Porch Group, Inc.: Form 10-Q for the period ended Mar 31, 2025

This quarterly report on Form 10-Q (this “Quarterly Report”) and the documents incorporated herein by reference contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management. Although we believe that our plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions, or expectations. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning our 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. You should understand that the following important factors, among others, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

• expansion plans and opportunities, and managing growth, to build a consumer brand;
• the incidence, frequency, and severity of weather events, extensive wildfires, and other catastrophes;
• economic conditions, especially those affecting the housing, insurance, and financial markets;
• expectations regarding revenue, cost of revenue, operating expenses, and the ability to achieve and maintain future profitability;
• existing and developing federal and state laws and regulations, including with respect to insurance, warranty, privacy, information security, data protection, and taxation, and management’s interpretation of and compliance with such laws and regulations;
• the structure, availability, and performance of Porch Reciprocal Exchange (the “Reciprocal”)’s and Homeowners of America (“HOA”)’s reinsurance programs to protect against loss and maintain their financial stability ratings and a healthy surplus, the success of which are dependent on a number of factors outside management’s control;
• the possibility that a decline in our share price would result in a negative impact to the Reciprocal’s, surplus position and may require further financial support to enable the Reciprocal to meet applicable regulatory requirements and maintain financial stability rating;
• uncertainties related to regulatory approval of insurance rates, policy forms, insurance products, license applications, acquisitions of businesses, or strategic initiative, and other matters within the purview of insurance regulators (including the discount associated with the shares contributed to HOA that were subsequently transferred to the Reciprocal in connection with the closing of the sale of HOA to the Reciprocal);
• the ability of the Company and its affiliates to successfully operate and manage the Reciprocal and our ability to successfully operate our businesses alongside a reciprocal exchange;
• our ability to implement our plans, forecasts and other expectations with respect to the Reciprocal and to realize expected synergies and/or convert policyholders from our existing insurance carrier business into policyholders of the Reciprocal;
• 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 II, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2024, as well as those discussed elsewhere in this report and in subsequent reports filed with the Securities and Exchange Commission (“SEC”), all of which are available on the SEC’s website at www.sec.gov (http://www.sec.gov).

We caution you that the foregoing list may not contain all the risks to forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described above and elsewhere in this Quarterly Report on Form 10-Q. 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.

Business Overview

Porch Group, Inc., (“Porch Group,” “Porch,” the “Company,” “we,” “our,” “us”) is a new kind of homeowners insurance company. We differentiate and look to win in the massive and growing homeowners insurance opportunity by:

• Utilizing our unique property data, with insights into more than 90% of United States (“U.S.”) homebuyers and properties, to enhance our property risk assessment creates advantages in pricing and underwriting decisions for the policyholder-owned Porch Reciprocal Exchange (the “Reciprocal”) we manage. This enables the Reciprocal to attract lower-risk properties and appropriately price higher-risks, in turn supporting growth of profitable premium and thus more management fees for our insurance services business.
• Aiming to be the best homeowners insurance partner for homebuyers by helping with more than just insurance. We provide moving services and offer both a full moving concierge and the Porch app. We help make moving easier and assist with important services such as insurance, moving, warranty, security, TV/Internet, and more.
• Providing more protection for the home by including home warranty alongside homeowners insurance. We are able to fill the gaps of protection for consumers, minimize surprises, and deepen our relationships and value proposition.

As a leader in the home services software-as-a-service (“SaaS”) space, we’ve built deep relationships with approximately 24 thousand companies who utilize our software. These companies are from industries key to the home-buying transaction, such as home inspectors, title companies, and mortgage companies.

Beginning in January 2025, we operate under four reportable segments that are also our operating segments. Three of these segments are owned by Porch Group — Insurance Services, Software & Data, and Consumer Services. We collectively call these three segments, along with corporate functions, the “Porch Shareholder Interest.” Our fourth segment, the Reciprocal Segment, is managed, but not owned, by Porch Group and, at this time, is consolidated for reporting purposes as described in the basis of presentation section in Note 1 of the unaudited Notes to Condensed Consolidated Financial Statements.

Insurance Services — Our Insurance Services segment manages and operates the Reciprocal, providing services related, but not limited, to underwriting, policy renewal, risk management, insurance portfolio management, financial management, and setting investment guidelines in exchange for commissions and fees. The Insurance Services segment also holds the surplus notes issued by the Reciprocal and includes our captive reinsurer which provides non-catastrophic weather reinsurance support to improve capital efficiency for the Reciprocal.

