Business Combinations

12 Months Ended

Dec. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Note 12. Business Combinations

During 2023, 2022, and 2021, we completed several business combination transactions. The purpose of each of the acquisitions was to expand the scope and nature of our product and service offerings, obtain new customer acquisition channels, add additional team members with important skillsets, and realize synergies. The aggregate transaction costs associated with these transactions were $0.1 million, $2.1 million and $5.4 million during the years ended December 31, 2023, 2022, and 2021, respectively, and are included in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss. The results of operations for each acquisition are included in our consolidated financial statements from the date of acquisition onwards. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions.

2023 Acquisitions

The acquisitions of the Florida and California operations of Residential Warranty Services (“RWS”) were closed on March 17, 2023. All other RWS operations were acquired in 2022 as discussed below. We paid approximately $2.1 million in cash to acquire $0.2 million of cash and current assets and $0.2 million of customer relationships with an estimated useful life of three years. The estimated value of the customer relationships intangible asset was calculated using the income approach and may be subject to change as additional information is received.

The aggregate transaction costs of $0.1 million are primarily comprised of legal and due diligence fees and are included in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss. The results of operations for each acquisition are included in the Insurance segment in our consolidated financial statements from the date of acquisition onwards.

2022 Acquisitions

The following table summarizes the total consideration and the estimated fair value of the assets acquired and liabilities assumed for business combinations during 2022:


	Weighted Average Useful Life (in years)	RWS		Other		Total
Purchase consideration:
Cash		$	25,572	$	13,763	$	39,335
Issuance of common stock		3,552		—		3,552
Holdback liabilities and amounts in escrow		1,000		1,500		2,500
Contingent consideration - liability-classified		8,700		—		8,700
Total purchase consideration:		$	38,824	$	15,263	$	54,087
Assets:
Cash, cash equivalents and restricted cash		$	2,030	$	256	$	2,286
Current assets		525		7		532
Property and equipment		497		—		497
Operating lease right-of-use assets		871		—		871
Intangible assets:
Customer relationships	8	13,860		2,750		16,610
Acquired technology	5	500		1,480		1,980
Trademarks and tradenames	9	400		200		600
Non-competition agreements	7	180		20		200
Goodwill		27,366		10,698		38,064
Total assets acquired		46,229		15,411		61,640
Current liabilities		(6,869)		(148)		(7,017)
Operating lease liabilities, non-current		(536)		—		(536)
Net assets acquired		$	38,824	$	15,263	$	54,087

RWS

On April 1, 2022, we entered into a stock and membership interest purchase agreement with RWS to acquire its home warranty and inspection software and services businesses. On this date, we completed the acquisition of substantially all of RWS’ operations except for those in Florida and California, which were acquired in 2023. The aggregate consideration, subject to certain closing adjustments, for the 2022 RWS acquisitions was $38.8 million, including $25.6 million in cash, $1.0 million held in escrow for two years to satisfy potential indemnifications, $3.6 million of our common stock, and $8.7 million in contingent consideration based on specific metrics.

The purpose of the acquisition is to expand the scope and nature of our service offerings, add addition team members with important skillsets, and realize synergies. Goodwill is expected to be deductible for tax purposes.

The following table summarizes the fair value of the intangible assets of RWS as of the date of the acquisition:


	Fair Value		Estimated Useful Life (in years)
Intangible assets:
Customer relationships	$	13,860	8
Acquired technology	500		3
Trademarks and tradenames	400		9
Non-competition agreements	180		7
	$	14,940

The weighted-average amortization period for the acquired intangible assets is 7.7 years.

The estimated fair value of the customer related intangible assets was calculated through the income approach using the multi-period excess earnings methodology. The estimated fair value of the trademarks and tradenames were calculated through the income approach using the relief from royalty methodology. The estimated fair value of the acquired internally developed and used technology was derived using the cost approach considering the estimated costs to replicate existing software. The estimated fair value of the non-competition agreement was calculated through the income approach using the with and without method over the contractual term of the agreement.

Other Acquisitions

During 2022, we completed one or more acquisitions which were not material to the consolidated financial statements. The purpose of any such acquisition, may include without limitation, to expand the scope and nature of our services offerings, add additional team members with important skillsets, and/or realize synergies. Goodwill of $10.7 million is deductible for tax purposes.

Pro forma results of operations have not been presented because the effects of 2022 acquisitions, individually and in the aggregate, were not material to our consolidated results of operations.

