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SPAC PropTech Acquisition (PTAC) to Combine with Porch.com

July 31, 2020 6:22 AM EDT

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PropTech Acquisition Corporation (NASDAQ: PTAC) (“PropTech” or “PTAC”), a special purpose acquisition company targeting businesses in the real estate technology industry, and Porch.com, Inc. (“Porch” or “the company”), a leading software and services platform for the home inspection and home service industries, have entered into a definitive agreement which would result in Porch becoming a publicly listed company.

Upon closing of the transaction, PropTech will be renamed Porch.com, Inc. and is expected to remain listed on the Nasdaq Capital Market under the new ticker symbol “PRCH.”

Porch is a unique home services platform that provides industry-leading ERP and CRM software to 11,000 inspection, moving and adjacent home services companies, gaining access to a proprietary and recurring sales funnel which includes a majority of homebuyers in the U.S. annually. The company’s innovative business-to-business-to-consumer (B2B2C) pricing model provides a cost-free alternative for software users and consumers while creating an expansive revenue opportunity for Porch, leveraging established monetization channels including insurance, moving, TV/internet, security, home repair and improvement, and more.

Porch delivers software and services through several wholly-owned brands, including Inspection Support Network (ISN), Elite Insurance Group, HireAHelper and Porch.com. In 2019, Porch processed approximately $2.2 billion of gross services volumes through its platform.2

1 Assumes no redemptions of PropTech’s public stockholders.
2 Represents the total estimated completed service volume (or gross merchandise volume (GMV)) from home services processed through or originating from the Porch platform.

Porch Investment Highlights

  • Access to Valuable Demand: Approximately 65% of all U.S. homebuyers are processed through Porch’s platform via its integrated software users.3 Approximately 27%4 of all U.S. homebuyers are introduced to Porch’s “Moving Concierge” six weeks prior to their move when most major purchasing decisions are made, providing Porch a distinct advantage in engaging with these high-value consumers.
  • Defensible Moat Provides Sustainable Advantage: The early access provided by Porch’s software platform allows it to deliver services efficiently across the lifetime of the home, from pre-move and move-in, to maintenance and improvement.
  • Large Addressable Market: Porch competes in a total U.S. addressable market estimated at more than $220 billion. As the company pursues other opportunities in the home services market, including expanding into other home services verticals, Porch’s potential addressable market will continue to grow.
  • Rapid Expected Revenue Growth: Pro forma 2018 revenue (excluding certain divested businesses) was $36 million and is projected to be $120 million in 2021, a 49% compounded annual growth rate.
  • Strong Unit Economics: Porch has innovated with a differentiated software pricing model, moving from traditional software-as-a-service (SaaS) fees to monetizing access to consumers provided by the platform, driving significantly more value than the traditional SaaS pricing model.
  • Attractive Margin Profile: Strong unit economics are driving high margins. Projected 2020 gross margin is expected to be 78% and Porch management anticipates being profitable on an adjusted EBITDA basis in 2021.

“Porch aligns well with the objectives laid out in our property technology investment thesis,” said Tom Hennessy, chairman, co-CEO and president of PropTech. “It brings significant innovation to the residential real estate industry by delivering critical home services in a scalable, software-based platform. Porch’s early access to millions of homebuyers through its 11,000 contracted companies brings to the public market an established company with a track record of significant revenue growth. Porch’s massive addressable market and software platform are well-positioned to deliver high gross margin, attractive unit economics and a well-defined path to achieve profitability in 2021. We are partnering with a world-class leadership team that shares our vision.”

Matt Ehrlichman, CEO and founder of Porch, commented: “Porch’s mission is to partner with home service companies and, together, delight the homeowner from move to improve and everything in between. Merging with PropTech and becoming a public company is the right next step in our growth phase and a key milestone for our company. A public listing will enhance our ability to scale more quickly and continue to innovate. We look forward to partnering with PropTech in a transaction that provides an efficient, accelerated and proven path for a successful public listing on NASDAQ.”

3 U.S. homebuyer data sourced from U.S. Census Bureau and National Association of Realtors (for the August 2019-January 2020 period).
4 Based on percentage of U.S. homebuyers during August 2019-January 2020 period with respect to which Porch had call and marketing rights.

Transaction Terms & Financing

The combined company will have an estimated post-transaction enterprise value of $523 million, consisting of an estimated equity value of $728 million and $205 million in cash and no debt, assuming no redemptions of PropTech public stockholders. Cash proceeds raised will consist of PropTech’s approximately $174 million of cash in trust (before redemptions) and an additional $150 million private investment at $10.00 per share.

The net proceeds raised from the transaction will be used to support Porch’s working capital, pay down debt and fund expansion through acquisitions. Porch’s growth strategy is expected to generate estimated revenue and adjusted EBITDA of $120 million and $7 million, respectively, in 2021, exclusive of any accretive benefits from M&A activity made possible by this transaction.

Current Porch management, employees and existing shareholders will roll 92% of their existing equity holdings into equity of the combined company. The business combination has been unanimously approved by the boards of directors of both Porch and PropTech. The business combination is expected to close in the fourth quarter of 2020, subject to regulatory and stockholder approvals, and other customary closing conditions.

For a summary of the material terms of the proposed transaction, as well as a supplemental investor presentation, please see the Current Report on Form 8-K filed today with the U.S. Securities and Exchange Commission (the “SEC”). Additional information about the proposed transaction will be described in PropTech’s registration statement relating to the merger, which it will file with the SEC.

Advisors

Financial Technology Partners and FTP Securities (FT Partners) is serving as exclusive strategic and financial advisor and Sidley Austin LLP is acting as legal advisor to Porch. Cantor Fitzgerald & Co. is acting as sole placement agent to PropTech. Cantor Fitzgerald & Co. and Northland Securities, Inc. are acting as capital markets advisors and Kirkland & Ellis LLP is acting as legal advisor to PropTech. Gateway Group is acting as investor relations and public relations to both PropTech and Porch. DLA Piper LLP (US) is acting as placement agent counsel.

Conference Call & Webcast Information

PropTech and Porch management will host a conference call and webcast to discuss the proposed transaction today, July 31, at 9:00 a.m. Eastern time. The webcast will be accompanied by a detailed investor presentation.

Date: Friday, July 31, 2020
Time: 9:00 a.m. Eastern time
Toll-free dial-in number: (833) 519-1293
International dial-in number: (914) 800-3864
Conference ID: 6352859

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.

The conference call will be broadcast live and available for replay here and via PropTech’s website at proptechacquisition.com.

A telephonic replay of the conference call will be available below after 12:00 noon Eastern time today through August 7, 2020.

Toll-free replay number: (855) 859-2056
International replay number: (404) 537-3406
Replay ID: 6352859



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