Table of Contents

		Page
		~~Page No.~~
~~PART I. FINANCIAL INFORMATION~~Part I.	1	Financial Information		3

Item 1.		Financial Statements	1	3

		Unaudited Condensed Consolidated Balance Sheets as of March 31, ~~2020 (Unaudited)~~2022 and December 31, ~~2019~~2021	1	3

		Unaudited Condensed ~~Statement~~Consolidated Statements of Operations for the three months ended March 31, ~~2020 (Unaudited)~~2022 and 2021	2	4

		Unaudited Condensed ~~Statement~~Consolidated Statements of ~~Changes in~~Comprehensive Loss for the three months ended March 31, 2022 and 2021		5

		Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, ~~2020 (Unaudited)~~2022 and 2021	3	6

		Unaudited Condensed ~~Statement~~Consolidated Statements of Cash Flows for the three months ended March 31, ~~2020 (Unaudited)~~2022 and 2021	4	8

		Notes to Unaudited Condensed Consolidated Financial Statements ~~(Unaudited)~~	5	10

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	16	30

Item 3.		Quantitative and Qualitative Disclosures ~~About~~about Market Risk	21	45

Item 4.		Controls and Procedures	21	46

~~PART II. OTHER INFORMATION~~Part II.	22	Other Information		48

Item 1.		Legal Proceedings	22	48

Item 1A.		Risk Factors	22	48

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	23	48

Item 3.		Defaults Upon Senior Securities	23	48

Item 4.		Mine Safety Disclosures	23	48

Item 5.		Other Information	23	48

Item 6.	~~Exhibits~~	23 Exhibits		49

~~SIGNATURES~~Exhibit Index	24			49

Signatures				50

PART ~~I—FINANCIAL~~I —FINANCIAL INFORMATION

Item 1. Financial Statements

PORCH GROUP, INC.

~~PROPTECH ACQUISITION CORPORATION~~

Condensed Consolidated Balance Sheets

~~CONDENSED BALANCE SHEETS~~(all numbers in thousands, except share amounts)

March 31,
2020

December 31,
2019

(Unaudited)
Assets:
Current assets:
Cash $ 1,231,753 $ 1,412,901
Prepaid expenses 210,367 217,566
Total current assets 1,442,120 1,630,467
Investments held in Trust Account 173,600,231 172,738,705
Total assets $ 175,042,351 $ 174,369,172

Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 27,591 $ 27,750
Accrued expenses - 26,711
Franchise tax payable 50,000 83,836
Income tax payable 220,674 32,523
Total current liabilities 298,265 170,820
Deferred underwriting commissions 6,037,500 6,037,500
Total liabilities 6,335,765 6,208,320

Commitments and Contingencies
Class A common stock, $0.0001 par value; 16,370,658 and 16,316,085 shares subject to possible redemption at $10.00 per share at March 31, 2020 and December 31, 2019, respectively 163,706,580 163,160,850

Stockholders' equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding - -
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 879,342 and 933,915 shares issued and outstanding (excluding 16,370,658 and 16,316,085 shares subject to possible redemption) at March 31, 2020 and December 31, 2019, respectively 88 93
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 4,312,500 shares issued and outstanding 431 431
Additional paid-in capital 4,421,643 4,967,368
Retained earnings 577,844 32,110
Total stockholders' equity 5,000,006 5,000,002
Total liabilities and stockholders' equity $ 175,042,351 $ 174,369,172


	March 31, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	292,373	$	315,741
Accounts receivable, net		29,996		28,767
Short-term investments		8,462		9,251
Reinsurance balance due		239,739		228,416
Prepaid expenses and other current assets		21,087		14,338
Restricted cash		10,162		8,551
Total current assets		601,819		605,064
Property, equipment, and software, net		8,340		6,666
Operating lease right-of-use assets		3,922		4,504
Goodwill		226,576		225,654
Long-term investments		56,865		58,324
Intangible assets, net		124,306		129,830
Restricted cash, non-current		500		500
Long-term insurance commissions receivable		9,061		7,521
Other assets		5,373		684
Total assets	$	1,036,762	$	1,038,747

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	8,016	$	6,965
Accrued expenses and other current liabilities		35,029		37,675
Deferred revenue		198,857		201,085
Refundable customer deposit		16,686		15,274
Current portion of long-term debt		150		150
Losses and loss adjustment expense reserves		79,608		61,949
Other insurance liabilities, current		43,049		40,024
Total current liabilities		381,395		363,122
Long-term debt		415,002		414,585
Operating lease liabilities, non-current		2,267		2,694
Earnout liability, at fair value		2,687		13,866
Private warrant liability, at fair value		5,004		15,193
Other liabilities (includes $12,822 and $9,617 at fair value, respectively)		15,528		12,242
Total liabilities		821,883		821,702
Commitments and contingencies (Note 12)
Stockholders’ equity
Common stock, $0.0001 par value:		10		10
Authorized shares – 400,000,000 and 400,000,000, respectively
Issued and outstanding shares – 98,297,186 and 97,961,597, respectively
Additional paid-in capital		647,551		641,406
Accumulated other comprehensive loss		(2,774)		(259)
Accumulated deficit		(429,908)		(424,112)
Total stockholders’ equity		214,879		217,045
Total liabilities and stockholders’ equity	$	1,036,762	$	1,038,747

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

PORCH GROUP, INC.

~~PROPTECH ACQUISITION CORPORATION~~

Condensed Consolidated Statements of Operations

~~CONDENSED STATEMENT OF OPERATIONS~~(all numbers in thousands, except share amounts, unaudited)

~~(Unaudited)~~


	Three Months Ended March 31,
	2022		2021
Revenue	$	62,561	$	26,742
Operating expenses⁽¹⁾:
Cost of revenue		21,189		5,930
Selling and marketing		25,743		14,638
Product and technology		14,231		11,789
General and administrative		26,699		24,016
Total operating expenses		87,862		56,373
Operating loss		(25,301)		(29,631)
Other income (expense):
Interest expense		(2,293)		(1,223)
Change in fair value of earnout liability		11,179		(18,770)
Change in fair value of private warrant liability		10,189		(15,910)
Investment income and realized gains, net of investment expenses		197		—
Other income, net		56		83
Total other income (expense)		19,328		(35,820)
Loss before income taxes		(5,973)		(65,451)
Income tax benefit		177		350
Net loss	$	(5,796)	$	(65,101)

Loss per share - basic and diluted (Note 14)	$	(0.06)	$	(0.76)

Shares used in computing basic and diluted loss per share		96,074,527		85,331,575

(1)	Amounts include stock-based compensation expense, as follows:


	Three Months Ended March 31,
	2022		2021
Cost of revenue	$	—	$	1
Selling and marketing		632		2,082
Product and technology		1,137		2,317
General and administrative		4,085		12,435
	$	5,854	$	16,835

For the
three months
ended
March 31,

2020
General and administrative expenses $ 130,057
Administrative expenses - related party 30,000
Franchise tax expense 52,017
Loss from operations (212,074 )
Gain on investments (net), dividends and interest, held in the Trust Account 945,960
Income before income tax expense 733,886
Income tax expense 188,152
Net income $ 545,734

Weighted average number of shares outstanding of Class A common stock 17,250,000
Basic and diluted net income per share, Class A $ 0.04
Weighted average number of shares outstanding of Class B common stock 4,312,500
Basic and diluted net loss per share, Class B $ (0.04 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

PORCH GROUP, INC.

~~PROPTECH ACQUISITION CORPORATION~~

Condensed Consolidated Statements of Comprehensive Loss

~~CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY~~(all numbers in thousands, unaudited)

~~(Unaudited)~~


	Three Months Ended March 31,
	2022		2021
Net loss	$	(5,796)	$	(65,101)
Other comprehensive loss:
Current period change in net unrealized loss, net of tax		(2,515)		—
Comprehensive loss	$	(8,311)	$	(65,101)

For the three months ended March 31, 2020
Common Stock Additional Total
Class A Class B Paid-In Retained Stockholders'
Shares Amount Shares Amount Capital Earnings Equity
Balances - December 31, 2019 933,915 $ 93 4,312,500 $ 431 $ 4,967,368 $ 32,110 $ 5,000,002
Common stock subject to possible redemption (54,573 ) (5 ) - - (545,725 ) - (545,730 )
Net income - - - - - 545,734 545,734
Balances - March 31, 2020 (Unaudited) 879,342 $ 88 4,312,500 $ 431 $ 4,421,643 $ 577,844 $ 5,000,006

Table of Contents

PORCH GROUP, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(all numbers in thousands, except share amounts, unaudited)


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity
Balances as of December 31, 2021	97,961,597	$	10	$	641,406	$	(424,112)	$	(259)	$	217,045
Net loss	—		—		—		(5,796)		—		(5,796)
Other comprehensive income	—		—		—		—		(2,515)		(2,515)
Stock-based compensation	—		—		5,854		—		—		5,854
Contingent consideration for acquisitions	—		—		530		—		—		530
Vesting of restricted stock awards	245,855		—		—		—		—		—
Exercise of stock options	185,685		—		473		—		—		473
Income tax withholdings	(95,951)		—		(712)		—		—		(712)
Balances as of March 31, 2022	98,297,186	$	10	$	647,551	$	(429,908)	$	(2,774)	$	214,879

Table of Contents

PORCH GROUP, INC.

Condensed Consolidated Statements of Stockholders’ Equity - Continued

(all numbers in thousands, except share amounts, unaudited)



				Additional				Total
	Common Stock			Paid-in		Accumulated		Stockholders’
	Shares	Amount		Capital		Deficit		Equity
Balances as of December 31, 2020	81,669,151	$	8	$	424,823	$	(317,506)	$	107,325
Net loss	—		—		—		(65,101)		(65,101)
Stock-based compensation	—		—		4,462		—		4,462
Stock-based compensation - earnout	—		—		12,373		—		12,373
Issuance of common stock for acquisitions	90,000		—		1,169		—		1,169
Reclassification of earnout liability upon vesting	—		—		25,815		—		25,815
Vesting of restricted stock awards	2,078,102		—		—		—		—
Exercise of stock warrants	8,087,623		1		93,007		—		93,008
Exercise of stock options	593,106		—		355		—		355
Income tax withholdings	(1,062,250)		—		(16,997)		—		(16,997)
Transaction costs	—		—		(402)		—		(402)
Balances as of March 31, 2021	91,455,732	$	9	$	544,605	$	(382,607)	$	162,007

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

~~PROPTECH ACQUISITION CORPORATION~~

PORCH GROUP, INC.

~~CONDENSED STATEMENT OF CASH FLOWS~~Condensed Consolidated Statements of Cash Flows

~~(Unaudited)~~(all numbers in thousands, unaudited)

For the
three months
ended
March 31,
2020

Cash Flows from Operating Activities:
Net income $ 545,734
Adjustments to reconcile net income to net cash used in operating activities:
Gain on investments, dividends and interest, held in the Trust Account (945,960 )
Changes in operating assets and liabilities:
Prepaid expenses 7,199
Accounts payable (159 )
Accrued expenses (26,711 )
Franchise tax payable (33,836 )
Income tax payable 188,151
Net cash used in operating activities (265,582 )

Cash Flows from Investing Activities:
Interest released from Trust Account to pay franchise taxes 84,434
Net cash provided by investing activities 84,434

Net decrease in cash (181,148 )
Cash - beginning of the period 1,412,901
Cash - end of the period $ 1,231,753

Supplemental disclosure of noncash activities:
Change in value of common stock subject to possible redemption $ 545,730


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(5,796)	$	(65,101)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		6,483		2,463
Amortization of operating lease right-of-use assets		582		345
Loss on sale and impairment of long-lived assets		70		68
Loss (gain) on remeasurement of private warrant liability		(10,189)		15,910
Loss (gain) on remeasurement of contingent consideration		3,205		(355)
Loss (gain) on remeasurement of earnout liability		(11,179)		18,770
Stock-based compensation		5,854		16,835
Amortization of investment premium/accretion of discount, net		566		—
Net realized losses on investments		68		—
Interest expense (non-cash)		1,046		311
Other		64		(225)
Change in operating assets and liabilities, net of acquisitions and divestitures
Accounts receivable		(1,296)		(846)
Reinsurance balance due		(11,323)		—
Prepaid expenses and other current assets		(6,749)		441
Accounts payable		1,051		(8,090)
Accrued expenses and other current liabilities		(3,145)		2,625
Losses and loss adjustment expense reserves		17,659		—
Other insurance liabilities, current		3,025		—
Deferred revenue		(2,228)		(1,362)
Refundable customer deposits		1,412		(837)
Contingent consideration - business combination		—		(1,663)
Long-term insurance commissions receivable		(1,540)		(1,383)
Operating lease liabilities, non-current		(235)		(354)
Other		(696)		(487)
Net cash used in operating activities		(13,291)		(22,935)
Cash flows from investing activities:
Purchases of property and equipment		(1,167)		(34)
Capitalized internal use software development costs		(1,574)		(798)
Purchases of short-term and long-term investments		(8,835)		—
Maturities, sales of short-term and long-term investments		8,449		—
Non-refundable deposit for acquisition		(4,950)		—
Acquisitions, net of cash acquired		—		(22,882)
Net cash used in investing activities		(8,077)		(23,714)
Cash flows from financing activities:
Repayments of principal and related fees		(150)		(150)
Proceeds from exercises of warrants		—		89,771
Proceeds from exercises of stock options		473		355
Income tax withholdings paid upon vesting of restricted stock units		(712)		(16,997)
Settlement of contingent consideration related to a business acquisition		—		(400)
Net cash (used) provided by financing activities		(389)		72,579
Net change in cash, cash equivalents, and restricted cash	$	(21,757)	$	25,930
Cash, cash equivalents, and restricted cash, beginning of period	$	324,792	$	207,453
Cash, cash equivalents, and restricted cash end of period	$	303,035	$	233,383

Table of Contents

PORCH GROUP, INC.

Condensed Consolidated Statements of Cash Flows - Continued

(all numbers in thousands, unaudited)


	Three Months Ended March 31,
	2022		2021
Supplemental disclosures
Cash paid for interest	$	1,587	$	903
Non-cash consideration for acquisitions	$	—	$	2,906
Earnout liability	$	—	$	25,815
Proceeds receivable from exercises of warrants	$	—	$	3,237

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

~~PROPTECH ACQUISITION CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

1. Description of ~~Organization~~Business and ~~Business Operations~~Summary of Significant Accounting Policies

Description of Business

~~Organization and General~~

~~PropTech Acquisition Corporation (the~~Porch Group, Inc. (“Porch Group,” “Porch” or the “Company”) is a ~~blank check company incorporated in Delaware on July 31, 2019 (date of inception). The Company was formed~~vertical software platform for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”).home, providing software and services to over 25,500 home services companies. The ~~Company is~~Vertical Software Segment provides software and services to home services companies, such as home inspectors, mortgage companies and loan officers, title companies, moving companies, real estate agencies, utility companies, and others, and the Insurance Segment operates both as an ~~early stage and emerging growth company~~insurance carrier underwriting home insurance policies, and as ~~such,~~an agent selling home and auto insurance for over 20 major and regional insurance companies. The Insurance Segment also includes Porch’s warranty service offering.

Porch helps home service providers grow their business and improve their customer experience. In addition, through these relationships Porch gains access to homebuyers and is able to offer services to make the ~~Company is subject to all~~moving process easier, helping consumers save time and make better decisions about critical services, including insurance, warranty, moving, security, TV/Internet, home repair and improvement.

Unaudited Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements include the accounts of ~~the risks associated with early stage~~Porch Group, Inc. and ~~emerging growth companies.~~

~~As of March 31, 2020, the Company had not yet commenced any operations.~~its subsidiaries. All ~~activities for the period from July 31, 2019 (date of inception) to March 31, 2020 related to the Company’s formation~~significant intercompany balances and ~~the Offering (as defined below),~~transactions have been eliminated in consolidation. Certain information and ~~since the closing of the Offering, the search for a prospective target for the initial Business Combination. The Company has selected December 31 as its fiscal year end.~~

~~Sponsor and Initial Public Offering~~

On November 26, 2019, the Company closed its initial public offering (the “Offering”) of 17,250,000 units at $10.00 per unit (including the underwriters’ full exercise of their over-allotment option) (the “Units” and, with respect to the shares of Class A common stockfootnote disclosures normally included in ~~the Units, the “Public Shares”~~annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) which is discussed in Note 3 and the sale of 5,700,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement (the “Private Placement”) to our sponsor, HC PropTech Partners I LLC (the “Sponsor”) that closed simultaneously with the closing of the Offering (as described in Note 4). The Company has listed the Units, the Public Shares and the Public Warrants (as defined below) on the Nasdaq Capital Market (“Nasdaq”).