Software & Data — Our Software & Data segment provides, on a subscription and predominantly transactional basis, software to inspection, mortgage, title, and roofing companies and data products to insurance and other types of companies. This segment includes several strategically important businesses, including home inspection software, title and mortgage software, Home Factors (our unique property insights product), and mover marketing products.

Consumer Services — Our Consumer Services segment provides warranty products through Porch Warranty and other warranty brands to protect the whole home. Our Consumer Services segment also provides moving related services such as movers, TV/Internet, and security.

Reciprocal Segment — The Reciprocal Segment includes HOA and its parent, Porch Reciprocal Exchange, which is a member-owned reciprocal exchange, owned by policyholder members rather than Porch Group, Inc. The Reciprocal Segment provides consumers with insurance to protect their homes, earning revenue primarily through premiums collected on policies.

The financial information herein should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024, contained in our Annual Report on Form 10-K for the year ended December 31, 2024, and the unaudited Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report. Unless otherwise noted herein, all numbers are in thousands, except per share amounts.

Recent Developments

Reciprocal

On January 1, 2025, we completed the formation of the Reciprocal. In connection with the formation, we completed the sale of our homeowners insurance carrier, HOA, to the Reciprocal for a purchase price equal to HOA’s estimated surplus at December 31, 2024, of approximately $105 million, less $58 million of principal and unpaid interest under a surplus note issued by HOA to Porch in 2023. The purchase price was financed by a surplus note issued by the Reciprocal to Porch, bringing the total surplus notes held by Porch to approximately $106 million. Following the sale, HOA became a wholly owned subsidiary of the Reciprocal and, as part of the transaction, subsequently transferred certain economics to the Reciprocal following TDI approval, including the 18.3 million Porch shares held by HOA. Porch will manage and operate the Reciprocal, providing services related, but not limited, to underwriting, policy renewal, risk management, insurance portfolio management, financial management, and setting investment guidelines. In addition, Porch will maintain the Reciprocal’s books and records and be responsible for its accounting and financial reporting. In exchange for these services, Porch will receive commissions and fees. The Reciprocal will pay all claims and claims adjustment expenses, reinsurance costs, agency commissions, and taxes and license fees.

New Segments

Beginning in January 2025, there was a change in internal reporting provided to the Chief Operating Decision Maker (“CODM”) and a change in the lens through which the CODM makes decisions and allocates resources. As a result, our reportable segments, that are also our operating segments, changed from Vertical Software and Insurance prior to 2025 to Insurance Services, Software & Data, Consumer Services, and the Reciprocal Segment. Management references the Insurance Services, Software & Data, and Consumer Services segments, together with corporate expenses, as “Porch Shareholder Interest.” Our fourth segment, the Reciprocal Segment, is managed, but not owned, by Porch Group and is consolidated for reporting purposes.

The changes in reporting were driven by how the CODM views our target customer (e.g. primarily total premium in Insurance Services, primarily businesses in Software & Data, and primarily direct consumers in Consumer Services) and by the shift to a reciprocal exchange model where we are the manager rather than the owner.

Results of Operations

Key Factors Affecting Operating Results

The following key factors affected our operating results in the three months ended March 31, 2025:

• On January 1, 2025, we completed the formation of the Reciprocal and sold HOA into the Reciprocal; Porch Group now holds $106 million of surplus notes due from the Reciprocal which pay interest of 9.75% plus SOFR.
• In Insurance Services, new business premiums are performing well.
• In Software and Data, Rynoh implemented a 20% price increase, in line with the strategic pricing goals.
• In Consumer Services, new services were launched including packing services for movers and new warranties for homeowners.

Three Months Ended March 31, 2025, compared to the Three Months Ended March 31, 2024

Consolidated Results

(dollar amounts in thousands)

(1) Adjusted EBITDA (Loss) and Adjusted EBITDA (Loss) Margin are non-GAAP measures. See Non-GAAP Financial Measures section for definitions.

Revenue. Total consolidated revenue including the Reciprocal decreased by $10.7 million, or 9%, from $115.4 million in the three months ended March 31, 2024, to $104.7 million in the three months ended March 31, 2025. The decrease in revenue was primarily a result of higher reinsurance ceding under the 2024 reinsurance program that began on April 1, 2024. Revenue related to the Porch Shareholder Interest was $84.5 million in the three months ended March 31, 2025, as detailed in the following table.

