Q4 2024 Earnings Presentation February 25, 2025 Copyright 2025 Porch Group, Inc. All rights reserved Disclaimers Financial Targets Porch is providing guidance and targets for future periods in this presentation based on current market conditions, assumptions, and expectations as of the date of this presentation. Actual results may vary due to a number of factors and there is no guarantee that we will be able to achieve these results. Please refer to the below for important disclaimers and a description of t ...

Core Viewpoint - Porch Group's stock experienced a significant surge, rising 76% over two trading days following its Q4 2024 earnings release, reaching a 52-week high [1][8]. Company Overview - Porch Group operates in the homebuying and home insurance sectors, aiming to create a flywheel effect where different business segments enhance each other [2]. - The company provides software utilized by 40% of the home inspection market, generating revenue and acquiring valuable data for home insurance pricing [3]. - Porch also serves 40% of the title transaction industry, gaining insights into home transaction timelines, which aids in marketing home insurance services [4][5]. - Additionally, Porch is the second-largest moving labor provider in the U.S., connecting homebuyers with moving professionals and earning fees from these services [6]. Financial Performance - In Q4 2024, Porch reported a gross profit margin of 89%, despite a 12% decline in revenues year-over-year [8]. - The company anticipates a gross margin of around 80% for 2025, a significant increase from the 48% margin achieved in 2024 [9]. - The formation of the Porch Insurance Reciprocal Exchange (PIRE) has allowed Porch to hold insurance policies and receive commissions, contributing to higher margins [10]. - Porch achieved record adjusted EBITDA of $42 million in Q4, with a full-year adjusted EBITDA of $7 million for 2024, and expects to increase this to $60 million in 2025 [11]. Stock Outlook - The average price target for Porch Group's stock is $5.84, indicating a potential downside of 16.40% from current levels, with a short-term upside potential of 19% based on recent earnings [12][13]. - Despite the recent stock surge, a short-term decline in share price would not be surprising given the rapid increase [13].

Financial Data and Key Metrics Changes - For the full year 2024, the company achieved adjusted EBITDA of $7 million, with Q4 adjusted EBITDA reaching a record $42 million, significantly better than guidance [9][12][52] - Total revenue for Q4 2024 was $100.4 million, a 12% decrease from the prior year, impacted by nonrecurring items and the divestiture of EIG [18][23] - The company provided 2025 adjusted EBITDA guidance of $60 million at the midpoint, representing a 15% adjusted EBITDA margin and an increase of over $50 million compared to 2024 [10][33] Business Line Data and Key Metrics Changes - In the Insurance segment, revenue was $72 million, with a strong 29% organic growth trend driven by increases in premium per policy [21] - Vertical Software revenue increased by 6% to $29.3 million, supported by SaaS price increases [21] - Insurance adjusted EBITDA was $48.8 million, a $17.2 million increase year-over-year, while Vertical Software adjusted EBITDA rose to $5 million, a $5.3 million increase [22] Market Data and Key Metrics Changes - The company reported gross written premium of $112 million, roughly flat compared to the prior year, with premium retention at 105% [20][45] - The gross loss ratio improved to 21% in Q4 2024, down from 36% the previous year, reflecting effective risk management [47] - The gross combined ratio for the full year was 79%, an improvement from 88% in the prior year [49] Company Strategy and Development Direction - The company aims to build one of the largest and most profitable homeowners insurance companies, focusing on advantaged underwriting and a customer-centric experience [6][8] - The formation of the Porch Insurance Reciprocal Exchange (PIRE) is expected to enhance financial predictability and margins [13][14] - The strategic focus includes scaling insurance premiums, innovating in vertical software, and expanding the data business [34][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2026 target of $100 million in adjusted EBITDA, emphasizing strong execution and growth momentum [12][51] - The company is positioned to benefit from a favorable insurance market dynamic, with plans to increase premiums and expand distribution [80] - Management remains conservative in assumptions regarding the housing market, expecting flat growth but ready to capitalize on any recovery [115] Other Important Information - The company ended 2024 with cash and investments of approximately $93 million, following the sale of HOA to PIRE [26] - The company