Q2 2025 Performance Highlights - Porch Shareholder Interest revenue reached $107 million[20], with a gross profit of $89.2 million[20] and an 83% gross margin[20] - Adjusted EBITDA for Porch Shareholder Interest was $15.6 million[20], representing a 15% margin[20] - Reciprocal Written Premium (RWP) grew to $120.7 million[20], a $72 million increase or 431% increase year-over-year[20, 21] - Porch Shareholder Interest Cash Flow from Operations was $14.9 million[20] Reciprocal Performance - The Reciprocal's surplus combined with non-admitted assets reached $299 million as of June 30, 2025[27], a $102 million increase compared to the prior quarter[27] and a $259 million increase compared to the prior year[27] - The company estimates that a ~$300M surplus could potentially drive ~$1.5B Reciprocal Written Premium and ~$240M Insurance Services Adjusted EBITDA[29] Segment Performance - Insurance Services revenue was $67.4 million with a gross profit of $57.9 million and Adjusted EBITDA of $19.7 million[42], representing an 86% gross margin and 29% Adjusted EBITDA margin[42, 50] - Software & Data revenue was $24.0 million with a gross profit of $18.2 million and Adjusted EBITDA of $5.5 million[42], representing a 76% gross margin and 23% Adjusted EBITDA margin[42, 54] - Consumer Services revenue was $17.7 million with a gross profit of $15.2 million and Adjusted EBITDA of $2.0 million[42], representing an 86% gross margin and 11% Adjusted EBITDA margin[42, 58] Guidance - The company increased its 2025 revenue guidance to $405 million - $425 million[68], gross profit guidance to $328 million - $342 million[68], and Adjusted EBITDA guidance to $65 million - $70 million[68]

[Second Quarter 2025 Results Overview](index=1&type=section&id=Second%20Quarter%202025%20Results%20Overview) [Q2 2025 Financial Highlights](index=1&type=section&id=Q2%202025%20Financial%20Highlights) Porch Group exceeded expectations in Q2 2025 and raised its full-year guidance, achieving $107 million in revenue attributable to Porch shareholders, a net income of $2.6 million, and adjusted EBITDA of $15.6 million, a significant increase of $50.4 million from the prior year period - Porch Group's Q2 2025 performance exceeded expectations, leading to an upward revision of its full-year 2025 guidance, primarily driven by insurance services[1](index=1&type=chunk) Q2 2025 Financial Performance (Millions USD) | Metric | Porch Shareholder Interest (Millions USD) | Consolidated (Millions USD) | | :--- | :--- | :--- | | Revenue | 107.0 | 119.3 | | Gross Profit | 89.2 | 75.9 | | Net Income (Loss) | 2.6 | 8.2 | | Adjusted EBITDA (Loss) | 15.6 | 15.6 | - Gross profit attributable to Porch shareholders increased by over **400% year-over-year**, and adjusted EBITDA grew by **$50.4 million** from the prior year to **$15.6 million**, driving operating cash flow to **$14.9 million**[3](index=3&type=chunk) [CEO Summary](index=1&type=section&id=CEO%20Summary) CEO Matt Ehrlichman stated that Q2 2025, the second quarter since Reciprocal's launch, was highly successful with financial results exceeding expectations and strong organizational performance on key initiatives, leading to an upward revision of the full-year 2025 guidance as the business has become simple, predictable, and profitable - CEO Matt Ehrlichman highlighted Q2 2025 as the second successful quarter under the company's new operating model since Reciprocal's launch, with financial results exceeding expectations[3](index=3&type=chunk) - The company's gross profit increased by over **400% year-over-year**, and adjusted EBITDA improved by **$50.4 million** from Q2 2024 to **$15.6 million**, generating **$14.9 million** in operating cash flow for Porch shareholders[3](index=3&type=chunk) - Given the strong business performance and new outlook, the company raised its 2025 full-year guidance for revenue, gross profit, and adjusted EBITDA attributable to Porch shareholders[3](index=3&type=chunk) [Second Quarter 2025 Operational Highlights](index=1&type=section&id=Second%20Quarter%202025%20Operational%20Highlights) [Operational Highlights Details](index=1&type=section&id=Operational%20Highlights%20Details) Porch Group achieved several operational advancements in Q2, including renewing its partnership with Goosehead Insurance and adding new insurance agent distribution partners, progressing well with the Home Factors product in its Software & Data business, and launching new home warranty and moving services in Consumer Services, while Reciprocal Exchange's surplus grew healthily to $299.2 million - In June, Porch renewed its partnership with Goosehead Insurance and added new insurance agent distribution partners including Roamly, Evertree, and MassDrive[6](index=6&type=chunk) - The Home Factors data product in the Software & Data business is progressing well, with the number of insurers in testing ahead of schedule, maintaining the goal of releasing **100 Home Factors** by year-end[6](index=6&type=chunk) - In Consumer Services, Porch insurance policyholders gained access to full home warranties and 4-hour moving services, with new offerings including packing services launched[6](index=6&type=chunk) - Reciprocal Exchange is operating healthily, with surplus and non-admitted assets totaling **$299.2 million** at the end of Q2 2025, an increase of **$259 million** from the prior year and **$102 million** from Q1 2025[6](index=6&type=chunk) [Key Performance Indicators (KPIs)](index=2&type=section&id=Key%20Performance%20Indicators%20(KPIs)) [Q2 2025 Key Performance