SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
(Rule 14a-101)INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Porch Group, Inc.
(Name of Registrant as Specified in its Charter)
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o | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11 0-11. |
Forward-Looking Statements
Certain statements in this proxy statement, including the letter to stockholders, may be considered “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. 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, assumptions, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements including, but not limited to, risks and uncertainties discussed in Part I, Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as well as those discussed in subsequent reports filed with the Securities and Exchange Commission, all of which are available on the SEC’s website at www.sec.gov. 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,” “intends,” or similar expressions. These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by the Company and its management at the time they are made, are inherently uncertain. Nothing in the stockholder letter or proxy statement should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Unless specifically indicated otherwise, the forward-looking statements in do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that have not been completed. The Company does not undertake any duty to update these forward-looking statements, whether as a result of changed circumstances, new information, future events, or otherwise, except as may be required by law.
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| Dear Porch Group Stockholders, | |
| I am thrilled to take this opportunity to express my pride in the accomplishments and dedication of the Porch team over the past year. Our team demonstrated resilience, focus, and delivered strong performance, despite facing numerous market headwinds. We have made good strides in both our insurance and SaaS businesses and are well positioned to win in homeowners insurance through our differentiators.
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| | Matt Ehrlichman |
| Chairman, Founder and Chief Executive Officer |
Who We Are
At Porch, we are committed to being the partner for the home, offering a range of products and services designed to protect consumers' most valuable asset and make the move and ongoing maintenance easy. Central to this commitment is our focus on homeowners insurance.
Our strategy for capturing the large and expanding homeowners insurance market revolves around three key differentiators: 1) providing the best services for homebuyers, 2) advantaged underwriting utilizing our unique property data, and 3) protecting the whole home.
Our vertical software products play a crucial role in supporting our insurance strategy by providing us with unique early access to homebuyers and insights about properties. This data enables us to better predict and price risk for homeowners insurance.
2023 Highlights1
Throughout 2023, we executed against various initiatives with a focus on insurance profitability. This included increasing premium per policy, non-renewing higher-risk policies, and improving underwriting, including the use of property insights unique to Porch. Additionally, we had success in our warranty and software businesses, launched new partnerships, and executed cost reductions across our businesses.
We ended the year on a high note. Our financial results for the fourth quarter of 2023 were strong and exceeded expectations: Revenue grew by 79% to $115 million. Revenue less Cost of Revenue increased by 82% to $80 million, and GAAP net loss improved $33 million to $(3) million. Most notably, our Adjusted EBITDA1 profit for the fourth quarter was $12 million, a substantial increase of $25 million compared to the same period in 2022. In every aspect, it was a remarkable quarter for us that sets up an exciting 2024 and future ahead.
For the full year 2023, we achieved Revenue of $430 million, a 56% increase over prior year and Revenue less Cost of Revenue of $210 million, a 25% increase over prior year. GAAP net loss was $(134) million in 2023, a $23 million improvement from prior year. Adjusted EBITDA1 (Loss) was $(45) million, a $5 million improvement over prior year. Most importantly, we surpassed our second-half 2023 profitability goal, achieving Adjusted EBITDA1 of $21 million. Notably, Adjusted EBITDA1 in the second half of 2023 was $45 million better than the second half of 2022. We are proud of the amount of progress we were able to make in just 12 months despite a challenging market environment, including the sharp increase in interest rates over the last couple of years, higher cost of reinsurance and claims, contraction in the real estate market, and historically challenging weather events.
Importantly, we finished a variety of system implementations during 2023 through which we addressed and remediated material weaknesses from 2022, a significant achievement driven by the expertise and leadership of our team. We also released our initial ESG report and we look forward to sharing more in the future.
2024 Outlook
Looking ahead, we are excited about 2024. Our full-year guidance reflects our commitment to sustainable growth and continued profitability improvements. We expect to achieve positive Adjusted EBITDA for the 2024 full year, underpinned by our continued focus on executing our insurance profitability actions, increasing prices in our software businesses, and prudent cost management.
As we reflect on our journey since becoming a public company in December 2020, it's clear that we made significant progress. We’ve delivered strong revenue growth at a 60% 4-year CAGR, from $72 million in 2020 to the $470 million mid-point of our 2024 guidance1. This is driven by our Insurance segment, which reflects the strength of our business model and the dedication of our team. Our 2024 mid-point of Adjusted EBITDA guidance is $5.5 million, a $50 million improvement compared to 2023. We are just getting started.
Closing
I want to express my sincere appreciation to our shareholders for your continued support and confidence in Porch. We believe that we are well-positioned for success, and are excited about the opportunities that lie ahead.
I would like to invite you to participate in our 2024 annual stockholder meeting to be held virtually on Wednesday, June 12, 2024, at 10 a.m. Pacific Time. You will be asked to vote on several items and I encourage you to read the proxy statement prior to the meeting, which includes details on how to attend and cast your votes. This year, among other items, you will be asked to vote on the election of the entire director nominees. This change in practice reflects our continuing commitment to employ best in class governance practices and accountability to our stockholders.
If you have any questions or would like to get in touch regarding anything mentioned in this letter, you may reach us at ir@porch.com.
Onward!
Matt Ehrlichman
Porch Group Chairman, Founder and Chief Executive Officer
April 24, 2024
1. See "Appendix A" of this proxy statement, entitled “Use of Non-GAAP Financial Measures,” for the reconciliation of Adjusted EBITDA (Loss) to net income (loss), which is the most directly comparable measure under GAAP, and Adjusted EBITDA (Loss) as a percentage of Revenue. Porch is not providing reconciliations of forward-looking non-GAAP guidance to the comparable GAAP measures because certain information necessary to calculate such measures on a GAAP basis is unavailable or dependent on the timing of future events outside of Porch’s control. In particular, the charges excluded from these non-GAAP measures are subject to high variability and complexity due to Porch’s ongoing growth.
NOTICE OF 2024 ANNUAL MEETING OF STOCKHOLDERS To Be Held on June
8, 202212, 2024
Notice is hereby given that the
2022 Annual Meeting2024 annual meeting of
Stockholdersstockholders (the “Annual Meeting”) of Porch Group, Inc., a Delaware corporation
(“Porch,” or the(the “Company”), will be held on June
8, 2022,12, 2024, at
9:10:00 a.m. Pacific Time as a virtual meeting held entirely over the Internet, to consider the following matters, as more fully described in the enclosed proxy statement:
| ■ | Election of two Class II directors named in this proxy statement until the 2025 Annual Meeting of Stockholders (or until the 2024 Annual Meeting of Stockholders if Proposal 2 is approved and the Declassification Amendment (as defined in this proxy statement) is filed and becomes effective as described in this enclosed proxy statement) and until their successors are duly elected and qualified, subject to their earlier resignation, removal or death; |
| ■ | the approval of an amendment to the Second Amended and Restated Certificate of Incorporation of Porch Group, Inc. (the “Certificate of Incorporation”) to declassify our Board commencing with the 2024 Annual Meeting of Stockholders; |
| ■ | the approval of an amendment to our Certificate of Incorporation to eliminate the Supermajority Voting Standard (as defined in the enclosed proxy statement) commencing with the 2024 Annual Meeting of Stockholders; |
| ■ | the approval of, on an advisory (non-binding) basis, the compensation of our Named Executive Officers (as defined in the enclosed proxy statement); |
| ■ | the approval of, on an advisory (non-binding) basis, the frequency of future advisory votes to approve the compensation of our Named Executive Officers; |
| ■ | to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022; and |
| ■ | to consider and transact other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
■election of the eight directors named in the enclosed proxy statement, each to serve until the 2025 annual meeting of stockholders and until their successors are duly elected and qualified, subject to their earlier resignation, removal, or other termination of service;
■to ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2024;
■the approval of, on an advisory (non-binding) basis, the compensation of our named executive officers; and
■to consider and transact other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.
Stockholders of record at the close of business on April
13, 202215, 2024, are entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.
To attend the Annual Meeting,
examine our list of stockholders, vote and submit your questions during the Annual Meeting, go to
www.virtualshareholdermeeting.com/PRCH2022.PRCH2024. A list of stockholders of record will also be available during the Annual Meeting on the meeting website. Prior to the Annual Meeting, you will be able to vote at
www.proxyvote.com and by the other methods described in
thisthe enclosed proxy statement.
To be admitted to the Annual Meeting, please visit www.virtualshareholdermeeting.com/PRCH2022.PRCH2024. You will log into the Annual Meeting by entering your unique 16-digit control number found on your proxy card or voting instructioninstructions form.
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You may cast your vote in advance of the Annual Meeting over the Internet, by telephone or by completing and mailing a proxy card. ReturningVoting in advance of the proxyAnnual Meeting does not deprive you of your right to attend the Annual Meeting and to vote your shares electronically during the Annual Meeting. Proxies forwarded by or for banks, brokers or other nominees should be returned as requested by them. We encourage you to vote promptly to ensure your vote is represented at the Annual Meeting, regardless of whether you plan to attend the Annual Meeting. |
You can find detailed information regarding voting in the section entitled “General Information” on the page immediately following the table"Notice of contents2024 Annual Meeting of Stockholders" of the accompanying proxy statement.
By order of the Board of Directors,
Matthew Cullen
General Counsel and Secretary
Seattle, Washington
April 24, 2024
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| By order of the Board of Directors,
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Matthew Cullen
General Counsel and Secretary
Seattle, Washington
April [•], 2022
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[April XX, 2022] at www.proxyvote.com. [Rule 14a-5(e)]
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 8, 2022 12, 2024The notice of the Annual Meeting, proxy statement and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021,2023, are first being sent and made available to stockholders on or about
April [•], 202224, 2024 at www.proxyvote.com. The date of this proxy statement is April [•], 2022.24, 2024. |
GENERAL INFORMATION
This proxy statement is furnished to stockholders of Porch Group, Inc., a Delaware corporation (the “Company”), in connection with the solicitation of proxies by the board of directors of the Company (the “Board”) for use at our 20222024 Annual Meeting of Stockholders to be held on June 8, 202212, 2024 (the “Annual Meeting”), and at any adjournment or postponement thereof. The Annual Meeting will be held at 9:10:00 a.m. Pacific Time at as a virtual meeting held entirely over the Internet.
The Company was formed upon the closing of the business combination of Porch.com, Inc. (“Legacy Porch”) with PropTech Acquisition Corporation (“PTAC”), a special purpose acquisition company, on December 23, 2020. In connection with such business combination, PTAC changed its name to “Porch Group, Inc.” and Porch Group, Inc.’s common stock commenced trading on the NASDAQ under the ticker “PRCH.”.
As permitted by the rules of the Securities and Exchange Commission (the “SEC”), we are making this proxy statement and our Annual Report on Form 10-K for the fiscal year ended December 31,
2021 (Form 10-K)2023 (“Form 10-K”) available to our stockholders electronically via the Internet at
www.proxyvote.com.www.proxyvote.com. We believe that internet delivery of our proxy materials allows us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. On or about April
[•] 2022,24, 2024, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (“Internet Notice”), containing instructions on how to access this proxy statement,
Form 10-K, and vote over the Internet or by telephone. If you received an Internet Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request them pursuant to the instructions provided in the Internet Notice. The Internet Notice instructs you on how to access and review all of the important information contained in this proxy statement.
The Annual Meeting will be held entirely over the Internet via live video webcast due to the public health impact of the COVID-19 pandemic and to support the health and wellness of our stockholders, directors, team members, and guests. The virtual Annual Meeting will also allow for greater participation by all of our stockholders, regardless of their geographic location. To attend the Annual Meeting, examine our list of stockholders, vote and submit your questions during the Annual Meeting, go to www.virtualshareholdermeeting.com/PRCH2022PRCH2024. Prior to the Annual Meeting, you will be able to vote at www.proxyvote.com and by the other methods described in this proxy statement. We are excited to embraceOur virtual format leverages the latest technology to provide expanded access, improved communication and cost savings for our stockholders.stockholders, while providing our stockholders with the same rights and opportunities as they would have at an in-person meeting.
To be admitted to the Annual Meeting, please visit www.virtualshareholdermeeting.com/PRCH2022PRCH2024. You will log into the Annual Meeting by entering your unique 16-digit control number found on your proxy card or voting instructioninstructions form.
Proxy Statement SummaryGLOSSARY OF TERMS
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| Term | Definition |
| 2012 Stock Plan | Porch.com, Inc. 2012 Equity Incentive Plan |
| 2020 Stock Plan | Porch Group, Inc. 2020 Stock Incentive Plan |
| 2023 Bonus Plan | Senior Level Performance Bonus Plan |
| 2023 LTI Equity Program | Long-term incentive compensation awarded to NEOs in 2023 comprised of RSUs and PRSUs, with PRSUs representing 75% of the award and RSUs representing 25% of the award |
| Absolute Share Price | Absolute share price based upon the closing price of a share of common stock of the Company being equal to or greater than certain specified prices (calculated based upon compound annual growth rates of the VWAP Common Stock Price) over a defined period. |
| Achievement Period | Each year of the performance period for PRSU awards subject to two performance goals |
| Annual Meeting | 2024 Annual Meeting of Stockholders of Porch Group, Inc. |
| Board | Board of Directors of Porch Group, Inc. |
| Business Combination | Business combination of Porch.com with PropTech Acquisition Corporation |
| Bylaws | Amended and Restated Bylaws of Porch Group, Inc. |
| CAGR | Compound Annual Growth Rate |
| CAP | Compensation actually paid |
| CEO Employment Agreement | Employment agreement with Mr. Ehrlichman |
| Certificate of Incorporation | The Third Amended and Restated Certificate of Incorporation dated June 9, 2022 |
| CFO Employment Agreement | Employment agreement with Mr. Tabak |
| Change in Control Termination | Upon a termination of the Executive’s employment by the Company without Cause (and other than by reason of death or Disability), or the Executive’s resignation for Good Reason, in each case within 12 months following a Change in Control |
| CIRP | Cybersecurity Incident Response Plan |
| COO Employment Agreement | Employment agreement with Mr. Neagle |
| Code | The Porch Group, Inc. Code of Business Conduct and Ethics adopted by the Board effective December 23, 2020, amended April 9, 2024 |
| Committees | Standing Committees (i.e., Audit, Compensation, Nominating and Corporate Governance, and Mergers and Acquisitions Committees) of the Board of Directors of Porch Group, Inc. |
| Company | Porch Group, Inc. |
| EBITDA | Earnings before interest, taxes, depreciation, and amortization |
| ESG | Environmental, Social and Governance |
| Exchange Act | Securities Exchange Act of 1934, as amended |
| Executive | Each of Messrs. Ehrlichman, Neagle, and Tabak, for purposes of the "Employment Agreements" section of this proxy statement |
| EY | Ernst & Young LLP, the Company's former independent registered public accounting firm |
| FASB ASC Topic 718 | Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation |
| Form 10-K | Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC |
| GAAP | Generally accepted accounting principles in the United States |
| Grant Thornton | Grant Thornton, LLP the Company's independent registered public accounting firm |
| HOA | Homeowners of America Insurance Company |
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| Internet Notice | Notice of Internet Availability of Proxy Materials |
| IRS Code | Internal Revenue Code of 1986, as amended |
| Legacy Porch | Porch.com, Inc. |
| LTI | Long-term incentive |
| Nasdaq | The Nasdaq Stock Market |
| NEO | Named Executive Officer |
| Non-Change in Control Termination | Termination of the Executive's employment by the Company without Cause (and other than by reason of death or Disability), or his resignation for Good Reason |
| PCAOB | Public Company Accounting Oversight Board |
| PEO | Principal Executive Officer |
| PRSU | Performance-based Restricted Stock Unit |
| RSU | Restricted Stock Unit |
| SaaS | Software-as-a-service |
| SOX | Sarbanes-Oxley Act of 2002 |
| Say on Pay | The opportunity for stockholders to vote (annually) on the Company’s NEO compensation program |
| SEC | U.S. Securities and Exchange Commission |
| Severance Period | Period of 12 months |
| STI | Short-term incentive |
| TSR | Total Shareholder Return |
| TTM Revenue Condition | Trailing twelve-month revenue |
| U.S. | United States |
| Vesttoo | Vesttoo Ltd. |
| VWAP | Volume-weighted average price of a share of common stock of the Company |
| WTW | The Company's independent compensation consultant, formerly Willis Towers Watson |
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PROXY STATEMENT SUMMARY
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| This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider. Please read carefully the entire proxy statement and Form 10-K before voting. |
About the Annual Meeting
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| Date and Time | Place | Record Date |
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| June 8, 2022,12, 2024, at 9:
10:00 a.m. Pacific Time | 
| Virtual Meeting Site:
www.virtualshareholdermeeting.com
/PRCH2022PRCH2024
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| You can vote if you were a stockholder of record as of the close of business on April 13, 2022 15, 2024 |
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If you plan to attend the virtual meeting, please be sure to have available your 16-digit control number found on your proxy card or voter instruction form. For beneficial holders who do not have a control number, please contact your broker, bank, or other nominee as soon as possible, so that you can be provided with a control number and gain access to the meeting. If you lost your 16-digit control number or are not a stockholder, you will be able to attend the meeting by visiting
www.virtualshareholdermeeting.com/PRCH2022PRCH2024 and registering as a guest. If you enter the meeting as a guest, you will not be able to vote your shares,
examine oursubmit questions or access the list of stockholders
or submit questionsas of the record date during the meeting.
Proposals and Voting Matters and Board Recommendations |
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| Board Vote
Recommendation | Page |
Election of the two Class IIeight directors named in this proxy statement, each to serve until the 2025 Annual Meetingannual meeting of Stockholders (or until the 2024 Annual Meeting of Stockholders if Proposal 2 is approved and the Declassification Amendment is filed and becomes effective as described in this proxy statement)stockholders and until their successors are duly elected and qualified, subject to their earlier resignation, removal or death.other termination of service. | FOR
each Director
Nominee | 5
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PROPOSAL 3: AMENDMENT TO COMPANY CERTIFICATE OF INCORPORATION to eliminate supermajority voting standard
Amendment to the Certificate of Incorporation of the Company to eliminate the Supermajority Voting Standard commencing with the 2024 Annual Meeting of Stockholders.
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PROPOSAL 4: say on pay
Advisory vote to approve Named Executive Officer compensation.
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PROPOSAL 5: SAY ON FREQUENCY OF PAY
Advisory vote on the frequency of future advisory votes on Named Executive Officer compensation.
| ONE YEAR
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PROPOSAL 6: RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ratification of the appointment of Ernst & YoungGrant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022. | FOR
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ir.porchgroup.com
Advisory (non-binding) vote to approve named executive officer compensation. | 1
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If you hold your shares in street name via a broker, bank or other nominee, you may direct your vote without attending the Annual Meeting by signing, dating and mailing your voting instruction card.instructions form. Internet or telephonic voting may also be available. Please see your voting instruction cardinstructions form provided by your broker, bank or other nominee for further details. If you are a holder of record of shares of common stock of the Company, you may direct your vote without attending the Annual Meeting in one of the following ways:
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Visit www.proxyvote.com with your proxy card in hand and follow the instructions on the web site. |
Go to www.virtualshareholdermeeting.com
/PRCH2022PRCH2024 and follow the voting instructionsinstructions. |
Call 1-800-690-6903, withhave your control number available and follow the instructions. Your control number can be found on your proxy card in hand and follow the instructions.or voter instruction form. |
Mark, sign and date your proxy card and return it in the postage-paid envelope provided or return it to: Vote Processing c/o Broadridge 51 Mercedes Way, Edgewood NY 11717. |
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About Porch Group, Inc.Porch Group is a leading vertical software and insurance platform and is positioned to be the best partner to help homebuyers move, maintain, and fully protect their homes. We offer differentiated products and services, with homeowners insurance at the center of this relationship.
We differentiate and look to win in the massive and growing homeowners insurance opportunity by 1) providing the best services for homebuyers, 2) leading by advantaged underwriting in insurance, 3) protecting the whole home.
As a leader in the home services SaaS space, we’ve built deep relationships with approximately 30 thousand companies that are key to the home-buying transaction, such as home inspectors, mortgage companies, and title companies.
We have grown the utilization of our software across these industries; for example, more than 40% of home inspections in 2023 and approximately 40% of title transactions in 2023 were processed through our software. These relationships provide us with early insights to a significant number of U.S. homebuyers. In partnership with these companies, we have the ability to help simplify the move for consumers with services such as insurance, warranty, moving and more.
Through our vertical software products we have unique insights into the majority of U.S. properties. This data helps feed our insurance underwriting models, better understand risk, and create competitive differentiation in underwriting.
We provide full protection for the home by including a variety of home warranty products alongside homeowners insurance. We are able to fill the gaps of protection for consumers, minimize surprises, and deepen our relationships and value proposition
Summary of Company Financial and Operating Performance
The Porch team delivered a strong performance in 2023, despite the challenges faced. Over the past year there were interest rate increases, higher reinsurance costs, housing market declines, and challenging weather events. The team remained focused and delivered record profitability in the second half of 2023, a milestone for the Company. Other key accomplishments include:
■Improving profitability through insurance profitability actions which focused on increases in premium per policy, non-renewal of higher risk policies and other underwriting actions
■Launching Porch Warranty and new products for software customers, resulting in increased pricing and high customer retention
■Reducing costs across the business while continuing investment in key growth initiatives
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About Us
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| 2023 Financial and Operating Performance Highlights |
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| < | Total Revenue of $430.3 million, an increase of 56% from total Revenue of $275.9 million for 2022 |
| < | Revenue less Cost of Revenue of $210.1 million, a 25% increase from $168.4 million for 2022 |
| < | GAAP net loss of $(133.9) million, compared to a GAAP net loss of $(156.6) million for 2022 |
| < | Achieved second half 2023 Adjusted EBITDA1 target of $21 million (~$45 million increase compared to prior year), which benefited from the insurance profitability actions, surpassing the second half 2023 profitability target set two years ago |
| < | Adjusted EBITDA (Loss) 1 of $(44.5) million or (10)% of total Revenue, compared to the Adjusted EBITDA loss1 of $(49.6) million or (18)% of total Revenue for the full year 2022 |
| < | Insurance segment key performance indicators: |
| < | Gross Loss Ratio of 69%, compared to 72% in 2022 |
| < | Gross written premium decreased 2% to $525 million from $536 million in 2022 |
| < | Annualized premium per policy increased 55% to $1,884 from $1,215 in 2022 |
| < | Software and services to companies: |
| < | Average number of companies of 30,476 compared to 29,032 in 2022 |
| < | Average revenue per company per month of $1,184 a 49% increase compared to $794 in 2022 |
| < | Monetized services1 for customers: |
| < | Number of monetized services was 903,455, compared to 1,128,223 in 2022 |
| < | Average revenue per monetized service was $404, an increase from $184 in 2022 |
| < | $398 million(2) of cash, cash equivalents, short-term and long-term investments as of December 31, 2023 |
| < | $34 million positive operating cash flow for 2023 |
| < | Refinanced debt, reducing medium-term maturity by $200 million while raising secured debt at 6.75% coupon |
| < | Launched new products in the SaaS businesses, increased pricing and built new partnerships |
| < | No material weaknesses in 2023, following system implementations and improvements in the control environment |
(1)See "Appendix A" of this proxy statement, entitled “Use of Non-GAAP Financial Measures,” for the reconciliation of Adjusted EBITDA (Loss) to net income (loss), which is the most directly comparable measure under GAAP. See "Appendix B" of this proxy statement, entitled “Use of Key Performance Measures,” for the reconciliation of Average Revenue per Monetized Service.
(2)Of this amount, HOA, Porch's insurance carrier, held cash and cash equivalents of $208 million and investments of $103 million. Excluding HOA, Porch held $87 million of cash, cash equivalents and investments.
WE SIMPLIFY THE HOME JOURNEY
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To be the partner for the home.
Mission
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To make the home simple from moving to improving and everything in between.
Our Shared Values
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2024 Proxy Statement |
OUR COMPENSATION AND GOVERNANCE HIGHLIGHTS
Our NEO Compensation Program, Practices and Policies
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■Stockholders have the opportunity to vote annually on the Company’s NEO compensation program (say-on-pay)■Engage independent compensation consultant ■Ongoing review of our compensation strategy and our compensation-related risk profile ■Change of control double-trigger equity awards generally ■Full prohibition on hedging and pledging of our securities by NEOs ■Adopted clawback policy in-line with the Nasdaq listing standards as a result of SEC rulemaking | ■Continue to mature and enhance our performance-based programs to further incentivize our NEOs to achieve our overall financial and operational objectives and deliver long-term value to our stockholders
■Utilize annual peer group benchmarking, including ongoing review of peer group composition■Stock ownership guidelines for NEOs |
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■Prohibit repricing or replacing stock options for NEOs ■No Jerks/No Egos - The journey starts with who you bring alongguaranteed salary increases and the most important person is who you choose to be. Choose each day to set the example in your actions and your attitude. Keep an open mind to feedback and different perspectives. Show kindness and respect to others, especially in conflict. |
| Be Ambitious - Any journey worth taking will push you beyond your sights. Don’t let uncertainty keep you from believing in what is possible. Push yourself to think big, to make every day count and to be optimistic it will be worth it.
|
| Solve Each Problem - Along the way, you will encounter challenges and opportunities and how you respond will forever mark your journey. Look at each as a problem to solve. Be thoughtful in your approach and let data drive your decisions. Learn and adapt as you go and persevere until you solve it.
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| Care Deeply - While the problems you solve set your path, the magic is in the everyday moments. Go above and beyond to make something right or show someone they matter. Invest in understanding and developing a connection with the people you serve. Take pride in the work you do and make sure it is done well.
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| Together We Win - At the end of the journey, you will think most about who stood beside you and who you did, or did not help along the way. Fight to win, but fight harder to win together. Focus on the team before yourself. Take ownership and make everyone you bring along betterprovide gross-ups for having been on the journey with you.
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severance payments |
Our Corporate Governance Practices and Policies
Our Governance Highlights
| |
Best Practices in Corporate Governance
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■Fully declassified Board structure effective as of this 2024 annual meeting of stockholders with annual director elections ■ The composition of our Board represents broad perspectives, experiences and knowledge relevant to our businesses, in addition to reflecting gender and ethnic diversity.
■
Established Lead Independent Director;Director with significant responsibilities; elected by Independent Directors.independent directors
■ Meetings comprised onlyProactive achievement of Independent Directors that follow quarterly Board meetings.
■
Review of committee governance atestablishing a business level to assess areas of improvement.
■
Directors may not serve on more than four public company boards in addition to the Company’s Board. Company’s CEO may not serve on more than two.
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Risk assessment process designed to identify and manage enterprise-wide risks, including risks relating to IT/cybersecurity.
| ■
Nominating and Corporate Governance Committee oversight and review of broader stakeholder perspective using Environmental, Social and Governance (ESG) lens; initiated ESG planning process.
■
Corporate governance guidelines sets forthdiverse Board; Board nominee selection criteria that takes into account diversity and experience, among other criteria.criteria
■Our Board and Committees engage in annual self-evaluations; in 2023, through discussion and directed feedback and engagement with management ■Annual management and board engagement to review board charters and Company policies for legal compliance and best practices; updates recommended by the Board committees and approved by the Board | Implemented director■Director resignation policy, including for conflicts of interest, over-boarding policy and a “plurality-plus” voting standard in uncontested elections.elections
■Enterprise risk assessment process designed to identify and mitigate key risks, including those related to financial systems, SOX compliance, cybersecurity, information systems, and data■Adopted clawback policy in-line with the Nasdaq listing standards as a result of SEC rule making ■Full prohibition on hedging and pledging of our securities by directors, NEOs, and employees Proposal, unanimously approved by Board,■Enhanced controls and procedures for cybersecurity risk management and incident response to declassify board structure.comply with new SEC disclosure requirements
■ Proposal, unanimously approved by Board, to eliminate supermajority voting requirement to amend certain provisions of Certificate of Incorporation.
■
Proposal, unanimously approved by Board, to hold an annual say-on-pay vote.
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Our Compensation Highlights
| |
WHAT WE DO
| WHAT WE DO NOT DO
|
✓
Utilize peer group benchmarking
✓
Engage independent compensation consultant
✓
Stock ownership guidelines for Directorsapplicable to executive officers and NEOsdirectors ■Established enhanced internal control procedures to strengthen our internal control over financial reporting and address previously identified material weaknesses; remediated all previously identified material weaknesses over internal control over financial reporting as of December 31, 2023 |
✓
On-going review of our compensation strategy, including a review of our compensation-related risk profile
✓
Change of control double-trigger equity awards generally
✓
Design compensation to align our executive compensation with long-term shareholder interests
✓
Link long-term incentive compensation to publicly available performance metrics to motivate strong performance
| | | | | |
| ir.porchgroup.com | ✘ Permit hedging and pledging by executives
✘ Offer executive perquisites
✘ Reprice or replace stock options
✘ Provide defined benefit, supplemental executive retirement or nonqualified deferred compensation plans
✘ Provide gross-ups for severance payments
✘ Guarantee salary increases
11 |
PROPOSAL 1: ELECTION OF THE CLASS II DIRECTORS NAMED IN THIS PROXY STATEMENT
In 2022, our stockholders approved changes to our Certificate of Incorporation to declassify our Board and move to one-year terms, with such transition period ending in 2024. Our
Board currently consistscurrent term of
sevenoffice for our Class I, Class II and Class III directors
which are divided into three classesexpires at this Annual Meeting, with
staggered, three-year terms.Atthe result being that, beginning with the Annual Meeting and at each subsequent annual meeting of stockholders, all of our stockholders will elect two Class II directors whoseare nominated for election for terms willthat expire annually. Upon recommendation by the Nominating and Corporate Governance Committee, the Board proposes that each director named in this proxy statement be elected for a new one-year term expiring at the Annual Meeting of Stockholders to be held in 2025. Each of our other current directors will continue to serve as a director2025 annual meeting and until the electiontheir respective successors are duly elected and qualification of his or her successor, or until his or her earlier death, resignation or removal.
Our board of directorsqualified.
The Board nominated Matthew Ehrlichman, Sean Kell, Rachel Lam, Alan Pickerill, Amanda Reierson, Maurice Tulloch, Camilla Velasquez and Regi Vengalil for election to our board of directors as Class II directorsthe Board at the Annual Meeting. Each of Messrs. Pickerill and Vengalilthe director nominees currently serves on our board of directors andthe Board, has consented to bebeing named in this proxy statement and agreed to serve, if elected, untilelected. If any of them becomes unavailable to serve as a director, the 2025 Annual Meeting of Stockholders. Each of Messrs. PickerillBoard may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board.
Information regarding the director nominees, including the qualifications, attributes and
Vengalil, if elected, will hold office until his successor has been duly elected and qualified or until his earlier resignation or removal.If Proposal 2 is approved, the Class II directors elected pursuantskills that led our Board to this Proposal 1 will serve two-year terms expiring at the 2024 Annual Meeting of Stockholders. If Proposal 2 is not approved, our board of directors will remain classified and the Class II directors elected pursuant to this Proposal 1 will serve three-year terms expiring at the 2025 Annual Meeting of Stockholders.
nominate each as a director, can be found below under “Board Nominees.”
There are no family relationships between or among any of our executive officers or director nominees.
Vote Required
The eight nominees
receiving the highest number of votes "FOR" their election will be elected as directors; however, any director nominee who receives more “WITHHOLD” votes than “FOR” votes will tender his or
continuing directors.her resignation to the Board promptly following certification of the stockholder vote. See "Corporate Governance, Structure and Responsibility—Plurality Plus Voting for Directors; Director Resignation Policy" for more information. Brokers do not have discretion to vote on this proposal. Withhold votes and broker non-votes are not treated as votes cast and, therefore, will have no effect on this proposal. Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is given, then "FOR" the election of each of the director nominees named in this proxy statement.
Recommendation of The Board
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| | THE BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE BOARD NOMINEES NAMED ABOVE. |
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OUR BOARD NOMINEES
Board Nominees and Continuing DirectorsThe following table sets forth information with respect to our director nominees for election at the Annual Meeting and continuing directors as of April 13, 2022:
| Name
| | | | |
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Matthew Ehrlichman
Age: 44
Director since 2020 | Age
| | Director Since
| | Occupation
|
| Class II - Nominees |
Matthew Ehrlichman is the Founder, Chief Executive Officer and Chairman of the Company. Prior to founding Legacy Porch in 2011, Mr. Ehrlichman was Chief Strategy Officer at Active Network. Mr. Ehrlichman joined Active Network in 2007 and helped grow its revenues from $65 million in 2006 to $420 million and an IPO in 2011. Before joining Active Network, Mr. Ehrlichman was Co-Founder and Chief Executive Officer at Thriva, which was acquired by Active Network in March 2007 for Electionapproximately $60 million in cash and stock. Mr. Ehrlichman built Thriva out of his dorm room at this year’s Annual Meeting |
Alan Pickerill
Independent Director
| 55
| | December 2020
| | Former EVP, CFO, Expedia Group, Inc.
|
Regi Vengalil
Independent Director
| 39
| | December 2020
| | CFO, Metromile, Inc.
|
Class III - Nominees for Election atStanford University, where he received his B.S. in Entrepreneurial Engineering and M.S. in Management Science and Engineering. In 2014, Mr. Ehrlichman was named USA TODAY’s Inaugural Entrepreneur of the 2023 Annual Meeting
|
MattYear. Mr. Ehrlichman
Founder, CEO and Chairman
| 42
| | December 2020
| | Founder, Chairman and CEO
is currently the largest single owner of Porch Group, Inc.
Mr. Ehrlichman is qualified to serve as a director due to his significant leadership since the founding of Legacy Porch in 2011 and throughout our journey as a new public company, as well as his ongoing contributions to our long-term strategy and criticality to our current and future business, and his extensive business experience in the home and technology industries. |
| Asha Sharma
Independent |
| | | | | |
| |
| |
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Sean Kell Age: 55 Director since 2022 | 33
|
| December 2020
|
| COO, Maplebear Inc. (d/b/a Instacart)
|
| Maurice Tulloch
Independent Director
| 53
| August 2021
| | Former Group CEO, Aviva plc
|
Class I - NomineesSean Kell was appointed as a director in March 2022 and is the Chief Executive Officer for ElectionMD2 an innovative medical concierge service. Formerly, he served as the Chief Executive Officer at the 2024 Annual Meeting
|
Sean Kell
| 53
| | March 2022
| | CEO, Blue Nile, Inc.
from 2019 until March 2023. He was charged with driving the Blue Nile strategic vision and elevating the company’s modern approach to purchasing handcrafted diamond rings and exquisite jewelry online. From 2011 to 2019, Mr. Kell served as Chief Executive Officer of A Place for Mom, a senior living marketplace, where he was responsible for overall brand management and business expansion. Mr. Kell has a proven track record of building successful businesses in e-commerce, digital innovation and product management across leading online retail organizations including Expedia, Hotels.com and Starbucks. He has also previously held various roles at McKinsey and IBM. Mr. Kell holds a M.B.A. from the University of Chicago and a B.S. in Electrical Engineering from the University of Southern California. Mr. Kell is well qualified to serve as a director due to his significant experience working with companies that are implementing rapid technological changes, brand development and business expansion. |
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Rachel Lam Director since 2021 | |
| ir.porchgroup.com
| 5
Independent Director
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Rachel Lam Independent Director
| 54
| | has served as a director since August 2021 | | and is the Co-Founder and Managing Partner
of Imagination Capital, an early-stage venture capital firm founded in 2017. From 2003 to 2017, Ms. Lam served as Senior Vice President and Group Managing Director of the Time Warner Investments Group, the strategic investing arm of Time Warner Inc. She managed Time Warner's investments in numerous digital media companies and served on the board of privately held Maker Studios and Bluefin Labs prior to their sales to the Walt Disney Company and Twitter, respectively. Ms. Lam has previously served on 20 boards of directors over the years and currently serves on the board of Magnite (Nasdaq: MGNI), the world’s large independent sell-side ad platform. She also spent several years in investment banking within the M&A group at Morgan Stanley and the Media and Telecommunications group at Credit Suisse. Ms. Lam received a B.S. in industrial engineering and operations research from U.C. Berkeley in 1989 and an M.B.A. from Harvard Business School in 1994. Ms. Lam is well qualified to serve as a director due to her extensive experience serving on both private and public company boards, along with her financial, M&A and strategy experience. |
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Board Diversity
| | | | | |
| |
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Alan Pickerill Director since 2020 | | |
| Gender
| Age
Diversity
|
| 
| 
|
Board Diversity Matrix (as of April 13, 2022)
Total Number of Directors | 7 |
| Female | | Male | | Non-Binary | | Did Not Disclose
Gender | |
Part I: Gender Identity |
Directors | | 2 | | 5 | | - | | - | |
Part II: Demographic Background |
African American or Black | | - | | - | | | | | |
Alaskan Native or Native American | | - | | - | | | | | |
Asian | | 2 | | 1 | | | | | |
Hispanic or Latinx | | - | | - | | | | | |
Native Hawaiian or Pacific Islander | | - | | - | | | | | |
White | | - | | 4 | | | | | |
Two or More Races or Ethnicities | | - | | - | | | | | |
LGBTQ+ | | - | | - | | | | | |
Did Not Disclose Demographic Background | | | | - | | | | | |
Additional biographical descriptions of the nominees and continuing directors are set forth in the text below. These descriptions include the experience, qualifications, qualities and skills that led to the conclusion that each director should serve as a member of our Board at this time.
