Porch Group Reports Fourth Quarter 2024 Results

Exceeds expectations delivering Q4'24 Net Income of $30m and Adjusted EBITDA of $42m

Porch Group, Inc. ("Porch Group" or "the Company") (NASDAQ:PRCH), a homeowners insurance and vertical software platform, today reported fourth quarter results through December 31, 2024, with total revenue of $100.4 million. GAAP net income was $30.5 million, an improvement of $33.0 million compared to the prior year, and Adjusted EBITDA was $41.8 million, an improvement of $30.1 million compared to the prior year.

CEO Summary

"We had a strong finish to the year, and delivered our full year positive Adjusted EBITDA target. We delivered record quarterly Adjusted EBITDA in Q4 2024, which we believe marks a pivotal shift toward sustainable profitable growth for Porch Group shareholders," said Matt Ehrlichman, Chief Executive Officer, Chairman and Founder. "We formed the Porch Insurance Reciprocal Exchange in January 2025, transforming Porch toward a simpler, commission and fee-based, higher margin model. With the strong progress over the last few months, we're raising our 2025 outlook, including Adjusted EBITDA of $60 million at the mid-point of guidance."

Fourth Quarter 2024 Financial Results²

• Total revenue of $100.4 million, a decrease of (12)% or $14.3 million compared to prior year (fourth quarter 2023: $114.6 million); the prior year included $26 million of non-recurring revenue due to lower reinsurance ceding following the cancellation of the Vesttoo related reinsurance coverage¹. Additionally, Q4 2024 included a $5 million non-recurring year-end adjustment related to the legacy reinsurance complexities following Vesttoo. These factors offset organic growth in the Insurance segment, including a 31% increase in premium per policy.

• Revenue less cost of revenue of $89.3 million, 89% of total revenue (fourth quarter 2023: $79.9 million, 70% of total revenue). Vertical Software Segment revenue less cost of revenue as a percentage of revenue improved ~500bps, driven by SaaS price increases and strong cost control.

• GAAP net income of $30.5 million, compared to a GAAP net loss of $2.5 million for the fourth quarter of 2023.

• Adjusted EBITDA of $41.8 million, a $30.1 million improvement from the prior year (fourth quarter 2023: $11.7 million), ahead of expectations. This was driven by operational excellence and a disciplined focus on profitability across the business.

• Gross written premium for the quarter in our Insurance segment was $112 million with approximately 206 thousand policies in force.

• $350.4 million cash, cash equivalents, and investments at December 31, 2024.

Fourth Quarter 2024 Operational Highlights²

• The Texas Department of Insurance approved the Company's application to form and license the Porch Insurance Reciprocal Exchange ("PIRE"). Since the period end, the Company solid its insurance carrier, Homeowners of America, into PIRE, resulting in Porch Group now holding $106 million of surplus notes from PIRE which pay interest of 9.75% plus SOFR.

• Gross loss ratio of 21%, an improvement from 36% in the prior year, driven by strong attritional loss ratio performance of 16%, an improvement from 30% in the prior year.

• In Insurance, premium growth has restarted, expanding distribution with reopening of geographies, hiring sales leadership and engaging agency partners. Q4 2024 new business premiums increased 50% compared to the prior year and already in Q1 2025 new business premiums are double versus the prior year.

• Strong pipeline of third-party testing of Home Factors, focused on execution to scale this business.

• Rolled out key software advancements, positioning the software businesses for growth as housing market transaction volumes recover.

• Launched MovingPlace, a marketplace for consumers that simplifies the moving process and longer term provides additional consumer access for insurance.

The following tables present financial highlights of the Company's fourth quarter 2024 results compared to the fourth quarter results of 2023 (dollars are in millions):

The following table presents the Company's key performance indicators⁽¹⁾.

Balance Sheet Information (unaudited)

The Company ended the fourth quarter of 2024 with cash, cash equivalents, and investments of $350.4 million. Of this amount HOA held cash and cash equivalents of $112.5 million and investments of $167.6 million. At December 31, 2024, excluding HOA, Porch held $70.2 million of cash, cash equivalents, and investments, and a $49 million surplus note from HOA. Following the sale of HOA to PIRE on January 1, 2025, as of month end January cash and investments was $93 million, and the surplus note balance increased to $106 million.

In addition, the Company ended the fourth quarter of 2024 with $29.1 million of restricted cash and cash equivalents, primarily for the captive and warranty businesses.

As of December 31, 2024, outstanding principal for convertible debt was $507.1 million. This includes $333.3 million of the 6.75% Senior Secured Convertible Notes due October 2028 (the "2028 Notes") and $173.8 million of 0.75% Convertible Senior Notes due September 2026 (the "2026 Notes").