Cost of revenue. Total consolidated cost of revenue including the Reciprocal decreased by $39.1 million, or 50%, from $78.4 million in the three months ended March 31, 2024, to $39.3 million in the three months ended March 31, 2025. The decrease was primarily the result of higher reinsurance ceding under the 2024 reinsurance program and a reduction in weather related claims. As a percentage of revenue, cost of revenue represented 38% of revenue in the three months ended March 31, 2025, compared with 68% in the three months ended March 31, 2024. Cost of revenue typically exhibits seasonal trends, with lower costs in the first and fourth quarters and higher costs in the second and third quarters, primarily due to increased frequency and severity of weather-related events and timing of insurance-related expenses. However, there were weather events in the first quarter of 2024 that were inconsistent wit historical seasonal trends. Cost of revenue related to Porch Shareholder Interest was $15.5 million in the three months ended March 31, 2025, as detailed in the table below. Porch Shareholder Interest Cost of Revenue is a non-GAAP measure. See Non-GAAP Financial Measures section for definition.

Selling and marketing. Total consolidated selling and marketing expenses including the Reciprocal decreased by $4.4 million, or 13%, from $33.9 million in the three months ended March 31, 2024, to $29.5 million in the three months ended March 31, 2025. The decrease is primarily driven by a reduction in the amortization of deferred policy acquisition costs, reflecting a shift away from policies written under historically higher commission rates. As a percentage of revenue, selling and marketing expenses represented 28% of revenue in the three months ended March 31, 2025 compared with 29% in the three months ended March 31, 2024. Selling and marketing expense related to Porch Shareholder Interest was $32.9 million in the three months ended March 31, 2025, as detailed in the table below. Porch Shareholder Interest Selling and Marketing is a non-GAAP measure. See Non-GAAP Financial Measures section for definition

General and administrative. Total consolidated general and administrative expenses including the Reciprocal decreased by $1.5 million, or 6%, from $25.5 million in three months ended March 31, 2024, to $24.0 million in the three months ended March 31, 2025, primarily due to a $1.1 million non-cash loss on revaluation of contingent considerations during the three months ended March 31, 2024. General and administrative expenses related to Porch Shareholder Interest were $22.9 million in the three months ended March 31, 2025, as detailed in the table below. Porch Shareholder Interest General and Administrative is a non-GAAP measure. See Non-GAAP Financial Measures section for definition

Change in fair value of derivatives. The fair value of the derivative liability increased more in the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The value is driven by various factors, including the fair value of the underlying debt, stock price, and assumptions regarding timing of possible repurchase events. See Note 6 in the unaudited Notes to Condensed Consolidated Financial Statements. The change in fair value of derivatives related entirely to Porch Shareholder Interest.

Gain on extinguishment of debt. In connection with the repurchase of a portion of the 2026 Notes, we recognized a $4.9 million gain on extinguishment of debt during the three months ended March 31, 2024. There was no corresponding debt extinguishment during the three months ended March 31, 2025. See Note 9 in the notes to the unaudited condensed consolidated financial statements. The gain on extinguishment of debt related entirely to Porch Shareholder Interest.

Other income, net. Total consolidated other income, net, including the Reciprocal decreased by $14.3 million from $22.7 million in the three months ended March 31, 2024, to $8.4 million in the three months ended March 31, 2025. The decrease is primarily driven by a $14.9 million gain on settlement of contingent consideration and $5.2 million loss on sale of our EIG business, both of which occurred during the three months ended March 31, 2024, with no comparable events during the three months ended March 31, 2025. Additionally, recoveries on reinsurance contracts were approximately $4.5 million lower in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Other income, net, related to Porch Shareholder Interest was $7.2 million in the three months ended March 31, 2025, as detailed table below. Porch Shareholder Interest Other Income is a non-GAAP measure. See Non-GAAP Financial Measures section for definition

Adjusted EBITDA (Loss). Adjusted EBITDA (Loss) for the three months ended March 31, 2025, was $16.9 million, a $33.6 million improvement from Adjusted EBITDA (Loss) of $(16.8) million for the same period in 2024. The improvement in Adjusted EBITDA (Loss) for the first quarter of 2025 was primarily driven by the shift in the business model from carrier to the manager of the Reciprocal, producing higher margin management fees and a reduction in weather-related claims. Our Insurance Services segment benefited from the receipt of management fees from the Reciprocal Segment which began in January 2025 and an increase in interest income from the surplus note due from the Reciprocal Segment. Corporate costs also declined due to less reliance on third party consultants, centralizing administrative functions, and shifting hiring to target lower-cost locations.. Adjusted EBITDA (Loss) is a non-GAAP measure. See Non-GAAP Financial Measures section for definition.

The following tables summarize operating results of our four segments as well as corporate expenses and eliminations.

(1) The “Eliminations” column represents eliminations of transactions between the Insurance Services segment, Software & Data segment, Consumer Services segment, and Corporate column.