Board Nominees — Class II Directors
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Alan Pickerill
| Director since 2020
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Alan Pickerill has served as a director since December 2020. Mr. Pickerill has served in a variety of finance and accounting roles, mainly for publicly tradedpublicly-traded technology companies. Most recently he served as Expedia Group’s Executive Vice President, Chief Financial Officer and Treasurer from September 2017 to December 2019 and had been with the Company since 2008. Mr. Pickerill oversaw Expedia Group’s accounting, financial reporting and analysis, investor relations, treasury, internal audit, tax and global real estate teams. Previously, he served as Expedia Group’s Senior Vice President of Investor Relations and Treasurer from July 2015 to September 2017. Mr. Pickerill was a director of Legacy Porch from September 2019 until the completion of the December 2020 business combination that created Porch Group, Inc. He currently serves as a directorchair of the board for Leafly Holdings, Inc. (NASDAQ:(Nasdaq: LFLY), a director for Manson Construction (a privately held marine construction company), a director for the YMCA of Greater Seattle and as adjunct faculty for the University of Washington Foster School Executive MBA program. Mr. Pickerill began his career as an accountant for seven (7) years at Deloitte and Touche before working at a variety of publicly tradedpublicly-traded technology and internet companies, including serving as CFOChief Financial Officer of INTERLINQ Software Corporation, a publicly tradedpublicly-traded technology provider, as well as roles at Microsoft and Getty Images. Mr. Pickerill was licensed as a certified public accountant in Washington in 1991. Mr. Pickerill holds a B.A. degree in Business and Accounting from the University of Washington’s Michael G. Foster School of Business. Mr. Pickerill is well qualified to serve as a director due to his extensive experience in finance-related leadership and governance roles in a publicpublic-held technology company. |
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Amanda Reierson Director since 2022 | |
|
|
| Amanda Reierson was appointed as a director in October 2022. She is a marketing veteran with over two decades of experience, including significant management experience in home services and property and casualty insurance. Ms. Reierson served as Chief Marketing Officer at Avant, a financial technology company that provides access to innovative financial solutions, including personal loans and credit cards, and is focused on reaching consumers wherever they may be on their financial journey. Prior to joining Avant, Ms. Reierson served as Head of Marketing at Sequoia-backed Thumbtack, overseeing all branding/creative efforts, media, CRM, and product marketing. Ms. Reierson was also previously Chief Growth Officer at Farmers Insurance, where she led the company's digital marketing and product transformation. Throughout her career she has also served in a variety of B2C and B2B marketing roles at Yahoo, DIRECTV, and the Los Angeles Times. She received her B.A. in Political Science from the University of California, Los Angeles. |
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Maurice Tulloch Age: 55 Director since 2021 | |
| |
| Maurice Tulloch has served as a director since August 2021. From March 2019 until his retirement in July 2020, Mr. Tulloch was Group Chief Executive Officer at Aviva plc, a leading multinational insurance company headquartered in London. He joined the Board of Aviva as an Executive Director in June 2017. In his role at Aviva, he oversaw global leadership, operations, strategy, risk management and governance. In addition, from 1992 until 2019, Mr. Tulloch held many executive and leadership roles at Aviva prior to serving as its Group Chief Executive Officer. On March 4, 2022, Mr. Tulloch joined the Public Sector Pension Investment Board (PSP). Mr. Tulloch has also served on several external boards including PoolRe and as Chair of ClimateWise. Mr. Tulloch received a B.A. in economics from the University of Waterloo in 1992, an M.B.A. from Heriot-Watt University in 2002, and is a Chartered Professional Accountant CPA, CMA since 1998. Mr. Tulloch is well qualified to serve as director due to his extensive operational, strategic, risk management and corporate governance experience, as well as executive leadership in the insurance industry. The Board also determined that Mr. Tulloch is an “Audit Committee financial expert” as defined by the applicable SEC rules. |
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Camilla Velasquez Age: 42 Director since 2022 | |
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| Camilla Velasquez was appointed as a director in October 2022. She is an accomplished senior product and growth leader who currently serves as the Senior Vice President and General Manager of New York Times Cooking. Prior, Ms. Velasquez worked as Senior Vice President of Product and Strategy at Justworks, the fastest growing HR and benefits technology company, which provides businesses and their employees with the SaaS tools and insurances they need to grow. Justworks also provides consumer-facing products and services. Throughout her career, Ms. Velasquez also held roles including Director of Payment Products and Multichannel Sales at Etsy and Director of New Product Development at American Express. In addition to her corporate experience, Ms. Velasquez serves as the board Chair for Young New Yorkers, an arts-based, youth diversion program focused on criminal justice reform. She holds a B.A. in Economics and in Spanish from Cornell University. Ms. Velasquez is well qualified to serve as director due to her significant strategic and product development experience, as well as her growth and executive leadership. |
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Regi Vengalil | Age: 41 Director since 2020 | |
|
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Regi Vengalil has served as a director since December 2020. Mr. Vengalil ishas been the Chief Financial Officer of Trax Retail, Inc, a private software company in the retail sector since August 2022. Prior to Trax, he was the Chief Financial Officer of Metromile, Inc. (NASDAQ:(Nasdaq: MILE, MILEW), a publicly-traded technology-driven auto insurer. He joined Metromile ininsurer from May 2021 after servinguntil the company’s sale to Lemonade in July 2022. Previously Mr. Vengalil served as Chief Financial Officer of Egencia, the corporate travel division of Expedia Group, from November 2019 to April 2021. Previously, Mr. Vengalil served as2021 and Global Head of Corporate Development & Strategy for Expedia Group from January 2017 to November 2019. Prior to that, Mr. Vengalil was an executive at Lending Club, an online lending marketplace, serving as Vice President, Strategy, M&A and Business Operations from May 2016 until January 2017. Previously Mr. Vengalil served as Vice President, Head of Strategy and Business Operations of Lending Club from November 2015 to May 2016 and Senior Director, Head of Corporate Strategy from October 2014 to November 2015. Mr. Vengalil holds a B.S. in Economics and an M.B.A., both earned with honors, from the Wharton School at the University of Pennsylvania. Mr. Vengalil is well qualified to serve as a director due to his extensive experience in M&A leadership at publicpublicly-traded technology companies and financial, M&A and strategy experience across regions, industries and functions, (includingincluding most recently with regard to insurance businesses). businesses. |
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Continuing Class III Directors
Director Nominee Skills and Experience
| | | | | | | | | | | | | | |
|
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Matt Ehrlichman
| Director since 2020
|
|
|
Matt Ehrlichman is the Founder, Chief Executive Officer Our directors exhibit broad perspectives, experiences,
and Chairman for the Company. Priorknowledge relevant to founding Legacy Porch in 2011, Mr. Ehrlichman was Chief Strategy Officer at Active Network, responsible for approximately 85% of the company’s P&L. Mr. Ehrlichman joined Active Network in 2007 and helped grow its revenues from $65 million in 2006 to $420 million and an IPO in 2011. Before joining Active Network, Mr. Ehrlichman was co-founder and Chief Executive Officer at Thriva, which was acquired by Active Network in March 2007 for approximately $60 million in cash and stock. Mr. Ehrlichman built Thriva out of his dorm room at Stanford University, where he received his B.S. in Entrepreneurial Engineering and M.S. in Management Science and Engineering. In 2014, Mr. Ehrlichman was named USA TODAY’s Inaugural Entrepreneur of the Year. Mr. Ehrlichman is qualified to serve as a director due to his extensive leadership and business experience in the home and technology industries.
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Asha Sharma
| Director since 2020
|
|
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Asha Sharma has served as a director since December 2020. Ms. Sharma is a senior business executive and currently the Chief Operating Officer of Instacart, which is North America’s largest third-party provider of online grocery stores. In this role, Ms. Sharma oversees the Instacart Marketplace, which includes the Instacart app, and Instacart logistics, growth and marketing, as well as focuses on engaging new and current customers. Before joining Instacart in February 2021, Ms. Sharma was Vice President of Product for Messenger at Facebook Inc. (NASDAQ: FB) from August 2017 to February 2021, a service used globally by more than 1.3 billion people and over 40 millionour businesses, in 190+ countries. As part of Ms. Sharma’s role, she was responsible for Messenger and Instagram Direct user engagement, revenue, privacy, and integrity. Prior to Messenger, Ms. Sharma led the Facebook Inc. Social Impact product teams including charitable giving, crisis response, health, AMBER alerts, and mentorship. As both an entrepreneur and executive, Ms. Sharma brings years of experience building, growing and transforming businesses, with deep focus in consumer product and online marketplaces. Before Facebook Inc., Ms. Sharma was the Chief Operating Officer and early team member of Legacy Porch. Ms. Sharma served as Chief Marketing officer of Legacy Porch from May 2013 to July 2015. Prior to that, Ms. Sharma started her career by founding two companies, one of which was recognized by the President of the United States in 2012. She graduated top of her class at University of Minnesota’s Carlson School of Management. Ms. Sharma is currently on the board of AppLovin Corporation (NASDAQ: APP) a leading marketing platform. Ms. Sharma is well qualified to serve as director due to her prior experience with the Company, her executive operations experience and product leadership.
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Maurice Tulloch
| Director since 2021
|
|
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Maurice Tulloch has served as a director since August 2021. From March 2019 until his retirement in July 2020, Mr. Tulloch was Group Chief Executive Officer at Aviva plc, a leading multinational insurance company headquartered in London. He joined the Board of Aviva as an Executive Director in June 2017. In his role at Aviva, he oversaw global leadership, operations, strategy,
financial systems, risk management and governance. In addition, from 1992 until 2019, Mr. Tulloch held many executive and leadership roles at Aviva prior to serving as its Group Chief Executive Officer. On March 4, 2022, Mr. Tulloch joined the board of the Public Sector Pension Investment Board (PSP). Mr. Tulloch has also served on several external boards including PoolRe and as Chair of ClimateWise. Mr. Tulloch received a B.A. in economics from University of Waterloo in 1992, an M.B.A. from Heriot-Watt University in 2002, and is a Chartered Professional Accountant CPA, CMA since 1998. Mr. Tulloch is well qualified to serve as director due to extensive operational, strategic, risk management and corporate governance experience, as well as executive leadership in the insurance industry.
long-term strategy |
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Continuing Class I Directors
Board Diversity
Represents gender and demographic diversity.
Board Diversity Matrix
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of April 24, 2024 | As of April 28, 2023 |
| Total Number of Directors | 8 | | | | 8 | | | |
| Female | Male | Non-Binary | Did Not Disclose
Gender | Female | Male | Non-Binary | Did Not Disclose
Gender |
| Part I: Gender Identity | | | | | | | | |
| Directors | 3 | 5 | - | - | 3 | 5 | - | - |
| Part II: Demographic Background | | | | | | | | |
| African American or Black | - | - | - | - | - | - | - | - |
| Alaskan Native or Native American | - | - | - | - | - | - | - | - |
| Asian | 1 | 1 | - | - | 1 | 1 | - | - |
| Hispanic or Latinx | 1 | - | - | - | 1 | - | - | - |
| Native Hawaiian or Pacific Islander | - | - | - | - | - | - | - | - |
| White | 1 | 4 | - | - | 1 | 4 | - | - |
| Two or More Races or Ethnicities | - | - | - | - | - | - | - | - |
| LGBTQ+ | - | - |
| Did Not Disclose Demographic Background | - | - |
| | | | | |
| 18 | |
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Sean Kell
| Director since 2022
|
|
|
Sean Kell was appointed as a director in March 2022 and is the Chief Executive Officer at Blue Nile, Inc., serving in that role since 2019. He is charged with driving the Blue Nile strategic vision and elevating the company’s modern approach to purchasing handcrafted diamond rings and exquisite jewelry online. From 2011 to 2019, Mr. Kell served as Chief Executive Officer of A Place for Mom, a senior living marketplace, where he was responsible for overall brand management and business expansion. Mr. Kell has a proven track record of building successful businesses in ecommerce, digital innovation and product management across leading online retail organizations including Expedia, Hotels.com and Starbucks. He has also previously held various roles at McKinsey and IBM. Mr. Kell holds a Master of Business Administration from the University of Chicago and a Bachelor of Science in Electrical Engineering from the University of Southern California. Mr. Kell is well qualified to serve as a director due to his significant experience working with companies that are implementing rapid technological changes, brand development and business expansion.
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CORPORATE GOVERNANCE, STRUCTURE AND RESPONSIBILITY
| |
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Rachel Lam
| Director since 2021
|
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Rachel Lam has served as a director since August 2021 and is the Co-Founder and Managing Partner of Imagination Capital, an early-stage venture capital firm founded in 2017. From 2003 to 2017, Ms. Lam served as Senior Vice President and Group Managing Director of the Time Warner Investments Group, the strategic investing arm of Time Warner Inc. She managed Time Warner's investments in numerous digital media companies and served on the Board of privately held Maker Studios and Bluefin Labs prior to their sales to the Walt Disney Company and Twitter, respectively. Ms. Lam has previously served on 20 boards of directors over the years and currently serves on the board of Magnite (NASDAQ: MGNI), the leading, independent omni-channel sell-side software platform, empowering programmatic ad salesDeclassified Board (fully declassified effective at a truly global scale, and Innovid Corp. (NYSE: CTV), an independent CTV advertising and measurement platform for the world’s largest brands. She also spent several years in investment banking within the M&A group at Morgan Stanley and the Media and Telecommunications group at Credit Suisse. Ms. Lam received a B.S. in industrial engineering and operations research from U.C. Berkeley in 1989 and an M.B.A. from Harvard Business School in 1994. Ms. Lam is well qualified to serve as a director due to her extensive experience serving on both private and public company boards, along with her financial, M&A and strategy experience.
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Vote Required
The nominees who receive the greatest number of affirmative votes will be elected as Class II directors, to hold office until the 2025 Annual Meeting of Stockholders (or until the 2024 Annual Meeting of Stockholders if Proposal 2 is approved and the Declassification Amendment is filed and becomes effective as described in this proxy statement) and until their successors have been elected and qualified, subject, however, to any such director’s earlier death, resignation, retirement, disqualification or removal. Abstentions and broker non-votes will not affect the election of directors.
Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is given, then FOR the election of the nominees named in this proxy statement.
Recommendation of Our Board
Meeting)
| OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE ELECTION OF THE CLASS II BOARD NOMINEES NAMED ABOVE.
|
Proposal 2: PROPoSED Amendment to OUR Certificate of Incorporation to Declassify OUR Board
General
Our Certificate of Incorporation currently provides for a classified Board divided into three classes of directors, with each class elected for three-year terms.
As part of our Board’s ongoing evaluation of our corporate governance practices and review of current corporate governance trends, the Board considered the advantages and disadvantages of Board declassification. After careful consideration, andOn June 8, 2022, upon the recommendation of the Nominating and Corporate Governance Committee, our Board, has determined that it is in the best interests of the Company and our stockholders overwhelmingly voted in favor to declassify ourthe Board. Our Board has unanimously approved, and recommends thatAccordingly, our stockholders approve at the Annual Meeting, the amendment to our Certificate of Incorporation attached to this proxy statement as Appendix A, which would
declassify the Board and provide for the annual election of directors over a two-year period (the “Declassification Amendment”).
Proposed Declassification Amendment
The Declassification Amendment to our Certificate of Incorporation would eliminate the classification of the board of directors over a two-year period beginning at the Annual Meeting, with the Class II directors to be elected pursuant to Proposal 1 serving two-year terms and the Class III directors to be elected at the 2023 Annual Meeting of Stockholders serving one-year terms and provide for the annual election of all directors beginning at the 2024 Annual Meeting of Stockholders. The three-year terms of the Class I directors elected at the 2021 Annual Meeting of Stockholders would not be affected by the proposed amendment. In addition, under the proposed amendment, at the 2024 Annual Meeting of Stockholders and at all future Annual Meetings of Stockholders, thereafter, a director elected to fill a vacancy or chosen to fill a position resulting from an increase in the number of directors would be elected for a term expiring at the next annual meeting of stockholders. Our Certificate of Incorporation currently provides that a director elected to fill a vacancy or chosen to fill a position resulting from an increase in the number of directors shall be elected for the remainder of the full term of the class of directors to which the new directorship was added or in which the vacancy occurred. In all cases, each director would serve until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal.
The Declassification Amendment also would provide that beginning with the 2024 Annual Meeting of Stockholders, directors may be removed with or without cause upon the affirmative vote of stockholders holding at least a majority of the voting power of all then outstanding shares of capital stock entitled to vote generally in the election of directors. Our Certificate of Incorporation currently provides that directors may be removed only for cause upon the affirmative vote of stockholders holding at least a majority of the voting power of all then outstanding shares of capital stock entitled to vote generally in the election of directors.
This description of the Declassification Amendment is qualified by the full text of the proposed amendment to our Certificate of Incorporation attached as Appendix A to this proxy statement.
Effectiveness of the Declassification Amendment
If this Proposal 2 is approved the Declassification Amendment would become effective upon the filing of the Certificate of Amendment with the Secretary of State of the State of Delaware, which the Company would file promptly following the Annual Meeting if our stockholders approve the amendment.
If our stockholders approve both this Proposal 2 and Proposal 3, the Company would file promptly following the Annual Meeting the Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware setting forth each of the proposed amendments to our Certificate of Incorporation from both this Proposal 2 and Proposal 3, which will become effective upon filing with the Secretary of State of the State of Delaware.
If this Proposal 2 is not approved, our board of directors will remain classified and the Class II directors elected pursuant to Proposal 1 will serve three-year terms expiring at the 2025 Annual Meeting of Stockholders.
Vote Required
Approval of the Declassification Amendment requires the affirmative vote of 66.7% in voting power of the outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class. As a result, abstentions and broker non-votes will have the same effect as a vote AGAINST this proposal.
Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is given, then FOR the approval of the Declassification Amendment.
This Proposal 2 is separate from, and is not conditioned upon, the approval of Proposal 3 (Proposed Amendmentchanges to our Certificate of Incorporation to Eliminate the Supermajority Voting Standard). Your vote on Proposal 2 does not affect your vote on Proposal 3 and vice versa.
Recommendation of Our Board
|
|
| OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION OF THE COMPANY TO DECLASSIFY THE BOARD.
|
Proposal 3: PROPOSED AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO ELIMINATE THE SUPERMAJORITY VOTING STANDARD
General
Our Certificate of Incorporation currently provides that the affirmative vote of the holders of at least 66.7% of the voting power of all outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class (the “Supermajority Voting Standard”), shall be required to effect any amendment, alteration or repeal of Article V: Directors of our Certificate of Incorporation, which includes provisions related to the Board’s powers, size and vacancies and the election, term and removal of directors.
As part of our Board’s ongoing evaluation of our corporate governance practices and review of current corporate governance trends, the Board considered the advantages and disadvantages of eliminating the Supermajority Voting Standard. After careful consideration, and upon the recommendation of the Nominating and Corporate Governance Committee,declassify our Board has determined that it is in the best interestsand move to one-year terms, with such transition period ending this year. Our current term of the Companyoffice for our Class I, Class II and our stockholders to eliminate the Supermajority Voting Standard. Our Board has unanimously approved, and recommends that our stockholders approveClass III directors expires at the Annual Meeting, the amendment to our Certificate of Incorporation attached to this proxy statement as Appendix B, which would eliminate the Supermajority Voting Standard and instead provide for a majority voting standard (the “Elimination of the Supermajority Voting Standard Amendment”).
Proposed Elimination of the Supermajority Voting Standard Amendment
The Elimination of the Supermajority Voting Standard Amendment to our Certificate of Incorporation would eliminate the Supermajority Voting Standard and provide that the affirmative vote of the holders of at least a majority of the voting power of all outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class, shall be required to effect any amendment, alteration or repeal of Article V: Directors of our Certificate of Incorporation, which includes provisions related to the Board’s powers, size and vacancies and the election, term and removal of directors.
This description of the Elimination of the Supermajority Voting Standard Amendment is qualified by the full text of the proposed amendment to our Certificate of Incorporation attached as Appendix B to this proxy statement.
Effectiveness of the Elimination of the Supermajority Voting Standard Amendment
If this Proposal 3 is approved, the Elimination of the Supermajority Voting Standard Amendment would become effective upon the filing of the Certificate of Amendment with the Secretary of State of the State of Delaware, which the Company would file promptly following the Annual Meeting if our stockholders approve the amendment.
If our stockholders approve both this Proposal 3 and Proposal 2, the Company would file promptly following the Annual Meeting the Certificate of Amendment to our Certificate of Incorporationresult being that, beginning with the Secretary of State of the State of Delaware setting forth each of the proposed amendments to our Certificate of Incorporation from both this Proposal 3 and Proposal 2, which will become effective upon filing with the Secretary of State of the State of Delaware.
If this Proposal 3 is not approved, the Supermajority Voting Standard in our Certificate of Incorporation will remain unchanged and in effect.
Vote Required
Approval of the Elimination of the Supermajority Voting Standard Amendment requires the affirmative vote of 66.7% in voting power of the outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class. As a result, abstentions and broker non-votes will have the same effect as a vote AGAINST this proposal.
Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is given, then FOR the approval of the Elimination of the Supermajority Voting Standard Amendment.
This Proposal 3 is separate from, and is not conditioned upon, the approval of Proposal 2 (Proposed Amendment to our Certificate of Incorporation to Declassify the Board). Your vote on Proposal 3 does not affect your vote on Proposal 2 and vice versa.
Recommendation of Our Board
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| OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE PROPOSED AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO ELIMINATE THE SUPERMAJORITY VOTING STANDARD.
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Proposal 4: APPROVAL OF, ON AN ADVISORY (NON-BINDING) BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
General
Our Board is committed to continuous review and improvement of governance. As part of this commitment, in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act and as required by Rule 14a-21 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our Board is providing our stockholders
with an opportunity to cast an advisory (non-binding) vote on a resolution to approve the compensation of our Named Executive Officers (defined below under “Compensation Discussion and Analysis - Overview”).
The principal objective of our compensation programs is to attract, retain and motivate key executives responsible for our success by rewarding performance, both individual and business, in a way that is aligned with the Company’s and stockholders’ short and long-term interests, providing incentives that reward achievement of performance goals that are designed to correlate with the enhancement of stockholder value and tying a portion of our executive officers’ compensation to increases in stockholder value. We believe our executive compensation program strikes an appropriate balance between the implementation of responsible, measured compensation practices and the effective provision of incentives for our Named Executive Officers to exert their best efforts for our success. We describe our compensation policies and programs in more detail below in this proxy statement, including in the Compensation Discussion and Analysis.
As required by Section 14A of the Exchange Act, we are asking for stockholder approval of the compensation of our Named Executive Officers. The Board recommends that stockholders approve such compensation by approving the following advisory resolution:
RESOLVED, that the stockholders of Porch Group, Inc. approve, on an advisory basis, the compensation of the Company’s Named Executive Officers identified in the Summary Compensation Table included in this proxy statement as such compensation is described pursuant to Item 402 of Regulation S-K in this proxy statement (which disclosure includes the Compensation Discussion and Analysis and the compensation tables and accompanying footnotes and narratives under the heading “Executive Compensation” in this proxy statement).
As an advisory vote, this proposal is not binding upon the Company. However, the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by stockholders. If there are a significant number of negative votes, we will seek to understand the concerns that influenced the vote, and will consider whether any actions are necessary to address those concerns. The Board has adopted a policy providing for an annual advisory vote to approve executive compensation. Unless the Board otherwise modifies this policy, the next advisory vote will be at the 2023 Annual Meeting of Stockholders.
Vote Required
The affirmative vote of a majority of the votes duly cast on this item is required to approve this proposal. Abstentions and broker non-votes are not treated as votes cast and, therefore, will have no effect on this proposal
Recommendation of Our Board
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| OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE ADVISORY RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
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PROPOSAL 5: Approval oF, on an advisory (non-binding) basis, the Frequency of Future Advisory Votes on Executive Compensation
General
As described in Proposal 4 above, the Company’s stockholders are being asked to approve, on an advisory basis, the Company’s executive compensation program for its Named Executive Officers. Pursuant to Section 14A of the Exchange Act, this Proposal 5 asks stockholders to cast an advisory vote on how often we should include an advisory vote on executive compensation in proxy materials for future stockholder meetings where compensation disclosure is required. Under this Proposal 5, stockholders may vote to have such a vote every year, every two years or every three years.
The Board recommends a vote every year (annually). The Company’s executive officer compensation design is evolving to have a greater a long-term focus. Accordingly, the Board believes that holding an annual advisory vote on executive compensation provides the Company with more direct and immediate feedback as it continues to structure its executive compensation program.
Stockholders should note that because the advisory vote on executive compensation will occur after the beginning of the compensation year, in many cases, it may not be appropriate or feasible to re-assess or change our executive compensation program in connection with a particular year’s advisory vote on executive compensation.
Vote Required
The option of one year, two years or three years that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on executive compensation that has been selected by stockholders. Abstentions and broker non-votes will have no effect on this proposal. Although the advisory vote is non-binding, the Board will review the results of the vote and take them into account in making a determination concerning the frequency of advisory votes on executive compensation.
Recommendation of Our Board
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| OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS select “one year” for the frequency of future advisory votes on executive compensation.
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PROPOSAL 6: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2022
General
Our Board is asking our stockholders to ratify the appointment by the Audit Committee of Ernst & Young LLP (“E&Y”), as the independent public accounting firm to conduct the audit of our financial statements for the fiscal year ending December 31, 2022. Stockholder ratification of such selection is not required by our Amended and Restated Bylaws (the “Bylaws”) or any other applicable legal requirement. However, our Board is submitting the selection of E&Y to our stockholders for ratification as a matter of good corporate governance.
In the event our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to continue to retain E&Y for the fiscal year ending December 31, 2022. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change should be made.
E&Y has audited our financial statements since 2015. A representative of E&Y is expected to be present at the Annual Meeting and will have the opportunity to make a statement if he or she desires to do so and is expected to be available to respond to appropriate stockholder questions.
Principal Accountant Fees and Services
The following table sets forth aggregate fees for professional service rendered by E&Y for the years ended December 31, 2021 and 2020.
| | | | | | |
| | Years Ended |
| | December 31, |
| | 2021 | | 2020 |
Audit fees | | $ | 2,896,000 | | $ | 1,981,000 |
Audit-related fees | | | 503,000 | | | 423,000 |
Tax fees | | | 673,000 | | | 276,000 |
All other fees | | | — | | | — |
Total fees | | $ | 4,072,000 | | $ | 2,680,000 |
For 2021, audit fees above are professional services for the annual audits of our financial statements and internal control over financial reporting, reviews of interim financial statements, professional consultations with respect to accounting issues directly related to the financial statement audit, and services rendered in connection with the filing of our registration statements and security offerings. Audit-related fees include fees and expenses for due diligence in connection with acquisitions, and related accounting consultations. Tax fees generally include fees related to tax compliance, tax planning and advice and tax due diligence in connection with acquisitions. There were no other fees billed for the years ended December 31, 2021 and 2020.
Determination of Independence
In considering the nature of the services provided by our independent registered public accounting firm, the Audit Committee determined that such services are compatible with the provision of independent audit services. The
Audit Committee discussed these services with our independent registered public accounting firm and our management to determine that they are permitted under the rules and regulations concerning auditor independence.
Additional information concerning the Audit Committee and its activities can be found in the following sections of this proxy statement: “Board Committees” and “Report of the Audit Committee.”
Pre-Approval Policy
According to policies adopted by the Audit Committee and ratified by our Board, to ensure compliance with the SEC’s rules regarding auditor independence, all audit and non-audit services to be provided by our independent registered public accounting firm must be pre-approved by the Audit Committee. The Audit Committee has established a general pre-approval policy for certain audit and non-audit services, up to a specified amount forat each identified service that may be provided by the independent auditors.
The Audit Committee approved all services provided by E&Y during the years ended December 31, 2021 and 2020. The Audit Committee has considered the nature and amount of the fees billed by E&Y and believes that the provision of the services for activities unrelated to the audit is compatible with maintaining E&Y’s independence.
Vote Required
The affirmative vote of the majority of our shares of common stock present at the Annual Meeting or represented by proxy and entitled to vote at the Annual Meeting is required for the approval of Proposal 6. An abstention on Proposal 6 will have the same effect as a vote “AGAINST” Proposal 6. Brokers will have discretionary authority to vote on this proposal. Accordingly, there will not be any broker non-votes on Proposal 6.
Recommendation of Our Board and Audit Committee
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| OUR BOARD AND OUR AUDIT COMMITTEE UNANIMOUSLY RECOMMEND THAT OUR STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2022.
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Report of the Audit Committee
The Audit Committee oversees our independent registered public accounting firm and assists our Board in fulfilling its oversight responsibilities on matters relating to the integrity of our financial statements, our compliance with legal and regulatory requirements and the independent registered public accounting firm’s qualifications and independence by meeting regularly with the independent registered public accounting firm and financial management personnel. Management is responsible for the preparation, presentation and integrity of our financial statements.
In fulfilling its oversight responsibilities, the Audit Committee:
| ■ | reviewed and discussed our financial statements as of and for the fiscal year ended December 31, 2021 with management and E&Y; |
| ■ | discussed with E&Y the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC; |
| ■ | discussed the effectiveness of internal controls over financial reporting (ICFR), as well as other important financial accounting and reporting issues with management and E&Y; |
| ■ | received the written disclosures and the letter from E&Y required by the applicable requirements of the Public Company Accounting Oversight Board; and |
| ■ | discussed with E&Y their independence. |
Based on the Audit Committee’s review and discussions noted above, the Audit Committee recommended to our Board, and our Board approved, that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, for filing with the SEC. The Audit Committee also appointed E&Y as our independent registered public accounting firm for fiscal year ending December 31, 2022.
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Javier Saade
Margaret Whelan
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| Submitted by the Audit Committee of the Board:
Alan Pickerill, Chair
Rachel Lam
Maurice Tulloch
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CORPORATE GOVERNANCE
Classified Board
Our Board is divided into three classes of directors that serve staggered three-year terms. At each Annual Meeting of Stockholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring. As a result, only one class of directors will be elected at eachsubsequent annual meeting of stockholders, all of our stockholders,directors are nominated for election for terms that expire annually. Notwithstanding the annual election of directors, our Board recently approved an amendment to our corporate governance guidelines to provide for an expectation that, subject to continued nomination and election, directors will serve for three or more full one-year terms. The Board believes that directors with increased tenure on the other classes continuing forBoard are often able to provide valuable contributions and insight into the remainderCompany's operations based on their experience with, and understanding of, their respective three-year terms.
the Company's business, history and objectives.
Each director’s term continues until the election and qualification of his or her successor, or his or her earlier
death, resignation,
removal or
removal.other termination of service. Our Certificate of Incorporation and Bylaws authorize only
ourthe Board to fill vacancies on
ourthe Board.
Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our Board may have the effect of delaying or preventing changes in control of our company.In this proxy statement, Proposal 2 is our proposal to change from this classification of our Board to one where all directors will be elected annually beginning at the 2024 Annual Meeting of Stockholders. The Board has unanimously approved the Declassification Amendment to our Certificate of Incorporation, subject to stockholder approval.
Our common stock is listed on
The Nasdaq Stock Market (“Nasdaq”).Nasdaq. Under the rules of Nasdaq, independent directors must comprise a majority of a listed company’s
Board.board of directors. In addition, the rules of Nasdaq require that, subject to specified exceptions, each member of a listed company’s
Audit, Compensationaudit, compensation, and
Nominatingnominating and
Corporate Governance Committeescorporate governance committees be independent. Under the rules of Nasdaq, a director will only qualify as an “independent director” if, in the opinion of that company’s
Board,board, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Additionally, Compensation Committee Among other objective factors, under the Nasdaq listing rules, a director is not independent if the director is or was within the past three years an executive officer or an employee of the company, or a family member of the director is or has been within the past three years an executive officer of the company.
In addition, compensation committee members must not have a relationship with
usour Company that is material to the director’s ability to be independent from management in connection with the duties of a Compensation Committee member.
Audit
Committeecommittee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an
Audit Committeeaudit committee of a listed company may not, other than in his or her capacity as a member of the
Audit Committee,audit committee, the
Boardboard or any other board
committee:committee, accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or be an affiliated person of the listed company or any of its subsidiaries.
Our
The Nominating and Corporate Governance Committee and Board hashave undertaken a review of the independence of each current director, all of whom have been nominated for election at the Annual Meeting, and considered all available factors whether each director has a material relationship with usthe Company that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, ourand upon the recommendation of the Nominating and Corporate Governance Committee, the Board determined that, with the exception of our Chief Executive Officer, MattMatthew Ehrlichman, each member of ourthe Board is an “independent director” as defined under the applicable rules and regulations of the SEC and the listing requirements and rules of Nasdaq. In addition, the Board has determined that each of the members of the Audit Committee and Compensation Committee qualify as independent in accordance with the additional independence rules established by the SEC and Nasdaq.
In making these determinations, ourthe Board reviewed and discussed information provided by the directors and by us with regard to each director’s business and personal activities and relationships as they may relate to usour Company, auditors, and our management, including the beneficial ownership of our common stock by each non-employee director and the transactions involving them described in the section titledentitled “Certain Relationships and Related Person Transactions.”
Board Leadership Structure – Lead Independent Director
Our corporate governance guidelines provide that the roles of Chairman of the Board and chief executive officerCEO may be separated or combined. OurThe Board has appointed MattMatthew Ehrlichman to serve as Chairman of the Board. As Chairman of the Board, Mr. Ehrlichman will preside at, and chair, boardBoard meetings and meetings of our stockholders, serve as liaison
for stockholders who request direct communication with the
board,Board, and perform such additional duties as
ourthe Board may otherwise request.
On
Since May
13, 2021,
our Board adopted amendments to ourthe corporate governance guidelines
to provide for a
lead independent director.Lead Independent Director. If the Board does not have an independent Chairman, the independent members of the Board will elect a director to serve as
lead independent director (the “Lead Director”)the Lead Independent Director to facilitate the Board’s fulfillment of its responsibilities and promote efficient and effective Board performance and functioning. The Lead
Independent Director will serve a term of
at least one year and until his or her successor is appointed, subject to earlier termination at
the sole discretion of a majority of
the independent directors or such person’s earlier departure from the position or
the Board.
Notwithstanding the annual election of the Lead Independent Director, our Board recently approved an amendment to our corporate governance guidelines to provide for an expectation that, subject to continued nomination and election, the Lead Independent Director will serve for three or more full one-year terms. The Board believes that increased tenure for the Lead Independent Director role will help facilitate valuable contributions and insight into the Company's operations based on their experience with, and understanding of, the Company's business, history and objectives.
In addition to presiding over meetings or sessions of the Board where the Chairman is not present, including but not limited to,
regularly held executive sessions of the independent directors, and
adviseadvising the Chairman of actions taken and material feedback provided, the Lead
Independent Director has clearly delineated and comprehensive duties, which include:
| ■ | serving as the primary liaison between the Chairman and the independent directors; |
| ■ | previewing information to be provided to the Board; |
| ■ | consulting with the Chairman and CEO regarding meeting agendas for the Board; |
| ■ | assuring that there is sufficient time for discussion of meeting agenda items; |
| ■ | in collaboration with the Nominating and Corporate Governance Committee, be primarily responsible for and lead the Board's annual self-assessment (including of chairpersons); |
| ■ | has authority to call meetings of the independent directors; and |
| ■ | if requested by the Chairman and CEO and/or major stockholders, ensure availability for consultation and direct communication. The Chairman and CEO is the main spokesperson of the Company, however, the Lead Director shall play a support role if requested by the Chairman or the Board. |
■serving as the primary liaison between the Chairman and the independent directors;
On March 17, 2022, Regi Vengalil
■previewing information to be provided to the Board;
■consulting with the Chairman and CEO regarding meeting agendas for the Board;
■assuring that there is sufficient time for discussion of meeting agenda items;
■in collaboration with the Nominating and Corporate Governance Committee, being primarily responsible for and leading the Board's annual self-assessment (including of chairpersons);
■having authority to call meetings of the independent directors; and
■if requested by the Chairman and CEO and/or major stockholders, ensuring availability for consultation and direct communication.
The Chairman and CEO is the main spokesperson of the Company; however, the Lead Independent Director will play a supporting role if requested by the Chairman or the Board. Alan Pickerill currently serves as our Lead Independent Director. He was initially recommended as Lead Independent Director in March 2023 by the Nominating and Corporate Governance Committee and was unanimously elected by a majority of independent directorsthe Board to serve as Lead Independent Director. PriorIn February 2024, upon the recommendation from the Nominating and Corporate Governance Committee, Mr. Pickerill was unanimously elected by the Board to continue to serve as the Lead Independent Director.
Our Board believes that our stockholders and the Company are best served by having Mr.
Vengalil, Javier Saade servedEhrlichman, our Chief Executive Officer, serve as Chairman of the Board and Mr. Pickerill serve as Lead Independent Director. Our Board believes that the current Board leadership structure, coupled with a strong emphasis on Board independence, provides effective independent oversight of management while allowing the Board and management to benefit from Mr. Ehrlichman’s executive leadership and operational experience at the Company, including familiarity with our business as the Company’s
first Lead Director since May 2021.founder, Mr. Pickerill's extensive finance, governance and executive and public company leadership experience, and the experience, oversight, perspectives, and expertise of our other independent directors. Our Board believes that this governance structure provides strong leadership, creates clear accountability and enhances our ability to communicate our message and strategy clearly and consistently to stockholders.
Role of the Board in Risk Oversight The Board and its Committees have extensive involvement in overseeing the Company’s risk management through their activities, some of which are noted below. We believe that the leadership structure of our Board and Committees provides appropriate risk oversight.
The Board has involvement in the oversight of risk management related to us and our business andbusiness. The Board accomplishes this oversight through (among other things) the regular reporting to the Board by the Audit Committee and its other standing Committees, as well as through reporting from time to time by key advisors.external advisors with appropriate expertise. The Audit Committee represents the Board by periodically reviewing our accounting, reporting, earnings releases and related earnings materials and financial policies and practices in an oversight capacity, including the integrity of our financial statements, the surveillanceeffectiveness of administrative and financial controls and our compliance with legal and regulatory requirements. Through its periodic meetings with management, including the finance, accounting, investor
relations, internal audit, legal, human resources, and information technology (including cybersecurity)cybersecurity and data-security) functions, the Audit Committee reviews and discusses allmany significant areas of our business and our functions and summarizes for the Board allkey areas of risk, and the appropriate mitigating factors.factors and whether resourcing is sufficient in its view to meet appropriate maturity levels for a company of our size and stage. In addition, ourthe Board receives
periodic detailed operating performance reviews from management. Finally, the Audit Committee also meets at least quarterly in periodic executive sessionsessions with E&YGrant Thornton and external legal and other advisors.
internal audit.
The Board oversees the Company's risk management primarily through the following: | | | | | |
| FULL BOARD | |
FULL BOARD
| ■ Board reviewReview and approval of management's annual business plan, and budget, and review of management's strategic and liquidity plans.
■ Board review,Review, on at least a quarterly basis, of business developments, strategic plans and implementation, liquidity, and financial results.
■ Board leadership of Chief Executive OfficerLeads CEO succession planning and oversight of management succession planning.
■ Board oversightOversight of capital spending and financings.
■ Board and committeeCommittee executive sessions consisting solely of independent directors. directors |
| |
| LEAD INDEPENDENT DIRECTOR | ■ ReviewsReview and provide feedback on Board meeting agendas and planning.
■ Primarily responsible for and lead the Board's annual self-assessment (including of chairpersons). ■ Regular sessions with CEO, General Counsel, and other independent directors. directors, as well as external advisors |
|
Assists the board in its oversight of the Internal Audit function, including approval of the annual Internal Audit plan and discussion of budget and staffing |
| AUDIT COMMITTEE | ■ Audit Committee oversightOversight of the Company's significant financial risk exposures (including credit, liquidity, and legal,financings, regulatory and, other contingencies), accountingon a shared basis with the Board, ongoing litigation) and management’s risk management policies
■Review of financial statements, earnings releases and earnings materials and SEC reports, including the adequacy of our internal control over financial reporting, disclosure controls and procedures, and any mitigating activities adopted in response to material weaknesses or significant control deficiencies ■Oversight of insurance risk management in terms of risk based capital and internal control processes,capital need, reinsurance and use of our captive reinsurer; underwriting and pricing strategy; probable maximum loss; and use of a reciprocal exchange structure ■Regular oversight and consultations with the independent registered public accounting firm ■Quarterly engagement and oversight over the subsidiary level audit committee of our insurance carrier, including statutory financial statements ■Regularly reviews reports from the Company’s finance, accounting, investor relations, legal, human resources, internal audit, function, and the Company's legal, regulatory and ethical compliance functions. ■ Oversight of key cybersecurity, and information technology, matters.and artificial intelligence risks ■Reviews the adequacy and effectiveness of Porch’s internal control framework and SOX compliance program ■Assists the board in its oversight of the Internal Audit function, including approval of the annual Internal Audit plan and discussion of budget and staffing ■Regular executive sessions, on at least a quarterly basis, with the Company's independent registered public accounting firm and internal audit function |
| | | | | |
| |
| COMPENSATION COMMITTEE | ■Review of benchmarking data and approval of peer group composition ■ Compensation Committee reviewReview and approval regarding executive officer compensation and its alignment with the Company's business and strategic plans
■Review whether any compensation programs encourage excessive risk taking, as well as risk mitigation policies and considerations ■Review and approval of annual share usage under the review2020 Stock Plan, including performance-based awards to senior management ■Review and approval of employment agreements ■Review and approval of compensation policies applicable to executive officers and senior management ■Review the Company’s employee and management compensation and benefit plans generally and policies ■Regular executive sessions with the related incentives, risks and risk mitigants. committee's independent compensation consultant |
| |
| MERGERS AND ACQUISITIONS COMMITTEE | ■ Mergers and Acquisitions Committee oversightOversight of the Company’s acquisition and integration strategy, including review and analysis of potential acquisitions and investments as well as
■Ongoing assessment of closed acquisitions and integration status, and general knowledge on how to create value with specific transactions. transactions |
| |
| NOMINATING AND CORPORATE GOVERNANCE COMMITTEE | ■ Nominating and Corporate Governance Committee select andRecommend to Board director nominees and oversight of Board structure and governance policies, including supporting Lead Independent Director with annual Board self-assessment.