~~Trust Account~~

Upon the closing of the Offering on November 26, 2019, the Company deposited $172,500,000 ($10.00 per Unit) from the proceeds of the Offering and the sale of the Private Placement Warrants, into a trust account (the “Trust Account”), which were then invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 dayshave been condensed or less, or in any money market fund meeting certain conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest only in direct U.S, government treasury obligations until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described below.

~~Initial Business Combination~~

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering and sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. Nasdaq rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (as defined below) (less any deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the signing a definitive agreement to enter a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.

The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholders meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with a Business Combination, the Company may seek stockholder approval of a Business Combination at a meeting called for such purpose at which public stockholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.

~~If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions~~omitted pursuant to the ~~tender offer~~ rules ~~the Company’s Amended~~ and Restated Certificate of Incorporation provides that, a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to 15% or more of the Public Shares without the Company’s prior written consent.

The public stockholders will be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to public stockholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the representative of the underwriters (as discussed in Note 5). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants (“Warrants”). These shares of Class A common stock will be recorded at a redemption value and classified as temporary equity upon the completion of the Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”

If a stockholder vote is not required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, offer such redemption pursuant to the tender offer rulesregulations of the Securities and Exchange Commission ~~(the “SEC”~~(“SEC”), regarding interim financial reporting. Accordingly, these unaudited condensed consolidated financial statements and ~~file tender offer documents containing substantially~~notes should be read in conjunction with the ~~same information as would be included in a proxy statement~~Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC ~~prior to completing a Business Combination.~~

on March 16, 2022. The Company’s Sponsor has agreed (a) to vote its Founder Shares (as defined in Note 4) and any Public Shares purchased during or after the Offering in favor of a Business Combination, (b) not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Founder Shares) and Private Placement Warrants (including underlying securities) into the right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Certificate of Incorporation relating to stockholders’ rights of pre-Business Combination activity and (d) that the Founder Shares and Private Placement Warrants (including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Offering if the Company fails to complete its Business Combination.

If the Company is unable to complete a Business Combination within 18 months from the closing of the Offering, or May 26, 2021, (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law. The representative of the underwriters has agreed to waive its rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Offering price per Unit ($10.00).

The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Accountinformation as of the day of liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, we have not asked the Sponsor to reserve for such indemnification obligations, nor have we independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

~~On January 9, 2020, the Company announced that, commencing on January 13, 2020, the holders of Units may elect to separately trade the shares of Class A common stock and warrants~~December 31, 2021 included in the ~~Units. No fractional warrants will be issued upon separation of~~unaudited condensed consolidated balance sheets was derived from the ~~Units and only whole warrants will trade.~~ Company’s audited consolidated financial statements.

The ~~shares of Class A Common Stock and the warrants currently trade~~unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) were prepared on the ~~Nasdaq Capital Market under~~same basis as the ~~symbols “PTAC” and “PTACW,” respectively. The Units not separated will continue to trade on the Nasdaq Capital Market under the symbol “PTACU.”~~

~~Liquidity~~

As of March 31, 2020, the Company had approximately $1.2 million of cash in its operating account, approximately $1.1 million of investment income held in the Trust Account available to pay franchise and income taxes (less up to $100,000 of such net interest to pay dissolution expenses), and working capital of approximately $1.1 million (including approximately $271,000 of tax obligations).

Through March 31, 2020, the Company’s liquidity needs have been satisfied through proceeds of $25,000 from the Sponsor for issuance of the Founder Shares (Note 4), $225,000 in loans from the Sponsor, and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The balance of $225,000 in loans was paid in full upon the closing of the Offering on November 26, 2019.

Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet the Company’s needs through the earlier of the consummation of a Business Combination or one year from the date of this filing. Over this time period, the Company will use these funds for payment of general and administrative expenses as well as expenses associated with identifying and evaluating prospective Business Combination candidates, performing due diligence on prospective target businesses and structuring, negotiating and consummating a Business Combination.

~~2. Basis of Presentation and Summary of Significant Accounting Policies~~

~~Basis of Presentation~~

~~The accompanying unaudited condensed~~audited consolidated financial statements ~~of the Company have been prepared~~and, in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, reflect all adjustments ~~(consisting~~(all of which are of a normal ~~accruals)~~recurring nature) considered necessary to present fairly the Company’s financial position, results of operations, comprehensive loss, stockholders’ equity, and cash flows for ~~a fair presentation have been included. Operating~~the periods and dates presented. The results of operations for the three months ended March 31, ~~2020~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~2022 or any other interim period or future year.

Comprehensive Loss

~~The accompanying~~Comprehensive loss consists of adjustments related to unrealized gains and losses on available-for-sale securities.

Reclassifications

Certain reclassifications to previously reported 2021 balances were made to conform to the current period presentation in the unaudited condensed ~~financial~~consolidated statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on form 10-K for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 20, 2020.of cash flows.

~~Emerging Growth Company~~

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with those of another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of ~~these~~ financial statements in conformity with GAAP requires ~~the Company’s~~ management to make estimates, judgments, and assumptions that affect the amounts reported ~~amounts of assets~~ and ~~liabilities and disclosure of contingent assets and liabilities at~~disclosed in the ~~date of the~~unaudited condensed consolidated financial statements and ~~the reported~~accompanying notes. On an ongoing basis these estimates, which include, but are not limited to,

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts ~~of expenses during the reporting period. It is at least reasonably possible that the estimate~~and unless otherwise stated, unaudited)

estimated variable consideration for services performed, estimated lifetime value of the ~~effect~~commissions, current estimate for credit losses, depreciable lives for property and equipment, the valuation of ~~a condition, situation or set of circumstances that existed at~~and useful lives for acquired intangible assets, goodwill, the ~~date of the balance sheet, which management considered~~valuation allowance on deferred tax assets, assumptions used in ~~formulating its estimate, could change due to one or more future confirming events.~~stock-based compensation expense, unpaid losses for insurance claims and loss adjustment expenses, contingent consideration, earnout liabilities and private warrant liabilities, are evaluated by management. Actual results could differ materially from those ~~estimates.~~estimates, judgments, and assumptions.

~~Net Income (Loss) Per Share of Common Stock~~

Net income per share of common stock is computed by dividing net income applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period. The Company has not considered the effect of the Public Warrants and the Private Placement Warrants to purchase an aggregate of 14,325,000 shares of Class A common stock in the calculation of diluted loss per share, since inclusion would be anti-dilutive under the treasury stock method as of March 31, 2020.

The Company’s statement of operations includes a presentation of income per share for common stock subject to redemption in a manner similar to the two-class method of income per share. Basic and diluted net income per share of Class A common stock for the three months ended March 31, 2020 is calculated by dividing the investment income earned on the investments held in the Trust Account (approximately $946,000, net of funds available to be withdrawn from the Trust Account for payment of taxes, resulting in a total of approximately $706,000), by the weighted average number of shares of Class A common stock outstanding for the period. Basic and diluted net loss per share of Class B common stock for the three months ended March 31, 2020 is calculated by dividing net income less income attributable to Class A common stock of approximately $706,000, by the weighted average number of shares of Class B common stock outstanding for the period.

~~Concentrations~~Concentration of Credit Risk

Financial instruments ~~that~~which potentially subject the Company to credit risk consist principally of cash, ~~and investments held in the Company’s operating account and the Trust Account. Cash is maintained in~~money market accounts on deposit with financial institutions, ~~which, at times may exceed~~money market funds, certificates of deposit and fixed-maturity securities, as well as receivable balance in the ~~federal depository insurance coverage~~course of $250,000. At March 31, 2020, the Company has not experienced losses on these cash accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.

~~Cash and Cash Equivalents~~

~~The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.~~

~~Investments Held in Trust Account~~

collection.

The Company’s ~~portfolio of investments held~~insurance carrier subsidiary has exposure and remains liable in the Trust Account are comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, and money market funds that invest solely in U.S. government securities. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain on investments (net), dividends and interest, held in the Trust Account in the accompanying statement of operations. The fair value for trading securities is determined using quoted market prices in active markets.

~~Fair Value Measurements~~

~~FASB ASC 820, Fair Value Measurement, defines fair value and requires disclosures about fair value measurements. Fair value is defined as the price that would be received for the sale~~event of an ~~asset or paid for transfer~~insolvency of ~~a liability,~~one of its primary reinsurers. Management and its reinsurance intermediary regularly assess the credit quality and ratings of its reinsurer counterparties. NaN reinsurers represented more than 10% individually, and 38% in ~~an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.~~

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

●

~~Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;~~

●

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

●

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

As of March 31, 2020, and December 31, 2019, the recorded values of cash, accounts payable, accrued expenses, and tax payables approximate their fair values due to the short-term nature of the instruments.

~~Offering Costs~~

Offering costs consist of expenses incurred in connection with the preparation of the Offering. These expenses, together with the underwriting discounts and commissions, in the amount of approximately $10 million, were charged to equity upon completion of the Offering.

~~Class A Common Stock Subject to Possible Redemption~~

As discussed in Note 1, all of the 17,250,000 shares of Class A common stock sold as part of Units in the Offering contain a redemption feature which allows for the redemption of the shares of Class A common stock if the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination. In accordance with FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that in no event will it redeem its shares of Class A common stock in an amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001 upon the closing of a Business Combination.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases in the carrying amount of redeemable shares of Class A common stock are affected by adjustments to additional paid-in capital. Accordingly, at March 31, 2020 and December 31, 2019, 16,370,658 and 16,316,085 shares of Class A common stock subject to conditional redemption, respectively, are presented as temporary equity, outside of the stockholders’ equity sectionaggregate, of the Company’s ~~unaudited condensed balance sheets.~~

~~Income Taxes~~

The Company follows the asset and liability method of accounting for income taxes under FASB ASC, 740, “Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits and no amounts accrued for interest and penaltiesinsurance subsidiary’s total reinsurance receivables as of March 31, 2020 and December 31, 2019. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. No amounts were accrued for the payment of interest and penalties as of March 31, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.2022.

~~Recent Accounting Pronouncements~~

~~In December 2019, the FASB issued ASU No. 2019-12, “~~~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~” (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact on the Company’s unaudited condensed financial statements.

~~3. Initial Public Offering~~

On November 26, 2019, the Company closed the Offering for the sale of 17,250,000 Units (including the underwriters’ full exercise of their overallotment option) at a price of $10.00 per Unit, generating gross proceeds of $172.5 million, and incurring offering costs of approximately $10.0 million, including approximately $6.0 million in deferred underwriting commissions.

~~Each Unit consists of one share~~Substantially all of the Company’s ~~Class A common stock, par value $0.0001 per share~~insurance-related revenues in the Insurance segment are derived from customers in Texas (which represent approximately 57% of such revenues in the three months ended March 31, 2022), South Carolina, North Carolina, Georgia, Virginia and ~~one-half of one redeemable warrant (the “Public Warrants”). Each whole Public Warrant is exercisable to purchase one share~~Arizona, which could be adversely affected by economic conditions, an increase in competition, or environmental impacts and changes.

No individual customer represented more than 10% of the Company’s ~~Class A common stock at an exercise price of $11.50 per share (see Note 6).~~

~~4. Related Party Transactions~~

~~Founder Shares~~

In July 2019, the Sponsor purchased 3,881,250 founder shares for an aggregate purchase price of $25,000, or approximately $0.006 per share. On October 30, 2019, the Company effected a stock dividend for approximately .11 shares for each share of Class B common stock outstanding, resulting in the Sponsor holding an aggregate of 4,312,500 founder shares (“Founder Shares”). In October 2019, the Sponsor transferred 25,000 Founder Shares to four of the Company’s directors, and to a senior advisor. The Sponsor had agreed to forfeit up to 562,500 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. On November 26, 2019, the underwriters exercised the over-allotment option in full; thus, these Founder Shares were no longer subject to forfeiture.

The Company’s initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) the date on which the Company completes a liquidation, merger, capital stock exchange or similar transaction that results in the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination, the Founder Shares will be released from the lock-up.

~~Private Placement Warrants~~

In connection with the Offering, the Sponsor purchased an aggregate of 5,700,000 Private Placement Warrants at a price of $1.00 per warrant ($5,700,000 in the aggregate) each exercisable to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, in a private placement that closed simultaneously with the closing of the Offering. The proceeds from the sale of the Private Placement Warrants was added to the net proceeds from the Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.

~~Promissory Note — Related Party~~

On July 31, 2019, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing and was due on the earlier of March 31, 2020 or upon the completion of the Offering. The Company borrowed $225,000 under the Note. The Note balance was paid in full upon the closing of the Offering on November 26, 2019.

~~Related Party Loans~~

In order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon consummation of a Business Combination into additional Private Placement Warrants at a price of $1.00 per Warrant. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. At March 31, 2020 and December 31, 2019, there were no outstanding Working Capital Loans.

~~Administrative Support Agreement~~

The Company agreed to pay $10,000 a month for office space, utilities, and secretarial and administrative support to the Sponsor. Services commenced on the date the securities were first listed on the Nasdaq and will terminate upon the earlier of the consummation by the Company of a Business Combination or the liquidation of the Company. The Company incurred $30,000 for expenses in connection with such servicestotal revenue for the three months ended March 31, ~~2020,~~2022, or 2021. As of March 31, 2022 and December 31, 2021, no individual customer accounted for 10% or more of the Company’s total accounts receivable.

As of March 31, 2022, the Company held approximately $233.4 million of cash with one U.S. commercial bank.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. The Company maintains cash balances that may exceed the insured limits by the Federal Deposit Insurance Corporation.

Restricted cash equivalents as of March 31, 2022 includes $0.3 million held in certificates of deposits and money market mutual funds pledged to the Department of Insurance in certain states as a condition of its Certificate of Authority for the purpose of meeting obligations to policyholders and creditors, $7.1 million in funds held for the payment of possible warranty claims as required under regulatory guidelines in twenty five states, $0.3 million of customer deposits, $0.4 million in escrow with an insurance regulator, and $2.6 million related to acquisition indemnifications, of which $0.5 million is ~~reflected~~recorded in non-current assets. Restricted cash equivalents as of December 31, 2021, includes $0.3 million held in certificates of deposits and money market mutual funds pledged to the Department of Insurance in certain states as a condition of its Certificate of Authority for the purpose of meeting obligations to policyholders and creditors, $5.9 million in funds held for the payment of possible warranty claims as required under regulatory guidelines in twenty five states, $0.3 million of customer deposits, and $2.6 million related to acquisition indemnifications in escrow accounts, of which $0.5 million is recorded in non-current assets.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

The reconciliation of cash and cash equivalents to amounts presented in the ~~accompanying statement~~unaudited condensed consolidated statements of ~~operations.~~cash flows are as follows:


	March 31, 2022		December 31, 2021

Cash and cash equivalents	$	292,373	$	315,741
Restricted cash and restricted cash equivalents - current		10,162		8,551
Restricted cash and restricted cash equivalents - non-current		500		500
Cash, cash equivalents and restricted cash	$	303,035	$	324,792

~~5. Commitments~~Accounts Receivable and ~~Contingencies~~Long-term Insurance Commissions Receivable

~~Risks~~Accounts receivable consist principally of amounts due from enterprise customers and ~~Uncertainties~~

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreakother corporate partnerships, as ~~a pandemic,~~well as credit card receivables. The Company estimates allowances for uncollectible receivables based on the ~~rapid increase~~creditworthiness of its customers, historical trend analysis and general economic conditions. Consequently, an adverse change in ~~exposure globally.~~those factors could affect the Company’s estimate of allowance for doubtful accounts. The ~~full impact~~allowance for uncollectible receivables at March 31, 2022 and December 31, 2021, was $0.5 million and $0.4 million, respectively.

Long-term insurance commissions receivable balance consists of the ~~COVID-19 outbreak continues~~estimated commissions from policy renewals expected to ~~evolve.~~be collected. The ~~impact~~Company records the amount of renewal insurance commissions expected to be collected in the next twelve months as current accounts receivable.

Deferred Policy Acquisition Costs

The Company capitalizes deferred policy acquisitions costs (“DAC”) which consist primarily of commissions, premium taxes and policy underwriting and production expenses that are directly related to the successful acquisition by the Company’s insurance subsidiary of new or renewal insurance contracts. DAC are amortized to expense on a straight-line basis over the terms of the ~~COVID-19 outbreak on~~policies to which they relate, which is generally one year. The amortization of DAC is included in sales and marketing expense in the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted for an extended period, the Company’s financial position, resultsunaudited condensed consolidated statements of operations and comprehensive loss. DAC is also reduced by ceding commissions paid by reinsurance companies which represent recoveries of acquisition costs. DAC is periodically reviewed for recoverability and adjusted if necessary. Future investment income is considered in determining the recoverability of DAC. As of March 31, 2022 and December 31, 2021, DAC of $7.7 million and $4.0 million is included in prepaid expenses and other current assets.

