UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2021~~March 31, 2022

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39142

Porch Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware	83-2587663
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

411 1^st Avenue S., Suite 501,Seattle, WA98104

(Address of Principal Executive Offices) (Zip Code)

(855) 767-2400

(Registrant’s telephone number, including area code)

2200 1^st Avenue SS.., Suite 300, Seattle, WA 98134

~~(Address of Principal Executive Offices)~~

(
~~855~~) ~~767-2400~~

~~(Registrant’s telephone number)~~

~~N/A~~
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading symbol	Name of Exchange on which registered
Common Stock, par value $0.0001 per share	PRCH	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant

was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐☒	Accelerated filer	☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the ~~Registrant’s Common Stock~~registrant’s common stock as of ~~August 12, 2021~~May 6, 2022 was ~~96,734,221.~~99,136,900.

Table of Contents

Table of Contents

		Page

Part I.	Financial Information	3

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	3

	Unaudited Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	4

	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	5

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity ~~(Deficit)~~ for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	6

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	78

	Notes to Unaudited Condensed Consolidated Financial Statements	910

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3630

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4945

Item 4.	Controls and Procedures	4946

Part II.	Other Information	5148

Item 1.	Legal Proceedings	5148

Item 1A.	Risk Factors	5248

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6148

Item 3.	Defaults Upon Senior Securities	6148

Item 4.	Mine Safety Disclosures	6148

Item 5.	Other Information	6148

Item 6.	Exhibits	6249

Exhibit Index		6249

Signatures		6350

Table of Contents

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

PORCH GROUP, INC.

Condensed Consolidated Balance Sheets

(all numbers in thousands, except share amounts)


	June 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Assets	(unaudited)
Current assets
Cash and cash equivalents	$	150,201	$	196,046	$	292,373	$	315,741
Accounts receivable, net		22,982		4,268		29,996		28,767
Short-term investments		10,149		—		8,462		9,251
Reinsurance balance due		307,956		—		239,739		228,416
Prepaid expenses and other current assets		6,844		4,080		21,087		14,338
Restricted cash		2,222		11,407		10,162		8,551
Total current assets		500,354		215,801		601,819		605,064
Property, equipment, and software, net		7,888		4,593		8,340		6,666
Operating lease right-of-use assets						3,922		4,504
Goodwill		120,961		28,289		226,576		225,654
Long-term investments		57,243		—		56,865		58,324
Intangible assets, net		84,670		15,961		124,306		129,830
Restricted cash, non-current						500		500
Long-term insurance commissions receivable		6,140		3,365		9,061		7,521
Other assets		368		378		5,373		684
Total assets	$	777,624	$	268,387	$	1,036,762	$	1,038,747

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	4,621	$	9,203	$	8,016	$	6,965
Accrued expenses and other current liabilities		25,670		9,905		35,029		37,675
Deferred revenue		162,627		5,208		198,857		201,085
Refundable customer deposit		2,299		2,664		16,686		15,274
Current portion of long-term debt		104		4,746		150		150
Losses and loss adjustment expense reserves		115,500		—		79,608		61,949
Other insurance liabilities, current		106,208		—		43,049		40,024
Total current liabilities		417,029		31,726		381,395		363,122
Long-term debt		43,834		43,237		415,002		414,585
Refundable customer deposit, non-current		378		529
Operating lease liabilities, non-current						2,267		2,694
Earnout liability, at fair value		47,224		50,238		2,687		13,866
Private warrant liability, at fair value		34,903		31,534		5,004		15,193
Other liabilities (includes $2,569 and $3,549 at fair value, respectively)		5,486		3,798
Other liabilities (includes $12,822 and $9,617 at fair value, respectively)						15,528		12,242
Total liabilities		548,854		161,062		821,883		821,702
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 12)
Stockholders’ equity
Common stock, $0.0001 par value:		10		8		10		10
Authorized shares – 400,000,000 and 400,000,000, respectively
Issued and outstanding shares – 96,293,416 and 81,669,151, respectively
Issued and outstanding shares – 98,297,186 and 97,961,597, respectively
Additional paid-in capital		627,396		424,823		647,551		641,406
Accumulated other comprehensive income		267		—
Accumulated other comprehensive loss						(2,774)		(259)
Accumulated deficit		(398,903)		(317,506)		(429,908)		(424,112)
Total stockholders’ equity		228,770		107,325		214,879		217,045
Total liabilities and stockholders’ equity	$	777,624	$	268,387	$	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.

Condensed Consolidated Statements of Operations

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


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2021		2020		2021		2020		2022		2021
Revenue	$	51,340	$	17,122	$	78,083	$	32,196	$	62,561	$	26,742
Operating expenses⁽¹⁾:
Cost of revenue		19,500		3,792		25,429		7,891		21,189		5,930
Selling and marketing		23,122		8,787		37,762		21,640		25,743		14,638
Product and technology		11,050		5,071		22,841		12,423		14,231		11,789
General and administrative		20,611		5,893		44,625		10,049		26,699		24,016
Gain on divestiture of businesses		—		(1,442)		—		(1,442)
Total operating expenses		74,283		22,101		130,658		50,561		87,862		56,373
Operating loss		(22,943)		(4,979)		(52,575)		(18,365)		(25,301)		(29,631)
Other income (expense):
Interest expense		(1,216)		(3,291)		(2,439)		(6,377)		(2,293)		(1,223)
Change in fair value of earnout liability		(4,032)		—		(22,801)		—		11,179		(18,770)
Change in fair value of private warrant liability		(4,303)		—		(20,212)		—		10,189		(15,910)
Gain on extinguishment of debt		8,243		3,856		8,243		3,609
Investment income and realized gains		387		—		397		—
Other income (expense), net		(165)		(1,841)		(91)		(3,468)
Total other expense		(1,084)		(1,276)		(36,904)		(6,236)
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		(24,027)		(6,255)		(89,479)		(24,601)		(5,973)		(65,451)
Income tax benefit (expense)		7,731		(3)		8,081		(24)
Income tax benefit										177		350
Net loss	$	(16,296)	$	(6,258)	$	(81,398)	$	(24,625)	$	(5,796)	$	(65,101)

Net loss attributable per share to common stockholders:
Basic	$	(0.17)	$	(0.18)	$	(0.89)	$	(0.70)
Diluted	$	(0.17)	$	(0.18)	$	(0.89)	$	(0.70)
Loss per share - basic and diluted (Note 14)									$	(0.06)	$	(0.76)

Weighted-average shares used in computing net loss attributable per share to common stockholders:
Basic		95,221,928		35,478,347		91,483,053		35,117,130
Diluted		95,221,928		35,478,347		91,483,053		35,117,130
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 June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2021		2020		2021		2020		2022		2021
Cost of revenue	$	—	$	—	$	1	$	—	$	—	$	1
Selling and marketing		1,424		48		3,506		98		632		2,082
Product and technology		1,836		105		4,154		504		1,137		2,317
General and administrative		3,382		209		15,816		432		4,085		12,435
	$	6,642	$	362	$	23,477	$	1,034	$	5,854	$	16,835

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

Table of Contents

PORCH GROUP, INC.

Condensed Consolidated Statements of Comprehensive Loss

(all numbers in thousands, 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)

Table of Contents

PORCH GROUP, INC.

Condensed Consolidated Statements of Stockholders’ Equity

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

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020
Net loss

$
(16,296)

$
(6,258)

$
(81,398)

$
(24,625)
Other comprehensive income:

Current period change in net unrealized gain (loss), net of tax (expense) benefit

267

—

267

—
Change in fair value of convertible promissory notes due to own credit

—

(3,856)

—

—
Comprehensive loss

$
(16,029)

$
(10,114)

$
(81,131)

$
(24,625)


								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

PORCH GROUP, INC.

Condensed Consolidated Statements of ~~Stockholders’ Equity~~ ~~(Deficit)~~Cash Flows

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

`




Additional





Total

Common Stock

Paid-in

Accumulated

Accumulated Other

Stockholders’


Shares

Amount

Capital

Deficit

Comprehensive Income

Equity (Deficit)
Balances as of December 31, 2019⁽¹⁾

34,197,822

$
3

$
203,492

$
(263,474)

$
—

$
(59,979)
Net loss

—

—

—

(18,367)

—

(18,367)
Other comprehensive income

—

—

—

—

3,856

3,856
Stock-based compensation

—

—

672

—

—

672
Issuance of Series C redeemable convertible preferred stock⁽¹⁾

671,836

—

4,714

—

—

4,714
Conversion of convertible notes to Series C redeemable convertible preferred stock⁽¹⁾

198,750

—

1,436

—

—

1,436
Vesting of restricted stock awards issued for acquisitions

472,141

—

—

—

—

—
Issuance of common stock warrants

—

—

44

—

—

44
Exercise of stock options

8,409

—

1

—

—

1
Balances as of March 31, 2020

35,548,958

$
3

$
210,359

$
(281,841)

$
3,856

$
(67,623)
Net loss

—

—

—

(6,258)

(6,258)
Other comprehensive income

—

—

—

—

(3,856)

(3,856)
Stock-based compensation

—

—

362

—

362
Issuance of common stock for acquisitions

11,744

—

39

—

—

39
Exercise of stock options

1,174

—

—

—

—

—
Balances as of June 30, 2020

35,561,876

$
3

$
210,760

$
(288,099)

$
—

$
(77,336)

Balances as of December 31, 2020

81,669,151

$
8

$
424,823

$
(317,506)

$
—

$
107,325
Net loss

—

—

—

(65,101)

—

(65,101)
Other comprehensive income

—

—

—

—

—
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 units

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
Net loss

—

—

—

(16,296)

—

(16,296)
Other comprehensive income

—

—

—

—

267

267
Stock-based compensation

—

—

2,466

—

—

2,466
Stock-based compensation - earnout

—

—

4,176

—

—

4,176
Issuance of common stock for acquisitions

1,292,441

—

28,372

—

—

28,372
Reclassification of private warrant liability upon exercise

—

—

16,843

—

—

16,843
Vesting of restricted stock units

33,182

—

—

—

—

—
Exercise of stock warrants

2,862,312

1

33,761

—

—

33,762
Exercise of stock options

946,392

—

2,227

—

—

2,227
Income tax withholdings

(296,643)

—

(5,194)

—

—

(5,194)
Transaction costs

—

—

140

—

—

140
Balances as of June 30, 2021

96,293,416

$
10

$
627,396

$
(398,903)

$
267

$
228,770

⁽¹⁾~~Issuance of redeemable convertible preferred stock and convertible preferred stock warrants have been retroactively restated to give effect to the recapitalization transaction.~~

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

~~Table of Contents~~

~~PORCH GROUP, INC.~~

~~Condensed Consolidated Statements of Cash Flows~~

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


	Six Months Ended June 30,				Three Months Ended March 31,
	2021		2020		2022		2021
Cash flows from operating activities:
Net loss	$	(81,398)	$	(24,625)	$	(5,796)	$	(65,101)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		6,356		3,386		6,483		2,463
Amortization of operating lease right-of-use assets						582		345
Loss on sale and impairment of long-lived assets		126		325		70		68
Loss (gain) on extinguishment of debt		(8,243)		(3,609)
Loss on remeasurement of debt		—		1,412
Loss (gain) on divestiture of businesses		—		(1,442)
Loss on remeasurement of warrants		20,212		1,999
Loss (gain) on remeasurement of private warrant liability						(10,189)		15,910
Loss (gain) on remeasurement of contingent consideration		(314)		1,400		3,205		(355)
Loss on remeasurement of earnout liability		22,801		—
Loss (gain) on remeasurement of earnout liability						(11,179)		18,770
Stock-based compensation		23,477		1,034		5,854		16,835
Amortization of premium/accretion of discount, net		654		—
Net realized (gains) losses on investments		—		—
Amortization of investment premium/accretion of discount, net						566		—
Net realized losses on investments						68		—
Interest expense (non-cash)		67		2,775		1,046		311
Other		(1,479)		310		64		(225)
Change in operating assets and liabilities, net of acquisitions and divestitures
Accounts receivable		(5,017)		(1,130)		(1,296)		(846)
Reinsurance balance due		(94,883)		—		(11,323)		—
Prepaid expenses and other current assets		1,654		130		(6,749)		441
Long-term insurance commissions receivable		(2,775)		(984)
Accounts payable		(21,417)		2,723		1,051		(8,090)
Accrued expenses and other current liabilities		(3,292)		3,522		(3,145)		2,625
Losses and loss adjustment expense reserves		29,655		—		17,659		—
Other insurance liabilities, current		76,474		—		3,025		—
Deferred revenue		15,824		4,320		(2,228)		(1,362)
Refundable customer deposits		(1,273)		(1,506)		1,412		(837)
Contingent consideration - business combination		—		—		—		(1,663)
Deferred income tax benefit		(8,153)		—
Long-term insurance commissions receivable						(1,540)		(1,383)
Operating lease liabilities, non-current						(235)		(354)
Other		172		218		(696)		(487)
Net cash used in operating activities		(30,772)		(9,742)		(13,291)		(22,935)
Cash flows from investing activities:
Purchases of property and equipment		(539)		(62)		(1,167)		(34)
Capitalized internal use software development costs		(1,510)		(1,571)		(1,574)		(798)
Purchases of short-term and long-term investments		(9,476)		—		(8,835)		—
Maturities, sales of short-term and long-term investments		8,110		—		8,449		—
Non-refundable deposit for acquisition						(4,950)		—
Acquisitions, net of cash acquired		(127,883)		—		—		(22,882)
Net cash used in investing activities		(131,298)		(1,633)		(8,077)		(23,714)
Cash flows from financing activities:
Proceeds from debt issuance, net of fees		—		10,079
Repayments of principal and related fees		(150)		(3,731)		(150)		(150)
Proceeds from issuance of redeemable convertible preferred stock, net of fees		—		4,714
Proceeds from exercises of warrants		126,772		—		—		89,771
Proceeds from exercises of stock options		2,544		1		473		355
Income tax withholdings paid upon vesting of restricted stock units		(22,126)		—		(712)		(16,997)
Settlement of contingent consideration related to a business combination		—		—
Net cash provided by financing activities		107,040		11,063
Change in cash, cash equivalents, and restricted cash	$	(55,030)	$	(312)
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	$	207,453	$	7,179	$	324,792	$	207,453
Cash, cash equivalents, and restricted cash end of period	$	152,423	$	6,867	$	303,035	$	233,383

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PORCH GROUP, INC.

Condensed Consolidated Statements of Cash Flows - Continued

(all numbers in thousands, unaudited)


	Six Months Ended June 30,				Three Months Ended March 31,
	2021		2020		2022		2021
Supplemental disclosures
Conversion of debt to redeemable convertible preferred stock (non-cash)	$	—	$	1,436
Cash paid for interest	$	1,779	$	2,408	$	1,587	$	903
Cancelation of a convertible promissory note on divestiture of a business	$	—	$	2,724
Reduction of earnout liability due to a vesting event	$	25,815	$	—
Non-cash consideration for acquisitions	$	37,792	$	—	$	—	$	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.

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PORCH GROUP, INC.

Notes to Condensed Consolidated ~~Financial~~ Statements ~~(unaudited)~~

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

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Porch Group, Inc. (“Porch ~~Group”,~~Group,” “Porch” or the “Company”) is a vertical software platform for the home, providing software and services to over 25,500 home services companies. The Vertical Software Segment provides software and services to home services companies, such as home inspectors, ~~insurance carriers,~~mortgage companies and loan officers, title companies, moving companies, real estate agencies, utility companies, and others, and the Insurance Segment operates both as an insurance carrier underwriting home insurance policies, and as an agent selling home and auto insurance for over 20 major and regional insurance companies. The Insurance Segment also includes Porch’s warranty ~~companies, and others.~~ service offering.

Porch helps ~~these~~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 moving process easier, helping consumers save time and make better decisions about critical services, including insurance, warranty, moving, security, TV/~~internet,~~Internet, home repair and ~~improvement, and more.~~

On April 5, 2021, the Company acquired Homeowners of America Holding Corporation (“HAHC”), an insurance holding company established to hold insurance entities for the purpose of marketing personal lines insurance products on a national basis. HAHC owns 100% of Homeowners of America Insurance Company (“HAIC”). HAIC is domiciled in Texas, licensed in multiple states and is authorized to write various forms of homeowners insurance. HAHC also owns 100% of Homeowners of America MGA, Inc. (“HAMGA”), a Texas Corporation, formed to provide marketing and claims administration services. Collectively the companies are referred to as Homeowners of America (“HOA”).

~~The Merger~~

On July 30, 2020, Porch.com, Inc. (“Legacy Porch”) entered into a definitive agreement (as amended, the “Merger Agreement”) with PropTech Acquisition Corporation (“PTAC”), a special purpose acquisition company, whereby the parties agreed to merge, resulting in the parent of Porch.com, Inc. becoming a publicly-listed company under the name Porch Group, Inc. (“Porch”). This merger (the “Merger”) closed on December 23, 2020, and was accounted for as a reverse recapitalization, equivalent to the issuance of stock by the private company for the net monetary assets of the shell corporation accompanied by a recapitalization (“Recapitalization”). The accounting is similar to that of a reverse acquisition, except that no goodwill or other intangible assets should be recorded. Therefore, the net assets of PTAC as of December 23, 2020, were stated at historical cost, and no goodwill or other intangible assets were recorded.

~~COVID-19 Update~~

The novel coronavirus disease 2019 (“COVID-19”) and the measures adopted by government entities in response to it have adversely affected Porch’s business operations since March of 2020. The impact of the COVID-19 pandemic and related mitigation on Porch’s ability to conduct ordinary course business activities has been and may continue to be impaired for an indefinite period of time. The extent of the continuing impact of the COVID-19 pandemic on Porch’s operational and financial performance will depend on various future developments, including the duration and spread of the outbreak and impact on the Company’s customers, suppliers, and employees, all of which remain uncertain at this time. Porch expects the COVID-19 pandemic to continue to have an uncertain impact on future revenues and results of operations, but is unable to predict the size and duration of such impact.improvement.

Unaudited Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements include the accounts of Porch Group, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, these unaudited condensed consolidated financial statements and notes should be read in conjunction with the Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended December 31, ~~2020,~~2021, filed with the SEC on ~~May 19, 2021.The~~March 16, 2022. The information as of December 31, ~~2020~~2021 included in the unaudited condensed consolidated balance sheets was

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derived from the Company’s audited ~~consolidated financial statements. Certain reclassifications to 2020 balances were made to conform to the current period presentation in the~~ consolidated financial statements.

The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) were prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (all of which are of a normal recurring nature) considered necessary to present fairly the Company’s financial position, results of operations, comprehensive loss, stockholders’ equity, ~~(deficit),~~ and cash flows for the periods and dates presented. The results of operations for ~~both~~ the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021~~2022 or any other interim period or future year.

Comprehensive ~~Income (Loss)~~Loss

Comprehensive ~~income (loss)~~loss consists of adjustments related to ~~(1)~~ unrealized gains and losses on available-for-sale ~~securities, and (2)~~securities.

Reclassifications

Certain reclassifications to previously reported 2021 balances were made to conform to the ~~effect of the Company’s own credit components on the fair value of certain convertible notes at fair value in accordance with the fair value option (“FVO Notes”).~~

~~Each reporting~~current period the fair value of the FVO Notes is determined and resulting gains and losses from the change in fair value of the FVO Notes associated with the Company’s own credit component is recognized in accumulated other comprehensive income (“AOCI”), while the resulting gains and losses associated with non-credit components are includedpresentation in the unaudited condensed consolidated statements of operations. The FVO Notes were extinguished during the quarter ended June 30, 2020, resulting in a reversal of the previously recognized gain from the change in fair value of the FVO associated with the Company’s own credit component in AOCI.cash flows.

Use of Estimates

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PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

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

estimated variable consideration for services performed, estimated lifetime value of the ~~allowance~~commissions, current estimate for ~~doubtful accounts,~~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, are evaluated by management. Actual results could differ materially from those estimates, judgments, and ~~assumptions, and to the extent those differences are material, the consolidated financial statements will be affected.~~

~~Segment Reporting~~

The Company operates as a single reportable segment. Operating segments are components of an enterprise for which separate discrete financial information is available and operational results are regularly evaluated by the chief operating decision maker (“CODM”) for the purposes of making decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer (“CEO”) is the CODM, and to date, the CEO has made such decisions and assessed performance at the aggregated level.

~~All the Company’s revenue is generated in the United States.~~

~~As of June 30, 2021 and December 31, 2020, the Company did not have assets located outside of the United States.~~assumptions.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to credit risk consist principally of cash, money market accounts on deposit with financial institutions, money market funds, certificates of deposit and ~~fixed- maturity~~fixed-maturity securities, as well as receivable balance in the course of collection.

The Company’s insurance carrier subsidiary has exposure and remains liable in the event of an insolvency of one of its primary reinsurers. Management and its reinsurance intermediary regularly assess the credit quality and ratings of its

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reinsurer ~~base companies. No individual reinsurer~~counterparties. NaN reinsurers represented more than 10% individually, and 38% in aggregate, of the Company’s insurance subsidiary’s total reinsurance receivables as of ~~the dates or for the periods presented.~~March 31, 2022.