■Succession planning for Board leadership ■Develop, review and approve the Company’s policies and practices with respect to corporate compliance and governance ■Oversight of directors’ and officers’ indemnification and insurance programs. ■ Oversight of ESG reporting, planning and program development.development ■Oversight of the Company's Insider Trading Policy, including application of its policies and procedures |
| |
In 2023, key risk matters overseen by the Board and its Committees included, but were not limited to, the following:
■The fraud committed by Vesttoo in connection with collateral it provided to HOA, the Company's insurance carrier subsidiary, including with respect to obtaining and maintaining appropriate reinsurance coverage, capital management, navigating the exit from the Texas Department of Insurance supervision and restoration of HOA's financial stability rating, and recovery pursuits from parties involved in the fraud, including the Aon settlement.
■Ongoing response to the Vesttoo fraud with increased efforts and oversight to enhance enterprise risk management. This included overseeing the creation of a collateral verification policy and Company representation on the unsecured creditors' committee in the Vesttoo bankruptcy proceeding, providing the Company with weekly engagement and visibility into the Vesttoo bankruptcy.
■Preparation and publication of the Company's first-ever ESG report.
■Filing of the reciprocal exchange application.
■Appointment of Grant Thornton as the Company's independent registered public accounting firm and dismissal of EY.
■Oversight of material weakness remediation in our internal control over financial reporting, which resulted in the remediation of all previously identified material weaknesses as of December 31, 2023.
■Oversight of the transition of the Internal Audit function to internal resources.
■Oversight of debt management and other strategic transactions, including the repurchase of the Company's 2026 notes and sale of Elite Insurance Group.
Cybersecurity Risk Management
Our Board oversees our risk management process, including as it pertains to cybersecurity risks, directly and through its Committees. The Audit Committee is primarily responsible for overseeing our risk management program, which focuses on the most significant risks we face in the short-, intermediate-, and long-term timeframe. Audit Committee meetings include discussions of specific risk areas throughout the year, including, among others, those relating to cybersecurity threats. The Audit Committee reviews our cybersecurity risk profile with management on a periodic basis using key performance and/or risk indicators. These key performance indicators are metrics and measurements designed to assess the effectiveness of our cybersecurity program in the prevention, detection, mitigation, and remediation of cybersecurity incidents.
Management is responsible for the day-to-day assessment and management of cybersecurity risks. Teams of IT, engineering, and information security professionals oversee cybersecurity risk management and mitigation, incident prevention, detection, and remediation. Leadership of these teams are professionals with cybersecurity expertise across multiple industries. Specifically, our Senior Information Security Manager leads our cybersecurity risk management function and is primarily responsible for assessing and managing our cybersecurity risk, with support from our Director of Information Technology and the Senior Director of Engineering. Our Senior Information Security Manager has over twenty years’ experience leading and managing cyber security programs and teams at various companies, and holds a CISSP certification (Certified Information Systems Security Professional).
We maintain a CIRP which establishes an organizational framework and guidelines intended to facilitate an effective response and handling of cybersecurity incidents that could jeopardize the availability, integrity, or confidentiality of our assets. The CIRP outlines roles and responsibilities of a cybersecurity incident response team comprised of cross-functional members of management from information technology, information security, legal, finance, and human resources; the specific criteria for measuring the severity of a cybersecurity incident; and an escalation framework. The CIRP also addresses senior management responsibility with respect to public disclosure determinations related to a cybersecurity incident and provides for Audit Committee and Board briefings. Along with the CIRP, management maintains numerous programs and processes to stay informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity incidents.
The Board evaluates its performance and the performance of its committees and individual directors on an annual basis through an evaluation process administered by our Lead Independent Director, working in partnership with ourthe Nominating and Corporate Governance Committee.Committee, oversees the annual performance evaluation process for the Board and its Committees. The self-evaluations are used to assist in the determination of whether the Board and its Committees are functioning effectively and, as appropriate, the assessment of director performance and contribution levels. In the past, the Board engaged a third-party independent advisor to facilitate the Board self-evaluation process with specific expertise in the area and may periodically engage such advisors in the future. The Board and its Committees are evaluated across a number of topics and, beginning in 2024, will use targeted questionnaires to facilitate the evaluation process. Areas of focus include performance, structure, conduct of meetings, quality of information and its timely dissemination, level and robustness of discussion, level of expertise on the Board and Committees, engagement with management and other key employees, and prioritization of topics for discussion.
The Board reviews and discusses eachthe evaluation to determine what, ifresults and any actions shouldto be taken to improveas a result of the discussion, and each committee reviews and discusses its own evaluation results. The Board also reviews the Nominating and Corporate Governance Committee’s periodic recommendations concerning the performance and effectiveness of the Board or any committee thereof or of the directors.and its Committees.
During the year ended December 31,
2021, our2023, the Board held
nineeight meetings.
During 2021, each person currentlyNo director serving
as a directorduring the 2023 fiscal year and nominated at the Annual Meeting attended
at leastless than 75% of the aggregate of the total number of meetings of the Board and each committee of which he or she was a member. The
Company Corporate Governance Guidelines statesCompany’s corporate governance guidelines state that all
Directorsdirectors are expected to make every effort to attend all meetings of the Board and all meetings of the
committeesCommittees on which they serve. Each director is also encouraged and generally expected to attend the Company’s annual meeting of stockholders.
All directors attended the Company’s 2023 annual meeting of stockholders.
The Board has established an Audit Committee, a Compensation Committee, a Mergers and Acquisitions Committee, and a Nominating and Corporate Governance Committee. The composition and general responsibilities of each of the committeesCommittees of ourthe Board are described below. See "Corporate Governance, Structure and Responsibility—Role of the Board in Risk Oversight" for further detail on Committee responsibilities. The Board may delegate other
responsibilities to each Committee from time to time. Copies of the charters for each committee are available on the investor relations page of our website athttps://ir.porchgroup.com/. The information in or accessible through our website is not incorporated into, and is not considered part of, this proxy statement. Members serve on these committeesCommittees until their resignation or until otherwise determined by ourthe Board. OurThe Board may establish other committees as it deems necessary or appropriate from time to time. The Board created one such special purpose committee in 2022, the Special Transaction Committee, which is further described following the standing Committees.
2023 Standing Committees of the Board. Our current Board standing committeesCommittees and membership isare as follows:
| | | | | | | | | | | | | | | | | | | | |
| AUDIT | | COMPENSATION | | MERGERS & ACQUISITIONS | | NOMINATING AND CORPORATE | | | | |
AUDIT
|
| COMPENSATION
|
| MERGERS &
ACQUISITION
|
| NOMINATING and
CORPORATE
GOVERNANCE
|
|
| Rachel Lam | |
■Sean Kell (Chair) ■Maurice Tulloch ■Camilla Velasquez | | ■Amanda Reierson | |
|
(1) In June 2023, Mr. Kell was appointed to the Audit Committee in place of Mr. Pickerill. The Board determined to appoint Mr. Kell to the Audit Committee given the significant time and engagement required of Mr. Pickerill to serve as our Lead Independent Director.
| | | | | | | | |
| Audit Committee | Meetings in 2021: 8
MEETINGS IN 2023: 12 |
Alan PickerillMaurice Tulloch (Chair)
| Sean Kell | Rachel Lam | Maurice Tulloch
|
Our
The Board determined that the members of
ourthe Audit Committee are independent within the meaning of Rule 10A-3 under the Exchange
Act. OurAct, and satisfy the additional Nasdaq and SEC standards to serve on the Audit Committee. The Board also determined that
Messrs. Pickerill andMr. Tulloch
areis an “Audit Committee financial
experts”expert” as defined by the applicable SEC rules.
Our
The Audit Committee operates under a written charter that satisfies the applicable Nasdaq listing standards. The purpose of the Audit Committee, as set forth in its charter,
among other things, is to
prepareassist the
Audit Committee report required by the SEC to be included in our proxy statement and to assist our Board in overseeing and monitoring:
| ■ | the quality and integrity of our financial statements, |
| ■ | our compliance with legal and regulatory requirements, |
| ■ | the qualifications and independence and the performance of our internal audit function, and |
| ■ | the performance of our independent registered public accounting firm. |
■retention and oversight of the Company's independent registered public accounting firm and assessment of its qualifications, independence, and performance;
■oversight of the Company's Internal Audit function;
■adequacy of the Company's internal controls and related disclosures, and review of other matters that might impact the Company's financial statements;
■major risk exposures of the Company and its related policies and programs, including its enterprise risk management structures;
■procedures related to complaints regarding accounting or auditing matters;
■review of the integrity of the Company's financial statements and related disclosures; and
■capital adequacy and risk management of the insurance business.
The Audit Committee is also responsible for the review of the Company’s information technology, cybersecurity, and cybersecurityartificial intelligence controls with members of the senior management team, as well as for evaluating the adequacy
of such programs, compliance and controls with members of the senior management team. In particular, the Audit Committee meets with the senior management team at least bi-annually for appropriate review, evaluation and discussion of such Company’sCompany programs, and receives on a quarterly basis, read-outs ofupdates on key developments from senior management.
Effective as of the Annual Meeting and upon election to the Board, Mr. Vengalil will replace Mr. Kell on the Audit Committee. The Nominating and Corporate Governance Committee recommended, and the full Board approved, this change given the cessation of the Mergers and Acquisitions Committee as described below, on which Mr. Vengalil chaired, and to provide Mr. Kell with additional time to devote to his duties as Chairman of the Compensation Committee. Mr. Vengalil has significant experience as a Chief Financial Officer, including previously with an insurance company publicly traded on Nasdaq. The Board determined that Mr. Vengalil is independent within the meaning of Rule 10A-3 under the Exchange Act and satisfies the Nasdaq and SEC standards to serve on the Audit Committee.
| | | | | | | | |
| Compensation Committee | MEETINGS IN 2023: 8 |
Compensation Committee
Sean Kell (Chair) | Meetings in 2021: 4
|
Maurice Tulloch (Chair) | Sean Kell
| Asha Sharma
Camilla Velasquez |
Our
The Board has determined that each member of
ourthe Compensation Committee is independent under the Nasdaq listing standards and a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.
Our
The Compensation Committee operates under a written charter that satisfies the applicable Nasdaq listing standards. The purpose of the Compensation Committee, as set forth in its charter,
among other things, is to assist
ourthe Board in discharging its responsibilities relating to:
| ■ | review corporate goals and objectives relevant to chief executive officer compensation, evaluate at least annually the chief executive officer’s performance in light of those goals and objectives and determine and approve the chief executive officer’s compensation, |
| ■ | setting our compensation program and compensation of our executive officers and directors, |
| ■ | monitoring our incentive and equity-based compensation plans, and |
| ■ | preparing the Compensation Committee report required to be included in our proxy statement under the rules and regulations of the SEC. |
■reviewing our corporate goals and objectives relevant to CEO compensation, evaluating at least annually the CEO’s performance in light of those goals and objectives, and determining and approving the CEO’s compensation;
■setting our compensation program and compensation of our executive officers, senior management and directors;
■monitoring our incentive and equity-based compensation plans;
■review compensation discussion and analysis, compensation disclosures, and compensation proposals to be included in our proxy statement;
■reviewing the Company’s employee and management compensation and benefit plans and policies; and
■preparing the Compensation Committee report required to be included in our proxy statement under the rules and regulations of the SEC.
Our Compensation Committee may form and delegate authority to subcommittees, provided that the subcommittees are composed entirely of directors who satisfy the applicable independence requirements.
Our Compensation Committee has the authority to retain counsel and other advisors to fulfill its responsibilities and duties. In connection with the engagement of such advisors generally, our Compensation Committee reviews the independence of such advisors, based on factors specified by Nasdaq and other factors it deems appropriate, and specifically with respect to any compensation consultant, any actual or potential conflicts of interest.
Our Compensation Committee determined to re-engage WTW, its independent compensation consultant since May 2021. Our Compensation Committee determined there were no conflicts of interest raised by the work of WTW for 2023 and that WTW is independent after considering the factors outlined in the Nasdaq rules. Our Compensation Committee’s processes and procedures for the consideration and determination of NEO compensation, including the role of executive officers and the Compensation Committee’s independent consultant in determining or recommending the amount or form of compensation of our NEOs, are discussed in the “Compensation Discussion and Analysis—2023 NEO Compensation Program” section below.
See “Compensation Discussion and Analysis—How Compensation is Determined” and “Compensation Discussion and Analysis—Competitive Positioning” for additional information on the activities of our Compensation Committee, WTW and management regarding the consideration and determination of the 2023 NEO compensation program.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee and no one who served on the Compensation Committee during 2023, is a current or former officer, or during 2023 was an employee, of Porch or any of its subsidiaries. None of Porch's executive officers serves or, during 2023, served as a director or member of the Compensation Committee (or other committee serving an equivalent function) of any other entity whose executive officers served as one of our directors or a member of our Compensation Committee.
| | | | | | | | |
| Mergers and Acquisitions Committee | Meetings in 2021: 5
MEETINGS IN 2023: 3 |
Regi Vengalil (Chair) | Sean Kell
| Rachel Lam | Amanda Reierson |
The purpose of the Mergers and Acquisitions Committee, as set forth in its written charter,
among other things, is to assist
ourthe Board in discharging its responsibilities relating
to | ■ | reviewing and evaluating the Company’s acquisition, investment and divestiture strategies, |
| ■ | evaluating acquisition, investment and divestiture opportunities, when and as appropriate, |
| ■ | review the performance of completed transactions (in the aggregate and individual transactions) with management, as the Committee deems necessary and appropriate, |
| ■ | assess integration of proposed and completed transactions and provide strategy for integration planning, |
| ■ | evaluate its performance on a periodic basis and develop criteria for such evaluation, and |
| ■ | periodically recommend any proposed changes to the Board for approval. |
to:■reviewing and evaluating the Company’s acquisition, investment and divestiture strategies;
■evaluating acquisition, investment and divestiture opportunities, when and as appropriate;
■reviewing the performance of completed transactions (in the aggregate and individually) with management, as the Committee deems necessary and appropriate; and
■assessing integration of proposed and completed transactions and providing strategy for integration planning.
Effective as of the Annual Meeting, the Mergers and Acquisitions Committee will cease to continue its standing meetings, have no oversight responsibilities, and its members will not receive compensation. The Nominating and Corporate Governance Committee recommended, and the full Board approved, this change given the limited acquisition and integration strategy oversight required over the upcoming year. The Board will oversee the duties, if any, previously attended to by the committee. The Board will evaluate whether to re-engage the committee in the future.
| | | | | | | | |
| Nominating and Corporate Governance Committee | Meetings in 2021:
MEETINGS IN 2023: 41 |
Rachel Lam (Chair) | Alan Pickerill | Regi Vengalil |
Our
(1) One meeting held in 2023 was an informal meeting of the Nominating and Corporate Governance Committee with the full board present.
The Board has determined that each member of ourthe Nominating and Corporate Governance Committee is independent under the applicable Nasdaq listing standards.
OurThe Nominating and Corporate Governance Committee operates under a written charter that satisfies the applicable Nasdaq listing standards. The purpose of ourthe Nominating and Corporate Governance Committee, as set forth in its charter, among other things, is to assist ourthe Board in discharging its responsibilities relating to:
| ■ | identifying individuals qualified to become new members of the board of directors, consistent with criteria approved by the Board, |
| ■ | reviewing the qualifications of incumbent directors to determine whether to recommend them for reelection and selecting, or recommending that the Board select, the director nominees for the next Annual Meeting of Stockholders, |
| ■ | identifying members of the board of directors qualified to fill vacancies■identifying individuals qualified to become new members of the Board, consistent with criteria approved by the Board; ■reviewing qualifications of incumbent directors to determine whether to recommend reelection, and selecting, or recommending that the Board select, the director nominees for the next annual meeting of stockholders; ■identifying members of the Board qualified to serve on any Board committee and recommending that the Board appoint the identified member or members to the applicable committee, |
| ■ | reviewing director independence and the financial literacy and expertise of Audit Committee members and nominees who may be asked to serve on the Audit Committee, and make recommendations to the Board relating to such matters, |
| ■ | reviewing and recommending to the board of directors corporate governance principles applicable to us, |
| ■ | reviewing and making recommendations in connection with directors’ and officers’ indemnification and insurance matters, including directors’ and officers’ liability insurance coverage, |
| ■ | overseeing the evaluation of the board of directors and management, |
| ■ | overseeing the Company’s environmental, sustainability and governance (“ESG”) efforts and progress, including the review of any ESG-related disclosures, and |
| ■ | handling such other matters that are specifically delegated to the committee by the Board from time to time. |
In the process of identifying, screening and recommending director candidatesthat the Board appoint the identified member or members to the fullapplicable Committee;
■reviewing director independence and the financial literacy and expertise of Audit Committee members and director nominees who may be asked to serve on the Audit Committee, and making recommendations to the Board ourrelating to such matters;
■reviewing and recommending to the Board corporate governance principles applicable to the Company;
■reviewing and making recommendations in connection with directors’ and officers’ indemnification and insurance matters, including directors’ and officers’ liability insurance coverage;
■overseeing the evaluation of the Board and management; and
■overseeing the Company’s ESG efforts and progress, including the review of any ESG-related disclosures.
The Board does not have specific requirements for eligibility to serve as a director of the Company beyond compliance with SEC and Nasdaq regulations. However, in evaluating candidates, regardless of how recommended, the Nominating and Corporate Governance Committee takes into consideration the needs of the Board and the Company and the qualifications of the candidates, such as their general understanding of various business disciplines and the Company’s business environment, theireach individual’s educational and professional background, analytical ability, independence, diversity of experience and viewpoints, and their willingness to devote adequate time to Board duties. The Board evaluates each individual in the context of the Board as a whole with the objective of retaining a group that is best equipped to help ensure that the long-term interests of the stockholders and the Company are served. When searching for new directors, the Nominating and Corporate Governance Committee may pay fees to third-party search firms to assist in identifying and evaluating potential nominees and will also rely on the recommendations from directors and management. With the declassification of our Board, four nominees previously appointed to our Board to fill vacancies are, for the first time, up for election by our stockholders at the Annual Meeting. The source of their recommendations to the Nominating and Corporate Governance Committee prior to their initial appointments by the Board were as follows: Ms. Lam (appointed August 2021) was recommended by a non-management director; Mr. Kell (appointed March 2022) was recommended by our Chief Executive Officer; and Mses. Reierson and Velasquez (both appointed October 2022) were recommended by a third-party search firm. The Nominating and Corporate Governance Committee will actively seek out diverse candidates, including women and individuals from minority groups, and directs any search firm it engages to include qualified women and minority candidates with a diversity of race/ethnicity and gender in the initial pool from whichpresented to the Nominating and Corporate Governance Committee for consideration. After its evaluation of potential director nominees, the Nominating and Corporate Governance Committee submits and recommends its chosen director nominees to the full Board for the Board are chosen. approval.
The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders on the same basis that it evaluates other
director nominees for director.
Each nominee for election as director at the Annual Meeting is recommended by the Nominating and Corporate Governance Committee, is presently a director and stands for election by the stockholders.
Effective as of the Annual Meeting and upon election to the Board, Ms. Reierson will replace Mr. Vengalil on the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee recommended, and the full Board approved, this change given Mr. Vengalil's appointment to the Audit Committee and to provide him with additional time to devote to his duties on that committee. Ms. Reierson brings deep experience as a senior executive in regulated industries and with publicly traded companies. The Board has determined that Ms. Reierson is independent under the applicable Nasdaq listing standards.
| | | | | | | | | | | |
| Special Transaction Committee | | MEETINGS IN 2023: 1 |
| Maurice Tulloch (Chair) | Alan Pickerill | Amanda Reierson | Regi Vengalil |
The Board previously determined the need for a special committee to review and consider the formation of a reciprocal exchange for our insurance business operations and to oversee the preparation and filing of an application for a reciprocal exchange. In October 2022, the Board approved the formation of the Special Transaction Committee and its charter that satisfies the applicable Nasdaq listing standards.
The Special Transactions Committee assisted the Board in discharging its responsibilities relating to reviewing, evaluating, recommending and approving a potential restructuring of the insurance carrier (and related insurance businesses) into a reciprocal exchange or similar transaction or arrangement. In addition to formal meetings, the Special Transaction Committee conducted a significant number of informal meetings to review and evaluate a reciprocal exchange structure, related capital requirements and opportunities, regulatory and rating agency dynamics, and identify compelling customer (policyholder) value propositions.
The Special Transactions Committee reviewed and approved the filing of an application for the formation of a reciprocal exchange in 2023, and the Company submitted the application. This application had not yet been approved and the reciprocal exchange has not yet been formed. However, after approving the reciprocal exchange application, the committee had fulfilled its intended purpose. As such, the committee's operations ceased and there were no further meetings. The Board may create a special committee in the future should the need arise to further evaluate the reciprocal exchange or oversee other specific strategic matters.
The formation of the reciprocal exchange is an initial step in the Company’s long-term strategy to reduce its exposure to earnings volatility from its insurance business by mitigating direct exposure to insurance claims and weather events. The reciprocal exchange may also help to reduce the impact of a challenging reinsurance market that has both less capacity and higher prices. The launch of the reciprocal exchange remains subject to review and approval by the Texas Department of Insurance and regulatory review in the context of broader capital and operating environment and the decision to proceed remains within the Company’s discretion.
Corporate Governance GuidelinesOur
The Board has adopted corporate governance guidelines, which provide the framework for our corporate governance along with our Certificate of Incorporation, Bylaws, committee charters and other key governance practices and policies. Our corporate governance guidelines cover a wide range of subjects, including the conduct of boardBoard meetings, independence and selection of directors, existence and scope of Lead Independent Director role, boardBoard membership criteria, conflicts of interest, committee composition, and expectations regarding tenure obligations for Board, committee, committee chair, and Lead Independent Director service.
No Director Over-boarding
All of our directors are in compliance with the over-boarding restrictions in our corporate governance guidelines, which provides that no director should serve on more than three other public company Boards; no member of our Audit Committee should serve on more than two other public company audit committees; and no director who is the Chief Executive Officer of another public company should serve on more than two other public company boards, aside from the board
committee composition.of his or her own company.
Plurality Plus Voting for Directors; Director Resignation Policy Pursuant to our Certificate of Incorporation and our Amended and Restated Bylaws, directors are elected by a plurality of the votes cast by the stockholders present in person or represented by proxy and entitled to vote
thereon at an Annual Meetingannual meeting of Stockholders.stockholders. In April 2022, ourthe Board adopted an amendment to our corporate governance guidelines to include a “plurality plus” voting standard for the election of directors, which provides that, in an uncontested election of directors, any director nominee who receives more “WITHHOLD” votes than “FOR” votes at a stockholder meeting at
which he or she is elected
shallwill tender his or her resignation to the Board promptly following certification of the stockholder vote. The Nominating and Corporate Governance Committee
shallwill consider the tendered resignation and make a recommendation to the Board as to whether to accept or reject the resignation or whether other action should be taken. The Board
shallwill act on the recommendation and publicly disclose its decision (by press release, SEC filing or any other public means of disclosure deemed appropriate) regarding the tendered resignation within 90 days following certification of the election results. The director who tenders his or her resignation
shallwill not participate in the recommendation of the Nominating and Corporate Governance Committee or the decision of the Board with respect to his or her resignation.
In addition, pursuant to our
Corporate Governancecorporate governance guidelines, each director is expected to promptly disclose to the Board any existing or proposed relationships or transactions that involve or could give rise to a conflict of interest. If a significant conflict of interest involving a director cannot be resolved (e.g., by recusing herself or himself from deliberation of a particular matter), the director should promptly tender a resignation to the Board. The Nominating and Corporate Governance Committee
shallwill then review the appropriateness of that director’s continued service on the Board in light of the conflict and make a recommendation to the Board as to whether the resignation should be accepted.
Code of Business Conduct and Ethics We have adopted a code of business conduct and ethics that applies to all of our directors, employees, officers, consultants and independent contractors. The code of business conduct and ethicsCode codifies the business and ethical principles that govern all aspects of our business. A copy of the code of business conduct and ethicsCode has been filed with the SEC and will be provided without charge upon written request to our General Counsel and Secretary, in writing at 411 First1st Avenue South, Suite 501, Seattle, WA 98104. A copy of the code of business conduct and ethicsCode can also be found at https://ir.porchgroup.com/corporate-governance/governance-documents. The Company intends to disclose any amendments to or waivers of certain provisions of its code of business conduct and ethicsCode on our website.
Stock Ownership by DirectorsOur
The Board believes that an ownership stake in the Company strengthens the alignment of interests between directors and
stockholders.stockholders, and we strongly encourage our directors to hold an equity interest in our Company. Accordingly, each non-employee director is required to own common stock (or equivalents) having a value of at least three times the annual cash retainer fee, within five years of becoming a director. In the event that the annual retainer fee is increased, non-employee directors will have three years to meet the new ownership guidelines.
OurThe Board will evaluate whether exceptions should be made for any director on whom these guidelines would impose a financial hardship.
See "Compensation Discussion and Analysis—2023 NEO Compensation Determinations—Other Compensation Practices and Policies" for stock ownership requirements for NEOs.
Insider Trading and Rule 10b5-1 Trading Plan Policies
We maintain an Insider Trading Policy that covers our directors, officers and employees, which sets forth restrictions and procedures related to trading in Porch Group’s securities, including prohibitions on trading on the basis of material nonpublic information. Our Insider Trading Policy also describes instances where certain persons, including our directors and executive officers, must obtain prior approval before engaging in a transaction in the Company’s securities. In addition, our Insider Trading Policy sets forth restrictions for regular and special trading blackout periods applicable to certain covered persons, as well as limited exceptions to such restrictions.
The SEC recently promulgated a new rule related to the adoption and modification of Rule 10b5-1 trading plans by directors and officers of registrants, which became effective on February 27, 2023. On March 7, 2023, the Board amended the Company’s Insider Trading Policy to include the Rule 10b5-1 trading plan guidelines would apply to our directors and executive officers, which complies with the SEC rule and requires, among other things, that any trades under a new or modified Rule 10b5-1 trading plan not be commenced before expiration of a waiting period and that directors and executive officers not use multiple overlapping Rule 10b5-1 trading plans except in limited circumstances.
Prohibition on Hedging and Pledging of Company SecuritiesThe Company has a policy that
Our Insider Trading Policy also prohibits officers, directors and employees, without exception, from engaging in hedging transactions, such as the purchase or sale of puts or calls, or the use of any other derivative instruments. Officers, directors and employees of the Company are also fully prohibited, without exception, from holding Company securities in a margin account or pledging Company securities as collateral for a loan. However,Our Insider Trading Policy previously provided a limited pledging exception for non-employee directors may pledge Company securities as collateral for a loan or other financing arrangement only with prior written approvaldirectors; however, upon the recommendation of the General Counsel, after conferring with theour Nominating and Corporate Governance Committee. IfCommittee, our Board amended our Insider Trading Policy to remove the limited pledging transactionexception for non-employee directors.
Stockholder Engagement
We believe proactive stockholder engagement is approved, any pledged Company stock shall not be counted towardskey to our corporate governance process and that maintaining open and transparent dialogue is essential to strong relationships and providing stockholders with confidence in the non-employee director’s stock ownershiplong-term success of our business. Our commitment to stockholder engagement includes:
■Annual meeting: stockholders have the opportunity to vote, ask questions and retention requirements.engage with our Board and management team
■Website: providing access to comprehensive documents, which provide detailed information on our business model, financial performance, strategy and outlook
■Investor relations: dedicated to communicating with stockholders, providing timely and accurate information about our performance through earnings and earnings calls and leading stockholder outreach which includes conversations on a broad range of business topics
We engage with stockholders through investor roadshows, face-to-face and virtual meetings, video or telephone calls, earnings presentations and webcasts, annual meetings, our earnings, SEC and press release announcements. In 2023, we held more than 200 investor meetings. The information gathered in these meetings is included in regular updates and presentations to the Board.
We appreciate the ongoing support and partnership of our stockholders, and we remain focused on achieving long-term value for all stakeholders. See "Compensation Discussion and Analysis—Stockholder Engagement and Annual Advisory Vote on NEO Compensation" for further details on stockholder engagement.
Stockholder Communications Any stockholder or other interested party who wishes to communicate with ourthe Board or any individual director may send written communications to ourthe Board or such director c/o General Counsel and Secretary, Porch Group, Inc., 411 First1st Avenue South, Suite 501, Seattle, WA 98104. The communication must include the stockholder’s full legal
name (and, with respect to entity stockholders, the full legal names of such entity’s owners), address, email, phone number, and an indication that the person is our stockholder. The General Counsel and Secretary will review any communications received from stockholders and will forward such communications to the appropriate director or directors, or committeeCommittee, based on the subject.
Environment, Social and Governance
We recognize that today companies need to be increasingly clear about their ESG policies, goals, and performance and are committed to ESG to better meet the needs of all of our stakeholders in the long term. We understand the importance of looking at non-financial factors that could affect long-term financial performance and sustainability of our business, and how our activities might influence stakeholder decisions about our Company and erode or create business value over time.
Oversight of ESG
■We believe strong governance and oversight of the ESG issues that matter most to our business and to our stakeholders contribute both to the long-term success of our business and to the positive impacts the Company can make in society.
■Oversight starts at the top through engagement and ownership at the Board and Chief Executive Officer levels. Our Chief Executive Officer works with the Board to ensure that ESG is integrated into our strategies and goals.
■Our Chief Executive Officer has aligned our key business leaders and management with our ESG initiatives, all of whom will be critical to push forward our ESG initiatives and will drive our progress to continue to enhance our ESG management accountability, transparency, and reporting.
■Our Nominating and Corporate Governance Committee provides general oversight of the Company’s ESG activities, programs, and public disclosure.
■Our Audit Committee provides oversight of our control framework, including enterprise risk management and cybersecurity risk, response, and reporting.
■Our Compensation Committee provides oversight of a range of human management activities, including employee engagement and diversity, equity, and inclusion.
Our ESG Journey and Highest Priority Areas
In 2022, we initiated a formal process to develop a tailored approach to ESG matters that aligns with our business strategy and balances the opportunities, risks, and values of our Company and our stakeholders. We engaged an
independent third-party consultant that conducted detailed peer benchmarking, provided an overview of relevant disclosure frameworks, and led our initial materiality assessment with key internal stakeholders. Our materiality assessment focused on tailored ESG topics and included interviews of key Board and senior leaders and a survey open to all employees. Responses were weighted and ranked based on a combination of their importance to our stakeholders and our business success.
In 2023, we analyzed the results of the materiality assessment to establish our highest priority ESG focus areas and prepared our inaugural ESG report describing our progress to date, which we published in November 2023. Informed by our materiality assessment and current state of our business, we identified our highest priority ESG areas as follows:
In 2024, management and key business leaders will refine our approach to ESG with the oversight of our Board and its Committees. We will continue to build our ESG strategy leading up to future ESG disclosures. In our next report, we will publish our progress to date. That report will highlight our further progress, describe the additional actions we have taken to develop and implement our ESG initiatives, and provide actionable goals for each of those high priority areas to bring about positive change in our business. We are currently implementing new Diversity, Equity, and Inclusion initiatives and methods to better serve our clients who speak different languages. We are excited to share more information with you in our next report.
For more information about our ESG initiatives, including our inaugural report and future developments on our initiatives, please visit: https://ir.porchgroup.com/investors/Sustainability/default.aspx.
The information in or accessible through the website referred to above, including our inaugural ESG report, is not incorporated into, and are not considered part of, this proxy statement. Further, our references to the URLs for these websites are intended to be inactive textual references only.
Policy for the Recovery of Erroneously Awarded Compensation (Dodd-Frank Compliant Policy)
As required by the listing standards adopted by Nasdaq as a result of SEC rule making, our Board, upon the recommendation of our Compensation Committee, recently adopted a new Policy for the Recovery of Erroneously Awarded Compensation. The policy provides that the Company must promptly recover specified incentive-based compensation that is received by our Section 16 officers on or after October 2, 2023, regardless of fault or
misconduct, upon specified accounting restatements of the Company’s financial statement that resulted in such persons receiving an amount that exceeded the amount that would have been received if based on the
subject.Compensationrestated financial statements. There are limited exceptions to the recovery requirement as set forth in the listing standards. Incentive-based compensation is defined as any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a financial reporting measure. The subject compensation will be determined without regard to any net settlement of, or taxes paid or payable or withheld on, such compensation, but there will not be any duplicative recovery by the Company. As specified in the listing standards, the Company cannot indemnify, or pay or reimburse for insurance for, a Section 16 officer for recoveries under this policy.
The recovery period under the policy is three full years preceding the date our Board or Audit Committee Interlocksconcludes, or reasonably should have concluded, that an accounting restatement is required. If applicable, the Company will provide the current or former Section 16 officer with a written demand for repayment or return and Insider Participationthe method thereof. If such repayment or return is not made when due, the policy provides that the Company will take all reasonable and appropriate actions to recover such erroneously awarded compensation from such person.
DIRECTOR COMPENSATION
The Company’s director compensation program consists of cash and equity compensation. With respect to
December), Maurice Tulloch (September2023, each non-employee director earned cash fees and received RSU awards in the Company’s non-employee director compensation program as set forth below. Employee directors are not compensated for their additional service provided to
December), Thomas D. Hennessy and Margaret Whelan (January to August). Mr. Hennessy and Ms. Whelan each resigned from the Board and thus are not included. The Company also reimburses its directors for their reasonable out-of-pocket expenses incurred in attending Board and Committee meetings. The director compensation program was adopted in May 2021. ■Annual Board Cash Retainer: $30,000
■Annual RSU Award: $80,000
■Annual Committee Member Additional Retainers (paid in RSUs):
▪Audit Committee: $10,000
▪Compensation Committee: $5,000
▪Nominating and Corporate Governance Committee: $3,250
▪M&A Committee: $5,000
■Annual Committee Chair Additional Retainers (paid in RSUs; inclusive of committee retainer above):
▪Audit Committee: $20,000
▪Compensation Committee: $10,000
▪Nominating and Corporate Governance Committee: $7,500
▪M&A Committee: $10,000
■Annual Lead Independent Director Additional Retainer:
▪Cash: $31,875
▪RSU Award: $31,875
The number of RSUs to be granted on August 12, 2021, following the successful completiongrant date, which occurs annually on the date of the business combination. NoCompany’s annual meeting of stockholders, will be the nearest whole number of shares as determined by dividing the dollar value of the RSU Award or non-cash Retainer by the closing market price of the Company’s common stock as listed on the Nasdaq on the grant date, and if the grant date does not fall on a Nasdaq trading day, then on the last trading day prior to the grant date.
Under the non-employee director compensation program, the RSU awards will vest on the one-year anniversary of the grant date, with two-thirds of the RSUs subject to resale restrictions expiring in equal increments on the first and second anniversaries of the vesting date. The RSUs will vest, and the resale restrictions will lapse in the event the director ceases to serve on the Board due to disability, removal without cause or other termination of service. In addition, in the event of a change in control in which the awards are not effectively assumed, the RSUs will vest in full, and the resale restrictions will lapse.
Directors elected by the Board between annual meetings are paid a pro rata amount of any cash fee and receive a pro-rata grant of RSUs, based on the period of their service on the Board, and any Committee for which they may be appointed.
2023 Director Compensation Table
The following table sets forth information for the year ended December 31, 2023, regarding the compensation awarded to or earned by certain of the Company’s non-employee directors. Mr. Ehrlichman, the Company’s Chief Executive Officer, does not receive any additional compensation for his service as a member of the Company’s Board. Please see "NEO Compensation Tables—2023 Summary Compensation Table" for the compensation paid or awarded to Mr. Ehrlichman for 2023.
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| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards
($)(2) | Total
($) |
Sean Kell(3) | 30,000 | | 86,616 | | 116,616 | |
Rachel Lam(4) | 30,000 | | 102,500 | | 132,500 | |
Alan Pickerill(5) | 53,906 | | 109,188 | | 163,094 | |
Amanda Reierson(6) | 30,000 | | 57,521 | | 87,521 | |
Maurice Tulloch(7) | 30,000 | | 100,000 | | 130,000 | |
Camilla Velasquez(8) | 30,000 | | 57,521 | | 87,521 | |
Regi Vengalil(9) | 37,969 | | 119,099 | | 157,068 | |
(1) This column reports the amount of cash compensation earned in 2023 for annual Board, and if applicable, Lead Independent Director Service.
(2) Amounts shown reflect the aggregate grant date fair value of RSU awards granted during 2023, computed in accordance with FASB ASC Topic 718. The grant date fair value of RSUs is valued using the closing price of Porch common stock on the June 8, 2023 grant date which was $1.33. These grant date fair values may not correspond to the actual value that will be realized by the directors.
(3) On June 8, 2023, Mr. Kell was granted 65,125 RSUs for Board and Committee service. Mr. Kell had 65,125 RSUs outstanding as of December 31, 2023.
(4) On June 8, 2023, Ms. Lam was duringgranted 77,068 RSUs for Board and Committee service. Ms. Lam had 77,068 RSUs outstanding as of December 31, 2023.
(5) On June 8, 2023, Mr. Pickerill was granted 82,097 RSUs for Board and Committee service. Mr. Pickerill had 35,231 vested outstanding stock options, and 82,097 outstanding RSUs as of December 31, 2023.
(6) On June 8, 2023, Ms. Reierson was granted 43,249 RSUs for Board and Committee service. Ms. Reierson had 43,249 RSUs outstanding as of December 31, 2023.
(7) On June 8, 2023, Mr. Tulloch was granted 75,188 RSUs for Board and Committee service. Mr. Tulloch had 75,188 RSUs outstanding as of December 31, 2023.
(8) On June 8, 2023, Ms. Velasquez was granted 43,249 RSUs for Board and Committee service. Ms. Velasquez had 43,249 RSUs outstanding as of December 31, 2023.
(9) On June 8, 2023, Mr. Vengalil was granted 89,548 RSUs for Board and Committee service. Mr. Vengalil had 89,548 RSUs outstanding as of December 31, 2023.
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2024
General
The Board is asking our stockholders to ratify the lastappointment by the Audit Committee of Grant Thornton, as the independent registered public accounting firm to conduct the audit of our financial statements for the fiscal year an officerending December 31, 2024. Stockholder ratification of such selection is not required by our Bylaws or employeeany other applicable legal requirement. However, the Board is submitting the selection of Grant Thornton to our stockholders for ratification as a matter of good corporate governance.
The Audit Committee appointed Grant Thornton as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024. The Audit Committee believes that the engagement of Grant Thornton as the Company’s independent registered public accounting firm for 2024 is in the best interest of the Company and its stockholders, and the Board recommends that stockholders ratify the Audit Committee’s appointment of Grant Thornton as the Company’s independent registered public accounting firm for 2024.
In the event our stockholders fail to ratify the selection, the Audit Committee may reconsider whether or not to continue to retain Grant Thornton for the fiscal year ending December 31, 2024 and in future years. Even if the selection is ratified, the Audit Committee in its subsidiaries; however, Ms. Sharma previously serveddiscretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change should be made.
Vote Required
The majority of votes cast by the stockholders present in person at the Annual Meeting or represented by proxy at the Annual Meeting and entitled to vote is required for the approval of Proposal 2. Abstentions are not treated as Chief Operating Officervotes cast and, Chief Marketing Officertherefore, will have no effect on this proposal. Brokers will have discretionary authority to vote on this proposal. Accordingly, there will not be any broker non-votes on Proposal 2. Holders of Legacy Porch. proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is given, then "FOR" the ratification of the appointment of Grant Thornton as our independent registered public accounting firm for the fiscal year ending December 31, 2024.