Changes in DAC for the three months ended March 31, 2022 are as follows:


	2022
Deferred policy acquisition costs at December 31, 2021 (gross)	$	33,014
Ceded deferred policy acquisition costs		(29,026)
Deferred policy acquisition costs at December 31, 2021 (net)		3,988
Capitalized costs		16,753
Amortized costs		(13,001)
Deferred policy acquisition costs at March 31, 2022 (net)	$	7,740

Fair Value of Financial Instruments

Fair value, as defined by the accounting standards, represents the amount at which an asset or liability would be transferred in a current orderly transaction between willing market participants. Emphasis is placed on observable inputs being used to assess fair value. To reflect this approach the standards require a three-tiered fair value hierarchy be

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

applied based on the nature of the inputs used when measuring fair value. The three hierarchical levels of inputs are as follows:

Level 1

Observable inputs, such as quoted prices (unadjusted) in active markets for identical assets or liabilities at the measurement date;

Level 2

Observable inputs, other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. This may include active markets for similar assets and liabilities, quoted prices in markets that are not highly active, or other inputs that are observable or can be corroborated by observable market data; and

Level 3

Unobservable inputs that are arrived at by means other than current observable market activity.

The level of the least observable significant input used in assessing the fair value determines the placement of the entire fair value measurement in the hierarchy. Management’s assessment of the significance of a particular input to the fair value measurement requires the use of judgment specific to the asset or liability.

Other Insurance Liabilities, Current

The following table details the components of other insurance liabilities, current on the condensed consolidated balance sheets:


	March 31, 2022		December 31, 2021
Ceded reinsurance premiums payable	$	21,439	$	22,523
Funds held under reinsurance treaty		2,092		2,206
Commissions payable, reinsurers and agents		9,259		10,697
General and accrued expenses payable		579		321
Advance premiums		9,680		4,277
Other insurance liabilities, current	$	43,049	$	40,024

Income Taxes

Provisions for income taxes for the three months ended March 31, 2022 and 2021 were a $0.2 million benefit and a $0.4 million benefit, respectively, and the effective tax rates for these periods were 2.96% and 0.53%, respectively. The difference between the Company’s effective tax rates for the 2022 period and the U.S. statutory rate of 21% was primarily due to a full valuation allowance related to the Company’s net deferred assets. The difference between the Company’s effective tax rates for the 2021 period and the U.S. statutory rate of 21% was primarily due to a full valuation allowance related to the Company’s net deferred tax assets.

Recently Adopted Accounting Standards

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update require an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. The amendments of this ASU do not affect the accounting for other assets or liabilities that may arise from revenue contracts with customers in accordance with Topic 606. The amendments of this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods in those fiscal years. The ASU clarifies that early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company early adopted this ASU as of January 1, 2022 and will apply the guidance prospectively for business combinations that occur after the adoption date. Therefore, the adoption will have no impact to the existing consolidated balance sheets, statements of operations, and statements of cash ~~flows~~flows.

2. Revenue

Disaggregation of Revenue

The Company generates revenue in its Vertical Software segment from (1) software and service subscription fees received for continued access to and transactions processed using owned software platforms by individual contractors, small business service providers and large enterprise service providers, (2) move-related transactions for a variety of services when end customers are connected with service providers primarily related to moving or settling into a new home, and (3) post-move transactions for the delivery of leads to service providers who primarily support the continued maintenance of the home.

The revenue generated by the Company’s Insurance segment is primarily from the sale of its own written insurance and warranty policies or third-party policies via its agency. This revenue includes insurance and warranty premiums earned over the life of the policy, reinsurance profit share, policy fees, commissions earned at the time it is put in force or ceded.

Total revenues consisted of the following:


	Three Months Ended March 31,
	2022		2021
Vertical Software segment
Software and service subscriptions	$	17,965	$	10,879
Move-related transactions (excluding insurance)		12,193		8,960
Post-move transactions		4,530		5,098
Total Vertical Software segment revenue		34,688		24,937

Insurance segment
Insurance and warranty premiums, commissions and policy fees⁽¹⁾		27,873		1,805
Total Insurance segment revenue		27,873		1,805

Total revenue	$	62,561	$	26,742

⁽¹⁾Revenue recognized during the three months ended March 31, 2022 includes revenue from regulated property and casualty insurance entity in the form of insurance premiums, policy fees, ceding commissions, and reinsurance profit sharing of $20.0 million which is accounted for separately from the revenue from contracts with customers.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

Contracts with Customers

Contract Assets - Insurance Commissions Receivable

A summary of the activity impacting the contract assets during the three months ended March 31, 2022, is presented below:


	Contract Assets
Balance at December 31, 2021	$	9,384
Estimated lifetime value of insurance policies sold by carriers		2,422
Cash receipts		(753)
Balance at March 31, 2022	$	11,053

As of March 31, 2022, $2.0 million of contract assets are expected to be collected within the next 12 months and therefore are included in current accounts receivable on the condensed consolidated balance sheets. The remaining $9.1 million of contract assets are expected to be collected in the following periods and are included in long-term insurance commissions receivable on the condensed consolidated balance sheets.

Contract Liabilities — Refundable Customer Deposits

A summary of the activity impacting the contract liabilities during the three months ended March 31, 2022 is presented below:


	Contract
	Liabilities
Balance at December 31, 2021		15,274
Additions to contract liabilities		7,891
Contract liabilities transferred to revenue		(6,479)
Balance at March 31, 2022	$	16,686

As of March 31, 2022, $16.7 million in contract liabilities related to refundable customer deposits received in advance of warranty services provided, are included in current refundable customer deposits on the consolidated balance sheets because the policyholder may cancel the policy at any time and receive a pro-rated refund. If the policies are not canceled, the balance is expected to be ~~materially adversely affected.~~transferred to revenue over the term of the policies, which is, on average, 19 months.

Deferred Revenue

Timing may differ between the satisfaction of performance obligations and the collection of amounts from customers. Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations. To the extent the amounts relate to services or coverage performed by the Company over time, these liabilities are classified as deferred revenue. If the amounts collected are related to a point in time obligation which has yet to be performed, these liabilities are classified as refundable customer deposits.

A summary of the activity impacting deferred revenue balances during the three months ended March 31, 2022 is presented below:


	Vertical Software		Insurance		Total
	Deferred Revenue		Deferred Revenue		Deferred Revenue
Balance at December 31, 2021		3,814	$	197,271	$	201,085
Revenue recognized⁽¹⁾		(5,279)		(91,994)		(97,273)

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

Additional amounts deferred			5,722			89,323			95,045
Balance at March 31, 2022		$	4,257		$	194,600		$	198,857

(1)

In the table above, revenue recognized on earned premiums related to the insurance segment is presented as the gross amount from policy holders excluding the impact of ceded premiums. On the unaudited condensed statements of operations earned premiums are presented net of ceded premiums of $71.7 million.

Remaining Performance Obligations

Contracts with customers include $4.3 million to performance obligations that will be satisfied at a later date. These amounts primarily include performance obligations that are recorded in the condensed consolidated balance sheets as deferred revenue.

The amount of the transaction price allocated to performance obligations to be satisfied at a later date, which is not recorded in the condensed consolidated balance sheets, is immaterial as of March 31, 2022 and December 31, 2021.

The Company has applied the practical expedients provided for in the accounting standards, and does not present unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which it has the right to invoice for services performed. Additionally, the Company excludes amounts related to performance obligations that are billed and recognized as they are delivered.

3. Investments

The following table provides the Company’s investment income, and realized gains on investments:


	Three Months Ended March 31,
	2022
Investment income, net of investment expenses	$	265
Realized gains on investments		2
Realized losses on investments		(70)
Investment income and realized gains, net of investment expenses	$	197

The Company did not have significant investment income during the three months ended March 31, 2021.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

The following table provides the amortized cost, fair value and unrealized gains and (losses) of the Company’s investment securities:


	March 31, 2022
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
U.S. Treasuries	$	3,653	$	1	$	(135)	$	3,519
Obligations of states, municipalities and political subdivisions		9,997		—		(584)		9,413
Corporate bonds		30,283		3		(1,234)		29,052
Residential and commercial mortgage-backed securities		15,237		27		(617)		14,647
Other loan-backed and structured securities		8,931		2		(237)		8,696
Total debt securities	$	68,101	$	33	$	(2,807)	$	65,327


	December 31, 2021
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
U.S. Treasuries	$	5,452	$	1	$	(36)	$	5,417
Obligations of states, municipalities and political subdivisions		8,913		21		(84)		8,850
Corporate bonds		31,491		89		(155)		31,425
Residential and commercial mortgage-backed securities		14,387		34		(139)		14,282
Other loan-backed and structured securities		7,637		5		(41)		7,601
Total debt securities	$	67,880	$	150	$	(455)	$	67,575

The amortized cost and fair value of securities at March 31, 2022, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	March 31, 2022
Remaining Time to Maturity	Amortized Cost		Fair Value
Due in one year or less	$	6,425	$	6,388
Due after one year through five years		20,771		19,914
Due after five years through ten years		13,700		12,820
Due after ten years		3,037		2,862
Residential and commercial mortgage-backed securities		15,237		14,647
Other loan-backed and structured securities		8,931		8,696
Total	$	68,101	$	65,327

Other-than-temporary Impairment

The Company regularly reviews its individual investment securities for other-than-temporarily impairment. The Company considers various factors in determining whether each individual security is other-than-temporarily impaired, including:

the financial condition and near-term prospects of the issuer, including any specific events that may affect its operations or earnings;

the length of time and the extent to which the market value of the security has been below its cost or amortized cost;

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

general market conditions and industry or sector-specific factors;

nonpayment by the issuer of its contractually obligated interest and principal payments; and

the Company’s intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.

Securities with gross unrealized loss position, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:


	Less Than Twelve Months				Twelve Months or Greater				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
At March 31, 2022	Loss		Value		Loss		Value		Loss		Value
U.S. Treasuries	$	(135)	$	3,204	$	—	$	—	$	(135)	$	3,204
Obligations of states, municipalities and political subdivisions		(584)		9,361		—		—		(584)		9,361
Corporate bonds		(1,234)		21,104		—		—		(1,234)		21,104
Residential and commercial mortgage-backed securities		(617)		13,816		—		—		(617)		13,816
Other loan-backed and structured securities		(237)		8,035		—		—		(237)		8,035
Total securities	$	(2,807)	$	55,520	$	—	$	—	$	(2,807)	$	55,520


	Less Than Twelve Months				Twelve Months or Greater				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
At December 31, 2021	Loss		Value		Loss		Value		Loss		Value
U.S. Treasuries	$	(36)	$	5,007	$	—	$	—	$	(36)	$	5,007
Obligations of states, municipalities and political subdivisions		(84)		4,292		—		—		(84)		4,292
Corporate bonds		(155)		15,446		—		—		(155)		15,446
Residential and commercial mortgage-backed securities		(139)		9,687		—		—		(139)		9,687
Other loan-backed and structured securities		(41)		6,818		—		—		(41)		6,818
Total securities	$	(455)	$	41,250	$	—	$	—	$	(455)	$	41,250

At March 31, 2022, and December 31, 2021, there were 448 and 358 securities, respectively, in an unrealized loss position. Of these securities, NaN had been in an unrealized loss position for 12 months or longer.

The Company believes there were no fundamental issues such as credit losses or other factors with respect to any of its available-for-sale securities. The unrealized losses on investments in fixed-maturity securities were caused primarily by interest rate changes. It is expected that the securities would not be settled at a price less than par value of the investments. Because the declines in fair value are attributable to changes in interest rates or market conditions and not credit quality, and because the Company has the ability and intent to ~~complete~~hold its available-for-sale investments until a market price recovery or maturity, the Company does not consider any of its investments to be other-than-temporarily impaired at March 31, 2022.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

4. Fair Value

The following table details the fair value measurements of assets and liabilities that are measured at fair value on a recurring basis:


	Fair Value Measurement at March 31, 2022
							Total
	Level 1		Level 2		Level 3		Fair Value
Assets
Money market mutual funds	$	5,041	$	—	$	—	$	5,041
Debt securities:
U.S. Treasuries		3,519		—		—		3,519
Obligations of states and municipalities		—		9,413		—		9,413
Corporate bonds		—		29,052		—		29,052
Residential and commercial mortgage-backed securities		—		14,647		—		14,647
Other loan-backed and structured securities		—		8,696		—		8,696
	$	8,560	$	61,808	$	—	$	70,368
Liabilities
Contingent consideration - business combinations	$	—	$	—	$	12,822	$	12,822
Contingent consideration - earnout		—		—		2,687		2,687
Private warrant liability		—		—		5,004		5,004
	$	—	$	—	$	20,513	$	20,513


	Fair Value Measurement at December 31, 2021
							Total
	Level 1		Level 2		Level 3		Fair Value
Assets
Money market mutual funds		17,318	$	—	$	—	$	17,318
Debt securities:
U.S. Treasuries		5,417		—		—		5,417
Obligations of states and municipalities		—		8,850		—		8,850
Corporate bonds		—		31,425		—		31,425
Residential and commercial mortgage-backed securities		—		14,282		—		14,282
Other loan-backed and structured securities		—		7,601		—		7,601
	$	22,735	$	62,158	$	—	$	84,893


Liabilities
Contingent consideration - business combinations	$	—	$	—	$	9,617	$	9,617
Contingent consideration - earnout		—		—		13,866		13,866
Private warrant liability		—		—		15,193		15,193
	$	—	$	—	$	38,676	$	38,676

Financial Assets

Money market mutual funds are valued at the closing price reported by the fund sponsor from an ~~initial~~actively traded exchange. As the funds are generally maintained at a net asset value which does not fluctuate, cost approximates fair value. These are included as a Level 1 measurement in the table above. The fair values for available-for-sale fixed-maturity securities are based upon prices provided by an independent pricing service. The Company has reviewed these prices for reasonableness and has not adjusted any prices received from the independent provider. Level 2 securities represent assets whose fair value is determined using observable market information such as previous day trade prices,

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

quotes from less active markets or quoted prices of securities with similar characteristics. There were no transfers between Level 1 and Level 2.

Contingent Consideration – Business ~~Combination may be materially adversely affected~~Combinations

The Company estimated the fair value of the business combination contingent consideration triggered by EBITDA or revenue milestones, related to certain 2021 acquisitions using the Monte Carlo simulation method. The fair value of $0.1 million and $0.3 million as of March 31, 2022 and December 31, 2021, respectively, is based on the simulated revenue and net income (loss) of the Company over the maturity date of the contingent consideration.

The Company estimated the fair value of the business combination contingent consideration that is triggered by stock price milestones, related to a certain 2021 acquisition, using the Monte Carlo simulation method. The fair value is based on the simulated stock price of the Company over the maturity date of the contingent consideration. As of March 31, 2022, the key inputs used to determine the fair value of $12.7 million, were the stock price of $6.95, strike price of $36.00, discount rate of 8.2% and volatility of 75%. As of December 31, 2021, the key inputs used in the determination of the fair value of $9.3 million included the volume weighted average price of $16.37, strike price of $36.00, discount rate of 7% and volatility of 60%.

Contingent Consideration - Earnout

The Company estimated the fair value of the earnout contingent consideration using the Monte Carlo simulation method. The fair value of $2.7 million is based on the simulated price of the Company over the maturity date of the contingent consideration and increased by certain employee forfeitures. As of March 31, 2022, the key inputs used to determine the fair value included exercise price of $22.00, volatility of 70%, forfeiture rate of 15% and stock price of $6.95. As of December 31, 2021, the key inputs used in the determination of the fair value included exercise price of $22.00, volatility of 65%, forfeiture rate of 15% and stock price of $15.59.

Private Warrants

The Company estimated the fair value of the private warrants of $5.0 million using the Black-Scholes-Merton option pricing model. As of March 31, 2022, the key inputs used to determine the fair value included exercise price of $11.50, expected volatility of 71%, remaining contractual term of 3.73 years, and stock price of $6.95. As of December 31, 2021, the key inputs used to determine the fair value included exercise price of $11.50, expected volatility of 60%, remaining contractual term of 3.98 years, and stock price of $15.59.