Indicators](index=2&type=section&id=Q2%202025%20Key%20Performance%20Indicators) In Q2 2025, insurance services saw Reciprocal Written Premium reach $120.7 million with 42.5 thousand policies, while the Software & Data business reported an average of 24.2 thousand companies and an annualized average revenue per company of $3,974, and Consumer Services had 87.2 thousand monetized services with an average revenue of $202 per monetized service Q2 2025 Key Performance Indicators | Metric | Amount/Quantity | | :--- | :--- | | **Insurance Services KPIs** | | | Reciprocal Written Premium (RWP) | 120.7 Million USD | | Reciprocal Policies Written | 42.5 Thousand | | Reciprocal Written Premium per Policy Written | 2,843 USD | | **Software & Data KPIs** | | | Average Number of Companies | 24.2 Thousand | | Annualized Average Revenue per Company | 3,974 USD | | **Consumer Services KPIs** | | | Number of Monetized Services | 87.2 Thousand | | Average Revenue per Monetized Service | 202 USD | [Balance Sheet Information](index=2&type=section&id=Balance%20Sheet%20Information) [Porch Shareholder Interest Cash and Investments](index=2&type=section&id=Porch%20Shareholder%20Interest%20Cash%20and%20Investments) As of June 30, 2025, total cash, cash equivalents, restricted cash, and investments attributable to Porch shareholders amounted to $117.5 million, an increase from December 31, 2024, primarily due to cash flow from operations and Vesttoo bankruptcy proceeds, despite some cash used for repurchasing 2026 convertible senior unsecured notes Porch Shareholder Interest Cash, Cash Equivalents, and Investments (Millions USD) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | 76.1 | 46.5 | | Short-term investments | 3.7 | 1.6 | | Long-term investments | 29.2 | 13.5 | | Unrestricted cash, cash equivalents, and investments | 109.1 | 61.6 | | Restricted cash and cash equivalents | 8.4 | 28.2 | | **Total cash, cash equivalents, investments, and restricted cash** | **117.5** | **89.9** | - Total cash, cash equivalents, restricted cash, and investments attributable to Porch shareholders increased from **$89.9 million** as of December 31, 2024, to **$117.5 million** as of June 30, 2025[10](index=10&type=chunk) - The increase was primarily driven by **$42.1 million** in cash flow from operating activities attributable to Porch shareholders (of which **$32.5 million** was contributed by Adjusted EBITDA) and **$7.1 million** received from the Vesttoo bankruptcy proceedings[10](index=10&type=chunk) - Porch used **$55.7 million** in cash during the six months ended June 30, 2025, to repurchase a portion of its 2026 convertible senior unsecured notes, including **$51.0 million** in cash proceeds from the issuance of 9.00% convertible senior unsecured notes due 2030[10](index=10&type=chunk) [Outstanding Convertible Debt](index=2&type=section&id=Outstanding%20Convertible%20Debt) As of June 30, 2025, Porch Group's total outstanding convertible debt amounted to $487.9 million, comprising 2030 notes, 2028 notes, and 2026 notes Outstanding Convertible Debt as of June 30, 2025 (Millions USD) | Note Type | Principal Outstanding | | :--- | :--- | | 9.00% Convertible Senior Unsecured Notes due 2030 | 134.0 | | 6.75% Convertible Senior Secured Notes due 2028 | 333.3 | | 0.75% Convertible Senior Unsecured Notes due 2026 | 20.5 | | **Total** | **487.9** | [Condensed Consolidated Balance Sheets](index=12&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Porch Group reported total assets of $770.7 million, total liabilities of $772.9 million, and a total shareholder deficit of ($2.188 million), showing a decrease in both total assets and liabilities, and an improvement in shareholder deficit compared to December 31, 2024 Condensed Consolidated Balance Sheet Highlights (Thousands USD) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 76,091 | 167,643 | | Short-term investments | 3,746 | 24,099 | | Total current assets | 113,753 | 365,127 | | Total assets | 770,717 | 813,968 | | **Liabilities and Shareholder Deficit** | | | | Total current liabilities | 66,227 | 414,156 | | Long-term debt | 394,128 | 403,788 | | Total liabilities | 772,905 | 857,193 | | Porch shareholder deficit | (29,292) | (43,225) | | Total shareholder deficit | (2,188) | (43,225) | - Total assets as of June 30, 2025, were **$770.7 million**, a decrease from **$813.9 million** as of December 31, 2024[53](index=53&type=chunk) - Total liabilities were **$772.9 million**, a decrease from **$857.1 million** as of December 31, 2024[56](index=56&type=chunk) - Porch shareholder deficit improved from **($43.225 million)** as of December 31, 2024, to **($29.292 million)** as of June 30, 2025[56](index=56&type=chunk) [Post Balance Sheet Events](index=3&type=section&id=Post%20Balance%20Sheet%20Events) [Debt Repurchase in July 2025](index=3&type=section&id=Debt%20Repurchase%20in%20July%202025) In July 2025, Porch Group repurchased 2026 notes with a total principal of $11.8 million for $11.3 million, expecting to recognize a debt extinguishment gain of approximately $0.3 million in Q3 2025, reducing the outstanding principal of 2026 notes to $8.8 million, with the board authorizing management to repurchase the remaining portion - In July 2025, the company repurchased 2026 notes with a total principal of **$11.8 million** for **$11.3 million**, representing **96.5%** of the face value[13](index=13&type=chunk) - A debt extinguishment gain of approximately **$0.3 million** is expected to be recognized in Q3 2025[13](index=13&type=chunk) - Following this transaction, the outstanding principal of the 