Recommendation of The Board and Audit Committee
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| | THE BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2024. |
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AUDIT FEES AND AUDIT COMMITTEE REPORT
In addition,this section of the proxy statement, we discuss the fees paid to our current and former independent auditors and provide the report of the Audit Committee for the year ended December 31, 2023. Each year, the Audit Committee will evaluate the qualifications, performance, tenure, and independence of the Company’s independent auditor and determine, after also considering the impact of a change in auditor, whether to re-engage the current independent auditor. On October 2, 2023, the Company appointed Grant Thornton to serve as its independent auditor and dismissed EY. The Audit Committee conducted a competitive process to select Grant Thornton as the Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2023. The Audit Committee invited several independent registered public accounting firms to participate in this process and evaluated the proposals of the participating firms, ultimately selecting Grant Thornton due to their expertise, industry experience, right-sized approach for our Company, and clear audit approach and timeline.
See "Appendix C" for more information about our change in independent registered public accounting firms.
Accountant Fees and Services
The following table sets forth aggregate fees for professional services rendered by Grant Thornton and EY for the years ended December 31, 2023 and 2022.
| | | | | | | | | | | | | | |
| Grant Thornton LLP | Ernst & Young LLP |
| Years Ended
December 31, | Years Ended
December 31, |
| 2023
($) | 2022
($) | 2023
($) | 2022
($) |
Audit fees(1) | 3,112,750 | | — | | 1,547,500 | | 5,081,000 | |
| Audit-related fees | — | | — | | — | | — | |
Tax fees(2) | — | | — | | 454,515 | | 403,000 | |
| All other fees | — | | — | | — | | — | |
| Total fees | 3,112,750 | | — | | 2,002,015 | | 5,484,000 | |
(1)Audit fees above are professional services for the annual audits of our financial statements and internal control over financial reporting, reviews of interim financial statements, professional consultations with respect to accounting issues directly related to the financial statement audit, and services rendered in connection with the filing of our registration statements and security offerings. Grant Thornton performed the audit of our financial statements for the fiscal year ended December 31, 2023. EY performed the audit of our financial statements for the year ended December 31, 2022, and reviews of our interim quarterly financial statements prior to the appointment of Grant Thornton.
(2)Tax fees generally include fees related to tax compliance, tax planning and advice and tax due diligence in connection with acquisitions.
Determination of Independence
In considering the nature of the services provided by our independent registered public accounting firm, the Audit Committee determined that such services are compatible with the provision of independent audit services. The Audit Committee discussed these services with our independent registered public accounting firm and our management to determine that they are permitted under the rules and regulations concerning auditor independence.
Additional information concerning the Audit Committee and its activities can be found in the following sections of this proxy statement: “Corporate Governance, Structure and Responsibility—Board Committees” and “Audit Fees and Audit Committee Report—Report of the Audit Committee.”
Pre-Approval Policy
According to policies adopted by the Audit Committee and ratified by the Board, to ensure compliance with the SEC’s rules regarding auditor independence, all audit and non-audit services to be provided by our independent registered public accounting firm must be pre-approved by the Audit Committee. The Audit Committee has established a general pre-approval policy for certain audit and non-audit services, up to a specified amount for each identified service that may be provided by the independent auditors.
The Audit Committee approved all services provided by EY during 2021, there were no Compensationthe years ended December 31, 2023 and 2022 and that of Grant Thornton during the year ended December 31, 2023. The Audit Committee interlockshas considered the nature and amount of the fees billed by EY and Grant Thornton and believes that the provision of the services for activities unrelated to the audit is compatible with maintaining EY’s and Grant Thornton's independence.
Report of the Audit Committee
The Audit Committee oversees our independent registered public accounting firm and assists the Board in fulfilling its oversight responsibilities on matters relating to the integrity of our financial statements, our compliance with legal and regulatory requirements and the independent registered public accounting firm’s qualifications and independence by meeting regularly with the independent registered public accounting firm and financial management personnel. Management is responsible for the preparation, presentation and integrity of our financial statements.
In fulfilling its oversight responsibilities, the Audit Committee:
■reviewed and discussed our audited financial statements as of and for the fiscal year ended December 31, 2023 with management and Grant Thornton;
■discussed with Grant Thornton the matters required to be disclosed.
discussed by the applicable requirements of the PCAOB and the SEC;
■discussed the effectiveness of internal control over financial reporting (ICFR), as well as other important financial accounting and reporting issues with management and Grant Thornton;■received the written disclosures and the letter from Grant Thornton required by the applicable requirements of the PCAOB; and
■discussed with Grant Thornton its independence.
Based on the Audit Committee’s review and discussions noted above, the Audit Committee recommended to the Board, and the Board approved, that the audited financial statements be included in our Form 10-K for the fiscal year ended December 31, 2023, for filing with the SEC. The Audit Committee appointed Grant Thornton as our independent registered public accounting firm for the fiscal year ending December 31, 2024.
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| Submitted by the Audit Committee of the Board: Sean Kell Rachel Lam |
| ir.porchgroup.com
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The following table sets forth information with respect to our executive officers as of April 13, 2022:24, 2024: | | | | | | | | | | | | | | |
| Matthew Ehrlichman | | Shawn Tabak | | Matthew Neagle |
| CHIEF EXECUTIVE OFFICER AND CHAIRMAN | | CHIEF FINANCIAL OFFICER | | CHIEF OPERATING OFFICER |
| Additional biographical descriptions of the executive officers are set forth in the text below. A description of the business experience of Matthew Ehrlichman is provided above in “Our Board Nominees—Board Nominees.” |
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Shawn Tabak Age: 44 | | | | | | |
| Matt Ehrlichman
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| Marty Heimbigner
|
| Matthew Neagle
Chief Executive Officer and Chairman
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| Chief Financial Officer
|
| Chief Operating Officer
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Additional biographical descriptions of the executive officers are set forth in the text below. A description of the business experience of Matt Ehrlichman is provided above in “Proposal 1 — Continuing Class III Directors.”
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Marty Heimbigner
| Age: 63
|
|
Marty Heimbigner is Chief Financial Officer for the Company, a position he has held since June 2020. Before joining the Company, Mr. Heimbigner served asShawn Tabak was appointed Chief Financial Officer of WASH Multifamily Laundry Systems, LLC from December 2017 to May 2020. Before that, Mr. Heimbignerthe Company in November 2022. Most recently, he served as the Chief Financial Officer of TheMaven,Naked Wines, Plc (LSE: WINE), a leading direct-to-consumer wine business from 2020 to 2022. Previously, Mr. Tabak served as Vice President of Finance at Upwork, Inc. from March 20172020 to December 2017. Additionally, Mr. Heimbigner was a partner2020, Vice President of Investor Relations and Treasury at Pacific CFO Group,Shutterfly, LLC from November2016 to 2020 and as Chief Finance Officer and Senior Vice President of Finance at Clean Power Finance, Inc. from 2012 to June 2020, where he served as an advisor and senior finance and accounting executive at client companies of the firm. From November 2014 to May 2016, Mr. Heimbigner was Chief Financial Officer of BSQUARE Corporation. From January 2003 to November 2012 Mr. Heimbigner was a partner with Tatum LLC, where he similarly served in senior finance and accounting executive roles with client companies. From January 2009 to April 2010 Mr. Heimbigner was President, Chief Executive Officer and a director at City Bank, headquartered in Lynnwood, Washington.2016. He has held other senior partner or financial leadership positions earlier inbegan his career at companies including Demand Media, Intelligent Results (acquired by First Data), Airbiquity Inc., Washington Energy Company,KPMG LLP, where he earned his CPA and KPMG.advised clients across the technology and internet sectors on M&A and other finance transactions. Mr. HeimbignerTabak holds a B.A. from Washington State University and an Executive M.B.A. degreein Economics from the University of Washington. He is a Certified Public Accountant in the State of Washington.
On April 1, 2022, the Company announced it had mutually agreed with Mr. Heimbigner to begin a search for Mr. Heimbigner’s successor. In order to assist with an orderly transition of his responsibilities, Mr. Heimbigner is expected to remain as Chief Financial Officer for up to six months following the announcement.
California, Santa Barbara. |
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Matthew Neagle Age: 45 | | | | |
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Matthew Neagle
| Age: 43
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Matthew Neagle is Chief Operating Officer for the Company. As Chief Operating Officer, Mr. Neagle leads efforts to drive organic growth of the Company’sPorch's software and services platform and manages the day-to-day rhythms of the business. Previously, Mr. Neaglehe also served as Legacy Porch’sPorch's Chief Revenue Officer from March 2017 to July 2020, Legacy Porch’sPorch's Chief Customer Officer from January 2016 to March 2017 and Legacy Porch’sPorch's Vice President, Operations from July 2014 to January 2016. Prior to joining the Company, Mr. NeaglePorch, Matthew worked at Amazon, leading the expansion of Kindle into stores in China, India, and Japan and at Google, leading the teams to help small businesses to acquire and retain customers online through AdWords. Mr. NeagleMatthew is a long-time leader, alumnus and supporter of AIESEC, the world’sworld's largest student organization. Mr. NeagleHe holds a B.A., B.S.E. and M.B.A. from the University of Michigan. |
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CERTAIN RELATIONSHIPS AND RELATED PersonPERSON TRANSACTIONS
In addition to the executive officer and director compensation arrangements discussed in the sections titled Directorentitled “Director Compensation” and “Executive Compensation,“Compensation Discussion and Analysis,” we describe below any transaction, arrangement or relationship, since January 1, 2023 to which we have been a party, in which the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year; the Company or any of its consolidated subsidiaries is or will be a participant; and in which any of our directors, nominees for director, executive officers or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.Certain Relationships and Related Person Transactions
Indemnification Agreements
In connection with the December 2020 business combination of Legacy Porch and PTAC, the
The Company entered into indemnification agreements with its directors and executive officers. Those indemnification agreements and the Bylaws require the Company to indemnify all directors and officers to the fullest extent permitted by Delaware law against any and all expenses, judgments, liabilities, fines, penalties, and amounts paid in settlement of any claims. The indemnification agreements also provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to the Company if it is found that such indemnitee is not entitled to such indemnification under applicable law.
Grant of Restricted Stock to Ehrlichman
Mr. Ehrlichman was granted a restricted stock award under the 2012 Plan which was converted into an award of 1,000,000 restricted shares of the company upon the closing of the business combination. The award will vest in one-third installments if certain stock price triggers are achieved within 36-months following the closing of the Merger as follows: (i) one-third (1/3) of the shares will vest if the closing price of a Company share is greater than or equal to $18.00 over any 20 trading days within any 30-consecutive trading day period; (ii) one-third (1/3) of the shares will vest if the closing price of a Company share is greater than or equal to $20.00 over any 20 trading days within any 30-consecutive trading day period; and (iii) the remaining one-third (1/3) of the shares will vest if the closing price of a Company share is greater than or equal to $22.00 over any 20 trading days within any 30-consecutive trading day period. As of December 31, 2021, only the shares described in clause (iii) of the prior sentence had not vested. If Mr. Ehrlichman’s employment with the Company or its affiliates is terminated prior to the award being fully vested, then the award will be terminated and cancelled, provided that if Mr. Ehrlichman’s employment is terminated by the Company or its affiliates 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.
Procedures with Respect to Review and Approval of Related Person Transactions
The
Company’s Board adopted a written related person transaction policy that sets forth the following policies and procedures for the review and approval or ratification of related person transactions.
A “Related Person Transaction” is a transaction, arrangement or relationship in which the Company or any of its subsidiaries was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had, has or will have a direct or indirect material interest. A “Related Person” means:
| ■ | any person who is, or at any time during the applicable period was, one of the Company’s executive officers or a member of the Company’s Board; |
| ■ | any person who is known by the Company to be the beneficial owner of more than five percent (5%) of our voting stock; |
| ■ | any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, officer or a beneficial owner of more than five percent (5%) of our voting stock, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than five percent (5%) of our voting stock; and |
| ■ | any firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10 percent (10%) or greater beneficial ownership interest. |
■any person who is known by the Company to be the beneficial owner of more than five percent (5%) of our voting stock;■any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, executive officer or a beneficial owner of more than five percent (5%) of our voting stock, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than five percent (5%) of our voting stock; and
■any firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a ten percent (10%) or greater beneficial ownership interest.
The Company also adopted policies and procedures designed to minimize potential conflicts of interest arising from any dealings it may have with its affiliates and to provide appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist from time to time. Specifically, pursuant to its Audit Committee charter, the Audit Committee will have the responsibility to review related person
transactions.
transactions
If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a related person transaction, the related person must report the proposed related person transaction to our General Counsel or the Chair of the Audit Committee. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the Audit Committee (or, if so, determined by the Audit Committee, the disinterested members of the Board). Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the Audit Committee will review, and, in its discretion, may ratify the related person transaction if it deems ratification appropriate under the circumstances. The policy also permits the Chair of the Audit Committee to review and, if deemed appropriate, approve proposed related person transactions that arise between audit and finance committee meetings, subject to ratification by the Audit Committee at its next meeting. Any related person transactions that are ongoing in nature are reviewed annually.A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the Audit Committee (or, if so, determined by the Audit Committee, the disinterested members of the Board) after full
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| 38 | 20222024Proxy Statement
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disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the audit and finance committee will review and consider:
■The size of the transaction and the amount payable to a related person and the transaction’s material terms;
■The nature of the interest of the related person in the transaction;
■Whether the transaction may involve a conflict of interest or would impair the ability of a director or executive officer to act in the best interests of the Company;
■Whether the transaction was undertaken in the ordinary course of our business;
■The business rationale for the transaction;
■Whether the transaction involves the provision of goods or services to the Company that are available from unaffiliated third parties and, if so, whether the transaction is on terms and made under circumstances that are at least as favorable to us as would be available in comparable transactions with or involving unaffiliated third parties; and
■Any other information regarding the related person transaction or the related person that would be material to investors in light of the circumstances of the particular transaction.
The Audit Committee may approve or ratify the transaction only if the Audit Committee determines that, under all of the circumstances, the transaction is consistent with our best interests. The audit and finance committee may impose any conditions on the related person transaction that it deems appropriate. In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, the Board has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
■Any indebtedness incurred for the purchase of goods and services subject to usual trade terms, for ordinary business travel and expense payments and for other transactions in the ordinary course of business;
■Any transaction in which the rates or charges involved in connection therewith are determined by competitive bids;
■Any transaction in which the interest of the related person arises solely from the ownership of a class of equity securities of the Company and all holders of that class of equity securities of the Company receive the same benefit on a pro rata basis;
■Any transaction where the related person’s interest derives solely from his or her direct or indirect ownership (together with the ownership of any other related person) of less than a 10% equity interest in another entity’s (other than a partnership) outstanding equity which is a party to the transaction;
■Any transaction where the related person’s interest derives solely from his or her position as a limited partner in a partnership in which the related person and all other related persons have an interest of less than 10%, and the related person is not a general partner of and does not hold another position in the partnership;
■Any transaction where the related person’s interest derives solely from his or her service as a director of another corporation or organization that is a party to the transaction;
■Any employment relationship or transaction (including equity awards) involving an executive officer if (a) the related compensation is reported pursuant to Item 402 of Regulation S-K or (b) the executive officer is not an immediate family member of another executive officer or director of the Company and the related compensation would have been reported under Item 402 of Regulation S-K if the executive officer was a “named executive officer” (as defined in Item 402 of Regulation S-K) and the Compensation Committee approved (or recommended that the Board approve) such compensation;
■Any compensation (including equity awards) paid to a director of the Company if the compensation is reported pursuant to Item 402 of Regulation S-K and the Compensation Committee of the Board approved (or recommended that the Board approve) such compensation;
■Any transaction with a related person involving the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority;
■Any transaction with a related person involving services as a bank depository of funds, transfer agent, registrar, trustee under a trust indenture, or similar services;
■Any charitable contribution, grant, endowment or pledge by the Company to a charitable organization, foundation or university where the related person’s only relationship with that organization is as a director
and the aggregate amount involved does not exceed the lesser of $1,000,000 or 2% of the charitable organization’s total annual receipts;
■Any indemnification payments and advancement of expenses made pursuant to the Company’s Certificate of Incorporation or Bylaws or pursuant to any agreement or instrument the form of which was previously approved by the Board or a committee thereof; or
■Any transaction pre-approved by the Audit Committee in accordance with the policy.
PROPOSAL 3: APPROVAL OF, ON AN ADVISORY (NON-BINDING) BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
General
The Compensation Committee values the perspectives of stockholders regarding our NEO compensation philosophy and program through an annual Say on Pay advisory vote.
As part of the Board’s commitment to continuous review and improvement of governance, in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act and as required by Rule 14a-21 of the Exchange Act, the Board is providing our stockholders with an opportunity to cast an advisory (non-binding) vote on a resolution to approve the compensation of our NEOs.
The principal objective of our compensation programs is to attract, retain and motivate key executives responsible for our success by rewarding individual and Company performance in a way that is aligned with the Company’s
historical directorand stockholders’ short and long-term interests. We do so by providing market competitive total compensation and incentives that reward achievement of performance goals that are designed to correlate with the enhancement of stockholder value and tying our NEOs’ incentive compensation to Company performance and increases in stockholder value. We believe our NEO compensation program
has consistedstrikes an appropriate balance between the implementation of
cashresponsible, measured compensation practices and
equity compensation. With respectthe effective provision of incentives for our NEOs to
2021, each non-employee director earned cash feesexert their best efforts for our success. We discuss our compensation philosophy and
received RSU (“RSU”) awards inprograms for the Company’s
non-employee director compensation program as set forth below. Employee directors are not compensatedNEOs, the decisions made by the Compensation Committee under those programs, and the process utilized, and factors considered in making those decisions for
their additional service provided to our
Board and thus are not included. The Company also reimburses its directors for their reasonable out-of-pocket expenses incurredNEOs in
attending board and committee meetings. | ■ | Annual Board Cash Retainer: $30,000 |
| ■ | Annual RSU Award: $80,00 |
| ■ | Annual Committee Member Retainers (paid in RSUs): |
2023 in more detail below in this proxy statement. | o | Audit Committee: $10,000 |
| o | Compensation Committee: $5,000 |
| o | Nominating and Corporate Governance Committee: $3,250 |
| ■ | Annual Additional Committee Chair Retainers (paid in RSUs): |
| o | Audit Committee: $20,000 |
| o | Compensation Committee: $10,000 |
| o | Nominating and Corporate Governance Committee: $7,500 |
| ■ | Annual Lead Independent Director: |
| o | Cash: $31,875 (paid in quarterly installments) |
The number of RSUs to be granted on the grant date shall be the nearest whole number of shares as determinedAs required by dividing the dollar valueSection 14A of the Award or RetainerExchange Act, we are asking for stockholder approval of the compensation of our NEOs. The Board recommends that stockholders approve such compensation by approving the closing market pricefollowing advisory resolution:
RESOLVED, that the stockholders of Porch Group, Inc. approve, on an advisory basis, the compensation of the Company’s
common stock as listed on the NASDAQ on the grant date, and if the grant date does not fall on a NASDAQ trading day, then on the last trading day prior to the grant dateUnder the non-employee director compensation program, the RSU awards will vest on the one (1) year anniversary of the grant date, with the resale restrictions applicable to two-thirds (2/3) of the RSUs expiring in equal increments on the first and second anniversaries of the vesting date. The RSUs will vest and the resale restrictions will lapseNEOs identified in the event the director ceases to serve on the board due to death, disability or removal without cause. In addition, in the event of a change in control in which the awards are not effectively assumed, the RSUs will vest in full and the resale restrictions will lapse. For RSU awards granted in 2021 for service between the closing of our business combination and our 2021 Annual Meeting of Stockholders, such RSUs awards vested on the date of the 2021 Annual Meeting of Stockholders.
2021 Director Compensation Table
The following table sets forth information for the year ended December 31, 2021 regarding the compensation awarded to or earned by certain of the Company’s non-employee directors. Mr. Ehrlichman, the Company’s Chief Executive Officer, does not receive any additional compensation for his service as a member of the Company’s Board. Please see the 20212023 Summary Compensation Table for the compensation paid or awarded to Mr. Ehrlichman for 2021.
| | | | | | | | | |
| | Paid in Cash | | | Stock Awards | | Total |
| | ($)(1) | | ($)(2) | | ($) |
Joseph Hanauer(3) | | $ | 52,500 | | $ | 0 | | $ | 52,500 |
Thomas Hennessey(4) | | | 22,500 | | | 143,374 | | | 165,874 |
Sean Davis Kell(5) | | | 0 | | | 0 | | | 0 |
Rachel Lam(6) | | | 15,000 | | | 86,197 | | | 101,197 |
Alan Pickerill(7) | | | 30,000 | | | 155,833 | | | 185,833 |
Javier Saade(8) | | | 61,875 | | | 179,024 | | | 240,899 |
Asha Sharma(9) | | | 30,000 | | | 126,970 | | | 156,970 |
Chris Terrill(10) | | | 30,000 | | | 139,580 | | | 169,580 |
Maurice Tulloch(11) | | | 15,000 | | | 91,263 | | | 106,263 |
Regi Vengalil(12) | | | 30,000 | | | 135,833 | | | 165,833 |
Margaret Whelan(13) | | | 22,500 | | | 143,374 | | | 165,874 |
(1)
| This column reports the amount of cash compensation earned in 2021 for annual Board, and if applicable, Lead Independent Director or Shareholder Representative ($25,000), service.
|
(2)
| Amounts shown reflect the aggregate grant date fair value of RSU awards granted during 2021, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“FASB ASC Topic 718”). These amounts reflect an estimate of the grant date fair value and may not correspond to the actual value that will be realized by the directors. Includes an estimate of the grant date fair value for RSUs which were granted in 2021 but were subsequently forfeited due to resignation. Stock awards consist of RSUs valued using the closing price of Porch common stock on the NASDAQ on the grant date.
|
(3)
| Mr. Hanauer resigned from the Board f on March 12, 2021, and, as a result all RSUs outstanding on of the date of resignation were forfeited.
|
(4)
| On March 23, 2021, Mr. Hennessy was granted an RSU award for Board and committee service for the period from December 20, 2020 through June 9, 2021, which RSU award vested in full on June 9, 2021. Mr. Hennessy, a director of the former special purpose acquisition corporation (SPAC), resigned from the Board on August 12, 2021, following the successful completion of the business combination and, as a result, 4,641 RSUs outstanding on of the date of resignation were forfeited.
|
(5)
| Mr. Kell was appointed to the Board on March 17, 2022, and therefore had no 2021 compensation.
|
(6)
| Ms. Lam was appointed to the Board on August 12, 2021. Ms. Lam had 4,630 RSUs outstanding at December 31, 2021.
|
(7)
| On March 23, 2021, Mr. Pickerill was granted an RSU award for Board and committee service for the period from December 20, 2020 through June 9, 2021, which RSU award vested in full on June 9, 2021. Mr. Pickerill had 26,423 vested stock options, 8,808 unvested stock options, and 5,044 RSUs outstanding at December 31, 2021.
|
(8)
| On March 23, 2021, Mr. Saade was granted an RSU award for Board and committee service for the period from December 20, 2020 through June 9, 2021, which RSU award vested in full on June 9, 2021. Mr. Saade had 6,320 RSUs outstanding at December 31, 2021. Mr. Saade served as Lead Independent Director in 2021.
|
(9)
| On March 23, 2021, Ms. Sharma was granted an RSU award for Board and committee service for the period from December 20, 2020 through June 9, 2021, which RSU award vested in full on June 9, 2021. Ms. Sharma had 172,140 vested stock options, and 4,141 RSUs outstanding at December 31, 2021.
|
(10)
| On March 23, 2021, Mr. Terrill was granted an RSU award for Board and committee service for the period from December 20, 2020 through June 9, 2021, which RSU award vested in full on June 9, 2021. Mr. Terrill had 4,607 RSUs outstanding at December 31, 2021.
|
(11)
| Mr. Tulloch was appointed to the Board on August 12, 2021. Mr. Tulloch had 4,914 RSUs outstanding at December 31, 2021.
|
(12)
| On March 23, 2021, Mr. Vengalil was granted an RSU award for Board and committee service for the period from December 20, 2020 through June 9, 2021, which RSU award vested in full on June 9, 2021. Mr. Vengalil had 4,397 RSUs outstanding at December 31, 2021.
|
(13)
| On March 23, 2021, Ms. Whelan was granted an RSU award for Board and committee service for the period from December 20, 2020 through June 9, 2021, which RSU award vested in full on June 9, 2021. Ms. Whelan, a director of the former special purpose acquisition corporation (SPAC), resigned from the Board on August 12, 2021, following the successful completion of the business combination and, as a result, 4,641 RSUs outstanding on of the date of resignation were forfeited.
|
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Summary
We are providing our initial CD&Aincluded in this proxy statement followingas such compensation is described pursuant to Item 402 of Regulation S-K in this proxy statement (which disclosure includes the endCompensation Discussion and Analysis and the compensation tables and accompanying footnotes and narratives under the heading “Compensation Discussion and Analysis” and "NEO Compensation Tables" in this proxy statement).
As an advisory vote, this proposal is not binding upon the Company. However, the Compensation Committee, which is responsible for designing and administering the Company’s NEO compensation program, values the opinions expressed by stockholders. If there are a significant number of negative votes, we will seek to understand the concerns that influenced the vote and will consider whether any actions are necessary to address those concerns.
Vote Required
The majority of votes cast by the stockholders present in person at the Annual Meeting or represented by proxy at the Annual Meeting and entitled to vote is required for the approval of Proposal 3. Brokers do not have discretion to vote on this proposal. Abstentions and broker non-votes are not treated as votes cast and, therefore, will have no effect on this proposal. We currently hold our advisory vote on executive compensation annually, and the next such vote is expected to occur at our 2025 annual meeting. Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is given, then "FOR" the advisory resolution to approve the compensation of our emerging growth company status at year-end 2021. This CD&A describesNEOs.
Recommendation of The Board
| | | | | | | | |
| | |
| | THE BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE ADVISORY RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS. |
| | |
COMPENSATION DISCUSSION AND ANALYSIS
In this section of the proxy statement, we discuss the compensation philosophy objectives, process and components of our 2021 compensation program for our NEOs in 2023, the following named executive officers (collectively,decisions made by the “NamedCompensation Committee related to such program, and the process utilized and factors considered in making those decisions for our NEOs. Our NEOs
In accordance with SEC rules and regulations, our NEOs for 2023 are our Chief Executive Officers” or “NEOs”).Officer, Chief Financial Officer and Chief Operating Officer.
| Matt | | | | | | | | | | | | | |
| Matthew Ehrlichman | |
Shawn Tabak | | Marty Heimbigner
| Matthew Neagle |
Chief Executive Officer
CHIEF EXECUTIVE OFFICER AND CHAIRMAN ■Porch Group CEO and Chairman■
Porch Group Chairman and CEO since December 2020
■ Legacy Porch CEO since 2011 | |
Chief Financial Officer
■CHIEF FINANCIAL OFFICER
Legacy Porch and ■Porch Group CFO since June 2020
■
Announced separation on March 30,November 2022 with service as CFO to continue for up to six months
| |
Chief Operating Officer
■CHIEF OPERATING OFFICER
■Legacy Porch and Porch Group COO since July 2020 ■ Legacy Porch Chief Revenue Officer from March 2017 to July 2020 ■Legacy Porch employee since 2013 |
2023 NEO Compensation PhilosophyWe expect that the Company’s executive
The NEO compensation philosophy
and program will continueimplemented by the Compensation Committee continues to evolve,
to reflect itsreflecting our status as a maturing publicly-traded
company, while still supporting the Company’s overall business and compensation objectives. The Compensation Committee is responsible for administering the Company’s executive compensation program and has engaged with third party professional service firms to help advise on the Company’s executive compensation program.Our Compensation Philosophy
key objectives OF OUR COMPENSATION philosophy:
■
Provide total compensation opportunities that align to the competitive market
■
Allow for above-market total compensation based on performance, including through utilization of performance-based equity as a significant portion of the equity grant value
■
Include appropriate risk mitigants in incentive programs
|
company. In order to achieve the Company’s strategic vision, of reinventing the homeownership journey, the Compensation Committee and Company are committed to providing a market-competitive total compensation program to attract and motivate a competent and highly-qualified workforce and to retain top-performing industry employees. Our compensation philosophy also intends to address the shared interests of many of the Company’s stakeholders. In 2021, the Compensation Committee utilized a preliminary, flexible philosophy to guide our transition as a new public company.
The Compensation Committee uses benchmarking for the NEOs as a reference point to align with the competitive market. In 2021, the Compensation Committee targeted the market median for base salary and target total cash compensation, and the 75th percentile of market for annual long-term equity awards (excluding the Together We Win Program described below, and above 75th percentile in limited circumstances). However, the Compensation Committee retains and utilizes significant discretion and flexibility to vary from benchmarking targets based on Company and individual performance, the person’s scope of role, skills, experience and criticality to the business, internal pay equity and similar factors.
The Compensation Committeealso is committed to designingevolving the design of our incentive programs to align with our long-term strategy and further enhance pay-for-performance.
2021 Performance Highlights
Porch is a vertical software platform for the home, providing software and services to over 24,000 home services companies, such as home inspectors, mortgage companies and loan officers, title companies, moving companies, real estate agencies, utility companies, roofers, and others. Porch helps these service providers grow their business and improve their customer experience. Porch also makes the moving process easier for homebuyers by helping them save time and make better decisions about critical services, including insurance, warranty, moving, security, TV/Internet, home repair and improvement. For certain services such as insurance and warranty , Porch can provide its own product to consumers. Porch has two reportable segments: the Vertical Software segment and the Insurance segment.
In 2021, our first full year as a public company, we continued to grow our position in our key verticals such as home inspection, expanded into new software verticals such as mortgage and title, enhanced our insurance and warranty offerings via the acquisitions of Homeowners of America and American Home Protect, increased our insurance footprint into many new states, and raised capital to fund future growth.
| | |
2021 Key financial and operational highlights
KEY OBJECTIVES OF OUR COMPENSATION PHILOSOPHY: |
✓
Total Revenue■Link NEO compensation to Company performance through utilization of $192.4 million, an increase of 166% from total Revenue of $72.3 million for 2020
✓
GAAP net loss of $106.6 million, compared toperformance-based equity as a GAAP net loss of $54.0 million for 2020
✓
Adjusted EBITDA (loss)* for the full year 2021 totaled ($24.0) million or -12.5%significant portion of total Revenue, an improvement oncompensation
■Attract and retain a percentage basis fromhighly qualified executive leadership team ■Motivate our executive leadership team to execute our long-term growth strategy ■Allow for above-market total compensation for strong Company performance, subject to alignment with peer group practices and in recognition of the Adjusted EBITDA (loss) of ($18.3) million or -25% of total Revenuecompetitive landscape for the full year 2020.highly qualified executive leaders ✓
Software and services to companies:
o
Average number of companies increased to 24,603 from 11,157■Include appropriate risk mitigants in Q4 2020
o
Average revenue per company per month increased 26% to $699 from $556 in Q4 2020
✓
Monetized services for customers:
o
Number of monetized services was 260,352 in Q4 2021, up from 169,949 in Q4 2020
o
Average revenue per monetized service* was $132, a 35% increase from $98 in Q4 2020
✓
$325 million of cash as of year-end
|
|
|
2021 insurance segment highlights
|
✓
greater than 300,000 policyholders
✓
greater than a $400 million gross written premium run rate
✓
89% policyholder retention rate as of year end
✓
expanded into an additional six states for a total of 12 as of year end
|
2021 software segment highlights
|
✓
expanded into mortgage and title verticals
✓
enhanced customer offerings
✓
began offering brands differentiated marketing to movers with the acquisition of V12
|
* See Appendix C of this Proxy Statement, entitled “Use of Non-GAAP Financial Measures,” for the reconciliation of Adjusted EBITDA (loss) to net income, which is the most directly comparable measure under generally accepted accounting principles in the United States (“GAAP”), and Adjusted EBITDA (loss) as a percentage of Revenue. See Appendix D of this Proxy Statement, entitled “Use of Non-GAAP Key Performance Measures,” for the reconciliation of Average Revenue per Monetized Service.
Public Company Transition and An Evolving2023 NEO Compensation Program
The Compensation Committee reviews and approves, or from time to time may recommend to
2023 NEO Incentive Programs
For the independent directors of the Board to approve, the compensation for the NEOs and the design and implementation of the NEO compensation program. The Compensation Committee also is responsible for overseeing and evaluating related
policies. Our business combination in December 2020 had a significant impact on our2023 NEO compensation program, in 2021,the Compensation Committee focused on enhancing our performance-based programs to further incentivize our NEOs to achieve our overall financial and we continueoperational objectives and deliver long-term value to evolve our compensation practices as described in detail below.
stockholders.
| | |
|
| SUMMARY OF 2023 NEO COMPENSATION PROGRAMS |
NEO Compensation
|
| | 2021
|
| Considerations for 2022
■Adopted the 2023 Bonus Plan, which features: ◦Achievement and Beyond |
award value solely based on two key objective Company financial performance metrics, with Compensation Philosophy | | ■
Preliminary, flexible philosophy guidingCommittee discretion on payout; this completed the multi-year transition for a new public company
■
Identify and create new peer group as a public company
|
| ■
An evolving compensation philosophy as we mature as a public company, including enhancing and balancing incentives that align with pay-for-performance
■
Assess comparable peers as we evolve and mature as a public company, reflecting changes in revenue and market capitalization, among other factors
|
Short-term Incentive
| | ■
No guaranteed bonuses, subject to discretion for new hires
■
Discretionaryfrom an NEO bonus program with fixeda discretionary achievement and award value component to a program solely based on key objective Company financial performance metrics
◦Continued use of revenue and Adjusted EBITDA (Loss) as a percentage of revenue, with payouts subject to achievement based on a combined performance grid of both metrics ◦A Compensation Committee-approved adjustment policy for performance metrics that provides objective methodology for addressing extraordinary events ◦Fixed payout caps ■
Utilizing Company performance measures as the primary guideposts
■
Company◦Compensation Committee’s annual discretion to pay earned bonus in cash or equity awards, following the performance period
|
| ■
No guaranteed bonuses, subject to discretion for new hires
■
A pre-approved, objective bonus plan, with fixed payout caps, that is performance based
■
Consideration to lock-in payment of cash, equity or a ratio thereof when establishing the program for the specified year
|
| Long-term Incentive
|
■Approved the 2023 LTI Equity Program, which features: ■
Equity grant programs tailored to each NEO with different purposes, objectives and terms
■
Use of stock options, RSUs and performance-based RSUs (PRSUs)
■
PRSUs representing significant portion of program, with stock price hurdles as performance measure
|
| ■
An annual equity program, generally with consistent terms
■
Establish annual grant timing within 30 days following fourth quarter earnings announcement
■
Use◦Continued mix of RSUs and PRSUs, althoughwith PRSUs representing 75% of target LTI equity vehicles may evolveaward
◦Three PRSU components: the achievement of share price CAGR goals during three-year performance period (50% weighted); revenue goals in 2025 (25% weighted) and Adjusted EBITDA goals in 2025 (25% weighted). Fixed payout cap of 200% of target PRSUs ◦RSUs subject to time-based vesting over time ■
We expect PRSUs to represent a more significant portion of program over time
|
NEO Compensation
|
| | 2021
|
| 2022 and Beyond
|
Employment agreements and severance/change-in-control benefits
|
| ■
Offer letters for new hires; severance and change-in-control benefits primarily in equity award agreements
■
Double-trigger change-in control benefits, except limited new hire benefit for CFO in connection with Legacy Porch transaction
|
| ■
Entered into employment agreements and/or amended offer letters with the NEOs in February 2022, with specified severance and change-in-control benefits superseding equity award agreement treatment
■
Continuation of double-trigger change-in control benefits
four years |
| Equity-related policies
| ■
Prohibition on hedging and pledging of our securities
■
Recoupment provisions in certain equity award agreements
|
| ■
Prohibition on hedging and pledging of our securities
■
Recoupment policy applicable to the NEOs
■
Executive stock ownership guidelines
|
| Limited use of perquisites and benefits
| ■
No defined benefit, supplemental executive retirement or nonqualified deferred compensation plans
■
No tax gross-ups for severance payments
|
See "Compensation Discussion and Analysis—2023 NEO Compensation Program—2024 NEO Incentive Compensation Programs Preview" for an overview of our incentive program enhancements for 2024.
2023 Target Compensation
The
timing of2023 target compensation
determinations byfor our NEOs did not materially change from the 2022 target compensation. In particular, Messrs. Ehrlichman and Neagle entered into employment agreements in February 2022, and Mr. Tabak entered into an employment agreement in November 2022 in connection with his hiring. In connection with such employment agreements and again in setting 2023 target compensation, the Compensation Committee
for the 2021 NEO compensation program—in particular, the PRSUs and RSUs granted to Mr. Ehrlichman in February 2022, which were considered part of 2021 compensation by the Compensation Committee—were impacted by the change of its independent compensation consultant in April 2021 and the change in Compensation Committee membership (including the Chair role) in August 2021 due to director resignations. The departing directors were partcompleted a detailed evaluation of the
PTAC special purpose acquisition company, represented twofollowing factors for each NEO: individual performance for continuing NEOs; scope of
role; skills, experience and criticality to the
three Compensation Committee members (including the Chair),business; and
each determined to conclude his or her Board service after helping guide Porch through a successful public company transition. Two new directors were appointed tointernal pay equity and similar factors. In addition, the Compensation Committee
in September 2021,reviewed peer group and
market survey data as a
new Chair was concurrently appointed.Further, beginning in our proxy statementreference point to address market competition for talent.
The following charts set forth the 2023 target compensation for our NEOs, as well as the percentage of 2023 Annual Meetingtarget compensation (based on grant value) that is performance-based (target bonus and target PRSUs) and that is at-risk (target bonus and target LTI equity awards).
Charts exclude target values of
Stockholders, we will annually disclose our CEO pay ratio.
2023 PRSUs related to the 2022 LTI equity program.
The target grant value of the 2023 LTI Equity Program is materially more than the grant date fair value of such awards computed in accordance with FASB ASC Topic 718 presented in “Stock Awards” column in the Summary
Compensation Table. See “Compensation Discussion and Analysis—2023 NEO Compensation Determinations—2023 LTI Equity Program” for further information. In addition, we made PRSU grants in March 2023, which represented the second tranche of the 2022 LTI Equity Program and were not considered by the Committee in establishing the 2023 target compensation. See “Compensation Discussion and Analysis—2023 NEO Compensation Determinations—Outstanding PRSUs During 2023.”
2024 NEO Incentive Compensation Programs Preview
For the 2024 NEO compensation program, the Compensation Committee focused on further improving and maturing our performance-based programs while maintaining key components from the 2023 NEO Compensation Program that the Compensation Committee believes incentivizes our NEOs to achieve our overall financial and operational objectives and deliver long-term value to our stockholders. Key updates include:
| | | | | |
| 2024 Long-Term Incentive Plan | ■Shifting Absolute Share Price to a TSR metric. The TSR goal is measured by the Company’s percentile rank achievement relative to the S&P SmallCap 600 Index over a three-year performance period ending December 31, 2026.