Level 3 Rollforward

Fair value measurements categorized within Level 3 are sensitive to changes in the assumptions or methodology used to determine fair value and such changes could result in a significant increase or decrease in the fair value.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

The changes for Level 3 items measured at fair value on a recurring basis using significant unobservable inputs are as follows:


			Contingent
	Contingent		Consideration -		Private
	Consideration -		Business		Warrant
	Earnout		Combinations		Liability
Fair value as of January 1, 2022	$	13,866	$	9,617	$	15,193
Additions		—		—		—
Settlements		—		—		—
Change in fair value, loss (gain) included in net loss⁽¹⁾		(11,179)		3,205		(10,189)
Fair value as of March 31, 2022	$	2,687	$	12,822	$	5,004


			Contingent
	Contingent		Consideration -		Private
	Consideration -		Business		Warrant
	Earnout		Combinations		Liability
Fair value as of January 1, 2021	$	50,238	$	3,549	$	31,534
Additions		—		1,737		—
Settlements		(25,815)		(2,062)		—
Change in fair value, loss (gain) included in net loss⁽¹⁾		18,770		(355)		15,910
Fair value as of March 31, 2021	$	43,193	$	2,869	$	47,444

(1)

Changes in fair value of contingent consideration related to business combinations are included in general and administrative expenses in the unaudited condensed consolidated statements of operations. Changes in fair value of the earnout contingent consideration and private warrant liabilityare disclosed separately in the unaudited condensed consolidated statements of operations.

Fair Value Disclosure

As of March 31, 2022 and December 31, 2021, the fair value of the convertible senior notes is $286.9 million and $400.4 million, respectively. The decrease of $113.5 million is primarily due to ~~significant governmental measures being implemented~~the decline in the stock price at March 31, 2022 as compared to ~~contain~~December 31, 2021. The fair value of other debt approximates the ~~COVID-19 outbreak~~unpaid principal balance and is considered a Level 3 measurement. See Note 7.

5. Property, Equipment, and Software

Property, equipment, and software net, consists of the following:


	March 31,		December 31,
	2022		2021
Software and computer equipment	$	8,257	$	7,287
Furniture, office equipment, and other		2,126		2,006
Internally developed software		14,221		13,102
Leasehold improvements		2,208		2,191
		26,812		24,586
Less: Accumulated depreciation and amortization		(18,472)		(17,920)
Property, equipment, and software, net	$	8,340	$	6,666

Depreciation and amortization expense related to property, equipment, and software was $1.0 million and $1.1 million for the three months ended March 31, 2022 and 2021, respectively.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

6. Intangible Assets and Goodwill

Intangible Assets

Intangible assets are stated at cost or ~~treat its impact, including travel restrictions,~~acquisition-date fair value less accumulated amortization, and consist of the ~~shutdown~~following, as of ~~businesses~~March 31, 2022:


	Weighted
	Average	Intangible				Intangible
	Useful Life	Assets,		Accumulated		Assets,
	(in years)	gross		Amortization		Net
Customer relationships	9.0	$	56,810	$	(8,658)	$	48,152
Acquired technology	5.0		48,135		(12,619)		35,516
Trademarks and tradenames	12.0		25,389		(3,194)		22,195
Non-compete agreements	2.0		450		(320)		130
Value of business acquired	1.0		400	��	(394)		6
Renewal rights	6.0		9,734		(1,137)		8,597
Trademarks and tradenames	Indefinite		4,750		—		4,750
Insurance licenses	Indefinite		4,960		—		4,960
Total intangible assets		$	150,628	$	(26,322)	$	124,306

The aggregate amortization expense related to intangibles was $5.5 million and ~~quarantines, among others, which may limit~~$1.3 million for the three months ended March 31, 2022 and 2021, respectively.

Goodwill

The following tables summarize the changes in the carrying amount of goodwill for the three months ended March 31, 2022:


	Goodwill
Balance as of December 31, 2021		225,654
Purchase price adjustments		922
Balance as of March 31, 2022	$	226,576

7. Debt

At March 31, 2022, debt comprised of the following:


					Debt
			Unaccreted		Issuance		Carrying
	Principal		Discount		Costs		Value
Convertible senior notes, due 2026	$	425,000	$	—	$	(10,228)	$	414,772
Other notes		450		(70)		—		380
	$	425,450	$	(70)	$	(10,228)	$	415,152

Convertible Senior Notes

Interest expense recognized related to the 0.75% Convertible Senior Notes due 2026 (the “2026 Notes”) was approximately $1.4 million for the three months ended March 31, 2022, and comprised of contractual interest expense and amortization of debt issuance costs.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

8. Equity and Warrants

Common Shares Outstanding and Common Stock Equivalents

The following table summarizes the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.fully diluted capital structure:


	March 31,	December 31,
	2022	2021
Issued and outstanding common shares	96,247,186	95,911,597
Earnout common shares	2,050,000	2,050,000
Total common shares issued and outstanding	98,297,186	97,961,597
Common shares reserved for future issuance:
Private warrants	1,795,700	1,795,700
Common stock options outstanding (Note 9)	4,569,743	4,822,992
Restricted stock units and awards (Note 9)	4,225,986	2,717,154
2020 Equity Plan pool reserved for future issuance	6,390,137	8,126,263
Convertible senior notes, due 2026⁽¹⁾	16,998,130	16,998,130
Total shares of common stock outstanding and reserved for future issuance	132,276,882	132,421,836

(1)

In connection with the September 16, 2021 issuance of the 2026 Notes, the Company used a portion of the proceeds to pay for the capped call transactions, which are expected to generally reduce the potential dilution to the Company’s common stock. The capped call transactions impact the number of shares that may be issued by effectively increasing the conversion price for the Company from $25 per share to approximately $37.74 per share, which would result in 11,261,261 potentially dilutive shares instead of the shares reported in this table.

~~Registration Rights~~

The holders of the Founder Shares, the Private Placement Warrants (and their underlying securities) and any Warrants that may be issued upon conversion of the Working Capital Loans (and underlying securities) are entitled to registration rights pursuant to a registration rights agreement executedtable above excludes common stock contingently issuable in connection with prior acquisitions. Such common stock is issuable to the extent specified operational milestones are achieved or market conditions are met in the future.

Warrants

There was no activity related to public and private warrants during the three months ended March 31, 2022.


	Number of
	Common
	Shares Issued	Cash Received
Balances as of January 1, 2022	1,795,700	$	—
Exercised	—		—
Canceled	—		—
Balances as of March 31, 2022	1,795,700	$	—

9. Stock-Based Compensation

Under the Company’s 2020 Stock Incentive Plan (the “2020 Plan”), which replaced the Company’s 2012 Equity Incentive Plan upon the closing of the ~~Offering. The holders~~Merger in December 2020, the employees, directors and consultants of ~~these securities are entitled to make up to three demands, excluding short form demands, that~~ the Company ~~register such securities. In addition,~~are eligible for grants of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards (“RSA”), restricted stock units (“RSU”), performance awards, and other stock awards, collectively referred to as “Awards”.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

Stock-based compensation consists of expense related to equity awards in the ~~holders have certain “piggy-back” registration rights with respect~~normal course, earnout restricted stock and a secondary market transaction as described below:


	Three months ended
	March 31,
	2022		2021
Secondary market transaction	$	—	$	1,933
Employee earnout restricted stock		—		12,373
Employee awards		5,854		2,529
Total operating expenses	$	5,854	$	16,835

Detail related to ~~registration statements filed subsequent to~~stock option, RSU and RSA activity for the consummation of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.three months ended March 31, 2022, is as follows:


		Number of	Number of
	Number of	Restricted	Restricted
	Options	Stock Units	Stock Awards
Balances as of January 1, 2021	4,822,992	2,712,762	4,392
Granted	—	1,885,725	—
Vested	—	(241,463)	(4,392)
Exercised	(185,685)	—	—
Forfeited, canceled or expired	(67,564)	(131,038)	—
Balances as of March 31, 2022	4,569,743	4,225,986	—

~~Underwriting Agreement~~

10. Reinsurance

The ~~underwriters~~effects of reinsurance on premiums written and earned for the three months ended March 31, 2022 were ~~paid a cash underwriting discount at closing~~as follows:


	2022
	Written		Earned
Direct premiums	$	87,123	$	84,318
Ceded premiums		(60,636)		(71,727)
Net premiums	$	26,487	$	12,591

The effects of ~~$3,450,000, which~~reinsurance on incurred losses and LAE for the three months ended March 31, 2022 were as follows:


	2022
Direct losses and LAE	$	68,221
Ceded losses and LAE		(58,973)
Net losses and LAE	$	9,248

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

The detail of reinsurance balances due is ~~equal to two percent (2.00%)~~as follows:


	March 31, 2022		December 31, 2021
Unearned premium	$	142,619	$	153,710
Losses and LAE Reserve		71,196		56,752
Reinsurance recoverable		25,746		17,780
Other		178		174
Reinsurance balance due	$	239,739	$	228,416

11. Unpaid Losses and Loss Adjustment Reserve

The following table provides the rollforward of the beginning and ending reserve balances for losses and LAE, gross ~~proceeds~~ of reinsurance for the ~~Offering. In addition,~~three months ended March 31, 2022:


	2022
Reserve for losses and LAE, at December 31, 2021	$	61,949
Reinsurance recoverables on losses and LAE		(56,752)
Losses and LAE reserve, net of reinsurance recoverables at December 31, 2021		5,197
Add provisions for losses and LAE occurring in:
Current year		9,868
Prior years		(620)
Net incurred losses and LAE during the current year		9,248
Deduct payments for losses and LAE occurring in:
Current year		(4,431)
Prior years		(1,602)
Net claim and LAE payments during the current year		(6,033)
Reserve for losses and LAE, net of reinsurance recoverables, at end of year		8,412
Reinsurance recoverables on losses and LAE		71,196
Losses and LAE reserve at March 31, 2022	$	79,608

As a result of additional information on claims occurring in prior years becoming available to management, changes in estimates of provisions of losses and loss adjustment expenses were made, resulting in a decrease of $0.6 million for the representative of the underwriters is entitled to a deferred fee of 3.50% of the gross proceeds of the Offering, or $6,037,500. The deferred fee will become payable to the representative of the underwriters from the amounts held in the Trust Account solely in the event thatthree months ended March 31, 2022.

12. Commitments and Contingencies

Acquisition Commitments

On September 2, 2021, the Company ~~completes~~entered into a ~~Business Combination, subject~~Stock Purchase Agreement with Covéa Coopérations S.A., to acquire CSE - a California-based personal lines insurer focused on property and auto. Subject to the terms and conditions set forth in the Agreement, at the closing of the ~~underwriting agreement.~~

~~6. Stockholders’ Equity~~

~~Preferred Stock~~

~~The Company is authorized to issue 1,000,000~~transactions contemplated by the Agreement, Buyer will pay $48.6 million in cash for all of the shares of ~~$0.0001 par value preferred stock. At March 31, 2020 and December 31, 2019, there were no preferred shares issued or outstanding.~~

~~Class A Common Stock~~

~~The Company is authorized to issue up to 100,000,000 shares~~GMF Financial Services Corporation, which owns all of ~~Class A common stock, $0.0001 par value. Holders of~~ the ~~Company’s Class A common stock are entitled to one vote for each share. As of March 31, 2020, and December 31, 2019, there were 17,250,000 shares of Class A common stock~~ issued and outstanding stock of ~~which 16,370,658~~Civil Service Employees Insurance Company, CSE Safeguard Insurance Company, CSE Insurance Services, Inc. and ~~16,316,085 shares of Class A common stock were classified outside of permanent equity, respectively.~~

~~Class B Common Stock~~

~~The~~CSE Group Services Company, is authorized to issue up to 10,000,000 shares of Class B common stock, $0.0001 par value. Holders of the Company’s Class B common stock are entitled to one vote for each share. The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like.

In July 2019, the Sponsor purchased 3,881,250 founder shares for an aggregate purchase price of $25,000, or approximately $0.006 per share. On October 30, 2019, the Company effected a stock dividend for approximately .11 shares for each share of Class B common stock outstanding, resulting in the Sponsor holding an aggregate of 4,312,500 shares of Class B common stock. In October 2019, the Sponsor transferred 25,000 Founder Shares to four of the Company’s directors and to a senior advisor. The Sponsor had agreed to forfeit up to 562,500 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. On November 26, 2019, the underwriters exercised the over-allotment option in full; thus, these Founder Shares were no longer subject to forfeiture (see also Note 4). As of March 31, 2020, and December 31, 2019, there were 4,312,500 shares of Class B common stock outstanding.

~~The Company may issue additional common stock or preferred stock to complete its Business Combination or under an employee incentive plan after completion of its Business Combination.~~

~~Warrants~~

The Public Warrants are exercisable on the later of (a) 30 days after the consummation of a Business Combination or (b) 12 months from the effective date of the registration statement relating to the Offering. No Public Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the common shares issuable upon exercise of the Public Warrants and a current prospectus relating to such common shares. Notwithstanding the foregoing, if a registration statement covering the common shares issuable upon the exercise of the Public Warrants is not effective within 60 business days from the consummation of a Business Combination, the holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise the Public Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.

~~The Company may call the Public Warrants for redemption (excluding the Private Placement Warrants), in whole and not in part, at a price of $0.01 per warrant:~~

●

~~at any time while the Public Warrants are exercisable,~~

●

~~upon not less than 30 days’ prior written notice of redemption to each Public Warrant holder,~~

●

if, and only if, the last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrantholders and,

●

if and only if, there is a current registration statement in effect with respect to the issuance of the common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Offering, except that the Private Placement Warrants and the common shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain ~~limited exceptions. Additionally,~~adjustments, as further described in the ~~Private Placement Warrants are exercisable~~Agreement. The closing is subject to customary conditions, including, among others, the absence of a material adverse effect on ~~a cashless basis~~GMFF and ~~are non-redeemable so long as they are held by~~ the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable byreceipt of specified governmental consents and approvals.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

Litigation

From time to time the Company is or may become subject to various legal proceedings arising in the ordinary course of business, including proceedings initiated by users, other entities, or regulatory bodies. Estimated liabilities are recorded when it is both probable that a liability has been incurred and ~~exercisable by such holders on~~ the ~~same basis as the Public Warrants.~~

~~The exercise price and number of shares of Class A common stock issuable upon exercise~~amount of the ~~warrants may~~loss can be ~~adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation.~~reasonably estimated. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. Ifmany instances, the Company is unable to ~~complete~~determine whether a ~~Business Combination within~~loss is probable or to reasonably estimate the ~~Combination Period~~amount of such a loss and, therefore, the potential future losses arising from a matter may differ from the amount of estimated liabilities the Company ~~liquidates the funds held~~has recorded in the ~~Trust Account, holders~~financial statements covering these matters. The Company reviews its estimates periodically and makes adjustments to reflect negotiations, estimated settlements, rulings, advice of ~~warrants will not receive any of such funds with respect~~legal counsel, and other information and events pertaining to ~~their warrants, nor will they receive any distribution from the Company’s assets held outside~~a particular matter.

Cases under Telephone Consumer Protection Act

Porch and/or an acquired entity, GoSmith.com, are party to twelve legal proceedings alleging violations of the ~~Trust Account~~automated calling and/or Do Not Call restrictions of the Telephone Consumer Protection Act of 1991. Some of these actions allege related state law claims. The proceedings were commenced as mass tort action by a single plaintiffs’ law firm in December 2019 and April/May 2020 in federal district courts throughout the United States. One of the actions was dismissed with prejudice and is on appeal before the ~~respect to such warrants. Accordingly, the warrants may expire worthless. If the Company calls the Public Warrants for redemption, management will~~Ninth Circuit Court of Appeals. The remainder have ~~the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described~~been consolidated in the ~~warrant agreement. The exercise price and number~~United States District Court for the Western District of ~~common shares issuable upon exercise~~Washington, where Porch resides. That case is stayed pending the outcome of the ~~Public Warrants~~appeal. Plaintiffs seek actual, statutory, and/or treble damages, injunctive relief, and reasonable attorneys’ fees and costs.

These actions are at an early stage in the litigation process. It is not possible to determine the likelihood of an unfavorable outcome of these disputes, although it is reasonably possible that the outcome of these actions may be ~~adjusted in certain circumstances including~~unfavorable. Further, it is not possible to estimate the range or amount of potential loss (if the outcome should be unfavorable). Porch intends to contest these cases vigorously.

Kandela, LLC v Porch.com, Inc.

In May 2020, the former owners of Kandela, LLC filed complaints against Porch in the ~~event~~Superior Court of the State of California, alleging a ~~stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. If~~breach of contract related to the ~~Company~~terms and achievement of an earnout agreement related to the acquisition of the Kandela business and related fraudulent inducement claims. Claimants seek to recover compensatory damages based on an asset purchase agreement entered into with Porch and related employment agreements. Claimants also seek punitive damages, attorney’s fees and costs. This matter is still in the arbitration process and Porch is unable to ~~complete a Business Combination~~determine the likelihood of an unfavorable outcome, although it is reasonably possible that the outcome may be unfavorable. Certain claimants have settled their claims, and this settlement is within the ~~Combination Period~~range of the estimated accrual. Arbitration of the remaining claims occurred in March 2022, but a final decision has yet to be issued by the Arbitrator. Porch is unable to provide an estimate of the range or amount of potential loss across the remaining claims (if the outcome should be unfavorable); however, Porch has recorded an estimated accrual related to the claims underlying the aforementioned settlement. Porch intends to contest the remaining claims vigorously.