plans to introduce new KPIs in 2025, focusing on gross profit instead of revenue less cost of revenue [30] Q&A Session Summary Question: Insights on 2025 growth expectations - Management noted strong execution and early signs of growth following the activation of the growth plan, with a focus on premium growth and agent engagement [58][62] Question: Agency engagement and new business - Management highlighted excitement among agents regarding PIRE and noted a reactivation of agency partnerships, leading to an increase in new policies [66][68] Question: Growth investments and M&A considerations - Management confirmed that current guidance is based on organic growth, with M&A opportunities being considered as incremental to existing plans [104][105] Question: Home Factors product performance - Management indicated strong interest from carriers in Home Factors, with ongoing development and a focus on expanding the product's market presence [93][95]

Core Viewpoint - Porch Group, Inc. reported quarterly earnings of $0.15 per share, significantly exceeding the Zacks Consensus Estimate of $0.06 per share, marking a 150% earnings surprise compared to a loss of $0.06 per share a year ago [1] Financial Performance - The company posted revenues of $100.36 million for the quarter ended December 2024, which was 8.95% below the Zacks Consensus Estimate and a decrease from $114.61 million in the same quarter last year [2] - Over the last four quarters, Porch Group has surpassed consensus EPS estimates two times and topped revenue estimates only once [2] Stock Performance - Porch Group shares have declined approximately 20.1% since the beginning of the year, contrasting with the S&P 500's gain of 1.7% [3] Future Outlook - The company's earnings outlook will be crucial for determining the stock's immediate price movement, with current consensus EPS estimates at -$0.19 for the coming quarter and -$0.38 for the current fiscal year [4][7] - The estimate revisions trend for Porch Group is currently favorable, resulting in a Zacks Rank 2 (Buy), indicating expected outperformance in the near future [6] Industry Context - The Internet - Software industry, to which Porch Group belongs, is currently ranked in the top 28% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8]

Financial Performance and Growth - Porch Insurance Reciprocal Exchange (PIRE) was approved on October 25, 2024, and funded with approximately $106 million in surplus notes, expected to enhance financial performance and mitigate exposure to seasonality and catastrophic weather [49]. - The strategy focuses on profitable growth by recruiting a high-performing sales team to increase insurance gross written premiums and premium per policy [51]. - The company plans to launch new SaaS products and features while maintaining high customer retention rates and increasing prices [52]. - The company expanded its insurance operations through the acquisition of HOA, a leading property and casualty insurance company, effective January 1, 2025 [91]. - The company operates an insurance business through Porch Insurance Reciprocal Exchange (PIRE), which directly affects its operating revenue and financial health [90]. - The company's future growth depends on managing operations and growing the insurance business by limiting attrition and increasing revenue from home-related services [96]. - The company may not be able to access capital markets when needed, impacting its ability to fund operations and seize business opportunities [87]. - The cyclical nature of the insurance industry may lead to fluctuations in financial performance, affecting premium rates and underwriting capacity [97]. - The company incurred operating losses of $64.6 million, $190.4 million, and $177.0 million for the years ended December 31, 2024, 2023, and 2022, respectively, with an accumulated deficit of $754.9 million as of December 31, 2024 [213]. - The company has experienced net losses in each year since its inception, indicating challenges in achieving and sustaining profitability [213]. Risks and Challenges - Claims costs for PIRE may increase due to inflated material costs, supply chain shortages, and labor cost increases, potentially impacting the company's financial position [92]. - The company faces risks from its expansion into the insurance business, including higher than expected claims costs and external factors affecting financial condition [90]. - PIRE's financial strength ratings could be downgraded, which may adversely affect the company's financial condition [87]. - Severe weather events and climate change may require additional capital for the insurance business, impacting financial stability [102]. - Increased insurance claims and costs could reduce access to reinsurance, negatively affecting the company's operations [103]. - Development