■For TSR, achievement and relative payout under the TSR component is determined as follows, with interpolation between the 25th and 75th percentiles: TSR below 25th percentile of the S&P SmallCap 600 Index, 0% payout; TSR equal to 25th percentile of the Index, 50% payout; TSR equal to 50th percentile of the Index, 100% payout; and TSR greater than or equal to 75th percentile of the S&P SmallCap 600 Index, 200% payout.■Maintaining the Adjusted EBITDA and Revenue goals, in addition to the TSR metric, and adjusting the weighting of the goals such that Revenue, Adjusted EBITDA, and TSR are weighted equally in determining achievement and related payouts. |
| ir.porchgroup.com
|
| 2024 Short-Term Incentive Plan | 35
■Maintaining Revenue and Adjusted EBITDA goals weighted equally and transitioning to separate performance grids for each metric replacing combined performance grid; achievement and award value continue to be based solely on these two key objective Company financial performance metrics, with Compensation Committee discretion on payout. ■Returning to full year measurement period to align with 2024 profitability goals to further enhance pay-for-performance and align interests with our stockholders. |
2023 NEO Compensation Components
2021 Key Compensation Components
| | | | | | |
Element | | Philosophy & Objective |
| Component
|
| Key Features
|
Salary | | ■ Attracts talent in a competitive market ■ Incentivizes achievement of individual performance goals
■
Provides stable income for retention during downturns in our industryrelevant industries or economy, |
|
|
| ■
Established initially based on benchmarking and internal pay equity, as well as expertiseupon reduced value of existing equity and experience
■Increases are not automatic or guaranteed, which incentivizes achievement of Company operational, financial and strategic goals and individual performance |
| |
| Short-Term Incentive Awards | ■ Annual reviewBonus Plan supports a pay-for-performance culture because achievement and award value are based on benchmarking, individual andachievement of two objective financial Company performance jobmetrics, with Compensation Committee discretion on payout
■Target bonuses reflect changes in base salary and additional responsibilities and internal pay equity (including promotions), as well as consideration of benchmarking data |
| Short-Term |
| Long-Term Incentive Equity Awards | | ■ Although discretionary, supports a “pay-for-performance” culture in practice due to payout based on two key Company performance metrics
|
| ■
Cash, vested equity awards, or a combination of both, at discretion of Compensation Committee
■
Performance metrics are a combination of Revenue and Adjusted EBITDA (loss), with target performance goals aligned with Board-approved budget
|
| ■
Bonus target as percent of base salary (other than for Mr. Heimbigner)
■
Payout range from 0-200% for CEO and 0-175% for COO
|
Equity Awards
| | ■
Aligns with the long-term interests of stockholders ■ Reinforces long-term strategic business objectives
■
Multiple equity vehicles provide diverse incentives for NEOs – RSUs provide full value on grant to serve retention needs,and retention; PRSUs reinforce long-term strategic business objectives and long-term value creation; both RSUs and PRSUs are focused on upside and value creation |
| ■
Grants of PRSUs and RSUs
|
| ■
Three tranches, each tranche earned based upon achievement ofalso subject to stock price hurdle within specified performance period
■
Post-vesting holding period for CEO awards
■
RSUs subject only to time-based vesting
changes |
2021
2023 NEO Compensation DeterminationsWe compensate the NEOs through a combination of base salary, annual cash bonuses, long-term incentives and other benefits as described below.
BASE SALARY
Base salariesSalary
Base salaries are reviewed on at least an annual basis. For Mr. Ehrlichman and Mr. Neagle,Ehrlichman’s annual base salary increases in 2021 wereremained unchanged for 2023. In November 2022, Mr. Tabak joined the Company at the discretiona base salary of the Compensation Committee primarily based on benchmarking against our peer group, individual performance$390,000 and retention factors. As discussed below, due to the change in compensation consultants, as well as our evolving compensation philosophy,his salary remained unchanged for 2023. Mr. Neagle’s base salary was reevaluated multiple times during 2021, which resulted in increases to Mr. Neagle’s salary. Accordingly, in March 2021, Mr. Neagle's base salary increased from $310,000 to $360,000 per year, and in October 2021 increased to $400,000 per year. In October 2021, Mr. Ehrlichman's base salary increased from $420,000$425,000, effective April 7, 2023, to $600,000 per year. Mr. Heimbigner’s base salary was determined pursuantreflect his performance, internal pay equity and market positioning relative to his offer letter and remained unchanged following an increase in December 2020 in connection with the closing of our business combination.peer group.
The following table sets forth the annual base salariessalary rate in effect for our NEOs for 2022 and 2023.
| | | | | | | | |
| Name | 2022 ($) | 2023 ($) |
| Matthew Ehrlichman | 600,000 | 600,000 |
| Shawn Tabak | 390,000 | 390,000 |
| Matthew Neagle | 400,000 | 425,000 |
2023 Short-Term Incentive – 2023 Bonus Plan
In April 2023, the
NEOs at December 31, 2020 and 2021. | | |
Name | 2020
($) | 2021
($) |
Matthew Ehrlichman | 420,000 | 600,000 |
Matthew Neagle | 310,000 | 400,000 |
Martin Heimbigner | 300,000 | 350,000 |
SHORT-TERM INCENTIVE AWARDS
Each ofCompensation Committee approved the NEOs received discretionary bonuses with respect to 2021 performance.2023 Bonus Plan for our NEOs. For Messrs. Ehrlichman and Neagle, bonus targets were set as a percentage of base salary (using the actual eligible paid salary in the applicable year). The establishment of the bonus targets (expressed as a percent of base salary) were unchanged for 2023. As set forth in his employment agreement, Mr. Tabak’s bonus target was established at 50% of his base salary for 2023; he did not participate in the 2022 bonus plan due to the timing of his hire. The base salary utilized for bonus calculations is the actual base salary paid for the 2021applicable performance year for Mr. Ehrlichman and Mr. Neagle, and the subsequent increase for Mr. Neagle, were at the discretion of the Compensation Committee and primarily based on benchmarking against our peer group, individual performance and retention factors, and specifically, with respect to Mr. Neagle, this depth of experience and leadership was viewed as being critical to the continued growth of the company.
period.
The following table sets forth the bonus targets in effect for Messrs. Ehrlichman and Neagle in
20202022 and
2021. | | |
Name | 2020 | 2021 |
Matthew Ehrlichman | ― | 100% |
Matthew Neagle | ― | 100% |
As noted above,2023, and in 2021,2023 for Mr. Tabak.
| | | | | | | | |
| Name | 2022 | 2023 |
| Matthew Ehrlichman | 100% | 100% |
| Shawn Tabak | -- | 50% |
| Matthew Neagle | 100% | 100% |
Earned bonuses for our NEOs were based upon performance grids specifying the NEO bonuses were considered discretionary. Although no formal bonus plan was established by thecombined achievement levels of two objective Company performance goals, Revenue and Adjusted EBITDA (Loss) as a percentage of Revenue (i.e., Adjusted EBITDA (Loss) margin). The Compensation Committee determined to use such performance metrics because it believes they are key performance metrics aligned with profit and loss and earnings performance, and support overall stockholder value creation. The 2023 Bonus Plan does not have a distinct discretionary component to determine award value or achievement, which differs from NEO bonus plans in prior years and completes the multi-year transition to a fully objective NEO performance-based plan. No payout is made if the individual participant is not employed as of the payout date, subject to their respective employment agreements, and any payout of the earned bonus following achievement of the objective Company financial metrics is subject to Compensation Committee was guided bydiscretion.
To further incentivize the Company's announced strategic goal of achieving profitability in the second half of 2023 and relied onbeyond, the Committee determined to set two measurement periods, each weighted equally:
■Full Year 2023 measurement period (50% weighted): achievement of the Company's 2023 Revenue and Adjusted EBITDA margin.
■Second half 2023 measurement period (50% weighted): achievement of the Company's second half 2023 Revenue and Adjusted EBITDA margin.
This 2023 Bonus Plan has a threshold and maximum bonus opportunity of 25% and 200% of the applicable NEO target bonus. No bonus is earned if actual performance is below all threshold levels. The Committee also retains negative discretion to reduce the bonus for any reason.
The 2023 Bonus Plan utilizes the same two Company performance measures utilized for the corporate bonus plan for key corporate employees that do not work directly for a business unit – the achievement of a combinationdefinition of Revenue and Adjusted EBITDA (loss) against(Loss) as a percentage of Revenue as are used for purposes of the Company’s 2021external reporting to stockholders, subject to the adjustment policy.
■Revenue is defined as GAAP total Revenue.
■Adjusted EBITDA (Loss) as a percentage of Revenue is defined as Adjusted EBITDA (Loss), a non-GAAP financial measure, divided by GAAP total Revenue. See "Appendix A" of this proxy statement, entitled “Use
of Non-GAAP Financial Measures,” for a definition of Adjusted EBITDA (Loss) and a reconciliation of Adjusted EBITDA (Loss) to net income (loss), which is the most directly comparable measure under GAAP.
In addition, the Compensation Committee pre-approved an adjustment policy for the 2023 Bonus Plan, which includes adjustments for accounting changes, acquisitions, investments and, for Adjusted EBITDA, if the bonus is not paid in stock. For example, accounting adjustments will be made if material accounting treatment changes have occurred since the Company’s approved financial budget approved byfor the Board in January 2021. These performance metrics, whichperiod, regardless of whether the changes are shared publicly, are also reviewed byfavorable or unfavorable, and do not reflect underlying performance of the Audit Committee.business.
Financial Performance Goal Setting. The 2023 performance goals established under the corporate bonus plan, further described below, were intended to be reasonably challenging and designed to appropriately incentivize and reward strong performance.Our The chart below sets forth the threshold, target and maximum goals for the financial performance metrics for each measurement period of the 2023 Bonus Plan established by the Compensation Committee determined that it was appropriate to useCommittee. The target goals approximated the Company's 2023 budget. Because the performance metrics described above because theygrids are viewed as key performance metrics aligned with profitbased on combined achievement levels, threshold and loss, and earningsmaximum can occur at multiple combinations of performance, and there are viewed as supporting overall stockholder value creation. Porch management uses these non-GAAP financial measures as supplemental measuresmany combinations of Porch’s financial performance, for internal budgetingachievement and forecasting purposes, to evaluate financial and strategic planning matters, and to establish certain performance goals for incentive programs. Porch believes thatpayouts in between.
| | | | | | | | | | | | | | |
| Full Year Measurement Period | Half Year Measurement Period (7/1/2023-12/31/2023) |
| Revenue ($) | Adjusted EBITDA (% of Revenue) | Revenue ($) | Adjusted EBITDA (% of Revenue) |
| Threshold Performance (25% payout for weighted factor) | 300M | (17.5) to (19.5) | 170M | (2) to 0 |
| 310M | (19.5) to (21.5) | 175M | (2) to (4) |
| 320M | Worse than (21.5) | 180M | Worse than (4) |
| Target Performance (100% payout for weighted factor) | 330M | (16.0) to (17.5) | 180M | 0 to 2 |
| Maximum Performance (200% payout for weighted factor) | 330M | Better than (13) | 180M | Better than 6 |
| 340M | (13.0) to (14.5) | 185M | 4 to 6 |
| 350M | (14.5) to (16.0) | 190M | 2 to 4 |
| 370M | (16.0) to (17.5) | 200M | 0 to 2 |
2023 Bonus Plan Results. The following are the
use of these non-GAAP financial measures provides investors with useful information to evaluate Porch’s operating and financial performance and trends and in comparing Porch’s financial results
with competitors, other similar companiesfor the Company's full year 2023 and
companies across different industries, many of which present similar non-GAAP financial measures to investors. However, Porch's definitionssecond half 2023 and
methodology in calculating these non-GAAP measures may not be comparable to those used by other companies. The corporate bonus plan utilizes the same definition of Revenue and Adjusted EBITDA (loss) as are used for purposes of the Company’s external reporting to stockholders withcorresponding payouts. No adjustments
(if any)were approved
on an exception basis by the Compensation Committee
as detailed below. | ■ | Adjusted EBITDA (loss) is defined as net income (loss) adjusted for interest expense, net, income taxes, other expenses, net, depreciation and amortization, certain non-cash long-lived asset impairment charges, stock-based compensation expense and acquisition-related impacts, 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 divestures and certain transaction costs. |
since the payouts would not have changed.
| ■ | Adjusted EBITDA (loss) as a percentage of Revenue is defined as Adjusted EBITDA (loss) divided by GAAP total Revenue. |
See Appendix C of this Proxy Statement, entitled “Use of Non-GAAP Financial Measures,” for the reconciliation of Adjusted EBITDA (loss) to net income, which is the most directly comparable measure under generally accepted accounting principles in the United States (“GAAP”),approximately $430 million and Adjusted EBITDA (loss) as a percentage(Loss) margin of Revenue.
Given our significant acquisition strategy, the corporate bonus plan addressed acquisition impacts on the performance goals when established by management. The plan provided that certain named acquisitions be counted fully towards achievement of such goals, and that corresponding adjustments to the performance goals would be made for a specified acquisition if it did not close around the time such closing was forecasted. The plan also established that any new acquisitions for consideration of at least $10 million would be added on a pro forma basis to the performance goals(10)%.
■Second half 2023 measurement period (50% weighted): 200% payout achieved, based on revenue achieved of approximately $244 million and Adjusted EBITDA margin of 8.4%.
As a
mid-case plan, and be included inresult, each NEO earned 200% of their target bonus under the
actual performance. When the Committee evaluated the NEO discretionary bonuses for Messrs. Ehrlichman and Neagle after year-end 2021, it utilized the corporate bonus plan metrics reflecting such acquisition treatment.2023 Bonus Plan. In 2021,February 2024, the Compensation Committee approved the following additional adjustmentspayouts and determined to such performance metrics as part of evaluating the discretionarypay NEO bonuses for Messrs. Ehrlichman and Neagle:
| ■ | Neutralizing certain changes in accounting treatment since the Board-approved budget, including for certain intercompany matters |
| ■ | Neutralizing the impact of certain expenses that were accelerated into 2021 at the request of management |
The final value of the 2021 discretionary bonuses for Messrs. Ehrlichman and Neagle were determined by multiplying their applicable bonus targets by an earned multiplier based on satisfaction of the applicable performance metrics. The earned multiplier is 50% for the CEO and 30% for the COO for threshold performance for the combined metrics (each of which is weighted at 50%), 100% for target performance for the combined metrics and 200% for the CEO (or 175% for the COO) for maximum performance for the combined metrics. The actual performance for Revenue and Adjusted EBITDA (loss) was $192.4 million and -12.5%, respectively. The corporate bonus plan established by management further includes a detailed achievement table for various combinations of the two metrics, which the Compensation Committee also took into consideration when determining the NEO discretionary bonusessolely in 2021.
cash. | | |
| Revenue
($)
| Adjusted EBITDA
(% of Revenue)
|
Threshold Performance
| 170.0M
| > (13.5%)
|
Target Performance
| 174.0M
| (10.5%)
|
Maximum Performance
| 215.0M
| < (7.5%)
|
Earned Multiplier – CEO
| 137%
|
Earned Multiplier – COO
| 120%
|
2023 LTI Equity Program
In addition, pursuant to the terms of his 2020 offer letter with the Company, Mr. Heimbigner was eligible to receive, for 2021, a discretionary bonus of $105,000 in cash or a restricted stock grant with a value of $200,000 with one-year vesting. Based on the foregoing performance,April 2023, the Compensation Committee approved such discretionary bonusthe 2023 LTI Equity Program for our NEOs for awards under the 2020 Stock Plan.
The following table sets forth the grant values for the 2023 LTI equity awards to our NEOs. The 2023 aggregate grant values for each of our NEOs were denominated in PRSUs (75% of grant value) and Mr. Heimbigner received a cash payment.RSUs (25% of grant value).
| | | | | | | | |
| Name | 2023 Annual PRSU Award(1) ($) | 2023 Annual RSU Award ($) |
Matthew Ehrlichman (1) | 4,125,000 | 1,375,000 |
| Shawn Tabak | 292,500 | 97,500 |
Matthew Neagle (1) | 1,950,000 | 650,000 |
Accordingly, the following Short Term Incentive (discretionary) bonusesGrant Values. The 2023 grant values were earneddenominated in 2021.
| | |
Name | Earned Bonus (% of Base Salary) | Earned Bonus ($) |
Matthew Ehrlichman | 137 | 822,840 |
Matthew Neagle | 120 | 433,876 |
Martin Heimbigner | ― | 105,000 |
Subject to agreement otherwise, an employee must be employedRSU awards and PRSU awards based on the date the Compensation Committee approves the bonus payment in order to be eligible to receive such bonus. The Compensation Committee elected to have the Company pay the NEO discretionary bonuses, as well as the corporate plan bonuses, in cash (60%) and immediately vested RSUs (40%). Accordingly, Mr. Ehrlichman received $493,704 in cash, and 46,743 RSUs, and Mr. Neagle received $260,326 in cash, and 24,647 RSUs. The 2021 bonuses, along with Mr. Heimbigner’s discretionary bonus described above, were paid on April 8, 2022.
ADDITIONAL CFO BONUS PROGRAMS
In addition to the discretionary bonus referenced above, Mr. Heimbigner’s offer letter, as amended, provided for certain additional bonus opportunities in 2021 as set forth below.
| ■ | If the Company had more than two times unrestricted cash or cash equivalents relative to debt before the end60-trading day VWAP of 2021, Mr. Heimbigner was eligible earn an additional bonus, at his election, of $50,000 in cash or $100,000 in restricted stock subject to a one-year vesting period. Based on the Company’s performance, the Compensation Committee approved such discretionary bonus in full, which was paid in cash on April 8, 2022. |
| ■ | If the Company had M&A-related growth in EBITDA of $10 million or more in 2021, he was eligible earn an additional bonus, at his election, of $50,000 in cash or $100,000 in restricted stock subject to a one-year vesting period. Based on the Company’s performance, the Compensation Committee approved such discretionary bonus in full, which was paid in cash on April 8, 2022. |
| ■ | When Mr. Heimbigner’s offer letter was amended in February 2022, the amendment provided that he also was eligible for a special discretionary bonus of up to $100,000 related to the completion of the 2021 financial audit and related controls assessment process to the satisfaction of the Board. This special discretionary bonus was not approved. |
EQUITY AWARDS
The long-term incentive program for the NEOs in 2021 reflected our transition to a new public company, with multiple equity grant programs with different purposes, objectives and terms. Each of the equity awards was granted pursuant to the Porch Group, Inc. 2020 Stock Incentive Plan (the “2020 Stock Plan”).
2021 NEO Compensation Program Grants
The grant value of the annual equity awards for each NEO in 2021 that were considered by the Compensation Committee to be part of the 2021 NEO compensation program were as follows. As described below, the Together We Win Program will not be a continuing part of the Company’s annual compensation program.
| | | |
Name | Together We Win RSU
($) | 2021 Annual PRSU ($) | 2021 Annual RSU ($) |
Matthew Ehrlichman* | 6,000,000 | 3,750,000 | 1,250,000 |
Matthew Neagle | 2,200,000 | 800,000 | 1,200,000 |
Martin Heimbigner** | ― | ― | ― |
*
| This chart reflects certain PRSUs and RSUs which were granted to Mr. Ehrlichman in February 2022. and are not included in the 2021 Summary Compensation Table due to the timing of grant, although such awards were considered part of 2021 compensation by the Compensation Committee.
|
**
| See below for a description of Mr. Heimbigner’s new hire equity awards granted in 2020 and an additional equity award in 2021.
|
Each PRSU represents the right to receive, upon vesting and satisfaction of the performance conditions, one share of common stock of the Company. TheCompany ending on April 4, 2023 ($2.3592 per share), which was also used for all Company employees who were granted annual equity awards in April 2023.
Annual PRSU Awards. Earned PRSUs vest in one-third installmentsfor our NEOs will be based on theupon achievement of specified stockthree distinct performance metrics and corresponding weightings:
■Absolute Share Price CAGR (50% weighting): achievement of CAGR hurdles by maintaining (i) a 90-day average closing share price hurdles. Each such PRSU award vests ratably on a quarterly basis onwithin the first day18 months or (ii) 30-day average closing share price within the last 18 months, in each case during the three-year performance period ending April 7, 2026.
■Profit – Adjusted EBITDA (25% weighting): achievement of each quarter, beginning January 1, 2022, over a 30-month vesting period, provided the applicable NEO continues to serve as an employeeAdjusted EBITDA goal for 2025.
■Revenue (25% weighting): achievement of the Company through the applicable vesting date (subject to specified exceptions).Revenue goal for 2025.
The Compensation Committee determinedpre-approved an adjustment policy for Adjusted EBITDA and Revenue metrics, which includes adjustments for accounting changes, acquisitions, divestitures, certain catastrophic insurance events and, for Adjusted EBITDA, if the bonus is not paid in stock.
The Compensation Committee established threshold, target and maximum levels of Adjusted EBITDA and Revenue performance for each of the metrics of 50%, 100% and 200% of target, respectively, with interpolation in-between. No PRSUs are earned for a performance metric if actual performance is below the threshold level for the respective performance metric. The Committee also retains negative discretion to use PRSUs with specifiedreduce the performance achievement or payouts for any reason.
The initial stock price hurdles because such award vehicle is transparentfor the Absolute Share Price CAGR of $2.3592 was established using a 60-trading day VWAP. The threshold, target and directly aligned with stockholder value. Further,maximum goals and corresponding payouts for the Absolute Share Price CAGR are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Threshold | Target | Maximum |
| Performance Metric | Weighting | Goal | Payout | Goal | Payout | Goal | Payout |
3 Year CAGR (4/7/2023 to 4/7/2026) | 50% | $3.59
15% CAGR | 50% | $4.08
20% CAGR | 100% | $5.18
30% CAGR | 200% |
As permitted by SEC rules and regulations, we are not including the threshold, target and maximum goals for Adjusted EBITDA and Revenue.
Any earned PRSUs will vest upon the Compensation
Committee believed it wouldCommittee’s determination of actual performance following the applicable performance period. No payout will be
challengingmade if the individual participant is not employed as of the date of determination of actual performance. Additional information related to
establish effective long-term, objective financialvesting and
operational performance goals due totermination are included in the
Company’s recent business combination and its significant growth strategy (including through numerous acquisitions and related integration activities).applicable PRSU Award Agreements as well as the terms of their employment agreements.
Annual RSU Awards. Each RSU represents the right to receive, upon vesting, one share of common stock of the Company. EachThe 2023 RSU award vests ratablyawards will vest 25% on a quarterly basis onApril 5, 2024, and the first day of each quarter, beginning January 1, 2022,remaining RSUs will vest semi-annually in equal installments over the applicable vesting period (30next 36 months, with respectsubject to the 2021 Annual RSU award, and 36 monthsindividual’s employment or service with respect to the Together We Win Program award), provided the applicable NEO continues to serve as an employee of the Company throughas contemplated in the applicable vesting date (subject to specified exceptions).Together We Win Program. In September 2021, the Board approved an equity award pool with a grant value of $25.1 million (targeting the 75th percentile of compensation survey data provided by Willis Towers Watson) for a special equity award program for all Company employees on the payrollRSU Award Agreement as of August 1, 2021, referred towell as the “Together We Win Program.”terms of their employment agreements.
Recoupment Provisions. The $25.1 million equity award pool did not include the Company’s executive officers, as the Compensation Committee intended to align such program with its annual2023 LTI equity awards to the NEOs. The Together We Win Program was designed to bridge the Company’s transition from a private company compensation model to a public company compensation model and address retention and incentive objectives critical to the Company, and will not be a continuing part of the Company’s annual compensation program. The Together We Win Program equity awards consisted of RSUs that vest ratably on a quarterly basis over a 36-month vesting period. Mr. Heimbigner did not participate in the Together We Win Program, as he received a new hire equity award, along with other bonus opportunities pursuant to his offer letter.Recoupment Provisions. The annual equity awards and the Together We Win Program equity awards granted to thefor our NEOs in 2021 provide for a forfeiture of such awards (and a clawback of
specified proceeds to the extent such awards have vested) for any material breach of specified restrictive covenants related to companyCompany policies and additional restrictive covenants, including non-competition, non-solicitation, non-disparagement, assignment of proprietary rights and confidentiality. The award agreements contemplateAdditionally, the amendment of such provisions when the Company adopts a formal clawback policy applicable to the NEOs.2021 Equity Awards – CEO. The2023 LTI equity awards are subject to Mr. Ehrlichman in February 2022 were consideredclawback under our clawback policy. See "Compensation Discussion and Analysis—2023 NEO Compensation Determinations—Other Compensation Practices and Policies—Clawback Policy" below.
Difference Between Grant Value and Grant Date Fair Value. The target grant value of the 2023 LTI Equity Program (used by the Compensation Committee as partto determine the number of his 2021 compensation. In approving the equity incentive awards to Mr.
Ehrlichman for 2021 (including the annual equity grant value greaterRSUs and PRSUs) is materially more thanthe 75th percentile), the Compensation Committee recognized Mr. Ehrlichman’s significant leadership since the founding of Legacy Porch in 2011 and throughout our journey as a new public company, as well as his ongoing contributions to our long-term strategy and criticality to our current and future business.
| ■ | Together We Win Program (RSUs)– In February 2022, the Compensation Committee granted a Together We Win Program award with a grant value of $6.0 million. |
| ■ | Annual Equity Award (PRSUs) – In February 2022, the Compensation Committee granted PRSUs with a grant value of $3.75 million, representing 75% of the annual equity award. One-third of the PRSUs will be earned if, within 36 months following the grant date fair value of such awards computed in accordance with FASB ASC Topic 718 (value presented in the Summary Compensation Table).With respect to the target grant value: ■To mitigate any volatility of stock price, the 2023 grant values were denominated in RSU awards and PRSU awards based on the 60-trading day VWAP of a share of common stock of the Company ending on April 4, 2023. The VWAP was $2.3592 per share, compared to the closing price of a share of the Company’s common stock is greater than or equal to $26.00, $28.00 and $30.00, respectively, over any 20 trading days within any 30-consecutive trading day period. |
| ■ | Annual Equity Award (RSUs) – In February 2022, the Compensation Committee granted RSUs with a grant value of $1.25 million. |
| ■ | Post-Vesting Holding Period – The PRSUs and RSUs each have a minimum post-vesting holding period of three years from any applicable vesting date (the “Post-Vesting Holding Period”), which the Compensation Committee believes addresses long-term retention and supports alignment with long-term stockholder objectives. |
| ■ | Methodology to Calculate Equity Awards – Under applicable accounting rules, the grant date fair value of the PRSUs and RSUs reflect a discount for the Post-Vesting Holding Period. The $3.75 million grant value for the PRSUs was denominated in a number of PRSUs based on a Monte Carlo valuation (including the Post-Vesting Holding Period discount) in accordance with applicable accounting rules. The $1.25 million and $6.0 million grant values for the RSUs were denominated in a number of RSUs using the 30-trading day average closing price of the Company’s stock on the business day prior to the grant date, which average closing price was then discounted for the Post-Vesting Holding Period (aligned with the discount used under applicable accounting rules). |
The resulting annual grants were 883,740 PRSUs and 144,844 RSUs, and the resulting Together We Win Program grant was 695,249 RSUs.
2021 Equity Awards – COO. In approving the equity incentive awards to Mr. Neagle in 2021 (including the annual equity grant value greater than the 75th percentile), the Compensation Committee recognized Mr. Neagle’s significant leadership since joining as an executive of Legacy Porch in 2014 and throughout our journey as a new public company, as well as his ongoing contributions to our long-term strategy and criticality to our current and future business.
| ■ | Together We Win Program (RSUs)– In November 2021, the Compensation Committee granted a Together We Win Program award with a grant value of $2.2 million. |
| ■ | Annual Equity Award (PRSUs) – In November 2021, the Compensation Committee granted PRSUs with a grant value of $0.8 million, representing 40% of the annual equity award. One-third of the PRSUs will be earned if, within 36 months following the grant date, the closing price of a share of the Company’s common stock is greater than or equal to $24.00, $26.00 and $28.00, respectively, over any 20 trading days within any 30-consecutive trading day period. |
| ■ | Annual Equity Award (RSUs) – In November 2021, the Compensation Committee granted RSUs with a grant value of $1.2 million. |
| ■ | Methodology to Calculate Equity Awards – The PRSUs and RSUs awarded to Mr. Neagle do not have a Post-Vesting Holding Period. The $0.8 million grant value for the PRSUs was denominated in a number of PRSUs based on a Monte Carlo valuation in accordance with applicable accounting rules. The $1.2 million and $2.2 million grant values for the RSUs were denominated in a number of RSUs using the 30-trading day average closing price of the Company’s stock on the business day prior to the grant date. |
The resulting annual grants were 37,184 PRSUs and 61,542 RSUs, and the resulting Together We Win Program grant was 112,826 RSUs.
Awards Granted in 2021 In Connection With 2020 Compensation Programs– COO. Mr. Neagle also received additional equity awards in 2021 related to 2020 compensation programs, including an aggregate of 51,018 shares of vested common stock relating to the Legacy Porch transaction and cancellation of the Neagle Retention Agreement, as further described below, as well as options to purchase 12,643 shares of our common stock relatingon April 4, 2023 of $1.56 per share.
With respect to the grant date fair value:
■RSUs and the portion of PRSUs based on the achievement of financial performance metrics were valued using the closing price of common stock of the Company on Nasdaq on the grant date. The closing price of our common stock on April 6, 2023 (the last trading day prior to the grant date) was $1.37.
■The PRSUs subject to the achievement of share price CAGR goals during the three-year performance period (50% weighted) is considered an award subject to a market condition, and therefore the grant date fair value is based on a Monte Carlo simulation that utilizes significant assumptions that determine the probability of satisfying the market conditions as of the grant date. The 2023 PRSUs subject to a market condition had a grant date fair value of $0.49 per share value as of the grant date.
Partially offsetting the above impact is the second tranche of the May 2022 PRSU awards, which were granted to Messrs. Ehrlichman and Neagle in March 2023. The grant date fair value recognized is one-third of the PRSU award (the maximum to be earned on the second tranche). See “Compensation Discussion and Analysis—2023 NEO Compensation Determinations—Outstanding PRSUs During 2023” below.
For example, Mr. Ehrlichman for 2023:
■$5,500,000 (grant value) divided by $2.3592 (60-day VWAP) = 2,331,299 shares for equity awards
■2,331,299 x 0.75 (PRSU weighting) = 1,748,474 PRSUs
▪1,748,474 x 0.50 (CAGR weighting) = 874,237 PRSUs x $0.49 (grant date fair value per share under Monte Carlo) = $428,376 grant date fair value
▪1,748,474 x 0.25 (Adjusted EBITDA weighting) = 437,119 PRSUs x $1.37 (grant date fair value per share at closing price) = $598,853 grant date fair value
▪1,748,474 x 0.25 (Revenue weighting) = 437,118 PRSUs x $1.37 (grant date fair value per share at closing price) = $598,852 grant date fair value
■2,331,299 x 0.25 (RSU weighting) = 582,825 RSUs x $1.37 (grant date fair value per share at closing price) = $798,470 grant date fair value
■211,127 PRSUs (second tranche of 2022 PRSUs) x $0.10 (grant date fair value per share under Monte Carlo) = $21,113 grant date fair value
■Total grant date fair value is $428,376 + $598,853 + $598,852 + $798,470 + $21,113 = $2,445,664
Outstanding New Hire Award (RSUs) – Mr. Tabak
In connection with his appointment at the Company, Mr. Tabak received a one-time award of RSUs having an aggregate grant value of $900,000, which will be granted in four equal grant installments. The first tranche was granted in December 2020 milestone award program, scheduled to vest 25% upon grant, 25%2022 and vested on the first anniversary of the grant date. The second tranche was granted in December 2023, with the remaining installments to be granted in December 2024 and 2025, respectively, and such RSUs will vest in approximately two equal installments on the six month anniversary and one year anniversary from the grant date. The vesting of the RSUs is subject to Mr. Tabak’s continued employment on each vesting date, certain other terms of the award agreement and the 2020 Stock Plan.
Mr. Tabak was granted 230,860 RSUs on December 1, 2023, representing the second tranche of his new hire award. The number of RSUs was determined using the 60-day VWAP for the Company's common stock preceding the grant date, consistent with the Company's current practice.
Outstanding PRSUs During 2023
In May 2022, the Compensation Committee approved annual PRSU awards to Messrs. Ehrlichman and Neagle. The May 2022 PRSUs may be earned annually over a three-year period based on the attainment of two performance metrics: specified stock price hurdles (established using specified CAGRs of the VWAP of common stock) and the TTM Revenue Condition. The stock price hurdles must be achieved over any 20 trading dates within any 30 consecutive trading-day period during the applicable Achievement Period. The TTM Revenue Condition is set and measured in each year of the three-year period, and is based upon the Company’s actual annual revenue achieving at least 80% of the revenue as set forth in the Board-approved Company budget for the fiscal year that ends on December 31 of the applicable Achievement Period; provided, however, if the prior year TTM Revenue Condition is not satisfied, then the TTM Revenue Condition set for the next Achievement Period will be increased by the percentage difference between actual revenue and the TTM Revenue Condition for the previous Achievement Period before to the application of the 80% calculation for the current Achievement Period.
FASB ASC Topic 718 stipulates that a grant date is established when the underlying terms of the award are fixed. As a result, the grantdate and associated award grant date fair value are established annually over the three-year performance period because the TTM Revenue Condition for these PRSU awards is set on an annual basis.
The actual number of PRSUs that can be earned for the 2022 and 2023 Achievement Periods is between 50% in 36 equal monthly installments thereafter.Awards Granted in 2021 and 100% (subject to interpolation in-between) of one-third of the target PRSUs based upon the absolute share price achieving threshold and target amounts, provided that the
TTM Revenue Condition target also is met for the
respective Achievement Period. In Connection With Lowe’s Shares—COO. In July 2019, Mr.2024, up to 200% of the full target PRSUs may be earned. Any earned PRSUs only vest at the end of the three-year performance period, with a fixed payout cap of 200% of target PRSUs.
■First Tranche. On May 20, 2022, Messrs. Ehrlichman and Neagle purchased 316,586 shareswere each granted one-third of Series A-1 preferred stockthe full target PRSU award for the 2022 Achievement Period. The absolute share price threshold of $6.81 was not met and 83,414 shares of Series A preferred stock (the "Lowe's Shares," as further described herein) from Mr. Ehrlichmanactual revenue for a purchase price of $0.25 per share, which2022 was lower than the Company’s most recent valuationTTM Revenue Condition of fair market value, calculated$305 million by 9.5%, resulting in accordance with Section 409Ano PRSUs earned for the 2022 Achievement Period.
■Second Tranche. On March 16, 2023, Messrs. Ehrlichman and Neagle were granted 211,127 PRSUs and 70,375 PRSUs, respectively, for the 2023 Achievement Period representing one-third of the Code. The shares purchased from Mr. Ehrlichman were subjectfull target PRSU award. Since the TTM Revenue condition was not achieved for the 2022 Achievement Period, the budget for the 2023 Achievement Period was increased by 9.5% to repurchase rights in favordetermine the TTM Revenue Condition of $294.1 million, as required by the terms of the Company, withaward. For the repurchase right lapsing2023 Achievement Period, the absolute share price threshold of $7.83 was not met, resulting in no PRSUs earned.
■Third Tranche. On February 27, 2024, Messrs. Ehrlichman and Neagle were each granted the remaining one-third of the full target PRSU award for the 2024 Achievement Period. Up to 200% of the target PRSUs may be earned in the third tranche. Specifically, (i) 50% and 100% (subject to interpolation in-between) of one-third of the target PRSUs can be earned based upon continued servicethe absolute share price achieving threshold ($9.00) and target ($10.23) amounts, and (ii) 100% to 200% (subject to interpolation in-between) of the full target PRSU award can be earned if the absolute share price exceeds target ($10.23) and maximum ($13.01) amounts and the occurrence of a liquidity event in the form of an initial public offering or sale of the Company. The service-based repurchase right lapses with respect to 50% of the shares subject to the award on the second anniversary of the grant date and in 25% increments onTTM Revenue Condition is met, which for the third and fourth anniversaries of the grant date. Because the purchase price was below fair market value and Mr. Ehrlichman was deemed an “economic interest holder” under FASB ASC Topic 718 with respect to the Company, the award was deemed granted by the Company under FASB ASC Topic 718, although there was notranche is $368.8 million. Such grant date fair value associated with the award because the performance-based vesting condition was not deemed probable at the time Mr. Neagle purchased such shares. The liquidity event condition was satisfied upon the consummation of the business combination. In early 2021, the Board waived the Company’s repurchase right with respectis expected to these shares. The waiver of this right was treated as a material modification to these shares. As such, Mr. Neagle was also granted 24,404 RSUs that immediately vested to cover the tax consequence that resulted of the modification. The Lowe's shares are those shares of the Company Mr. Ehrlichman purchased from Lowe’s Companies, Inc.Awards Grantedbe significantly higher than in 2021 In Connection With 2020 Compensation Programs – CFO. On March 11, 2021, Mr. Heimbigner received 13,307 shares of restricted stock having a grant value of $200,000, related to 2020 compensation programs, which vested on the first anniversary of the business combination.
OTHER COMPENSATION PRACTICES AND POLICIES
Perquisites. The Company does not currently provide any material perquisites to the named executive officers.
401(k) Plan. The Company maintains,two years.
Employment Agreements and the named executive officers may participate in, a tax qualified 401(k) retirement savings plan. Each participant may contribute to the plan through payroll deductions, up to 90% of his or her salaryArrangements
CEO, CFO and bonus limited to the maximum allowed by the Internal Revenue Service regulations (for 2021, the limit was $19,500, with a maximum catch-up contribution of $6,500 for individuals turning 50 years of age or older during 2021). The Company does not provide matching contributions to any plan participants.COO Employment Arrangements.Agreements.
The Company entered into an offer letter with Mr. Heimbigner in connection with his appointment as CFO in June 2020. In February 2022, the Compensation Committee approved Company employment agreements with Mr.for Messrs. Ehrlichman and Neagle in February 2022 and for Mr. Neagle, as well as an amendment to Mr. Heimbigner’s offer letter.Tabak in November 2022. The Compensation Committee believes these arrangementagreements improve our ability to attract and retain qualified executives by establishing key terms of employment and providing severance benefits for long-term security. Certain of the provisions included in the employment agreements, including provisions regarding severance, were benchmarked against other companies in our peer group in order to provide reasonable, market-based provisions.terms.
The employment agreements and offer letter do not provide for guaranteed salary increases, earned bonuses or equity awards (except new hire awards in Mr. Heimbigner’s offer letter).awards. Further, the employment agreements provide for double-trigger equity acceleration upon a change in control for qualifying terminations, except in limited circumstances if any equity awards are not assumed in the transaction. The Compensation Committee believes that double-trigger equity acceleration benefits are appropriate to mitigate the uncertainty that executive officers can experience while the possibility of a change in control exists and incentivize them to remain with the Company through the change in control event. Mr. Heimbigner’s offer letter had a limited single-trigger acceleration related to the Legacy Porch transaction given his hiring within a short-time period of the planned transaction; the offer letter does not have any further single-trigger provisions. The severance benefits in such agreements are subject to compliance with restrictive covenants, including non-competition, non-solicitation, assignment of proprietary rights and confidentiality.
On April 1, 2022, the Company announced that it had mutually agreed with Mr. Heimbigner to begin a search for Mr. Heimbigner’s successor. In order to assist with an orderly transition of his responsibilities, Mr. Heimbigner is expected to remain as Chief Financial Officer for up to six months following the announcement. The Company will treat such separation for purposes of the applicable provisions of the Agreement as a “without cause” separation event, as described further below in "—Potential Payments Upon Termination or Change in Control." During such transition period, Mr. Heimbigner may be removed from his role at the Company only for “cause”.
See "Named Executive Officer"NEO Compensation Tables – Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table" and "—Potential Payments Upon Termination or Change in Control"Tables—Employment Agreements" for a description of the material terms of the employment agreements, including specified payments in connection with certain termination events and upon a change in control.
Other Compensation Practices and PoliciesStock Ownership. We strongly encourage our executives to hold an equity interest in our Company. Each of our executive officers is required to build and maintain their share ownership to the levels listed below within a period of five years of the later of March 23, 2021 (the effective date of the guidelines) or date the person became an executive officer subject to Section 16 of the Exchange Act.