Substantially all of the Company’s insurance-related revenues in the Insurance segment are derived from customers in Texas ~~Arizona, Georgia,~~(which represent approximately 57% of such revenues in the three months ended March 31, 2022), South Carolina, North Carolina, Georgia, Virginia and ~~South Carolina,~~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 total revenue for the three months ended March 31, 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 ~~June 30, 2021~~March 31, 2022 includes ~~$314 thousand~~$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 ~~$1.9~~$2.6 million related to acquisition ~~indemnification hold backs.~~indemnifications, of which $0.5 million is recorded in non-current assets. Restricted cash equivalents as of December 31, ~~2020~~2021, includes ~~$8.4~~$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 ~~the Paycheck Protection Program Loans held~~acquisition indemnifications in escrow ~~with a commercial bank (see Note 7)~~accounts, of which $0.5 million is recorded in non-current assets.

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PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and ~~a $3.0 million minimum cash balance required by the Company’s senior secured lender.~~unless otherwise stated, unaudited)

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


					March 31, 2022		December 31, 2021
	June 30, 2021		December 31, 2020
Cash and cash equivalents	$	150,201	$	196,046	$	292,373	$	315,741
Restricted cash and restricted cash equivalents - current		2,222		11,407		10,162		8,551
Restricted cash and restricted cash equivalents - non-current						500		500
Cash, cash equivalents and restricted cash	$	152,423	$	207,453	$	303,035	$	324,792

Accrued expenses and other current liabilities as of June 30, 2021, include $17.9 million of both claim and general operating expense checks issued in excess of cash book balances, not yet presented for payments.

~~Investments~~

The Company’s investments are primarily comprised of short-term certificates of deposit, U.S. Treasury notes, and mortgage-backed securities and are classified as available-for-sale and reported at fair value with unrealized gains and losses included in AOCI. Investments are classified as current or non-current based upon the remaining maturity of the investment. Amortization of premium and accretion of discount are computed using the effective interest method. The amortization of discounts and premiums on mortgage-backed securities takes into consideration actual and future estimated principal prepayments. The Company utilizes estimated prepayment speed information obtained from published sources. The effects of the yield of a security from changes in principal prepayments are recognized prospectively. The degree to which a security is susceptible to yield adjustments is influenced by the difference between its carrying value and par, the relative sensitivity of the underlying mortgages backing the assets to prepayment in a changing interest rate environment, and the repayment priority for structured securities.

The Company evaluates whether declines in the fair value of its investments below amortized cost are other-than-temporary. This evaluation includes the Company's ability and intent to hold the security until an expected recovery occurs, the severity and duration of the unrealized loss, as well as all available information relevant to the collectability of the security, including past events, current conditions, and reasonable and supportable forecasts, when developing estimates of cash flows expected to be collected.

~~Realized gains and losses on sales of investments are determined using the specific-identification method.~~

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Accounts Receivable and Long-term Insurance Commissions Receivable

Accounts receivable ~~represent~~consist principally of amounts due from enterprise customers and other corporate partnerships, as well as due and deferred insurance premiums. Due and deferred premiums consist of uncollateralized premiums and agents’ balances which are in the process of collection as well as premiums earned but not yet due from customers. Long-term insurance commissions receivable balance consists of the estimated commissions from policy renewals expected to be collected.credit card receivables. The Company estimates allowances for uncollectible receivables based on the ~~credit worthiness~~creditworthiness of its customers, historical trend analysis and general economic conditions. Consequently, an adverse change in those factors could affect the Company’s estimate of allowance for doubtful accounts. The allowance for uncollectible receivables at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, was ~~$327~~$0.5 million and ~~$249,~~$0.4 million, respectively.

Long-term insurance commissions receivable balance consists of the estimated commissions from policy renewals expected to be collected. The 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 policies to which they ~~relate.~~relate, which is generally one year. The amortization of DAC is included in sales and marketing expense in the unaudited 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 ~~June 30,~~March 31, 2022 and December 31, 2021, DAC of ~~$3.1~~$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

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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.

~~Losses and Loss Adjustment Expenses Reserves~~

The liability for losses and loss adjustment expenses (“LAE”) is an estimate of the amounts required to cover known incurred losses and LAE, and is developed through the review and assessment of loss reports, along with the analysis of known claims. These reserves include management’s estimate of the amounts for losses incurred but not reported (“IBNR”), based on evaluation of overall loss reporting patterns as well as the loss development cycles of individual claim cases. Although management believes that the balance of these reserves is adequate, as such liabilities are necessarily dependent on estimates, the ultimate expense may be more or less than the amounts presented. The approach and methods for developing these estimates and for recording the resulting liability are continually reviewed. Any adjustments to this reserve are recognized in the statement of operations. Losses and LAE, less related reinsurance are charged to expense as incurred.

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~~The following table provides the rollforward of the beginning and ending reserve balances for losses and LAE, gross of reinsurance for June 30, 2021:~~

2021
Losses and LAE reserve at April 5

$
84,366
Reinsurance recoverables on losses and LAE

(82,898)
Losses and LAE reserve, net of reinsurance recoverables at April 5

1,468
Net incurred losses and LAE during the current year

31,134
Net claim and LAE payments during the current year

(24,516)
Reserve for losses and LAE, net of reinsurance recoverables, at end of year

8,086
Reinsurance recoverables on losses and LAE

107,414
Losses and LAE reserve at June 30

$
115,500

~~Reinsurance~~

In the normal course of business, the Company continually monitors its risk exposure and seeks to reduce the overall exposure to losses that may arise from catastrophes or other events that cause unfavorable underwriting results by reinsuring certain levels of risk with other insurance enterprises or reinsurers. The Company only engages quality, financially rated reinsurers and continually monitors the financial ratings of these companies through its brokers. The amount and type of reinsurance employed is based on management’s analysis of liquidity as well as its estimates of probable maximum loss and evaluation of the conditions within the reinsurance market. Reinsurance premiums, expense reimbursements, and reserves related to reinsured business are accounted for on a basis consistent with those used for the original policies issued and the terms of the reinsurance contracts. Premiums paid for reinsurance are recognized as reductions of revenue.

~~The effects of reinsurance on premiums written and earned were as follows, for the period since the acquisition date of April 5, 2021 to June 30, 2021:~~

June 30, 2021

Written

Earned
Direct premiums

$
81,132

$
62,352
Ceded premiums

(70,844)

(59,077)
Net premiums

$
10,288

$
3,275

Other Insurance Liabilities, Current

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


	June 30, 2021		March 31, 2022		December 31, 2021
Ceded reinsurance premiums payable	$	61,604	$	21,439	$	22,523
Funds held under reinsurance treaty		3,435		2,092		2,206
Commissions payable, reinsurers and agents		8,402		9,259		10,697
General and accrued expenses payable		26,006		579		321
Advance premiums		6,761		9,680		4,277
Other Insurance liabilities, current	$	106,208
Other insurance liabilities, current			$	43,049	$	40,024

~~Earnout Shares~~

Upon the Merger, 6,000,000 restricted common shares, subject to vesting and cancellation provisions, were issued to holders of pre-Merger Porch common stock (the “earnout shares”). The earnout shares were issued in 3 equal tranches with separate market vesting conditions. ~~One-third of the earnout shares met the market vesting condition when~~

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the Company’s common stock had a closing price of greater than or equal to $18.00 over 20 trading days within a 30-consecutive trading day period (see Note 9). An additional third will vest when the Company’s common stock has a closing price of greater than or equal to $20.00 over the same measurement criteria. The final third will vest when the Company’s common stock has a closing price of greater than or equal to $22.00 over the same measurement criteria. Additional earnout shares may also be issued to earnout stockholders, on a pro rata basis, depending on forfeitures of employee earnout shares that are subject to a continued service vesting condition (see Note 9).

The earnout shares are accounted for as a derivative financial instrument, which is classified as a liability and periodically measured at fair value, with changes in fair value recognized in the statement of operations. Note 4 denotes the beginning and ending balances of the earnout share liability, and activity recognized during the period.

~~Revenue Recognition~~

The Company generates its Core Services Revenue from (1) fees received for connecting homeowners to individual contractors, small business service providers and large enterprise service providers, (2) commissions from third-party insurance carriers, and (3) insurance premiums, policy fees and other insurance-related fees generated through its own insurance carrier. The Company’s Managed Services Revenue is generated from fees received for providing select and limited services directly to homeowners. The Company’s Software and Service Subscription Revenue is generated from fees received for providing subscription access to the Company’s software platforms and subscription services across various industries.

~~Core Services Revenue~~

Core Services Revenue is generated by the Company connecting third-party service providers (“Service Providers”) with homeowners that meet pre-defined criteria and who may be looking for relevant services. Service Providers represent a broad variety of offerings across the construction and repair, utilities, and other connected services spaces, which includes movers, TV/Internet, warranties, security monitoring providers, plumbers, electricians, roofers, et al. The Company also connects homeowners with home and auto insurance policies from third-party insurance carriers, and in April 2021, began providing various forms of homeowners insurance through its own insurance carrier and managing general agency.

Revenue generated from Service Providers is recognized at a point in time upon the connection of a homeowner to the Service Provider, at which point the Company’s performance obligation has been satisfied. The transaction price is generally either a fixed price per qualifying lead or activated service, or a percentage of the revenue the Service Provider ultimately generates through the homeowner connection. When the revenue to which the Company is entitled is based on the amount of revenue the Service Provider generates from the homeowner, the transaction price is considered variable and an estimate of the constrained transaction price is recorded by the Company upon delivery of the lead or upon the activation of the service.

Amounts received in advance of delivery of leads to the Service Provider is recorded as deferred revenue. Certain Service Providers have the right to return leads in limited instances. An estimate of returns is included as a reduction of revenue based on historical experience or specific identification depending on the contractual terms of the arrangement. Estimated returns are not material in any period presented.

In January 2020, the Company, through its wholly-owned subsidiary and licensed insurance agency, Elite Insurance Group (“EIG”), began selling homeowner and auto insurance policies for third-party insurance carriers. The transaction price for these arrangements is the estimated lifetime value (“LTV”) of the commissions to be paid by the third-party carrier for the policies sold. The LTV represents fixed first-year commission upon sale of the policy as well as the estimated variable future renewal commissions expected. The Company constrains the transaction price based on its best estimate of the amount which will not result in a significant reversal of revenue in a future period. After a policy is sold to an insurance carrier, the Company has no additional or ongoing contractual obligation to the policyholder or insurance carrier.

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The Company estimates LTV by evaluating various factors, including commission rates for specific carriers and estimated average plan duration based on insurance carrier and market data related to policy renewals for similar insurance policies. On a quarterly basis, management reviews and monitors changes in the data used to estimate LTV as well as the cash received for each policy type compared to original estimates. The Company analyzes these fluctuations and, to the extent it identifies changes in estimates of the cash commission collections that it believes are indicative of an increase or decrease to prior period LTVs, the Company will adjust LTV for the affected policies at the time such determination is made. Changes in LTV may result in an increase or a decrease to revenue. Changes to the estimated variable consideration were not material for the periods presented.

Starting in April 2021, through the newly-acquired HOA, the Company is authorized to write various forms of homeowners insurance. Insurance-related revenues included in Core Services Revenue primarily relate to premiums, policy fees, excess ceding commissions and reinsurance profit share, and loss adjustment income. Premiums are recognized as revenue on a daily pro rata basis of the policy term. The portion of premiums related to the unexpired term of policies in force as of the end of the measurement period and to be earned over the remaining term of these policies, is deferred and reported as deferred revenue.

Policy fees are collected by HAMGA and include application fees, which are intended to offset the costs incurred in establishing the insurance policy. Policy fees on policies where premium is traditionally paid in full upon inception of the policy are recognized when written.

Excess ceding commissions represent the commissions from reinsurers in excess of the portion which represents the reimbursement of acquisition costs associated with insurance risk ceded to reinsurers and is earned on a pro-rata basis over the life of the insurance policy. Reinsurance profit share is additional ceding commissions payable to the Company based on attaining specified loss ratios within individual treaty years. Reinsurance profit share income is recognized when earned, which includes adjustments to earned reinsurance profit share based on changes in incurred losses.

~~Loss adjustment fee income is recognized when the claim file is opened, and other fee income is recognized when the related service is performed.~~

~~Managed Services Revenue~~

Managed services revenue includes fees earned from providing a variety of services directly to the homeowner, including handyman and moving services. The Company generally invoices for managed services projects on a fixed fee or time and materials basis. The transaction price represents the contractually agreed upon price with the end customer for providing the respective service. Revenue is recognized as services are performed based on an output measure of progress, which is generally over a short duration (e.g., same day). Fees earned for providing managed services projects are non-refundable and there is generally no right of return.

The Company acts as the principal in managed services revenue as it is primarily responsible to the end customer for providing the service, has a level of discretion in establishing pricing, and controls the service prior to providing it to the end customer. This control is evidenced by the ability to identify, select, and direct the service provider that provides the ultimate service to end customers.

~~Software and Service Subscription Revenue~~

Software and Service Subscription Revenue is primarily generated from the vertical software sold to home inspectors and other home services companies. The Company does not provide the customer with the right to take possession of any part of the software supporting the cloud-based application services. However, the Company does provide certain data analytics and marketing services under subscription contracts. The Company’s standard subscription contracts are monthly contracts in which pricing is based on a specified volume of activity completed through the software. Fees earned for providing access to the subscription software and services 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 and services during the monthly contract term.

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Income Taxes

Provisions for income taxes for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$7.7~~a $0.2 million benefit and ~~$3 thousand expense,~~a $0.4 million benefit, respectively, and the effective tax rates for these periods were ~~30.94%~~2.96% and ~~(0.11%)~~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 assets and the impact of acquisitions on the Company’s valuation allowance. The difference between the Company’s effective tax rates for the 2020 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.

~~Other income (expense), net~~

~~The following table details the components of other income (expense), net on the condensed consolidated statements of operations:~~

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020
Loss on remeasurement of debt

$
—

$
(958)

$
—

$
(1,412)
Loss on remeasurement of legacy preferred stock warrant liability

—

(920)

—

(1,999)
Other, net

(165)

37

(91)

(57)

$
(165)

$
(1,841)

$
(91)

$
(3,468)

~~Emerging Growth Company Status~~

The Company is an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). In accordance with the JOBS Act, the Company previously elected to delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. As of June 30, 2021, the last business day of the second fiscal quarter, the Company met certain thresholds for qualification as a “large accelerated filer” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. Therefore, the Company expects to lose EGC status as of December 31, 2021. The impact of this change in filing status includes being subject to the requirements of large accelerated filers, which includes shortened filing timelines, no delayed adoption of certain accounting standards, and attestation of the Company’s internal control over financial reporting by its independent auditor.

~~Recent~~Recently Adopted Accounting ~~Pronouncements Not Yet Adopted~~Standards

In ~~August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06,~~ Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. The ASU is effective for public companies, excluding entities eligible to be smaller reporting companies, for fiscal years beginning after December 15,October 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020 and adoption must be as of the beginning of the Company’s annual fiscal year. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

~~In June 2016,~~ the FASB issued ASU No. ~~2016-13,~~2021-08, ~~Financial Instruments — Credit Losses~~Business Combinations (Topic ~~326)~~805): ~~Measurement of Credit Losses on Financial Instruments~~Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ~~Additionally, the FASB issued ASU No. 2019-04,~~ ~~Codification Improvements to Topic 326~~ ~~in April 2019 and ASU 2019-05,~~ ~~Financial Instruments — Credit Losses (Topic 326) — Targeted Transition Relief~~ ~~in May 2019.~~ 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 ~~loans, debt securities, trade receivables, net investments~~the accounting for other assets or liabilities that may arise from revenue contracts with customers in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. In November 2019, the FASB issuedaccordance with Topic 606. The amendments of this ASU ~~No. 2019-10, which~~

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~~defers the~~are effective ~~date of ASU No. 2016-13~~ for ~~smaller reporting companies to~~ fiscal years beginning after December 15, 2022, including interim periods ~~within~~in those fiscal years. ~~In the event the Company no longer qualifies as an emerging growth company, it will no longer qualify for the deferral~~The ASU clarifies that early adoption of the ~~effective~~ 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

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PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

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

date ~~available for emerging growth companies.~~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 ~~is currently evaluating~~early adopted this ASU as of January 1, 2022 and will apply the ~~impact of~~guidance prospectively for business combinations that occur after the adoption ~~of ASU No. 2016-13 on~~date. Therefore, the adoption will have no impact to the existing consolidated balance sheets, statements of operations, and statements of cash flows.

~~In February 2016,~~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 ~~FASB issued~~ ~~ASU 2016-02, Leases (Topic 842)~~. delivery of leads to service providers who primarily support the continued maintenance of the home.

The ~~new standard~~revenue generated by the Company’s Insurance segment is ~~effective for non-public companies for reporting periods beginning after December 15, 2021~~primarily from the sale of its own written insurance and ~~early adoption is permitted. The comprehensive new standard will amend~~warranty policies or third-party policies via its agency. This revenue includes insurance and ~~supersede existing lease accounting guidance and is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on~~warranty premiums earned over the ~~balance sheet and requiring disclosure~~life of ~~key information about leasing arrangements. The guidance requires lessees and lessors to recognize and measure leases~~the policy, reinsurance profit share, policy fees, commissions earned at the ~~beginning~~time it is put in force or ceded.

Total revenues consisted of the ~~earliest period presented using a modified retrospective approach. In~~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 ~~event~~three months ended March 31, 2022 includes revenue from regulated property and casualty insurance entity in the ~~Company no longer qualifies as an emerging growth company, it will no longer qualify~~form of insurance premiums, policy fees, ceding commissions, and reinsurance profit sharing of $20.0 million which is accounted for separately from the ~~deferral~~revenue from contracts with customers.

Table of ~~the effective date available for emerging growth companies. The Company is currently evaluating the impact that adoption will have on the consolidated balance sheets, statements of operations,~~Contents

PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

(all numbers in thousands, except share amounts and statements of cash flows and expects that the adoption of the ASU will increase assets and liabilities related to the Company’s operating leases on the consolidated balance sheets. The Company estimates that as of June 30, 2021, the adoption of Topic 842 would increase the Company’s total assets reflecting right of use asset of approximately $4.0 million and total liabilities reflecting the lease obligation payable of approximately $4.0 million.unless otherwise stated, unaudited)

~~2. Revenue~~

~~Disaggregation of Revenue~~

~~Total revenues consisted of the following:~~

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020

Core services revenue

$
28,684

$
11,709

$
39,708

$
20,837

Managed services revenue

9,669

3,698

14,314

7,833

Software and service subscription revenue

12,987

1,715

24,061

3,526

Total revenue

$
51,340

$
17,122

$
78,083

$
32,196

~~Revenue from Divested Businesses~~

There were 0 divestitures during the three months and six months ended June 30, 2021. Total revenue reported includes revenue from divested businesses of $1.8 million and $4.3 million for the three months ended June 30, 2020 and six months ended June 30, 2021 and 2020, respectively.

Contracts with Customers

Contract Assets - ~~Long-term~~ Insurance Commissions Receivable

A summary of the activity impacting the contract assets during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022, is presented below:


	Contract Assets		Contract Assets
Balance at December 31, 2020	$	3,529
Balance at December 31, 2021			$	9,384
Estimated lifetime value of insurance policies sold by carriers		3,816		2,422
Cash receipts		(966)		(753)
Balance at June 30, 2021	$	6,379
Balance at March 31, 2022			$	11,053

As of ~~June 30, 2021, $239~~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 ~~$6,140~~$9.1 million of contract assets

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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

In September 2019, the Company entered into a Lead Buyer Agreement with a customer (“Buyer”) that provides residential security systems. Under the Lead Buyer Agreement, the Buyer pays the Company a referral fee for leads resulting in completed installations of certain residential security systems. At inception of this agreement, the Buyer made a prepayment of $7,000, which is to be credited over the term from October 2019 to September 2022, from earned referral fees for leads provided by the Company. This prepayment represents a contract liability since it is an advanced deposit for services the Company has yet to provide.

A summary of the activity impacting the contract liabilities during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is presented below:


	Contract		Contract
	Liabilities		Liabilities
Balance at December 31, 2020	$	3,193
Balance at December 31, 2021				15,274
Additions to contract liabilities		966		7,891
Additions to contract liabilities – significant financing component interest		110
Contract liabilities transferred to revenue		(1,592)		(6,479)
Balance at June 30, 2021	$	2,677
Balance at March 31, 2022			$	16,686

As of ~~June 30, 2021, $2,299 of~~March 31, 2022, $16.7 million in contract liabilities ~~are expected~~related to ~~be transferred to revenue within the next 12 months and therefore~~refundable customer deposits received in advance of warranty services provided, are included in current refundable customer deposits on the ~~unaudited condensed~~ consolidated balance ~~sheets. The remaining $378 of contract liabilities~~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 transferred to revenue over the ~~remaining~~term of the ~~contract and are included in refundable customer deposits, non-current~~policies, which is, on ~~the unaudited condensed consolidated balance sheets.~~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 ~~related to contracts with customers~~ during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is presented below:

Deferred

Revenue
Balance at December 31, 2020

$
5,208
Revenue recognized

(16,759)
Additional amounts deferred

32,842
Impact of acquisitions

141,336
Balance at June 30, 2021

$
162,627

~~Deferred revenue presented on the Company’s condensed consolidated balance sheet includes $148.9 million and $10.0 million of unearned premiums and unearned ceding commissions, respectively.~~


	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)

1815

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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 ~~amounts allocated~~$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 ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~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 ~~we have~~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 for 2021:~~investments:


Investment income	$	429
			Three Months Ended March 31,
			2022
Investment income, net of investment expenses			$	265
Realized gains on investments	$	20		2
Realized losses on investments	$	(52)		(70)
Investment income and realized gains, net of investment expenses			$	197

The ~~following table provides~~Company did not have significant investment income during the ~~amortized cost, fair value and unrealized gains and (losses) of the Company’s investment securities:~~

June 30, 2021

Gross Unrealized


Amortized Cost

Gains

Losses

Fair Value
U.S. treasury - held as restricted

$
1,288

$
—

$
(2)

$
1,286
U.S. government obligations

4,280

—

(3)

4,277
Obligations of states, municipalities and political subdivisions

3,880

17

(3)

3,894
Industrial and miscellaneous

36,613

271

(16)

36,868
Residential and commercial mortgage-backed securities

15,578

80

(36)

15,622
Other loan-backed and structured securities

5,437

15

(7)

5,445
Total debt securities

$
67,076

$
383

$
(67)

$
67,392

The amortized cost and fair value of securities at June 30, 2021, 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.