Post Balance Sheet Events

On January 1, 2025, the Company completed the formation of the Porch Insurance Reciprocal Exchange ("PIRE") and the sale of Homeowners of America Insurance Company ("HOA") to PIRE.

The Company sold HOA to PIRE for a purchase price equal to HOA's December 31, 2024 surplus of $105 million, less the existing 2023 surplus note of $49 million and less $9 million of outstanding interest expected to be paid in 2025. This brings the total surplus notes held by Porch to approximately $106 million, which will bear interest income to Porch of 9.75% plus the Secured Overnight Financing Rate. With this transaction now complete, going forward all insurance policies, premium and related claims, as well as all HOA assets and liabilities will be owned by PIRE. Porch Group will receive commissions and fees for providing operating and other services to PIRE, which is expected to deliver more predictable and higher-margin financial results for Porch Group Shareholders.

Porch Group Shareholder Interests Full Year 2025 Financial Outlook

Porch Group provides full year 2025 guidance based on current market conditions and expectations as of the date of this release.

Financial guidance represents Porch Shareholder Interests following the formation of PIRE and sale of HOA to PIRE in January 2025. For the avoidance of doubt, guidance does not include the future results of PIRE or HOA; while we expect to consolidate their results into Porch GAAP financial statements, the PIRE and HOA results will be excluded from Revenue, Gross Profit, Adjusted EBITDA and the associated margins.

Porch Group Shareholder Interest Full year 2025 guidance is as follows:

Porch Group is not providing reconciliations of Porch Group Shareholder Interests expected Revenue, Gross Profit or Adjusted EBITDA for future periods to the most directly comparable measures prepared in accordance with GAAP because the Company is unable to provide these reconciliations without unreasonable effort because certain information necessary to calculate such measures on a GAAP basis is unavailable or dependent on the timing of future events outside of the Company's control.

Conference Call

Porch Group management will host a conference call today February 25, 2025, at 5:00 p.m. Eastern time (2:00 p.m. Pacific time). The call will be accompanied by a slide presentation available on the Investor Relations section of the Company's website at ir.porchgroup.com. A question-and-answer session will follow management's prepared remarks.

All are invited to listen to the event by registering for the webinar, a replay of the webinar will also be available. See the Investor Relations section of the Porch Group's corporate website at ir.porchgroup.com.

About Porch Group

Porch Group, Inc. ("Porch") is a new kind of homeowners insurance company. Porch's strategy to win in homeowners insurance is to deploy leading vertical software solutions in select home-related industries, provide the best services for homebuyers including important moving services, leverage unique data for advantaged underwriting, and provide more protection for policyholders.

To learn more about Porch, visit ir.porchgroup.com.

Forward-Looking Statements

Certain statements in this release are considered forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management. Although we believe that our plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions, or expectations. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning our financial outlook and guidance, possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. Forward-looking statements in this release also include expectations regarding whether the reciprocal is the optimal structure for our insurance business and the benefits financial and otherwise thereof, including any expectations that the reciprocal will result in higher margins and a more predictable financial profile and equip our insurance operations to scale profitably in the future These statements may be preceded by, followed by, or include the words "believe," "estimate," "expect," "project," "forecast," "may," "will," "should," "seek," "plan," "scheduled," "anticipate," "intend," or similar expressions.

Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the date hereof. You should understand that the following important factors, among others, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

• expansion plans and opportunities, and managing growth, to build a consumer brand;

• the incidence, frequency, and severity of weather events, extensive wildfires, and other catastrophes;

• economic conditions, especially those affecting the housing, insurance, and financial markets;

• expectations regarding revenue, cost of revenue, operating expenses, and the ability to achieve and maintain future profitability;

• existing and developing federal and state laws and regulations, including with respect to insurance, warranty, privacy, information security, data protection, and taxation, and management's interpretation of and compliance with such laws and regulations;

• the structure, availability, and performance of Porch Insurance Reciprocal Exchange ("PIRE")'s and Homeowners of America ("HOA")'s reinsurance programs to protect against loss and maintain their financial stability ratings and a healthy surplus, the success of which are dependent on a number of factors outside management's control;

• the possibility that a decline in our share price would result in a negative impact to HOA's, surplus position and may require further financial support to enable HOA to meet applicable regulatory requirements and maintain financial stability rating;

• uncertainties related to regulatory approval of insurance rates, policy forms, insurance products, license applications, acquisitions of businesses, or strategic initiative, and other matters within the purview of insurance regulators (including the discount associated with the shares contributed to HOA);

