PRCH Porch Group Inc

Porch Delivers Strong Fourth Quarter Earnings, Ahead of Expectations

Porch Group, Inc. (“Porch Group” or “the Company”) (NASDAQ: PRCH), a homeowners insurance and vertical software platform, today reported fourth quarter results ended December 31, 2023, with total revenue of $114.6 million, which increased 79% compared to the prior year. GAAP net loss of $2.5 million, an improvement from $35.5 million GAAP net loss in the prior year and Adjusted EBITDA of $11.7 million, which increased $25.0 million compared to the prior year.

CEO Summary

"We are excited to share our financial results, far exceeding the second half profitability target we provided around two years ago, with Adjusted EBITDA of $20.5 million in the second half 20231. I am proud of the achievements and execution of the team over the last year, which improved profitability in our insurance business, launched important new SaaS products for our customers, and maintained strong cost control. We remain focused on improving profitability and further executing our strategy in 2024,” said Matt Ehrlichman, Chief Executive Officer, Chairman and Founder.

Fourth Quarter 2023 Financial Results

• Total revenue of $114.6 million, an increase of 79% or $50.5 million compared to prior year (fourth quarter 2022: $64.1 million), driven by the Insurance segment.
• Revenue less cost of revenue of $79.9 million, 70% of total revenue, an increase of 82% compared to prior year (fourth quarter 2022: $43.9 million, 69% of total revenue). Increase driven by premium per policy increases, underwriting actions, and non-renewal of higher risk policies in the Insurance segment.
• GAAP net loss of $2.5 million, compared to $35.5 million for the fourth quarter of 2022.
• Adjusted EBITDA of $11.7 million, a $25.0 million increase from the prior year (fourth quarter 2022: loss of $13.3 million), driven by the Insurance segment and cost control actions.
• Gross written premium for the quarter in our Insurance segment was $112 million with approximately 310 thousand policies in force.
• $397.6 million cash, cash equivalents and investments at December 31, 2023.

Fourth Quarter 2023 Operational Highlights

• 36% gross loss ratio and 49% combined loss ratio, an improvement from prior year driven by underwriting actions, non-renewal of higher risk policies, and the fourth quarter 34% increase in premium per policy.
• Approved in 13 states to use Porch's unique property data in insurance pricing which improves risk accuracy to provide better priced policies for customers.
• Launching new products continues, with an important new title software product, HVAC micro-warranty and back office software for small inspection companies introduced and additional a new utilities partnership.
• Moving business executing a local full-service offering, which is higher margin and a larger market opportunity.
• Released first ESG report, sharing the foundation for its ESG journey.
• Admitted into Deloitte's Technology Fast 500 2023.

____________________________________________

(1)

Adjusted EBITDA of $20.5 million includes Q3 2023 Adjusted EBITDA of $8.8 million and Q4 2023 Adjusted EBITDA of $11.7 million. See Non-GAAP Financial Measures section for the definition and Adjusted EBITDA (loss) table for the reconciliation to GAAP net income (loss).

The following tables present financial highlights of the Company’s fourth quarter and full year 2023 results compared to the fourth quarter and full year results of 2022 (dollars are in millions):

Fourth Quarter 2023 (unaudited)

 

Insurance

 

Vertical Software

 

Corporate

 

Consolidated

Revenue

 

$

86.9

 

 

$

27.7

 

 

$

—

 

 

$

114.6

 

Year-over-year growth

 

 

179

%

 

 

(16

)%

 

 

—

%

 

 

79

%

Revenue less cost of revenue

 

$

57.9

 

 

$

22.0

 

 

$

—

 

 

$

79.9

 

Year-over-year growth

 

 

192

%

 

 

(9

)%

 

 

—

%

 

 

82

%

As % of revenue

 

 

67

%

 

 

79

%

 

 

—

%

 

 

70

%

GAAP net loss

 

 

 

 

 

 

 

$

(2.5

)