June 30, 2021
Remaining Time to Maturity

Amortized Cost

Fair Value
Due in one year or less

$
8,513

$
8,509
Due after one year through five years

22,041

22,092
Due after five years through ten years

13,536

13,719
Due after ten years

1,971

2,005
Residential and commercial mortgage-backed securities

15,578

15,622
Other loan-backed and structured securities

5,437

5,445
Total

$
67,076

$
67,392

three months ended March 31, 2021.

1916

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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 ~~(“OTTI”)~~

The Company regularly reviews its individual investment securities for ~~OTTI.~~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;

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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~~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, ~~at June 30, 2021,~~ 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				Less Than Twelve Months				Twelve Months or Greater				Total
	Gross				Gross				Gross				Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
At June 30, 2021	Loss		Value		Loss		Value		Loss		Value
U.S. treasury - held as restricted	$	(2)	$	673	$	—	$	—	$	(2)	$	673
U.S. government obligations		(3)		1,473		—		—		(3)		1,473
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		(3)		1,113		—		—		(3)		1,113		(584)		9,361		—		—		(584)		9,361
Industrial and miscellaneous		(16)		11,472		—		—		(16)		11,472
Corporate bonds														(1,234)		21,104		—		—		(1,234)		21,104
Residential and commercial mortgage-backed securities		(36)		8,805		—		—		(36)		8,805		(617)		13,816		—		—		(617)		13,816
Other loan-backed and structured securities		(7)		3,073		—		—		(7)		3,073		(237)		8,035		—		—		(237)		8,035
Total securities	$	(67)	$	26,609	$	—	$	—	$	(67)	$	26,609	$	(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 ~~June 30,~~March 31, 2022, and December 31, 2021, there were ~~194~~448 and 358 securities, respectively, in an unrealized loss position. Of these securities, ~~there were~~ ~~none~~ ~~that~~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 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 ~~June 30, 2021.~~March 31, 2022.

2018

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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 June 30, 2021								Fair Value Measurement at March 31, 2022
							Total								Total
	Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3		Fair Value
Assets
Money market mutual funds	$	12,321	$	—	$	—	$	12,321	$	5,041	$	—	$	—	$	5,041
Restricted money market mutual funds		314		—		—		314
Debt securities:		—		—		—		—
U.S. treasury - held as restricted		1,286		—		—		1,286
U.S. government obligations		4,277		—		—		4,277
U.S. Treasuries										3,519		—		—		3,519
Obligations of states and municipalities		—		3,894				3,894		—		9,413		—		9,413
Industrial and miscellaneous		—		36,868				36,868
Corporate bonds										—		29,052		—		29,052
Residential and commercial mortgage-backed securities		—		15,623		—		15,623		—		14,647		—		14,647
Other loan-backed and structured securities		—		5,445		—		5,445		—		8,696		—		8,696
	$	18,198	$	61,830	$	—	$	80,028	$	8,560	$	61,808	$	—	$	70,368
Liabilities
Contingent consideration - business combinations	$	—	$	—	$	2,569	$	2,569	$	—	$	—	$	12,822	$	12,822
Contingent consideration - earnout		—		—		47,224		47,224		—		—		2,687		2,687
Private warrant liability		—		—		34,903		34,903		—		—		5,004		5,004
	$	—	$	—	$	84,696	$	84,696	$	—	$	—	$	20,513	$	20,513


	Fair Value Measurement at December 31, 2020								Fair Value Measurement at December 31, 2021
							Total								Total
	Level 1		Level 2		Level 3		Fair Value		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	$	—	$	—	$	3,549	$	3,549	$	—	$	—	$	9,617	$	9,617
Contingent consideration - earnout		—		—		50,238		50,238		—		—		13,866		13,866
Private warrant liability		—		—		31,534		31,534		—		—		15,193		15,193
	$	—	$	—	$	85,321	$	85,321	$	—	$	—	$	38,676	$	38,676

Financial Assets

Money market mutual funds are valued at the closing price reported by the fund sponsor from an 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,

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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 0 no transfers between Level 1 and Level 2.

Contingent Consideration – Business Combinations

The Company estimated the fair value of the business combination contingent consideration ~~that is~~ triggered by EBITDA or revenue milestones, ~~which~~ 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. As of June 30, 2021, the key inputs used in the determination of the combined fair value of $1,714 included volatility of 41.7% to 77.0%, discount rate of 24.2% to 26.0% and weighted-average cost of capital of 26.0% .

The Company estimated the fair value of the business combination contingent consideration that is triggered by stock price milestones, ~~which~~ related to a certain ~~2020 acquisitions,~~2021 acquisition, using the Monte Carlo simulation method. The fair

~~Table of Contents~~

value is based on the simulated stock price of the Company over the maturity date of the contingent consideration. As of ~~June 30,~~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 ~~$8.55 thousand~~$9.3 million included ~~current stock~~the volume weighted average price of ~~$19.34,~~$16.37, strike price of ~~$20.00,~~$36.00, discount rate of ~~5.3% and volatility of 70%. As of December 31, 2020, the key inputs used in the determination of the fair value of $1,749 included current price of $14.27, strike price of $20.00, discount rate of 9%~~7% and volatility of 60%.

The Company estimated the fair value of the 2018 business combination contingent consideration using a variation of the income approach known as the real options method. The fair value is based on the present value of the contingent payments to be made using a weighted probability of possible payments. In January 2021, the 2018 business combination contingent consideration was settled in full for a cash payment of $2,063. As of December 31, 2020, the key inputs used in the determination of fair value of $1,800 include projected revenues and expenses, discount rate of 9.96% to 9.98%, revenue volatility of 18.0% and weighted-average cost of capital of 21.5%.

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 ~~the~~ certain employee forfeitures. As of ~~June 30,~~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 ~~$20 and $22,~~$22.00, volatility of 65%, forfeiture rate of 15% and stock price of $19.34. As of December 31, 2020, the key inputs used in the determination of the fair value included exercise price of $18, $20 and $22, volatility of 60%, forfeiture rate of 16% and stock price of $14.27.$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 ~~June 30, 2021,~~March 31, 2022, the key inputs used ~~in the determination of~~to determine the fair value included exercise price of $11.50, expected volatility of ~~52%~~71%, remaining contractual term of ~~4.48~~3.73 years, and stock price of ~~$19.34.~~$6.95. As of December 31, ~~2020,~~2021, the key inputs used ~~in the determination of~~to determine the fair value included exercise price of $11.50, expected volatility of ~~35%~~60%, remaining contractual term of ~~4.98~~3.98 years, and stock price of ~~$14.27.~~$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.

~~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, 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
Additions

—

—

—
Settlements

—

—

(16,843)
Change in fair value, loss (gain) included in net loss⁽¹⁾

4,031

(300)

4,302
Fair value as of June 30, 2021
$
47,224

$
2,569

$
34,903

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PORCH GROUP, INC.

Notes to Condensed Consolidated Statements - Continued

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

Redeemable

Contingent

Convertible

Consideration -

Preferred Stock

Business

Warrants

FVO Notes

Combinations
Fair value as of January 1, 2020

$
6,684

$
11,659

$
100
Additions

—

—

—
Settlements

—

—

—
Change in fair value, loss (gain) included in net loss⁽¹⁾

1,214

454

(80)
Change in fair value, (gain) included in other comprehensive income

—

(3,856)

—
Fair value as of March 31, 2020

$
7,898

$
8,257

$
20
Additions

—

—

—
Settlements

—

(2,724)

—
Change in fair value, loss (gain) included in net loss⁽¹⁾

785

(2,898)

1,480
Change in fair value, (gain) included in other comprehensive income

—

3,856

—
Fair value as of June 30, 2020

$
8,683

$
6,491

$
1,500

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 the redeemable convertible stock warrants and FVO Notes are included in other income (expense), net, and 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. Ch~~anges~~Changes in fair value of the earnout contingent consideration and private warrant liability are 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 the decline in the stock price at March 31, 2022 as compared to December 31, 2021. The fair value of other debt approximates the unpaid principal balance and is considered a Level 23 measurement. See Note 7.

5. Property, Equipment, and Software

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


	June 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
Software and computer equipment	$	1,928	$	1,381	$	8,257	$	7,287
Furniture, office equipment, and other		1,526		567		2,126		2,006
Internally developed software		17,671		10,741		14,221		13,102
Leasehold improvements		1,351		1,112		2,208		2,191
		22,476		13,801		26,812		24,586
Less: Accumulated depreciation and amortization		(14,588)		(9,208)		(18,472)		(17,920)
Property, equipment, and software, net	$	7,888	$	4,593	$	8,340	$	6,666

Depreciation and amortization expense related to property, equipment, and software was ~~$1,174~~$1.0 million and ~~$935~~$1.1 million for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $2,296 and $1,917 for the six months ended June 30, 2021 and 2020,~~ respectively.

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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 acquisition-date fair value less accumulated amortization, and consist of the following, as of ~~June 30, 2021:~~March 31, 2022:

Weighted




Average

Intangible

Intangible

Useful Life

Assets,

Accumulated

Assets,


(in years)

gross

Amortization

Net
Customer relationships

10.0

$
45,890

$
(3,603)

$
42,287
Acquired technology

6.0

19,583

(7,057)

12,526
Trademarks and tradenames

11.0

18,375

(1,511)

16,864
Non-compete agreements

2.0

370

(110)

260
Value of business acquired

1.0

400

(94)

306
Renewal rights

8.0

7,692

(225)

7,467
Insurance licenses

Indefinite

4,960

—

4,960
Total intangible assets

$
97,270

$
(12,600)

$
84,670

~~Intangible assets consist of the following, as of December 31, 2020:~~


	Weighted							Weighted
	Average	Intangible				Intangible		Average	Intangible				Intangible
	Useful Life	Assets,		Accumulated		Assets,		Useful Life	Assets,		Accumulated		Assets,
	(in years)	gross		Amortization		Net		(in years)	gross		Amortization		Net
Customer relationships	7.0	$	8,440	$	(2,173)	$	6,267	9.0	$	56,810	$	(8,658)	$	48,152
Acquired technology	6.0		12,170		(5,481)		6,689	5.0		48,135		(12,619)		35,516
Trademarks and tradenames	9.0		3,688		(893)		2,795	12.0		25,389		(3,194)		22,195
Non-compete agreements	2.0		225		(15)		210	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		$	24,523	$	(8,562)	$	15,961		$	150,628	$	(26,322)	$	124,306

The aggregate amortization expense related to intangibles was ~~$2,720~~$5.5 million and ~~$662~~$1.3 million for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $4,060 and $1,469 for the six months ended June 30, 2021 and 2020,~~ respectively.

Goodwill

The following tables summarize the changes in the carrying amount of goodwill for the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:

Goodwill
Balance as of December 31, 2020

$
28,289
Acquisitions

92,672
Balance as of June 30, 2021

$
120,961


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

~~Table of Contents~~

7. Debt

At ~~June 30, 2021,~~March 31, 2022, debt comprised of the following:


					Debt								Debt
			Unaccreted		Issuance		Carrying				Unaccreted		Issuance		Carrying
	Principal		Discount		Costs		Value		Principal		Discount		Costs		Value
8.55% term loan, due 2024		42,145		(755)		(1,892)		39,498
Line of credit, due 2022		3,944		—		—		3,944
Convertible senior notes, due 2026									$	425,000	$	—	$	(10,228)	$	414,772
Other notes		600		(104)		—		496		450		(70)		—		380
	$	46,689	$	(859)	$	(1,892)	$	43,938	$	425,450	$	(70)	$	(10,228)	$	415,152

Convertible Senior ~~Secured Term Loans~~Notes

~~In January 2021, the Company entered into an amendment (the~~ “~~Runway Amendment~~”)Interest expense recognized related to the ~~Loan~~0.75% Convertible Senior Notes due 2026 (the “2026 Notes”) was approximately $1.4 million for the three months ended March 31, 2022, and ~~Security Agreement, dated as~~comprised of ~~July 22, 2020 (as amended, the~~ “~~Runway Loan Agreement~~”), with Runway Growth Credit Fund, Inc., as agent for a syndicate of lenders. Among other things, the Runway Amendment includes a commitment for a supplemental term loan in the aggregate amount of up to $10.0 million, a reduction in the interest rate payable on borrowed amounts, a reduction to certain financial covenants related to minimum revenue, as well as amends the maturity date to December 15, 2024, and eliminates a minimum cash balance requirement of $3.0 million. Porch did not borrow any additional amounts in connection with entering into the Runway Loan Amendment.

The Runway Loan is a first lien loan secured by any and all properties, rights and assets of the Company with a maturity date of December 15, 2024. Until the Runway Amendment, interest was payable monthly in arrears at a variable rate of interest based on the greater of 0.55% or LIBOR rate (as defined) plus an applicable margin of 8.50% plus 2% of PIK interest. As of December 31, 2020, the calculated interest rate was 11.05%. The Runway Amendment reduced the applicable margin from 8.5% to 8% and eliminated the PIK interest. As of June 30, 2021 the calculated interest rate was 8.55%. Principal payments are required beginning on August 15, 2022 in equal monthly installments through the maturity date. A prepayment fee of 2%, 1.5%, 1% or 0.5% of the outstanding loan amount is due if the loan is repaid prior to the 1st, 2nd, 3rd or 4th anniversary date, respectively. There is a final payment fee of $1,750 or 3.5% of any partial payment, which is reflected as a discount on the loan and is accreted tocontractual interest expense ~~using the effective interest method over the term~~and amortization of the loan or until extinguishment of the related loan. Upon a default, the loan is immediately due and payable and bears interest at 5% higher than the applicable loan interest rate. The financial covenants require the Company to maintain minimum revenue of $15.4 million in the quarter ended December 31, 2020, and 70% of projected revenue in all future quarters.

~~As of June 30, 2021, the Company is in compliance with all covenants of the Runway Loan Agreement.~~

~~Paycheck Protection Program Loans~~

In April 2020, the Company entered into a loan agreement with Western Alliance Bank pursuant to the Paycheck Protection Program established under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). The Company received loan proceeds of $8.1 million (the “Porch PPP Loan”). The term of the Porch PPP Loan was two years with a maturity date of April 18, 2022 and bore interest at a fixed rate of 1.00%. Payments of principal and interest on the Porch PPP Loan were deferred for the first nine months of the term of the Porch PPP Loan. Principal and interest were payable monthly, less the amount of any potential forgiveness. The Company submitted an application for forgiveness of the loan in December 2020, and in June 2021 the loan was forgiven in whole. As a result, the outstanding principal balance of $8.1 million and unpaid interest of $91 were written off and the Company recorded a gain on extinguishment in the consolidated statements of operations.

In connection with an acquisition of DataMentors Holdings, LLC d/b/a V12 Data (“V12 Data”) on January 12, 2021 (see Note 10), the Company assumed a loan agreement with Western Alliance Bank pursuant to the Paycheck Protection Program for the amount of $2.0 million (the “V12 Data PPP Loan”). The loan had a maturity date of April 19, 2022 and a fixed interest rate of 1%. All other terms were the same as those of the Porch PPP Loan. An application for forgivenessdebt issuance costs.

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of the loan was submitted in November 2020, and in June 2021 the loan was forgiven in whole. In accordance with the terms of the purchase agreement, the restricted cash held in escrow will be provided to the seller as consideration for the transaction and no gain will be recorded in the consolidated statements of operations for this extinguishment. The balance of this payable remained in restricted cash as of June 30, 2021.PORCH GROUP, INC.

~~Line of Credit~~Notes to Condensed Consolidated Statements - Continued

In connection with the acquisition of HOA on April 5, 2021, the Company assumed a $5.0 million revolving line of credit (“RLOC”) with Legacy Texas Bank that had an outstanding balance of $3.9 million. Outstanding balances under the RLOC bear interest at the Wall Street Journal Prime + 0%(all numbers in thousands, except share amounts and ~~mature on November 16, 2022. In addition, the Company pays 0.25% per annum of the daily-unused portion of the RLOC.~~

Collateral for the RLOC includes all assets of HAHC and its subsidiaries as well as the stock of HAIC. The credit agreement is subject to standard financial covenants and reporting requirements. At June 30, 2021, the Company was in compliance with all required covenants. Outstanding borrowings on the RLOC at June 30, 2021 were $4.0 million. These borrowings were utilized primarily to increase HAIC’s capital surplus.

~~Term Loan Facility~~

In connection with HOA acquisition on April 5, 2021, the Company assumed a nine-year, $10.0 million term loan facility with a local bank. As of June 30, 2021 the Company has made 0 borrowings on the term loan facility.

~~Other Promissory Notes~~

In connection with an acquisition on November 2, 2020, the Company issued a promissory note payable to the founder of the acquired entity. The promissory note has an initial principal balance of $750 thousand and aunless otherwise stated, ~~interest rate of 0.38% per annum. The promissory note shall be paid in 5 equal annual installments of $150 thousand each, plus accrued interest commencing on January 21, 2021.~~unaudited)

8. Equity and Warrants

~~Shares Authorized~~

As of June 30, 2021, the Company had authorized a total of 410,000,000 shares of stock for issuance, with 400,000,000 shares designated as common stock, and 10,000,000 shares designated as preferred stock.

Common Shares Outstanding and Common Stock Equivalents

The following table summarizes ~~our~~the Company’s fully diluted capital ~~structure at June 30, 2021:~~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.

The table 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.


~~Issued and outstanding common shares~~	~~92,193,417~~
~~Earnout common shares (Note 1 and Note 9)~~	~~4,099,999~~
~~Total common shares issued and outstanding~~	~~96,293,416~~
~~Common shares reserved for future issuance:~~Number of
~~Public warrants~~		Common
		Shares Issued	Cash Received
Balances as of January 1, 2022		1,795,700	$	—
Exercised		—		—
Canceled		—		—
~~Private warrants~~Balances as of March 31, 2022		1,795,700	~~3,125,154~~
~~Common stock options outstanding - 2012 Equity Plan~~$	~~5,514,174~~
~~Restricted stock units (Note 9)~~	~~1,637,495~~
~~2020 Equity Plan pool reserved for future issuance (Note 9)~~	~~10,105,864~~
~~Total shares of common stock outstanding and reserved for future issuance~~	~~116,676,103~~—

~~Table of Contents~~

~~Warrants~~

~~Upon completion of the Merger with PTAC on December 23, 2020, the Company assumed 8,625,000 public warrants and 5,700,000 private~~ ~~warrants~~ to purchase an aggregate 14,325,000 shares of common stock, which were outstanding as of December 31, 2020. Each warrant entitles the registered holder to purchase 1 share of common stock at a price of $11.50 per share, subject to adjustment, commencing 30 days after the completion of the Merger, and expiring on December 23, 2025 which is five-years after the Merger.

~~The Company may call the public warrants for redemption (excluding the private warrants), in whole, 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 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 warrant holders 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 warrants are identical to the public warrants, except that the private warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees, as defined in the warrant agreements. If the placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants. 5,700,000 and 3,125,154 private warrants were held as of December 31, 2020 and June 30, 2021, respectively, by the initial purchases or their permitted transferees.

The public and private warrants are classified separately on our condensed consolidated balance sheets due to differences in each instrument’s contractual terms. The public warrants are classified in equity classified financial instruments and are not remeasured periodically. The private warrants are liability classified financial instruments measured at fair value, with periodic changes in fair value recognized through earnings. See Note 4.

On March 23, 2021, the Company announced that it would redeem all outstanding public warrants on April 16, 2021 pursuant to a provision of the warrant agreement under which the public warrants were issued. During March 2021, certain holders of public warrants exercised their warrants to acquire 8,087,623 shares of common stock at a price of $11.50 per share, resulting in cash proceeds of $89.8 million in March and $3.2 million in April.

During April 2021, certain warrant holders exercised their warrants to acquire 2,935,753 shares of common stock at a price of $11.50 per share, resulting in cash proceeds of $33.8 million. During April 2021, the Company also redeemed all of the public warrants that remained outstanding as of April 16, 2021 for a redemption price of $0.01 per public warrant. In connection with the redemption, the public warrants stopped trading on the Nasdaq Capital Market and were delisted, with the trading halt announced after close of market on April 16, 2021.

9. Stock-Based Compensation

Under the Company’s 2020 ~~Equity~~Stock Incentive Plan (the “2020 Plan”), which replaced the Company’s 2012 Equity Incentive Plan upon the closing of the Merger in December 2020, the employees, directors and consultants of the Company 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 ~~RSUs,~~other stock awards, collectively referred to as “Awards”.