(2) The “Porch Shareholder Interest Subtotal” column includes non-GAAP measures that are used by management to evaluate performance. Porch Shareholder Interest includes the Insurance Services, Software & Data, and Consumer Services segments as well as Corporate expenses and applicable intercompany eliminations. See Non-GAAP Financial Measures section.

(3) The “Eliminations Related to Reciprocal Segment” column represents eliminations of transactions between the Reciprocal Segment and other segments or Corporate.

(4) Adjusted EBITDA (Loss) is a non-GAAP measure. See Non-GAAP Financial Measures section for definition.

(1) The “Eliminations” column represents eliminations of transactions between the Insurance Services segment, Software & Data segment, Consumer Services segment, and Corporate column.

(2) The “Eliminations Related to Reciprocal Segment” column represents eliminations of transactions between the Reciprocal Segment and other segments or Corporate.

(3) Adjusted EBITDA (Loss) is a non-GAAP measure. See Non-GAAP Financial Measures section for definition.

Porch Shareholder Interest Results (Non-GAAP)

Effective January 1, 2025, Porch Group Inc. shareholders own three segments: Insurance Services, Software & Data, and Consumer Services. Together, these segments—offset by corporate expenses—comprise what we refer to as the “Porch Shareholder Interest.” These segments contribute to Net Income Attributable to Porch and are what is expected to generate cash for Porch shareholders. Comparative period amounts in the following table include only the Insurance Services, Software & Data, and Consumer Services segments as well as corporate expenses. Certain amounts presented in the following table are non-GAAP measures and are reconciled to the nearest GAAP measure in the earlier “Consolidated Results” section.

(1) Porch Shareholder Interest Revenue, Gross Profit, and Adjusted EBITDA (Loss) are non-GAAP measures. For the three months ended March 31, 2025, Porch Shareholder Interest Adjusted EBITDA (Loss) is equivalent to total Adjusted EBITDA (Loss) for consolidated Porch, as Porch Group no longer owns HOA following its sale to the Reciprocal on January 1, 2025. See Non-GAAP Financial Measures section.

For the three months ended March 31, 2025, revenue for Porch Shareholder Interest increased $0.1 million when compared to the same segments in the prior year period. The increase was primarily due to the launch of the Reciprocal on January 1, 2025, and the associated revenue streams as Porch acts as its manager. This increase was partially offset by an increase in the average coverage period of our warranty products, resulting in revenue being recognized over a longer timeframe, and strategic shift to lower revenue, higher profit services in our moving businesses.

Porch Shareholder Interest Gross Profit improved by $19.2 million for the three months ended March 31, 2025, when compared to the prior year period. This improvement is primarily due to the increase in revenue and a reduction in weather-related claims. Porch Shareholder Interest Gross Profit is a non-GAAP measure. See Non-GAAP Financial Measures section for definition.

Porch Shareholder Interest Adjusted EBITDA (Loss) improved by $20.9 million for the three months ended March 31, 2025, compared to the prior year period. The improvement was primarily driven by the shift in the business model from carrier to the manager of the Reciprocal, producing higher margin management fees and a reduction in weather-related claims. Our Insurance Services segment benefited from the receipt of management fees from the Reciprocal Segment which began in January 2025 and an increase in interest income from the surplus note due from the Reciprocal Segment. Corporate costs also declined due to lower professional fees, reduced reliance on third-party consultants, and strong cost control. Porch Shareholder Interest Adjusted EBITDA (Loss) is a non-GAAP measure. See Non-GAAP Financial Measures section for definition.

INSURANCE SERVICES

(1) Insurance Services Adjusted EBITDA (Loss) is a non-GAAP measure. See Non-GAAP Financial Measures section.

(2) See Key Performance Measures and Operating Metrics for definitions of metrics.

For the three months ended March 31, 2025, Insurance Services segment revenue was $49.8 million. For the three months ended March 31, 2024, Insurance Services segment revenue was $47.4 million. The 5% increase in Insurance Services segment revenue was primarily driven by the launch of the Reciprocal on January 1, 2025, and the associated revenue streams as Porch acts as its manager.

Our Insurance Services segment generates economics in several ways: management fees based on a percentage of Reciprocal Written Premium, policy fees based on the number of Reciprocal Policies Written, non-catastrophic weather quota share reinsurance to improve capital efficiency for the Reciprocal, lead fees from third-party insurance agencies, and interest from the surplus note due from the Reciprocal.

Insurance Services Adjusted EBITDA (Loss) was $25.8 million in the first quarter of 2025, which improved compared to prior year due to the various commissions and fees beginning January 1, 2025, including interest income from the surplus note due from the Reciprocal Segment.