2026 notes decreased to **$8.8 million**[13](index=13&type=chunk) - The Board of Directors has authorized management to repurchase the remaining 2026 notes in the open market or through privately negotiated transactions[13](index=13&type=chunk) [Full Year 2025 Financial Outlook](index=3&type=section&id=Full%20Year%202025%20Financial%20Outlook) [Porch Group Shareholder Interest Full Year 2025 Guidance](index=3&type=section&id=Porch%20Group%20Shareholder%20Interest%20Full%20Year%202025%20Guidance) Porch Group raised its full-year 2025 financial guidance for Porch shareholder interest, increasing the revenue midpoint by $5 million to $415 million, gross profit midpoint by $7.5 million to $335 million, and adjusted EBITDA midpoint by $2.5 million to $67.5 million, with this guidance excluding future performance of Reciprocal Porch Shareholder Interest Full Year 2025 Guidance (Millions USD) | Metric | New Guidance Range | Midpoint Increase (Millions USD) | Original Guidance Range | | :--- | :--- | :--- | :--- | | Revenue | 405 - 425 | 5.0 | 400 - 420 | | Gross Profit | 328 - 342 | 7.5 | 320 - 335 | | Adjusted EBITDA | 65 - 70 | 2.5 | 60 - 70 | - The company raised its 2025 full-year guidance for revenue, gross profit, and adjusted EBITDA attributable to Porch shareholders[15](index=15&type=chunk) - This guidance represents only the business owned by Porch shareholders and excludes the future performance of Reciprocal[15](index=15&type=chunk) [Company Information](index=4&type=section&id=Company%20Information) [Conference Call](index=4&type=section&id=Conference%20Call) Porch Group management held a conference call on August 5, 2025, to discuss results and conduct a Q&A session, with presentation slides and a replay available on the company's investor relations website - Porch Group management held a conference call on August 5, 2025, to discuss financial results[18](index=18&type=chunk) - Presentation slides from the conference call are available on the company's investor relations website, ir.porchgroup.com, with a webcast replay also provided[18](index=18&type=chunk)[19](index=19&type=chunk) [About Porch Group](index=4&type=section&id=About%20Porch%20Group) Porch Group, Inc. is a new kind of homeowner's insurance company strategically positioned to succeed in the homeowner's insurance market by deploying leading vertical software solutions, providing best-in-class homebuyer services including moving services, leveraging unique data for advantageous underwriting, and offering more protection to policyholders - Porch Group, Inc. is a new kind of homeowner's insurance company[20](index=20&type=chunk) - The company's strategy includes deploying vertical software solutions, providing homebuyer services (such as moving services), leveraging unique data for underwriting, and offering more protection to policyholders[20](index=20&type=chunk) [Investor Relations Contact](index=4&type=section&id=Investor%20Relations%20Contact) Investors can contact Porch Group's investor relations department via IR@porch.com - Investor relations contact email is IR@porch.com[22](index=22&type=chunk) [Legal and Financial Disclosures](index=5&type=section&id=Legal%20and%20Financial%20Disclosures) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, based on management's beliefs and assumptions, but subject to inherent risks, uncertainties, and assumptions, with the company cautioning investors not to place undue reliance on these statements and listing important factors that could cause future results to differ materially, including expansion plans, weather events, economic conditions, laws and regulations, reinsurance programs, capital requirements, and cybersecurity risks - Certain statements in this press release are considered forward-looking statements, based on management's beliefs and assumptions, but subject to inherent risks, uncertainties, and assumptions[23](index=23&type=chunk) - Important factors could cause future results to differ materially from forward-looking statements, including expansion plans, weather events, economic conditions, laws and regulations, reinsurance programs, capital requirements, cybersecurity risks, and other risks discussed in the company's annual report on Form 10-K[24](index=24&type=chunk)[31](index=31&type=chunk) - The company undertakes no obligation to publicly update any forward-looking statements, except as required by applicable law[26](index=26&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) This press release includes non-GAAP financial measures such as Adjusted EBITDA (Loss), Adjusted EBITDA (Loss) Margin, and non-GAAP metrics related to Porch shareholder interest, which management uses to evaluate performance, for budgeting and strategic planning, and to set incentive targets, while acknowledging their limitations in excluding certain significant revenues and expenses required by GAAP and advising investors not to view them in isolation - This press release includes non-GAAP financial measures such as Adjusted EBITDA (Loss), Adjusted EBITDA (Loss) Margin, and non-GAAP metrics related to Porch shareholder interest[27](index=27&type=chunk) - Management uses these non-GAAP measures as supplemental metrics for evaluating operating and financial performance, internal budgeting and forecasting, strategic planning, and setting incentive targets[28](index=28&type=chunk) - A primary limitation of non-GAAP financial measures is that they exclude certain significant revenues and expenses required to be recorded under GAAP, and investors should not view these measures in