes strong revenue growth to acquisitions and organic expansion, while higher operating losses are due to growth-related costs and public company expenses Business Overview and Key Performance Measures - Porch operates as a vertical software platform for the home, providing software and services to approximately 17,000 home services companies as of Q2 2021186190 Key Performance Metrics | Key Performance Metrics | Q2 2021 | Q2 2020 | YoY Change | | :--- | :--- | :--- | :--- | | Average Companies in Quarter | 17,120 | 10,523 | +62.7% | | Average Revenue per Account per Month | $1,000 | $556 | +79.9% | | Monetized Services in Quarter | 302,462 | 181,520 | +66.6% | | Revenue per Monetized Service in Quarter | $129 | $86 | +50.0% | - The company has expanded through selective acquisitions, including ISN™, HireAHelper™, and in H1 2021, V12 Data, HOA, and Rynoh188 Results of Operations - Q2 2021 revenue increased 200% YoY to $51.3 million, driven by acquisitions and organic growth in moving, inspection, and insurance businesses, which contributed $36.0 million of the increase218 - Cost of Revenue for Q2 2021 increased 414% YoY, primarily due to growth in the moving business and costs from acquired businesses, rising to 38% of revenue from 22% in the prior year221 - General and Administrative expenses for Q2 2021 grew 250% YoY, mainly due to a $3.2 million increase in stock compensation, costs of operating as a public company, and increased hiring229 - Total stock-based compensation expense for H1 2021 was $23.5 million, a significant increase from $1.0 million in H1 2020, largely driven by employee earnout restricted stock and other awards post-merger232 Non-GAAP Financial Measures Adjusted EBITDA (Loss) Reconciliation | Adjusted EBITDA (Loss) Reconciliation (in thousands) | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(16,296) | $(6,258) | $(81,398) | $(24,625) | | Adjustments... | ... | ... | ... | ... | | Adjusted EBITDA (loss) | $(10,312) | $(2,094) | $(19,916) | $(12,864) | - Adjusted EBITDA loss for H1 2021 was $19.9 million, a decline from a loss of $12.9 million in H1 2020, attributed to weather-related losses in the HOA insurance business and higher public company costs245247 Liquidity and Capital Resources - As of June 30, 2021, the company had cash and cash equivalents of $150.2 million and restricted cash of $2.2 million248 - In H1 2021, the company raised approximately $126.8 million from the exercise of public warrants250 - The company spent $127.9 million in cash (net of cash acquired) and $22.9 million in stock to acquire several companies during the first six months of 2021251 Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate exposure from its variable-rate debt, with minimal inflation or foreign currency risk - The company is exposed to interest rate risk through its variable-rate senior secured term loans, which totaled $43.8 million as of June 30, 2021262 - A hypothetical 1% increase in interest rates on variable-rate debt would increase annual interest expense by approximately $0.5 million263 Controls and Procedures Management concluded disclosure controls were ineffective due to previously identified material weaknesses, and a remediation plan is currently underway - The CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of June 30, 2021268 - The ineffectiveness is attributed to material weaknesses in internal control over financial reporting described in the company's Annual Report on Form 10-K/A268 - Remediation efforts include hiring a new CFO and Controller, recruiting additional personnel, improving system automation, and enhancing the review process for complex accounting matters269273 Part II. Other Information Legal Proceedings The company is involved in several legal proceedings concerning TCPA violations, a contract dispute, and a wage class action, with outcomes currently uncertain - The company is party to 14 legal proceedings alleging violations of the Telephone Consumer Protection Act (TCPA), which have been consolidated in the Western District of Washington165276 - A complaint was filed by the former owners of Kandela, LLC, alleging breach of contract related to an earnout agreement, with arbitration scheduled for Q1 2022168278 - A former employee filed a putative class action lawsuit for wage and hour violations in California, and a tentative settlement has been reached pending court approval169279 Risk Factors The company faces significant risks from industry competition, acquisition integration challenges, and its recent expansion into the highly regulated insurance business - The company operates in competitive industries (insurance, moving, home services, software) with low switching costs for consumers, which could adversely affect business282283 - Significant risks are associated with acquisitions, including the ability to successfully integrate businesses and realize synergies, with the recent HOA acquisition noted as particularly large and complex300302304 - Expansion into the insurance business exposes the company to new risks, including underwriting risk, catastrophic weather events, state-level regulation, and potential inadequacy of loss reserves306307318330
Porch(PRCH) - 2021 Q2 - Quarterly Report