of new insurance products and market expansion efforts may require substantial expenditures and carry inherent risks [106]. - The company faces risks related to customer service quality, which could harm its reputation and sales if not maintained [128]. - The company is subject to market volatility affecting raw material prices, which may hinder its ability to pass cost increases to customers [132]. - The company is dependent on reinsurance, and any inability to secure adequate reinsurance could materially impact its business model and profitability [168]. - The company may face litigation risks related to the actions of its service providers, which could divert management's focus and resources [133]. Regulatory and Compliance Issues - The company is subject to various risks related to regulatory compliance, which could limit growth and impose additional costs on PIRE and HOA [87]. - The company is subject to extensive state regulation in its insurance businesses, which could limit growth and impose additional costs [220]. - The company is subject to evolving privacy and data protection regulations, which could increase operational costs and expose it to liabilities [229]. - Compliance with privacy and data protection laws may impose significant costs and burdens on the company, potentially delaying product development and affecting business relationships [232]. - Non-compliance with applicable laws could lead to increased scrutiny from regulatory agencies and result in significant financial penalties [239]. - The company is subject to numerous regulations, including the Truth in Lending Act and the Fair Credit Reporting Act, which impose specific compliance obligations [235]. Employee and Organizational Structure - As of December 31, 2024, the company had a total of 733 employees, including 729 full-time employees, and maintains good relationships with employees and contractors [82]. - The company emphasizes a decentralized operating model to maintain momentum and entrepreneurial culture during acquisitions [78]. - The company was certified as a Great Place to Work in 2023 and 2024, highlighting its commitment to a supportive and inclusive environment [81]. - Employee costs, the largest expense for the company, could increase due to external factors like inflation, impacting profitability [201]. Strategic Partnerships and Market Position - Partnerships with moving companies and utilities are being leveraged to expand access to high-value homebuyers and foster long-term customer relationships [54]. - The company is incorporating AI into its products and services, which presents both opportunities and regulatory risks [147]. - A business collaboration agreement with Aon includes a cash payment of approximately $25 million and additional payments in 2025, contingent on maintaining certain conditions [165]. Financial Management and Capital Structure - Management fees and commissions from PIRE are critical to the company's revenue; any reduction could adversely affect profitability [153]. - The company does not own PIRE but serves as its attorney-in-fact, which subjects it to risks associated with PIRE's financial health [151]. - Changes in the management fee rate could materially affect the company's revenues and profitability, as it is determined at Porch's discretion [160]. - PIRE holds surplus notes totaling $106 million, with payments subject to risk-based capital levels and regulatory approval [157]. - The company has net operating loss carryforwards of $430.4 million for U.S. federal income tax purposes and $289.7 million for state income tax purposes, which may expire if not utilized [219].

Financial Performance - Total revenue for Q4 2024 was $100.4 million, a decrease of 12% compared to Q4 2023, primarily due to $26 million of non-recurring revenue in the prior year[5] - GAAP net income for Q4 2024 was $30.5 million, an improvement of $33 million from a net loss of $2.5 million in Q4 2023[5] - Adjusted EBITDA for Q4 2024 was $41.8 million, a $30.1 million increase from $11.7 million in Q4 2023, driven by operational excellence[5] - Revenue for Q4 2024 was $100,361, a decrease of 12.4% compared to $114,612 in Q4 2023[50] - Operating income for Q4 2024 was $25,080, compared to $7,380 in Q4 2023, indicating a significant improvement[50] - Net income for the year ended December 31, 2024, was a loss of $32,829, an improvement from a loss of $133,933 in 2023[50] - Adjusted EBITDA for the three months ended December 31, 2024, was $41.797 million, with an Adjusted EBITDA margin of 42%, up from 10% in the same period of 2023[35] Insurance Segment Performance - Gross written premium for Q4 2024 was $112 million with approximately 206 thousand policies in force, reflecting a 50% increase in new business premiums compared to the prior year[5] - The