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Table of Contents

~~Stock-based compensation consists of expense related to (1) equity awards in the normal course and (2) a secondary market transaction as described below:~~PORCH GROUP, INC.

Three months ended

Six months ended

June 30,

June 30,


2021

2020

2021

2020

Secondary market transaction

$
—

$
—

$
1,933

$
—

Employee earnout restricted stock

4,176

—

16,549

—

Employee awards

2,466

362

4,995

1,034

Total operating expenses

$
6,642

$
362

$
23,477

$
1,034

Notes to Condensed Consolidated Statements - Continued

~~2019 Secondary Stock Transactions~~

~~In May 2019, the Company’s CEO~~(all numbers in thousands, except share amounts and Founder purchased a total of 7,559,047 shares of legacy Porch.com redeemable convertible preferred stock from an existing investor for an aggregate purchase price of $4.0 million ($0.53 per legacy Porch.com share). The Company determined that the purchase price was below fair value of such shares and as result recorded compensation expense of $33.2 million in general and administrative expense for the difference between the purchase price and fair value, in accordance with the accounting standards.

In July 2019, the Company’s CEO and Founder subsequently sold 901,940 shares of legacy Porch.com redeemable convertible preferred stock as an incentive to 11 executives of the Company at the same price at which the shares were initially acquired in the May 2019 transaction, which represents a $2.6 million discount to fair value. The original termsunless otherwise stated, that the Company had the right to repurchase such shares if certain service vesting conditions and performance conditions are not met. In December 2020, the performance vesting conditions were met, and compensation expense of $1.6 million was recorded in 2020 related to these awards, of which $0.7 million was related to former employees and immediately recognized, as there is no continued service vesting requirement, and $0.9 million was related to current employees and recognized as a cumulative catch up related to the portion of the service period satisfied through December 31, 2020. In March 2021, the Porch board of directors (the “Board”) amended the original terms to accelerate the vesting of these awards and remove the Company’s repurchase right with the respect to the shares. The remaining stock compensation of $1.9 million related to the award was recognized in March 2021.

~~2020 Equity Incentive Plan~~

The aggregate number of shares of common stock reserved for future issuance under the 2020 Plan is 10,105,864. The number of shares of common stock available under the 2020 Plan will increase annually on the first day of each calendar year, beginning with the calendar year ending December 31, 2021, and continuing until (and including) the calendar year ending December 31, 2030, with such annual increase equal to the lesser of (i) 5% of the number of shares of common stock issued and outstanding on December 31st of the immediately preceding fiscal year and (ii) an amount determined by the Board.

~~Stock-Based Compensation~~

Awards granted under the 2020 Plan to employees typically vest 25% of the shares one year after the options’ vesting commencement date and the remainder ratably on a monthly basis over the following three years. Other vesting terms are permitted as determined by the Board. Options have a term of no more than ten years from the date of grant and vested options are generally canceled three months after termination of employment.

~~During the six months ended June 30, 2021, the Company approved 747,689 RSU’s and 284,271 stock options to various levels of key employees and members of the Board.~~

~~Payroll Reduction Program~~unaudited)

In March 2020, in response to the adverse impact of COVID-19 on the Company’s operations and financial performance, the Company carried out a variety of measures to reduce cash operating expenses, including the

~~Table of Contents~~

implementation of a partial employee furlough and payroll reduction in exchange for RSUs. During the year ended December 31, 2020, the Company reduced cash payroll costs by $4.0 million in exchange for a commitment by the Company to provide up to 2,356,045 RSUs subject to (a) a performance (liquidity) vesting condition and (b) and ongoing employment until March 31, 2021 (or June 30, 2021, for certain awards) in order to be fully vested. The grant of these RSUs was approved by the Board of Directors in June, July, and August 2020 and 2,356,045 were issued during the year ended December 31, 2020. The performance vesting conditions, which were previously considered not probable of achievement were met in December 2020 as a result of the Merger. As a result, a cumulative catch up of $6.5 million of compensation expense was recorded in the fourth quarter of 2020.

~~Compensation cost of $1,605 was recorded during the six months ended June 30, 2021, and 0 additional cost is expected to be recorded over the remaining service period in 2021.~~

~~Employee Earnout Restricted Stock~~

Upon the Merger, 1,003,317 restricted common shares, subject to vesting and forfeiture conditions, were issued to employees and service providers pursuant to their holdings of pre-Merger options, RSUs or restricted shares (the “employee earnout shares”). The employee earnout shares were issued in 3 equal tranches with separate market vesting conditions. ~~One-~~third of the employee earnout shares will meet the market vesting condition when the closing price of the Company’s common stock is greater than or equal to $18.00 over any 20 trading days within any 30- consecutive trading day period within 36 months of the closing date of the Merger. An additional third will vest when the Company’s common stock is greater than or equal to $20.00 over the same measurement period. The final third will vest when the Company’s common stock is greater than or equal to $22.00 over the same measurement period. The employee earnout shares are forfeited upon termination of an employee’s employment. Upon forfeiture, the forfeited shares will be redistributed to all earnout stockholders. Upon redistribution of earnout shares, the awards will be recorded as new awards. The fair value of the award on the grant date is a weighted average of $12.08 per share and will be recognized as stock compensation expense on a graded vesting basis over the derived service period of 1 year or shorter if the awards vest.

During the six months ended June 30, 2021, 24,278 shares were forfeited due to employee terminations. This resulted in the grant of 4,773 additional shares to employee holders at a weighted-average grant date fair value of $16.78. During March 2021, 329,132 restricted employee earnout shares were fully vested, as the market condition for vesting was fully satisfied as a result of the Company’s stock price and trading activity. The Company recorded $8.5 million in stock compensation expense related to the employee earnout shares in the six months ended June 30, 2021, and $3.4 million is expected to be recorded over the remaining estimated service period in 2021.

~~CEO Earnout Restricted Stock~~

Prior to the closing of the Merger, the Company’s CEO and Founder, Matt Ehrlichman was granted a restricted stock award under the 2012 Plan which was converted into an award of 1,000,000 restricted shares of common stock upon the closing of the Merger. The award will vest in ~~one-third installments if certain stock price triggers are achieved within~~ ~~36-months~~ following the closing of the Merger. One-third of the restricted shares will meet the market vesting condition when the Company’s common stock is greater than or equal to $18.00 over any 20 trading days within any 30 consecutive trading day period within 36 months of the closing date of the Merger. An additional third will vest when the Company’s common stock is greater than or equal to $20.00 over the same measurement period. The final third will vest when the Company’s common stock is greater than or equal to $22.00 over the same measurement period. If Mr. Ehrlichman’s employment with the Company is terminated prior to the award being fully vested, then the award will be terminated and canceled, provided that if Mr. Ehrlichman’s employment is terminated by the Company without cause or Mr. Ehrlichman resigns due to good reason (in each case, as defined in the award agreement), the award will remain outstanding and will vest to the extent the stock price triggers are achieved during the ~~36-month~~ period. The fair value of the award on the grant date is an average of $12.08 per share and will be recognized as stock compensation expense on a graded vesting basis over the derived service period of 1 year or shorter if the awards vest.

During the six months ended June 30, 2021, 333,333 CEO restricted earnout shares were fully vested, as the first market condition for vesting was fully satisfied as a result of the Company’s stock price and trading activity. The

~~Table of Contents~~

Company recorded $8.3 million in stock compensation expense related to the restricted stock award in the six months ended June 30, 2021, and $3.4 million is expected to be recorded over the remaining estimated service period in 2021.

~~10. Business Combinations~~

~~During the six months ended June 30, 2021, the Company completed several transactions which have been accounted for as business combinations. The purpose~~Stock-based compensation consists of ~~each of the acquisitions is~~expense related to expand the scope and nature of the Company’s product and service offerings, obtain new customer acquisition channels, add additional team members with important skillsets, and realize synergies. Acquisition-related costs of $4.9 million primarily comprised of legal and due-diligence related fees, are included in general and administrative expenses on the consolidated statements of operations. The results of operations for each acquisition are includedequity awards in the ~~Company’s consolidated financial statements from the date of acquisition onwards.~~

~~The following table summarizes the total consideration~~normal course, earnout restricted stock and ~~the preliminary estimated fair value of the assets acquired and liabilities assumed for business combinations made by the Company during the six months ended June 30, 2021:~~a secondary market transaction as described below:

Weighted Average Useful Life (in years)

January 12, 2021 Acquisition

April 5, 2021 Acquisition

May 20, 2021 Acquisition

Other Acquisitions

Total
Purchase consideration:

Cash

$
20,346

$
82,002

$
32,302

$
13,490

$
148,140
Issuance of common stock

—

21,687

—

1,169

22,856
Common stock consideration

Payable

—

3,014

3,500

—

6,514
Contingent consideration

1,410

6,685

—

327

8,422
Total purchase consideration:

$
21,756

$
113,388

$
35,802

$
14,986

$
185,932
Assets:

Cash, cash equivalents and restricted cash

$
1,035

$
17,766

$
408

$
1,048

$
20,257
Current assets

4,939

235,669

932

860

242,400
Property and equipment

996

2,267

334

72

3,669
Intangible assets:

Customer relationships
10.0

1,650

16,700

12,700

6,400

37,450
Acquired technology
5.0

3,525

—

2,900

940

7,365
Trademarks and tradenames
11.0

1,225

12,200

900

410

14,735
Non-competition agreements
1.0

40

—

90

15

145
Value of business acquired
1.0

—

400

—

—

400
Renewal rights
8.0

—

7,692

—

—

7,692
Insurance licenses
Indefinite

—

4,960

—

—

4,960
Goodwill

16,760

47,008

21,952

6,952

92,672
Other non-current assets

—

55,165

—

—

55,165
Total assets acquired

30,170

399,827

40,216

16,697

486,910
Current liabilities

(6,388)

(273,759)

(409)

(1,285)

(281,841)
Long term liabilities

(2,026)

(8,913)

—

—

(10,939)
Deferred tax liabilities, net

—

(3,767)

(4,005)

(426)

(8,198)
Net assets acquired

$
21,756

$
113,388

$
35,802

$
14,986

$
185,932


	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

~~The estimated fair values assigned~~Detail related to ~~tangible~~stock option, RSU and intangible assets acquired and liabilities assumed are preliminary in nature and may be subject to change as additional information is received. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

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~~January 12, 2021 Acquisition~~

On January 12, 2021, Porch acquired V12 Data, an omnichannel marketing platform. The purpose of the acquisition is to expand the scope and nature of Porch’s service offerings, add additional team members with important skillsets, and realize synergies. Porch acquired V12 Data for $20.3 million cash with an additional $1.4 million held as contingent consideration. The contingent consideration is based on the achievement of certain Revenue and EBITDA milestones over the ~~two~~ succeeding years and is paid in cash or common stock at Porch’s discretion. The consideration was paid to the sellers in exchange for net assets of $21.8 million. Goodwill is expected to be deductible for tax purposes. Acquisition-related costs of $274 thousand are included in general and administrative expenses on the consolidated statements of operationsRSA activity for the ~~six~~three months ended ~~June 30, 2021.~~

~~The following table summarizes the fair value of the intangible assets of V12 Data~~March 31, 2022, is as ~~of the date of the acquisition:~~follows:


			Estimated		Number of	Number of
	Fair		Useful Life	Number of	Restricted	Restricted
	Value		(in years)	Options	Stock Units	Stock Awards
Intangible assets:
Customer relationships	$	1,650	10
Acquired technology		3,525	4
Trademarks and tradenames		1,225	15
Non-competition agreements		40	2
	$	6,440
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	—

~~The weighted-average amortization period for the acquired intangible assets is 7.6 years.~~

The estimated fair value of the customer relationships intangible asset was calculated through the income approach using the multi-period excess earnings methodology. The estimated fair value of the trademarks and tradenames as well as acquired technology intangible assets were calculated through the income approach using the relief from royalty methodology. The estimated fair value of the non-competition agreement is derived using the with and without method over the contractual term of the agreement. The estimated fair value of deferred revenue is derived using the cost-plus-profit method, which presumes that an acquirer of deferred revenue would not pay more than the costs and expenses to fulfill the obligation plus a profit for the effort employed.

~~April 5, 2021 Acquisition~~

On April 5, 2021, Porch acquired HOA. The purpose of the acquisition is to expand the scope and nature of Porch’s product offerings, add additional team members with important skillsets, and gain licenses to operate as an insurance carrier and managing general agent in 31 states. Total consideration related to this transaction included $113.4 million, consisting of $82 million in cash paid at closing, $21.7 ~~million in Porch common stock, and acquisition hold backs and contingent consideration of~~ ~~$9.7 million. Acquisition-related costs of $2.9~~ ~~million were primarily for legal and due-diligence related fees and are included in general and administrative expenses for the six months ended June 30, 2021.~~

~~Table of Contents~~

~~The following table summarizes the fair value of the intangible assets of HOA as of the date of the acquisition:~~10. Reinsurance

Estimated

Fair

Useful Life

Value

(in years)
Intangible assets:




Customer relationships

$
16,700

10
Trademarks and tradenames

12,200

10
Business acquired

400

1
Renewal rights

7,692

8
Insurance licenses

4,960

Indefinite

$
41,952

The ~~weighted-average amortization period~~effects of reinsurance on premiums written and earned for the ~~acquired intangible assets is 8.4 years.~~

The fair value of customer relationships was estimated through the income approach using the multi-period excess earnings methodology. The fair value of trade name and trademarks was estimated through the income approach using the relief from royalty methodology. The business acquired was valued using the income approach based on estimates of expected future losses and expenses associated with the policies that were in-force as of the closing date of the transaction compared to the future premium remaining to be earned. The renewal rights was estimated through the income approach based on premium forecast and cash flows from the renewal policies modeled over the life of the renewals. The insurance licenses were valued using the market approach based on arms-length transactions in which certificate authority companies with licenses were purchased.

~~May 20, 2021 Acquisition~~

On May 20, 2021, Porch acquired Segin Systems, Inc. (“Rynoh”), a software and data analytics company that supports financial management and fraud prevention primarily for the title and real estate industries. The purpose of the acquisition is to expand the scope and nature of Porch’s product offerings, add additional team members with important skillsets, and realize synergies. Total consideration related to this transaction include $35.8 million, consisting of $32.3 million in cash paid at closing, and acquisition hold backs of $3.5 million. Acquisition-related costs of $1.6 million were primarily for legal and due-diligence related fees and are included in general and administrative expenses for the sixthree months ended ~~June 30, 2021.~~

~~The following table summarizes the fair value of the intangible assets of Rynoh~~March 31, 2022 were as ~~of the date of the acquisition:~~follows:


			Estimated	2022
	Fair		Useful Life	Written		Earned
	Value		(in years)
Intangible assets:
Customer relationships	$	12,700	10
Acquired technology		2,900	7
Trademarks and tradenames		900	20
Non-competition agreements		90	1
	$	16,590
Direct premiums				$	87,123	$	84,318
Ceded premiums					(60,636)		(71,727)
Net premiums				$	26,487	$	12,591

The ~~weighted-average amortization period~~effects of reinsurance on incurred losses and LAE for the ~~acquired intangible assets is 10 years.~~

~~The fair value of customer relationships was estimated through the income approach using the multi-period excess earnings methodology. The fair value of trade name and trademarks,~~three months ended March 31, 2022 were as well as acquired technology was estimated through the income approach using the relief from royalty methodology. The fair value of the non-competition agreement is derived using the with and without method over the contractual term of the agreement.follows:


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

3224

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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 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

Revenue from these 3 acquisitions included in the Company’s consolidated statements of operations through June 30, 2021 is $27.9 million. Net income included in the Company’s consolidated statements of operations from the these acquisitions through June 30, 2021 is $4.3 million.

~~Unaudited Pro Forma Consolidated Financial Information~~11. Unpaid Losses and Loss Adjustment Reserve

The following table ~~summarizes~~provides the ~~estimated unaudited pro forma consolidated financial information~~rollforward of the ~~Company as if~~beginning and ending reserve balances for losses and LAE, gross of reinsurance for the ~~V12 Data, HOA, and Rynoh acquisitions had occurred on January 1, 2020:~~three months ended March 31, 2022:


	Three months ended				Six months ended				2022
		June 30,				June 30,
	2021		2020		2021		2020
Revenue	$	52,867	$	36,086	$	97,610	$	68,837
Net loss	$	(17,102)	$	(8,408)	$	(79,417)	$	(27,608)
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

~~Other Acquisitions~~

~~In the first half~~As a result of ~~2021, the Company completed 2 other acquisitions which~~additional information on claims occurring in prior years becoming available to management, changes in estimates of provisions of losses and loss adjustment expenses were ~~not individually material to the consolidated financial statements. The purpose~~made, resulting in a decrease of the acquisitions was to expand the scope and nature of the Company’s service offerings, add additional team members with important skillsets, and realize synergies. The transaction costs associated with these acquisitions were $144 thousand and are included in general and administrative expenses on the consolidated statements of operations$0.6 million for the ~~six~~three months ended ~~June 30, 2021. Goodwill of $3.6 million is not expected to be deductible for tax purposes, while goodwill of $3.3 million is expected to be deductible for tax purposes.~~March 31, 2022.

~~11.~~12. Commitments and Contingencies

Acquisition Commitments

On September 2, 2021, the Company entered into a 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 transactions contemplated by the Agreement, Buyer will pay $48.6 million in cash for all of the shares of GMF Financial Services Corporation, which owns all of the issued and outstanding stock of Civil Service Employees Insurance Company, CSE Safeguard Insurance Company, CSE Insurance Services, Inc. and CSE Group Services Company, subject to certain adjustments, as further described in the Agreement. The closing is subject to customary conditions, including, among others, the absence of a material adverse effect on GMFF and the receipt of specified governmental consents and approvals.

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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 the amount of the loss can be reasonably estimated. In many instances, the Company is unable to determine whether a loss is probable or to reasonably estimate the 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 has recorded in the financial statements covering these matters. The Company reviews its estimates periodically and makes adjustments to reflect negotiations, estimated settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter.

Cases under Telephone Consumer Protection Act

Porch ~~and~~and/or an acquired entity, GoSmith.com, are party to 14twelve legal proceedings alleging violations of the automated calling and/or Do Not Call restrictions of the Telephone Consumer Protection Act of ~~1991 (“TCPA”).~~1991. Some of these actions allege related state law claims. ~~Most of the~~The proceedings were commenced as mass tort ~~actions~~action by a single plaintiffs’ law firm in December 2019 and April/May 2020 in federal district courts throughout the United ~~States~~States. One of the actions was dismissed with prejudice and is on appeal before the Ninth Circuit Court of Appeals. The remainder have been consolidated in the United States District Court for the Western District of Washington, where Porch resides. That case is stayed pending the outcome of the appeal. Plaintiffs seek actual, statutory, and/or treble damages, injunctive relief, and reasonable attorneys’ fees and costs. ~~A related action brought by the same plaintiffs’ law firm was dismissed with prejudice and is on appeal before the Ninth Circuit Court of Appeals.~~

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 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.

~~Table of Contents~~

Kandela, LLC v Porch.com, Inc.

In May 2020, the former owners of Kandela, LLC filed ~~a complaint~~complaints against Porch in the Superior Court of the State of California, alleging a breach of contract related to the 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 determine the likelihood of an unfavorable outcome, although it is reasonably possible that the outcome may be unfavorable. ~~However, certain~~Certain claimants have settled their claims, ~~with a portion~~and this settlement is within the range of the ~~settlement offer to be paid by insurance and a portion to be paid by Porch. This settlement limits the potential of any unfavorable outcome for the remaining matters to be arbitrated.~~estimated accrual. Arbitration of the remaining claims ~~is currently scheduled~~occurred in March 2022, but a final decision has yet to ~~occur during~~be issued by the ~~first quarter of 2022.~~Arbitrator. Porch is unable to provide an estimate of the range or amount of potential loss across ~~all~~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. While this action is still at an early stage in the litigation process,~~costs for which, Porch has recorded an estimated accrual for a contingent loss based on information currently known. The parties recently attended a mediation

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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 ~~tentative~~ deal was ~~reached pending execution of~~reached. The parties have executed the long form settlement agreement and obtained preliminary approval byfrom the ~~court.~~

~~Regulatory Requirements and Restrictions~~

~~HAIC is subject~~court on April 25, 2022. Notices will go out to the ~~laws~~putative class, and ~~regulations~~after the notice period, the parties will seek final approval of the ~~State of Texas~~settlement from the court on August 11, 2022. If final approval is granted, and the ~~regulations~~settlement will be funded, and the case will be complete.

Other

In addition, in the ordinary course of ~~any other states in which HAIC conducts business. State regulations cover all aspects of HAIC’s~~ business, Porch and its subsidiaries are ~~generally designed~~(or may become) parties to ~~protect the interests of insurance policyholders, as opposed to the interests of stockholders. The Texas Insurance Code requires all~~litigation involving property, personal injury, contract, intellectual property and ~~casualty insurers to have a minimum of $2.5 million in capital stock~~other claims, as well as stockholder derivative actions, class action lawsuits and ~~$2.5 million in surplus. HAIC has capital and surplus in excess of this requirement.~~

As of June 30, 2021 HAIC had restricted cash and investments totaling $314 thousand and 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. See Note 1.

other matters. The ~~Texas Insurance Code limits dividends from insurance companies to their stockholders to net income accumulated in the Company’s surplus account, or “earned surplus”. The maximum dividend~~amounts that may be ~~paid without approval~~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 ~~Insurance Commissioner is limited~~outcome of which, we believe, if determined adversely to ~~the greater of 10% of the statutory surplus at the end of the preceding calendar year~~us, would individually or ~~the statutory net income of the preceding calendar year. NaN dividends were paid by HAIC~~ in the ~~first half~~aggregate have a material adverse effect on our business, financial condition or results of ~~2021.~~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 as home inspectors, moving companies, utility companies, title companies and others, and includes software fee revenues from 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 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 provides the Company’s 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.