SOFTWARE & DATA

(1) Software & Data Adjusted EBITDA (Loss) is a non-GAAP measure. See Non-GAAP Financial Measures section.

(2) See Key Performance Measures and Operating Metrics for definitions of metrics. In 2025, metrics are presented on a segment-level basis.

For the three months ended March 31, 2025, Software & Data segment revenue was $22.0 million. For the three months ended March 31, 2024, Software & Data segment revenue was $21.1 million. Revenue was impacted by an increase in transaction volume of our Home Factors product and price increases of our title insurance software. These increase were partially offset by a decline in existing homes sales in the industry.

Software & Data Adjusted EBITDA (Loss) was $4.6 million in the first quarter of 2025, which improved compared to prior year due to strong cost control, including a reduction in workforce, lower professional fees, and lower rent expense from an expired lease.

CONSUMER SERVICES

(1) Consumer Services Adjusted EBITDA (Loss) is a non-GAAP measure. See Non-GAAP Financial Measures section.

(2) See Key Performance Measures and Operating Metrics for definitions of metrics. In 2025, metrics are presented on a segment-level basis.

For the three months ended March 31, 2025, Consumer Services segment revenue was $14.7 million. For the three months ended March 31, 2024, Consumer Services segment revenue was $16.2 million. The decrease in revenue was primarily driven by an increase in the average coverage period of our warranty products, resulting in revenue being recognized over a longer timeframe. The decrease in revenue was also driven by a strategic shift to lower revenue higher profit services in our moving businesses. This dynamic is demonstrated by the decrease in Average Revenue per Monetized Service.

Consumer Services Adjusted EBITDA (Loss) was $(0.7) million in the first quarter of 2025, which decreased compared to prior year’s positive results primarily driven by the decrease in monthly revenue resulting from a longer warranty coverage period. The new longer warranty is priced higher but results in a lower monthly rate. An increase in direct mail marketing expense for new warranty products also contributed to the change from prior year.

CORPORATE

(1) Adjusted EBITDA (Loss) is a non-GAAP measure. See Non-GAAP Financial Measures section for definition.

Corporate expenses decreased for the three months ended March 31, 2025, compared to the the same period for 2024. The decrease was driven primarily by lower professional fees and reduced reliance on third-party consultants as well as strong cost control across the business. Our cost control measures included centralizing administrative functions and shifting hiring to target lower-cost locations.

Key Performance Measures and Operating Metrics

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.

Insurance Services

Reciprocal Written Premium — We define Reciprocal Written Premium as the total premium written by the Reciprocal for the face value of one year’s premium gross of cancellations and before deductions for reinsurance and ceding commissions in the period.

Reciprocal Policies Written — We define Reciprocal Policies Written as the number of new and renewal insurance policies written during the period by the Reciprocal Segment.

Reciprocal Written Premium per Policy Written — We define Reciprocal Written Premium per Policy Written as the Reciprocal Written Premium in the period divided by the Reciprocal Policies Written in the period.

Software & Data

Average Number of Companies — We define Average Number of Companies 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 Software & Data segment. This only includes the number of companies in our Software & Data segment and no longer includes moving services companies nor insurance agencies which are included in Consumer Services and Insurance Services segments respectively.

Annualized Average Revenue per Company — We define Annualized Average Revenue per Company as the revenue generated across the Software & Data segment in the period over the Average Number of Companies in the period, which is then annualized (for example, for a given quarter, multiplied by 4).

Consumer Services

Monetized Services — We define Monetized Services as the total number of services from which we generated revenue, including, but not limited to, new and renewing warranty policies, completed moving jobs, sold security, TV/Internet or other home projects, measured over the period. This only includes services from Consumer Services segment and does not include insurance policies sold.

Average Revenue per Monetized Service — We define Average Revenue per Monetized Service as total Consumer Services segment revenue generated in the period over the number of Monetized Services.

Liquidity and Capital Resources

In our early years, we raised capital primarily through equity investments. As a publicly traded company, we have relied on convertible debt as our primary source of capital. As of March 31, 2025, we had $507.1 million of aggregate principal amount outstanding in convertible notes and promissory notes.

Based on our current operating and growth plan, management believes cash and cash equivalents and liquid investments at March 31, 2025, are sufficient to finance our operations, planned capital expenditures, working capital requirements, and debt service obligations for at least the next 12 months. As our operations evolve and we continue our growth strategy, including through acquisitions, we may elect or need to obtain alternative sources of capital, and we may finance additional liquidity needs in the future through one or more equity or debt financings. We may not be able to obtain equity or additional debt financing in the future when needed or, if available, the terms may not be satisfactory to us or could be dilutive to our stockholders.