Insurance segment achieved an Adjusted EBITDA of $48.812 million for Q4 2024, compared to $31.648 million in Q4 2023, reflecting a strong performance[35] - The gross loss ratio improved to 21% in Q4 2024 from 36% in the prior year, while the attritional loss ratio improved to 16% from 30%[8] - The Gross Loss Ratio for the three months ended December 31, 2024, was 21%, a significant improvement from 36% in 2023, while the Attritional Loss Ratio improved to 16% from 30%[36] - Policies in Force at the end of the period increased, contributing to a higher Annualized Revenue per Policy, which is a key performance indicator for the Insurance segment[39] Strategic Initiatives - Porch Group formed the Porch Insurance Reciprocal Exchange in January 2025, transitioning to a commission and fee-based model[2] - Porch Group's strategy includes leveraging unique data for advantaged underwriting and expanding its market presence in homeowners insurance[21] - The company is focused on developing new products and enhancing existing services to improve customer retention and attract new clients[25] - Porch Group's Premium Retention Rate is calculated based on renewed premiums over the last four quarters, indicating the effectiveness of its customer retention strategies[40] - The company is actively managing growth and expansion opportunities to build a strong consumer brand in the insurance market[25] - Forward-looking statements indicate expectations for improved margins and a more predictable financial profile through the operation of Porch Insurance Reciprocal Exchange[24] Financial Position - The company ended Q4 2024 with cash, cash equivalents, and investments totaling $350.4 million, a decrease of 12% from $397.6 million at the end of 2023[10] - Total current assets decreased from $481,078 in 2023 to $365,127 in 2024, a decline of 24.2%[48] - Total liabilities decreased from $935,076 in 2023 to $857,193 in 2024, a reduction of 8.3%[48] - Cash and cash equivalents at the end of the period were $196,782, down from $297,232 in the previous year[53] - The company reported a total of $75,281 in operating expenses for Q4 2024, down from $107,232 in Q4 2023, a decrease of 29.8%[50] Growth Metrics - Average Monthly Revenue per Account in the quarter is a key growth metric, reflecting the company's focus on increasing revenue from existing customers[44] - The average revenue generated per monetized service is a critical metric for measuring market penetration and service delivery effectiveness[46] - The company has focused on shifting the mix of services toward higher revenue services as part of its growth strategy[46]

Company Overview - Porch Group, Inc. (PRCH) currently holds a Momentum Style Score of B, indicating a positive momentum outlook [2] - The company has a Zacks Rank of 2 (Buy), suggesting strong potential for outperformance in the market [3] Price Performance - PRCH shares have increased by 50.55% over the past week, significantly outperforming the Zacks Internet - Software industry, which rose by 1.93% during the same period [6] - Over the past quarter, PRCH shares have surged by 242.67%, and they have gained 147.12% over the last year, while the S&P 500 has only increased by 10.27% and 32.66%, respectively [7] Trading Volume - The average 20-day trading volume for PRCH is 2,914,973 shares, which serves as a bullish indicator when combined with rising stock prices [8] Earnings Estimates - In the last two months, two earnings estimates for PRCH have been revised upwards, while none have been lowered, leading to an increase in the consensus estimate from -$0.76 to -$0.63 [10] - For the next fiscal year, two estimates have also moved upwards with no downward revisions, indicating a positive earnings outlook [10] Conclusion - Considering the positive momentum indicators and earnings outlook, PRCH is positioned as a 2 (Buy) stock with a Momentum Score of B, making it a potential candidate for investors seeking short-term gains [11]

Company Overview - Porch Group, Inc. (NASDAQ: PRCH) is based in Seattle and operates within the home services and insurance sectors [1] - The company's stock has experienced a significant increase, rising 170% over the past year [1] Market Sentiment - Wall Street analysts believe that Porch Group still has potential for further growth, indicating positive market sentiment towards the company [1] Research Principles - Grassroots Trading focuses on providing objective and unbiased research, particularly on small- to mid-cap companies, while also identifying opportunities in larger companies [1]