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PORCH GROUP, INC.

~~12.~~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 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 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. It has been retrospectively adjusted for all periods prior to the reverse capitalization. The retroactive adjustment is based on the same number of weighted-average shares outstanding in each historical period.

~~Table of Contents~~

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.

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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 ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended				Six Months Ended
	June 30,				June 30,				Three Months Ended March 31,
	2021		2020		2021		2020		2022		2021
Numerator:
Net loss	$	(16,296)	$	(6,258)	$	(81,398)	$	(24,625)
Net loss used to compute net loss per share - basic and diluted									$	(5,796)	$	(65,101)

Denominator:
Shares used in computing net loss attributable per share to common stockholders, basic and diluted		95,221,928		35,478,347		91,483,053		35,117,130
Net loss attributable per share to common stockholders:
Basic and diluted	$	(0.17)	$	(0.18)	$	(0.89)	$	(0.70)
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:


	Three Months Ended		Six Months Ended		2022	2021
	2021	2020	2021	2020
Stock options	6,350,253	7,719,210	6,350,253	7,719,210	4,569,743	6,199,325
Restricted stock units and awards	2,975,463	106,890	2,975,463	106,890	4,225,986	1,282,327
Legacy Porch warrants	—	3,134,068	—	3,134,068
Public and private warrants	3,125,154	—	3,125,154	—	1,795,700	6,237,377
Earnout shares	4,099,999	—	4,099,999	—	2,050,000	4,099,999
Convertible debt	—	1,034,760	—	1,034,760
Convertible debt⁽¹⁾					16,998,130	—

~~See Note 8 for additional information regarding~~⁽¹⁾ In connection with the ~~terms~~September 16, 2021 issuance of the ~~warrants. See Note 9~~2026 Notes, the Company used a portion of the proceeds to pay for ~~additional information regarding stock options and restricted~~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, 2022.

~~13.~~15. Subsequent Events

~~In July 2021,~~On April 1, 2022, the Company ~~completed an acquisition of a marketing~~acquired the home warranty and inspection software and services ~~company targeting homeowners and movers. The total purchase price was $13.7~~businesses from Residential Warranty Services (“RWS”). Total consideration in the transaction is $33 million, ~~comprised of $11.7~~including $29 million of cash, of which $5 million was paid ~~at closing~~in March 2022, and $2$4 million of Porch common ~~stock.~~stock and additional contingent consideration tied to the performance of a recently launched business line.

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PART II —OTHER INFORMATION

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

This ~~report~~Quarterly Report and the documents incorporated herein by reference contain forward- looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management. Although 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 ~~report~~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:

●

~~the ability to recognize the anticipated benefits of the Company’s~~expansion plans and opportunities, including recently completed acquisitions as well as future acquisitions or additional business combination consummated on December 23, 2020 (the “Merger”) pursuant to that certain Agreement and Plan of Merger, dated July 30, 2020 (as amended by the First Amendment to the Agreement and Plan of Merger, dated as of October 12, 2020, the “Merger Agreement”), by and among PropTech Acquisition Corporation (“PTAC”), PTAC Merger Sub Corporation, a Delaware corporation and wholly-owned subsidiary of PTAC (“Merger Sub”), Porch.com, Inc. a Delaware corporation, and Joe Hanauer, in his capacity as the stockholder representative, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably, maintain key commercial relationships and retain its management and key people;combinations;

●

●~~expansion plans and opportunities, including future acquisitions or additional business combinations;~~

●costs related to ~~the Merger and~~ 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 impact of the COVID-19~~
●
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 ~~report~~Quarterly Report are more fully described in Part II, Item 1A of this ~~report,~~Quarterly Report, Item 1A of the Company’s Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2020~~2021 filed with the SEC on ~~May 19,2021~~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.

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Business Overview

Porch is a vertical software platform for the home, providing software and services to ~~approximately 17,000~~over 25,500 home services companies, such as home inspectors, mortgage companies and loan officers, title companies, moving companies, real estate agencies, utility companies, ~~warranty companies,~~roofers and ~~others. Porch helps~~others, helping these service providers grow their business and improve their customer experience.

~~Porch~~ 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, ~~Porch’s~~the Company’s platform drives demand for other services from such companies as part of ~~our~~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,~~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~~Internet providers, who pay ~~Porch~~ for new customer sign-ups.

Throughout the last eight (8) years, Porch has established many partnerships across a number of home-related industries. Porch has also selectively acquired companies which can be efficiently integrated into Porch’s platform. In 2017, we significantly expanded our position in the home inspection industry by acquiring ISN™, a developer of ERP and CRM software for home inspectors. In November 2018, we acquired HireAHelper™, a provider of software and demand for moving companies.In 2019, we acquired a business that connects new homebuyers to utility companies. In 2020, we acquired a moving services technology company, iRoofing, LLC a roofing software company, and two individually immaterial acquisitions. In the first half of 2021, we acquired a home inspection integrated customer service and call handling solution company, V12 Data, an omnichannel marketing platform, HOA, an insurance managing general agency, as well as Rynoh, a financial management and fraud prevention software service for the title and real estate industries. We will continue to make additional acquisitions that are consistent with our focus on insurance and home services related verticals.

~~We sell our~~The Company sells software and services to companies using a variety of sales and marketing ~~tactics. We have~~tactics, including teams of inside sales representatives organized by vertical market who engage directly with ~~companies. We have~~companies, and enterprise sales teams ~~which~~that target the large named accounts in each of ~~our~~the vertical markets. These teams are supported by ~~a variety of~~various typical software marketing tactics, including ~~both~~ 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 ~~the approximately 17,000~~over 25,500 companies using ~~Porch’s~~the Company’s software to provide the company with end customer access and introductions. ~~Porch~~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. ~~Porch~~The Company has invested in limited direct-to-consumer ~~(“D2C”)~~ 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 ~~our~~these businesses, ~~we identify, measure~~the Company identifies, measures and ~~evaluate a variety of~~evaluates various operating metrics. The key performance measures and operating metrics ~~we use~~used in managing ~~our~~the businesses are set forth below. These key performance measures and operating metrics are not prepared in accordance with ~~GAAP,~~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 ~~Porch~~ businesses in ~~2018 through~~ 2020.

●

Average ~~Number of~~ 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. ~~Porch~~The Company’s customers include home services companies, ~~such as home inspectors,~~ for whom ~~Porch~~the Company provides software and services and who provide introductions to homebuyers and ~~homeowners. Porch~~homeowners and tracks the average number of home services companies from which it generates revenue each quarter in order to measure ~~our~~the ability to attract, retain and

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grow ~~our~~ relationships with home services companies. Porch management defines the average number of companies in a quarter as the ~~straight line~~straight-line average of the number of companies as of the end of period compared with the beginning of period ~~number~~across all of ~~companies, inclusive of all companies across Porch’s~~the Company’s home services verticals that (i) generate recurring revenue and (ii) generated revenue in the quarter. For new acquisitions, ~~we determine~~ the number of ~~customers~~companies is determined in ~~their~~the initial quarter based on the percentage of the quarter ~~they were~~the acquired business is a part of ~~Porch.~~the Company.

● Average Revenue per Account per Month in Quarter— Management views ~~Porch~~the Company’s ability to increase revenue generated from existing customers as a key component of Porch’s growth strategy. Average Revenue per Account per~~Average revenue per account per month~~Month in ~~quarter~~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

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in Quarter is derived from all customers and total revenue, ~~from~~not only customers and revenues associated with the ~~quarter divided by the average number of companies in the period divided by 3 (to provide monthly revenue).~~Company’s referral network.

The following table summarizes ~~our average companies~~Average Companies in ~~quarter~~Quarter and ~~average revenue~~Average Revenue per ~~account~~Account per ~~month~~Month in Quarter for each of the quarterly periods indicated:


	2018		2018		2019		2019		2019		2019		2020		2020		2020		2020		2021		2021		2022		2022			2022			2022
	Q3		Q4		Q1		Q2		Q3		Q4		Q1		Q2		Q3		Q4		Q1		Q2		Q1		Q2			Q3			Q4
Average Companies in Quarter		9,142		9,627		10,199		10,470		10,699		10,972		10,903		10,523		10,792		11,157		13,995		17,120		25,512		—			—			—
Average Revenue per Account per Month in Quarter	$	344	$	325	$	305	$	468	$	552	$	450	$	484	$	556	$	664	$	556	$	637	$	1,000	$	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.
● ~~Number of~~ 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~~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. ~~Porch~~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 ~~to measure~~ market penetration with homebuyers and homeowners and ~~Porch~~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 wethe Company generated revenue, including, but not limited to, new and renewing insurance and warranty customers, completed moving jobs, security installations, TV/~~internet~~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 ~~home owners~~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

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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.

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


	2018		2018		2019		2019		2019		2019		2020		2020		2020		2020		2021		2021		2022		2022			2022			2022
	Q3		Q4		Q1		Q2		Q3		Q4		Q1		Q2		Q3		Q4		Q1		Q2		Q1		Q2			Q3			Q4
Monetized Services in Quarter		188,502		184,645		185,378		205,887		211,190		172,862		152,165		181,520		198,165		169,949		182,779		302,462		254,249		—			—			—
Revenue per Monetized Service in Quarter	$	42	$	44	$	43	$	63	$	76	$	78	$	93	$	86	$	97	$	98	$	92	$	129
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
~~COVID-19 Impact~~Adoption of New Accounting Standards
~~In March 2020,~~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 ~~World Health Organization declared a pandemic related~~guidance prospectively for business combinations that occur after the adoption date. The adoption has no impact to the global novel coronavirus disease 2019 (“COVID-19”) outbreak. The COVID-19 pandemic and the measures adopted by government entities in response to it have adversely affected Porch’s business operations, which has impacted revenue primarily in the first half of 2020. The impact of the COVID-19 pandemic and related mitigation measures, Porch’s ability to conduct ordinary course business activities has been and may continue to be impaired for an indefinite period of time. The extent of the continuing impact of the COVID-19 pandemic on Porch’s operational and financial performance will depend on various future developments, including the duration and spread of the outbreak and impact on the Company’s customers, suppliers, and employees, all of which is uncertain at this time. Porch expects the COVID-19 pandemic to continue to have an uncertain impact on future revenue and results of operations, but Porch is unable to predict at this time the size and duration of such impact.
~~Comparability of Financial Information~~
~~Porch’s future results~~existing unaudited condensed consolidated balance sheets, statements of operations, and ~~financial position may not be comparable to historical results as a result~~statements of ~~the Merger.~~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 ~~approximately 17,000~~over 25,500 home services companies, such as home inspectors, moving companies, utility companies,

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warranty companies, ~~and others.~~etc. The following are key factors affecting our operating results in ~~2020 and~~ the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:

●

~~Continued investment~~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 ~~growing~~January 2021), HOA (acquired in April 2021), Rynoh (acquired in May 2021), AHP (acquired in September 2021) and ~~expanding~~Floify (acquired in October 2021). For a complete discussion of our ~~position~~2021 acquisitions, refer to Item 8 in the ~~home inspection industry as a result of the 2017 acquisition of ISN~~™~~, a developer of ERP and CRM software for home inspectors.~~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. ~~We are specifically~~Specifically by increasing economies of scale related to ~~our variable~~fixed selling costs, Moving Concierge call center operations and product and technology costs.

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●

InOngoing expansion in other software verticals related to the ~~second quarter of 2021 the Company invested $127.9 million in cash, net of acquired,~~home and ~~$22.9 million in common stock to acquire companies to expand the scope~~related services such as title, warranty and ~~nature of the Company’s service offerings, add additional team members with important skillsets, and realize synergies.~~mortgage software.

●

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

●

Investments in establishing and ~~April~~maintaining controls required by the Sarbanes-Oxley Act of ~~2021, a number of holders of public warrants exercised their warrants to acquire approximately 10.9 million shares of common stock, resulting~~2002 (“SOX”) and other internal controls across IT and accounting organizations.

●

Investments in ~~cash proceeds of $126.8 million.~~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 ~~Porch~~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 ~~a single segment.~~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. ~~To date, the Company’s CODM has made such decisions and assessed performance at the Company level.~~

Components of Results of Operations

Total Revenue

The Company generates ~~its Core Services Revenue~~revenue from (1) ~~fees received for connecting homeowners to individual contractors, small business~~software and service providers and large enterprise service providers, (2) commissions from third-party insurance carriers, and (3) insurance premiums, policy fees and other insurance-related fees generated through its own insurance carrier. The Company’s Managed Services Revenue is generated from fees received for providing select and limited services directly to homeowners. The Company’s Software and Service Subscription Revenue issubscription revenue generated from fees received for providing subscription access to the Company’s software platforms and subscription services across various ~~industries.~~

Inindustries; (2) insurance revenue in the ~~Core Services Revenue stream, the Company connects Service Providers with~~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-

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related fees generated through its own insurance carrier; (3) move-related service revenue through feesreceived for connecting homeowners ~~that meet pre-defined criteria and may be looking for relevant services. Service Providers include a variety of~~to service providers ~~throughout~~during time of a ~~homeowner’s lifecycle,~~move including movers, TV/Internet, warranty, and security monitoring providers ~~plumbers, electricians, roofers, et al. The Company also sells home insurance policies through the Company’s own insurance carrier, as well as~~and for ~~third-party insurance carriers~~

~~Managed Services Revenue includes fees earned from homeowners~~certain move related services for providing select services directly to the ~~homeowner,~~homeowner; (4) post-move related revenue in the form of fees earned from introducing homeowners to home service professionals including ~~handyman~~handymen, plumbers, electricians, roofers etc., and ~~moving services. The Company generally invoices~~ for ~~managed services~~certain projects ~~on a fixed fee or time and materials basis. The transaction price represents the contractually agreed upon price with the end customer~~ for providing select services directly to the respective service. Revenue is recognized as services are performed based on an output measure or progress, which is generally over a short duration (e.g., same day). Fees earned for providing managed services projects are non-refundable and there is generally no right of return.homeowner.

Software and ~~Service Subscription Revenue~~service subscription revenue primarily relates to subscriptions to the Company’s ~~home inspector~~ software offerings across its verticals as well as marketing software and ~~services, and other vertical software.~~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.

40

~~Table~~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 ~~Contents~~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.

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Cost of revenue primarily ~~consist~~consists of ~~professional fees and materials under the Managed Services model,~~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.~~fees and operational cost of SaaS businesses.

Selling and marketing expenses primarily consist of ~~third-party data leads, affiliate and partner leads, paid search and search engine optimization (“SEO”) costs, policy acquisition and other underwriting expenses,~~ payroll, employee benefits and ~~stock-compensation~~stock-based compensation expense, and other headcount related costs associated with sales efforts directed toward companies and ~~consumers.~~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-compensation~~stock-based compensation expense, other ~~headcount related~~headcount-related costs associated with product development, net of costs capitalized as internally developed ~~software,~~software. Also included are cloud computing, hosting and other technology costs, software subscriptions, professional services and amortization of ~~internally-development~~internally developed software.

General and administrative expenses primarily consist of expenses associated with functional departments for finance, legal, human resources and executive ~~management expenses.~~management. The primary categories of expenses include payroll, employee benefits, ~~stock-compensation~~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 ~~allowance~~insurance agency commissions, current estimate for ~~doubtful accounts,~~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 estimates, judgments, and ~~assumptions, and to the extent those differences are material, the consolidated financial statements will be affected.~~assumptions.

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

~~Table of Contents~~

During the three months ended ~~June 30, 2021,~~March 31, 2022, there were no changes to the critical accounting policies discussed in our Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended December 31, ~~2020,~~2021, as filed on ~~May 19, 2021.~~March 16, 2022. For a complete discussion of our critical accounting policies, refer to Item 87 in the ~~2020~~2021 Annual Report on Form ~~10-K/A.~~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 June 30,						Six Months Ended June 30,						Three Months Ended March 31,					$	%
	2021		2020		% Change		2021		2020		% Change		2022		2021		Change		Change

	(dollar amounts in thousands, except share and per share data)												(dollar amounts in thousands)
Revenue	$	51,340	$	17,122	200	%	$	78,083	$	32,196	143	%	$	62,561	$	26,742	$	35,819	134	%
Operating expenses:
Cost of revenue		19,500		3,792	414	%		25,429		7,891	222	%		21,189		5,930		15,259	257	%
Selling and marketing		23,122		8,787	163	%		37,762		21,640	75	%		25,743		14,638		11,105	76	%
Product and technology		11,050		5,071	118	%		22,841		12,423	84	%		14,231		11,789		2,442	21	%
General and administrative		20,611		5,893	250	%		44,625		10,049	344	%		26,699		24,016		2,683	11	%
Gain on divestiture of business		—		(1,442)	(100)	%		—		(1,442)	(100)	%
Total operating expenses		74,283		22,101	236%	%		130,658		50,561	158	%		87,862		56,373		31,489	56	%
Operating loss		(22,943)		(4,979)	361%	%		(52,575)		(18,365)	186	%		(25,301)		(29,631)		4,330	(15)	%
Other expense:
Other income (expense):
Interest expense		(1,216)		(3,291)	(63)	%		(2,439)		(6,377)	(62)	%		(2,293)		(1,223)		(1,070)	87	%
Change in fair value of earnout liability		(4,032)		—	NM			(22,801)		—	NM			11,179		(18,770)		29,949	NM
Change in fair value of private warrant liability		(4,303)		—	NM			(20,212)		—	NM			10,189		(15,910)		26,099	NM
Gain on extinguishment of debt		8,243		3,856	114	%		8,243		3,609	128	%
Investment income and realized gains		387		—	NM			397		—	NM
Other expense, net		(165)		(1,841)	(91)	%		(91)		(3,468)	(97)	%
Total other expense, net		(1,084)		(1,276)	(15)	%		(36,904)		(6,236)	492	%
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		(24,027)		(6,255)	284	%		(89,479)		(24,601)	264	%		(5,973)		(65,451)		59,478	(91)	%
Income tax benefit (expense)		7,731		(3)	NM			8,081		(24)	NM
Income tax benefit														177		350		(173)	(49)	%
Net loss	$	(16,296)	$	(6,258)	160%	%	$	(81,398)	$	(24,625)	231	%	$	(5,796)	$	(65,101)	$	59,305	(91)	%

NM = Not Meaningful

~~Comparison of Three and Six Months Ended June 30, 2021 and 2020~~

Revenue

~~Three months ended June 30, 2021 compared to three months ended June 30, 2020:~~

Total revenue increased by ~~$34.2~~$35.8 million, or ~~200%~~134%, from ~~$17.1~~$26.7 million in the three months ended ~~June 30, 2020~~March 31, 2021 to ~~$51.3~~$62.6 million in the three months ended ~~June 30, 2021. The~~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 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 ~~2021~~2022 is primarily driven by the 2021 acquisitions, by accelerated growth after acquisition and by organic ~~growth in our moving services, inspection and insurance businesses, which contributed~~growth.

During the quarter ended December 31, 2021, the Company corrected an ~~aggregate of $36.0 million of the revenue, offset by the revenue~~immaterial error related to ~~divestitures~~revenue from claims fees and contra claims expense, which was corrected in the fourth quarter of ~~$1.8 million. As Porch has grown~~2021. This error impacted revenue and cost of revenue for the ~~number of companies that use our software~~three months ended June 30, 2021 and ~~services, we~~September 30, 2021. The correction did not impact operating loss or net loss in these periods, and did not have ~~been able to grow our B2B2C (“Business to Business to Consumer”) and move related services revenues.~~any impact on the three months ended March 31, 2021.