Adjusted EBITDA (loss)

(1)

$

31.6

 

 

$

(0.3

)

 

$

(19.7

)

 

$

11.7

 

Adjusted EBITDA (loss) as a percent of revenue

(2)

 

36

%

 

 

(1

)%

 

 

—

%

 

 

10

%

Fourth Quarter 2022 (unaudited)

 

Insurance

 

Vertical Software

 

Corporate

 

Consolidated

Revenue

 

$

31.2

 

 

$

33.0

 

 

$

—

 

 

$

64.1

 

Revenue less cost of revenue

 

$

19.8

 

 

$

24.1

 

 

$

—

 

 

$

43.9

 

As % of revenue

 

 

64

%

 

 

73

%

 

 

—

%

 

 

69

%

GAAP net loss

 

 

 

 

 

 

 

$

(35.5

)

Adjusted EBITDA (loss)

(1)

$

0.7

 

 

$

1.1

 

 

$

(15.1

)

 

$

(13.3

)

Adjusted EBITDA (loss) as a percent of revenue

(2)

 

2

%

 

 

3

%

 

 

—

%

 

 

(21

) %

Year Ended December 31, 2023 (unaudited)

 

Insurance

 

Vertical Software

 

Corporate

 

Consolidated

Revenue

 

$

305.2

 

 

$

125.1

 

 

$

—

 

 

$

430.3

 

Year-over-year growth

 

 

152

%

 

 

(19

) %

 

 

—

%

 

 

56

%

Revenue less cost of revenue

 

$

114.7

 

 

$

95.4

 

 

$

—

 

 

$

210.1

 

Year-over-year growth

 

 

95

%

 

 

(13

) %

 

 

—

%

 

 

25

%

As % of revenue

 

 

38

%

 

 

76

%

 

 

—

%

 

 

49

%

GAAP net loss

 

 

 

 

 

 

 

$

(133.9

)

Adjusted EBITDA (loss)

(1)

$

12.3

 

 

$

4.3

 

 

$

(61.1

)

 

$

(44.5

)

Adjusted EBITDA (loss) as a percent of revenue

(2)

 

4

%

 

 

3

%

 

 

—

%

 

 

(10

) %

Year Ended December 31, 2022 (unaudited)

 

Insurance

 

Vertical Software

 

Corporate

 

Consolidated

Revenue

 

$

121.0

 

 

$

154.9

 

 

$

—

 

 

$

275.9

 

Revenue less cost of revenue

 

$

58.8

 

 

$

109.6

 

 

$

—

 

 

$

168.4

 

As % of revenue

 

 

49

%

 

 

71

%

 

 

—

%

 

 

61

%

GAAP net loss

 

 

 

 

 

 

 

$

(156.6

)

Adjusted EBITDA (loss)

(1)

$

(5.5

)

 

$

14.7

 

 

$

(58.8

)

 

$

(49.6

)

Adjusted EBITDA (loss) as a percent of revenue

(2)

 

(5

)

 

 

9

%

 

 

—

%

 

 

(18

) %

____________________________________________

(1)

See Non-GAAP Financial Measures section for the definition and Adjusted EBITDA (loss) table for the reconciliation to GAAP net income (loss)

(2)

Adjusted EBITDA (loss) as a percent of revenue is calculated as Adjusted EBITDA (loss) divided by Revenue

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

 

 

Three Months Ended December 31,

 

 

2023

 

2022

 

% Change

Gross Written Premium (in millions)

 

$

112

 

 

$

131

 

 

(14

) %

Policies in Force (in thousands)

 

 

310

 

 

 

389

 

 

(20

) %

Annualized Revenue per Policy (unrounded)

 

$

1,120

 

 

$

347

 

 

223

%

Annualized Premium per Policy (unrounded)

 

$

1,861

 

 

$

1,391

 

 

34

%

Premium Retention Rate

 

 

96

%

 

 

107

%

 

 