■CEO: 6x current base salary
■Other NEOs: 2x current base salary
Shares owned outright (including shares from unvested time-based RSUs) will count toward the ownership goals, while shares associated with PRSU and unexercised stock options do not count toward compliance with the policy. In February 2023, the Compensation Committee amended our stock ownership guidelines to exclude unexercised vested stock options from counting toward the ownership goals.
We believe the stock ownership policy will contribute to the retention of shares by our executive officers. Messrs. Ehrlichman and Neagle have met their respective ownership levels, and it is anticipated that Mr. Tabak will be in compliance with the suggested ownership levels within the requisite time frame.In the event that the ownership goals are not achieved within the applicable five-year period, the executive officer would be required to hold 50% of net profits shares issued upon exercise of stock options or settlement of RSUs and PRSUs as applicable (in each case, after payment of any applicable withholding tax obligations) until the required ownership guideline is reached.
The stock ownership policy is in addition to any holding period requirements that may be required under any equity award.
Clawback Policy. As required by the listing standards adopted by Nasdaq as a result of SEC rulemaking, our Board recently adopted a new Policy for the Recovery of Erroneously Awarded Compensation. The policy provides that the Company must promptly recover specified incentive-based compensation that is received by our Section 16 officers (including our NEOs) on or after October 2, 2023, regardless of fault or misconduct, upon specified accounting restatements of the Company’s financial statement that resulted in such persons receiving an amount that exceeded the amount that would have been received if based on the restated financial statements. See “Corporate Governance, Structure and Responsibility–Policy for the Recovery of Erroneously Awarded Compensation (Dodd-Frank Compliant Policy)” for additional information.
Perquisites. The Company has agreed to reimburse Mr. Ehrlichman for personal legal expenses, not to exceed $60,000 annually, relating to Section 13 reporting to the SEC for his open market purchases of shares of the Company’s common stock. Otherwise, the Company does not currently provide any material perquisites to our NEOs.
401(k) Plan. The Company maintains, and our NEOs may participate in, the Porch 401(k) Plan, a tax qualified 401(k) retirement savings plan. Each participant may contribute to the plan through payroll deductions, up to 90% of such person’s salary and bonus limited to the maximum allowed by Internal Revenue Code regulations (for 2023, the limit was $22,500, with a maximum catch-up contribution of $7,500 for individuals turning 50 years of age or older during 2023). No employees received a Company match in 2023.
How Compensation is Determined
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| Role of CEO & Management | In determining the compensation of named executive officersNEOs other than Mr. Ehrlichman, the Compensation Committee receives input from Mr. Ehrlichman, the Compensation Committee's independent compensation consultant, and leadership in the human resources team.leadership. Mr. Ehrlichman, as founder and CEO of Porch, has the most involvement and knowledge of the Company’s business goals, strategies, performance, and overall effectiveness of the senior management team and each person’s individual contribution to the Company's performance. Other key leaders, most notably the Company’s VP of People and Mr. Neagle, as Porch’s COO, provide valuable context on the Company’s human capital management efforts as well as an understanding of peer and general market practices regarding compensation. Management also provides the Compensation Committee with information regarding the individual’s experience, current performance, potential for advancement and other subjective factors. No NEO participates in the final deliberations by the Committee with respect to such person’s own compensation. |
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| Role of Compensation Committee | As detailed further above, the Compensation Committee establishes the compensation of our NEOs after reviewing: individual performance for continuing NEOs; scope of role; skills, experience and criticality to the business; internal pay equity; benchmarking market data; and other factors it deems relevant. It also has used similar considerations to negotiate employment, transition and separation agreements with our NEOs.
The Compensation Committee works with management to set the agenda for its regular Committee meetings. The Compensation Committee also has special meetings and informal meetings and meets regularly in executive session to discuss compensation issues generally outside the presence of management, as well as to review the performance and determine the compensation of Mr. Ehrlichman. The Compensation Committee also regularly consults with outsideits external advisors, including its compensation consultant and legal counsel. |
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| Role of Independent Consultants | WTW. The Compensation Committee engaged WTW (formerly Willis Towers Watson) as its independent compensation consultant beginning in May 2021.2021 and continues to engage WTW. Representatives of WTW are invited to attend variousall Compensation Committee meetings. Among other matters for the 2021 NEO compensation program, WTW provided recommendations on an appropriate peer group, peer groupassisted in the evaluation of 2023 target compensation setting, and other benchmarking regarding target annual compensation for all named executive officers, as well as detailed information onreviewed and discussed alternatives for the design and implementation of the named executive officer compensation program.
Aon. In connection with the business combination with Legacy Porch, the2023 NEO Compensation Committee engaged Aon as its independent compensation consultant for executive compensation matters and approved the terms of such engagement. Representatives of Aon were invited to attend various Compensation Committee and Board meetings. Aon advised on the 2020 NEO compensation program, some elements of which continued to be effective for 2021, including the bonus arrangements set forth in Mr. Heimbigner’s offer letter.
Aon advised on certain matters considered by, and in certain cases approved by, the Compensation Committee related to the 2021 NEO compensation program. Among other matters, Aon provided recommendations on an appropriate peer group, peer group and other benchmarking regarding target annual compensation for the NEOs, as well as detailed information on alternatives for the design and implementation of the NEO compensation program. Aon’s engagement concluded in April 2021.
Program. |
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Stockholder Engagement and Annual Advisory Vote on NEO Compensation
Our stockholders’ views on corporate governance and NEO compensation are important to us and we value and use the feedback and insights that we receive from stockholders. Stockholders may contact the Board or the Compensation Committee at any time throughout the year to provide feedback on our NEO compensation. We provide our stockholders with the annual opportunity to cast an advisory vote on our NEO compensation through a Say on Pay proposal. At the 2023 annual meeting of stockholders, stockholders representing approximately 70% of the votes cast approved, on an advisory basis, the Say on Pay proposal.
Use
The Compensation Committee believes that a significant portion of the votes against such proposal was due to Mr. Ehrlichman’s reported compensation for 2022 including multiple years of equity awards, and
Other Market Datathe related accounting expense based on the nature of such awards, all as described in detail in the Company’s 2023 proxy statement. However, the Compensation Committee understands the importance of obtaining further feedback from stockholders and intends to oversee a broad stockholder outreach on compensation matters by the end of 2024.
Competitive Positioning
The following criteria were assessed in determining the 2023 peer group:
■Publicly-traded companies on a major U.S. national securities exchange, with no bankruptcies or de-listings within the last three years
■Within our relevant industries
■Within an appropriate revenue range (which was the primary factor analyzed)
Based on the advice of WTW and
theconsideration by Compensation Committee
members’ experience with compensation practices in other businesses,members of criteria relevant to peer group selection, the Compensation Committee determined
in May 2021for 2023 that the following companies were comparable for purposes of evaluating the
20212023 compensation program
and the target annual compensation for
named executive officers. The peer group consists of companies that are: | ■ | U.S. publicly-traded companies on a major national securities exchange, with no bankruptcies or de-listings within the last three years |
| ■ | Within our relevant industries, including internet and direct marketing retail, enterprise software, online services and insurance brokers |
| ■ | Within one-third to three times our revenue and market capitalization |
| ■ | Projecting reasonable revenue growth |
NEOs:
| 44
| 2022Proxy Statement
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| 2023 Peer Group |
■Agilysys, Inc. ■American Software, Inc. ■Blend Labs, Inc. ■Domo, Inc. ■Eventbrite, Inc. ■EverQuote, Inc. | ■Fathom Holdings Inc. ■Goosehead Insurance, Inc. ■HCI Group, Inc. ■Hippo Holdings, Inc. ■Lemonade, Inc. | ■Liquidity Services, Inc. ■LivePerson, Inc. ■Mitek Systems, Inc. ■NI Holdings, Inc. ■PROS Holdings, Inc. | ■PubMatic, Inc. ■QuinStreet, Inc. ■Quotient Technology, Inc. ■Root, Inc. ■TrueCar, Inc. |
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This was the first refresh of the peer group since Porch became a public company. While there was a preference to maintain prior peers that remained appropriate under the criteria to ensure stability in the compensation analysis, the following adjustments were made to the foregoing peer group for 2023 given the importance of including insurance companies with the identified revenue criteria to complement the application software/technology focused peer group. The Compensation Committee believes these adjustments better reflect the changes in our Company since going public, our growth strategy, and the recent change in our Global Industrial Classification Standard (GICS) code from (25502020) Internet and Direct Marketing Retail to (45103010) Application Software.
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| Removals for 2023 | Additions for 2023 |
■BRP Group, Inc. Agilysys,■CarParts.com, Inc.
■Model N, Inc. | | | |
| ■ThredUp Inc. ■Trivago N.V. Fathom■SemRush Holdings, Inc.
| ■Blend Labs, Inc ■HCI Group, Inc. PubMatic,■Hippo Holdings, Inc.
■Lemonade, Inc. | ■LivePerson, Inc. ■ SEMrushNI Holdings, Inc.
■Root, Inc. |
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Goosehead Insurance, Inc.
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Liquidity Services, Inc.
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Quotient Technology Inc.
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In addition to2023, the Compensation Committee reviewed proposed target compensation against the peer group median for base salary and target total cash compensation, and the 75th percentile of the peer group for annual long-term equity awards.
Compensation Policies and Practices Risk Assessment
Consistent with SEC disclosure requirements, the Compensation Committee,
also utilized general industrywith the assistance of WTW and
high tech survey data provided by WTW in its benchmarking analysis. Formanagement, has assessed compensation policies and practices for Company employees and concluded that the
Together We Win Program,risks arising from such policies and practices are not reasonably likely to have a material adverse effect on the
Compensation Committee further utilized WTW data regarding off-cycle, retention equity awards among companies in the S&P Small-Cap 600 Index.Company.
Other Equity-Related Policies Timing Ofof Equity-Based Grants The Compensation Committee and the Board do not coordinate the timing of equity-based grants to theour NEOs with the release of material non-public information. However, equity-basedAs a maturing public Company, our annual LTI awards are typically
granted early in the second quarter of the year following our Company-wide annual review cycle and to coincide with the timing of grants
in 2021 were sporadic due to our transition as a new public company, as well as due to the
changes inrest of the
Company’s compensation consultantemployee population. Off-cycle monthly awards may be made if our CEO and
the membership of the Compensation Committee
described above. As partdeem it necessary for new hires, or in other special or unique circumstances. The effective date for an off-cycle award is the first business day of the
on-going design efforts for 2022, the Compensation Committee expects to finalize an annual equity program for the NEOs, with such grants to be made within 30 daysmonth following the
announcementemployee's hire date. In particular, the grant date of the
fourth quarter earningssecond tranche of
each year during an open window period.the 2022 PRSUs was on March 16, 2023, following the establishment of the TTM Revenue Condition based on revenue achieved in 2022. We use the VWAP of a share of Company’s common stock when granting annual LTI awards to mitigate any volatility of stock price.
Tax Mattersno excise tax gross-ups
No Excise Tax Gross-Ups
If a company makes “parachute payments,” Section 280G of the
Internal Revenue Code prohibits the company from deducting the portion of the parachute payments constituting “excess parachute
payments”payments,” and Section 4999 of the
Internal Revenue Code imposes on the payee a 20% excise tax on the excess parachute payments. For this purpose, parachute payments generally are defined as payments to specified persons that are contingent upon a change in control in an amount equal to or greater than three times the person’s base amount (i.e., the five-year average Form W-2 compensation). The excess parachute payments, which are nondeductible and subject to a 20% excise tax, equal the portion of the parachute payments that exceeds one times the payee’s base amount. If a covered employee receives excess parachute payments in any year, the $1 million deduction limitation applicable to the covered employee for such year under Section 162(m) of the
Internal Revenue Code is reduced (but not below zero) by the amount of the excess parachute payments.
Mr. Heimbigner’s offer letter,
The CEO, CFO and COO employment agreements and the Company’s equity incentive plans (including the award agreements)
, and the employment agreements with Mr. Ehrlichman and Mr. Neagle (beginning in February 2022) may entitle
theour NEOs to receive payments in connection with a change in control that may result in excess parachute payments. However, the Company is not obligated to pay any tax gross-ups with respect to the excise tax imposed on any person who receives excess parachute
payments
payments.
COMPENSATION COMMITTEE REPORT
The following reportReport of the Board on executive compensation shall not be deemed to be “soliciting material” or to be “filed” with the SEC nor shall this information be incorporated by reference into any future filing made with the SEC, whether made before or after the date hereof and irrespective of any general incorporation language in such filing.
Compensation Committee
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our
annual reportAnnual Report on Form 10-K for the year ended December 31,
2021.
Submitted by the Compensation Committee of the Board*
Maurice Tulloch, Chair
Asha Sharma
* On March 17, 2022, Mr. Tulloch was appointed Chair, Compensation Committee, and member2023.
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| Submitted by the Compensation Committee of the Board: |
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| Sean Kell, Chair |
| Maurice Tulloch |
| Camilla Velasquez |
This report of the Compensation Committee
since September 20211. Mr. Kell joineddoes not constitute soliciting material and will not be deemed filed, incorporated by reference into or a part of any other filing by the
Compensation Committee and did not participate inCompany (including any future filings) under the
discussionsSecurities Act of 1933, as amended, or
recommendations regarding the
Compensation Discussion and Analysis.
Exchange Act, except to the extent the Company specifically incorporates such report by reference therein. | 46
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| 52 | 20222024Proxy Statement
|
2021NEO COMPENSATION TABLES
2023 Summary Compensation Table The following table shows information regarding the compensation of the named executive officersour NEOs for services earned during the fiscal year ended December 31, 202,2023, and, to the extent required by SEC disclosure rules, the fiscal years ended December 31, 20202022 and 2019.2021.
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| | | | | | | | | | Stock | | Option | | All Other | | | | |
| Name and Principal Position | | Year | | Salary($)(1) | | Bonus($)(2) | | Awards($)(3)(4) | | Awards($)(3) | | Compensation | | Total | | Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total |
Matt Ehrlichman | | 2021 | | $ | 450,000 | | $ | 822,840 | | $ | — | | $ | — | | $ | — | | $ | 1,272,840 | |
Chief Executive Officer and Chairman | | 2020 | | | 361,872 | | | 1,500,000 | | | 14,964,212 | | | 40 | | | 3,322 | | | 16,829,446 | |
| | 2019 | | | 1 | | | — | | | — | | | — | | | 2,665 | | | 2,666 | |
Marty Heimbigner | | 2021 | | | 350,000 | | | 205,000 | | | 251,103 | | | — | | | — | | | 806,103 | |
| 2021 | |
| Shawn Tabak | |
Chief Financial Officer | | 2020 | | | 161,887 | | | 100,000 | | | — | | | 837,136 | | | — | | | 1,099,023 | |
| | 2019 | | | — | | | — | | | — | | | — | | | — | | | — | |
Matthew Neagle | | 2021 | | | 348,488 | | | 433,876 | | | 8,866,323 | | | 89,888 | | | — | | | 9,738,575 | |
Chief Operating Officer | | 2020 | | | 232,610 | | | 500,000 | | | 275,888 | | | 72,110 | | | — | | | 1,080,608 | |
| | 2019 | | | 295,577 | | | — | | | — | | | — | | | — | | | 295,577 | |
| 2021 | |
(1) | Reflects base salary earned during the relevant fiscal year. In October 2021, Mr. Ehrlichman's base salary increased from $420,000 to $600,000 per year. In March 2021, Mr. Neagle's base salary increased from $310,000 to $360,000 per year, and in October 2021 increased to $400,000 per year. There were no changes to Mr. Heimbigner's base salary in 2021. |
(2) | Reflects the total value of Short Term Incentive Awards bonuses that were paid to named executive officers for performance in the relevant fiscal year (2021), which were paid in cash (40%) and immediately vested RSUs (60%). Mr. Ehrlichman received $493,704 in cash and 46,743 immediately vested RSUs with a grant value of $329,136; Mr. Neagle received $260,326 in cash and 24,647 immediately vested RSUs with a grant value of $173,550; and Mr. Heimbigner received $105,000. See the section above titled “Compensation Discussion and Analysis—2021 Compensation Determinations—Short Term Incentive Awards” for a description of the 2021 cash bonuses that were paid in 2022. Also reflects total value of awards pursuant to Mr. Heimbigner’s Offer Letter. See the section above titled “Compensation Discussion and Analysis—2021 Compensation Determinations—Short Term Incentive Awards-Additional CFO Bonus Programs” for a description of the additional 2021 cash bonuses that were approved by the Board and paid in 2022 to Mr. Heimbigner. |
(3) | Includes aggregate grant date fair value of awards granted in the year indicated, computed in accordance with FASB ASC Topic 718. The grant date fair value of awards reflects an estimate as of the grant date and may not correspond to the actual value that will be realized by the named executive officers. Stock Awards consist of RSUs and PRSUs valued using the closing price of Porch common stock on the NASDAQ Stock Market on the grant date and, in the case of the PRSUs, based on the probable achievement of the underlying performance goals as of the date of grant. Under FASB ASC Topic 718, the vesting condition related to the PRSUs is considered a market condition and not a performance condition. The PRSUs were valued using a Monte Carlo simulation model that utilizes significant assumptions, including volatility, that determine the probability of satisfying the market condition. Option Awards consist of stock options valued using a Black-Scholes model. For details regarding the assumptions used to calculate these amounts in 2021, see footnote 4 to the table below entitled, "2021 Grants of Plan-Based Awards." |
(4) | Included in the Stock Awards column for Mr. Neagle is $2,512,647 of incremental fair value associated with the vesting of Mr. Neagle’s Lowe’s Shares, as described below, in 2021. In July 2019, Mr. Neagle purchased 316,586 shares of Series A-1 preferred stock and 83,414 shares of Series A preferred stock (the "Lowe's Shares") from Mr. Ehrlichman for a purchase price of $0.25 per share, which was lower than the Company’s most recent valuation of fair market value, calculated in accordance with Section 409A of the Code. The shares purchased from Mr. Ehrlichman were subject to repurchase rights in favor of the Company, with the repurchase right lapsing upon continued service and the occurrence of a liquidity event in the form of an initial public offering or sale of the Company. The service-based repurchase right lapses with respect to 50% of the shares subject to the award on the second anniversary of the grant date and in 25% increments on the third and fourth anniversaries of the grant date. Because the purchase price was below fair market value and Mr. Ehrlichman was deemed an “economic interest holder” under FASB ASC Topic 718 with respect to the Company, the award was deemed granted by the Company under FASB ASC Topic 718, although there was no grant date fair value associated with the award because the performance-based vesting condition was not deemed probable at the time Mr. Neagle purchased such shares. The liquidity event condition was satisfied upon the consummation of the business combination. In early 2021, the Board waived the Company’s repurchase right with respect to these shares. The Lowe's shares are those shares of the Company Mr. Ehrlichman purchased from Lowe’s Companies, Inc. |
(1)Reflects base salary during the relevant fiscal year. Mr. Ehrlichman's 2022 base salary is higher than his 2023 base salary because during 2022 he received an increase effective October 1, 2021. For a discussion regarding changes in base salary, see “Compensation Discussion and Analysis—2023 NEW Compensation Determinations—Base Salary.”
(2)Includes aggregate grant date fair value of awards granted in the year indicated computed in accordance with FASB ASC Topic 718. The grant date fair value of awards reflects an estimate as of the grant date and may not correspond to the actual value that will be realized by our NEOs. Option Awards consist of stock options valued using a Black-Scholes model. Stock Awards consist of RSUs and PRSUs. RSUs and the portion of PRSUs based on the achievement of financial performance metrics were valued using the closing price of common stock of the Company on Nasdaq on the grant date. The portion of PRSUs based on share price performance, considered a market condition under FASB ASC Topic 718, were valued based on the probable achievement of the underlying market conditions as of each grant date using a Monte Carlo simulation model that utilizes significant assumptions, including volatility, that determine the probability of satisfying the market conditions. The grant date fair value of PRSU awards granted in May 2022 in the Summary Compensation Table for 2022 and 2023 is determined under FASB ASC Topic 718, which stipulates that a grant date is established when the underlying terms of the award are fixed. Because the revenue condition for the PRSU awards granted in May 2022 are set on an annual basis, the grant date and associated award grant date fair value are established annually over the three-year performance period. The grant date fair value in 2022 and 2023 is impacted by the ability to earn only up to one-third of the target PRSU.
(3)Reflects payouts under the 2023 Bonus Plan. For purposes of the 2023 Bonus Plan including the Permitted Adjustments, our full year Revenue was approximately $430 million and Adjusted EBITDA (Loss) as a percentage of Revenue was (10)%. On a combined basis this performance achievement resulted in the maximum payout for the full year measurement period. Our second half Revenue was approximately $244 million and Adjusted EBITDA as a percentage of Revenue was 8.4% resulting in a maximum payout for the half-year measurement period. This level of performance resulted in each of our NEOs earning 200% of their respective target bonuses under the 2023 Bonus Plan.
(4)In connection with the additional SEC reporting and filing requirements for Mr. Ehrlichman’s purchase of shares in the Company, the Company has agreed to reimburse Mr. Ehrlichman for his personal legal expenses, not to exceed $60,000 annually. In 2023, the Company reimbursed Mr. Ehrlichman $21,110 for personal expenses relating to legal services received for SEC reporting and filings that relate to his purchase of shares in the Company.
20212023 Grants of Plan-Based Awards
The table below includes information regarding
grantsawards of
2023 Bonus Plan, RSUs
PRSUs and
stock optionsPRSUs to our
Named Executive OfficersNEOs during the fiscal year ended December 31,
2021. | | | | | | | | | | | | | | | | |
Name | | Grant Date | | | Threshold (#) | Target (#) | Maximum (#) | | | | | | | | | |
Matthew Ehrlichman | | — | | | | | | | — | | — | | — | | — | |
Matthew Neagle | | 3/11/21 | | | | | | | 26,614 | | | | | | 502,206 | |
| | 3/26/21 | | | | | | | 24,404 | | | | | | 408,767 | |
| | 3/26/21 | | | | | | | 187,905 | | | | | | 2,512,647 | |
| | 4/22/21 | | | | | | | | | 12,643 | | 13.23 | | 89,888 | |
| | 11/16/21 | | | 11,990 | 24,376 | 37,184 | | | | | | | | 968,420 | |
| | 11/16/21 | | | | | | | 61,542 | | | | | | 1,579,168 | |
| | 11/16/21 | | | | | | | 112,826 | | | | | | 2,895,115 | |
Martin Heimbigner | | 3/11/21 | | | | | | | 13,307 | | | | | | 251,103 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | |
| Name | Grant Date | Type of Award | Threshold ($) | Target ($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) | | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | Grant Date Fair Value of Stock Awards ($)(3) |
| Matt Ehrlichman | 3/16/23 | PRSU | | | | | | 211,127 | | 211,127 | | (4) | | 21,113 | |
| | BP | 300,000 | | 600,000 | | 1,200,000 | | | | | | | | |
| 4/7/23 | PRSU | | | | | 437,119 | | 874,237 | | 1,748,474 | | (5) | | 428,376 | |
| 4/7/23 | PRSU | | | | | 218,560 | | 437,119 | | 874,238 | | (6) | | 598,853 | |
| 4/7/23 | PRSU | | | | | 218,559 | | 437,118 | | 874,236 | | (7) | | 598,852 | |
| 4/7/23 | RSU | | | | | | | | | 582,825 | | 798,470 | |
| Shawn Tabak | 12/1/23 | RSU | | | | | | | | | 230,860 | | 387,845 | |
| | BP | 97,500 | | 195,000 | | 390,000 | | | | | | | | |
| 4/7/23 | PRSU | | | | | 30,996 | | 61,991 | | 123,982 | | (5) | | 30,375 | |
| 4/7/23 | PRSU | | | | | 15,498 | | 30,996 | | 61,992 | | (6) | | 42,465 | |
| 4/7/23 | PRSU | | | | | 15,498 | | 30,996 | | 61,992 | | (7) | | 42,465 | |
| 4/7/23 | RSU | | | | | | | | | 41,328 | | 56,619 | |
| Matthew Neagle | 3/16/23 | PRSU | | | | | — | 70,375 | | 70,375 | | (4) | | 7,038 | |
| | BP | 208,943 | | 417,885 | | 835,770 | | | | | | | | |
| 4/7/23 | PRSU | | | | | 206,638 | | 413,275 | | 826,550 | | (5) | | 202,505 | |
| 4/7/23 | PRSU | | | | | 103,319 | | 206,638 | | 413,276 | | (6) | | 283,094 | |
| 4/7/23 | PRSU | | | | | 103,319 | | 206,638 | | 413,276 | | (7) | | 283,094 | |
| 4/7/23 | RSU | | | | | | | | | 275,517 | | 377,458 | |
(1) | Amount reported in this column represent PRSUs granted to Mr. Neagle which will be earned if the Company achieves specified stock price hurdles over a 36-month period, beginning on the date of grant. |
(2) | Mr. Ehrlichman did not receive any RSU grants in 2021. However, on February 10, 2022, he received a discretionary grant of 144,844 RSUs and 883,740 PRSUs, relating to 2021 performance. See the section above titled "Compensation Discussion and Analysis-Compensation Program Elements-Equity" for a description of the 2021 equity that was granted in 2022. Mr. Neagle received RSU grants under the 2020 Stock Plan on March 11, 2021 for 26,614 shares (in exchange for cancellation of the Neagle Retention Agreement), and March 26, 2021 for 24,404 shares (supplement Lowe's Shares to cover the tax consequence relating to the lapse of the repurchase right with respect to these shares), respectively, both of which vested 100% on the date of grant, and on November 16, 2021, for 61,542 shares, which vests every quarter over 30 months, and 112,826 shares, which vests every quarter over 36 months. Mr. Heimbigner received a restricted stock grant on March 11, 2021, for 13,307, which vested 100% on the first anniversary of the business combination. |
(3) | Messrs. Ehrlichman and Heimbigner did not receive any stock option awards in 2021. The stock options awarded to Mr. Neagle on April 22, 2021 have a ten-year term and vest 25% on the first anniversary of the grant date and then monthly in equal installments commencing on the first anniversary of the grant date. |
(4) | Represents the aggregate grant date fair value of awards granted in 2021, computed in accordance with FASB ASC Topic 718. The grant date fair value of awards reflects an estimate as of the grant date and may not correspond to the actual value that will be recognized by the named executive officers. RSUs granted during the year were valued based on the closing stock price on the date of grant, or in the case of the Lowe’s Shares, the 187,905 RSUs were valued based on the closing stock price on the date of the modification (March 26, 2022). Stock options awarded to Mr. Neagle on April 22, 2021 were valued using a Black-Scholes model. PRSUs granted to Mr. Neagle on November 16, 2021 were valued using a Monte Carlo model. The Black-Scholes model incorporates various other assumptions including expected volatility, expected term and risk-free interest rates. For stock and option awards granted to Mr. Neagle during 2021, the Black-Scholes and Monte Carlo pricing model assumptions were as follows: |
(1)Represents potential threshold, target and maximum payouts under the 2023 Bonus Plan for Messrs. Ehrlichman, Tabak and Neagle. The bonus opportunity under the 2023 Bonus Plan can be earned based upon a performance grid specifying the combined achievement levels of two objective Company performance goals, Revenue and Adjusted EBITDA (Loss) as a percentage of Revenue. The performance goals at target are based upon the Company’s 2023 budget, subject to an approved adjustment policy by the Compensation Committee. This performance-based 2023 bonus program has a threshold and maximum bonus opportunity of 50% and 200% of the applicable target bonus. The Committee has negative discretion to reduce the bonus for any reason.
(2)The RSU awards granted on April 7, 2023, to Messrs. Ehrlichman, Tabak and Neagle will vest 25% on April 5, 2024, and thereafter semiannually in equal increments over the next 36 months, subject to each individual’s employment or service with the Company in accordance with applicable award and employment agreements. The RSU award granted to Mr. Tabak on December 1, 2023, represents the second installment of his one-time new hire award having an aggregate grant date value of $900,000 that is being granted in four installments. This second installment vests semiannually over one year, subject to Mr. Tabak's continued employment in accordance with his award and employment agreements.
(3)Each amount reported in this column represents the grant date fair value of the applicable award which was determined pursuant to FASB ASC Topic 718. RSUs granted during the year and the portion of PRSUs granted during the year based on financial performance metrics were valued based on the closing stock price on the date of grant. The portion of PRSUs based on market conditions were valued based on the probable achievement of the underlying market conditions as of the date of grant using a Monte Carlo simulation. The actual amounts that will be received by our NEOs with respect to these market and/or performance-based awards will be determined at the end of the performance period based upon our actual performance, which may differ from the performance that was deemed probable at the date of grant. The Monte Carlo pricing model assumptions were as follows: | | | | | | | | | | | | | | |
| Grant Date | Expected Term (years) | Risk-Free Interest Rate
(%) | Expected Volatility (%) | Assumed Annual Dividend Rate (% of grant date closing price) |
| 3/16/2023 | 0.8 | 4.6 | 100.0 | | 0 | |
| 4/7/2023 | 3.0 | 3.7 | | 95.0 | | 0 | |
(4)This amount represents the grant date fair value of the second tranche of the May 20, 2022 PRSU awards granted to each of Messrs. Ehrlichman and Neagle for the 2023 Achievement Period, representing one-third of the full target PRSU award. The actual number of PRSUs that can be earned for the 2023 Achievement Period is between 50% and 100% based upon the Absolute Share Price achieving threshold and target amounts, provided that the TTM Revenue Condition target is also met for the 2023 Achievement Period. The March 16, 2023 grant date reflects the timing of when all the definitive terms of the award were known, i.e., the determination of the 2023 TTM Revenue Condition. Actual revenue for 2022 was lower than the TTM Revenue Condition by 9.5%, resulting in no PRSUs being earned by Messrs. Ehrlichman and Neagle for the 2022 Achievement Period. Therefore, the budget for 2023 Achievement Period was increased by 9.5% to determine the TTM Revenue Condition representing 80% of the budget. For the
| | | | | |
|
| | | | | |
| Grant Date | Expected Term (years) | Risk-Free Interest Rate (%) | Expected Volatility (%) | Assumed Annual Dividend Rate (% of grant date closing price) |
Matthew Neagle | 4/22/21 | 5.63 | 0.94 | 60.2 | 0 |
| 11/16/21 | 3.00 | 0. | 65.0 | 0 |
| 48
| | | | |
| 54 | 20222024Proxy Statement
|
Achievement Period in 2024, each of Messrs. Ehrlichman and Neagle can earn between 100% to 200% of the full target PRSU award if the Absolute Share Price exceeds target and maximum amounts and the TTM Revenue Condition target is met.
(5)This amount represents the grant date fair value of the portion of the PRSU awards granted to each of our NEOs in April 2023 that may be earned and vested based on achieving absolute share price CAGR hurdles. The CAGR hurdles can be achieved by maintaining a 90-day average closing share price within the first 18 months or 30-day average closing share price within the last 18 months of the three-year performance period ending April 5, 2026. The threshold, target and maximum levels of CAGR performance of 15%, 20% and 30% yield 50%, 100% and 200% of target, respectively.
(6)This amount represents the grant date fair value of the portion of the PRSU awards granted to each of our NEOs in April 2023 that may be earned and vested based on achieving Adjusted EBITDA goals for 2025.
(7)This amount represents the grant date fair value of the portion of the PRSU awards granted to each of our NEOs in April 2023 that may be earned and vested based on achieving Revenue goals for 2025.
Outstanding Equity Awards at 20212023 Fiscal Year-End The following table presents information regarding the outstanding stock options and stock awards held by each of the named executive officersour NEOs as of December 31, 2021.2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Name | Grant
Date | Vesting
Commencement
Date | Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) | | Option
Exercise
Price
($) | Option
Expiration
Date | | Number
of
Shares or
Units of
Stock
That
Have Not
Vested
(#) | | Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#) | | Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($) | |
| Matthew Ehrlichman | 3/23/2017 | 3/22/2017 | 281,856 | (1) | — | | 1.92 | | 3/22/2027 | | — | | — | | | — | | — | | |
| 3/23/2017 | 5/19/2017 | 281,856 | (1) | — | | 1.92 | | 3/22/2027 | | — | | — | | | — | | — | | |
| 10/18/2018 | 9/12/2018 | 1,328,468 | (1) | — | | 2.73 | | 10/17/2028 | | — | | — | | | — | | — | | |
| 6/5/2020 | 3/31/2020 | 21 | (2) | 2 | (2) | 3.30 | | 6/4/2030 | | — | | — | | | — | | — | | |
| 2/10/2022 | 10/1/2021 | — | | — | | — | | — | | 28,969 | (5) | 89,225 | | (9) | — | | — | | |
| 2/10/2022 | 10/1/2021 | — | | — | | — | | — | | 231,750 | (6) | 713,790 | | (9) | — | | — | | |
| 2/10/2022 | 10/1/2021 | — | | — | | — | | — | | — | | — | | | 883,740 | (10) | 2,721,919 | | (9) |
| 5/20/2022 | 4/1/2022 | — | | — | | — | | — | | 131,969 | (7) | 406,465 | | (9) | — | | — | | |
| 3/16/2023 | 3/16/2023 | — | | — | | — | | — | | — | | — | | | 211,127 | (11) | 650,271 | | (9) |
| 4/7/2023 | 4/1/2023 | — | | — | | — | | — | | 582,825 | (7) | 1,795,101 | | (9) | — | | — | | |
| 4/7/2023 | 4/7/2023 | — | | — | | — | | — | | — | | — | | | 1,748,474 | (13) | 5,385,300 | | (9) |
| Matthew Neagle | 6/6/2018 | 4/1/2018 | 264 | (1) | — | | 2.07 | | 6/5/2028 | | — | | — | | | — | | — | | |
| 6/6/2018 | 4/1/2018 | 291 | (1) | — | | 2.07 | | 6/5/2028 | | — | | — | | | — | | — | | |
| 8/24/2018 | 7/1/2018 | 1,278 | (1) | — | | 2.73 | | 8/23/2028 | | — | | — | | | — | | — | | |
| 6/5/2020 | 3/1/2020 | 5,135 | (3) | 734 | (3) | 3.30 | | 6/4/2030 | | — | | — | | | — | | — | | |
| 6/5/2020 | 3/1/2020 | 6,199 | (2) | 846 | (2) | 3.30 | | 6/4/2030 | | — | | — | | | — | | — | | |
| 4/22/2021 | 12/31/2020 | 10,656 | (4) | 1,987 | (4) | 13.23 | | 4/21/2031 | | — | | — | | | — | | — | | |
| 11/16/2021 | 10/1/2021 | — | | — | | — | | — | | 37,609 | (5) | 115,836 | | (9) | — | | — | | |
| 11/16/2021 | 10/1/2021 | — | | — | | — | | — | | 12,309 | (6) | 37,912 | | (9) | — | | — | | |
| 11/16/2021 | 10/1/2021 | — | | — | | — | | — | | — | | — | | | 37,184 | (12) | 114,527 | | (9) |
| 5/20/2022 | 4/1/2022 | — | | — | | — | | — | | 131,969 | (7) | 406,465 | | (9) | — | | — | | |
| 3/16/2023 | 3/16/2023 | — | | — | | | | | — | | — | | | 70,375 | (11) | 216,755 | | (9) |
| 4/7/2023 | 4/1/2023 | — | | — | | | | | 275,517 | (7) | 848,592 | | (9) | — | | — | | |
| 4/7/2023 | 4/7/2023 | — | | — | | — | | — | | — | | — | |
| 826,551 | (13) | 2,545,777 | | (9) |
| Shawn Tabak | 4/7/2023 | 4/1/2023 | — | | — | | — | | — | | 41,328 | (7) | 127,290 | | (9) | — | | — | | |
| 4/7/2023 | 4/7/2023 | — | | — | | — | | — | | — | | — | | | 123,983 | (13) | 381,868 | | (9) |
| 12/1/2023 | 12/1/2023 | — | | — | | — | | — | | 230,860 | (8) | 711,049 | | (9) | — | | — | | |
(1)This option vested 25% on the first anniversary of the vesting commencement date and the remaining in subsequent 1/36th monthly increments.
(2)This option vests 25% on the vesting commencement date, 25% on the first anniversary of the vesting commencement date and the remaining in subsequent 1/36th monthly increments.
(3)This option vests 25% on the six month anniversary of the vesting commencement date, 25% in monthly increments over the next six months, another 25% on the first anniversary of the vesting commencement date and the remaining 25% of options vest in subsequent 1/36th monthly increments.
(4)This option vests 25% on the vesting commencement date, 25% on the first anniversary of the vesting commencement date and the remaining in subsequent 1/35th monthly increments.
(5)This stock award vests in 1/10th increments every quarter over 30 months.
(6)This stock award vests in 1/12th increments every quarter over 36 months.
(7)This stock award vests 25% on the first anniversary of the vesting commencement date and the remaining semiannually over three years.
(8)This stock award vests semiannually over one year.
(9)This value is calculated by multiplying the number of shares subject to this award by $3.08, the closing stock price of a share of Company common stock on December 31, 2023.
(10)This stock award vests in one-third installments if certain stock price triggers are achieved within 36-months following the grant as follows: (i) one-third (1/3) of the shares will vest if the closing price of a share of Company common stock is greater than or equal to $26.00 over 20 trading days within a 30-consecutive trading day period; (ii) one-third (1/3) of the shares will vest if the closing price of a share of Company common stock is greater than or equal to $28.00 over any 20 trading days within any 30-consecutive trading day period; and (iii) the remaining one-third (1/3) of the shares will vest if the closing price of a share of Company common stock is greater than or equal to $30.00 over any 20 trading days within any 30-consecutive trading day period.
(11)This stock award represents the second tranche of the May 20, 2022 PRSU award for the 2023 Achievement Period, representing one-third of the full target PRSU award. The following table does not include Earnout Shares (as defined below)actual number of PRSUs that Messrs. Ehrlichmancan be earned for the 2023 Achievement Period is between 50% and Neagle received pursuant to100% based upon the Absolute Share Price achieving threshold and target amounts, provided that the TTM Revenue Condition target is also met for the 2023 Achievement Period. The March 16, 2023 grant date reflects the timing of when all the definitive terms of the merger agreementaward were known, i.e., the determination of the 2023 TTM Revenue Condition. Actual revenue for 2022 was lower than the TTM Revenue Condition by 9.5%, resulting in connection withno PRSUs being earned for the business combination2022 Achievement Period. Therefore, the budget for 2023 Achievement Period was increased by 9.5% to determine the TTM Revenue Condition representing 80% of the budget. For the Achievement Period in 2024, the NEO can earn between 100% to 200% of the full target PRSU award if the Absolute Share Price exceeds target and which were issuedmaximum amounts and the TTM Revenue Condition target is met.
(12)This stock award vests in one-third installments if certain stock price triggers are achieved within 36 months following the grant as follows: (i) one-third (1/3) of the shares will vest if the closing price of a share of Company common stock is greater than or equal to Messrs. Ehrlichman$24.00 over 20 trading days within a 30-consecutive trading day period; (ii) one-third (1/3) of the shares will vest if the closing price of a share of Company common stock is greater than or equal to $26.00 over any 20 trading days within any 30-consecutive trading day period; and Neagle(iii) the remaining one-third (1/3) of the shares will vest if the closing price of a share of Company common stock is greater than or equal to $28.00 over any 20 trading days within any 30-consecutive trading day period.