Financial Data and Key Metrics Changes - In Q3 2024, Porch Group reported revenue of $111.2 million, a 14% decrease from the prior year, primarily due to the Vesttoo matter [14] - Adjusted EBITDA was $16.9 million, an $8.1 million improvement from the prior year, driven by the insurance segment and strong cost control [14][19] - Net income for Q3 was positive at $14 million, with positive operating cash flow of $12 million [9][20] - The gross loss ratio in Q3 was 57%, with an attritional loss ratio of 21% without catastrophic weather [10][48] Business Line Data and Key Metrics Changes - The insurance segment accounted for 72% of total revenue, generating $79.9 million, a 16% decrease from the prior year [16] - Vertical Software segment revenue was $31.3 million, a decrease of 9% from the prior year, although software and services subscriptions revenue increased by 7% [16] - Gross written premium in the insurance segment decreased by 10% from the prior year, while premium per policy increased by 25% year-over-year [15][46] Market Data and Key Metrics Changes - The company has constrained premium growth to approximately flat until the approval of the reciprocal exchange, with plans to reactivate channel partners and launch a premium growth plan [8] - The annualized premium per policy for HOA increased by 25% to $2,208, with premium retention at 100% [47] Company Strategy and Development Direction - Porch Group is transitioning to a reciprocal insurance model, expected to result in higher margins and more predictable financial results [7][31] - The company plans to launch Porch Insurance in Texas in January 2025, with a focus on enhancing the value proposition for consumers [34] - The new insurance services segment will operate with two business units, focusing on risk management and capital solutions [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving full-year profitability in 2024, with a focus on delivering positive adjusted EBITDA each quarter [52] - The company anticipates strong growth in 2025, leveraging the new reciprocal model and improved insurance profitability [53] Other Important Information - The company repurchased $43 million of its September 2026 unsecured debt for $20 million in cash, reducing outstanding debt [12][20] - The expected surplus for HOA at the end of the year is approximately $100 million, compared to $50 million at the end of the prior year [23] Q&A Session Summary Question: How does the new value proposition for consumers differ from past offerings? - Management highlighted the integration of moving services and a 90-day warranty as differentiators for homebuyers, aiming to enhance the customer experience [55] Question: What was the decision behind exiting the corporate relocation business? - The company noted a decline in corporate relocations due to remote work trends, making it less viable to focus on that segment [56] Question: How will the reciprocal impact overall corporate revenue and expenses? - Management indicated that the new model would lead to a more fixed expense profile, enhancing profitability [58] Question: What are the plans for growing policies in force post-reciprocal launch? - The focus will be on expanding in Texas and other states, leveraging agent recruitment and Home Factors data for profitable growth [61][65] Question: How stable is the 20% commission fee? - Management suggested that while the 20% rate is a good starting point, there may be opportunities for it to increase in the future [66] Question: What is the current performance of Floify and the embedded insurance marketplace? - Management acknowledged challenges in the mortgage market but expressed optimism about future growth opportunities in the vertical software segment [70][72] Question: What is the potential of Home Factors for Porch Group? - Management expressed excitement about the Home Factors opportunity, indicating it could become a significant pillar of the business due to its unique data and positive feedback from third parties [73][74]

Revenue and Premiums - Gross Written Premium for Q3 2024 was $139 million, a decrease of 10% from $154 million in Q3 2023[113] - Total revenue decreased by $18.4 million, or 14%, from $129.6 million in Q3 2023 to $111.2 million in Q3 2024, primarily due to higher reinsurance ceding and a reduction in policies in force[126] - Insurance segment revenue was $79.9 million, representing 72% of total revenue, down from $95.2 million or 74% of total revenue in the same quarter of 2023, primarily due to a reduction in policies in force[131] - Vertical Software segment revenue decreased to $31.3 million, down 9% from $34.3 million in the prior year, driven by a 33% decline in move-related transactions[130] - Year-to-date revenue for the nine months ended September 30, 2024, was $337.5 million, a 7% increase from $315.7 million in the same period of 2023[136] - Total revenue for the nine months ended September 30, 2024, was $337.5 million, reflecting a 7% increase from $315.7 million in the same period of 2023[141] - Insurance