isolation[29](index=29&type=chunk) Reconciliation of Adjusted EBITDA (Loss) to Net Income (Loss) (Thousands USD) | Metric | June 30, 2025 (Amount) | June 30, 2025 (Margin) | June 30, 2024 (Amount) | June 30, 2024 (Margin) | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | 8,247 | 7% | (64,323) | (58)% | | Less: Net loss (income) attributable to Reciprocal | (5,668) | (5)% | — | —% | | Interest expense | 12,026 | 10% | 10,326 | 9% | | Provision for (benefit from) income taxes | (1,186) | (1)% | 688 | 1% | | Depreciation and amortization | 4,461 | 4% | 6,202 | 6% | | Gain on extinguishment of debt | (34) | —% | — | —% | | Other income, net | (95) | —% | (704) | (1)% | | (Gain) loss on reinsurance contracts | — | —% | (1,095) | (1)% | | Stock-based compensation expense | 8,000 | 7% | 7,105 | 6% | | Mark-to-market (gain) loss | (9,975) | (8)% | 5,405 | 5% | | Restructuring costs | (187) | —% | 1,635 | 1% | | Acquisition and other transaction costs | 41 | —% | (12) | —% | | **Adjusted EBITDA (Loss)** | **15,630** | **13%** | **(34,773)** | **(31)%** | [Porch Shareholder Interest Definition](index=10&type=section&id=Porch%20Shareholder%20Interest%20Definition) Porch shareholder interest is defined as the Insurance Services, Software & Data, and Consumer Services segments, plus corporate expenses, with the operating results of these segments constituting the 'Net income (loss) attributable to Porch' in the company's unaudited condensed consolidated statements of operations and comprehensive income (loss) - Porch shareholder interest is defined as the Insurance Services, Software & Data, and Consumer Services segments, plus corporate expenses[41](index=41&type=chunk) - The operating results of these segments constitute the 'Net income (loss) attributable to Porch' in the company's unaudited condensed consolidated statements of operations and comprehensive income (loss)[42](index=42&type=chunk) [Key Performance Indicators Definitions](index=11&type=section&id=Key%20Performance%20Indicators%20Definitions) This section provides definitions for the company's key performance indicators (KPIs) used to manage the business, including Reciprocal Written Premium, Reciprocal Policies Written, and Reciprocal Written Premium per Policy Written for Insurance Services; Average Number of Companies and Annualized Average Revenue per Company for Software & Data; and Monetized Services and Average Revenue per Monetized Service for Consumer Services - Reciprocal Written Premium is defined as the total face value of one-year premiums underwritten by Reciprocal during the period, net of cancellations and before reinsurance and commissions[45](index=45&type=chunk) - Average Number of Companies is defined as the straight-line average of the number of companies at the end and beginning of the period for the Software & Data segment[47](index=47&type=chunk) - Monetized Services is defined as the total number of services for which the company generates revenue, including but not limited to new and renewed warranty policies, completed moving jobs, and sales of security, TV/internet, or other home projects[49](index=49&type=chunk) [Detailed Financial Statements](index=7&type=section&id=Detailed%20Financial%20Statements) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) In Q2 2025, Porch Group reported consolidated revenue of $119.3 million, gross profit of $75.9 million, operating income of $5 million, and net income of $8.2 million, with net income attributable to Porch being $2.6 million, showing significant year-over-year growth in revenue and gross profit, and a shift from net loss to net income Condensed Consolidated Statements of Operations Highlights (Thousands USD) | Metric | June 30, 2025 (Three Months) | June 30, 2024 (Three Months) | | :--- | :--- | :--- | | Revenue | 119,295 | 110,844 | | Cost of revenue | 43,422 | 94,046 | | Gross profit | 75,873 | 16,798 | | Operating expenses | 70,824 | 69,277 | | Operating income (loss) | 5,049 | (52,479) | | Net income (loss) | 8,247 | (64,323) | | Less: Net income attributable to Reciprocal | 5,668 | — | | **Net income (loss) attributable to Porch** | **2,579** | **(64,323)** | | Earnings per share - Basic | 0.03 | (0.65) | | Earnings per share - Diluted | — | (0.65) | Porch Shareholder Interest Performance Summary (Thousands USD) | Metric | June 30, 2025 (Three Months) | June 30, 2024 (Three Months) | Change | | :--- | :--- | :--- | :--- | | Revenue | 107,018 | 75,865 | 31,153 | | Gross profit | 89,234 | 46,788 | 42,446 | | Adjusted EBITDA (Loss) | 15,630 | (3,204) | 18,834 | - In Q2 2025, Porch shareholder interest revenue was **$107 million**, gross profit was **$89.2 million**, and adjusted EBITDA was **$15.6 million**, all showing significant improvement from the prior year period[60](index=60&type=chunk) [Supplemental Cash Flow Information](index=15&type=section&id=Supplemental%20Cash%20Flow%20Information) In Q2 2025, Porch Group's consolidated operating cash flow was $35.6 million, investing activities used $5.9 million, and financing activities used $7.8 million, with Porch shareholder interest operating cash flow at $14.9 million, and consolidated cash, cash equivalents, and restricted cash totaling $187.9 million as of June 30, 2025 Q2 2025 Cash Flow Highlights (Thousands USD) | Metric | Consolidated | Reciprocal Segment | Porch Shareholder Interest | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 35,569 | 20,679 | 14,890 | | Net cash provided by (used in) investing activities | (5,901) | (179) | (5,722) | | Net cash provided by (used in) financing activities | (7,782) | — | (7,782) | | Cash, cash equivalents, and restricted cash, end of period | 187,893 | 103,395 | 84,498 | H1 2025 Cash Flow Highlights (Thousands USD) | Metric | Consolidated | Reciprocal Segment | Porch Shareholder Interest | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 24,391 | (17,678) | 42,069 | | Net cash provided by (used in) investing activities | (25,269) | (47,752) | (24,330) | | Net cash provided by (used in) financing activities | (8,011) | 46,813 | (8,011) | | Cash, cash equivalents, and restricted cash, end of period | 187,893 | 103,395 | 84,498 | - Porch shareholder interest generated **$42.069 million** in cash flow from operating activities during the first half of 2025[64](index=64&type=chunk)