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~~Six months ended June 30, 2021 compared to six months ended June 30, 2020:~~

~~Total revenue increased by $45.9 million, or 143% from $32.2 million in~~The following table summarizes the six months ended June 30, 2020 to $78.1 million in the six months ended June 30, 2021. The increase in revenue in 2021 is driven by acquisitions and organic growth in our moving services, inspection and insurance businesses, which contributed an aggregate of $50.0 millionimpact of the ~~revenue, offset~~correction by ~~the revenue related to divestitures of $4.1 million.~~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
~~Three months ended June 30, 2021 compared to three months ended June 30, 2020:~~
Cost of revenue increased by ~~$15.7~~$15.3 million, or ~~414%~~257%, from ~~$3.8~~$5.9 million in the three months ended ~~June 30, 2020~~March 31, 2021 to ~~$19.5~~$21.2 million in the three months ended ~~June 30, 2021.~~March 31, 2022. The increase in the cost of revenue was ~~mostly~~primarily attributable to the ~~growth~~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 ~~moving business and~~three months ended March 31, 2021, therefore no cost of revenue ~~for our acquired businesses.~~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 ~~38%~~34% of revenue in the three months ended ~~June 30, 2021~~March 31, 2022 compared with 22% in the same period in ~~2020.~~
~~Six months ended June 30, 2021 compared to six months ended June 30, 2020:~~
2021. Cost of revenue increased by $17.5 million, or 222% from $7.9 million in the six months ended June 30, 2020 to $25.4 million in the six months ended June 30, 2021. The increase in the cost of revenue was mostly attributable to the growth in the moving business and cost of revenue for our acquired businesses. Asas 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 represented 33% of revenue in the three months ended June 30, 2021 compared with 25% in the same period in 2020.~~revenue.
Selling and marketing
~~Three months ended June 30, 2021 compared to three months ended June 30, 2020:~~
Selling and marketing expenses increased by ~~$14.3~~$11.1 million, or ~~163%~~76%, from ~~$8.8~~$14.6 million in the three months ended ~~June 30, 2020~~March 31, 2021 to ~~$23.1~~$25.7 million in the three months ended ~~June 30, 2021.~~March 31, 2022. The increase is due to ~~$11.7~~$8.3 million related to ~~higher selling and marketing costs associated with the growth in our moving, inspection and insurance businesses, as well as~~ the selling and marketing costs of ~~our~~the acquired ~~businesses. Additionally, there was an increase~~businesses comprised of ~~$1.4 million in stock compensation charges. This is offset by our divested businesses~~the underwriting and policy acquisition costs for HOA and additional selling and marketing ~~costs~~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 ~~$0.7 million.~~$1.5 million in stock-based compensation expenses. As a percentage of revenue, selling and marketing expenses represented ~~45%~~41% of revenue in the three months ended ~~June 30, 2021~~March 31, 2022 compared with ~~51%~~55% in the same period in ~~2020.~~
~~Six months ended June 30, 2021 compared to six months ended June 30, 2020:~~
~~Selling~~2021.The improvement in selling and marketing expenses increased by $16.1 million, or 75% from $21.6 million in the six months ended June 30, 2020 to $37.8 million in the six months ended June 30, 2021. The increase is due to $14.2 million related to higher selling and marketing costs associated with the growth in our moving, inspection and insurance businesses, as well as the selling and marketing costs of our acquired businesses. Additionally, there was an increase of $3.7 million in stock compensation charges. This is offset by our divested businesses selling and marketing costs of $1.8 million. As a percentage of revenue ~~selling~~is due to the growing economies of scale across the Company’s vertical software and ~~marketing expenses represented 48% of revenue in the six months ended June 30, 2021 compared with 68% in the same period in 2020.~~insurance segments.
Product and technology
~~Three months ended June 30, 2021 compared to three months ended June 30, 2020:~~
Product and technology expenses increased by $6$2.4 million, or ~~118%~~21%, from ~~$5.1~~$11.8 million in the three months ended ~~June 30, 2020~~March 31, 2021 to ~~$11.1~~$14.2 million in the three months ended ~~June 30, 2021.~~March 31, 2022. The increase is mainly due to ~~investments~~a $2.0 million increase in ~~our moving, insurance~~amortization expense related to acquired intangibles and ~~inspection groups, due to the growth~~a $1.8 million increase in ~~these businesses,~~ 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 ~~our~~$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

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~~acquired businesses, and $1.7 million higher stock~~months ended March 31, 2021, there was a gain of $0.4 million. This was offset by stock-based compensation ~~charge. As a percentage of revenue, product and technology expenses represented 22% of revenue in~~expense for the three months ended ~~June 30, 2021 compared with 30%~~March 31, 2022, which was $8.4 million lower than in the same period in ~~2020.~~

~~Six months ended June 30, 2021 compared to six months ended June 30, 2020:~~

~~Product and technology expenses increased by $10.4 million, or 84% from $12.4 million in the six months ended June 30, 2020 to $22.8 million in the six months ended June 30,~~ 2021. The increase is due to investments in moving, insurance, and inspection groups due to the growth in these businesses, product and technology costs from our acquired businesses and $3.7 million higher stock compensation charge. As a percentage of revenue, product and technology expenses represented 29% of revenue in the six months ended June 30, 2021 compared with 39% in the same period in 2020.

~~General and administrative~~

~~Three months ended June 30, 2021 compared to three months ended June 30, 2020:~~

General and administrative expenses increased by $14.7 million, or 250% from $5.9 million in the three months ended June 30, 2020 to $20.6 million in the three months ended June 30, 2021, primarily due to increase in stock compensation charge for three months ended June 30, 2021 of $3.2 million. See the table and discussion below for the details related to stock-based compensation in the three and six months ended June 30, 2021 and 2020. In the three months ended June 30, 2021 the Company incurred costs related to operating as a public company and increased hiring of corporate resources. Additionally, from March 2020 through June 2020, the Company reduced pay for certain employees and partially or fully furloughed certain employees therefore reducing compensation expense in three months ended June 30, 2020.

~~Six months ended June 30, 2021 compared to six months ended June 30, 2020:~~

General and administrative expenses increased by $34.6 million, or 344% from $10 million in the six months ended June 30, 2020 to $44.6 million in the six months ended June 30, 2021.The increase is primarily due to increase in stock compensation of $15.4 million and costs operating as a public company and increased hiring of corporate resources. Additionally, from March 2020 through June 2020, the Company reduced pay for certain employees and partially or fully furloughed certain employees therefore reducing compensation expense in six months ended June 30, 2020.

Stock-based compensation consists of expense related to (1) equity awards granted as compensation in the normal course of business operations, (2) employee earnout restricted stock (see Note 9) and (3) a secondary market transaction as described below (dollar amounts in thousands).

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020
Secondary market transaction

$
—

$
—

$
1,933

$
—
Employee earnout restricted stock

4,176

—

16,549

—
Employee awards

2,466

362

4,995

1,034
Total stock-based compensation expenses

$
6,642

$
362

$
23,477

$
1,034

Interest expense, net
~~Three months ended June 30, 2021 compared to three months ended June 30, 2020:~~
Interest expense ~~decreased~~increased by ~~$2.1~~$1.1 million, or ~~63%~~87%, from ~~$3.3 million in the three months ended June 30, 2020 to~~ $1.2 million in the three months ended ~~June 30, 2021. The decrease was primarily due~~March 31, 2021 to ~~lower outstanding debt balance and decreased interest rates paid during the three months ended June 30, 2021 compared with the three months ended~~

~~Table of Contents~~

~~June 30, 2020, as a result of the January 2021 amendment to the Company’s senior secured term loans. Among other terms, this amendment reduced the interest payable from 11.05% to 8.55% (see Note 7).~~

~~Six months ended June 30, 2021 compared to six months ended June 30, 2020:~~

~~Interest expense decreased by $4~~$2.3 million or 62% from $6.4 million in the six months ended June 30, 2020 to $2.4 million in the six months ended June 30, 2021. The decrease was primarily due to a lower outstanding debt balance and decreased interest rates paid during the six months ended June 30, 2021 compared with the six months ended June 30, 2020, as a result of the January 2021 amendment to the Company’s senior secured term.

~~Other expense, net~~

~~Three months ended June 30, 2021 compared to three months ended June 30, 2020:~~

~~Other expense, net was $ (0.2) million expense~~ in the three months ended ~~June 30,~~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 $50.8 million at January 1, 2021 and ~~$ (1.8)~~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 ~~expense~~(gain) and $18.8 million (loss) in the three months ended ~~June 30, 2020.~~March 31, 2022 and 2021, respectively. The decrease in ~~expense of $ (1.6) million~~fair value was primarily due to ~~$0.9~~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 ~~loss on remeasurement~~ of ~~legacy preferred stock~~the earnout liability was reclassified to additional paid in capital as a result of a vesting event in March 2021.

Change in fair value of private warrant liability

Changes in fair value of private warrant liability were $10.2 million (gain) and ~~$1.0~~$15.9 million ~~loss on remeasurement of debt~~(loss) in the three months ended ~~June 30, 2020.~~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.

~~Six~~Investment income and realized gains, net of investment expenses

Investment income and realized gains, net of investment expenses was $0.2 million in the three months ended ~~June 30,~~March 31, 2022. In April 2021, ~~compared~~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 ~~six months ended June 30, 2020:~~

~~Other expense, net was $ (0.1) million expense in the six months ended June 30, 2021 and $ (3.5) million expense in the six months ended June 30, 2020.~~April 2021.

Income tax ~~expense (benefit)~~benefit

~~Three months ended June 30, 2021 compared to three months ended June 30, 2020:~~

Income tax benefit of ~~$7.7~~$0.2 million and $0.4 million was recognized for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~primarily due to the impact of acquisitions on the Company’s valuation allowance. Income tax expense was not material for the three months ended June 30, 2020.~~respectively. The Company’s effective tax ~~rate~~rates in both periods differs substantially from the U.S. federal statutory tax rate of 21% primarily due to a full valuation allowance related to the Company’s net deferred tax assets.

~~Six months ended June 30, 2021 compared to six months ended June 30, 2020:~~Segment Results of Operations

~~Income tax benefit of $8.1 million was recognized for~~We operate our business as two reportable segments that are also our operating segments: Vertical Software and Insurance. For additional information about our segments, see Note 13 in the ~~six months ended June 30, 2021 primarily due~~notes to the ~~impact~~unaudited condensed consolidated financial statements included in Part I, Item 1 of acquisitions on the Company’s valuation allowance. Income tax expense was not material for the six months ended June 30, 2020. The Company’s effective tax rate in both periods differs substantially from the statutory tax rate primarily due to a full valuation allowance related to the Company’s net deferred tax assets.

~~Non-GAAP Financial Measures~~

In addition to our results determined in accordance with U.S. GAAP, we believe that Adjusted EBITDA, a non-GAAP measure which we define below, is useful in evaluating our operational performance distinct and apart from financing costs, certain non-cash expenses and non-operational expenses. We use this non-GAAP financial information to evaluate our ongoing operations and for internal planning, budgeting and forecasting purposes and for setting management bonus programs. We believe this non-GAAP financial information, when taken collectively, may be helpful to investors in assessing our operating performance and comparing our performance with competitors and other comparable companies. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP. We endeavor to compensate for the limitation of the non-GAAP measure presented by also providing the most directly comparable GAAP measure, which is net loss, and a description of the reconciling items and adjustments to derive the non-GAAP measure.Quarterly Report.

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Table of 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, 2022, Vertical Software segment revenues were $34.7 million or 55.5% of total revenue. Software and service subscriptions revenue increased from $10.9 million to $18.0 million as the Company acquired a V12 Data in January 2021, Rynoh in May 2021 and Floify in October 2021. Other than V12 Data, these businesses were not owned by the Company during the quarter ended March 31, 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 the three months ended March 31, 2021 to $27.9 million in the three months ended March 31, 2022 is mainly due to the acquisitions of HOA (acquired in April 2021) and AHP (acquired in September 2021), and the accelerated growth of these 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 our segments. Segment Adjusted EBITDA (loss) also excludes non-cash items, certain transactions that are not indicative of ongoing segment operating and financial performance and 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 reportable segments, as well as certain shared costs.
⁽²⁾See reconciliation of adjusted EBITDA (loss) to net loss below.

Table of Contents

Non-GAAP Financial Measures

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

The Company defines Adjusted EBITDA (loss) as net income (loss) adjusted for interest expense, ~~net;~~net, income ~~taxes; total~~taxes, other expenses, ~~net;~~net, depreciation and amortization, certain non-cash long-lived asset impairment ~~charges; depreciation and amortization;~~charges, stock-based compensation ~~expense;~~expense and acquisition-related impacts, ~~including compensation to the sellers that requires future service,~~ amortization of intangible assets, gains (losses) recognized on changes in the value of contingent consideration arrangements, if any, gain or loss on ~~divestitures~~divestures and certain transaction costs.

Adjusted EBITDA ~~is intended~~(loss) as a percent of revenue is defined as Adjusted EBITDA (loss) divided by GAAP total revenue. Average revenue per monetized services in 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 ~~measure~~measures of ~~our~~the Company’s operating and financial performance, ~~that is neither required by, nor presented in accordance with, GAAP. We believe~~for internal budgeting and forecasting purposes, to evaluate financial and strategic planning matters, and to establish certain performance goals for incentive programs. The Company believes that the use of ~~Adjusted EBITDA~~these non-GAAP financial measures provides ~~an additional tool for~~ investors with useful information to ~~use in evaluating ongoing~~evaluate the Company’s operating ~~results~~and financial performance and trends and in comparing ~~the Company’s~~Porch’s financial ~~measures~~results with ~~those~~competitors, other similar companies and companies across different industries, many of ~~comparable companies,~~ which ~~may~~ present similar non-GAAP financial measures to investors. However, ~~you~~the Company’s definitions and 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, and any such modification may be material.
You should not consider these non-GAAP financial measures in isolation, as a substitute to or superior to financial performance measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude specified income and expenses, some of which may be ~~aware~~significant or material, that ~~when evaluating Adjusted EBITDA, we~~are required by GAAP to be recorded in the Company’s consolidated financial statements. The Company may also incur future income or expenses similar to those excluded ~~when calculating~~from these ~~measures. In addition, our~~non-GAAP financial measures, and the presentation of these measures should not be construed as an inference that ~~our~~ future results will be unaffected by unusual or non-recurring items. ~~Our computation~~In addition, these non-GAAP financial measures reflect the exercise of ~~Adjusted EBITDA may not be comparable to other similarly titled~~management judgment about which income and expense are included or excluded in determining these non-GAAP financial measures.
See the reconciliation tables below for more details regarding these non-GAAP financial measures, ~~computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.~~
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA on a supplemental basis. You should reviewincluding the reconciliation of ~~net~~non-GAAP financial measures to the most directly comparable GAAP financial measures.

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Revenue Less Cost of Revenue

The following table reconciles revenue less cost of revenue to operating loss for the three months ended March 31, 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 three months ended March 31, 2021 to $41.4 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 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 ~~below and not rely on any single financial measure to evaluate our business.~~(loss)
The following table reconciles net loss to Adjusted EBITDA (loss) for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and the three and six months ended June 30, 2020~~respectively (dollar amounts in thousands):


Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020

Net loss

$
(16,296)

$
(6,258)

$
(81,398)

$
(24,625)

Interest expense

1,216

3,291

2,439

6,377

Income tax (benefit) expense

(7,731)

3

(8,081)

24

Depreciation and amortization

3,894

128

6,356

1,917

Gain on extinguishment of debt

(8,243)

(3,856)

(8,243)

(3,609)

Investment income and realized gains

(387)

—

(397)

—

Other expense, net⁽¹⁾

165

1,841

91

3,468

Non-cash long-lived asset impairment charge

72

134

139

301

Non-cash stock-based compensation

6,642

363

23,365

732

Non-cash bonus expense

393

—

683

—

Revaluation of contingent consideration

574

1,480

220

1,400

Revaluation of earnout liability

4,032

—

22,801

—

Revaluation of private warrant liability

4,303

—

20,212

—

Acquisition and related expense⁽²⁾

1,056

780

1,896

1,151

Adjusted EBITDA (loss)

$
(10,312)

$
(2,094)

$
(19,916)

$
(12,864)

Adjusted EBITDA (loss) as a percentage of revenue

(20)
%

(12)
%

(26)
%

(40)
%

~~(1)~~ ~~Other expense, net includes:~~


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)
%


Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020
Loss on remeasurement of debt

—

958

—

1,412
Loss on remeasurement of legacy preferred stock warrant liability

—

920

—

1,999
Other, net

165

(37)

91

57

$
165

$
1,841

$
91

$
3,468
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 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

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Table of Contents

~~(2)~~

~~Acquisition~~

(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 and ~~related expense includes:~~

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020
Acquisition compensation – cash

$
—

$
—

$
—

$
14
Acquisition compensation – stock

—

—

112

302
Amortization expense – acquisition

—

1,469

—

1,469
Bank fees

4

—

8

—
Bonus expense

—

22

—

44
Gain on divestiture

—

(1,442)

—

(1,442)
Professional fees – accounting

155

256

214

256
Professional fees – legal

897

411

1,562

444
Transaction expenses

—

64

—

64

$
1,056

$
780

$
1,896

$
1,151

Adjusted EBITDA ~~loss for~~(loss) was recognized from these businesses during that period. Thus, the ~~six months ended June 30, 2021 was $19.1 million, a $6.2 million decline from Adjusted EBITDA loss of $12.9 million for the same period in 2020. The decline~~improvement in Adjusted EBITDA ~~loss~~(loss) in 2022 is ~~due to~~primarily driven by the ~~weather related loss impact of the HOA insurance business, legal costs attributable to general legal matters, increase~~2021 acquisitions, offset by investments in ~~general~~sales and ~~administrative costs~~marketing and product and technology related to ~~public companies~~consumer experience, app build out, data platforms and ~~increased hiring for corporate resources. Additionally during the six months ended June 30, 2020 there was a compensation reduction which did not recur during the comparable period~~investments in ~~the current year. This was partially offset by revenue growth in the moving, insurance~~establishing and ~~inspection groups, as well as no negative impact of the divested businesses in 2020.~~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 sales of redeemable 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 aggregate cash proceeds from recapitalization, net of ~~transactions costs.~~ 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 options, respectively.
As of ~~June 30, 2021,~~March 31, 2022, the Company had cash and cash equivalents of ~~$150.2~~$292.4 million and ~~$2.2~~$10.7 million of restricted ~~cash.~~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, 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 ~~June 30, 2021, together with borrowing available under senior secured debt,~~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 ~~continues~~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 ~~offerings.~~financings. The Company may not be able to obtain equity or additional debt financing in the future when needed or, if available, the terms may not be satisfactory to 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 has incurred losses since its inception,~~Company’s insurance company subsidiaries are highly regulated and ~~has an accumulated deficit at June 30, 2021~~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 ~~December 31, 2020 totaling $398.9~~cash equivalents of $35.5 million and $317.5 million, respectively. As of June 30, 2021, and December 31, 2020 the Company had $46.7 million and $50.8 million aggregate principal amount outstanding on term loans and promissory notes, respectively. During 2020 and the first half of 2021, the Company refinanced the existing $40.0 million term loans and received additional loan proceeds of $7.0 million from new senior secured term loans and $10.3 million from the U.S. government pursuant to the Paycheck Protection Program under the CARES Act. Additionally, in the six months ended June 30, 2021, the company raised approximately $126.8 million from the exercises of public warrants. The Company has used the proceeds from debt and equity principally to fund general operations and acquisitions.
~~In the six months ended June 30, 2021, the Company spent $127.9 million in cash, net of cash acquired, plus stock of $22.9 million to acquire several~~investments held by these companies ~~in transactions accounted for as a business combination.~~was $65.3 million.

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The following table provides a summary of cash flow data for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~June 30, 2020:~~2021:


	Six Months Ended June 30,				$		%		Three Months Ended March 31,				$		%
	2021		2020		Change		Change		2022		2021		Change		Change

	(dollar amounts in thousands)								(dollar amounts in thousands)
Net cash used in operating activities	$	(30,772)	$	(9,742)	$	(21,030)	216	%	$	(13,291)	$	(22,935)	$	9,644	42	%
Net cash used in investing activities		(131,298)		(1,633)		(129,665)	7,940	%		(8,077)		(23,714)		15,637	66	%
Net cash provided by financing activities		107,040		11,063		95,977	868	%
Net cash (used) provided by financing activities										(389)		72,579		(72,968)	NM
Change in cash, cash equivalents and restricted cash	$	(55,030)	$	(312)	$	(54,718)	NM		$	(21,757)	$	25,930	$	(47,687)	NM

Operating Cash Flows

~~Six months ended June 30, 2021 compared to six months ended June 30, 2020:~~

Net cash used in operating activities was ~~$30.8~~$13.3 million for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. Net cash used in operating activities consists of net loss of ~~$81.4~~$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 ~~$23.5~~$5.9 million, depreciation and amortization of ~~$6.4~~$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 ~~$0.1~~$0.3 million, fair value adjustments to earnout liability and private warrant liability of ~~$22.8~~$18.8 million (loss) and ~~$20.2~~$15.9 million (loss), respectively. Net changes in working capital were a use of cash of ~~$13.0~~$11.6 million, primarily due to increases in current liabilities.

Investing Cash Flows

~~Six months ended June 30, 2021 compared to six months ended June 30, 2020:~~

Net cash used in investing activities was ~~$131.3~~$8.1 million for the ~~six~~three months ended ~~June 30,~~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~~internal-use software of ~~$1.5~~$0.8 million and acquisitions, net of cash acquired of ~~$127.9 million.~~

~~Net cash used in investing activities was $1.6~~$22.9 million, for the six months ended June 30, 2020. Net cash used in investing activities is primarily related to investments to develop internal use software of $1.6 million and purchases of property and equipment of $0.1 million.including V12 Data.

Financing Cash Flows

~~Six~~Net cash used in financing activities was $0.4 million for the three months ended ~~June 30, 2021 compared~~March 31, 2022. Net cash used in financing activities is primarily related to ~~six months ended June 30, 2020:~~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 ~~$107~~$72.6 million for the ~~six~~three months ended ~~June 30,~~March 31, 2021. Net cash provided by financing activities is primarily related to exercises of warrants and stock ~~option~~options of ~~$129.3~~$89.9 million, offset by shares repurchased to pay income tax withholdings upon vesting of RSUs of ~~$22.1~~$14.6 million and debt repayments of $0.2 million.