2021 Acquisitions

The following table summarizes the total consideration and the estimated fair value of the assets acquired and liabilities assumed for business combinations during 2021:


	Weighted Average Useful Life (in years)	V12 Data		HOA		Rynoh		AHP		Floify		Other Acquisitions		Total
Purchase consideration:
Cash		$	20,196	$	84,370	$	32,302	$	43,750	$	75,959	$	27,121	$	283,698
Issuance of common stock		—		22,773		—		—		9,908		3,026		35,707
Holdback liabilities and amounts in escrow		150		1,000		3,500		2,500		900		1,775		9,825
Contingent consideration - equity-classified		—		6,685		—		—		—		—		6,685
Contingent consideration - liability-classified		1,410		—		—		—		8,632		327		10,369
Total purchase consideration:		$	21,756	$	114,828	$	35,802	$	46,250	$	95,399	$	32,249	$	346,284
Assets:
Cash, cash equivalents and restricted cash		$	1,035	$	17,766	$	408	$	5,078	$	1,508	$	1,473	$	27,268
Current assets		4,939		235,669		932		8,221		221		1,795		251,777
Property and equipment		996		615		334		17		87		80		2,129
Operating lease right-of-use assets		1,383		1,258		159		913		731		445		4,889
Intangible assets:
Customer relationships	9	1,650		16,700		12,700		—		7,000		10,320		48,370
Acquired technology	4	3,525		—		2,800		—		28,300		1,340		35,965
Trademarks and tradenames	12	1,225		12,200		900		700		6,025		650		21,700
Non-competition agreements	2	40		—		90		—		40		55		225
Value of business acquired	7	—		400		—		—		—		—		400
Renewal rights	8	—		7,692		—		2,042		—		—		9,734
Trademarks and tradenames	Indefinite	—		—		—		—		—		4,750		4,750
Insurance licenses	Indefinite	—		4,960		—		—		—		—		4,960
Goodwill		16,708		45,370		22,051		45,681		53,056		14,499		197,365
Other non-current assets		—		55,165		—		25		—		3		55,193
Total assets acquired		31,501		397,795		40,374		62,677		96,968		35,410		664,725
Current liabilities		(6,871)		(269,460)		(517)		(15,487)		(1,014)		(2,485)		(295,834)
Operating lease liabilities, non-current		(848)		(898)		(72)		(685)		(555)		(204)		(3,262)
Long term liabilities		(2,026)		(7,434)		—		(79)		—		(46)		(9,585)
Deferred tax liabilities, net		—		(5,175)		(3,983)		(176)		—		(426)		(9,760)
Net assets acquired		$	21,756	$	114,828	$	35,802	$	46,250	$	95,399	$	32,249	$	346,284

V12 Data

On January 12, 2021, we acquired V12 Data, an omnichannel marketing platform. The purpose of the acquisition is to expand the scope and nature of our service offerings, add additional team members with important skillsets, and realize synergies. We acquired V12 Data for $20.3 million cash with an additional $1.4 million as contingent consideration. The contingent consideration is based on the achievement of certain Revenue and EBITDA milestones over the two succeeding years and is paid in cash or common stock at our discretion. The consideration was paid to the sellers in exchange for net assets of $21.8 million. Goodwill is deductible for tax purposes. Acquisition-related costs of $0.8 million are included in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021.

The following table summarizes the fair value of the intangible assets of V12 Data as of the date of the acquisition:


	Fair Value		Estimated Useful Life (in years)
Intangible assets:
Customer relationships	$	1,650	10
Acquired technology	3,525		4
Trademarks and tradenames	1,225		15
Non-competition agreements	40		2
	$	6,440

The weighted-average amortization period for the acquired intangible assets is 7.6 years.

The estimated fair value of the customer relationships intangible asset was calculated through the income approach using the multi-period excess earnings methodology. The estimated fair value of the trademarks and tradenames as well as acquired technology intangible assets were calculated through the income approach using the relief from royalty methodology. The estimated fair value of the non-competition agreement is derived using the with and without method over the contractual term of the agreement.

HOA

On April 5, 2021, we acquired HOA. The purpose of the acquisition is to expand the scope and nature of our product offerings, add additional team members with important skillsets, and operate as a full-service insurance carrier in 15 states at the time of the acquisition. Total consideration related to this transaction included $114.8 million, consisting of $84.1 million in cash, $22.8 million in Porch common stock, and acquisition hold backs and contingent consideration of $7.7 million. An additional $0.3 million related to the final working capital adjustment was paid to the sellers in the third quarter of 2021. Goodwill is not deductible for tax purposes. Acquisition-related costs of $1.9 million were primarily for legal and due-diligence related fees and are included in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021.

The following table summarizes the fair value of the intangible assets of HOA as of the date of the acquisition:


	Fair Value		Estimated Useful Life (in years)
Intangible assets:
Customer relationships	$	16,700	10
Trademarks and tradenames	12,200		10
Business acquired	400		1
Renewal rights	7,692		8
Insurance licenses	4,960		Indefinite
	$	41,952

The weighted-average amortization period for the acquired intangible assets is 9.5 years.

The fair value of customer relationships was estimated through the income approach using the multi-period excess earnings methodology. The fair value of trade name and trademarks was estimated through the income approach using the relief from royalty methodology. The business acquired was valued using the income approach based on estimates of expected future losses and expenses associated with the policies that were in-force as of the closing date of the transaction compared to the future premium remaining to be earned. Renewal rights asset was estimated through the income approach based on premium forecast and cash flows from the renewal policies modeled over the life of the renewals. The insurance licenses were valued using the market approach.

