What happened
Shares of home-services company Porch Group (PRCH +1.26%) got crushed on Tuesday after the company reported financial results for the second quarter of 2021. Many growth stocks are selling off today. So perhaps Porch Group's sell-off is more due to general market volatility because it's hard to find many problems in its quarterly report, as we'll see. Nevertheless, Porch Group stock was down 12% as of 1:30 p.m. EDT today.
So what
Porch Group went public via a merger with a special purpose acquisition company (SPAC) in December. And its strategy has been growth via acquisitions. That's been a fortuitous combination. As a reminder, SPACs get extra cash from the redemption of public warrants when the stock price is over $18. Porch Group's was, and it was able get $126.8 million from this during the second quarter as a result. During the quarter, it immediately put this capital to work by spending $127.9 million to acquire other companies.
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Porch Group's goal is to offer a range of subscription services to businesses and consumers related to homebuying and homeownership. For example, during the second quarter, it acquired Rynoh, a software-as-a-service company for title companies. As a result of all its acquisitions, the quarter's revenue was up 200% year over year, beating management's guidance. Additionally, it raised full-year guidance to $184 million, which represents 155% growth from 2020.
Now what
According to the company's filing with the Securities and Exchange Commission, some of Porch Group's revenue growth this year has been organic. And I wouldn't be surprised if the company can keep it up. Many of its newly acquired businesses are complementary to each other, providing significant cross-sell opportunities.
As you'd expect with a company in this position, Porch Group's sales and marketing expenses are ramping up. In the second quarter, it spent 45% of revenue on this one line item. While that's a lot, it seems like money well spent given the acquisition strategy it's executed over the past year.