~~Net cash provided by financing activities was $11.1 million for the six months ended June 30, 2020. Net cash provided by financing activities is primarily related to proceeds from issuance~~44

Table of ~~redeemable convertible preferred stock of $4.7 million and debt financing of $10.1 million, net of loan repayments of $3.7 million.~~Contents

Off-Balance Sheet Arrangements

Since the date of ~~our~~ incorporation, ~~we have~~the Company has not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

~~Table of Contents~~

~~Emerging Growth Company Status~~

The Company is an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). In accordance with the JOBS Act, the Company previously elected to delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. As of June 30, 2021, the last busines day of the second fiscal quarter, the Company met certain thresholds for qualification as a “large accelerated filer” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. Therefore, the Company expects to lose EGC status as of December 31, 2021. The impact of this change in filing status includes being subject to the requirements of large accelerated filers, which includes shortened filing timelines, no delayed adoption of certain accounting standards, and attestation of the Company’s internal control over financial reporting by its independent auditor.

Recent Accounting Pronouncements

See Note 1 to our unaudited condensed consolidated financial statements as of and for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk
~~We are~~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.
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 ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020, we have~~2021, the Company has interest-bearing debt of ~~$43.8~~$425.5 million and ~~$50.8 million.~~$425.6 million, respectively. Our ~~senior secured term loans~~0.75% Convertible Senior Notes due 2026 (the “2026 Notes”) have a principal balance of $425 million as of ~~June 30, 2021 are variable rate loans that accrue interest at~~March 31, 2022, have a ~~variable~~fixed coupon rate of 75 basis points, and effective interest ~~based~~rate of 1.3%. As such, interest expense on the ~~greater~~2026 Notes will not change if market interest rates increase. Other debt as of ~~0.55% or LIBOR rate (as defined) plus an applicable margin of 8.0%. As of June 30, 2021, the calculated interest rate~~March 31, 2022 totaled $0.5 million and is ~~8.55%.~~variable-rate.
A one percent ~~(1%)~~ increase in interest rates in our variable rate indebtedness would result in ~~approximately $0.5 million~~a nominal change in ~~additional~~ annual interest expense.
As of March 31, 2022, the 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 consider these assets to have material interest rate risk.
Inflation Risk
~~Porch does not believe~~Due to significant increases in the consumer price index in the past twelve months, supply chain disruptions, war in Ukraine and other geo-political events, the Company believes that inflation ~~has had, or currently has,~~may have a material ~~effect~~impact on its ~~business.~~business in the future.
Foreign Currency Risk
There was no material foreign currency risk for three ~~and six~~ months ended ~~June 30, 2021 and the year ended December~~March 31, ~~2020. Porch’s~~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
Under the supervision and with the participation of 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 ~~June 30, 2021,~~March 31, 2022, which is the end of the period covered by this Quarterly Report. Based on this evaluation, our Chief

~~Table of Contents~~

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 reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, evaluated and reported, as applicable, within the time periods specified in the United States Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures were not effective as of ~~June 30, 2021~~March 31, 2022 due to the material weaknesses in internal control over financial reporting described in Part II, Item 9A of the Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended December 31, ~~2020~~2021 filed with the SEC on ~~May 19, 2021.~~March 16, 2022.

Remediation Plan

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

●

~~we hired a new Chief Financial Officer in June 2020 and~~consolidation of relevant financial systems across our ~~new Controller joined in April 2021; both are experienced finance and accounting professionals for public companies;~~internal control framework;

●

~~we recruited additional personnel, in addition~~investments to ~~utilizing third-party consultants and specialists,~~upgrade or replace existing systems which do not have the appropriate infrastructure to ~~supplement~~meet the requirements of our internal ~~resources;~~control framework;

●

~~we have been and continue~~expanding the available resources at the Company with experience designing and implementing ~~additional automation~~control activities, including information technology general controls and ~~integration in our financially significant systems;~~automated controls, through hiring and use of third-party consultants and specialists;

●

~~we will continue~~recruiting and hiring additional personnel with the appropriate skills and experience to ~~expand~~operate the internal controls required by the nature, pace, and ~~improve~~complexity of our ~~review process of complex securities, significant transactions, and related accounting standards;~~business, and

●

~~we are implementing additional~~perform ongoing training ~~of our personnel~~with control performers to improve ~~our understanding and~~ documentation that supports effective control ~~operation,~~activities, including evidence of the completeness and ~~will identify third-party professionals with whom to consult regarding complex accounting literature as necessary.~~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

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

~~Management initiated~~During 2022, the ~~process of implementing remediation steps~~Company continued to ~~address the material weakness and~~take actions on initiatives to improve ~~our~~the internal control ~~over financial reporting.~~environment, which started in 2021. Specifically, we ~~are continuing~~formed an internal working group to ~~expand~~detail and ~~improve our review process~~implement specific remediation plans for ~~complex securities, transactions,~~these control deficiencies, engaged with outside consultants to provide advice and ~~related accounting standards, including the determination of the appropriate accounting classification of our financial instruments. We plan to further improve this process by implementing~~assistance, and hired additional ~~training of~~ personnel to ~~improve our understanding~~perform and ~~documentation that supports effective~~monitor internal control ~~operation and will identify third-party professionals with whom to consult regarding the application~~activity.

Table of complex accounting literature as necessary. 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.Contents

Limitations on Effectiveness of Controls and Procedures

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

5047

Table of Contents

PART II — OTHER INFORMATION
Item 1. Legal Proceedings
~~TCPA Proceedings~~~~.   Porch and/or an acquired entity, GoSmith.com, are party~~See Note 12 (“Commitments and Contingencies”) to ~~14 legal proceedings alleging violations~~Part I, Item 1 of the automated calling and/or Do Not Call restrictions of the Telephone Consumer Protection Act of 1991 (“TCPA”). Some of these actions allege related state law claims. Most of the proceedings were commenced as mass tort actionsthis Quarterly Report, which is incorporated by a single plaintiffs’ law firm in December 2019 and April/May 2020 in federal district courts throughout the United States and have been consolidated in the United States District Court for the Western District of Washington, where Porch resides. Plaintiffs seek actual, statutory, and/or treble damages, injunctive relief, and reasonable attorneys’ fees and costs. A related action brought by the same plaintiffs’ law firm was dismissed with prejudice and is on appeal before the Ninth Circuit Court of Appeals.
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 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 Proceeding~~.   In May 2020, the former owners of Kandela, LLC filed a complaint against Porch in the Superior Court of the State of California, alleging a breach of contract related to the 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 enteredreference into with Porch and related employment agreements. Claimants also seek punitive damages, attorney’s fees and costs. This matter is at an early stage in the arbitration process and Porch is unable to determine the likelihood of an unfavorable outcome, although it is reasonably possible that the outcome may be unfavorable. Arbitration of the claims is currently scheduled for March 2022. Porch is unable to provide an estimate of the range or amount of potential loss across all 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™, 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, attorney’s fees and costs. While this ~~action is still at an early stage in the litigation process, we have recorded an estimated accrual~~Part II, Item 1, for a ~~contingent loss based on information currently known. The parties recently attended a mediation in an effort to resolve the matter. The mediation was successful~~description of certain litigation and ~~a tentative deal was reached pending execution of the long form settlement agreement and approval by the court.~~legal proceedings.
In addition, in the ordinary course of 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,~~the Company, would individually or in the aggregate have a material adverse effect on ~~our~~the business, financial condition or results of operations.

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Item 1A. Risk Factors
~~Except as set forth below,~~As of May 10, 2022, the Company’s risk factors ~~as of August 16, 2021,~~ have not materially changed from those described in Part 1, Item 1A of ~~our~~the Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended December 31, ~~2020~~2021 filed with the SEC on ~~May 19, 2021.~~
~~Risks Relating to the Company’s Business and Industry~~
March 16, 2022.~~Our brands and businesses operate in an especially competitive and evolving industry.~~
The insurance industry, moving services industry, home service industry, and software for home services companies industry are all competitive, with many existing competitors and a consistent and growing stream of new entrants, services and products. Some of our competitors are more well-established or enjoy better competitive positions with respect to certain geographical areas, consumer and service professional demographics, and/or types of services offered. Some of our competitors have stronger brand recognition, better economies of scale, more developed software platforms or other intellectual property, and/or better access to capital. In the home services space, we compete with online home services marketplaces, search engines and social media platforms that have the ability to market products and services online in a more prominent and cost-effective manner than we can, and may better tailor results with respect to products and services to individual users. In the SaaS application space, we compete with existing providers of enterprise resource planning (“ERP”) and customer relationship management (“CRM”) software through both traditional software and SaaS models. Additionally, many of our competitors in the home and home-related services industries are undergoing consolidation and vertical integration. These consolidations may make it more difficult to compete with such competitors. Any of these advantages could enable these competitors to reach more consumers and service professionals than we do, offer products and services that are more appealing to consumers and service professionals than our products and services, and respond more quickly and/or cost effectively than we do to evolving market opportunities and trends, any of which could adversely affect our business, financial condition and results of operations.
In addition, since most home services marketplace products and services are offered to consumers for free, consumers can easily switch among home services offerings (or use multiple home services offerings simultaneously) at no cost to them. And while service professionals may incur additional or duplicative near-term costs, the costs for switching to a competing platform over the long term are generally not prohibitive. Low switching costs, coupled with the propensity of consumers to try new products and services generally, will most likely result in the continued emergence of new products and services, entrants and business models in the home and home-related services industry.
With the HOA acquisition, we are exposed to competition in the programs market. While we believe the number of competitors in the small-and mid-sized programs markets with the broad in-house expertise and wide array of services that HOA offers is limited, it will nonetheless face increased competition if other companies decide to compete within this space. Any increased competition in this market, particularly by one or more companies with greater resources than us, could materially and adversely impact our business, financial condition, and results of operations.
Our inability to compete effectively against new competitors, services or products could result in decreases in the size and level of engagement of our consumer and service professional bases, any of which could adversely affect our business, financial condition and results of operations.

~~We may not be able to effectively manage our growth.~~
Our future growth, if any, may cause a significant strain on our management and our operational, financial, and other resources. Our ability to manage our growth effectively will require us to implement and improve our operational, financial, and management systems and to expand, train, manage, and motivate our employees. These demands may require the hiring of additional management personnel and the development of additional expertise by our management. Any increase in resources used without a corresponding increase in our operational, financial, and management systems could have a material adverse effect on our business, financial condition, and results of operations.

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~~Our brands and businesses are sensitive to general economic events or trends, particularly those that adversely impact consumer confidence and spending behavior.~~

Our businesses are sensitive to events and trends, such as a general economic downturn or sudden disruption in business conditions, consumer confidence, spending levels and access to credit, which could result in decreases in demand for moving, real estate transactions, home improvement services and insurance. Any such decreases could result in turnover of our consumer and service professional base and/or adversely impact the breadth of services offered through our platform and our insurance products, any or all of which could adversely affect our business, financial condition and results of operations.

These events and trends could also result in decreased marketing and advertising expenditures by service professionals or cash flow problems for service professionals that could affect their ability to pay us subscription fees, their ability to purchase leads from us and the success of any revenue sharing arrangements with them. Adverse economic conditions and trends could result in service professionals decreasing and/or delaying subscription fees paid for our platform or being more likely to default on incurred fees, which would result in decreased revenue and could adversely affect our business, financial condition and results of operations.

~~Our risk management policies and procedures may prove to be ineffective and leave us exposed to unidentified or unanticipated risk.~~

We have identified and continue to develop enterprise-wide risk management policies and procedures to mitigate risk and loss to which we are exposed. There are inherent limitations to our risk management strategies because there may be existing or future risks that have not been fully identified. If internal risk management policies and procedures are ineffective, we may suffer unexpected losses which could be material and adversely affect our financial results and operations. Our risk management framework may not evolve at the same pace as we expand our business. As a result, there is a risk that new products or new business strategies may present risks that are not fully identified, effectively monitored, or thoroughly managed.

~~Conditions in the real estate market generally impact the demand for a portion of the Company’s products and services.~~

Demand for a portion of the Company’s products and services generally decreases as the number of real estate transactions in which its products and services are purchased decreases. The real estate market is seasonal, cyclical and affected by significant conditions beyond the Company’s control. The number of real estate transactions in which certain of the Company’s products and services are purchased have been, and may continue to be impacted by the following situations, among others:

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~~high, volatile or rising mortgage interest rates;~~

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~~availability of credit, including commercial and residential mortgage funding;~~

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~~real estate affordability, housing supply rates, home building rates, housing foreclosures rates, multi-family housing fundamentals, and the pace of home price appreciation or the lack of it;~~

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~~slow economic growth or recessionary conditions and other macroeconomic conditions, which may be impacted by national or global events (such as the COVID-19 pandemic);~~

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~~local, state and federal government intervention in the financial markets;~~

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~~increased unemployment or declining or stagnant wages;~~

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~~changes in household debt levels and disposable income;~~

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~~changing trends in consumer spending; and~~

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~~changing expectations for inflation and deflation.~~

~~Any adverse impact on a macro level to the real estate market generally could have an adverse impact on our business, results of operations and financial condition.~~

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~~Risks Relating to Financial Reporting and Results of Operations~~

Our quarterly operating results may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline.

Our quarterly operating results may fluctuate as a result of a variety of factors, many of which are outside of our control. If our quarterly operating results or guidance fall below the expectations of research analysts or investors, the price of our Common Stock could decline substantially. Fluctuations in our quarterly operating results or guidance may be due to a number of factors, including, but not limited to, those listed below:

●	~~seasonality;~~

●	~~economic trends related to the home services and general economic, industry and market conditions;~~

●	~~the extent to which home services companies, service providers and consumers employ our platform;~~

●	the extent to which new home services companies, consumers, service providers, and commercial partners are attracted to our solutions to satisfy their (and in the case of home services companies and commercial partners, their customers’) needs;

●	~~the timing, commitment levels, and revenue share rates at which we enter into agreement for our solutions with home service companies and service providers, along with their~~

●	~~ongoing capacity and fulfillment performance to handle volume and the effectiveness of our marketing and affiliate channels to drive volume to our network;~~

●	the volume of consumer referrals that home services companies and commercial partners send to us, and the addition or loss of large home services companies or commercial partners, including through acquisitions or consolidations;

●	~~the mix of home services companies and commercial partners across small, mid-sized and large organizations;~~

●	~~changes in our pricing policies or those of our competitors;~~

●	~~volatility in commissions from our insurance business;~~

●	~~widespread claim costs associated with P&C claims;~~

●	~~losses resulting from actual policy experience that is adverse to assumptions made in product pricing;~~

●	~~losses resulting from a decline in the value of our invested assets;~~

●	declines in value and/or losses with respect to companies and other entities whose securities we hold and counterparties with whom we transact business or to whom we have credit exposure, including reinsurers, and declines in the value of investments;

●	~~the financial health of our home services companies, consumers, service providers, and commercial partners;~~

●	~~the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure;~~

●	~~the timing and success of new solutions introduced by us;~~

●	~~the timing and success of current and new products and services introduced by our competitors;~~

●	~~other changes in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners;~~

●	~~our ability to manage our existing business and future growth, including increases in the number of customers on our platform and new geographic regions; and~~

●	various other factors, including those related to significant disruptions in our systems and platform infrastructure risks related to independent contractors, and privacy and data security breaches, each of which is described elsewhere in this “~~Risk Factors~~~~” section.~~

We may be unable to access the capital markets when needed, which could adversely affect the ability to take advantage of business opportunities as they arise and to fund operations in a cost-effective manner.

Our ability to grow our business depends, in part on the ability to access capital when needed to provide statutory surplus. Capital markets may become illiquid from time to time, and we cannot predict the extent and duration of future economic and market disruptions or the impact of any government interventions. We may not be able to obtain financing

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on acceptable terms, or at all. If we require capital but cannot raise it or cannot obtain financing on acceptable terms, our business, financial condition, and results of operations may be materially adversely affected and we may be unable to execute our long-term growth strategy.

~~Our quarterly results of operations fluctuate due to seasonality and other factors associated with our industry.~~

Our businesses are seasonal and our results of operations and cash flows fluctuate significantly from quarter to quarter. Historically, our revenues have been strongest in the second and third fiscal quarters due to peak moving activity occurring during the summer months. The first and fourth fiscal quarters are generally weakest, due to lower moving activity during the winter months. As a result, our operating results for any given quarterly period are not necessarily indicative of operating results for an entire year.

We are also subject to the cyclical nature of the insurance industry. The financial performance of the insurance industry has historically fluctuated with periods of lower premium rates and excess underwriting capacity resulting from increased competition followed by periods of higher premium rates and reduced underwriting capacity resulting from decreased competition. Although the financial performance of an insurance company depends on its own specific business characteristics, the profitability of many insurance companies tends to follow this cyclical market pattern. Because market cyclability is due in large part to the actions of competitors and general economic factors, we cannot predict the timing or duration of changes in the market cycle.

~~Risks Relating to Our Acquisition Strategy~~

~~We may experience risks related to acquisitions, including the HOA Acquisition.~~

We have made acquisitions in the past and we continue to seek to identify potential acquisition candidates to expand our business generally in the future. If we do not identify suitable acquisition candidates or complete acquisitions with satisfactory pricing and other terms, our growth could be adversely affected. Even if we complete what we believe to be suitable acquisitions, we may experience related operational and financial risks. As a result, to the extent that we continue to grow through acquisitions, we will need to:

●	~~properly identify, value, and complete prospective acquisitions, especially those of companies with limited operating histories;~~

●	~~successfully integrate acquired businesses to the extent and in a manner that aligns with our strategy;~~

●	~~successfully identify and realize potential synergies among acquired and existing business;~~

●	~~retain or hire senior management and other key personnel at acquired businesses; and~~

●	~~successfully manage acquisition-related strain on our management, operations and financial resources.~~

We may not be successful in addressing these challenges or any other problems encountered in connection with historical and future acquisitions. Adverse reactions by potential acquisition targets could frustrate our ability to execute on our acquisition strategy as could the failure of our due diligence process to uncover material risks, legal or otherwise. We may also be negatively impacted by adverse reactions of home services companies, consumers, service providers and business partners to the disclosure or consummation of any acquisition. In addition, the anticipated benefits of one or more acquisitions may not be realized. Also, future acquisitions could result in increased operating losses, dilutive issuances of equity securities and/or the assumption of contingent liabilities. Additionally, acquisitions may be compensated in part with future or contingent payments that will create future liabilities or dilution for us upon the consummation of such acquisitions. Lastly, the value of goodwill and other intangible assets acquired could be impacted by one or more continuing unfavorable events and/or trends, which could result in significant impairment charges. The occurrence of any of these events could have an adverse effects on our business, financial condition and results of operations.

On April 5, 2021, the Company completed its acquisition of HOA, a leading property and casualty insurance company focused on products in the residential homeowner space. HOA is a large and complex company that added significantly to the size and scale of our operations. In addition, as discussed under “~~— Risks Related to Our Insurance Business~~~~,” HOA provides us with the opportunity to further expand our insurance business. The HOA~~

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Acquisition is the largest acquisition in our history (as measured by purchase price). We may have failed to identify all the risks to which the HOA Acquisition may expose us or the effects it may have on the long-term value of our combined company, including any risks related to HOA or HOA’s compliance with, among other, laws and regulations, contractual obligations and leases. Although we expect the HOA Acquisition to result in a significant amount of synergies and other financial and operational benefits, we may be unable to realize these synergies or other benefits in the timeframe that we expect or at all. We continue to assess synergies that we may realize as a combined company, the realization of which will depend on a number of factors. The success of the HOA Acquisition, including anticipated synergies, benefits and cost savings, will depend, in part, on our ability to successfully combine and integrate our current operations with HOA’s business. It is possible that the integration process could result in higher than expected costs, diversion of management attention, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with customers, suppliers, vendors and employees or to achieve the anticipated benefits and cost savings of the HOA Acquisition. If we experience difficulties with the integration process or other unforeseen costs, the anticipated benefits and cost savings of the HOA Acquisition may not be realized fully or at all, or may take longer to realize than expected. Management continues to refine its integration plan. The integration planning and implementation process will result in significant costs and divert management attention and resources. These integration matters could have an adverse effect on our combined company for an undetermined period. Any of the foregoing may have a material and adverse effect on our business, results of operations and financial condition.
~~Risks Relating to Our Insurance Business~~
~~We face a variety of risks through our expansion into the insurance business.~~
In 2020, we expanded our lines of business to include home, auto, flood and umbrella insurance through the formation and licensure of Elite Insurance Group, our wholly-owned licensed insurance agency. In addition, we further expanded our insurance operations through the acquisition of HOA, a managing general agent (“MGA”) and carrier hybrid with a strong reinsurance strategy that currently operates in six states. Risks of our entry into the insurance business include, without limitation, difficulties integrating the new insurance business with our ongoing operations, potential diversion of management’s time and other resources from our previously-established lines of business, accurately underwriting risks and charging competitive, yet profitable rates to policyholders, the need for additional capital and other resources to expand into this new line of business, and inefficient integration of operational and management systems and controls.
Severe weather events, extensive wildfires and other catastrophes, including the effects of climate change and global pandemics, may harm our insurance business. For example, if carriers restrict the sale of policies in certain geographical areas and/or for certain types of coverage or if they increase their premiums as a result of these events, it could result in fewer carriers whose policies we could offer to our customers and otherwise make policies harder to sell. With the acquisition of HOA, we are exposed to these losses directly. While we intend to manage our risk via reinsurance, there can be no guarantee this will adequately reduce our exposure to losses, including, but not limited to, the inability to negotiate reinsurance contracts at renewal at acceptable terms or at all, large catastrophes that exceed the our aggregate reinsurance coverage limits, the inability or unwillingness of counterparties to pay us reinsurance receivables we believe we are owed, and multiple losses in a single year that exceed our ability to reinstate reinsurance contracts.
In addition, these events have in the past and could in the future negatively affect the economy in general and the housing market in particular, which in turn negatively affects the market for insurance sales. A significant increase in insurance claims by consumers who purchased their policy through Elite Insurance Group, whether as a result of these events or otherwise, could cause the affected carriers to terminate their relationship with us or decrease our commission rates. The occurrence of any of these events could have an adverse effect on our business, financial condition and results of operations.
~~A substantial majority of Elite Insurance Group’s revenue is generated from commissions and depends on relationships with insurance providers with no long-term contractual commitments. See “~~~~— Our insurance business is commission-based and depends on our relationships with insurance providers with no long-term~~

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contractual commitments. insurance providers stop working with us or pay us lower amounts for new customers, or if we are unable to establish and maintain new relationships with other insurance providers, our insurance business could be materially affected, which in turn could impact our business, results of operations and financial condition~~” for more information.~~

Claims by consumers against an agency’s errors and omissions (E&O) insurance coverage are common in the insurance industry. If a carrier denies a consumer’s claim under an insurance policy or the consumer has insufficient coverage and the consumer therefore has to pay out-of-pocket for a loss, the consumer often seeks relief from agency that sold the policy. While we maintain E&O coverage, we could experience losses if claims by consumers exceed our coverage limitations. In addition, if we were to experience a significant number of claims or if our E&O coverage were to lapse, insurance providers could elect to terminate their relationships with us and we could face challenges in finding replacement coverage.