Gross Loss Ratio

 

 

36

%

 

 

56

%

 

 

Average Companies in Quarter (unrounded)

 

 

29,919

 

 

 

30,860

 

 

(3

)%

Average Monthly Revenue per Account in Quarter (unrounded)

 

$

1,277

 

 

$

693

 

 

84

%

Monetized Services (unrounded)

 

 

219,657

 

 

 

212,992

 

 

3

%

Average Quarterly Revenue per Monetized Service (unrounded)

 

$

448

 

 

$

219

 

 

105

%

_____________________________________

(1)

Definitions of the key performance indicators presented in this table are included on page 10 of this release.

Balance Sheet Information (unaudited)

(dollars are in millions)

 

December 31, 2023

 

December 31, 2022

 

Change

Cash and cash equivalents

 

$

258.4

 

$

215.1

 

20

%

Investments

 

 

139.2

 

 

91.6

 

52

%

Cash, cash equivalents and investments

 

$

397.6

 

$

306.7

 

30

%

The Company ended the fourth quarter of 2023 with cash, cash equivalents and investments of $397.6 million. Of this amount, HOA, Porch's insurance carrier, held cash and cash equivalents of $207.6 million and investments of $102.8 million. Excluding HOA, Porch held $87.2 million of cash, cash equivalents and investments.

As of December 31, 2023, outstanding principal for convertible debt was $558.3 million. This includes $333.3 million of the 6.75% Senior Secured Convertible Notes due October 2028 (the “2028 Notes”) and $225.0 million of 0.75% Convertible Senior Notes due September 2026 (the “2026 Notes”).

Post Balance Sheet Events

Following the period end, the Company signed a business collaboration agreement with Aon Corp. and Aon Re, Inc. ("Aon") to provide a variety of services to Porch Group companies, resulting in payments to Porch of approximately $25 million upfront and an expected approximately $5 million over the following four years. As part of this agreement, the parties also signed a release of claims arising from the Vesttoo fraud. Porch has not released any claims against non-Aon parties related to these matters and intends to vigorously pursue recovery.

The Company completed the sale of EIG, its insurance agency, on January 31, 2024 for $12.2 million, subject to post-closing adjustments. EIG represented approximate $45 million of GWP placed with third party carriers in 2023, which generated approximately $4.7 million of annual commissions. In 2023, EIG's Adjusted EBITDA loss was approximately $3 million. This divestiture follows testing with third party agencies to compare conversion rates and profitability against EIG. Unit economics and profitability improved as costs associated with running the agency are removed and leveraging partners national footprint.

The Company repurchased $8.0 million aggregate principal amount of its 2026 Notes in a private transaction for $3.0 million in cash, or 37.5% of par. Following the close of the transaction, outstanding principal for the 2026 Notes reduced to $217.0 million.

Full Year 2024 Financial Outlook

Full year 2024 guidance is as follows:

Full Year 2024 Guidance

 

Revenue $450m to $490m Growth of 5% to 14%

 

Revenue Less Cost of Revenue $225m to $240m

 

Adjusted EBITDA1 $1m to $10m

 

Gross Written Premium2 $460m to $480m

1

Adjusted EBITDA is a non-GAAP measure.

2

2024 gross written premium (“GWP”) guidance is stated as the expected full-year GWP for 2024 and is the total premium written by our licensed insurance carrier(s) (before deductions for reinsurance) and premiums from our home warranty offerings (for the face value of one year’s premium). Note, 2023 GWP includes approximately $45 million from EIG placed with third party carriers.

Porch Group provides full year 2024 guidance based on current market conditions and expectations. The Company reiterated its Adjusted EBITDA profitability target for 2024 and future years on a full year basis. Guidance assumes a 63% gross loss ratio for the full year 2024, in line with the 5-year weighted average.