segment revenue increased to $246.1 million for the nine months ended September 30, 2024, up 13% from $218.3 million in the same period of 2023, accounting for 73% of total revenue[141] Policies and Loss Ratios - Policies in Force decreased by 34% to 219,000 from 334,000 year-over-year[113] - Gross Loss Ratio increased to 57% from 39%[115] - Non-catastrophe gross loss ratio improved by 11 percentage points from the prior year, driven by premium per policy increases and non-renewal of higher risk policies[123] Expenses and Cash Flow - Selling and marketing expenses decreased by $12.9 million, or 32%, from $40.1 million in Q3 2023 to $27.2 million in Q3 2024, primarily due to a decrease in variable policy acquisition costs[126] - Interest expense increased by 50% to $31.8 million for the nine months ended September 30, 2024, compared to $21.2 million in the same period of 2023[137] - Net cash used in operating activities was $(5.1) million for the nine months ended September 30, 2024, a decrease of $79.978 million or 107% compared to $74.9 million in the same period of 2023[3] - Net cash used in investing activities increased by 53% to $(52.2) million for the nine months ended September 30, 2024, from $(34.2) million in 2023[4] - The company reported a net cash change of $(80.6) million for the nine months ended September 30, 2024, compared to a positive change of $133.1 million in 2023, reflecting a 161% decrease[8] Debt and Equity - The company repurchased $51.2 million of its 2026 senior convertible notes at an average par value of 45.3%, for $23.2 million during the nine months ended September 30, 2024[123] - A gain of $22.5 million on extinguishment of debt was recognized during Q3 2024 due to the repurchase of a portion of the 2026 Notes[127] - The company repurchased $43.2 million of its 2026 Notes in September 2024, paying an average of 47% of par value, resulting in a $22.5 million gain on extinguishment of debt[5] - The company issued a total of 18.3 million newly issued shares to HOA to support the transition of Porch's insurance underwriting business, enhancing HOA's balance sheet strength[121] - The company contributed a total of 18.3 million newly issued shares to HOA to support its insurance underwriting business transition, which is expected to bolster HOA's balance sheet and support premium growth in 2025[7] Net Loss and Adjusted EBITDA - The company recorded a loss of $5.3 million from the sale of its insurance agency, Elite Insurance Group, for a sale price of $12.2 million[119] - Net loss for the nine months ended September 30, 2024, was $63.3 million, a 52% improvement from a net loss of $131.4 million in the same period of 2023[136] - Adjusted EBITDA loss for the nine months ended September 30, 2024, was $(34.6) million, a $21.6 million improvement from $(56.2) million in the same period of 2023[148] - Segment Adjusted EBITDA for the Insurance segment improved to a loss of $24.8 million, a 30% increase compared to a loss of $19.0 million in the same period last year[133] - Vertical Software segment Adjusted EBITDA increased to a loss of $5.1 million, improving by 62% from a loss of $3.2 million in the prior year[134] - Vertical Software segment Adjusted EBITDA improved to $11.0 million for the nine months ended September 30, 2024, compared to $4.6 million in the same period of 2023, a 140% increase[143] - Insurance segment Adjusted EBITDA loss narrowed to $(5.4) million for the nine months ended September 30, 2024, from $(19.3) million in the same period of 2023, an improvement of 72%[143] Cash and Investments - Cash recoveries on terminated reinsurance contracts amounted to approximately $28 million during the nine months ended September 30, 2024[123] - Cash and cash equivalents as of September 30, 2024, totaled $206.7 million, with an additional $10.0 million in restricted cash[149] - The insurance carrier, HOA, held cash and cash equivalents of $150.5 million and investments of $166.0 million as of September 30, 2024[6] - The company has a $197.8 million portfolio of fixed income securities with an unrealized loss of $(0.9) million as of September 30, 2024[10] - Investment income and realized gains increased to $3.8 million in Q3 2024 from $2.5 million in Q3 2023, attributed to a higher investment balance and reinvested securities at higher interest rates[127] - Investment income and realized gains increased to $11.0 million for the nine months ended September 30, 2024, compared to $4.5 million in the same period of 2023[138] Regulatory and Contractual Developments - The Texas Department of Insurance approved the application to form a reciprocal exchange on October 25, 2024[116] - The terminated reinsurance contract with Vesttoo would have required approximately $20 million in additional premium payments if not terminated[116]