~~Entry into the insurance business also subjects us to new laws and regulations with which we are not familiar and may lead to increased compliance costs and regulatory risk. See “~~~~— Our insurance business is subject to state governmental regulation, which could limit the growth of our insurance business and impose additional costs on us~~~~” for additional information.~~

~~In addition, with the HOA Acquisition, Porch became an MGA and an insurance carrier, exposing us to the additional risks of underwriting and of handling and managing insurance claims.~~

With the HOA acquisition, we will bear the cost of paying insured claims, which costs will be greater if Elite Insurance Group were to become an insurance carrier. As a result, the likelihood of being significantly affected by the risks inherent to the insurance industry, and the magnitude of such risks, would be greatly increased. Although we would follow the industry practice of transferring, or ceding, part of the risk we have assumed to a reinsurance company in exchange for part of the premium we receive in connection with the risk or securing excess of loss reinsurance coverage, we may not be able to successfully mitigate our risk through such reinsurance arrangements. Although reinsurance would make the reinsurer liable to us to the extent the risk is transferred to the reinsurer or we have coverage under an excess of loss reinsurance arrangement, it will not relieve us of our liability to our policyholders. If any of our reinsurers are unable or unwilling to pay amounts they owe us in a timely fashion, we could suffer a significant loss or a shortage of liquidity, which would have a material adverse effect on our business and results of operations. In addition, reinsurance may not be available for an acceptable cost or at all. Failure to successfully mitigate an acceptable portion of our risk could materially and adversely affect our ability to write insurance business and harm our business. If our actual losses from insured claims were to exceed our loss reserves, our business, financial condition and results of operations would be adversely affected.

HOA distributes the majority of its products through third-party independent agents. As such, HOA is highly dependent on maintaining successful relationships with such third-party independent agencies. Negative changes in such relationships could adversely affect HOA’s insurance business, including, but not limited to, reduced sales, the loss of existing policies, the need to lower prices, or the need to pay higher commissions. In addition, such agencies act as agents of HOA. Any misconduct on the part of such agents could have an adverse impact on our business, financial conditions, reputation and results of operations.

Furthermore, the HOA acquisition represents a significant expansion of Porch’s revenue from insurance sales and may have the effect of heightening many of the risks and uncertainties described above and below with respect to our insurance business.

~~Our insurance businesses are subject to state governmental regulation, which could limit the growth of our insurance businesses and impose additional costs on us.~~

Our insurance businesses maintain licenses with a number of individual state departments of insurance. Our insurance businesses are subject to state governmental regulation and supervision. This state governmental supervision could limit the growth of our insurance businesses, increasing the costs of regulatory compliance, limiting or restricting the products or services we provide or the methods by which we provide them, and subjecting us to the possibility of

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regulatory actions or proceedings. If we are unable to comply with such regulations, we may be precluded or temporarily suspended from carrying on some or all of the activities of our insurance businesses or otherwise be fined or penalized in a given jurisdiction. Additionally, actual or perceived failure to comply with such state regulation may give rise to a right to terminate under arrangements with the insurance providers. Our continued ability to maintain our insurance licenses in the jurisdictions in which we are licensed or to expand to new operations or new jurisdictions depends on our compliance with the rules and regulations promulgated from time to time by the regulatory authorities in each of these jurisdictions. Furthermore, state insurance departments conduct periodic examinations, audits and investigations of the affairs of insurance companies and agencies, any of which could result in the expenditure of significant management time or financial resources.

In all jurisdictions, the applicable laws and regulations are subject to amendment and interpretation by regulatory authorities. Generally, such authorities are vested with relatively broad discretion to grant, renew and revoke licenses and approvals and to implement and interpret rules and regulations. No assurances can be given that our insurance businesses can continue to be conducted in any given jurisdiction as it has been conducted in the past or that we will be able to expand our insurance business in the future.

Our insurance businesses are commission-based and depends on our relationships with insurance providers with no long-term contractual commitments. If insurance providers stop working with us or pay us lower amounts for new customers, or if we are unable to establish and maintain new relationships with other insurance providers, our insurance businesses could be materially affected, which in turn could impact our business, results of operations and financial condition.

A substantial majority of the revenue of Elite Insurance Group is currently derived from selling insurance policies to consumers as the insurance agency and then receiving commissions from the insurance carriers. As we grow our insurance business, including through the HOA acquisition, other potential acquisitions in the insurance space and potential expansion from an insurance agency to a managed general agency or insurance carrier, we expect to derive a greater percentage of our insurance revenue from insurance policies and reinsurance policies. Our agreements with insurance carriers are short-term agreements, and many of the insurance carriers can end their business with us at any time with no notice. We expect any future agreements with reinsurers will typically have annual terms. As a result, we cannot guarantee that insurance carriers or reinsurers will continue to work with us, or, if they do, we cannot guarantee the commissions they will pay in the first year of the policy as well as each additional year. The commissions we earn are based on premiums and commission rates set by the carriers, and any decreases in these premiums or commission rates, including as a result of adverse trends in the insurance industry, would decrease our revenue. In addition, we may not be able to attract new insurance carriers or reinsurers to our services or increase the amount of revenue we earn from our insurance business over time. The insurance business is historically cyclical in nature, and we may experience periods with excess underwriting capacity and unfavorable premium rates, which could adversely affect our business.

If we are unable to maintain in good standing existing relationships with insurance carriers, or unable to add new insurance carriers or reinsurers, or if we become dependent on a limited number of carriers or reinsurers, we may be unable to meet the expectations of consumers and other counterparties in our insurance businesses. This deficiency could reduce confidence in our ability to offer competitive rates and terms, making us less popular with such consumers and counterparties. As a result, our insurance businesses could be materially impacted, which could have an adverse impact on our business, financial condition and results of operations.

~~Our insurance businesses compete with a large number of companies in the insurance industry for underwriting premium.~~

During periods of intense competition for premium, our insurance businesses are exposed to the actions of other companies that may seek to write policies without the appropriate regard for risk and profitability. During these times, it is very challenging to grow or maintain premium volume without sacrificing underwriting discipline and income.

~~The effects of emerging claim and coverage issues in the insurance industry are uncertain.~~

As industry practices, economic, legal, judicial, social, and other environmental conditions change, unexpected issues related to claims and coverage may emerge. These issues may adversely affect our insurance businesses by either

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~~extending coverage beyond the underwriting intent or by increasing the number and size of claims. Examples of emerging claims and coverage issues include, but are not limited to:~~

●	~~Judicial expansion of policy coverage and the impact of new theories of liability;~~

●	~~Plaintiffs targeting property and casualty (“P&C”) insurers in class action litigation relating to claims-handling and other practices;~~

●	~~Medical developments linking health issues to particular cases, resulting in liability claims; and~~

●	~~Claims related to unanticipated consequences of current or new technologies, including cyber- security related risks and claims relating to potentially changing climate conditions.~~

In some instances, these emerging issues may not become apparent for some time after affected insurance policies have been issued. As a result, the full extent of liability may not be immediately known, nor their financial impacts adequately provided for in premium charges.

In addition, potential passage of new legislation designed to expand the right to sue, to remove limitations on recovery, to extend statutes of limitations or otherwise repeal or weaken tort reforms could have an adverse impact on our insurance businesses.

The effects of these and other unforeseen emerging claim and coverage issues are difficult to predict and could harm our insurance businesses and materially adversely affect their results and operations.

~~The failure to accurately and timely pay claims could harm our insurance businesses.~~

Though our insurance businesses historically evaluated and paid claims timely and in accordance with its policies and statutory obligations, they must continue to manage costs and close claims expeditiously. Many factors affect the ability to evaluate and pay claims accurately and timely, including training and experience of claims staff, claims department's culture and the effectiveness of management, the ability to develop or select and implement appropriate procedures and systems to support claims functions and other factors. The failure to accurately and timely pay claims could lead to regulatory and administrative actions or material litigation, undermine our insurance businesses' reputation in the marketplace and materially and adversely affect their businesses, financial conditions and results of operations.

If our insurance businesses are unable to hire, train and retain claims staff, their claims departments may be required to handle an increasing workload, which could adversely affect the quality of their claims administration, which could be materially and adversely impact our business.

~~Our insurance businesses' loss reserves may be inadequate to cover actual losses.~~

Estimating loss reserves is a difficult, complex, and inherently uncertain process involving many variables and subjective judgments, Significant periods of time can elapse between the occurrence of an insured loss, the reporting of a claim, and payment of that claim. Loss reserves are estimates of the ultimate cost of claims and do not represent a precise calculation of any ultimate liability of our insurance businesses. These estimates are based on the analysis of historical loss development patterns and on estimates of current labor and material costs. The various factors reviewed include:

●	~~Loss emergence, reporting and development patterns;~~

●	~~Underlying policy terms and conditions;~~

●	~~Business and exposure mix;~~

●	~~Trends in claims frequency and severity;~~

●	~~Changes in operations;~~

●	~~Emerging economic and social trends;~~

●	~~inflation; and~~

●	~~Changes in the regulatory and litigation environments.~~

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This process assumes that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for predicting future events. It also assumes that adequate historical or other data exists upon which to make these judgments. There is no precise method for evaluating the impact of variances in estimates. If the actual amount of insured losses is greater than the amount reserved for these losses, our insurance businesses' profitability could suffer.

~~The performance of our insurance businesses' investment portfolios is subject to a variety of investment risks.~~

The results of operations of our insurance businesses depend, in part, on the performance of their investment portfolios. Our insurance businesses seek to hold a high-quality portfolio managed by a professional investment advisory firm in accordance with its investment policy and routinely reviewed by the internal management team. Investments, however, are subject to general economic conditions and market risks as well as risks inherent to particular securities.

The values of our insurance businesses' investment portfolios are subject to the risk that certain investments may default or become impaired due to deterioration in the financial condition of an issuer's payments on such investments. Downgrades in the credit ratings of fixed income securities could also have a significant negative effect on the market valuation of such securities.

Such factors could reduce our insurance businesses' net investment incomes and result in realized investment losses, as well as negatively impact its statutory capital. Our insurance businesses' investment portfolios are subject to increased valuation uncertainties when investment markets are illiquid, thereby increasing the risk that the estimated fair value (i.e. carrying amount) of the securities our insurance businesses hold in their portfolio does not reflect prices at which accrual transactions would occur.

Risks for all types of securities are managed through the application of the our insurance businesses' investment policies, which establish investment parameters that include maximum percentages of investment in certain types of securities and minimum levels of credit quality, which they believe are within applicable guidelines established by the National Association of Insurance Commissioners (“NAIC”). In addition, our insurance businesses seek to employ investment strategies that are not correlated with its insurance and reinsurance exposures, however, losses in their investment portfolios may occur at the same time as underwriting losses.

~~Our insurances businesses could be forced to sell investments to meet liquidity requirements.~~

Our insurance businesses invest premiums until they are needed to pay policyholder claims. Consequently, our insurance businesses seek to manage the duration of their investment portfolios based on the duration of their losses and loss adjustment expenses payment cycles in order to ensure sufficient liquidity and to avoid having to unexpectedly liquidate investments to fund claims. In addition unfavorable trends in litigation could potentially result in the need to sell investments to fund these liabilities. Our insurance businesses may not be able to sell their investments at favorable prices or at all. Sales of invested assets could result in significant realized losses depending on the conditions of the general market, interest rates, and credit issues with individual securities.

~~Our business may also be adversely affected by downturns in the home, auto, flood and umbrella insurance industries.~~

Through our insurance businesses, we primarily serve customers in the homeowners’ insurance market. We also sell auto, flood and umbrella insurance and we expect sales in those markets to increase in the future. Decreases in consumer demand in the home and automotive industry in general could adversely affect the demand for insurance and, in turn, the number of consumers we provide insurance quotes and corresponding sales. For example, negative trends in the real estate industry, such as decreases rental payments and increases in home values have the potential to adversely affect home purchases and to decrease the demand for homeowners, flood and umbrella insurance. In addition, consumer purchases of homes and new and used automobiles generally decline during recessionary periods and other periods in which income is adversely affected and may be affected by negative trends in the broader economy, including the availability and cost of credit, reductions in business and consumer confidence, stock market volatility and increased unemployment.

~~Table of Contents~~

~~Insurance commission revenue recognition and changes within our insurance business may create a fluctuation of our business results and expose us to additional risks.~~

Current accounting standards allow an insurance agency like Elite Insurance Group to recognize the full lifetime value of each insurance sale up front, because Elite Insurance Group does not service the customer or have any other responsibilities after the initial sale. Elite Insurance Group then collect the ongoing commission payments from the insurance carriers on an ongoing basis each year so long as the customer does not cancel the insurance. In the future, Elite Insurance Group may begin to provide ongoing services to the policyholder or customer in order to receive higher commission amounts and a higher overall lifetime value. We would expect any such change to result in a shift in revenue recognition from the first year to ongoing years, which could increase long-term growth rates but negatively impact our short-term results.

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.

6148

Table of Contents

Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Exhibit
No.
Description
~~10.1*†~~
~~Non-Employee Director Compensation Policy~~
~~10.2*†~~
~~Form of Restricted Stock Unit Award Agreement under Porch Group, Inc. 2020 Stock Incentive Plan.~~
10.3*
~~Porch.com, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 4.4 of the Form S-8 (File No. 333-253778) filed with the SEC on March 2, 2021).~~
~~10.4*†~~
~~Form of Restricted Stock Unit Award Agreement under Porch Group, Inc. 2012 Stock Incentive Plan.~~
~~10.5*†~~
~~Form of Restricted Stock Award Agreement under Porch Group, Inc. 2012 Equity Incentive Plan.~~
~~10.6*†~~
~~Form of Stock Option Agreement under Porch Group, Inc. 2012 Equity Incentive Plan.~~
~~31.1†~~31.1*
Certification of Chief Executive Officer 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 Sarbanes-Oxley Act of 2002

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

~~32.2†~~32.2**
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS†~~101.INS*
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

~~101.SCH†~~101.SCH*
XBRL Taxonomy Extension Schema Document

~~101.CAL†~~101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document

~~101.DEF†~~101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document

~~101.LAB†~~101.LAB*
XBRL Taxonomy Extension Label Linkbase Document

~~101.PRE†~~101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document

~~104†~~104*

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* ~~Management contract or compensatory plan or arrangement.~~ Filed herewith.
~~† Filed herewith Except Exhibits 32.1~~ ** ThesecertificationsarefurnishedtotheSECpursuanttoSection906oftheSarbanes-OxleyActof2002and ~~32.2, which~~ are ~~furnished~~ deemednot ~~filed.~~filedforpurposesof Section18oftheSecuritiesExchangeActof1934,asamended,norshalltheybedeemedincorporatedbyreferenceinanyfilingunderthe SecuritiesActof1933,exceptasshallbeexpresslysetforthbyspecificreferenceinsuchfiling.

6249

Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.
Date: ~~August 16, 2021~~May 10, 2022

PORCH GROUP, INC.

By:
/s/ Martin L. Heimbigner

Name:
Martin L. Heimbigner

Title:
Chief Financial Officer

(Principal Financial Officer)

��

6350


	2021
Losses and LAE reserve at April 5	$	84,366
Reinsurance recoverables on losses and LAE		(82,898)
Losses and LAE reserve, net of reinsurance recoverables at April 5		1,468
Net incurred losses and LAE during the current year		31,134
Net claim and LAE payments during the current year		(24,516)
Reserve for losses and LAE, net of reinsurance recoverables, at end of year		8,086
Reinsurance recoverables on losses and LAE		107,414
Losses and LAE reserve at June 30	$	115,500


	Deferred
	Revenue
Balance at December 31, 2020	$	5,208
Revenue recognized		(16,759)
Additional amounts deferred		32,842
Impact of acquisitions		141,336
Balance at June 30, 2021	$	162,627


	Redeemable				Contingent
	Convertible				Consideration -
	Preferred Stock				Business
	Warrants		FVO Notes		Combinations
Fair value as of January 1, 2020	$	6,684	$	11,659	$	100
Additions		—		—		—
Settlements		—		—		—
Change in fair value, loss (gain) included in net loss⁽¹⁾		1,214		454		(80)
Change in fair value, (gain) included in other comprehensive income		—		(3,856)		—
Fair value as of March 31, 2020	$	7,898	$	8,257	$	20
Additions		—		—		—
Settlements		—		(2,724)		—
Change in fair value, loss (gain) included in net loss⁽¹⁾		785		(2,898)		1,480
Change in fair value, (gain) included in other comprehensive income		—		3,856		—
Fair value as of June 30, 2020	$	8,683	$	6,491	$	1,500


	Goodwill
Balance as of December 31, 2020	$	28,289
Acquisitions		92,672
Balance as of June 30, 2021	$	120,961


	Weighted Average Useful Life (in years)	January 12, 2021 Acquisition		April 5, 2021 Acquisition		May 20, 2021 Acquisition		Other Acquisitions		Total
Purchase consideration:
Cash		$	20,346	$	82,002	$	32,302	$	13,490	$	148,140
Issuance of common stock			—		21,687		—		1,169		22,856
Common stock consideration
Payable			—		3,014		3,500		—		6,514
Contingent consideration			1,410		6,685		—		327		8,422
Total purchase consideration:		$	21,756	$	113,388	$	35,802	$	14,986	$	185,932
Assets:
Cash, cash equivalents and restricted cash		$	1,035	$	17,766	$	408	$	1,048	$	20,257
Current assets			4,939		235,669		932		860		242,400
Property and equipment			996		2,267		334		72		3,669
Intangible assets:
Customer relationships	10.0		1,650		16,700		12,700		6,400		37,450
Acquired technology	5.0		3,525		—		2,900		940		7,365
Trademarks and tradenames	11.0		1,225		12,200		900		410		14,735
Non-competition agreements	1.0		40		—		90		15		145
Value of business acquired	1.0		—		400		—		—		400
Renewal rights	8.0		—		7,692		—		—		7,692
Insurance licenses	Indefinite		—		4,960		—		—		4,960
Goodwill			16,760		47,008		21,952		6,952		92,672
Other non-current assets			—		55,165		—		—		55,165
Total assets acquired			30,170		399,827		40,216		16,697		486,910
Current liabilities			(6,388)		(273,759)		(409)		(1,285)		(281,841)
Long term liabilities			(2,026)		(8,913)		—		—		(10,939)
Deferred tax liabilities, net			—		(3,767)		(4,005)		(426)		(8,198)
Net assets acquired		$	21,756	$	113,388	$	35,802	$	14,986	$	185,932


	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	$	—	$	—	$	—	$	—	$	—


	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


Exhibit No.		Description

~~10.1*†~~		~~Non-Employee Director Compensation Policy~~
~~10.2*†~~		~~Form of Restricted Stock Unit Award Agreement under Porch Group, Inc. 2020 Stock Incentive Plan.~~
10.3*		~~Porch.com, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 4.4 of the Form S-8 (File No. 333-253778) filed with the SEC on March 2, 2021).~~
~~10.4*†~~		~~Form of Restricted Stock Unit Award Agreement under Porch Group, Inc. 2012 Stock Incentive Plan.~~
~~10.5*†~~		~~Form of Restricted Stock Award Agreement under Porch Group, Inc. 2012 Equity Incentive Plan.~~
~~10.6*†~~		~~Form of Stock Option Agreement under Porch Group, Inc. 2012 Equity Incentive Plan.~~
~~31.1†~~31.1*		Certification of Chief Executive Officer 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 Sarbanes-Oxley Act of 2002

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

~~32.2†~~32.2**		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS†~~101.INS*		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

~~101.SCH†~~101.SCH*		XBRL Taxonomy Extension Schema Document

~~101.CAL†~~101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

~~101.DEF†~~101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

~~101.LAB†~~101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

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


	PORCH GROUP, INC.

	By:	/s/ Martin L. Heimbigner
	Name:	Martin L. Heimbigner
	Title:	Chief Financial Officer
		(Principal Financial Officer)