Porch Group is not providing reconciliations of expected 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 March 7, 2024, 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 homeowners insurance and vertical software platform. Porch's strategy to win in homeowners insurance is to leverage unique data for advantaged underwriting, provide the best services for homebuyers, and protect the whole home. The long-term competitive moats that create this differentiation comes from Porch's leadership in home services software-as-a-service and its deep relationships with approximately 30 thousand companies that are key to the home-buying transaction, such as home inspectors, mortgage, and title companies.

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

Forward-Looking Statements

Certain statements in this release may be considered “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management. Although we, Porch Group, Inc., 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 possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. 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. Unless specifically indicated otherwise, the forward-looking statements in this release do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that have not been completed as of the date of this release. 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;
• our reinsurance program, which includes the use of a captive reinsurer, the success of which is dependent on a number of factors outside management’s control, along with reliance on reinsurance to protect against loss;
• the uncertainty and significance of the known and unknown effects on our insurance carrier subsidiary, Homeowners of America Insurance Company (“HOA”), and us due to the termination of a reinsurance contract following the fraud committed by Vesttoo Ltd. (“Vesttoo”), including, but not limited to, the outcome of Vesttoo’s Chapter 11 bankruptcy proceedings; our ability to successfully pursue claims arising out of the fraud, the costs associated with pursuing the claims, and the timeframe associated with any recoveries; HOA's ability to obtain and maintain adequate reinsurance coverage against excess losses; HOA’s ability to stay out of regulatory supervision and maintain its financial stability rating; and HOA’s ability to maintain a healthy surplus;
• uncertainties related to regulatory approval of insurance rates, policy forms, insurance products, license applications, acquisitions of businesses, or strategic initiatives, including the reciprocal restructuring, and other matters within the purview of insurance regulators;
• 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 Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2022; in Part II, Item 1A, “Risk Factors,” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023; in Part II, Item 1A, “Risk Factors,” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023; in Part II, Item 1A, "Risk Factors," in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, and in subsequent reports, including our Form 10-K for the year ended December 31, 2023, 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 of 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 that 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 in Item 1A, “Risk Factors,” 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) and Adjusted EBITDA (Loss) as a percent of revenue.

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; provision for doubtful accounts related to reinsurance, or related recoveries; 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) as a percent of revenue is defined as Adjusted EBITDA (Loss) divided by total revenue.

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):

 

Three Months Ended December 31,

 

Year Ended December 31,

(unaudited)

2023

 

2022

 

2023

 

2022

Net loss

$

(2,486

)

 

$

(35,473

)

 

$

(133,933

)

 

$

(156,559

)

Interest expense

 

10,598

 

 

 

2,219

 

 

 

31,828

 

 

 

8,723

 

Income tax provision

 

588

 

 

 

574

 

 

 

622

 

 

 

842

 

Depreciation and amortization

 

5,914

 

 

 

6,356

 

 

 

24,415

 

 

 

27,930

 

Mark-to-market losses (gains)

 

774

 

 

 

1,585

 

 

 

(1,003

)

 

 

(21,364

)

Gain on extinguishment of debt

 

—

 

 

 

—

 

 

 

(81,354

)

 

 

—

 

Impairment loss on intangible assets and goodwill

 

—

 

 

 

4,329

 

 

 

57,232

 

 

 

61,386

 

Impairment loss on property, equipment, and software

 

—

 

 

 

535

 

 

 

254

 

 

 

637

 

Stock-based compensation expense

 

432

 

 

 

6,396

 

 

 

20,709

 

 

 

27,041

 

Loss (gain) on reinsurance contract (1)

 

(5,159

)

 

 

—

 

 

 

36,042

 

 

 

—

 

Other income, net

 

(368

)

 

 

(608

)

 

 

(3,893

)

 

 

(571

)

Restructuring costs (2)

 

1,226

 

 

 

647

 

 

 

4,015

 

 

 

647

 

Acquisition and other transaction costs

 

144

 

 

 

104

 

 

 

552

 

 

 

1,687

 

Non-cash bonus expense

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Adjusted EBITDA (Loss)

$

11,663

 

 

$

(13,336

)

 

$

(44,514

)

 

$

(49,601

)

Adjusted EBITDA (Loss) as a percentage of revenue

 

10

%

 

 

(21

) %

 

 

(10

) %

 

 

(18

) %

______________________________________

(1)

Loss on reinsurance contract relates to one reinsurer.