We may, at any time and from time to time, seek to retire or purchase our outstanding debt or equity through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

We incurred net losses historically, resulting in an accumulated deficit of $636.5 million at March 31, 2025, and $754.9 million at December 31, 2024. Our results of operations during the three months ended March 31, 2025, were favorable and reduced the accumulated deficit since December 31, 2024.

Porch Group, Inc. is a holding company that transacts the majority of its business through operating subsidiaries, including subsidiaries that are involved in providing reinsurance and management services for the Reciprocal which is an insurance carrier. Consequently, our ability to pay dividends and expenses is largely dependent on dividends or other distributions from our subsidiaries. The insurance industry is highly regulated, and insurance businesses are restricted by statute as to the amount of dividends they may pay without the prior approval of regulatory authorities.

Liquidity and Capital Resources of Porch Shareholder Interest

The following table provides the components of cash and cash equivalents, restricted cash and cash equivalents, and investments of Porch Shareholder Interest.

(1) Includes $9.2 million of treasury bills as of March 31, 2025, held as collateral for the benefit of the Reciprocal temporarily while in the process of converting to short-term investments. See Note 1 in the unaudited Notes to Condensed Consolidated Financial Statements for a description of the nature of restrictions.

2026 Convertible Notes. As of March 31, 2025, outstanding principal was $173.8 million on our 0.75% Convertible Senior Notes due on September 15, 2026 (the “2026 Notes”). During 2024, we repurchased a total of $51.2 million aggregate principal amount of our 2026 Notes, including $8.0 million in the first quarter for $3.0 million, and $43.2 million through the rest of the year for $20.2 million, representing 45.3% of par value, in total. We recognized a total gain on extinguishment of debt in 2024 of $27.4 million, of which $4.9 million was recognized in the first quarter of 2024. We may redeem for cash all or any portion of the 2026 Notes, at our option if the last reported sale price of the common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide a notice of redemption, at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2026 Notes. The 2026 Notes are convertible at an initial conversion rate of 39.9956 shares of common stock per one thousand dollars principal amount of 2026 Notes, which is equivalent to an initial conversion price of approximately $25.00 per share of common stock (the “Conversion Rate”). The Conversion Rate is subject to customary adjustments for certain events as described in the indenture governing the 2026 Notes. We may settle the conversion option obligation with cash, shares of our common stock, or any combination of cash and shares of our common stock. Holders of the 2026 Notes may convert the 2026 Notes at their option (in whole or in part) on or after June 15, 2026, until the close of business on the second trading day immediately preceding the maturity date of September 15, 2026. In addition, holders of the 2026 Notes may convert the 2026 Notes at their option (in whole or in part) at any time prior to the close of business on the business day immediately preceding June 15, 2026, only under certain circumstances described in our Annual Report for the year ended December 31, 2024.

2028 Convertible Notes. As of March 31, 2025, outstanding principal was $333.3 million on our 6.75% Senior Secured Convertible Notes due in 2028 (the “2028 Notes”). The 2028 Notes are convertible into cash, shares of common stock, or a combination of cash and shares of common stock at our election at an initial conversion rate of 39.9956 shares of common stock per one thousand dollars principal amount of the 2028 Notes, which is equivalent to an initial conversion price of approximately $25.00 per share. The 2028 Notes will mature on October 1, 2028, unless earlier repurchased, redeemed or converted. Prior to the close of business on the business day immediately preceding July 1, 2028, the 2028 Notes will be convertible at the option of the holders only upon the satisfaction of certain conditions and during certain periods. Thereafter, until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2028 Notes will be convertible at the option of the holders at any time regardless of these conditions. Additionally, if more than $30.0 million aggregate principal amount of 2026 Notes remain outstanding on June 14, 2026, the holders of the 2028 Notes have the right to require us to repurchase for cash on June 15, 2026, all or any portion of the 2028 Notes, in principal amounts of $1,000 or an integral multiple thereof, at a repurchase price equal to 106.5% of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

Liquidity and Capital Resources of the Reciprocal (Consolidated VIE)

The following table provides the components of cash and cash equivalents, restricted cash and cash equivalents, and investments of the Reciprocal.

(1) See Note 1 in the unaudited Notes to Condensed Consolidated Financial Statements for a description of the nature of restrictions.