Putative Wage and Hours Class Action Proceeding

A former employee of HireAHelper™ filed a complaint in San Diego County Superior Court in November 2020, asserting putative class action claims for failure to pay overtime, failure to pay compensation at the time of separation and unfair business practices in violation of California law. HireAHelper™ was served with the complaint in December 2020 and on January 28, 2021 Defendants removed the case to the United States District Court for the Southern District of California. The plaintiff seeks to represent all current and former non-exempt employees of HireAHelper™ and Legacy Porch and Porch’s other affiliated companies in the State of California during the relevant time period. Plaintiffs seek damages for unpaid wages, liquidated damages, penalties, attorneys’ fees and costs for which, Porch has recorded an estimated accrual for a contingent loss based on information currently known. The parties recently attended mediation

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

in an effort to resolve the matter. The mediation was successful, and a deal was reached. The parties have executed the long form settlement agreement and obtained preliminary approval from the court on April 25, 2022. Notices will go out to the putative class, and after the notice period, the parties will seek final approval of the settlement from the court on August 11, 2022. If final approval is granted, and the ~~Company liquidates~~settlement will be funded, and the ~~funds held~~case will be complete.

Other

In addition, in the ~~Trust Account, holders~~ordinary course of ~~warrants will not receive~~business, Porch and its subsidiaries are (or may become) parties to litigation involving property, personal injury, contract, intellectual property and other claims, as well as stockholder derivative actions, class action lawsuits and other matters. The amounts that may be recovered in such matters may be subject to insurance coverage. Although the results of legal proceedings and claims cannot be predicted with certainty, neither Porch nor any of its subsidiaries is currently a party to any legal proceedings the outcome of which, we believe, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition or results of operations.

13. Segment Information

Beginning in 2021, the Company has 2 reportable segments that are also our operating segments: Vertical Software and Insurance. Our reportable segments have been identified based on how our CODM manages our business, makes operating decisions and evaluates operating and financial performance. The chief executive officer acts as the CODM and reviews financial and operational information for our 2 reportable segments. Operating segments are components of an enterprise for which separate discrete financial information is available and operational results are regularly evaluated by the CODM for the purposes of making decisions regarding resource allocation and assessing performance.

Our Vertical Software segment primarily consists of a vertical software platform for the home, providing software and services to home services companies, such ~~funds with respect to their warrants, nor will they receive any distribution~~as home inspectors, moving companies, utility companies, title companies and others, and includes software fee revenues from ~~the Company’s assets held outside~~companies, and non-insurance revenue. The Vertical Software segment also includes per-lead and per-quote-based revenue from insurance companies.

Our Insurance segment offers various forms of ~~the Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.~~

~~7. Fair Value Measurements~~

homeowner insurance policies through its own insurance carrier and certain homeowner and auto insurance policies through its licensed insurance agency. The Insurance segment also includes home warranty service revenue.

The following table ~~presents information about~~provides the Company’s ~~assets~~revenue by segment:


	Three Months Ended March 31,
	2022		2021
Segment revenues:
Vertical Software	$	34,688	$	24,937
Insurance		27,873		1,805
Total segment revenue	$	62,561	$	26,742

Our segment operating and financial performance measure is segment Adjusted EBITDA (loss). Segment Adjusted EBITDA (loss) is defined as revenue less the following expenses associated with our segments: cost of revenue, sales and marketing, product and technology, and general and administrative expenses. Segment Adjusted EBITDA (loss) also excludes non-cash items or items that management does not consider are reflective our ongoing core operations.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

Currently, we do not allocate any shared expenses to the reportable segments. These expenses are included in Corporate and Other. Corporate and Other includes shared expenses such as sales and marketing, certain product and technology, accounting, human resources, legal and general and administrative, and other income, expenses, gains and losses that are ~~measured~~not allocated in assessing segment performance due to their function. Such transactions are excluded from the reportable segments results but included in reported consolidated results.

The reconciliation of segment Adjusted EBITDA (loss) to consolidated loss from operations below includes the effects of corporate and other items that the CODM does not consider in assessing segment performance.

The following tables provide financial information for the 2 reportable segments and reconciliations to consolidated financial information for the periods presented:


	Three Months Ended March 31,
	2022		2021
Segment adjusted EBITDA (loss):
Vertical Software	$	2,984	$	3,151
Insurance		3,286		508
Corporate and Other		(13,342)		(13,261)
Total segment adjusted EBITDA (loss)		(7,072)		(9,602)
Reconciling items:
Depreciation and amortization		(6,483)		(2,463)
Non-cash stock-based compensation expense		(5,854)		(16,835)
Acquisition and related expense		(895)		(728)
Non-cash long-lived asset impairment charge		(69)		(68)
Revaluation of contingent consideration		(3,205)		355
Investment income and realized gains		(197)		—
Non-cash bonus expense		(1,526)		(290)
Operating loss	$	(25,301)	$	(29,631)

The CODM does not review assets on a ~~recurring basis~~segment basis.

All of the Company’s revenue is generated in the United States. As of March 31, 2022 and December 31, 2021, the Company did not have assets located outside of the United States.

14. Basic and Diluted Net Loss Per Share

Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities.

Under the two-class method, basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings per share attributable to common stockholders adjusts basic earnings per share for the potentially dilutive impact of stock options, RSUs, RSAs, convertible notes, earnout shares and warrants. As the Company has reported losses for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share equals diluted net loss per share.

Table of Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and unless otherwise stated, unaudited)

The following table sets forth the computation of the Company’s basic and diluted net loss attributable per share to common stockholders for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
	2022		2021
Numerator:
Net loss used to compute net loss per share - basic and diluted	$	(5,796)	$	(65,101)

Denominator:
Weighted average shares outstanding used to compute loss per share - basic and diluted		96,074,527		85,331,575

Loss per share - basic and diluted	$	(0.06)	$	(0.76)

The following table discloses securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share because to do so would have been antidilutive for all periods presented:


	2022	2021

Stock options	4,569,743	6,199,325
Restricted stock units and awards	4,225,986	1,282,327
Public and private warrants	1,795,700	6,237,377
Earnout shares	2,050,000	4,099,999
Convertible debt⁽¹⁾	16,998,130	—

⁽¹⁾ In connection with the September 16, 2021 issuance of the 2026 Notes, the Company used a portion of the proceeds to pay for the capped call transactions, which are expected to generally reduce the potential dilution to the Company’s common stock. The capped call transactions impact the number of shares that may be issued by effectively increasing the conversion price for the Company from $25 per share to approximately $37.74 per share, which would result in 11,261,261 potentially dilutive shares instead of the shares reported in this table as of March 31, ~~2020 and December 31, 2019 and indicates the fair value hierarchy of the valuation techniques that~~2022.

15. Subsequent Events

On April 1, 2022, the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest ratesacquired the home warranty and ~~yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability,~~inspection software and ~~include situations where there is little, if any, market activity for the asset or liability.~~

~~March 31, 2020~~

Description
Quoted Prices
in Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Other
Unobservable
Inputs
(Level 3)

Investments held in Trust Account
Money Market Fund $ 173,600,231 $ - $ -

~~December 31, 2019~~

~~8. Subsequent Events~~

Management has evaluated subsequent events to determine if events or transactions occurring through the date the financial statements were available for issuance require potential adjustment to or disclosureservices businesses from Residential Warranty Services (“RWS”). Total consideration in the ~~financial statements~~transaction is $33 million, including $29 million of cash, of which $5 million was paid in March 2022, and ~~has concluded that all such events that would require recognition or disclosure have been recognized or disclosed.~~$4 million of Porch common stock and additional contingent consideration tied to the performance of a recently launched business line.

Table of Contents

PART II —OTHER INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations

References to “we,” “us,” “our” or the “Company” are to PropTech Acquisition Corporation, except where the context requires otherwise. References to our “management” or our “management team” are to our officers and directors, and references to the “sponsor” are to HC PropTech Partners I LLC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes thereto included elsewhere in this report.

~~Special Note Regarding Forward-Looking Statements~~

~~All statements other than statements of historical fact included in this section and elsewhere in this Form 10-Q regarding the Company’s financial position, business strategy~~This Quarterly Report and the ~~plans and objectives~~documents incorporated herein by reference contain forward- looking statements as defined by the Private Securities Litigation Reform Act of management for future operations, are forward-looking statements. When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking1995. These statements are based on the beliefs and assumptions of management. Although the Company believes that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, the Company cannot assure you that it 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 the Company’s 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 “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” 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 Quarterly Report 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 filing. You should understand that the following important factors, among others, could affect the Company’s future results and could cause those results or other outcomes to differ materially from those expressed or implied in the Company’s forward-looking statements:

●

expansion plans and opportunities, including recently completed acquisitions as well as future acquisitions or additional business combinations;

●

costs related to being a public company;

●litigation, complaints, and/or adverse publicity;

●

the impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability;

●

further expansion into the insurance industry, and the related federal and state regulatory requirements;

●privacy and data protection laws, privacy or data breaches, or the loss of data; and

●

the duration and scope of the COVID pandemic, and its continued effect on the business and financial conditions of the Company.

These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this Quarterly Report are more fully described in Part II, Item 1A of this Quarterly Report, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 16,2022 and in any of the Company’s subsequent SEC filings. The risks described in these filings are not exhaustive. New risk factors emerge from time to time, and it is not possible for us to predict all such risk factors, nor can the Company assess the impact of all such risk factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. All forward- looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. The Company undertakes no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Table of Contents

Business Overview

Porch is a vertical software platform for the home, providing software and services to over 25,500 home services companies, such as home inspectors, mortgage companies and loan officers, title companies, moving companies, real estate agencies, utility companies, roofers and others, helping these service providers grow their business and improve their customer experience. The Company provides software and services to home services companies and, through these relationships, gains unique and early access to homebuyers and homeowners, assists homebuyers and homeowners with critical services such as insurance and moving, and, in turn, the Company’s platform drives demand for other services from such companies as part of the value proposition. Porch has three types of customers: (1) home services companies, such as home inspectors, mortgage companies, and loan officers and title companies, for whom Porch provides software and services and who pay recurring SaaS fees and increasingly provide introductions to homebuyers and homeowners; (2) consumers, such as homebuyers and homeowners, whom Porch assists with the comparison and provision of various critical home services, such as insurance, moving, security, TV/Internet, and home repair and improvement; and (3) service providers, such as insurance carriers, moving companies, security companies, title companies, mortgage companies and TV/Internet providers, who pay for new customer sign-ups.

The Company sells software and services to companies using a variety of sales and marketing tactics, including teams of inside sales representatives organized by vertical market who engage directly with companies, and enterprise sales teams that target the large named accounts in each of the vertical markets. These teams are supported by various typical software marketing tactics, including digital, in-person (such as trade shows and other events) and content marketing.

For consumers, Porch largely relies on our unique and proprietary relationships with over 25,500 companies using the Company’s software to provide the company with end customer access and introductions. The Company then utilizes technology, lifecycle marketing and teams in lower cost locations to operate as a Moving Concierge to assist these consumers with services. The Company has invested in limited direct-to-consumer marketing capabilities, but expects to become more advanced over time with capabilities such as digital and social retargeting.

Key Performance Measures and Operating Metrics

In the management of these businesses, the Company identifies, measures and evaluates various operating metrics. The key performance measures and operating metrics used in managing the businesses are set forth 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. The key performance measures presented have been adjusted for divested businesses in 2020.

●

Average Companies in Quarter — Porch provides software and services to home services companies and, through these relationships, gains unique and early access to homebuyers and homeowners, assists homebuyers and homeowners with critical services such as insurance, warranty and moving. The Company’s customers include home services companies, for whom the Company provides software and services and who provide introductions to homebuyers and homeowners and tracks the average number of home services companies from which it generates revenue each quarter in order to measure the ability to attract, retain and grow relationships with home services companies. Porch management defines the average number of companies in a 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 the Company’s 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 the Company.

●

Average Revenue per Account perMonthin Quarter —Management views the Company’s ability to increase revenue generated from existing customers as a key component of Porch’s growth strategy. Average Revenue per Account perMonth in Quarter is defined as the average revenue permonth generated across all our home services company customer accounts in a quarterly period. Average Revenue per Account perMonth

Table of Contents

in Quarter is derived from all customers and total revenue, not only customers and revenues associated with the Company’s referral network.

The following table summarizes Average Companies in Quarter and Average Revenue per Account per Month in Quarter for each of the quarterly periods indicated:


	2022		2022			2022			2022
	Q1		Q2			Q3			Q4
Average Companies in Quarter		25,512		—			—			—
Average Revenue per Account per Month in Quarter	$	817	$	—		$	—		$	—

	2021		2021			2021			2021
	Q1		Q2			Q3			Q4
Average Companies in Quarter		13,995		17,120			20,472			24,603
Average Revenue per Account per Month in Quarter (adjusted)⁽¹⁾	$	637	$	933	⁽¹⁾	$	985	⁽¹⁾	$	776	⁽¹⁾

	2020		2020			2020			2020
	Q1		Q2			Q3			Q4
Average Companies in Quarter		10,903		10,523			10,792			11,157
Average Revenue per Account per Month in Quarter	$	484	$	556		$	664		$	556

(1)

During the quarter ended December 31, 2021, the Company corrected an immaterial error that impacted revenue and cost of revenue for the three months ended June 30, 2021 and September 30, 2021. Average Revenue per Account per Month in Quarter metrics were recalculated for the affected quarters to show the impact of the adjustments.

The following tables shows the impact of this error on Average Revenue per Account per Month in Quarter:


	2021		2021		2021		2021
	Q1		Q2		Q3		Q4
Total Revenue (as previously reported)		26,742	$	51,340	$	62,769	$	51,582
Quarterly Impact of Revenue Adjustment Recorded in Q4		—		(3,400)		(2,300)		5,700
Total Revenue (as adjusted)	$	26,742	$	47,940	$	60,469	$	57,282
Average Revenue per Account per Month in Quarter (as adjusted)	$	637	$	933	$	985	$	776
Average Revenue per Account per Month in Quarter (as previously reported)	$	637	$	1,000	$	1,022	$	699

In 2021, the Company completed acquisitions of V12 Data in Q1, Homeowners of America (“HOA”) and Rynoh in Q2, American Home Protect (“AHP”) in Q3 and Floify in Q4, that impacted the average number of companies in the quarter.

Due to COVID-19, some small companies put their business with the Company on hold, which is reflected in a lower number of total companies in 2020 and higher average revenue per account.

●

Monetized Services in Quarter — Porch connects consumers with home services companies nationwide and offers a full range of products and services where homeowners can, among other things: (i)compare and buy home insurance policies (along with auto, flood and umbrella policies) and warranties with competitive rates and coverage; (ii)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; (iii)discover and install home automation and security systems; (iv)compare Internet and television options for their new home; (v)book small handyman jobs at fixed, upfront prices with guaranteed quality; and (vi)compare bids from home improvement professionals who can complete bigger jobs. The Company tracks the number of monetized services performed through its platform each quarter and the revenue generated per service performed in order to measure market penetration with homebuyers and homeowners and the Company’s ability to deliver high-revenue services within those groups. Monetized services per quarter is defined as the total number of unique services from which the Company 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 a quarterly period.

●

Average Revenue per Monetized Service in Quarter —Management believes that shifting the mix of services delivered to homebuyers and homeowners toward higher revenue services is a key component of Porch’s growth strategy. Average revenue per monetized services in quarter is the average revenue generated

Table of Contents

per monetized service performed in a quarterly period. When calculating Average Revenue per Monetized Service in quarter, average revenue is defined as total quarterly service transaction revenues generated from monetized services.

The following table summarizes our monetized services and average revenue per monetized service for each of the quarterly periods indicated:


	2022		2022			2022			2022
	Q1		Q2			Q3			Q4
Monetized Services in Quarter		254,249		—			—			—
Average Revenue per Monetized Service in Quarter	$	176	$	—		$	—		$	—

	2021		2021			2021			2021
	Q1		Q2			Q3			Q4
Monetized Services in Quarter		182,779		302,462			329,359			260,352
Average Revenue per Monetized Service in Quarter (adjusted)⁽¹⁾	$	92	$	118	⁽¹⁾	$	137	⁽¹⁾	$	154	⁽¹⁾

	2020		2020			2020			2020
	Q1		Q2			Q3			Q4
Monetized Services in Quarter		152,165		181,520			198,165			169,949
Average Revenue per Monetized Service in Quarter	$	93	$	86		$	97		$	98

(1)

During the quarter ended December 31, 2021, the Company corrected an immaterial error that impacted revenue and cost of revenue for the three months ended June 30, 2021 and September 30, 2021. Average Revenue per Monetized Service in Quarter metrics were recalculated for the affected quarters to show the impact of the adjustments.