(13)This stock award vests in 2026 based on the same terms asachievement of three performance metrics, 50% based on absolute share price CAGR, 25% based on Revenue and 25% based on Adjusted EBITDA. The actual number of PRSUs that can be earned is between 0% and 200% of the Company’s other equity holders. Earnout Shares beneficially owned by Messrs. Ehrlichman and Neagle are reflected in the section entitled “Security Ownershiptarget number of Certain Beneficial Owners and Management” on pages 59 through 60 of this proxy statement. | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Option Awards | | Stock Awards | |
| | | | | | | | | | | | | | | | | | | | | | Equity | |
| | | | | | | | | | | | | | | | | | | | | | Incentive | |
| | | | | | | | | | | | | | | | | | | | Equity | | Plan | |
| | | | | | | | | | | | | | | | | | | | Incentive | | Awards: | |
| | | | | | | | | | | | | | | | | | | | Plan | | Market | |
| | | | | | | | | | Equity | | | | | | | | | | Awards: | | or Payout | |
| | | | | | | | | | Incentive | | | | | | | | | | Number of | | Value of | |
| | | | | | | | | | Plan | | | | | | Number | | Market | | Unearned | | Unearned | |
| | | | | | | | | | Awards: | | | | | | of | | Value of | | Shares, | | Shares, | |
| | | | | | Number of | | Number of | | Number of | | | | | | Shares or | | Shares or | | Units or | | Units or | |
| | | | | | Securities | | Securities | | Securities | | | | | | Units of | | Units of | | Other | | Other | |
| | | | | | Underlying | | Underlying | | Underlying | | | | | | Stock | | Stock | | Rights | | Rights | |
| | | | | | Unexercised | | Unexercised | | Unexercised | | Option | | | | That | | That | | That | | That | |
| | | | Vesting | | Options | | Options | | Unearned | | Exercise | | Option | | Have Not | | Have Not | | Have Not | | Have Not | |
| | Grant | | Commencement | | (#) | | (#) | | Options | | Price | | Expiration | | Vested | | Vested | | Vested | | Vested | |
Name | | Date | | Date | | Exercisable | | Unexercisable | | (#) | | ($) | | Date | | (#) | | ($) | | (#) | | ($) | |
Matt | | 3/23/2017 | | 3/22/2017 | | 281,856 | (1)(2) | — | | — | | 1.92 | | 3/22/2027 | | — | | — | | — | | — | |
Ehrlichman | | 3/23/2017 | | 5/19/2017 | | 281,856 | (1)(2) | — | | — | | 1.92 | | 3/22/2027 | | — | | — | | — | | — | |
| | 10/28/2018 | | 9/12/2018 | | 1,078,380 | (2)(3) | 249,088 | | — | | 2.73 | | 10/17/2028 | | — | | — | | — | | — | |
| | 6/5/2020 | | 3/31/2020 | | 13 | (4) | 10 | (4) | — | | 3.30 | | 6/4/2030 | | — | | — | | — | | — | |
| | 12/21/2020 | | — | | — | | — | | — | | — | | — | | — | | — | | 333,333 | (5) | 5,196,661 | (6) |
Marty | | 7/29/2020 | | 6/15/2020 | | 88,080 | (1) | 146,800 | (1) | — | | 3.30 | | 7/28/2030 | | — | | — | | — | | — | |
Heimbigner | | 7/29/2020 | | 12/23/2020 | | 58,720 | (1) | 176,160 | (1) | — | | 3.30 | | 7/28/2030 | | — | | — | | — | | — | |
Matthew | | 2/21/2017 | | — | | 30,535 | (1) | — | (1) | — | | 1.92 | | 2/20/2027 | | — | | — | | — | | — | |
Neagle | | 5/15/2017 | | 4/1/2017 | | 770 | (1) | — | (1) | — | | 1.92 | | 5/14/2027 | | — | | — | | — | | — | |
| | 8/19/2017 | | 7/1/2017 | | 219 | (1) | — | | — | | 1.92 | | 8/18/2027 | | — | | — | | — | | — | |
| | 6/6/2018 | | 4/1/2018 | | 2,599 | (1) | 1,162 | (1) | — | | 2.07 | | 6/5/2028 | | — | | — | | — | | — | |
| | 6/6/2018 | | 4/1/2018 | | 2,111 | (1) | 1,056 | (1) | — | | 2.07 | | 6/5/2028 | | — | | — | | — | | — | |
| | 6/6/2018 | | 3/1/2018 | | 1,388 | (1) | 720 | (1) | — | | 2.07 | | 6/5/2028 | | — | | — | | — | | — | |
| | 8/24/2018 | | 7/1/2018 | | 319 | (1) | 2,236 | (1) | — | | 2.73 | | 8/23/2028 | | — | | — | | — | | — | |
| | 6/5/2020 | | 3/1/2020 | | — | (7) | 6,603 | (7) | — | | 3.30 | | 6/4/2030 | | — | | — | | — | | — | |
| | 6/5/2020 | | 3/1/2020 | | 282 | (4) | 7,609 | (4) | — | | 3.30 | | 6/4/2030 | | — | | — | | — | | — | |
| | 4/22/2021 | | 12/31/2020 | | 6,321 | (8) | 6,322 | (8) | — | | 13.23 | | 4/22/2031 | | — | | — | | — | | — | |
| | 11/16/2021 | | 10/1/2021 | | — | | — | | — | | — | | — | | 61,542 | (9) | 959,440 | (6) | — | | — | |
| | 11/16/2021 | | 10/1/2021 | | — | | — | | — | | — | | — | | 112,826 | (10) | 1,758,957 | (6) | — | | — | |
| | 11/16/2021 | | 10/1/2021 | | — | | — | | — | | — | | — | | — | | — | | 37,184 | (11) | 968,420 | (6) |
(1) | This option vests 25% on the first anniversary of the vesting commencement date and in subsequent 1/48th increments for each subsequent month of continuous employment. Options held by Mr. Ehrlichman and the new hire grants awarded to Mr. Heimbigner will vest 50% upon a change in control, with the remaining options vesting in the event of a qualifying termination within 12 months after such change in control, while options held by Mr. Neagle will vest in full upon a change in control subject to Mr. Neagle’s continued employment through such date. |
(2) | Because these options may be early exercised for restricted stock, options are reported in this table as “Exercisable.” Please see footnote (1) to this table for the vesting schedule applicable to the option awards. |
(3) | This option vests 25% on the first anniversary of the vesting commencement date and in subsequent 1/48th increments for each subsequent month of continuous employment. Of the then-unvested shares subject to the option, 50% will vest immediately upon a change in control, with the remaining unvested portion of the option vesting (i) in the event of a qualifying termination of employment within 12 months after such change in control, or (ii) in the event the acquiror does not assume the Company’s rights and obligations under the option. |
(4) | This option vests 25% on the vesting commencement date and in subsequent 1/13th increments for each subsequent month of continuous employment. |
(5) | This stock award vests in one-third instalments if certain stock price triggers are achieved within 36-months following the closing of the merger as follows: (i) one-third (1/3) of the shares vested in 2021 as a result of the closing price of a share of Company common stock equaling or exceeding $18.00 over 20 trading days within a 30-consecutive trading day period; (ii) one-third (1/3) of the shares vested in 2021 as a result of the closing price of a share of Company common stock equaling or exceeding $20.00 over any 20 trading days within any 30-consecutive trading day period; and (iii) the remaining one-third (1/3) of the shares will vest if the closing price of a share of Company common stock is greater than or equal to $22.00 over any 20 trading days within any 30-consecutive trading day period. |
(6) | This value is calculated by multiplying the number of shares subject to this award by $15.59, the closing stock price of a share of Company common stock on December 31, 2021. |
PRSUs.
(7) | With respect to half of the shares subject to this option, 50% vests in one year, with six-month cliff and monthly thereafter and, with respect to the remaining half of the shares subject to this option, 50% vests on the one-year anniversary of the Vesting Commencement Date and monthly thereafter for the following 36 months, subject to continuous employment. |
(8) | This option vests 25% on the vesting commencement date, 25% on the first anniversary of the vesting commencement date and in subsequent 1/35th increments for each subsequent month of continuous employment. |
(9) | This stock award vests in 1/10th increments every quarter over 30 months. |
(10) | This stock award vests in 1/12th increments every quarter over 36 months. |
(11) | This stock award vests in one-third installments if certain stock price triggers are achieved within 36-months following the grant as follows: (i) one-third (1/3) of the shares will vest if the closing price of a share of Company common stock is greater than or equal to $24.00 over 20 trading days within a 30-consecutive trading day period; (ii) one-third (1/3) of the shares will vest if the closing price of a share of Company common stock is greater than or equal to $26.00 over any 20 trading days within any 30-consecutive trading day period; and (iii) the remaining one-third (1/3) of the shares will vest if the closing price of a share of Company common stock is greater than or equal to $28.00 over any 20 trading days within any 30-consecutive trading day period. |
20212023 Options Exercised and Stock Vested
The following table reflects, for each of our named executive officers, the number of option exercises andNEOs, the number of RSUs and RSAs vestingvested during the fiscal year ended December 31, 2021. The following table does not include Earnout Shares (as defined below)2023. There were no option exercises for our NEOs during the fiscal year ended December 31, 2023.
| | | | | | | | | | | |
| | Stock Awards |
| Name | | Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($)(2) |
| Matthew Ehrlichman | | 368,868 | 494,453 | |
| Shawn Tabak | | 145,405 | 244,280 | |
| Matthew Neagle | | 141,406 | 182,115 | |
(1)Represents the gross number of shares acquired upon vesting of RSUs without taking into account any shares that Messrs. Ehrlichman and Neagle received pursuantmay be withheld to satisfy applicable tax obligations.
(2)Represents the termsvalue of vested RSUs calculated by multiplying the gross number of vested RSUs by the closing price of the merger agreement in connection with the business combination and which were issued to Messrs. Ehrlichman and NeagleCompany’s common stock on the same terms asNasdaq on the Company’s other equity holders. Earnout Shares beneficially owned by Messrs. Ehrlichman and Neagle are reflected investing date or if the section entitled “Security Ownership of Certain Beneficial Owners and Management”vesting occurred on pages 59 through 60 of this proxy statement.
| | | | | | | | | | | |
| | Option Awards | Stock Awards |
| | Number of Shares Acquired on Exercise | | Value Realized on Exercise | | Number of Shares Acquired on Vesting | | Value Realized on
Vesting |
Name | | (#)(1) | | ($)(2) | | (#)(3) | | ($)(4) |
Matthew Ehrlichman | | | | | | | 20,639 | | $ | 393,999 | |
Martin Heimbigner | | | | | | | 13,307 | | | 237,397 | |
Matthew Neagle | | 132,086 | | $ | 2,246,978 | | | | | | |
| | | | | | | 120,468 | | | 2,251,291 | |
| | | | | | | 187,904 | | | 3,147,395 | (5) |
(1) | Represents the gross number of shares acquired upon exercise of options without taking into account any shares that may be withheld to satisfy applicable tax obligations. |
(2) | Represents the value of exercised options calculated by multiplying (i) the number of shares of Porch's common stock to which the exercise of the option related by (ii) the difference between the market price of Porch's common stock at exercise and the exercise price of the options. |
(3) | Represents the gross number of shares acquired upon vesting of RSUs without taking into account any shares that may be withheld to satisfy applicable tax obligations. |
(4) | Represents the value of vested RSUs calculated by multiplying the gross number of vested RSUs by the closing price of Porch common stock on the NASDAQ on the vesting date or if the vesting occurred on a day on which the NASDAQ was closed for trading, the next trading day. |
(5) | In July 2019, Mr. Neagle purchased the Lowe's Shares from Mr. Ehrlichman for a purchase price of $0.25 per share, which was lower than the Company’s most recent valuation of fair market value, calculated in accordance with Section 409A of the Code. The shares purchased from Mr. Ehrlichman were subject to repurchase rights in favor of the Company, with the repurchase right lapsing upon continued service and the occurrence of a liquidity event in the form of an initial public offering or sale of the Company. The service-based repurchase right lapses with respect to 50% of the shares subject to the award on the second anniversary of the grant date and in 25% increments on the third and fourth anniversaries of the grant date. Because the purchase price was below fair market value and Mr. Ehrlichman was deemed an “economic interest holder” under FASB ASC Topic 718 with respect to the Company, the award was deemed granted by the Company under FASB ASC Topic 718, although there was no grant date fair value associated with the award because the performance-based vesting condition was not deemed probable at the time Mr. Neagle purchased such shares. The liquidity event condition was satisfied upon the consummation of the business combination. On March 26, 2021, the Board waived the Company’s repurchase right with respect to these shares and the amount reflected |
a day on which the Nasdaq was closed for trading, the next trading day.
| represents the number of Lowes’ shares that vested based on the stock price on the date on which the Board waived the repurchase right. The Lowe's shares are those shares of the Company Mr. Ehrlichman purchased from Lowe’s Companies, Inc. |
Pension Benefits
The Company does not sponsor or maintain any defined benefit pension plan that provides for payments or other benefits at, following, or in connection with retirement of its employees, including
the named executive officers.our NEOs.
Nonqualified Deferred Compensation The Company does not sponsor or maintain any defined contribution or other plan for its employees, including
the named executive officers,our NEOs, that provides for the deferral of compensation on a basis that is not tax-qualified.
Potential Payments Upon Termination or Change in Control
The following discussion describes
Employment Agreements
On February 11, 2022, the amountsCompany entered into new employment agreements with each of Mr. Ehrlichman (the “CEO Employment Agreement”) and benefits that would have been owed toMr. Neagle (the “COO Employment Agreement”), and on November 2, 2022, upon the Named Executive Officers inhire of Mr. Tabak as the eventnew Chief Financial Officer, the Company entered into an employment agreement with Mr. Tabak (the “CFO Employment Agreement”) (each, for purposes of this subsection, an “Executive”).
Following is a
terminationsummary of
employment or athe material severance and change in control
asprovisions of
December 30, 2021, under the Employment Agreements, the equity award agreements, and other compensatory arrangements with the Named Executive Officers.Employment Arrangements with Named Executive Officers as of December 31, 2021
Each of the named executive officers was party to an employment agreement or offer letter as of December 31, 2021 that, in certain cases, provides for specified payments in connection with certain termination or change in control events, as set forth below. For additional information on the material terms of the employment agreements, see “--New Employment Agreements / Offer Letter Amendments” on pages 56 through 57 of this proxy statement.
Severance Payments. Upon any termination of employment, each of the named executive officersCEO Employment Agreement, CFO Employment Agreement and COO Employment Agreement.
Term: Each agreement is for an initial term of 36 months and provides for automatic renewals for successive 12-month terms absent written notice from the Company or the Executive at least 60 days prior to the expiration of the then-current term. Each Executive is an at-will employee and either party may terminate Executive’s employment and the agreement at any time, with or without cause.
Non-Change in Control (Termination). Upon a Non-Change in Control Termination, subject to the execution and non-revocation of a general release and compliance with the restrictive covenants described below, the Executive will be entitled to accrued obligations (i.e., payment of any earned but unpaid base salary, accrued but unused paid time off (if required by applicable law to be paid upon termination), vested benefits in accordance with the applicable employee benefit plan and unreimbursed business expenses. In addition, Mr. Heimbigner’s offer letter provides that,expenses) and (i) cash severance equal to 12 months of the Executive’s then-current annual base salary and the Executive’s annual target bonus opportunity, payable in equal monthly installments over the eventSeverance Period, subject to offset due to other employment, and (ii) during the Severance Period (but ceasing once equivalent employer-paid coverage is otherwise available to him or upon the earliest of his terminationcertain other events, including violation of employment (except for terminations by the Company for Cause or resignation by Mr. Heimbigner without Good Reason) (each, as defined in Mr. Heimbigner’s offer letter)restrictive covenants described below), hethe Executive will be entitled to receive six (6) months’ severance atmonthly payments necessary to cover the premiums for continued coverage for him and his then-current base salary payabledependents under Porch’s health, dental and vision plans through COBRA.
Furthermore, upon a Non-Change in Control Termination, (i) any outstanding performance-based equity awards will remain outstanding and will vest in accordance with the formspecified vesting schedule (excluding any requirement for continued employment), (ii) any outstanding time-vesting equity awards that would have vested through the first anniversary of salary continuation payments. In addition, in the eventtermination date will vest on the termination date and any unvested awards remaining thereafter will be terminated and canceled by the Company, and (iii) for any stock options which were vested as of the termination date, such options may be exercised until the earlier of 12 months following the termination date and the expiration date and any unvested stock options remaining thereafter will be terminated and canceled by the Company. Upon termination due to death or Disability, any vested options may be exercised until the earlier of the one-year anniversary of the termination date and the expiration date of such termination, (i) if Mr. Heimbigner experienced aoptions. Upon the Executive’s termination of employment following the end of the performance period to which his annual bonus applies, but prior to the payment of that annual bonus, such bonus will be paid in full, and (ii) if Mr. Heimbigner was employed for over one-half of the performance period but wasis not employed on the last day of the performance period and the Company was expected to achieve the underlying performance conditions, then Mr. Heimbigner will receive a pro-rated target payout for such year. Furthermore, Mr. Heimbigner’s offer letter provides that if within 12 months following a Change of Control (as defined in such offer letter), Mr. Heimbigner is terminated by the Company without Cause or Mr. Heimbigner resigns for Good Reason, all then-unvestedany vested options may be exercised until the earlier of 90 days following the termination date and the expiration date.
Equity Acceleration (Change in Control). Each of the CEO, CFO and COO Agreements also provide for double-trigger equity awards held by Mr. Heimbigner will vest.Change of Control Benefits (Absent Termination). Pursuant to the terms of Mr. Heimbigner’s offer letter,acceleration in the event of a “Change of Control”Change in Control (as such term is defined in such offer letter), 50% of the then-unvestedapplicable agreements). Upon a Change in Control, existing equity awards held by Mr. Heimbigner will vest so long as his status as a full-time employee has not been terminated prior to such time. Similarly, Mr. Neagle’s employment agreement provides that in the event of a “Change of Control” (as defined in such employment agreement), 50% of the total number of an unvested shares that have not vested as of such Change of Control shall be immediately vested,continue based on specified terms, provided that he has remained continuously employed(i) any unearned performance-based share awards will be treated as RSUs or time-based options (respectively) and vest 12 months from the closing date and (ii) all outstanding equity awards will be accelerated in full and paid upon a full-time employee asChange in Control if such awards are not assumed or substituted by the surviving entity on a reasonably equivalent basis. Upon a Change in Control Termination, (i) any outstanding equity awards will be fully earned and vested and (ii) any vested options may be exercised until the earlier of such time.
12 months following the termination date and the expiration date. Also, following a change in control, (x) upon termination due to death or Disability, any vested options may be exercised until the earlier of 12 months following the termination date and the expiration date, and (y) upon any other termination except Cause, any vested options may be exercised until the earlier of 90 days following the termination date and the expiration date.
Pursuant to action taken by the Compensation Committee of the Company’s Board in February 2020, outstanding options held by Mr. Neagle will vest upon the occurrence of a “change in control” of the Company, subject to Mr. Neagle’s continued employment through such date.
Restrictive Covenants. Under the terms of their respective offers of employment, the named executive officersour CEO, CFO and COO are subject to restrictive covenants relating to non-competition and non-solicitation of employees while employed by the Company for 18 months (in the case of Messrs. Ehrlichman and Heimbigner)Mr. Ehrlichman) and for 12 months (in the case of Mr. Neagle)Messrs. Neagle and Tabak) thereafter (subject to a longer period if due to breach). In addition, each executive officer has agreed not to use or disclose any confidential information of Porch,the Company, subject to customary exceptions, and to be bound by customary covenants relating to proprietary rights and the related assignment of such rights.
Following are the terms of the various award agreements granted under the Company’s 2020 Stock Plan provide for accelerated vesting upon the occurrence of certain events.
As of December 31, 2021, Mr. Neagle was the only NEO with any unvested equity awards issued pursuant to the 2020 Stock Plan.
Effect of a Change in Control or Certain Other Transactions under the 2020 Stock Plan. In the event of a Change in Control (as defined in the 2020 Stock Plan), the 2020 Stock Plan generally provides that the Company’s board of directorsBoard may determine to effect some combination of accelerated vesting, assumption, substitution or surrender of outstanding equity awards in exchange for cash, stock or other property in connection with such Change in Control.
Clawback of Proceeds. The award agreements issued to the NEOsour Executives under the 2020 Stock Plan generally require the recipient of the applicable award to agree to restrictive covenants relating to confidentiality, non-disparagement and, for 12 months post-termination, non-solicitation of employees and business relations and non-competition and, to the extent such covenants (or any other agreement between the recipient and the Company) are breached by the recipient, to forfeit the award and remit a cash payment based on the number of earned and vested shares underlying the applicable equity award.
Tax Matters. Pursuant to the award agreements under the 2020 Stock Plan, if any payments or benefits to which the recipient thereof would be entitled to receive pursuant to the terms of the applicable agreement or otherwise in connection with a change in the ownership or effective control of the Company would result in all or a portion of such payments or benefits being deemed "parachute payments" under Section 280G of the IRS Code and the excise tax imposed by Section 4999 of the IRS Code, such payments and benefits will be reduced to the minimum extent necessary so that they would not result in the imposition of an excise tax under Section 4999 of the IRS Code, provided that no reduction will be made if the named executive officerExecutive would receive a greater net after-tax amount absent such reduction.
Accelerated Vesting – Execution of Release. As a condition to any accelerated vesting of underlying equity awards, the award agreements under the 2020 Stock Plan require the recipient of the applicable award to execute a release of claims in favor of the Company within 60 days of the applicable termination of employment.
Accelerated Vesting of RSUs – Termination of Employment – Mr. Neagle. The RSU award agreements for Mr. Neagle generally provide that if histhe Executive’s employment with the Company is terminated by the Company without Cause or Mr. Neaglethe Executive resigns with Good Reason (in each case, as defined in the applicable award agreement) that, subject to the execution and irrevocability of the release discussed above, any unvested RSUs that would otherwise have vested within 12 months of such termination will become vested as of the 61st day following such termination or resignation.
Accelerated Vesting of PRSUs – Termination of Employment – Mr. Neagle. The PRSU award agreements for Mr. Neagle generally provide that if his employment with the Company is terminated by the
Company without Cause or Mr. Neaglesuch Executive resigns with Good Reason that, subject to the execution and irrevocability of the release discussed above, the applicable award will remain outstanding and will vest when earned in accordance with the applicable vesting schedule without regard for any vesting condition relating to employment.
Treatment of RSUs – Change in Control – Mr. Neagle. The RSU award agreements for Mr. Neagle generally provide that in the event of a Change in Control: | o | if the award is assumed or reasonably substituted on an equitable basis to Mr. Neagle, the award will continue subject to the terms of the award agreement, except that if Mr. Neagle’s employment with the Company is terminated by the Company without Cause or Mr. Neagle resigns with Good Reason on or within 12 months following the consummation of such Change in Control, the award will fully vest as of the 61st day following such termination or resignation; or |
| o | if the award is not assumed or reasonably substituted on an equitable basis to Mr. Neagle, the award will fully vest immediately prior to the consummation of the Change in Control. |
■if the award is assumed or reasonably substituted on an equitable basis to such Executive, the award will continue subject to the terms of the award agreement, except that if such Executive’s employment with the Company is terminated by the Company without Cause or such Executive resigns with Good Reason on or within 12 months following the consummation of such Change in Control, the award will fully vest as of the 61st day following such termination or resignation; or
■if the award is not assumed or reasonably substituted on an equitable basis to such Executive, the award will fully vest immediately prior to the consummation of the Change in Control.
Treatment of PRSUs – Change in Control – Mr. Neagle. The performance-based RSUPRSU award agreements for Mr. Neagle generally provide that in the event of a Change in Control: | o | if the award is assumed or reasonably substituted on an equitable basis to Mr. Neagle, any earned portion of the award will remain issued and outstanding as RSUs, subject to a vesting period commencing on the closing date of such Change in Control and ending on the earlier of (a) the one year anniversary thereof and (b) the 61st day following the date on which Mr. Neagle’s■if the award is assumed or reasonably substituted on an equitable basis to such Executive, any earned portion of the award will remain issued and outstanding as RSUs, subject to a vesting period commencing on the closing date of such Change in Control and ending on the earlier of (a) the one year anniversary thereof and (b) the 61st day following the date on which the Executive’s employment is terminated by the Company without Cause or Mr. Neagle resigns for Good Reason; or |
| o | if the award is not assumed or reasonably substituted on an equitable basis to Mr. Neagle, the award will fully vest immediately prior to the consummation of the Change in Control. |
Retention Agreement – Mr. Neagle. The Company and Mr. Neagle entered into a retention agreement in February 2018 (the “Neagle Retention Agreement”), which provided that if Mr. Neagle’s employment with the Company endedwithout Cause or such Executive resigns for any reasonGood Reason; or
■if the award is not assumed or reasonably substituted on an equitable basis to such Executive, the award will fully vest immediately prior to April 21, 2027, the Company was required to offer to engage Mr. Neagle as an advisor or consultant on terms substantially similar to the Company’s existing board advisory relationships through April 21, 2027 and such engagement could only be terminated for “Cause,” which is generally defined as Mr. Neagle’s (i) willful embezzlement, misappropriation, or fraud which is, in each case, injurious to the Company, (ii) willful misconduct that actually results in material harm or loss to the Company or (iii) conviction of a crime that constitutes a felony, if such felony is related to his advisory role and results in material harm to the Company.The Neagle Retention Agreement provided that Mr. Neagle would receive a restricted stock award upon a change in controlconsummation of the Company if he remained employed with, or is still providing services to, the Company through such date. The number of shares subject to the restricted stock award was to be determined by dividing $400,000 by the changeChange in control price, with such shares fully vested as of the date of the change in control. While the business combination did not constitute a change in control under the Neagle Retention Agreement, in lieu of any compensation under the Neagle Retention Agreement, Mr. Neagle received a grant of fully vested shares of Company common stock in early 2021 with a grant date fair value of $400,000 and the Neagle Retention Agreement was terminated.
Control.
2012 Equity Incentive Plan
Prior to the closing of the
business combination,Business Combination, each of Messrs. Ehrlichman
Neagle and
HeimbignerNeagle were granted equity awards pursuant to the
Porch.com, Inc. 2012
Equity IncentiveStock Plan,
(the "2012 Plan"), a portion of which remain unvested.
Effect of a Change in Control or Certain Other Transactions under the 2012 Stock Plan. Under the terms of the 2012 Stock Plan, pursuant to which certain of the Company’s named executive officersNEOs hold outstanding stock options, in the event of a merger or “Change in Control” (as defined in the 2012 Stock Plan), the administrator of the 2012 Stock Plan may provide that (i) awards will be assumed or substituted, (ii) awards will terminate, (iii) awards will vest and become exercisable, realizable or payable, and/or (iv) participants will receive cash payments or replacement awards in exchange for their outstanding awards. The 2012 Stock Plan also provides that an award will vest in full if such award is not assumed or substituted by a successor.
Options held by Mr. Neagle. Pursuant to action taken by the compensation committeeCompensation Committee of the Company’s board of directorsBoard in February 2020, outstanding options held by Mr. Neagle will vest upon the occurrence of a “change in control” of the Company, subject to Mr. Neagle’s continued employment through such date. The business combination was not a “change in control” of the Company for purposes of his outstanding equity awards.Grant of Restricted Stock to Mr. Ehrlichman. Mr. Ehrlichman was granted a restricted stock award under the 2012 Plan which was converted into an award of 1,000,000 restricted shares of the company upon the closing of the business combination. The award will vest in one-third installments if certain stock price triggers are achieved within 36-months following the closing of the Merger as follows: (i) one-third (1/3) of the shares will vest if the closing price of a Company share is greater than
Potential Payments Upon Termination or equal to $18.00 over any 20 trading days within any 30-consecutive trading day period; (ii) one-third (1/3) of the shares will vest if the closing price of a Company share is greater than or equal to $20.00 over any 20 trading days within any 30-consecutive trading day period; and (iii) the remaining one-third (1/3) of the shares will vest if the closing price of a Company share is greater than or equal to $22.00 over any 20 trading days within any 30-consecutive trading day period. As of December 31, 2021, only the shares described in clause (iii) of the prior sentence had not vested. If Mr. Ehrlichman’s employment with the Company or its affiliates is terminated prior to the award being fully vested, then the award will be terminated and cancelled, provided that if Mr. Ehrlichman’s employment is terminated by the Company or its affiliates 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.Change of Control/Severance Payment Table
Contro
l The following table estimates the potential payments and benefits to
the named executive officersour NEOs upon termination of employment or a change of control, assuming such event occurs on December 31,
2021.2023. These estimates do not reflect the actual amounts that would be paid to such persons, which would only be known at the time that they become eligible for payment and would only be payable if the specified event occurs.
Items Not Reflected in Table. The table below does not include (1) accrued salary, accrued bonus and paid time off, (2) benefits (e.g., with respect to severance) which are generally available to all Company employees and do not discriminate in favor of our executive officers, and (3) amounts outstanding under the Company's 401(k) plan.
Other Notes Applicable to Table.The 2012 Stock Plan and the 2020 Stock Plan each provide for the acceleration of vesting of equity awards under specified circumstances noted above. The table reflects (A) the intrinsic value of such acceleration, based on the closing price of the common stock on NASDAQNasdaq on December 31, 202129, 2023 ($15.59)3.08) and (B) to the extent the
applicable equity award is an option, the exercise price thereof. The table does not reflect the intrinsic value of vested equity awards, which is set forth in "Outstanding Equity Awards at December 31, 2021.2023."
The Compensation Committee or Board has discretion to accelerate the vesting of equity awards under the 2012
Stock Plan or the 2020 Stock Plan to the extent not expressly set forth above. The table assumes
that neither the
Compensation Committee
does notnor the Board utilize such discretion.
For a termination following a change in control, the table below assumes the change in control event and the termination event each occur as of December 31, 2021.2023.
| Executive | Qualifying Termination of Employment (1) | Qualifying Termination within 12 Months Following a Change in Control(2) | Change in Control(3) | Executive | Qualifying Termination of Employment(1) | Qualifying Termination within 12 Months Following a Change in Control(2) | Change in Control(3) |
Matt Ehrlichman | $7,333,326(4) | $7,333,326 | $3,203,395 |
| Matthew Ehrlichman | |
| Shawn Tabak | |
| Shawn Tabak | |
| Shawn Tabak | |
Matthew Neagle | $1,938,492(5) | $2,718,397(6) | $3,556,158(7) |
Marty Heimbigner | $255,000(8) | $4,224,178(9) | $3,969,178 |
| Matthew Neagle | |
| Matthew Neagle | |
(1) | For purposes of this column, “qualifying termination of employment” refers to (i) in the case of Mr. Heimbigner’s cash severance benefits, to a termination of employment by the Company other than for cause or by Mr. Heimbigner for good reason, and (ii) in all other cases, to a termination of employment by the Company or any subsidiary without cause or a termination by the executive for good reason. |
(2) | For purposes of this column, the Company has assumed that the outstanding equity awards have been assumed or substituted by the successor or acquiror in connection with the change in control event. “Qualifying Termination of Employment” for purposes of this column refers to (i) in the case of Mr. Heimbigner’s performance-based restricted share award, a termination of employment by the Company other than for cause or by Mr. Heimbigner for good reason, and (ii) in all other cases, to a termination of employment by the Company or any subsidiary without cause or a termination by the executive for good reason. |
(3) | For purposes of this column, the Company has assumed that the outstanding equity awards were not assumed or substituted by the successor or acquiror in connection with the change in control event. |
(4) | Reflects(1) For purposes of this column, “qualifying termination of employment” refers to a termination of employment by the Company or any subsidiary without cause or a termination by the executive for good reason. For each of our NEOs, the figures reflect the value of lapse of service-based vesting restrictions with respect to certain of Mr. Ehrlichman’s unvested performance-based restricted shares, assuming (for purposes of this disclosure) that the final performance goal is satisfied prior to the end of the performance period, and assuming further that the value of the vesting performance-based restricted shares is $22 per share. |
(5) | Reflects accelerated vesting of a portion of Mr. Neagle’s outstanding RSU awards under the 2020 Plan as described above, as well as the lapse of service-based vesting restrictions with respect to Mr. Neagle’s outstanding PRSU awards under the 2020 Plan, assuming, for purposes of this table, that all performance goals applicable to the PRSU awards are satisfied prior to the conclusion of the performance period, and assuming further that the market value of such PRSUs is equal to the stock price threshold at which such PRSUs are eligible to become vested. |
(6) | Reflects full accelerated vesting of Mr. Neagle’s outstanding RSU awards under the 2020 Plan as of December 31, 2021. As none of the applicable performance goals applicable to Mr. Neagle’s PRSUs had been attained as of December 31, 2021, no value has been reflected with respect to those PRSUs. |
(7) | Reflects full accelerated vesting of each of Mr. Neagle’s outstanding equity incentive awards as of December 31, 2021. For the purpose of this calculation, the Company has calculated the value of the accelerated vesting of Mr. Neagle’s PRSUs based upon the closing stock price of the Company on December 31, 2021, which was $15.59. |
(8) | Includes the value of Mr. Heimbigner’s earned but unpaid bonus for FY 2021 of $105,000, as well as a cash severance payment equal to $150,000. |
(9) | Reflects (i) the value of Mr. Heimbigner’s earned but unpaid bonus for FY 2021 of $105,000, (ii) a cash severance payment equal to $150,000, and (iii) the value of full accelerated vesting of Mr. Heimbigner’s outstanding unvested equity incentive awards under the 2012 Plan, based upon a closing stock price of $15.59 on December 31, 2021. |
New Employment Agreements / Offer Letter Amendments
On February 11, 2022, the Company entered into new employment agreements with each of Mr. Ehrlichman (the “CEO Employment Agreement”) and Mr. Neagle (the “COO Employment Agreement”), and the first amendment (the “CFO Offer Letter Amendment”) to the offer letter, effective June 15, 2020 (the “CFO Offer Letter”) with Mr. Heimbigner (each, for purposes of this subsection, an “Executive”). A summary of the material severance and change in control provisions of each of the CEO Employment Agreement, COO Employment Agreement and CFO Offer Letter Amendment is set forth below, and each is qualified in its entirety by reference to such agreements, which have previously been filed with the SEC and are incorporated herein by reference.
CEO and COO Employment Agreements
Term: Each agreement is for an initial term of 36 months and provides for automatic renewals for successive 12-month terms absent written notice from Porch or the Executive at least 60 days prior to the expiration of the then-current term. Executive is an at-will employee and either party may terminate Executive’s employment and the agreement at any time, with or without cause.
Severance; Equity Acceleration: Upon a termination of Executive’s employment by Porch without Cause (and other than by reason of death or Disability), or his resignation for Good Reason (each, as defined in the applicable employment agreement)(each, a “Non-Change in Control Termination”), subject to the execution and non-revocation of a general release and compliance with the restrictive covenants described below, Executive will be entitled to accrued obligations and (i) cash severance equal to 12 months of the Executive’s then-current annual base salary, and the Executive’s annual target bonus, opportunity, payable in equal monthly installments over a periodthe cost of 12 months (the “Severance Period”), subject to offset due to other employment, and (ii) duringCOBRA coverage, the Severance Period (but ceasing once equivalent employer-paid coverage is otherwise available to him or upon the earliestvalue of certain other events, including violation of the restrictive covenants described below), Executive will be entitled to monthly payments necessary to cover the premiums for continued coverage for him and his dependents under Porch’s health, dental and vision plans through COBRA.
Upon a Non-Change in Control Termination, (i) any outstanding performance-based equity awards will remain outstanding and will vest in accordance with the specified vesting schedule (excluding any requirement for continued employment), (ii) any outstanding time-vesting equityRSU awards that would have vested through the first anniversary of the termination date will vest on the termination date, and (iii) for any stock options which were vested as of the termination date, such options may be exercised until the earlier ofwithin 12 months following the termination, date and the expiration date. Upon termination duevalue of accelerated vesting of PRSU awards. For our PRSU awards, the Company has assumed performance goals applicable to deatheach award are satisfied at target prior to the end of each applicable performance period.
(2) For purposes of this column, the Company has assumed that the outstanding equity awards have been assumed or
Disability, any vested options may be exercised untilsubstituted by the
earliersuccessor or acquirer in connection with the change in control event. “Qualifying Termination of
the one-year anniversaryEmployment” for purposes of
the termination date and the expiration date of such options. Upon the Executive’sthis column refers to a termination of employment
which is notby the Company or any subsidiary without cause or a termination by the executive for
Good Reason, any vested options may be exercised untilgood reason. For each of our NEOs, the
earlier of 90 days followingfigures reflect the
termination date andvalues noted in footnote (1) with the
expiration date.Eachexception of the CEO Agreement andvalue of RSU awards in that we are including the COO Agreement also provide for single-trigger and double-trigger equity acceleration invalue of accelerated vesting of all outstanding RSU awards pursuant to the eventterms of a Change in Control (as such term is defined in the applicable agreements). Upon a Change in Control, existing equity awards will continue based on specified terms, providedaward agreements.
(3) For purposes of this column, the Company has assumed that (i) any unearned performance-based share awards options will be treated as RSUs or time-based options (respectively) and vest 12 months from the closing date and (ii) all outstanding equity awards will be accelerated in full and paid upon a Change in Control if such awards arewere not assumed or substituted by the surviving entitysuccessor or acquirer in connection with the change in control event. For each of our NEOs, the figures reflect the values noted in footnote (1) with the exception of the value of RSU awards in that we are including the value of accelerated vesting of all outstanding RSU awards pursuant to the terms of the applicable award agreements.
CEO PAY RATIO
Pursuant to applicable SEC rules, presented below is the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our employees (excluding our CEO). The ratio presented below is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. This information is being provided for compliance purposes only. Neither the Compensation Committee nor management of the Company used the pay ratio in making compensation decisions for 2023.
For 2023, we selected a new median employee given our population changes resulting from headcount reductions and the inclusion of employees of our 2022 acquisitions that were previously excluded from our 2022 CEO pay ratio. The new median employee was selected from a group of 867 full-time and part-time employees who were active as of December 31, 2023. In identifying our median employee, we used the annual base salary of each employee for the twelve-month period that ended on December 31, 2023, plus any earned commissions and overtime, all of which was obtained from internal payroll and records. We did not include independent contractors or leased workers in our employee population for purposes of making our determination.
As disclosed in the Summary Compensation Table, the 2023 annual total compensation, as determined under Item 402 of Regulation S-K, for our CEO was $4,266,774. The 2023 annual total compensation, as determined under Item 402 of Regulation S-K, for our median employee was $87,129, representing a reasonably equivalent basis. Uponbusiness unit exempt level employee receiving base salary and annual LTI awards. Based on the foregoing, our estimate of the ratio of our CEO’s annual total compensation to our median employee’s annual total compensation for 2023 is 49 to 1.
Given the different methodologies, estimates, adjustments and other assumptions that public companies utilize to determine an estimate of their pay ratios, the estimated ratio reported above should not be used as a terminationbasis for comparison between companies.