Rynoh

On May 20, 2021, we acquired Segin Systems, Inc. (“Rynoh”), a software and data analytics company that supports financial management and fraud prevention primarily for the title and real estate industries. The purpose of the acquisition is to expand the scope and nature of our product offerings, add additional team members with important skillsets, and realize synergies. Total consideration related to this transaction includes $35.8 million, consisting of $32.3 million in cash paid at closing, and acquisition hold backs of $3.5 million. Goodwill is not expected to be deductible for tax purposes. Acquisition-related costs of $0.2 million were primarily for legal and due-diligence related fees and are included in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021.

The following table summarizes the fair value of the intangible assets of Rynoh as of the date of the acquisition:


	Fair Value		Estimated Useful Life (in years)
Intangible assets:
Customer relationships	$	12,700	10
Acquired technology	2,800		7
Trademarks and tradenames	900		20
Non-competition agreements	90		1
	$	16,490

The weighted-average amortization period for the acquired intangible assets is 10 years.

The fair value of customer relationships was estimated through the income approach using the multi-period excess earnings methodology. The fair value of trade name and trademarks, as well as acquired technology was estimated through the income approach using the relief from royalty methodology. The fair value of the non-competition agreement is derived using the with and without method over the contractual term of the agreement.

American Home Protect

On September 9, 2021, we acquired American Home Protect (“AHP”), a company providing home warranty policies. The purpose of the acquisition is to expand the scope and nature of our product offerings, add additional team members with important skillsets, and realize synergies. Total consideration related to this transaction includes $46.3 million, consisting of $43.8 million in cash paid at closing, and acquisition hold backs of $2.5 million. Acquisition-related costs of $0.5 million are included in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021.

Since the acquisition date of AHP, we finalized the preliminary estimated fair value of AHP assets acquired and liabilities assumed. As a result, in the year ended December 31, 2022, we recorded a net increase to goodwill of approximately $23.8 million attributed to increases in current liabilities and net decreases in current assets.

The following table summarizes the fair value of the intangible assets of AHP as of the date of the acquisition:


	Fair Value		Estimated Useful Life (in years)
Intangible assets:
Renewal rights	$	2,042	6
Trademarks and tradenames	700		10
	$	2,742

The weighted-average amortization period for the acquired intangible assets is 7.0 years.

Renewal rights asset was estimated through the income approach based on forecast and cash flows from the renewal policies modeled over the life of the renewals. The fair value of trade name and trademarks was estimated through the income approach using the relief from royalty methodology.

Floify

On October 27, 2021, we acquired Floify, a company providing digital mortgage automation and point-of-sale software for mortgage companies and loan officers. The purpose of the acquisition is to expand the scope and nature of our product offerings, add additional team members with important skillsets, and realize synergies. Total consideration related to this transaction includes $95.4 million, consisting of $76.0 million in cash, $9.9 million of our common stock, $0.9 million in acquisition hold backs and a guarantee that our common stock will double in value by the end of 2024 with respect to any such common shares retained by the sellers throughout the period. The guarantee requires us to provide additional shares of common stock or cash to sellers if the stock does not double in value. The value of the guarantee at acquisition date was estimated to be $8.6 million. Acquisition-related costs of $0.4 million are included in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021.

The following table summarizes the fair value of the intangible assets of Floify as of the date of the acquisition:


	Fair Value		Estimated Useful Life (in years)
Intangible assets:
Customer relationships	$	7,000	4
Acquired technology	28,300		4
Trademarks and tradenames	6,025		15
Non-competition agreements	40		3
	$	41,365

The weighted-average amortization period for the acquired intangible assets is 5.6 years.

The fair value of customer relationships and non-competition agreements, was estimated through the with-and-without method based on a comparison of the prospective revenues or expenses for the business with and without these intangible assets in place. The fair value of trade name and trademarks, was estimated through the income approach using the relief from royalty methodology. The fair value of the acquired technology was estimated through the multi-period excess earnings method.

Revenue and Net Loss Information Related to 2021 Acquisitions

Revenue from these five acquisitions included in the Consolidated Statements of Operations and Comprehensive Loss through December 31, 2021 is $79.6 million. Net loss included in the Consolidated Statements of Operations and Comprehensive Loss from these acquisitions through December 31, 2021 is $1.8 million.

Other Acquisitions

During 2021, we completed other acquisitions which were not individually or in aggregated material to the consolidated financial statements. The purpose of the acquisitions was to expand the scope and nature of our service offerings, add additional team members with important skillsets, and realize synergies. The transaction costs associated with these acquisitions were $1.6 million and are included in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021. Goodwill of $3.5 million is not deductible for tax purposes, while goodwill of $11.0 million is deductible for tax purposes.