The following tables shows the impact of this error on Average Revenue per Monetized Service in Quarter:


	2021		2021		2021		2021
	Q1		Q2		Q3		Q4
Service Revenue (as previously reported)	$	16,812	$	39,102	$	47,398	$	34,351
Quarterly Impact of Revenue Adjustment Recorded in Q4		—		(3,400)		(2,300)		5,700
Service Revenue (as adjusted)	$	16,812	$	35,702	$	45,098	$	40,051
Average Revenue per Monetized Service in Quarter (adjusted)	$	92	$	118	$	137	$	154
Average Revenue per Monetized Service in Quarter (as previously reported)	$	92	$	129	$	144	$	132

In 2021, the Company completed acquisitions of V12 in Q1, HOA and Rynoh in Q2, AHP in Q3 and Floify in Q4, which impacted the number of monetized services in the quarter.

In 2020, the Company shifted insurance monetization from getting paid per quote to earning multiyear insurance commissions, resulting in fewer monetized transactions with higher average revenue.

In March 2020, COVID-19 impacted the service volumes during the period from March until June. The impact on service volumes, largely recovered by June 30, 2020, and after adjusting for insurance monetization remains above prior year volumes.

Recent Developments

Adoption of New Accounting Standards

We early adopted Accounting Standards Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers on January 1, 2022 and will apply the guidance prospectively for business combinations that occur after the adoption date. The adoption has no impact to the existing unaudited condensed consolidated balance sheets, statements of operations, and statements of cash flows.

Key Factors Affecting Operating Results

The Company has been implementing its strategy as a vertical software platform for the home, providing software and services to over 25,500 home services companies, such as home inspectors, moving companies, utility companies,

Table of Contents

warranty companies, etc. The following are key factors affecting our operating results in the three months ended March 31, 2022:

●

In 2021, the Company completed several acquisitions with an aggregate purchase price of $346.3 million to acquire companies to expand the scope and nature of the Company's services offerings, add additional team members with important skillsets, and realize synergies. These acquisitions included V12 Data (acquired in January 2021), HOA (acquired in April 2021), Rynoh (acquired in May 2021), AHP (acquired in September 2021) and Floify (acquired in October 2021). For a complete discussion of our 2021 acquisitions, refer to Item 8 in the 2021 Annual Report on Form 10-K.

●

Continued investment in growing and expanding the Company’s position in the home inspection industry including through our core ERP and CRM software offered by ISN.

●

Continued investment in growing and expanding the Company’s position in providing moving services to consumers as a result of the 2018 acquisition of HireAHelper™, a provider of software and demand for moving companies.

●

Intentionally building operating leverage in the business by focusing on growing operating expenses at a slower rate than the growth in revenue. Specifically by increasing economies of scale related to fixed selling costs, Moving Concierge call center operations and product and technology costs.

●

Ongoing expansion in other software verticals related to the home and related services such as title, warranty and mortgage software.

●

Investments in consumer experience to drive higher conversion rates, including investments in apps.

●

Investments in establishing and maintaining controls required by the Sarbanes-Oxley Act of 2002 (“SOX”) and other internal controls across IT and accounting organizations.

●

Investments in data platforms and leveraging that data in pricing optimization within insurance.

●

Growth across the insurance business, including geographic expansion.

Basis of Presentation

The unaudited condensed consolidated financial statements and accompanying notes of the Company include the accounts of the Company and its consolidated subsidiaries and were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All significant intercompany accounts and transactions are eliminated in consolidation.

The Company operates in two operating segments: Vertical Software and Insurance. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the CODM in making decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer is the CODM.

Components of Results of Operations

Total Revenue

The Company generates revenue from (1) software and service subscription revenue generated from fees received for providing subscription access to the Company’s software platforms and subscription services across various industries; (2) insurance revenue in the form of commissions from third-party insurance carriers where Porch acts as an independent agent and commissions from reinsurers, insurance and warranty premiums, policy fees and other insurance-

Table of Contents

related fees generated through its own insurance carrier; (3) move-related service revenue through feesreceived for connecting homeowners to service providers during time of a move including movers, TV/Internet, warranty, and security monitoring providers and for certain move related services for providing select services directly to the homeowner; (4) post-move related revenue in the form of fees earned from introducing homeowners to home service professionals including handymen, plumbers, electricians, roofers etc., and for certain projects for providing select services directly to the homeowner.

Software and service subscription revenue primarily relates to subscriptions to the Company’s software offerings across its verticals as well as ~~assumptions made by,~~marketing software and ~~information currently available~~services. The Company’s subscription arrangements for this revenue stream do not provide the customer with the right to take possession of the software supporting the cloud-based application services. The Company’s standard subscription contracts are monthly contracts in which pricing is based on a specified price per inspection completed through the software. Marketing software and services are primarily contractual monthly recurring billings. Fees earned for providing access to the subscription software are non-refundable and there is no right of return. Revenue is recognized based on the amount which the Company is entitled to for providing access to the subscription software during the monthly contract term.

The Insurance segment offers various property-related insurance policies through its own risk-bearing carrier and independent agency as well as a risk-bearing home warranty company. Third-party insurance companies pay Porch Company’s agency upfront and renewal commissions for selling their policies, reinsurers pay the Company ceding commissions when premiums are ceded from owned insurance products, and revenues are earned in the form of policy premiums collected from insureds from owned insurance products. The Insurance segment also includes home warranty revenue which mainly consists of premiums paid by warranty customers for the Company’s home warranty products.

Move-related transactions revenue arises when the Company connects service providers with homeowners that meet pre-defined criteria and may be looking for relevant services. Service providers include movers, TV/Internet, warranty, and security monitoring providers. The Company earns revenue when consumers purchase services from third-party providers. For moving products where the Company manages the process of selecting the service provider and setting the price, the Company generally invoices for projects on a fixed fee or time and materials basis.

Post-move-related transaction revenue includes fees earned from introducing consumers to home service providers as well as directly to the homeowner when the Company manages the service. Revenue generated from service providers is recognized at a point in time upon the connection of a homeowner to the service provider. The Company generally invoices for managed services projects on a fixed fee or time and materials basis.

Total Costs and Expenses

Operating expenses

Operating expenses are categorized into four categories:

●

Cost of revenue;

●

Selling and marketing;

●

Product and technology; and

●

General and administrative.

The categories of operating expenses include both cash expenses and non-cash charges, such as stock-based compensation, depreciation and amortization. Depreciation and amortization are recorded in all operating expense categories, and consist of depreciation from property, equipment and software and intangible assets.

Table of Contents

Cost of revenue primarily consists of insurance claims losses and loss adjustment expenses, warranty claims, third-party providers for executing moving labor and handyman services when the Company is managing the job, data costs related to marketing campaigns, certain call center costs, credit card processing and merchant fees and operational cost of SaaS businesses.

Selling and marketing expenses primarily consist of payroll, employee benefits and stock-based compensation expense, and other headcount related costs associated with sales efforts directed toward companies and consumers, and deferred policy acquisition costs (“DAC”) of new and renewal insurance contracts. Also included are any direct costs to acquire customers, such as search engine optimization (“SEO”), marketing (“SEM”) costs and affiliate and partner leads.

The Company capitalizes DAC, which consists primarily of commissions, premium taxes, policy underwriting, and production expenses directly related to the successful acquisition by the Company’s insurance subsidiary of new or renewal insurance contracts. DAC are amortized to expense on a straight-line basis over the terms of the policies to which they relate, which is generally one year. DAC is also reduced by ceding commissions paid by reinsurance companies which represent recoveries of acquisition costs. DAC is periodically reviewed for recoverability and adjusted if necessary.

Product and technology development costs primarily consist of payroll, employee benefits, stock-based compensation expense, other headcount-related costs associated with product development, net of costs capitalized as internally developed software. Also included are cloud computing, hosting and other technology costs, software subscriptions, professional services and amortization of internally developed software.

General and administrative expenses primarily consist of expenses associated with functional departments for finance, legal, human resources and executive management. The primary categories of expenses include payroll, employee benefits, stock-based compensation expense and other headcount related costs, rent for office space, legal and professional fees, taxes, licenses and regulatory fees, merger and acquisition transaction costs, and other administrative costs.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported and disclosed in the unaudited condensed consolidated financial statements and accompanying notes. On an ongoing basis these estimates, which include, but are not limited to, estimated variable consideration for services performed, estimated lifetime value of the insurance agency commissions, current estimate for credit losses, depreciable lives for property and equipment, the valuation of and useful lives for acquired intangible assets, goodwill, the valuation allowance on deferred tax assets, assumptions used in stock-based compensation expense, unpaid losses for insurance claims and loss adjustment expenses, contingent consideration, earnout liabilities and private warrant liabilities, all of which are evaluated by management. Actual results could differ materially from those ~~contemplated~~estimates, judgments, and assumptions.

At least quarterly, the Company evaluates estimates and assumptions and makes changes accordingly. For information on our significant accounting policies, see Note 1 to the accompanying Porch unaudited condensed consolidated financial statements.

During the three months ended March 31, 2022, there were no changes to the critical accounting policies discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed on March 16, 2022. For a complete discussion of our critical accounting policies, refer to Item 7 in the 2021 Annual Report on Form 10-K.

Table of Contents

Results of Operations

Comparison of Three Months Ended March 31, 2022 and 2021

The following table sets forth our historical operating results for the periods indicated:


	Three Months Ended March 31,					$	%
	2022		2021		Change		Change

	(dollar amounts in thousands)
Revenue	$	62,561	$	26,742	$	35,819	134	%
Operating expenses:
Cost of revenue		21,189		5,930		15,259	257	%
Selling and marketing		25,743		14,638		11,105	76	%
Product and technology		14,231		11,789		2,442	21	%
General and administrative		26,699		24,016		2,683	11	%
Total operating expenses		87,862		56,373		31,489	56	%
Operating loss		(25,301)		(29,631)		4,330	(15)	%
Other income (expense):
Interest expense		(2,293)		(1,223)		(1,070)	87	%
Change in fair value of earnout liability		11,179		(18,770)		29,949	NM
Change in fair value of private warrant liability		10,189		(15,910)		26,099	NM
Investment income and realized gains, net of investment expenses		197		—		197	NM
Other income, net		56		83		(27)	(33)	%
Total other income (expense)		19,328		(35,820)		55,148	(154)	%
Loss before income taxes		(5,973)		(65,451)		59,478	(91)	%
Income tax benefit		177		350		(173)	(49)	%
Net loss	$	(5,796)	$	(65,101)	$	59,305	(91)	%

NM = Not Meaningful

Revenue

Total revenue increased by $35.8 million, or 134%, from $26.7 million in the three months ended March 31, 2021 to $62.6 million in the three months ended March 31, 2022. During 2021, the Company acquired a number of businesses with an aggregate purchase price of $346.3 million as disclosed in the Company’s Annual Report on Form 10-K. These acquisitions included V12 Data (acquired in January 2021), HOA (acquired in April 2021), Rynoh (acquired in May 2021), AHP (acquired in September 2021) and Floify (acquired in October 2021). Other than V12 Data, these businesses were not owned by the ~~forward-looking statements~~Company during the three months ended March 31, 2021, therefore no revenue was recognized from these businesses during that period. Thus, the increase in revenue in 2022 is primarily driven by the 2021 acquisitions, by accelerated growth after acquisition and by organic growth.

During the quarter ended December 31, 2021, the Company corrected an immaterial error related to revenue from claims fees and contra claims expense, which was corrected in the fourth quarter of 2021. This error impacted revenue and cost of revenue for the three months ended June 30, 2021 and September 30, 2021. The correction did not impact operating loss or net loss in these periods, and did not have any impact on the three months ended March 31, 2021.

Table of Contents

The following table summarizes the impact of the correction by quarter (in thousands):


	Quarter ended
	March 31, 2021		June 30, 2021		September 30, 2021		December 31, 2021		Total
Revenue increase (decrease)	$	—	$	(3,400)	$	(2,300)	$	5,700	$	—
Cost of revenue increase (decrease)		—		3,400		2,300		(5,700)		—
Net loss impact	$	—	$	—	$	—	$	—	$	—

Cost of Revenue

Cost of revenue increased by $15.3 million, or 257%, from $5.9 million in the three months ended March 31, 2021 to $21.2 million in the three months ended March 31, 2022. The increase in the cost of revenue was primarily attributable to the 2021 acquisitions of V12 Data (acquired in January 2021), HOA (acquired in April 2021), Rynoh (acquired in May 2021), AHP (acquired in September 2021), and Floify (acquired in October 2021). Other than V12 Data, these businesses were not owned by the Company in the three months ended March 31, 2021, therefore no cost of revenue was recognized from these businesses during that period. Thus, the increase in cost of revenue in 2022 is primarily driven by the 2021 acquisitions, by accelerated growth after acquisition and by organic growth. As a percentage of revenue, cost of revenue represented 34% of revenue in the three months ended March 31, 2022 compared with 22% in the same period in 2021. Cost of revenue as a percentage of revenue is higher due to the mix shift in business with insurance as the claims and loss and loss adjustment expense is recorded in cost of revenue.

Selling and marketing

Selling and marketing expenses increased by $11.1 million, or 76%, from $14.6 million in the three months ended March 31, 2021 to $25.7 million in the three months ended March 31, 2022. The increase is due to $8.3 million related to the selling and marketing costs of the acquired businesses comprised of the underwriting and policy acquisition costs for HOA and additional selling and marketing expenses for V12, AHP, Floify and Rynoh. The increase was also due to a $1.5 million increase in amortization expense related to acquired intangibles. This was partially offset by a decrease of $1.5 million in stock-based compensation expenses. As a percentage of revenue, selling and marketing expenses represented 41% of revenue in the three months ended March 31, 2022 compared with 55% in the same period in 2021.The improvement in selling and marketing expenses as a percentage of revenue is due to the growing economies of scale across the Company’s vertical software and insurance segments.

Product and technology

Product and technology expenses increased by $2.4 million, or 21%, from $11.8 million in the three months ended March 31, 2021 to $14.2 million in the three months ended March 31, 2022. The increase is mainly due to a $2.0 million increase in amortization expense related to acquired intangibles and a $1.8 million increase in product and technology costs of the acquired businesses, most notably HOA. This was offset by $1.2 million lower stock-based compensation expense. As a percentage of revenue, product and technology expenses represented 23% of revenue in the three months ended March 31, 2022 compared with 44% in the same period in 2021. The improvement in product and technology expenses as a percentage of revenue is due to the growing economies of scale in the overall business.

General and administrative

General and administrative expenses increased by $2.7 million, or 11%, from $24.0 million in the three months ended March 31, 2021 to $26.7 million in the three months ended March 31, 2022, primarily due to costs related to increased hiring of corporate resources, audit and accounting fees, as well as consulting fees related to the ongoing SOX requirements. In the three months ended March 31, 2022, general and administrative expenses included $11.7 million related to the HOA, AHP, Floify and Rynoh, which were acquired in 2021, and $3.8 million attributable to increased corporate resources, investments in corporate systems and SOX implementation. In addition, during the three months ended March 31, 2022, there was a loss on revaluation of contingent consideration of $3.2 million, while during the three

Table of Contents

months ended March 31, 2021, there was a gain of $0.4 million. This was offset by stock-based compensation expense for the three months ended March 31, 2022, which was $8.4 million lower than in the same period in 2021.

Interest expense, net

Interest expense increased by $1.1 million, or 87%, from $1.2 million in the three months ended March 31, 2021 to $2.3 million in the three months ended March 31, 2022. This was primarily due to issuance of $425 million of Convertible Senior Notes in September 2021, that in part was used to pay off the $42.1 million of Senior Secured Term Loans that were outstanding at March 31, 2021. The total level of interest-bearing debt balance was $425.6 million at January 1, 2022 and $50.8 million at January 1, 2021 and this higher outstanding debt balance was the primary reason for the increased interest expense.

Change in fair value of earnout liability

Changes in fair value of earnout liability were $11.2 million (gain) and $18.8 million (loss) in the three months ended March 31, 2022 and 2021, respectively. The decrease in fair value was primarily due to the decline in the stock price at March 31, 2022 as compared to March 31, 2021. During the three months ended March 31, 2021, $25.8 million of the earnout liability was reclassified to additional paid in capital as a result of ~~certain factors detailed~~a vesting event in ~~our filings with~~March 2021.

