Porch(PRCH) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue grew 12% to $111 million in Q2 2024, with revenue less cost of revenue increasing 10% to$ 19 million [7][14] - Adjusted EBITDA loss was $34.8 million, an improvement of$ 8.4 million over the prior year [15][19] - Gross written premium was $117 million, a decrease from the prior year as the company focused on profitability and nonrenewal of higher-risk policies [15][25] Business Line Data and Key Metrics Changes - The insurance segment accounted for 71% of total revenue, increasing from 65% in Q2 2023, with revenue of$ 78.3 million, a 22% increase year-over-year [16] - Vertical software segment revenue was $32.6 million, a decrease of 5% over the prior year, although software and services subscription businesses increased 4% [16][24] - The insurance segment's adjusted EBITDA loss was$ 27.3 million, an improvement of $3.9 million over the prior year [17] Market Data and Key Metrics Changes - The housing market declined 3% year-over-year in Q2, impacting the company's vertical software segment [12] - The average number of companies served was 29,000, slightly lower due to pressures in the mortgage title and inspection industries [24] - Average revenue per company per month increased 17% to$ 1,253, driven by lower seating and premium increases [24] Company Strategy and Development Direction - The company has refiled the reciprocal exchange application to optimize its structure and reduce exposure to unusual weather events [6][9] - The launch of Home Factors data products aims to improve risk assessment and marketing for third parties [6][10] - The company is focused on controlling operating expenses and improving profitability through price increases and strong cost control [15][19] Management's Comments on Operating Environment and Future Outlook - Management highlighted strong execution in underwriting and cost control despite macro headwinds and rare weather events impacting results [6][8] - The company expects to grow premiums nicely in 2025 and beyond, leveraging unique data for insurance profitability [27][35] - Management reiterated a commitment to achieving positive adjusted EBITDA for the full year 2024, despite the impact of catastrophic weather events [23][35] Other Important Information - The company has been recertified as a great place to work, with year-over-year improvements in key metrics [12] - The contribution of 18.3 million Porch shares to HOA is expected to bolster its balance sheet and support future premium growth [10][11] - The company is pursuing legal action related to the Vesttoo fraud discovered in 2023 [12] Q&A Session Summary Question: Thoughts on investing in growth versus derisking the portfolio until TDI approval - Management believes recent catastrophic events do not change their growth plans and they are ready to unlock growth opportunities [37][38] Question: Expectations for vertical software revenue in a housing recovery - Management expects vertical software revenue to outpace the national market recovery due to improved profitability and scalability [45][46] Question: Consideration of exiting markets like Houston due to weather events - Management does not plan to exit Houston, viewing it as a historically attractive market despite recent events [49][50] Question: Update on the reciprocal application and housing market assumptions - The reciprocal application was updated to reflect actual performance and milestones achieved, with a conservative outlook on the housing market [52][54] Question: Clarification on the $18 million share contribution to HOA - The share contribution was strategic to strengthen HOA's balance sheet and support future premium growth [56][58]