(2)

Primarily consists of costs related to forming a reciprocal exchange.

 

Three Months Ended December 31,

 

Year Ended December 31,

(unaudited)

2023

 

2022

 

2023

 

2022

Segment Adjusted EBITDA (Loss)

 

 

 

 

 

 

 

Vertical Software

$

(292

)

 

$

1,078

 

 

$

4,307

 

 

$

14,678

 

Insurance

 

31,648

 

 

 

704

 

 

 

12,320

 

 

 

(5,499

)

Subtotal

 

31,356

 

 

 

1,782

 

 

 

16,627

 

 

 

9,179

 

Corporate and other

 

(19,693

)

 

 

(15,118

)

 

 

(61,141

)

 

 

(58,780

)

Adjusted EBITDA (Loss)

$

11,663

 

 

$

(13,336

)

 

$

(44,514

)

 

$

(49,601

)

The following table presents Segment Adjusted EBITDA (Loss) as a percentage of segment revenue for the periods presented:

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2023

 

2022

 

2023

 

2022

Segment Adjusted EBITDA (Loss) as a Percentage of Revenue

Vertical Software

(1.1

%)

 

3.3

%

 

3.4

%

 

9.5

%

Insurance

36.4

%

 

2.3

%

 

4.0

%

 

(4.5

) %

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.

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.

PORCH GROUP, INC.

Consolidated Balance Sheets (Unaudited)

(all numbers in thousands)

 

 

December 31,

 

2023

 

2022

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

258,418

 

 

$

215,060

 

Accounts receivable, net

 

24,288

 

 

 

26,438

 

Short-term investments

 

35,588

 

 

 

36,523

 

Reinsurance balance due

 

83,582

 

 

 

299,060

 

Prepaid expenses and other current assets

 

13,214

 

 

 

11,293

 

Deferred policy acquisition costs

 

27,174

 

 

 

8,716

 

Restricted cash and cash equivalents

 

38,814

 

 

 

13,545

 

Total current assets

 

481,078

 

 

 

610,635

 

Property, equipment, and software, net

 

16,861

 

 

 

12,240

 

Goodwill

 

191,907

 

 

 

244,697

 

Long-term investments

 

103,588

 

 

 

55,118

 

Intangible assets, net

 

87,216

 

 

 

108,255

 

Long-term insurance commissions receivable

 

13,429

 

 

 

12,265

 

Other assets

 

5,314

 

 

 

5,847

 

Total assets

$

899,393

 

 

$

1,049,057

 

 

 

 

 

Liabilities and Stockholders’ Equity (Deficit)

 

 

 

Current liabilities

 

 

 

Accounts payable

$

8,761

 

 

$

6,268

 

Accrued expenses and other current liabilities

 

59,396

 

 

 

39,742

 

Deferred revenue

 

248,683

 

 

 

270,690

 

Refundable customer deposits

 

17,980

 

 

 

20,142

 

Current debt

 

244

 

 

 

16,455

 

Losses and loss adjustment expense reserves

 

95,503

 

 

 

100,632

 

Other insurance liabilities, current

 

31,585

 

 

 

61,710

 

Total current liabilities

 

462,152

 

 

 

515,639

 

Long-term debt

 

435,495

 

 

 

425,310

 

Other liabilities

 

37,429

 

 

 

28,755

 

Total liabilities

 

935,076

 

 

 

969,704

 

Commitments and contingencies (Note 16)

 

 

 

Stockholders’ equity (deficit)

 

 

 

Common stock, $0.0001 par value:

 