Change in fair value of private warrant liability

Changes in fair value of private warrant liability were $10.2 million (gain) and $15.9 million (loss) in the ~~SEC.~~three months ended March 31, 2022 and 2021, respectively. The decrease in fair value was primarily due to the decline in the stock price at March 31, 2022 as compared to March 31, 2021.

Investment income and realized gains, net of investment expenses

~~Overview~~Investment income and realized gains, net of investment expenses was $0.2 million in the three months ended March 31, 2022. In April 2021, the Company acquired HOA that maintains a short-term and long-term investment portfolio that generated investment income for nine months in 2021. The Company did not have any material investments prior to April 2021.

Income tax benefit

~~We are a blank check company incorporated as a Delaware corporation~~Income tax benefit of $0.2 million and ~~formed~~$0.4 million was recognized for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our initial business combination using cashthree months ended March 31, 2022 and 2021, respectively. The Company’s effective tax rates in both periods differs substantially from the ~~proceeds~~U.S. federal statutory tax rate of ~~our initial public offering and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection with our initial business combination (pursuant~~21% primarily due to ~~forward purchase agreements or backstop agreements we may enter into), shares issued~~a full valuation allowance related to the ~~owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.~~Company’s net deferred tax assets.

~~The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:~~

●

may significantly dilute the equity interest of investors in our initial public offering, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock;

●

~~may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;~~

●

could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;

●

~~may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and~~

●

~~may adversely affect prevailing market prices for our Class A common stock and/or warrants.~~

~~Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:~~

●

~~default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;~~

●

acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;

●

~~our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;~~

●

~~our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;~~

●

~~our inability to pay dividends on our common stock;~~

●

using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes;

●

~~limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;~~

●

~~increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;~~

●

~~limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and~~

●

~~other purposes and other disadvantages compared to our competitors who have less debt.~~

We expect to continue to incur significant costs in the pursuit of our initial business combination plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.

On November 26, 2019, we completed our initial public offering of 17,250,000 units, including 2,250,000 units that were issued pursuant to the underwriters’ full exercise of their over-allotment option. The units were sold at a price of $10.00 per unit, generating gross proceeds to us of $172.5 million. We incurred offering costs of approximately $10.1 million, inclusive of approximately $6.0 million in deferred underwriting commissions.

On November 26, 2019, simultaneously with the consummation of our initial public offering, we completed the private sale (the “private placement”) of 5,700,000 private placement warrants at a purchase price of $1.00 per warrant to our sponsor, generating gross proceeds to us of $5.7 million.

Upon the closing of our initial public offering, an aggregate of $172.5 million of the net proceeds from our initial public offering and the private placement was deposited in a trust account established for the benefit of our public stockholders (the “trust account”).

If we are unable to complete our initial business combination by May 26, 2021, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by May 26, 2021. The representative of the underwriters has agreed to waive its rights to the deferred underwriting commission held in the trust account in the event we do not complete our initial business combination by May 26, 2021 and, in such event, such amounts will be included with the funds held in the trust account that will be available to fund the redemption of the public shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than $10.00.

Our amended and restated certificate of incorporation provides that we will have only 18 months from the closing of our initial public offering (or until May 26, 2021) to complete our initial business combination. If we are unable to complete our initial business combination by May 26, 2021, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by May 26, 2021.

Segment Results of Operations

We ~~have neither engaged in any significant operations nor generated any~~operate our business as two reportable segments that are also our operating ~~revenue to date. Our only activities from inception related to~~segments: Vertical Software and Insurance. For additional information about our formation and our initial public offering, and since the closing of our initial public offering, the search for a prospective initial business combination. Although we have not generated operating revenue, we have generated non-operating incomesegments, see Note 13 in the ~~form~~notes to the unaudited condensed consolidated financial statements included in Part I, Item 1 of ~~investment income from investments held in the trust account. We expect to incur increased expenses as a result~~this Quarterly Report.

Table of ~~being a public company, as well as costs in the pursuit of an initial business combination.~~Contents

Segment Revenue


	Three Months Ended March 31, 2022
	Vertical Software Segment		Insurance Segment			Total
Revenue:
Software and service subscriptions	$	17,965	$	—	$	17,965
Move-related transactions (excluding insurance)		12,193		—		12,193
Post-move transactions		4,530		—		4,530
Insurance		—		27,873		27,873
Total revenue	$	34,688	$	27,873	$	62,561


	Three Months Ended March 31, 2021
	Vertical Software Segment		Insurance Segment			Total
Revenue:
Software and service subscriptions	$	10,880	$	—	$	10,880
Move-related transactions (excluding insurance)		8,961		—		8,961
Post-move transactions		5,096		—		5,096
Insurance		—		1,805		1,805
Total revenue	$	24,937	$	1,805	$	26,742

For the three months ended March 31, ~~2020, we had net income~~2022, Vertical Software segment revenues were $34.7 million or 55.5% of ~~approximately $546,000, which consisted of approximately $946,000~~total revenue. Software and service subscriptions revenue increased from $10.9 million to $18.0 million as the Company acquired a V12 Data in ~~investment income, offset~~January 2021, Rynoh in May 2021 and Floify in October 2021. Other than V12 Data, these businesses were not owned by approximately $130,000 in general and administrative expenses, $30,000 in related-party administrative expenses, approximately $52,000 in franchise tax expense and approximately $188,000 in income tax expense.

~~Liquidity and Capital Resources~~

~~As of~~the Company during the quarter ended March 31, ~~2020, we had approximately $1.2~~2021, and therefore no revenue was recognized from these businesses in the same period. Thus, the increase in revenue in 2022 is primarily driven by the 2021 acquisitions, by accelerated growth after acquisition and by organic growth.

Insurance segment revenues were $27.9 million or 44.6% of total revenue during the same period.The increase from $1.8 million in ~~our operating account, approximately $1.1~~the three months ended March 31, 2021 to $27.9 million ~~of investment income earned from investments held~~ in the ~~trust account that may be released~~three months ended March 31, 2022 is mainly due to ~~us to pay our taxes (less up to $100,000~~the acquisitions of ~~such net interest to pay dissolution expenses)~~HOA (acquired in April 2021) and AHP (acquired in September 2021), and ~~working capital~~the accelerated growth of ~~approximately $1.1 million (including approximately $271,000 of tax obligations).~~

Through March 31, 2020, our liquidity needs have been satisfied through proceeds of $25,000 from our sponsor for issuance of the founder shares, $225,000 in loans from our sponsor, and the net proceeds from the private placement not held in the trust account. The balance of $225,000 in loans was paid in full at the closing of our initial public offering on November 26, 2019.

Based on the foregoing, we believe that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of our initial business combination or one year from this filing. Over this time period, these ~~funds will be used for payment of general and administrative expenses~~businesses after acquisition, as well as the organic growth of the Company’s existing insurance operation.

Segment Adjusted EBITDA (Loss)

Segment Adjusted EBITDA (loss) is defined as revenue less operating expenses associated with ~~identifying~~our segments. Segment Adjusted EBITDA (loss) also excludes non-cash items, certain transactions that are not indicative of ongoing segment operating and ~~evaluating prospective initial business combination candidates, performing due diligence on prospective target businesses~~financial performance and ~~structuring, negotiating and consummating~~are not reflective of the Company’s core operations. See Note 13 in the notes to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report for additional information.


	Three Months Ended March 31,
		2022		2021
Segment adjusted EBITDA (loss):
Vertical Software	$	2,984	$	3,151
Insurance		3,286		508
Corporate and Other⁽¹⁾		(13,342)		(13,261)
Total segment adjusted EBITDA (loss)⁽²⁾	$	(7,072)	$	(9,602)

⁽¹⁾Includes costs that are not directly attributable to our ~~initial business combination.~~reportable segments, as well as certain shared costs.

⁽²⁾See reconciliation of adjusted EBITDA (loss) to net loss below.

Table of Contents

This Quarterly Report includes non-GAAP financial measures, such as Adjusted EBITDA (loss), Adjusted EBITDA (loss) as a ~~pandemic, based~~percent of revenue, and average revenue per monetized service.

The Company defines Adjusted EBITDA (loss) as net income (loss) adjusted for interest expense, net, income taxes, other expenses, net, depreciation and amortization, certain non-cash long-lived asset impairment charges, stock-based compensation expense and acquisition-related impacts, amortization of intangible assets, gains (losses) recognized on changes in the ~~rapid increase~~value of contingent consideration arrangements, if any, gain or loss on divestures and certain transaction costs. Adjusted EBITDA (loss) as a percent of revenue is defined as Adjusted EBITDA (loss) divided by GAAP total revenue. Average revenue per monetized services in ~~exposure globally. The full impact~~quarter is the average revenue generated per monetized service performed in a quarterly period. When calculating average revenue per monetized service in a quarter, average revenue is defined as total quarterly service transaction revenues generated from monetized services.

Company management uses these non-GAAP financial measures as supplemental measures of the ~~COVID-19 outbreak continues~~Company’s operating and financial performance, for internal budgeting and forecasting purposes, to ~~evolve.~~evaluate financial and strategic planning matters, and to establish certain performance goals for incentive programs. The ~~impact~~Company believes that the use of these non-GAAP financial measures provides investors with useful information to evaluate the ~~COVID-19 outbreak on our~~Company’s operating and financial performance and trends and in comparing Porch’s financial results with competitors, other similar companies and companies across different industries, many of ~~operations,~~which present similar non-GAAP financial ~~position~~measures to investors. However, the Company’s definitions and ~~cash flows will depend on~~methodology in calculating these non-GAAP measures may not be comparable to those used by other companies. In addition, the Company may modify the presentation of these non-GAAP financial measures in the future, ~~developments, including the duration~~ and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted for an extended period, our results of operations, financial position and cash flowsany such modification may be ~~materially adversely affected. Additionally, our ability~~material.

You should not consider these non-GAAP financial measures in isolation, as a substitute to ~~complete an initial business combination may be materially adversely affected due~~or superior to ~~significant governmental~~financial performance measures ~~being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown~~determined in accordance with GAAP. The principal limitation of ~~businesses~~these non-GAAP financial measures is that they exclude specified income and ~~quarantines, among others, which may limit our ability to have meetings with potential investors or affect the ability~~expenses, some of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial business combination in a timely manner. Our ability to consummate an initial business combination may also be dependent on the ability to raise additional equity and debt financing, which may be ~~impacted~~significant or material, that are required by GAAP to be recorded in the ~~COVID-19 outbreak~~Company’s consolidated financial statements. The Company may also incur future income or expenses similar to those excluded from these non-GAAP financial measures, and the ~~resulting market downturn.~~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.

~~Related Party Transactions~~

~~Founder Shares~~

~~In July 2019, our sponsor paid $25,000 in offering expenses on our behalf in exchange~~See the reconciliation tables below for more details regarding these non-GAAP financial measures, including the ~~issuance~~reconciliation of 3,881,250 founder shares. In October 2019, we effected a stock dividend for approximately .11 shares for each share of Class B common stock outstanding, resulting in our sponsor holding an aggregate of 4,312,500 founder shares (up to 562,500 shares of which were subject to forfeiturenon-GAAP financial measures to the extent the underwriters did not exercise their over-allotment option in full). On November 26, 2019, the underwriters exercised their over-allotment in full; thus, these founder shares were no longer subjectmost directly comparable GAAP financial measures.

Table of Contents

Revenue Less Cost of Revenue

The following table reconciles revenue less cost of revenue to forfeiture. The founder shares will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustments, and are subject to certain transfer restrictions, as described in more detail below.

Our initial stockholders have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of (A) one year after the completion of our initial business combination or (B) subsequent to our initial business combination, (x) if the last reported sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. Any permitted transferees will be subject to the same restrictions and other agreements of our initial stockholders with respect to any founder shares.

~~Private Placement Warrants~~

Simultaneously with the consummation of our initial public offering, we completed the private placement of warrants to our sponsor, generating gross proceeds of $5.7 million. Each Private Placement Warrant is exercisable for one share of our Class A common stock at an exercise price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants was added to the proceeds from our initial public offering held in the trust account. If our initial business combination is not completed by May 26, 2021, the proceeds from the sale of the Private Placement Warrants held in the trust account will be used to fund the redemption of the public shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless basis so long as they are held by the sponsor or its permitted transferees.

~~Our sponsor agreed, subject to limited exceptions, not to transfer, assign or sell any of its Private Placement Warrants until 30 days after the completion of our initial business combination.~~

~~Promissory Note – Related Party~~

On July 31, 2019, our sponsor agreed to loan us an aggregate of up to $300,000 to cover expenses related to the our initial public offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing and was due upon the completion of our initial public offering. We borrowed $225,000 under the Note. The Note balance was paid in full at closing of our initial public offering on November 26, 2019.

~~Administrative Support Agreement~~

We agreed to pay $10,000 a month for office space, utilities, and secretarial and administrative support to our sponsor. Services commenced on the date the securities were first listed on the Nasdaq and will terminate upon the earlier of our initial business combination or our liquidation. We incurred $30,000 for expenses in connection with such servicesoperating loss for the three months ended March 31, ~~2020, which is reflected~~2022 and 2021, respectively (dollar amounts in thousands):


	Three Months Ended March 31,
	2022		2021
Revenue	$	62,561	$	26,742
Less: Cost of revenue		(21,189)		(5,930)
Revenue less cost of revenue		41,372		20,812
Less: Selling and marketing costs		25,743		14,638
Less: Product and technology costs		14,231		11,789
Less: General and administrative costs		26,699		24,016
Total operating expenses	$	87,862	$	56,373
Operating loss	$	(25,301)	$	(29,631)

Revenue less cost of revenue increased by $20.6 million, or 98.8% from $20.8 million in the ~~accompanying statement of operations.~~

~~Critical Accounting Policies and Estimates~~

~~Investments Held in Trust Account~~

~~Our portfolio of investments held~~three months ended March 31, 2021 to $41.4 million in the ~~Trust Account are comprised~~three months ended March 31, 2022. During 2021, the Company acquired a number of ~~U.S. government securities, within the meaning set forth in Section 2(a)(16)~~businesses with an aggregate purchase price of ~~the Investment Company Act, with a maturity of 185 days or less, and money market funds that invest solely in U.S. government securities. Our investments held~~$346.3 million as disclosed in the ~~Trust Account are classified~~Company’s Annual Report on Form 10-K. These acquisitions included V12 Data (acquired in January 2021), HOA (acquired in April 2021), Rynoh (acquired in May 2021), AHP (acquired in September 2021) and Floify (acquired in October 2021). Other than V12 Data, these businesses were not owned by the Company in the three months ended March 31, 2021, therefore no revenue less cost of revenue was recognized from these businesses during that period. Thus, the increase revenue less cost of revenue in 2022 is primarily driven by the 2021 acquisitions, by accelerated growth after acquisition and by organic growth.

Adjusted EBITDA (loss)

The following table reconciles net loss to Adjusted EBITDA (loss) for the three months ended March 31, 2022 and 2021, respectively (dollar amounts in thousands):


	Three Months Ended March 31,
	2022			2021
Net loss	$	(5,796)		$	(65,101)
Interest expense		2,293			1,223
Income tax benefit		(177)			(350)
Depreciation and amortization		6,483			2,463
Other expense (income), net		(56)			(83)
Non-cash long-lived asset impairment charge		69			68
Non-cash stock-based compensation expense		5,854			16,835
Revaluation of contingent consideration		3,205			(355)
Revaluation of earnout liability		(11,179)			18,770
Revaluation of private warrant liability		(10,189)			15,910
Acquisition and related expense		895			728
Non-cash bonus expense		1,526			290
Adjusted EBITDA (loss)	$	(7,072)		$	(9,602)
Adjusted EBITDA (loss) as a percentage of revenue		(11)	%		(36)	%

Adjusted EBITDA (loss) for the three months ended March 31, 2022 was $7.1 million, a $2.5 million improvement from Adjusted EBITDA (loss) of $9.6 million for the same period in 2021. During 2021, the Company acquired a number of businesses with an aggregate purchase price of $346.3 million as ~~trading securities. Trading securities are presented~~disclosed in the Company’s Annual Report on Form 10-K. These acquisitions included V12 Data (acquired in January 2021), HOA (acquired in April 2021), Rynoh

Table of Contents

(acquired in May 2021), AHP (acquired in September 2021) and Floify (acquired in October 2021). Other than V12 Data, these businesses were not owned by the ~~balance sheets at fair value at~~Company in the ~~end of each reporting~~three months ended March 31, 2021, therefore no revenue and Adjusted EBITDA (loss) was recognized from these businesses during that period. ~~Gains~~Thus, the improvement in Adjusted EBITDA (loss) in 2022 is primarily driven by the 2021 acquisitions, offset by investments in sales and ~~losses resulting~~marketing and product and technology related to consumer experience, app build out, data platforms and investments in establishing and maintaining SOX and other internal controls across IT and accounting organizations.