Core Viewpoint - Porch Group, Inc. (PRCH) is expected to report a year-over-year increase in earnings despite lower revenues for the quarter ended June 2025, with the consensus outlook being crucial for assessing the company's earnings picture [1][2]. Earnings Expectations - The consensus EPS estimate for Porch Group is a loss of $0.13 per share, reflecting an 80% year-over-year improvement [3]. - Revenues are projected to be $96.56 million, which is a decrease of 12.9% compared to the same quarter last year [3]. Estimate Revisions - Over the last 30 days, the consensus EPS estimate has been revised 42.86% higher, indicating a reassessment by analysts [4]. - The Most Accurate Estimate for Porch Group aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0% [12]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive or negative reading indicates the likely deviation of actual earnings from the consensus estimate, with a positive ESP being a strong predictor of an earnings beat [9][10]. - Porch Group currently holds a Zacks Rank of 2, which complicates the prediction of an earnings beat despite the positive revision trend [12]. Historical Performance - In the last reported quarter, Porch Group was expected to post a loss of $0.07 per share but instead reported earnings of $0.02, resulting in a surprise of +128.57% [13]. - Over the past four quarters, the company has exceeded consensus EPS estimates two times [14]. Market Reaction - The stock price may increase if the upcoming earnings report exceeds expectations, while a miss could lead to a decline [2]. - An earnings beat or miss is not the sole factor influencing stock movement, as other variables can also impact investor sentiment [15].

Group 1: Momentum Investing Overview - Momentum investing involves following a stock's recent trend, with the aim of buying high and selling higher, capitalizing on established price movements [1] - The Zacks Momentum Style Score helps define momentum characteristics, with Porch Group, Inc. (PRCH) currently holding a Momentum Style Score of B [2][3] Group 2: Performance Metrics - PRCH shares have increased by 4.24% over the past week, outperforming the Zacks Internet - Software industry, which rose by 2.59% [5] - Over the last quarter, PRCH shares have surged by 138.35%, and over the past year, they have gained 600.55%, while the S&P 500 has only increased by 23.56% and 13.28%, respectively [6] Group 3: Trading Volume and Earnings Outlook - The average 20-day trading volume for PRCH is 1,991,823 shares, indicating a bullish sign with rising stock prices [7] - In the past two months, one earnings estimate for PRCH has moved higher, raising the consensus estimate from -$0.22 to -$0.18, with no downward revisions [9] Group 4: Conclusion - Considering the performance metrics and earnings outlook, PRCH is rated as a 2 (Buy) stock with a Momentum Score of B, making it a promising near-term investment [11]

Group 1 - Porch Group, Inc. has transitioned from a tech company focused on home services to a data-driven platform emphasizing insurance, software, and consumer engagement [1] - The company's current strategy prioritizes margin-focused operations rather than service provision [1] Group 2 - The analysis primarily targets small- to mid-cap companies, which are often overlooked by investors, while also occasionally reviewing large-cap companies for a broader market perspective [1]

Group 1 - The analysis begins coverage on Porch Group (NASDAQ: PRCH) with a comprehensive overview of their business model, history, financial performance, Q1 2025 earnings, valuation, and risks [1] - A 'Hold' rating will be issued for Porch Group based on the analysis [1]

PART I — FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited Q1 2025 consolidated financial statements reflect the company's financial position and performance, significantly impacted by the Reciprocal Exchange formation [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) The March 31, 2025, balance sheet reflects total assets of **$802.3 million** and a **$32.0 million** stockholders' deficit, including the consolidated Reciprocal Exchange Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $65,899 | $167,643 | | Total current assets | $111,368 | $365,127 | | Goodwill | $191,907 | $191,907 | | Assets of Reciprocal (VIE) | $403,267 | $0 | | **Total assets** | **$802,283** | **$813,968** | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $73,071 | $414,156 | | Long-term debt | $409,160 | $403,788 | | Liabilities of Reciprocal (VIE) | $319,911 | $0 | | **Total liabilities** | **$834,332** | **$857,193** | | Porch stockholders' deficit | ($52,418) | ($43,225) | | **Total stockholders' deficit** | **($32,049)** | **($43,225)** | - On January 1, 2025, Porch sold HOA to the newly formed Porch Reciprocal