Insurance companies in the United States are required by state law to maintain a minimum level of policyholder’s surplus. As of March 31, 2025, the Reciprocal’s total statutory surplus combined with non-admitted assets was $197.6 million. Insurance regulators in the states in which the Reciprocal operates have a risk-based capital standard designed to identify property and casualty insurers, or reinsurers, that may be inadequately capitalized based on inherent risks of the insurer’s assets and liabilities and its mix of net written premium. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action. See Note 12 in the unaudited Notes to Condensed Consolidated Financial Statements for a description of our reinsurance programs.

Cash Flow Information

The following table provides a summary of consolidated cash flow information for the three months ended March 31, 2025 and 2024:

Operating Cash Flows

Net cash provided by (used in) operating activities was $(11.2) million for the three months ended March 31, 2025. Net cash used in operating activities was primarily driven by timing of changes in working capital, particularly ceded insurance premiums payable as settlement terms with reinsurance partners changed from quarterly to monthly.

Net cash provided by (used in) operating activities was $8.5 million for the three months ended March 31, 2024. Net cash provided by (used in) operating activities consists of primarily of cash flow from the non-recurring cash receipt of $25 million related to the Aon agreement (see Note 12 in the notes to the unaudited condensed consolidated financial statements) partially offset by the net loss of $13.4 million during the three months ended March 31, 2024.

Investing Cash Flows

Net cash provided by (used in) investing activities was $19.4 million for the three months ended March 31, 2025. Net cash provided by (used in) investing activities is primarily related to proceeds from maturities and sales of investments of $24.9 million offset by purchases of investments of $40.9 million and investments in developing internal-use software of $3.3 million.

Net cash provided by (used in) investing activities was $12.7 million for the three months ended March 31, 2024. Net cash provided by (used in) investing activities is primarily related to proceeds from sale of EIG of $10.3 million and maturities and sales of investments of $4.7 million offset by investments in developing internal-use software of $2.3 million.

Financing Cash Flows

Net cash used in financing activities was $(0.2) million for the three months ended March 31, 2025. Net cash used in financing activities is primarily related to a payment of a promissory note of $0.2 million.

Net cash used in financing activities was $2.5 million for the three months ended March 31, 2024. Net cash used by financing activities is primarily related to the repurchase of the 2026 Notes of $3.0 million.

Supplemental Cash Flow Information

The following table provides further detail of cash flows of Porch Group and cash flows of the Reciprocal Segment for the three months ended March 31, 2025.

(1) Porch Shareholder Interest net cash provided by or used in operating, investing, and financing activities are non-GAAP measures. See Non-GAAP Financial Measures section. This table reconciles these non-GAAP measures to the nearest GAAP measures in the “Consolidated” column.

Non-GAAP Financial Measures

This Quarterly Report includes non-GAAP financial measures, such as Adjusted EBITDA (Loss), Adjusted EBITDA (Loss) Margin, and certain amounts related to Porch Shareholder Interest.

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.

Adjusted EBITDA (Loss)

We define Adjusted EBITDA (Loss) as net income (loss) adjusted for net income (loss) attributable to the Reciprocal; interest expense; income taxes; depreciation and amortization; gain or loss on extinguishment of debt; other expense

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

The following table reconciles Net income (loss) to Adjusted EBITDA (Loss) and Net income (loss) as a percentage of revenue to Adjusted EBITDA (Loss) Margin.

Adjusted EBITDA (Loss) for each of our Insurance Services, Software & Data, and Consumer Services segments is a non-GAAP financial measure. The impact of corporate expenses on Adjusted EBITDA (Loss) is also a non-GAAP financial measure. Reconciliations of these non-GAAP financial measures to the nearest GAAP measure are included in the Consolidated Results section.

Porch Shareholder Interest

Certain amounts related to Porch Shareholder Interest are non-GAAP financial measures. We define Porch Shareholder Interest as the Insurance Services, Software & Data, and Consumer Services segments, together with corporate expenses.

The operating results of these segments comprise “Net income (loss) attributable to Porch” in our unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Reconciliations of the following non-GAAP financial measures to the nearest GAAP measure are included in the Consolidated Results section:

• Porch Shareholder Interest Adjusted EBITDA (Loss)
• Porch Shareholder Interest Cost of Revenue
• Porch Shareholder Interest Depreciation and Amortization
• Porch Shareholder Interest General and Administrative
• Porch Shareholder Interest Gross Margin
• Porch Shareholder Interest Gross Profit
• Porch Shareholder Interest Income (Loss) Before Income Taxes
• Porch Shareholder Interest Income Tax Benefit (Provision)
• Porch Shareholder Interest Interest Expense
• Porch Shareholder Interest Mark-to-Market Losses (Gains)
• Porch Shareholder Interest Operating Income (Loss)
• Porch Shareholder Interest Other Expense (Income)
• Porch Shareholder Interest Other Gains and Losses
• Porch Shareholder Interest Product and Technology
• Porch Shareholder Interest Revenue
• Porch Shareholder Interest Selling and Marketing
• Porch Shareholder Interest Stock-based Compensation Expense