Liquidity and Capital Resources

Since inception, as a private company, we have financed our operations primarily from the change in fair value of these securities is included in investment income from investments held in Trust Account in our statement of operations. The fair value for trading securities is determined using quoted market prices in active markets.

~~Class A Common Stock Subject to Possible Redemption~~

~~We account for the Class A common stock subject to possible redemption in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 480, “~~~~Distinguishing Liabilities from Equity~~.” Shares of Class A common stock subject to mandatory redemption (if any) are classified as a liability and measured at fair value. Shares of conditionally redeemable Class A common stock (including shares of Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. We recognize changes in redemption value immediately as they occur and will adjust the carrying value of the security at the end of each reporting period. Increases or decreases in the carrying valuesales of redeemable ~~shares~~convertible preferred stock and convertible promissory notes, and proceeds from the senior secured term loans. On December 23, 2020, the Company received approximately $269.5 million of ~~Class A common~~aggregate cash proceeds from recapitalization, net of transaction costs, as it began trading publicly.

During 2021, the Company completed a private offering of $425 million aggregate principal amounts of convertible debt maturing in 2026, and raised $126.7 million and $4.3 million from exercise of public warrants and stock shall be affected by charges against additional paid-in capital. Accordingly, as of March 31, 2020 and December 31, 2019, 16,370,658 and 16,316,085 shares of Class A common stock subject to conditional redemption, respectively, are presented as temporary equity, outside of the stockholders’ equity section of our balance sheet.

~~Recent Accounting Pronouncements~~

~~In December 2019, the FASB issued ASU No. 2019-12, “~~~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~” (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statements and related disclosures.

~~We do not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact on our financial statements.~~

~~Off-Balance Sheet Arrangements; Commitments and Contractual Obligations~~

options, respectively.

As of March 31, ~~2020,~~2022, the Company had cash and cash equivalents of $292.4 million and $10.7 million of restricted cash, respectively. Restricted cash consists of funds held for the payment of possible warranty claims as required in 25 states; funds held in certificates of deposits and money market mutual funds pledged to, or held in escrow with, certain state insurance regulators in connection with our insurance operations; customer deposits; and acquisition indemnifications.

The Company has incurred net losses since its inception, and has an accumulated deficit at March 31, 2022 and December 31, ~~2019, we did~~2021 totaling $429.9 million and $424.1 million, respectively.

As of March 31, 2022 and December 31, 2021, the Company had $425.5 million and $425.6 million aggregate principal amount outstanding in convertible notes and promissory notes, respectively.

Based on the Company’s current operating and growth plan, management believes cash and cash equivalents at March 31, 2022, are sufficient to finance the Company’s operations, planned capital expenditures, working capital requirements and debt service obligations for at least the next 12 months. As the Company’s operations evolve and continue its growth strategy, including through acquisitions, the Company may elect or need to obtain alternative sources of capital, and it may finance additional liquidity needs in the future through one or more equity or debt financings. The Company may not ~~have~~be able to obtain equity or additional debt financing in the future when needed or, if available, the terms may not be satisfactory to the Company or could be dilutive to its stockholders.

Porch Group, Inc. is a holding company that transacts a majority of its business through operating subsidiaries, including insurance subsidiaries. Consequently, the Company’s ability to pay dividends and expenses is largely dependent on dividends or other distributions from its subsidiaries. The Company’s insurance company subsidiaries are highly regulated and are restricted by statute as to the amount of dividends they may pay without the prior approval of their respective regulatory authorities. As of March 31, 2022, cash and cash equivalents of $35.5 million and investments held by these companies was $65.3 million.

Table of Contents

The following table provides a summary of cash flow data for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,				$		%
	2022		2021		Change		Change

	(dollar amounts in thousands)
Net cash used in operating activities	$	(13,291)	$	(22,935)	$	9,644	42	%
Net cash used in investing activities		(8,077)		(23,714)		15,637	66	%
Net cash (used) provided by financing activities		(389)		72,579		(72,968)	NM
Change in cash, cash equivalents and restricted cash	$	(21,757)	$	25,930	$	(47,687)	NM

Operating Cash Flows

Net cash used in operating activities was $13.3 million for the three months ended March 31, 2022. Net cash used in operating activities consists of net loss of $5.8 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include stock-based compensation expense of $5.9 million, depreciation and amortization of $6.5 million, and fair value adjustments to earnout liability and private warrant liability of $11.2 million (gain) and $10.2 million (gain), respectively. Net changes in working capital were a use of cash of $4.1 million, primarily due to increases in current liabilities and reinsurance balance due, offset by losses and loss adjustment expense reserves.

Net cash used in operating activities was $22.9 million for the three months ended March 31, 2021. Net cash used in operating activities consists of net loss of $65.1 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include stock-based compensation expense of $16.8 million, depreciation and amortization of $2.5 million, non-cash accrued and payment-in-kind interest of $0.3 million, fair value adjustments to earnout liability and private warrant liability of $18.8 million (loss) and $15.9 million (loss), respectively. Net changes in working capital were a use of cash of $11.6 million, primarily due to increases in current liabilities.

Investing Cash Flows

Net cash used in investing activities was $8.1 million for the three months ended March 31, 2022. Net cash used in investing activities is primarily related to purchases of investments of $8.8 million, investments in developing internal-use software of $1.6 million, purchases of property and equipment of $1.2 million, and a $5.0 million non-refundable deposit for an acquisition. This was offset by the cash inflows related to maturities and sales of investments of $8.4 million.

Net cash used in investing activities was $23.7 million for the three months ended March 31, 2021. Net cash used in investing activities is primarily related to investments to develop internal-use software of $0.8 million and acquisitions, net of cash acquired of $22.9 million, including V12 Data.

Financing Cash Flows

Net cash used in financing activities was $0.4 million for the three months ended March 31, 2022. Net cash used in financing activities is primarily related to shares repurchased to pay income tax withholdings upon vesting of RSUs of $0.7 million and debt repayments of $0.2 million, partially offset by proceeds from exercises of stock options of $0.5 million.

Net cash provided by financing activities was $72.6 million for the three months ended March 31, 2021. Net cash provided by financing activities is primarily related to exercises of warrants and stock options of $89.9 million, offset by shares repurchased to pay income tax withholdings upon vesting of RSUs of $14.6 million and debt repayments of $0.2 million.

Table of Contents

Off-Balance Sheet Arrangements

Since the date of incorporation, the Company has not engaged in any off-balance sheet arrangements, as defined in ~~Item 303(a)(4)(ii)~~the rules and regulations of ~~Regulation S-K~~the SEC.

Recent Accounting Pronouncements

See Note 1 to our unaudited condensed consolidated financial statements as of and ~~did not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities.~~

~~JOBS Act~~

~~On April 5, 2012,~~for the ~~Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements~~three months ended March 31, 2022 for ~~qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act and are allowed to comply with new or revised~~more information about recent accounting pronouncements, ~~based~~the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial ~~statements may not be comparable to those~~condition and our results of ~~companies that comply with new or revised accounting pronouncements as of public company effective dates.~~operations.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following November 26, 2024, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is 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.

~~We are~~Interest Rate Risk

The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. As of March 31, 2022, and December 31, 2021, the Company has interest-bearing debt of $425.5 million and $425.6 million, respectively. Our 0.75% Convertible Senior Notes due 2026 (the “2026 Notes”) have a ~~smaller reporting company~~principal balance of $425 million as ~~defined~~of March 31, 2022, have a fixed coupon rate of 75 basis points, and effective interest rate of 1.3%. As such, interest expense on the 2026 Notes will not change if market interest rates increase. Other debt as of March 31, 2022 totaled $0.5 million and is variable-rate.

A one percent increase in ~~Rule 12b-2~~interest rates in our variable rate indebtedness would result in a nominal change in annual interest expense.

As of March 31, 2022, the ~~Exchange Act~~Company’s insurance subsidiary has a $65.3 million portfolio of fixed income securities and an unrealized loss of $2.8 million, as described in Note 3. In a rising interest rate environment, the portfolio would result in unrealized losses.

At March 31, 2022, accounts receivable and reinsurance balances due were $30.0 million and $239.7 million, respectively, were not interest-bearing assets and are generally collected in less than 180 days. As such, the Company does not ~~required~~consider these assets to ~~provide~~have material interest rate risk.

Inflation Risk

Due to significant increases in the ~~information otherwise required by this item.~~consumer price index in the past twelve months, supply chain disruptions, war in Ukraine and other geo-political events, the Company believes that inflation may have a material impact on its business in the future.

Foreign Currency Risk

There was no material foreign currency risk for three months ended March 31, 2022. The Company’s activities to date have been conducted in the United States.

Table of Contents

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~Disclosure controls are procedures that are designed~~Under the supervision and with the ~~objective~~participation of ~~ensuring~~our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2022, which is the end of the period covered by this Quarterly Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures to ensure that information required to be disclosed by the Company in ~~our~~ reports ~~filed~~we file or submit under the Exchange Act ~~such as this report,~~ is (i) recorded, processed, summarized, evaluated and reported, as applicable, within the time ~~period~~periods specified in the ~~SEC’s~~United States Securities and Exchange Commission’s rules and ~~forms. Disclosure controls are also designed with the objective of ensuring that such information is~~forms and (ii) accumulated and communicated to ~~our~~the Company’s management, including the ~~chief executive officer~~Company’s Chief Executive Officer and ~~chief financial officer,~~Chief Financial Officer, as appropriate to allow timely decisions regarding required ~~disclosure. Our management evaluated, with the participation of our executive officers (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures~~disclosures were not effective as of March 31, ~~2020, pursuant~~2022 due to ~~Rule 13a-15(b) under~~ the ~~Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of March 31, 2020, our disclosure controls and procedures were effective.~~

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitationsmaterial weaknesses in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any.

~~Management’s Report on Internal Controls over Financial Reporting~~

~~This report does not include a report of management’s assessment regarding~~ internal control over financial reporting ~~or an attestation report of our registered public accounting firm due to a transition period established by the rules~~described in Part II, Item 9A of the ~~Commission~~Annual Report on Form 10-K for ~~newly public companies.~~the fiscal year ended December 31, 2021 filed with the SEC on March 16, 2022.

Remediation Plan

Our remediation efforts for these material weaknesses have included the following:

●

consolidation of relevant financial systems across our internal control framework;

●

investments to upgrade or replace existing systems which do not have the appropriate infrastructure to meet the requirements of our internal control framework;

●

expanding the available resources at the Company with experience designing and implementing control activities, including information technology general controls and automated controls, through hiring and use of third-party consultants and specialists;

●

recruiting and hiring additional personnel with the appropriate skills and experience to operate the internal controls required by the nature, pace, and complexity of our business, and

●

perform ongoing training with control performers to improve documentation that supports effective control activities, including evidence of the completeness and accuracy of information produced by the entity.

These remediation measures may be time consuming and costly. In addition, there is no assurance that we will be successful in remediating the material weakness.We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to address any other matters we identify.

Changes in Internal Control over Financial Reporting

~~There were~~Except for actions taken under the Remediation Plan described above in this Part I, Item 4, there has been no ~~changes~~change in our internal control over financial reporting (as ~~such term is~~ defined in Rules 13a-15(f) and 15d-15(f) ofunder the Exchange Act) during ~~the~~our most recent fiscal quarter that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

During 2022, the Company continued to take actions on initiatives to improve the internal control environment, which started in 2021. Specifically, we formed an internal working group to detail and implement specific remediation plans for these control deficiencies, engaged with outside consultants to provide advice and assistance, and hired additional personnel to perform and monitor internal control activity.

Table of Contents

Limitations on Effectiveness of Controls and Procedures

As specified above, the Company disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Company 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.

Table of Contents

PART ~~II—~~II — OTHER INFORMATION

Item 1. Legal Proceedings

See Note 12 (“Commitments and Contingencies”) to Part I, Item 1 of this Quarterly Report, which is incorporated by reference into this Part II, Item 1, for a description of certain litigation and legal proceedings.

ToIn addition, in the ~~knowledge~~ordinary course of ~~our management, there is no~~business, Porch and its subsidiaries are (or may become) parties to litigation ~~currently pending against us,~~involving property, personal injury, contract, intellectual property and other claims, stockholder derivative actions, class action lawsuits and other matters. The amounts that may be recovered in such matters may be subject to insurance coverage. Although the results of legal proceedings and claims cannot be predicted with certainty, neither Porch nor any of ~~our officers~~its subsidiaries is currently a party to any legal proceedings the outcome of which, we believe, if determined adversely to the Company, would individually or ~~directors~~ in ~~their capacity as such~~the aggregate have a material adverse effect on the business, financial condition or ~~against any~~results of ~~our property.~~operations.

Item 1A. Risk Factors

As of May 10, 2022, the ~~date~~Company’s risk factors have not materially changed from those described in Part 1, Item 1A of ~~this Quarterly~~the Annual Report on Form ~~10-Q, except as set forth below, there have been no material changes to~~10-K for the ~~risk factors disclosed in our Form 10-K~~fiscal year ended December 31, 2021 filed with the SEC on March ~~20, 2020.~~16, 2022.

~~Our search for a business combination may be materially adversely affected by the recent COVID-19 outbreak.~~

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted for an extended period, the Company’s financial position, results of operations and cash flows may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Table of Contents

Item 6. Exhibits

~~We hereby file~~The following exhibits are filed as part of, or incorporated by reference into, this ~~report the exhibits listed in the attached Exhibit Index. Copies of such material can be obtained~~Quarterly Report on ~~the SEC website at www.sec.gov.~~Form 10-Q.

~~Exhibit Number~~			~~Description~~
~~31.1~~ Exhibit No.		Description

31.1*		Certification of ~~the Co-Principal~~Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).*Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
~~31.2~~
31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of the ~~Co-Principal~~Sarbanes-Oxley Act of 2002

32.1**		Certification of Chief Executive Officer ~~and Principal~~Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).*Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~32.1~~			Certification of the Co-Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.**
~~32.2~~ 101.INS*			~~Certification of~~ XBRL Instance Document – the Co-Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.**instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
~~101.INS~~			XBRL Instance Document*
~~101.SCH~~ 101.SCH*			XBRL Taxonomy Extension Schema*Schema Document
~~101.CAL~~
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase*Linkbase Document
~~101.LAB~~
101.DEF*		XBRL Taxonomy Label Linkbase*Extension Definition Linkbase Document
~~101.PRE~~			XBRL Definition Linkbase Document*
~~101.DEF~~ 101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL ~~Definition~~Taxonomy Extension Presentation Linkbase Document*Document
104*	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

*	~~Filed herewith~~

~~Furnished herewith~~

* Filed herewith.

** ThesecertificationsarefurnishedtotheSECpursuanttoSection906oftheSarbanes-OxleyActof2002andaredeemednotfiledforpurposesof Section18oftheSecuritiesExchangeActof1934,asamended,norshalltheybedeemedincorporatedbyreferenceinanyfilingunderthe SecuritiesActof1933,exceptasshallbeexpresslysetforthbyspecificreferenceinsuchfiling.

Table of Contents

SIGNATURES

Pursuant to the requirements of ~~Section 13 or 15(d) of~~ the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this report to be signed on its behalf by the undersigned, ~~thereunto~~ duly authorized.

Date: May 10, 2022

	~~PROPTECH ACQUISITION CORPORATION~~
	PORCH GROUP, INC.
~~Date: May 13, 2020~~	~~/s/ Thomas D. Hennessy~~
	~~Name:~~ By:	~~Thomas D. Hennessy~~ /s/ Martin L. Heimbigner
	~~Title:~~	~~Co-Chief Executive~~Name:	Martin L. Heimbigner
	Title:	Chief Financial Officer ~~and President~~
		(~~Co-Principal Executive~~Principal Financial Officer)

��

~~3485 N. Pines Way, Suite 110~~ ~~Wilson, WY~~		~~83104~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~


Title of ~~each class~~Each Class	Trading symbol	~~Trading Symbol(s)~~	Name of ~~each exchange~~Exchange on which registered
~~Class A~~ Common Stock, par value $0.0001 per share	PRCH	~~PTAC~~	The Nasdaq Stock Market LLC
~~Redeemable Warrants~~		~~PTACW~~	~~The Nasdaq Stock Market LLC~~
~~Units, each consisting of one share of Class A Common Stock and one-half of one Redeemable Warrant~~		~~PTACU~~	~~The Nasdaq Stock Market LLC~~


Large accelerated filer	☐ ☒	Accelerated filer	☐

Non-accelerated filer	☒ ☐	Smaller reporting company	☒
☐		Emerging growth company	☒ ☐