Exchange, a consolidated VIE managed by Porch[8](index=8&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)%20(Unaudited)) Q1 2025 consolidated net income was **$3.7 million**, a turnaround from a **$13.4 million** loss in Q1 2024, driven by reduced cost of revenue Q1 2025 vs Q1 2024 Performance (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $104,745 | $115,443 | | Cost of revenue | $39,297 | $78,366 | | **Gross Profit** | **$65,448** | **$37,077** | | Operating loss | ($1,266) | ($34,668) | | **Net income (loss)** | **$3,736** | **($13,362)** | | Net loss attributable to the Reciprocal | ($4,659) | $0 | | **Net income (loss) attributable to Porch** | **$8,395** | **($13,362)** | | Net income (loss) attributable to Porch per share - basic | $0.08 | ($0.14) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Q1 2025 net cash used in operating activities was **$11.2 million**, a reversal from **$8.5 million** provided in Q1 2024, primarily due to working capital shifts Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($11,178) | $8,465 | | Net cash provided by (used in) investing activities | ($19,368) | $12,697 | | Net cash used in financing activities | ($229) | ($2,501) | | **Net change in cash** | **($30,775)** | **$18,661** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Notes detail accounting policies and the strategic shift to a reciprocal insurance model, establishing new segments and the Reciprocal's formation - As of January 2025, the company operates under new segments: Insurance Services, Software & Data, Consumer Services (Porch Shareholder Interest), and the Reciprocal Segment[32](index=32&type=chunk)[62](index=62&type=chunk) - The Reciprocal's formation on January 1, 2025, involved Porch selling HOA and receiving approximately **$106 million** in surplus notes[85](index=85&type=chunk) - As of April 1, 2025, the Reciprocal's reinsurance program includes excess of loss catastrophe coverage starting at **$25 million** and a 7.5% third-party quota share[163](index=163&type=chunk)[164](index=164&type=chunk) - The company is involved in legal proceedings alleging TCPA violations, with potential loss currently unestimable[173](index=173&type=chunk)[177](index=177&type=chunk) [Management's Discussion and Analysis (MD&A)](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Q1 2025 transition to a new reciprocal insurance model, leading to improved profitability and Adjusted EBITDA despite a revenue decrease [Business Overview](index=36&type=section&id=Business%20Overview) Porch leverages SaaS relationships and property data for its homeowners insurance business, operating under four new segments as of January 2025 - Porch leverages relationships with approximately **24,000** SaaS companies to gain insights into U.S. homebuyers and properties for its insurance business[187](index=187&type=chunk) - Unique property data enhances risk assessment, pricing, and underwriting for the policyholder-owned Porch Reciprocal Exchange, managed by Porch[193](index=193&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Q1 2025 consolidated revenue decreased 9% to **$104.7 million**, but operating loss significantly narrowed, and Adjusted EBITDA turned positive due to the new reciprocal model Consolidated Results Summary (in thousands) | Metric | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $104,745 | $115,443 | ($10,698) | (9)% | | Cost of revenue | $39,297 | $78,366 | ($39,069) | (50)% | | Operating loss | ($1,266) | ($34,668) | $33,402 | (96)% | | Net income (loss) attributable to Porch | $8,395 | ($13,362) | $21,757 | (163)% | | Adjusted EBITDA (Loss) | $16,861 | ($16,788) | $33,649 | (200)% | - Revenue decreased primarily due to higher reinsurance ceding, while cost of revenue fell due to the same program and fewer weather-related claims[202](index=202&type=chunk)[203](index=203&type=chunk) - Adjusted EBITDA improved due to the shift to the reciprocal model, generating higher-margin management fees, and reduced weather-related claims[206](index=206&type=chunk) [Porch Shareholder Interest Results (Non-GAAP)](index=42&type=section&id=Porch%20Shareholder%20Interest%20Results%20(Non-GAAP)) Porch Shareholder Interest segments showed strong Q1 2025 performance, with flat revenue but significant increases in Gross Profit and Adjusted EBITDA Porch Shareholder Interest Performance (in thousands) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $84,546 | $84,416 | $130 | | Gross Profit | $69,074 | $49,838 | $19,236 | | Adjusted EBITDA (Loss) | $16,861 | ($4,075) | $20,936 | - Gross Profit and Adjusted EBITDA improved due to the shift to managing the Reciprocal, generating high-margin management fees, and reduced weather-related claims[220](index=220&type=chunk)[221](index=221&type=chunk) [Key Performance Measures and Operating Metrics](index=44&type=section&id=Key%20Performance%20Measures%20and%20Operating%20Metrics) The company tracks key operating metrics for its new segments, including Reciprocal Written Premium, Average Companies, and Monetized Services - Q1 2025 Insurance Services metrics include **$96.9 million** in Reciprocal Written Premium and **36.1 thousand** policies written[222](index=222&type=chunk) - Q1 2025 Software & Data metrics include **24.1 thousand** average companies and **$3,644** in annualized average revenue per company[228](index=228&type=chunk) - Q1 2025 Consumer Services metrics include **71.0 thousand** monetized services and **$207** in average revenue per monetized service[232](index=232&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity and capital resources as of March 31, 2025, are discussed, with management affirming sufficient funding for 12 months Liquidity of Porch Shareholder Interest (in thousands) | Component | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Unrestricted cash, cash equivalents, and investments | $96,624 | $61,648 | | Restricted cash and cash equivalents | $17,213 | $28,244 | | **Total cash, cash equivalents, and investments** | **$113,837** | **$89,892** | - The company has outstanding convertible notes totaling **$507.1 million** principal, with maturities in 2026 (**$173.8 million**) and 2028 (**$333.3 million**)[254](index=254&type=chunk)[255](index=255&type=chunk) - Net cash used in operating activities was **$11.2 million** in Q1 2025, a reversal from **$8.5 million** provided in Q1 2024, due to ceded insurance premium timing[260](index=260&type=chunk)[261](index=261&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks including interest rate fluctuations, inflation, and dependence on the Reciprocal's financial health - The company's **$507.1 million** fixed-rate convertible debt means interest expense is not directly impacted by market rate changes[280](index=280&type=chunk) - Fixed income investment portfolios of both the company and the Reciprocal are exposed to unrealized losses in a rising interest rate environment[282](index=282&type=chunk) - Inflation negatively impacts operations through higher costs and could reduce consumer spending[284](index=284&type=chunk) - A key risk is the company's dependence on the Reciprocal's financial condition and growth, as it impacts Porch's management fee revenue[286](index=286&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[287](index=287&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter[288](index=288&type=chunk) PART II — OTHER INFORMATION [Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to Note 16 for legal proceedings, believing current claims will not materially adversely affect the business - The report refers to Note 16 in the financial statements for a description of certain litigation and legal proceedings[291](index=291&type=chunk) - Management believes current legal proceedings will not materially adversely affect the company's business, financial condition, or results of operations[292](index=292&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were disclosed from the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[293](index=293&type=chunk) [Other Information](index=52&type=section&id=Item%205.%20Other%20Information) Two Board members entered Rule 10b5-1 trading plans in March 2025 to sell shares for tax obligations related to board compensation - Lead Independent Director Alan Pickerill entered a Rule 10b5-1 trading plan on March 13, 2025, to sell up to **40,000** shares[297](index=297&type=chunk) - Board member Rachel Lam entered a Rule 10b5-1 trading plan on March 14, 2025, to sell up to **50,000** shares[298](index=298&type=chunk)

Core Viewpoint - Porch Group, Inc. reported quarterly earnings of $0.02 per share, exceeding the Zacks Consensus Estimate of a loss of $0.07 per share, marking a significant improvement from a loss of $0.21 per share a year ago [1] Financial Performance - The company posted revenues of $104.75 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 30.20%, although this is a decline from year-ago revenues of $115.44 million [2] - Over the last four quarters, Porch Group has surpassed consensus EPS estimates two times and topped consensus revenue estimates just once [2] Stock Performance - Porch Group shares have increased approximately 27% since the beginning of the year, contrasting with the S&P 500's decline of -3.9% [3] Future Outlook - The company's earnings outlook will be crucial for determining the sustainability of its stock price movement, with current consensus EPS estimates for the coming quarter at -$0.02 on revenues of $98.16 million, and -$0.10 on revenues of $400 million for the current fiscal year [4][7] - The estimate revisions trend for Porch Group is currently mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Internet - Software industry, to which Porch Group belongs, is currently ranked in the top 35% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was reported at $85 million, generated from $97 million of written premium, both exceeding expectations [6][7] - Gross profit reached $69 million, an 86% increase year-over-year, with gross margins at 82% [8][20] - Adjusted EBITDA was $17 million, representing a 20% margin and a $34 million increase compared to the prior year [9][20] - Net income attributable to Porch was positive at $8 million, with positive cash flow from operations amounting to $27 million [9][26] Business Line Data and Key Metrics Changes - Insurance services accounted for 59% of revenue, with a gross margin of 85% and adjusted EBITDA of $25.8 million [19][22] - Software and data revenue was $22 million, a 4% increase year-over-year, with a gross margin of 75% [22] - Consumer services revenue decreased by 9% to $14.7 million, driven by the closure of lower-margin moving products [24] Market Data and Key Metrics Changes - The reciprocal's written premium reached $97 million, reflecting a 10% increase year-over-year [37] - New business premium doubled compared to the prior year, indicating strong growth in the insurance segment [40] Company Strategy and Development Direction - The company has transitioned to a commission and fee-based model, focusing on higher margins and predictable results [5][6] - Strategic focus areas