10

 

 

 

10

 

Authorized shares – 400 million and 400 million, at December 31, 2023 and 2022, respectively

 

 

 

Issued and outstanding shares – 97.1 million and 98.5 million, at December 31, 2023 and 2022, respectively

 

 

 

Additional paid-in capital

 

690,223

 

 

 

670,537

 

Accumulated other comprehensive loss

 

(3,860

)

 

 

(6,171

)

Accumulated deficit

 

(722,056

)

 

 

(585,023

)

Total stockholders’ equity (deficit)

 

(35,683

)

 

 

79,353

 

Total liabilities and stockholders’ equity (deficit)

$

899,393

 

 

$

1,049,057

 

PORCH GROUP, INC.

Consolidated Statements of Operations (Unaudited)

(all numbers in thousands except per share amounts)

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2023

 

2022

 

2023

 

2022

Revenue

$

114,612

 

 

$

64,113

 

 

$

430,302

 

 

$

275,948

 

Operating expenses:

 

 

 

 

 

 

 

Cost of revenue

 

34,677

 

 

 

20,170

 

 

 

220,243

 

 

 

107,577

 

Selling and marketing

 

36,950

 

 

 

28,031

 

 

 

144,307

 

 

 

113,848

 

Product and technology

 

14,611

 

 

 

15,119

 

 

 

58,502

 

 

 

59,565

 

General and administrative

 

25,925

 

 

 

29,835

 

 

 

103,192

 

 

 

109,814

 

Provision for (recovery of) doubtful accounts

 

(4,931

)

 

 

424

 

 

 

37,180

 

 

 

805

 

Impairment loss on intangible assets and goodwill

 

—

 

 

 

4,329

 

 

 

57,232

 

 

 

61,386

 

Total operating expenses

 

107,232

 

 

 

97,908

 

 

 

620,656

 

 

 

452,995

 

Operating income (loss)

 

7,380

 

 

 

(33,795

)

 

 

(190,354

)

 

 

(177,047

)

Other income (expense):

 

 

 

 

 

 

 

Interest expense

 

(10,598

)

 

 

(2,219

)

 

 

(31,828

)

 

 

(8,723

)

Change in fair value of earnout liability

 

44

 

 

 

13

 

 

 

44

 

 

 

13,822

 

Change in fair value of private warrant liability

 

(1,064

)

 

 

95

 

 

 

(444

)

 

 

14,486

 

Change in fair value of derivatives

 

(1,821

)

 

 

—

 

 

 

(4,261

)

 

 

—

 

Gain on extinguishment of debt

 

—

 

 

 

—

 

 

 

81,354

 

 

 

—

 

Investment income and realized gains, net of investment expenses

 

3,793

 

 

 

399

 

 

 

8,285

 

 

 

1,174

 

Other income, net

 

368

 

 

 

608

 

 

 

3,893

 

 

 

571

 

Total other income (expense)

 

(9,278

)

 

 

(1,104

)

 

 

57,043

 

 

 

21,330

 

Loss before income taxes

 

(1,898

)

 

 

(34,899

)

 

 

(133,311

)

 

 

(155,717

)

Income tax provision

 

(588

)

 

 

(574

)

 

 

(622

)

 

 

(842

)

Net loss

$

(2,486

)

 

$

(35,473

)

 

$

(133,933

)

 

$

(156,559

)

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

$

(0.03

)

 

$

(0.36

)

 

$

(1.39

)

 

$

(1.61

)

 

 

 

 

 

 

 

 

Shares used in computing basic and diluted net loss per share

 

96,896

 

 

 

98,366

 

 

 

96,057

 

 

 

97,351

 

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

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2023

 

2022

 

2023

 

2022

Selling and marketing

$

323

 

 

$

1,263

 

 

$

3,351

 

 

$

4,855

 

Product and technology

 

154

 

 

 

1,547

 

 

 

4,804

 

 

 

5,435

 

General and administrative

 

(45

)

 

 

3,586

 

 

12,554

 

 

16,751

Total stock-based compensation expense

$

432

 

 

$

6,396

 

 

$

20,709

 

 

$

27,041

 

PORCH GROUP, INC.