Reconciliations of the following non-GAAP financial measures to the nearest GAAP measure are included in the Liquidity and Capital Resources section:

• Porch Shareholder Interest net cash provided by (used in) financing activities
• Porch Shareholder Interest net cash provided by (used in) investing activities
• Porch Shareholder Interest net cash provided by (used in) operating activities

Critical Accounting Estimates

Our critical accounting policies, including the assumptions and judgements underlying them, are disclosed in the 2024 Annual Report, including those policies as discussed in Note 1 to the Notes to Consolidated Financial Statements included in the 2024 Annual Report. There have been no material changes to these policies during the three months ended March 31, 2025.

Off-Balance Sheet Arrangements

Since the date of incorporation, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission (the “SEC”).

We are exposed to a variety of market and other risks, including the effects of changes in interest rates, and inflation, as well as risks to the availability of funding sources, hazard events, and specific asset risks.

Interest Rate Risk

The market risk inherent in our financial instruments and financial position represents the potential loss arising from adverse changes in interest rates. As of March 31, 2025, and December 31, 2024, we have interest-bearing debt of $507.1 million and $507.3 million, respectively. Our 0.75% convertible senior notes due in September 2026 (the “2026 Notes”) have a principal balance of $173.8 million as of March 31, 2025, a fixed coupon rate of 0.75%, and an effective interest rate of 1.3%. Our 6.75% senior secured convertible notes due in October 2028 (the “2028 Notes”) have a principal balance of $333.3 million as of March 31, 2025, a fixed coupon rate of 6.75%, and an effective interest rate of 17.9%. Interest expense includes both contractual interest expense and amortization of debt issuance costs and discount. The following table details the interest expense recognized for both the 2026 and 2028 Notes:

Because the coupon rates are fixed, interest expense on the 2026 Notes and the 2028 Notes will not change if market interest rates increase.

As of March 31, 2025, Porch has a $30.7 million portfolio of fixed income securities and an unrealized gain (loss) of $0.4 million while the Reciprocal has a $170.9 million portfolio of fixed income securities and an unrealized gain loss of $(3.1) million, as described in Note 5 in the notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report. In a rising interest rate environment, the portfolio would result in unrealized losses.

As of March 31, 2025, accounts receivable balances were $12.2 million and $6.2 million for Porch and the Reciprocal, respectively, and reinsurance balance due for the Reciprocal was $94.4 million. These are not interest-bearing assets, and are generally collected in less than 180 days. As such, we do not consider these assets to have material interest rate risk.

Inflation Risk

We believe our operations have been negatively affected by inflation and the change in the interest rate environment. General economic factors beyond our control and changes in the global economic environment, specifically fluctuations in inflation, including access to credit under favorable terms, could result in lower revenues, higher costs, and decreased margins and earnings in the foreseeable future. While we take action wherever possible to reduce the impact of the effects of inflation, in the case of sustained inflation across several of the markets in which we operate, it could become increasingly difficult to effectively mitigate the increases to costs. In addition, the effects of inflation on consumers’ budgets could result in the reduction of consumer spending habits, specifically in the move and post-move markets. If unable to take actions to effectively mitigate the effect of the resulting higher costs, our profitability and financial position could be materially and adversely impacted.

Foreign Currency Risk

There was no material foreign currency risk for the three months ended March 31, 2025. Our activities to date have been conducted primarily in the United States.

Other Risks

We are exposed to a variety of market and other risks, including risks to the availability of funding sources, reinsurance providers, weather and other catastrophic hazard events, and specific asset risks. As the AIF, our results of operations are tied to the growth and financial condition of the Reciprocal. If any events occur that impair the Reciprocal's ability to grow or sustain its financial condition, including but not limited to reduced financial strength ratings, disruption in the independent agency relationships, significant catastrophe losses, or products not meeting customer demands, the Reciprocal could find it more difficult to retain its existing business and attract new business. A decline in the business of the Reciprocal almost certainly could have as a consequence a decline in the total premiums paid and a correspondingly adverse effect on the amount of the management fees we receive. We also have an exposure to a concentration of credit risk related to the unsecured receivables due from the Reciprocal for net management fee and other reimbursements.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, evaluated and reported, as applicable, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures were effective as of March 31, 2025.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the risk factors disclosed in Part 1, Item 1A, of the Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 25, 2025.