Proch (PRCH) provides software and services to home services companies such as home inspection and moving. Through these companies, Porch gains early access to homebuyers. Porch generates B2B2C transactional revenues by facilitating key and high value service purchases for these consumers.
According to the investor presentation “Porch Has The Potential to Grow Revenues ~20x”: 73M 2020E Revenue; the potential 20x Revenue will come from: 30.35% CAGR + Core business Revenue potential in 5-7 years 500M + Mover Marketing: ~$200M potential revenue opportunity + Insurance Expansion: ~$400M potential revenue opportunity + New Vertical Expansion: ~$400M potential revenue opportunity = 1.5B revenue
They seem to follow a strategy of acquiring companies in different fields (Home insurance; Moving services; mover marketing; contractor services etc) – these acquisitions expand their TAM (I do not know if they acquired these companies at a good price). These acquisitions have expanded their TAM by almost $100B → Their U.S. TAM went from ~$228B to ~$320B through these acquisitions.
2021 Revenue Expected to be $170M (>134% YoY Growth).
90% of 2021E Revenue expected to be recurring or reoccurring.
They are showing strong annual improvements in Adjusted EBITDA %.
Here is the investor presentation: https://d1io3yog0oux5.cloudfront.net/_b423e6d706a5920a7818f9…
And here is a video: https://vimeo.com/467589485
I am only in the early states of learning about this company; but I though it might be useful to introduce the company to the board nonetheless.
I hold no position in Porch.
Funny, my father (who I often discuss investments and finances with) asked me about this the other day. So I spent a little time looking into it.
My email back to him yesterday stated in part:
Porch merged with ProTech (a SPAC) in Dec. Porch was a private company so there is little financial information about it – one of the problems with SPACs.
So to make an educated decision on this investment one would have to dig deep and find the financial information for 5 privately held companies:
- Homeowners of America
This would be a time consuming task that would take hours. If we choose to do it then we would need to look at their combined financials and read the investor presentations on the acquisitions to determine the total revenues, growth rates, and potential expense savings due to the acquisitions.
In my humble option there are other potential investment options where the information is more readily available and don’t require the hours available to dig into this and do the research.
And until the research is done you are basically investing in the leadership of the PropTech SPAC and Porch – a bit of a spec SPAC play (pun intended). So if you want a spec play here and trust Hennessy (Spac leadership) and Ehrlichman (Porch CEO) to deliver, go for it. But I think I’ll pass for now until they demonstrate a track record of achieving the “potential growth” that they see - demonstrated through future financial filings.
So in my opinion, it doesn’t yet fit the type of investment that this board is about. But that is just my opinion and will not be offended if others disagree with me.
And of course my father called me again earlier to tell me that Porch was up 11% today.
Only going by what is posted here.
- All services and transactional revenue - not subscription, or is it? Do their business customers pay a subscription for the software use?
- Growth from acquisitions. Better check their debt management and integration record and be sure this is not a red flag like it usually is. “a strategy of acquiring companies in different fields” rarely works from what I’ve seen over the years. Even if it does, I’m not sure how to call it investible without a long track record of success in this strategy.
…This sounds more like buying growth than quality hypergrowth.
“90% of 2021E Revenue expected to be recurring or reoccurring.”
What percent of revenue is expected to be recurring because of hope vs contracts and such? Why should they expect this? Also, this implies 10% churn and loss of customers. Why are they losing customers? Or am I reading this backwards and there is just other revenue that is not recurring. Is there a retention rate? Can we even depend on it if acquisitions are happening?
Is their TAM really the addressable market for their services. That sounds more like just adding up some industries rather than taking in to account the segment that would actually need to have their solutions.
I’m not trying to be argumentative. These are just the first thoughts and questions that came up for me reading the pitch here. If I can only buy a new company by replacing something I already own, it would have to be pretty darn special, with dependable growth prospects. I would prefer something that has grown by innovation and attracting customers rather than acquiring them. Too much unknown.
Borngiantsfan, thanks for your comments – I am beginning to realize that what you have written is indeed true. It is difficult and exceptionally time consuming to find clear information for PRCH. I am reconsidering whether it is worth the effort anymore, because without information the thesis would be more speculative and thus not something for me or for this board. I am more than likely going to just put in on my watch list for the moment.
Rafe, those are great questions; indeed I had the same questions myself (in particular regarding if customers pay subscription – this is something I have not been able to clarify yet.) I think your question on recurring revenue would also tie in with whether they have a subscription model or not.
I understood 90% recurring revenue to mean that 90% of the revenue will be expected to continue into the future. (this seems to suggest that they do have a subscription model)
Regarding the TAM, they are adding related services – all to do with the home – they want to be the one-stop-shop for home-owners (as the CEO mentions in the video). I would not say that they are adding up “industries” because all of the acquisitions are related to home-owner needs (that’s they way I understood it anyway).
“I’m not trying to be argumentative. These are just the first thoughts and questions that came up for me reading the pitch here. If I can only buy a new company by replacing something I already own, it would have to be pretty darn special, with dependable growth prospects. I would prefer something that has grown by innovation and attracting customers rather than acquiring them. Too much unknown” - I appreciate your comments, and questions. I fully agree – there is too much unknown (also as Borngiantsfan alluded to, and as I have come to realize, information on these details are not easy to come by). I think you make a great point when you say “I would prefer something that has grown by innovation and attracting customers rather than acquiring them” – I think PRCH is not a company that grows through technological innovation (or at least I get the impression that their technological innovation does not seem to be key even if they do provide software solutions to customers) – rather I think the growth story here is based on the fact they are fulfilling a need in the market and the approach they are taking is setting up a fly-wheel effect.
I have no position in PRCH – and based on the information I have so far I too will not sell any of my exiting positions to buy PRCH. But I do think it is work taking a look at again once they start reporting earnings – I think an earning call might reveal many of the answers which we seek. I am happy to put this on the backburner until then.