Consolidated Statements of Cash Flows (Unaudited)

(all numbers in thousands)

 

 

Year Ended December 31,

 

2023

 

2022

Cash flows from operating activities:

 

 

 

Net loss

$

(133,933

)

 

$

(156,559

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities

 

 

 

Depreciation and amortization

 

24,415

 

 

 

27,930

 

Provision for doubtful accounts

 

37,180

 

 

 

805

 

Impairment loss on intangible assets and goodwill

 

57,232

 

 

 

61,386

 

Gain on extinguishment of debt

 

(81,354

)

 

 

—

 

Change in fair value of private warrant liability

 

444

 

 

 

(14,486

)

Change in fair value of contingent consideration

 

(5,664

)

 

 

6,944

 

Change in fair value of earnout liability and derivatives

 

4,217

 

 

 

(13,822

)

Stock-based compensation

 

20,709

 

 

 

27,041

 

Non-cash interest expense

 

20,756

 

 

 

2,270

 

Other

 

1,057

 

 

 

3,590

 

Change in operating assets and liabilities, net of acquisitions and divestitures

 

 

 

Accounts receivable

 

1,030

 

 

 

(4,886

)

Reinsurance balance due

 

179,436

 

 

 

(70,644

)

Deferred policy acquisition costs

 

(18,458

)

 

 

(4,716

)

Accounts payable

 

2,491

 

 

 

(697

)

Accrued expenses and other current liabilities

 

(1,386

)

 

 

(6,519

)

Losses and loss adjustment expense reserves

 

(5,129

)

 

 

38,683

 

Other insurance liabilities, current

 

(30,125

)

 

 

21,686

 

Deferred revenue

 

(21,583

)

 

 

66,254

 

Refundable customer deposits

 

(13,925

)

 

 

6,537

 

Other assets and liabilities, net

 

(3,481

)

 

 

(8,533

)

Net cash provided by (used in) operating activities

 

33,929

 

 

 

(17,736

)

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(851

)

 

 

(2,350

)

Capitalized internal use software development costs

 

(9,245

)

 

 

(8,100

)

Purchases of short-term and long-term investments

 

(91,015

)

 

 

(52,506

)

Maturities, sales of short-term and long-term investments

 

46,832

 

 

 

21,906

 

Acquisitions, net of cash acquired

 

(1,974

)

 

 

(38,628

)

Net cash used in investing activities

 

(56,253

)

 

 

(79,678

)

Cash flows from financing activities:

 

 

 

Proceeds from line of credit

 

—

 

 

 

5,000

 

Proceeds from advance funding

 

319

 

 

 

18,643

 

Repayments of advance funding

 

(4,133

)

 

 

(22,746

)

Proceeds from issuance of debt

 

116,667

 

 

 

10,000

 

Repayments of principal

 

(10,150

)

 

 

(5,150

)

Cash paid for debt issuance costs

 

(4,694

)

 

 

—

 

Income tax withholdings paid upon vesting of restricted stock units

 

(1,240

)

 

 

(3,108

)

Repurchase of stock

 

(5,608

)

 

 

(1,813

)

Other

 

(210

)

 

 

401

 

Net cash provided by financing activities

 

90,951

 

 

 

1,227

 

Net change in cash, cash equivalents, and restricted cash

$

68,627

 

 

$

(96,187

)

Cash, cash equivalents, and restricted cash, beginning of period

$

228,605

 

 

$

324,792

 

Cash, cash equivalents, and restricted cash end of period

$

297,232

 

 

$

228,605

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240307892100/en/

Investor Relations Contact: Lois Perkins, Head of Investor Relations Porch Group, Inc. Loisperkins@porch.com