Home improvement marketplace Porch Group Inc. has closed its latest acquisition, just days after announcing it intends to part ways with its chief financial officer after discovering material weaknesses in its financial reporting that prevented it from filing its 2021 annual report on time.
Porch announced Monday it had closed a deal to acquire Residential Warranty Services’ home warranty and inspection software and services businesses for $33 million, including $29 million in cash and $4 million in Porch common stock. Porch said it expects RWS will contribute approximately $8 million of revenue in 2022, based on annualized revenue of $10 million.
“We have worked with the RWS team for many years and their addition to Porch greatly bolsters our leadership position in the strategic home inspection industry,” Porch CEO Matt Ehrlichman said in a statement.
According to its most recent annual report to investors, last year Porch spent $346.3 million on acquisitions, including:
- Property and casualty insurance agency Homeowners of America ($114.8 million)
- Digital mortgage automation and point-of-sale software developer Floify ($95.4 million)
- Home warranty provider American Home Protect ($46.3 million)
- Title and real estate software and data analytics company Rynoh ($35.8 million)
- Omnichannel marketing platform V12 Data ($21.8 million)
In addition, Porch said in its annual report that it expects a pending $48.6 million acquisition of California-based property and auto insurer CSE to close during the second quarter of 2022. That would bring the total cost of Porch’s 2021 and 2022 acquisitions to date to $428 million.
But in a March 1 regulatory filing, Porch Chief Financial Officer Marty Heimbigner said the company had identified material weaknesses in its internal control over financial reporting and would not be able to file its 2021 annual report to investors in time.
According to Porch’s annual report, which was belatedly submitted to regulators on March 16, the material weaknesses were related to user access and program change-management for systems supporting internal control processes, along with the identification, design, implementation, and retention of evidence of control activities.
Porch said it also uncovered a material weakness in its 2019 and 2020 financial reports, “due to our lack of sufficient, qualified personnel to prepare and review complex technical accounting issues.”
In its annual report, Porch said it was taking steps to fix the problems that include the consolidation of relevant financial systems, and upgrades of systems “which do not have the appropriate infrastructure to meet the requirements of our internal control framework.”
On March 30, Porch announced a mutual agreement with Heimbigner to begin a search for his successor as CFO. Heimbigner agreed to remain as CFO for up to six months “in order to assist with an orderly transition of his responsibilities.”
In announcing the closing of its RWS acquisition, Porch said it provides software and services to more than 24,000 home services companies including home inspectors, mortgage companies and loan officers, title companies, moving companies, real estate agencies, utility companies and warranty companies.
In its most recent annual report to investors, Porch reported a $106.6 million 2021 net loss, on $192.4 million in revenue. Revenue was up 166 percent from 2020, when Porch posted a $54 million net loss.
Shares in Porch, which went public in a December 2020 SPAC merger, have traded for as little as $5.83 and for as much as $27.50 over the last year. Monday’s closing price of $7.32 gives the company a market cap of about $718 million.