• the ability of the Company and its affiliates to successfully operate and manage PIRE and our ability to successfully operate our businesses alongside a reciprocal exchange;

• our ability to implement our plans, forecasts and other expectations with respect to PIRE and to realize expected synergies and/or convert policyholders from our existing insurance carrier business into policyholders of PIRE;

• reliance on strategic, proprietary relationships to provide us with access to personal data and product information, and the ability to use such data and information to increase transaction volume and attract and retain customers;

• the ability to develop new, or enhance existing, products, services, and features and bring them to market in a timely manner;

• changes in capital requirements, and the ability to access capital when needed to provide statutory surplus;

• our ability to timely repay our outstanding indebtedness;

• the increased costs and initiatives required to address new legal and regulatory requirements arising from developments related to cybersecurity, privacy, and data governance and the increased costs and initiatives to protect against data breaches, cyber-attacks, virus or malware attacks, or other infiltrations or incidents affecting system integrity, availability, and performance;

• retaining and attracting skilled and experienced employees;

• costs related to being a public company; and

• other risks and uncertainties discussed in our filings with the SEC, including Part II, Item 1A, "Risk Factors," in our Annual Report on Form 10-K ("Annual Report") for the year ended December 31, 2024, as well as those discussed elsewhere in this release and in subsequent reports filed with the Securities and Exchange Commission ("SEC"), all of which are available on the SEC's website at www.sec.gov.

We caution you that the foregoing list may not contain all the risks to forward-looking statements made in this release.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this release primarily on our current expectations and projections about future events and trends we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described above and elsewhere in this release. We disclaim any obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.

Non-GAAP Financial Measures

This release includes non-GAAP financial measures, such as Adjusted EBITDA (Loss), Adjusted EBITDA (Loss) margin, and Attritional Loss Ratio.

Adjusted EBITDA

We define Adjusted EBITDA (Loss) as net income (loss) adjusted for interest expense; income taxes; depreciation and amortization; gain or loss on extinguishment of debt; other expense (income), net; impairments of intangible assets and goodwill; loss on reinsurance contract; impairments of property, equipment, and software; stock-based compensation expense; mark-to-market gains or losses recognized on changes in the value of contingent consideration arrangements, earnouts, warrants, and derivatives; restructuring costs; acquisition and other transaction costs; and non-cash bonus expense. Adjusted EBITDA (Loss) Margin is defined as Adjusted EBITDA (Loss) divided by total revenue.

Attritional Loss Ratio

The Attritional Loss Ratio is calculated by deducting the Gross Loss Ratio related to catastrophic weather events from total Gross Loss Ratio. Catastrophic weather events include, without limitation, hurricanes, tornados, earthquakes, hailstorms, wildfires, high winds, and winter storms. We believe the Attritional Loss Ratio is useful to investors and use this financial measure to reveal trends in our Gross Loss Ratio that may be obscured by catastrophe losses as such events cannot be accurately predicted and may cause our Gross Loss Ratio to vary significantly between periods as a result of their incidence of occurrence and magnitude. We have adopted the industry-wide catastrophe classifications of storms and other events published by Insurance Services Office, Inc. ("ISO") to track and report losses related to catastrophes. ISO classifies an event as a catastrophe when the event causes $25 million or more in direct losses.

Disclaimers

Our management uses these non-GAAP financial measures as supplemental measures of our operating and financial performance, for internal budgeting and forecasting purposes, to evaluate financial and strategic planning matters, and to establish certain performance goals for incentive programs. We believe that the use of these non-GAAP financial measures provides investors with useful information to evaluate our operating and financial performance and trends and in comparing our financial results with competitors, other similar companies and companies across different industries, many of which present similar non-GAAP financial measures to investors. However, our definitions and methodology in calculating these non-GAAP measures may not be comparable to those used by other companies. In addition, we may modify the presentation of these non-GAAP financial measures in the future, and any such modification may be material.

You should not consider these non-GAAP financial measures in isolation, as a substitute to or superior to financial performance measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude specified income and expenses, some of which may be significant or material, that are required by GAAP to be recorded in our consolidated financial statements. We may also incur future income or expenses similar to those excluded from these non-GAAP financial measures, and the presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or non-recurring items. In addition, these non-GAAP financial measures reflect the exercise of management judgment about which income and expense are included or excluded in determining these non-GAAP financial measures.