include scaling insurance premiums, software innovation, and expanding data services [31][35] - The company aims to grow its written premium to $3 billion over the next 7-10 years, with a target revenue of $2.3 billion [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience during economic downturns, particularly in the homeowners insurance market [12][14] - The company anticipates continued growth in written premiums and management fees, supported by strategic pricing and distribution efforts [37][39] - Management noted that the reciprocal's surplus reached $198 million, the highest ever, indicating a strong financial position [10][72] Other Important Information - The company has reduced corporate expenses significantly, leading to improved cash flow [25] - The reciprocal's reinsurance costs have decreased year-over-year due to strong underwriting results [10][45] Q&A Session Summary Question: Clarity on high take rate in the quarter - Management explained that the high take rate was due to policy fees from policyholders and management fees from the reciprocal, with a healthy surplus of nearly $200 million [54][55] Question: Willingness to accelerate growth given strong start - Management indicated a willingness to invest in growth initiatives, including engaging more agents and expanding into new geographies [58][60] Question: Insights on consumer selection between HOA and Porch insurance - Management did not provide specific metrics but noted strong conversion rates among homebuyers and new construction segments [69][70] Question: Surplus metrics and expectations - Management clarified that the surplus combined with non-admitted assets was $198 million, the highest ever, and discussed the seasonal nature of surplus [72][74] Question: Reinsurance process and reinsurers' appetite - Management expressed satisfaction with the reinsurance renewal process, highlighting strong relationships with reinsurers and reduced risk exposure [86][88] Question: Breakdown of reciprocal written premium growth - Management stated that growth would come from both rate increases and new policy acquisitions, with expectations for continued growth in the second quarter [90][91] Question: Growth levers and agent channel size - Management noted that many previously closed ZIP codes have reopened and emphasized the potential for growth through the agency channel [96][100]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $85 million, generated from $97 million of premium written, both exceeding expectations [6][19] - Gross profit reached $69 million, an 86% increase year-over-year, with gross margins at 82% [7][20] - Adjusted EBITDA was $17 million, a 20% margin, representing a $34 million increase over the prior year [8][20] - Positive cash flow from operations was $27 million for the quarter [8][26] Business Line Data and Key Metrics Changes - Insurance services accounted for 59% of revenue, with a gross margin of 85% and adjusted EBITDA of $25.8 million [19][22] - Software and data revenue was $22 million, a 4% increase year-over-year, with a gross margin of 75% [22] - Consumer services revenue decreased by 9% to $14.7 million, driven by the closure of lower-margin products [24] Market Data and Key Metrics Changes - The reciprocal's written premium reached $97 million, reflecting a 10% increase year-over-year [37] - New business premium doubled compared to the prior year, indicating effective expansion efforts [40] Company Strategy and Development Direction - The company has transitioned to a commission and fee-based model, enhancing predictability and margins [4][5] - Focus areas include scaling insurance premiums, software innovation, and expanding access to homebuyers [32][34] - The company aims to grow its written premium to $3 billion over the next 7-10 years [59] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the homeowners insurance market, even during economic downturns [12][45] - The company anticipates continued growth in reciprocal written premium and management fees due to strategic pricing and distribution efforts [37][90] - Management noted that the reciprocal's surplus reached $198 million, the highest ever, providing a strong financial position [10][71] Other Important Information - The company has reduced corporate expenses significantly, leading to improved cash flow [25] - The reciprocal's reinsurance costs have decreased year-over-year due to strong underwriting results [10][44] Q&A Session Summary Question: Clarification on high take rate in the quarter - Management explained that the high take rate was due to management fees and policy fees from the reciprocal, with a healthy surplus of nearly $200 million [52][54] Question: Willingness to accelerate growth given strong start - Management indicated a willingness to invest in growth initiatives, including engaging more agents and expanding into new geographies [56][59] Question: Insights on Texas market and consumer selection - Management noted that they do not disclose specific metrics on consumer selection but emphasized their focus on homebuyers and new construction [67][68] Question: Details on reinsurance process and reinsurers' appetite - Management expressed satisfaction with the reinsurance renewal process, highlighting strong relationships with reinsurers and a healthy retention limit [84][86] Question: Breakdown of reciprocal written premium growth - Management stated that they do not break out the specific contributions from rate increases versus policy acquisition but expect continued growth in both areas [89][90]