You should review the tables accompanying this release for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure. We are not providing reconciliations of non-GAAP financial measures for future periods to the most directly comparable measures prepared in accordance with GAAP. We are unable to provide these reconciliations without unreasonable effort because certain information necessary to calculate such measures on a GAAP basis is unavailable or dependent on the timing of future events outside of our control.

The following tables reconcile Net loss to Adjusted EBITDA (Loss) for the periods presented (dollar amounts in thousands):

The following table presents Segment Adjusted EBITDA (Loss) Margin for the periods presented:

The following table reconciles Gross Loss Ratio to Attritional Loss Ratio.

Key Performance Indicators

In the management of these businesses, we identify, measure and evaluate various operating metrics. The key performance measures and operating metrics used in managing the businesses are discussed below. These key performance measures and operating metrics are not prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and may not be comparable to or calculated in the same way as other similarly titled measures and metrics used by other companies.

Gross Written Premium — We define Gross Written Premium as the total premium written by our licensed insurance carrier(s) (before deductions for reinsurance); premiums from our home warranty offerings (for the face value of one year's premium); and premiums of policies placed with third-party insurance companies for which we earn a commission.

Policies in Force — We define Policies in Force as the number of in-force policies at the end of the period for the Insurance segment, including policies and warranties written by us and policies and warranties written by third parties for which we earn a commission.

Annualized Revenue per Policy — We define Annualized Revenue per Policy as quarterly revenue for the Insurance segment, divided by the number of Policies in Force in the Insurance segment, multiplied by four.

Annualized Premium per Policy — We define Annualized Premium per Policy as the total direct earned premium for HOA, our insurance carrier, divided by the number of active insurance policies at the end of the period, multiplied by four.

Premium Retention Rate — We define Premium Retention Rate as the ratio of our insurance carrier's renewed premiums over the last four quarters to base premiums, which is the sum of the preceding year's premiums that either renewed or expired.

Gross Loss Ratio — We define Gross Loss Ratio as our insurance carrier's gross losses divided by the gross earned premium for the respective period on an accident year basis.

Attritional Loss Ratio — We define Attritional Loss Ratio as Gross Loss Ratio excluding the losses due to catastrophic weather. Catastrophic weather events include, without limitation, hurricanes, tornados, earthquakes, hailstorms, wildfires, high winds, and winter storms.

Gross Combined Ratio — We define Gross Combined Ratio as being the sum of the loss ratio including loss adjustment expense and expense ratio. This is on a statutory basis for our insurance carrier.

Average Companies in Quarter — We define Average Companies in Quarter as the straight-line average of the number of companies as of the end of period compared with the beginning of period across all of our home services verticals that (i) generate recurring revenue and (ii) generated revenue in the quarter. For new acquisitions, the number of companies is determined in the initial quarter based on the percentage of the quarter the acquired business is a part of Porch.

Average Monthly Revenue per Account in Quarter — We view our ability to increase revenue generated from existing customers as a key component of our growth strategy. Average Monthly Revenue per Account in Quarter is defined as the average revenue per month generated across all home services company customer accounts in a quarterly period. Average Monthly Revenue per Account in Quarter is derived from all customers and total revenue.

Monetized Services — We connect consumers with home services companies nationwide and offer a full range of products and services where homeowners can, among other things: (1) compare and buy home insurance policies (along with auto, flood and umbrella policies) and warranties with competitive rates and coverage; (2) arrange for a variety of services in connection with their move, from labor to load or unload a truck to full-service, long-distance moving services; (3) discover and install home automation and security systems; (4) compare internet and television options for their new home; (5) book small handyman jobs at fixed, upfront prices with guaranteed quality; and (6) compare bids from home improvement professionals who can complete bigger jobs. We track the number of monetized services performed through our platform each quarter and the revenue generated per service performed in order to measure market penetration with homebuyers and homeowners and our ability to deliver high-revenue services within those groups. Monetized Services is defined as the total number of services from which we generated revenue, including, but not limited to, new and renewing insurance and warranty customers, completed moving jobs, security installations, TV/Internet installations or other home projects, measured over the period.

Average Quarterly Revenue per Monetized Service — We believe that shifting the mix of services delivered to homebuyers and homeowners toward higher revenue services is an important component of our growth strategy. Average Quarterly Revenue per Monetized Service is the average revenue generated per monetized service performed in a quarterly period. When calculating Average Quarterly Revenue per Monetized Service, average revenue is defined as total quarterly service transaction revenues generated from monetized services.

The following table summarizes the classification of stock-based compensation expense in the unaudited consolidated statements of operations.

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Investor Relations Contact

Lois Perkins, Head of Investor Relations

Porch Group, Inc.

[email protected]