The following table provides information about the relationship between executive CAP and certain financial performance of the Company, in accordance with Item 402(v) of Regulation S-K. Please see the “Compensation Discussion and Analysis” for an overview of our compensation philosophy, objectives, processes and components of our NEO compensation program, including how the Compensation Committee structures our NEO compensation program to motivate and reward the achievement of performance-based financial goals that align with our operational and strategic objectives. The SEC-defined CAP data set forth in the table below does not reflect amounts actually realized by Porch without Cause (andour NEOs, and the Compensation Committee has not used or considered CAP previously in establishing the NEO compensation program. A significant portion of the CAP amounts shown relate to changes in the values of unvested awards over the course of the reporting year. These unvested awards remain subject to significant risk from forfeiture conditions and possible future declines in value based on changes in our stock price. As described in detail in the “Compensation Discussion and Analysis”, the PRSUs are subject to multi-year performance conditions tied to objective performance metrics and all of the RSUs, PRSUs and stock options are subject to time vesting conditions or holding periods. The ultimate values actually realized by our NEOs from unvested equity awards, if any, will not be determined until the awards fully vest (or thereafter upon exercise, in the case of outstanding stock options).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Value of Initial Fixed $100 Investment Based on: | | |
Year (1) | Summary Compensation Table Total for PEO ($)(2) | Compensation Actually Paid to PEO ($)(3) | Average Summary Compensation Table Total for Non-PEO NEOs ($)(2) | Average Compensation Actually Paid to Non-PEO NEOs ($)(4) | Company Total Shareholder Return ($)(5) | Peer Group Total Shareholder Return ($)(6) | Net Income (Loss) (in thousands) ($)(7) | Stock Price Performance ($)(8) |
| 2023 | 4,266,774 | | 9,047,023 | | 1,873,307 | | 3,318,178 | | 31 | | 202 | | (133,933) | | 1.98 | |
| 2022 | 13,583,222 | | (5,051,506) | | 896,705 | | (1,798,741) | | 19 | | 129 | | (156,559) | | 7.87 | |
| 2021 | 1,272,840 | | 12,645,437 | | 5,272,339 | | 3,812,619 | | 157 | | 182 | | (106,606) | | 19.57 | |
| 2020 | 16,829,446 | | 35,260,766 | | 1,089,816 | | 5,083,656 | | 144 | | 136 | | (71,316) | | 11.02 | |
(1)We have never sponsored or maintained any defined benefit or actuarial pension plans. Therefore no pension value adjustments were made to the compensation actually paid amounts set forth in the table above. The Company has not paid nor accrued any dividends on equity awards in any applicable year.
(2)The dollar amounts reported in the table are the amounts of total compensation reported for Mr. Ehrlichman and the average amounts of total compensation reported for the other thanNEOs as a group, as listed in footnote (4), for each corresponding year in the "Total" column of the Summary Compensation Table, as applicable. See "NEO Compensation Tables—2023 Summary Compensation Table".
(3)The PEO reported in the table represents Mr. Ehrlichman for all four years shown. The dollar amounts reported represent the amount of CAP as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by reasonor paid to Mr. Ehrlichman during the applicable year. In accordance with the requirements of death or Disability), or Executive’s resignationItem 402(v) of Regulation S-K, the following table provides the adjustments that were made to Mr. Ehrlichman’s total compensation for Good Reason,each year to determine the CAP.
| | | | | | | | | | | | | | | | | | | | | | | |
| Year | Reported Summary Compensation Table
Total for PEO
($) | Less | Reported Value of Equity Awards
($)(a) | Plus | Equity Award Adjustments
($)(b) | Equals | CAP for PEO
($) |
| 2023 | 4,266,774 | | | 2,445,664 | | | 7,225,913 | | | 9,047,023 | |
| 2022 | 13,583,222 | | | 12,893,066 | | | (5,741,662) | | | (5,051,506) | |
| 2021 | 1,272,840 | | | — | | | 11,372,597 | | | 12,645,437 | |
| 2020 | 16,829,446 | | | 14,964,252 | | | 33,395,572 | | | 35,260,766 | |
| | | | | | | | | | | | | | | | | | | | |
| Equity Award Adjustments | |
| Year | Added Value of Outstanding and
Unvested Awards Granted During the
Year
($) | Added Change in Value of Outstanding and
Unvested Awards Granted in Prior Years
($) | Added Value as of Vesting Date of
Awards Granted and Vested During the
Year
($) | Added Change in Value of Awards
Granted in Prior Years and Vested During
the Year
($) | Deducted Fair Value at the End of the Prior Year of Awards that Failed to Meet Vesting Conditions During the Year
($) | Total Equity Award Adjustments
($) |
| 2023 | 6,974,212 | | 471,227 | | — | | (199,020) | | (20,506) | | 7,225,913 | |
| 2022 | 1,520,099 | | (6,746,516) | | 1,520,122 | | (2,035,367) | | — | | (5,741,662) | |
| 2021 | — | | (1,078,059) | | — | | 12,450,656 | | — | | 11,372,597 | |
| 2020 | 24,873,237 | | 7,524,199 | | — | | 998,136 | | — | | 33,395,572 | |
(a)The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year.
(b)The equity award adjustments for each case within 12 months following a Changeapplicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in Control (each, a “Changethe applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior year) in Control Termination”), (i)fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards granted and vested in the same year for any applicable year, the amount equal to the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior year) in fair value; and (v) the subtraction of the prior year year-end fair value for any awards granted in prior years that fail to meet the applicable vesting conditions during the applicable year. The fair values of RSUs and PRSUs included in the CAP to our PEO and the Average CAP to our other NEOs are calculated at the required measurement dates in accordance with FASB ASC 718, consistent with the approach used to value the awards at the grant date as described in our Form 10-K. In accordance with Item 402(v) of Regulation S-K, the fair values of unvested and outstanding equity awards will be fully earnedwere remeasured as of the end of each year, and vestedas of each vesting date. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the grant date. Any material changes to the RSU, PRSU and (ii) any vested options may be exercised untilstock option fair values from the earlier of 12 monthsgrant date (for current year grants) and from prior year-end (for prior year grants) are based on our updated stock price at the respective measurement dates, and for PRSUs, updated estimates for performance outcomes.
(4)The Non-PEO NEOs reported in the table represent Messrs. Neagle and Heimbigner for years 2020 and 2021, Messrs. Tabak, Neagle and Heimbigner for year 2022, and Messrs. Tabak and Neagle for 2023. To calculate CAP, the following average adjustments were made to the termination dateaverage total compensation number shown in the Summary Compensation Table. See footnotes (a) and (b) to footnote (3) above for information on footnotes (a) and (b) in the expiration date. Also, following a change in control, (x) upon termination due to death or Disability, any vested options may be exercised until the earlier of 12 months following the termination date and the expiration date, and (y) upon any other terminationtable below.
| | | | | | | | | | | | | | | | | | | | | | | |
| Year | Average Reported Summary Compensation Table Total for Non-PEO NEOs ($) | Less | Average Reported Value of Equity Awards
($)(a) | Plus | Average Equity Award Adjustments
($)(b) | Equals | Average CAP for Non-PEO NEOs
($) |
| 2023 | 1,873,307 | | | 856,479 | | | 2,301,350 | | | 3,318,178 | |
| 2022 | 896,705 | | | 464,687 | | | (2,230,759) | | | (1,798,741) | |
| 2021 | 5,272,339 | | | 4,603,657 | | | 3,143,937 | | | 3,812,619 | |
| 2020 | 1,089,816 | | | 592,567 | | | 4,586,407 | | | 5,083,656 | |
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| 62 | 20222024Proxy Statement
|
except cause, any vested options may be exercised until | | | | | | | | | | | | | | | | | | | | |
| Equity Award Adjustments |
| Year | Added Value of Outstanding and
Unvested Awards Granted During
the Year
($) | Added Change in Value of
Outstanding and Unvested
Awards Granted in Prior Years
($) | Added Value as of Vesting Date
of Awards Granted and Vested
During the Year
($) | Added Change in Value of
Awards Granted in Prior Years
and Vested During the Year
($) | Deducted Fair Value at the End of the Prior Year of Awards that Failed to Meet Vesting Conditions During the Year
($) | Total Equity Award Adjustments
($) |
| 2023 | 2,249,022 | | 110,119 | | — | | (57,460) | | (331) | | 2,301,350 | |
| 2022 | 223,440 | | (765,032) | | — | | (635,944) | | (1,053,223) | | (2,230,759) | |
| 2021 | 1,594,276 | | 197,963 | | 590,891 | | 760,807 | | — | | 3,143,937 | |
| 2020 | 4,394,085 | | 124,552 | | 40,810 | | 26,960 | | — | | 4,586,407 | |
(5)Assumes an investment of $100 was made in the earlierCompany's common stock on January 13, 2020, the first day of 90 days followingtrading of the terminationCompany’s common stock on Nasdaq, and measures cumulative TSR from that date through and including December 31 of the expiration date.Restrictive Covenants: Duringspecified year. Historical stock performance is not necessarily indicative of future stock performance.
(6)Assumes an investment of $100 was made in the termS&P 500 IT Index on January 13, 2020, and measures cumulative TSR from that date through and including December 31 of employmentthe specified year.
(7)Reflects the Company's net income (loss) as reported in our financial statements.
(8)Reflects the highest average 90-day average of the closing share price of the Company's common stock within the specified year, representing a performance condition associated with stock price compound annual growth targets for our PRSU awards.
Pay versus Performance Description of Relationships
The graphs below show the relationship of CAP for our PEO and
for 12 months (COO)other NEOs in 2023, 2022, 2021 and 2020 to: (1) TSR of both our Company and Peer Group; (2) net income (loss); and (3) Stock Price Performance (reflecting the highest 90-day average of the closing share price of the Company's common stock within the specified year). The Compensation Committee has not previously used or
18 months (CEO) thereafter (subject to a longer period if due to breach), Executive is bound by a covenant not to compete with Porch, a covenant not to solicit Porch’s employees, customers or business partners and a covenant not to hire Porch’s employees or induce them to terminate employment with Porch. In addition, Executive has agreed not to use or disclose any confidential information of Porch, subject to customary exceptions, and to be bound by customary covenants relating to proprietary rights and the related assignment of such rights.CFO Offer Letter Amendment
Severance: The amendment provides that the base salary dueconsidered CAP, as severance upon specified severance events will be paid in a lump sum (in lieu of being paid over six monthscomputed in accordance with Item 402(v) of Regulation S-K, to set NEO target pay or align our NEO compensation to Company performance. See “Compensation Discussion and Analysis” for a discussion of how the CFO Offer Letter).
Equity Acceleration: Upon any terminationCompensation Committee designs our NEO compensation program and sets NEO target pay.
Compensation Actually Paid versus Total Shareholder Return
Compensation Actually Paid versus Net Income (loss)
Compensation Actually Paid versus Stock Price Performance
Reflects the highest 90-day average of the closing share price of the Company's common stock within the specified year, consistent with a performance condition of PRSU awards granted in 2023.
Tabular List of Performance Measures
In the Company’s assessment, the financial performance measures set forth in the table below represent the most important financial performance measures used by the Company for 2023 to a six-month transition period at Executive’s existing pay rate (or earlier death or long-term disability during such transition period) priorlink compensation actually paid to the effectiveness of such termination, Executive’s nonqualified stock option awards that were issued pursuantCompany’s NEOs to Company performance. Please refer to “Compensation Discussion and Analysis” for additional information.
| | | | | | | | |
| MOST IMPORTANT PERFORMANCE MEASURES TO DETERMINE 2023 COMPENSATION ACTUALLY PAID |
| Stock Price Performance | Revenue | Adjusted EBITDA (Loss) as a Percentage of Revenue |
This pay versus performance section is not “soliciting material,” is not deemed filed with the
CFO Offer Letter that are outstanding on the termination dateSEC and
that would have vested through the six-month anniversaryis not to be incorporated by reference into any of the
terminationCompany's filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date
(or an equivalent cash value if there are not sufficient unvested stock options) will vest upon such termination dateof this proxy statement and
be exercisable for 90 days following vesting.As noted above, on April 1, 2022, the Company announced that it had mutually agreed with Mr. Heimbigner to begin a search for Mr. Heimbigner’s successor. In order to assist with an orderly transitionirrespective of his responsibilities, Mr. Heimbigner is expected to remain as Chief Financial Officer for up to six months following the announcement. The Company will treat such separation for purposes of the applicable provisions of the Agreement as a “without cause” separation event. On April 8, 2022, he received a lump sum payment of $175,000, which is six (6) months’ severance at his current base salary. In addition, all outstanding nonqualified stock option awards held by Mr. Heimbigner that would have vested through the six-month anniversary of the termination date will vest upon such termination date and be exercisable for 90 days following vesting.
Compensation Policies and Practices Risk Assessment.
Consistent with SEC disclosure requirements, management has assessed compensation policies and practices for Company employees and has concluded that such policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
any general incorporation language therein.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 20212023, regarding the number of shares of ourthe Company’s common stock that may be issued under our equity compensation plans. | | | | | | | | |
| | A | | | B | | C | |
| | | | | | | Number of | |
| | | | | | | Securities | |
| | | | | | | Remaining | |
| | | | | | | Available | |
| | Number of | | | | | for Future | |
| | Securities to | | | | | Issuance | |
| | be | | | | | Under Equity | |
| | Issued upon | | Weights Average | | Compensation | |
| | Exercise of | | Exercise Price of | | Plans | |
| | Outstanding | | Outstanding | | (Excluding | |
| | Options, | | Options, | | Securities | |
| | Warrants and | | Warrants and | | Reflected | |
Plan Category | | Rights | | Rights | | in Column A) | |
Equity Compensation Plans Approved by Security Holders | | 7,540,146 | | $ | 3.63 | (2) | 8,126,263 | |
Equity Compensation Plans Not Approved by Security Holders | | — | | | — | | — | |
Total | | 7,540,146 | | $ | 3.63 | | 8,126,263 | |
| | | | | | | | | | | | | | | | | | | | |
| A | | B | | C | |
| Plan Category | Number of
Securities to
be
Issued upon
Exercise of
Outstanding
Options,
Warrants and
Rights | | Weighted Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights | | Number of
Securities
Remaining
Available
for Future
Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected
in Column A) | |
| Equity Compensation Plans Approved by Security Holders | 15,706,969 | (1) | $ | 3.47 | | (2) | 8,008,671 | (3) |
| Equity Compensation Plans Not Approved by Security Holders | — | | — | | — | |
| Total | 15,706,969 | | $ | 3.47 | | | 8,008,671 | |
(1) | Includes 6,414,611 shares issuable pursuant to outstanding stock options and 2,415,140 shares issuable pursuant to outstanding RSUs under our 2020 Stock Plan and 2012 Plan. The number included for PRSUs reflects the target number of units awarded. Assuming maximum payout for PRSU grants that have not completed the required performance period, the number of securities to be issued would increase by 37,184. |
(2) | Only option awards were used in computing the weighted-average exercise price. |
(1)Includes 3,642,022 shares issuable pursuant to outstanding stock options, 8,310,548 shares issuable pursuant to outstanding RSUs and 3,754,399 shares issuable pursuant to outstanding PRSUs under our 2020 Stock Plan and 2012 Stock Plan.
(2)Only option awards were used in computing the weighted-average exercise price.
(3)The number of shares of the Company’s common stock available under the 2020 Stock 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 31 of the immediately preceding fiscal year and (ii) an amount determined by the Board.
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| 66 | 20222024Proxy Statement
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information relating to the beneficial ownership of
ourthe Company’s common stock as of March
29, 2022, (the “Beneficial Ownership Date”)31, 2024 for the following:
| ■ | each person, or group of affiliated persons, known by us to beneficially own 5% of the outstanding shares of our common stock; |
| ■ | each of our non-employee directors; |
| ■ | each of our current named executive officers; and |
| ■ | all current directors and named executive officers as a group. |
■each person, or group of affiliated persons, known by us to beneficially own 5% of the outstanding shares of the Company’s common stock;
■each of our current directors and director nominees;
■each of our current NEOs; and
■all of the directors and NEOs as a group.
Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, common stock subject to options, or warrants or other convertible securities held by that person that are currently exercisable or exercisable within 60 days of the Beneficial Ownership DateMarch 31, 2024 are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. Percentage of beneficial ownership is based on 98,297,09097,731,699 shares outstanding as of the Beneficial Ownership Date.March 31, 2024.
To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name.
| | | | |
| | Number of | | |
| | Shares of | | |
| | Common | | Percentage of |
| | Stock | | Outstanding |
| | Beneficially | | Common |
Name and Address of Beneficial Owners(1) | | Owned | | Stock |
5% Stockholders: | | | | |
Matt Ehrlichman(2) | | 17,911,291 | | 17.74% |
Vulcan Value Partners, LLC(3)
Three Protective Center
2801 Highway 280 South, Suite 300
Birmingham, AL 35223 | | 10,068,923 | | 10.27% |
FMR LLC(4)
245 Summer Street
Boston, MA 02210 | | 7,353,707 | | 7.50% |
Southpoint Master Fund, LP(5)
1114 Avenue of the Americas, 22nd Floor
New York, NY 10036 | | 7,000,000 | | 7.10% |
Capital World Investors(6)
333 South Hope Street, 55th Floor
Los Angeles, CA 90071 | | 6,412,252 | | 6.50% |
Park West Asset Management LLC(7)
900 Larkspur Landing Circle, Suite 165
Larkspur, CA 94939 | | 5,161,798 | | 5.30% |
BlackRock, Inc.(8)
55 East 52nd Street
New York, NY 10055 | | 5,116,975 | | 5.20% |
Park West Investors Master Fund, Limited(7)
900 Larkspur Landing Circle, Suite 165
Larkspur, CA 94939 | | 4,696,538 | | 4.80% |
Named Executive Officers | | | | |
Matt Ehrlichman(2) | | 17,911,291 | | 17.74% |
Marty Heimbigner(9) | | 514,518 | | * |
Matthew Neagle(10) | | 257,481 | | * |
Directors and nominees for Director (excluding CEO) | | | | |
Sean Davis Kell | | — | | * |
Rachel Lam | | 4,630 | | * |
Alan Pickerill(11) | | 47,085 | | * |
Asha Sharma(12) | | 239,299 | | * |
Maurice Tulloch | | 4,914 | | * |
Regi Vengalil | | 7,151 | | * |
All directors and executive officers as a group (9 individuals) | | 18,986,369 | | 18.64% |
*
| Indicates beneficial ownership of less than 1% of the outstanding shares of our common stock.
|
(1) | Unless otherwise noted, the business address of those listed in the table above is 411 First Avenue South, Suite 501, Seattle, Washington 98104. |
(2) | This amount includes (i) 7,894,028 shares of Common Stock held directly by Mr. Ehrlichman, (ii) 1,892,203 shares of Common Stock that are obtainable upon exercise of options granted to Mr. Ehrlichman by the Company, of which options to acquire 1,726,135 shares of Common Stock are currently exercisable and options to acquire 55,353 shares of Common Stock are exercisable within 60 days of March 29, 2022, (iii) 767,672 shares of Common Stock that are obtainable upon vesting and settlement of RSUs granted to Mr. Ehrlichman by the Company, of which 72,421 RSUs vest within 60 days, (iv) 683,530 shares of |
| | | | | | | | |
Name and Address of Beneficial Owners(1) | Number of
Shares of
Common
Stock
Beneficially
Owned | Percentage of
Outstanding
Common
Stock
(%) |
| 5% Stockholders: | | |
Matt Ehrlichman(2) | 21,479,859 | 21.37% |
Granahan Investment Management, LLC(3) 404 Wyman Street Massachusetts, MA 02451 | 11,890,749 | 12.03% |
| Named Executive Officers: | | |
Matt Ehrlichman(2) | 21,479,859 | 21.37% |
Shawn Tabak(4) | 292,311 | * |
Matthew Neagle(5) | 1,305,306 | * |
| Directors and nominees for Director (excluding CEO): | | |
Sean Kell(6) | 193,428 | * |
Rachel Lam(7) | 133,775 | * |
Alan Pickerill(8) | 154,503 | * |
Amanda Reierson (9) | 43,249 | * |
Maurice Tulloch(10) | 106,211 | * |
Camilla Velasquez(11) | 45,225 | * |
Regi Vengalil(12) | 131,122 | * |
| All directors and executive officers as a group (10 individuals) | 23,884,989 | 23.46% |
*Indicates beneficial ownership of less than 1% of the outstanding shares of the Company’s common stock.
(1)Unless otherwise noted, the business address of those listed in the table above is 411 1st Avenue South, Suite 501, Seattle, Washington 98104.
(2)This amount includes (i) 18,684,564 shares of Common Stock held directly by Mr. Ehrlichman, (ii) 1,892,203 shares of Common Stock that are obtainable upon exercise of options granted to Mr. Ehrlichman by the Company, of which options to acquire 1,892,203 shares of Common Stock are currently exercisable, (iii) 903,092 shares of Common Stock that are obtainable upon vesting and settlement of
| | | | | |
| ir.porchgroup.com | Common Stock which constitute unvested Earnout Consideration held by Mr. Ehrlichman, (v) 6,416,712 shares of Common Stock held by West Equities, LLC, over which Mr. Ehrlichman has sole voting and investment power, and (vi) 228,796 shares of Common Stock which constitute unvested Earnout Consideration held by West Equities LLC. The 683,530 shares of Common Stock which constitute Earnout Consideration held by Mr. Ehrlichman and the 228,796 shares of Common Stock which constitute Earnout Consideration held by West Equities LLC all are currently unvested and will only vest if, at any time during the three years following the closing of the Business Combination, the volume-weighted average price of Common Stock is greater than or equal to $22.00 for any twenty trading days within any thirty-trading day period. However, Mr. Ehrlichman currently has voting power over the shares of Common Stock which constitute Earnout Consideration held directly by each of Mr. Ehrlichman and West Equities LLC and, accordingly, these shares have been added to his beneficial ownership reported herein. |
(3) | Based solely on the information contained it its Schedule 13G/A (Amendment No. 1) filed with the SEC on February 10, 2022, Vulcan Value Partners, LLC (“Vulcan”) is the beneficial owner of 10,068,923 shares of our common stock. Vulcan has sole dispositive and voting power over 10,068,923 shares of our common stock. Various persons, including the investment companies and owners of the separate accounts to which Vulcan serves as investment adviser, have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities that are the subject of this schedule. As of January 31, 2022, Vulcan Value Partners Small Cap Fund, an investment company advised by Vulcan, owned 6.06% of issuer’s common stock. |
(4) | Based solely on the information contained it its Schedule 13G/A (Amendment No. 1) filed with the SEC by FMR LLC (“FMR”) and Abigail P. Johnson on February 9, 2022, FMR and Ms. Johnson are the beneficial owners of 7,353,707 shares of our common stock. FMR has sole power to vote or direct the vote with respect to 152,713 that it beneficially owns and no shared dispositive power. The shares are beneficially owned through the following entities: FIAM LLC; Fidelity Institutional Asset Management Trust Company; Fidelity Management & Research (Hong Kong) Limited; Fidelity Management & Research Company LLC; and Strategic Advisers LLC. Ms. Johnson is a director, the Chairman and the Chief Executive Officer of FMR. Ms. Johnson and other members of the Johnson family own directly or indirectly 49% of the voting power of FMR and they and all of the Series B stockholders have entered into a voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of such shares. They do not, however, have the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act ("Fidelity Funds") advised by Fidelity Management & Research Company LLC ("FMR Co. LLC"), a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds' Boards of Trustees. FMR Co. LLC carries out the voting of the shares under written guidelines established by the Fidelity Funds' Boards of Trustees. |
(5) | Based solely on the information contained it its Schedule 13G/A (Amendment No. 1) filed with the SEC by Southpoint Capital Advisors, LP (“Southpoint”) and John S. Clark II on February 10, 2022, Southpoint and Mr. Clark are the beneficial owners of 7,000,000 shares of our common stock. Southpoint has shared voting and dispositive power that it beneficially owns. The shares are beneficially owned through the following entities: Southpoint Capital Advisors, LP; Southpoint Capital Advisors LLC; Southpoint GP, LP; Southpoint GP, LLC; and John S. Clark, II, individually. |
(6) | Based solely on the information contained it its Schedule 13G filed with the SEC by Capital World Investors (“Capital World”) on February 14, 2022, Capital World is the beneficial owner of 6,412,252 shares of our common stock. Capital World has sole voting power and dispositive power over 6,412,252 shares of our common stock. |
(7) | Based solely on information reported on a Schedule 13G/A (Amendment No. 2) jointly filed on February 14, 2022 by (i) Park West Asset Management LLC (“PWAM”), (ii) Park West Investors Master Fund, Limited, (“PWIMF”) and (iii) Peter S. Park (“Mr. Park”). PWAM is the investment manager to PWIMF and Park West Partners International, Limited. Mr. Park, through one or more affiliated entities, is the controlling manager of PWAM. PWAM and Mr. Park have shared voting and dispositive power over 5,161,798 shares of our common stock and PWIMF has shared voting and dispositive power over 4,696,538 shares of our common stock. |
(8) | Based solely on the information contained it its Schedule 13G filed with the SEC by BlackRock, Inc. (“BlackRock”) on February 4, 2022, BlackRock is the beneficial owner of 5,116,975 shares of our common stock. BlackRock has sole power to vote or direct the vote with respect to 5,056,055 that it beneficially owns and sole dispositive power with respect to 5,116,975. It has no shared voting or dispositive power. The shares are beneficially owned through the following entities: BlackRock Advisors, LLC; BlackRock Investment Management (UK) Limited; BlackRock Asset Management Canada Limited; BlackRock (Netherlands) B.V.; BlackRock Fund Advisors; BlackRock Fund Advisors; BlackRock Asset Management Ireland Limited; BlackRock Institutional Trust Company, Nation Association; BlackRock Financial Management, Inc.; BlackRock Fund Managers Ltd; BlackRock Asset Management Schweiz AG; and BlackRock Investment Management, LLC. |
(9) | This amount includes (i) 16,290 shares of Common Stock held directly by Mr. Heimbigner, (ii) 469,760 shares of Common Stock that are obtainable upon exercise of options granted to Mr. Heimbigner by the Company, of which options to acquire 176,160 shares of Common Stock are currently exercisable and options to acquire 19,572 shares of Common Stock are exercisable within 60 days of March 29, 2022. The 16,290 shares of Common Stock which constitute Earnout Consideration held by Mr. Heimbigner all are currently unvested and will only vest if, at any time during the three years following the closing of the Business Combination, the volume-weighted average price of Common Stock is greater than or equal to $22.00 for any twenty trading days within any thirty-trading day period. However, Mr. Heimbigner currently has voting power over the shares of Common Stock which constitute Earnout Consideration held directly by Mr. Heimbigner and, accordingly, these shares have been added to his beneficial ownership reported herein. |
(10) | This amount includes (i) 71,279 shares of Common Stock held directly by Mr. Neagle, (ii) 27,390 shares of Common Stock that are obtainable upon exercise of options granted to Mr. Neagle by the Company, of which options to acquire 6,682 shares of Common Stock are currently exercisable and options to acquire 2,607 shares of Common Stock are exercisable within 60 days of March 29,67 |
| 2022, (iii) 158,812 shares of Common Stock that are obtainable upon vesting and settlement of RSUs granted to Mr. Neagle by the Company. The 22,056 shares of Common Stock which constitute Earnout Consideration held by Mr. Neagle all are currently unvested and will only vest if, at any time during the three years following the closing of the Business Combination, the volume-weighted average price of Common Stock is greater than or equal to $22.00 for any twenty trading days within any thirty-trading day period. However, Mr. Neagle currently has voting power over the shares of Common Stock which constitute Earnout Consideration held directly by Mr. Neagle and, accordingly, these shares have been added to his beneficial ownership reported herein. |
(11) | This amount includes 4,630 shares of Common Stock that are obtainable upon vesting and settlement of RSUs granted to Ms. Lam. |
(12) | This amount includes (i) 6,810 shares of Common Stock held directly by Mr. Pickerill, (ii) 35,231 shares of Common Stock that are obtainable upon exercise of options granted to Mr. Pickerill by the Company, of which options to acquire 29,358 shares of Common Stock are currently exercisable, (iii) 50,044 shares of Common Stock that are obtainable upon vesting and settlement of RSUs granted to Mr. Pickerill by the Company. The 1,221 shares of Common Stock which constitute Earnout Consideration held by Mr. Pickerill all are currently unvested and will only vest if, at any time during the three years following the closing of the Business Combination, the volume-weighted average price of Common Stock is greater than or equal to $22.00 for any twenty trading days within any thirty-trading day period. However, Mr. Pickerill currently has voting power over the shares of Common Stock which constitute Earnout Consideration held directly by Mr. Pickerill and, accordingly, these shares have been added to his beneficial ownership reported herein. |
(13) | This amount includes (i) 63,018 shares of Common Stock held directly by Ms. Sharma, (ii) 172,140 shares of Common Stock that are obtainable upon exercise of options granted to Ms. Sharma by the Company, of which options to acquire 172,140 shares of Common Stock are currently exercisable, (iii) 4,141 shares of Common Stock that are obtainable upon vesting and settlement of RSUs granted to Ms. Sharma. The 60,470 shares of Common Stock which constitute Earnout Consideration held by Ms. Sharma all are currently unvested and will only vest if, at any time during the three years following the closing of the Business Combination, the volume-weighted average price of Common Stock is greater than or equal to $22.00 for any twenty trading days within any thirty-trading day period. However, Ms. Sharma currently has voting power over the shares of Common Stock which constitute Earnout Consideration held directly by Ms. Sharma and, accordingly, these shares have been added to her beneficial ownership reported herein. |
(14) | This amount includes 4,914 shares of Common Stock that are obtainable upon vesting and settlement of RSUs granted to Mr. Tulloch. |
(15) | This amount includes (i) 2,754 shares of Common Stock held directly by Mr. Vengalil, and (ii) 4,397 shares of Common Stock that are obtainable upon vesting and settlement of RSUs granted to Mr. Vengalil. |
RSUs granted to Mr. Ehrlichman by the Company, 244,523 of which vest within 60 days, and (iv) 6,416,712 shares of Common Stock held by West Equities, LLC, over which Mr. Ehrlichman has sole voting and investment power.(3)Based solely on the information contained in its Schedule 13G filed (Amendment No. 2) filed with the SEC by Granahan Investment Management, LLC (“Granahan”) on December 31, 2023, Granahan is the beneficial owner of 11,890,749 shares of common stock. Granahan has sole power to vote or direct the vote with respect to 9,766,417 shares of common stock that it beneficially owns and sole dispositive power with respect to 11,890,749 shares of common stock. It has no shared voting or shared dispositive power.
(4)This amount includes (i) 20,123 shares of common stock held directly by Mr. Tabak; and (ii) 272,188 shares of common stock that are obtainable upon vesting and settlement of RSUs granted to Mr. Tabak by the Company of which 10,332 vest within 60 days of March 31, 2024.
(5)This amount includes (i) 836,068 shares of common stock held directly by Mr. Neagle; (ii) 27,390 shares of common stock that are obtainable upon exercise of options granted to Mr. Neagle by the Company of which options to acquire 27,390 shares of common stock are currently exercisable and 181 options to acquire are exercisable within 60 days of March 31, 2024, and (iii) 441,848 shares of common stock that are obtainable upon vesting and settlement of RSUs granted to Mr. Neagle by the Company of which 110,830 vest within 60 days of March 31, 2024.
(6)This amount includes (i) 128,303 shares of common stock held directly by Mr. Kell, and (ii) 65,125 shares of common stock that are obtainable upon vesting and settlement of RSUs granted to Mr. Kell.
(7)This amount includes (i) 56,707 shares of common stock held directly by Ms. Lam, and (ii) 77,068 shares of common stock that are obtainable upon vesting and settlement of RSUs granted to Ms. Lam.
(8)This amount includes (i) 37,175 shares of common stock held directly by Mr. Pickerill, (ii) 35,231 shares of common stock that are obtainable upon exercise of options granted to Mr. Pickerill by the Company, of which options to acquire 35,231 shares of common stock are currently exercisable, and (iii) 82,097 shares of common stock that are obtainable upon vesting and settlement of RSUs granted to Mr. Pickerill by the Company.
(9)This amount includes 43,249 shares of common stock that are obtainable upon vesting and settlement of RSUs granted to Ms. Reierson.
(10)This amount includes (i) 31,023 RSUs vested outstanding for Mr. Tulloch, and (ii) 75,188 shares of common stock that are obtainable upon vesting and settlement of RSUs granted to Mr. Tulloch.
(11)This amount includes (i) 1,976 shares of common stock held directly by Ms. Velasquez, and (ii) 43,249 shares of common stock that are obtainable upon vesting and settlement of RSUs granted to Ms. Velasquez.
(12)This amount includes (i) 41,574 shares of common stock held directly by Mr. Vengalil, and (ii) 89,548 shares of common stock that are obtainable upon vesting and settlement of RSUs granted to Mr. Vengalil.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires directors, executive officers, and 10% beneficial owners of the Company’s common stock to file reports concerning their ownership of and transactions in the Company’s common stock. Based on a review of the reports of changes in beneficial ownership of Company common stock and written representations made to the Company, the Company believes that its officers
subject to Section 16 reporting, directors and 10% beneficial owners complied with all filing requirements under Section 16(a) during
2021,2023, except that, due to
inadvertent oversights,an administrative oversight, Matthew
Neagle,Ehrlichman, Chief
OperatingExecutive Officer
and Chairman, filed a
late Form 4
one trading day late reporting a transaction that took place on
July 11, 2021 and was filed one day late.
May 17, 2023. | 62
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| 68 | 20222024Proxy Statement
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the
Securities Exchange Act,
of 1934, as amended, and, in accordance therewith, file electronically with the SEC our annual, quarterly and current reports, proxy statements and other information. We make available on the investor relations page of our website at
https://ir.porchgroup.com/, free of charge, copies of these reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is
www.sec.gov.www.sec.gov. The information in or accessible through the websites referred to above
areis not incorporated into, and
areis not considered part of, this proxy statement. Further, our references to the URLs for these websites are intended to be inactive textual references only.
You should rely on the information contained in this proxy statement to vote your shares at the Annual Meeting. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated April
[•], 2022.24, 2024. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date, and the mailing of this proxy statement to stockholders at any time after that date does not create an implication to the contrary. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make such proxy solicitations in such jurisdiction.
We will make available, on or about April [•], 2022,24, 2024, the proxy materials, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, at www.proxyvote.com. We will also make available, solely for your reference and by courtesy, our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 on the investor relations page of our website at https://ir.porchgroup.com/. We will also provide, free of charge, to each person,
to any stockholder of record or beneficial owner of our common stock as of the record date, upon the written or oral request of any such persons, a copy of our
Annual Report on Form
10-K for the fiscal year ended December 31, 2021 as filed with the SEC.10-K. Requests for such copies should be addressed to our General Counsel and Secretary at the address below:
Porch Group, Inc.
411
First1st Avenue South, Suite 501
Seattle, WA 98104
Attention: General Counsel and Secretary
Telephone: (855) 767-2400
Please include your contact information with the request. The exhibits set forth on the exhibit index of the Form 10-K may be made available
upon request at a reasonable charge.
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| 70 | 20222024Proxy Statement
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Why am I receiving these materials? We are distributing our proxy materials because
ourthe Board is soliciting your proxy to vote at the Annual Meeting. This proxy statement summarizes the information you need to vote at the Annual Meeting. You do not need to attend the Annual Meeting to vote your shares.
Pursuant to SEC rules, we are providing access to our proxy materials via the Internet. Accordingly, we are sending an Internet Notice to all of our stockholders as of the record date. All stockholders may access our proxy materials on the website referred to in the Internet Notice. You may also request to receive a printed set of the proxy materials. You can find instructions regarding how to access our proxy materials via the Internet and how to request a printed copy in the Internet Notice. Additionally, by following the instructions in the Internet Notice, you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We believe that these rules allow us to provide our stockholders with the information they need while lowering the costs of delivery and reducing the environmental impact of the Annual Meeting.
What proposals will be voted on at the Annual Meeting?
Stockholders will vote on
sixthree proposals at the Annual Meeting:
| ■ | Election of two Class II directors named in this proxy statement until the 2025 Annual Meeting of Stockholders (or until the 2024 Annual Meeting of Stockholders if Proposal 2 is approved and the Declassification Amendment (as defined in this proxy statement) is filed and becomes effective as described in this enclosed proxy statement) and until their successors are duly elected and qualified, subject to their earlier resignation, removal or death; |
| ■ | the approval of an amendment to our Second Amended and Restated Certificate of Incorporation of Porch Group, Inc. (the “Certificate of Incorporation”) to declassify our Board; |
| ■ | the approval of an amendment to our Certificate of Incorporation to eliminate the supermajority voting requirement therein; |
| ■ | the approval of, on an advisory (non-binding) basis, the compensation of our Named Executive Officers (as defined in the enclosed proxy statement); |
| ■ | the approval of, on an advisory (non-binding) basis, the frequency of future advisory votes to approve the compensation of our Named Executive Officers; and |
| ■ | to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022. |
■The election of the eight directors named in this proxy statement until the 2025 annual meeting of stockholders and until their successors are duly elected and qualified, subject to their earlier resignation, removal or other termination of service;
■The ratification of the appointment of Grant Thornton as our independent registered public accounting firm for the fiscal year ending December 31, 2024; and
■The approval of, on an advisory (non-binding) basis, the compensation of our NEOs.
We will also consider other business, if any, that properly comes before the Annual Meeting.
What happens if other business not discussed in this proxy statement comes before the meeting?
The Company does not know of any business to be presented at the Annual Meeting other than the proposals discussed in this proxy statement. If other business comes before the meeting and is proper under our Certificate of Incorporation, Amended and Restated Bylaws, and Delaware law, the Company’s Chief Executive Officer and Chairman and General Counsel and Secretary will use their discretion in casting all of the votes that they are entitled to cast.
How does the Board recommend that stockholders vote on the proposals?
Our
The Board recommends that stockholders vote “FOR” the election of
the Class II directors, “FOR” the amendment to the Certificate of Incorporation to declassify the Board, “FOR” the amendment to the Certificate of Incorporation to eliminate the supermajority voting requirement therein, “FOR” the advisory resolution to approve executive compensation, “ONE YEAR” on the frequency of future advisory votes on executive compensation, andall eight director nominees, “FOR” the ratification of the appointment of
Ernst & Young LLPGrant Thornton as our independent registered public accounting firm for the fiscal year ending December 31,
2022.2024, and “FOR” the non-binding advisory resolution to approve NEO compensation.
The record date for the Annual Meeting is the close of business on April
13, 2022.15, 2024. As of the record date,
99,013,76998,198,656 shares of common stock, par value $0.0001 per share, were outstanding. Only holders of record of
ourthe Company’s common stock as of the record date will be entitled to notice of and to vote at the Annual Meeting
orand any adjournment or postponement thereof. Each stockholder is entitled to one vote for each share of
ourthe Company’s common stock held by such stockholder on the record date.
What do I need for admission to the Annual Meeting?
The Annual Meeting will be held entirely over the Internet via live video webcast
due to
the public health impact of the COVID-19 pandemic and to support the health and wellness of our stockholders, directors, team members, and guests. The virtual Annual Meeting will also allow for greater participation by all of our stockholders, regardless of their geographic location.
If you are a registered stockholder or beneficial owner of common stock holding shares at the close of business on the record date, you may attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/PRCH2022PRCH2024 and logging in by entering the 16-digit control number found on your proxy card or voter instruction form. If you lost your 16-digit control number or are not a stockholder, you will be able to attend the meeting by visiting
www.virtualshareholdermeeting.com/PRCH2022PRCH2024 and registering as a guest. If you enter the meeting as a guest, you will not be able to vote your shares, examine our list of stockholders or submit questions during the meeting. You may log into the virtual annual meeting beginning at
8:9:45 a.m. Pacific Time on June
8, 202212, 2024, and the Annual Meeting will begin promptly at
9:10:00 a.m. Pacific Time. If you experience any technical difficulties during the meeting, a
toll freetoll-free number will be available on our virtual stockholder login site for assistance.
How can I vote my shares without attending the Annual Meeting?
If you are a holder of record of shares of common stock of the Company, you may direct your vote without attending the Annual Meeting by following the instructions on the Internet Notice or proxy card to vote by Internet or by telephone, or by signing, dating and mailing a proxy card.
If you hold your shares in street name via a broker, bank or other nominee, you may direct your vote without attending the Annual Meeting by signing, dating and mailing your voting
instruction card.instructions form. Internet or telephonic voting may also be available. Please see your voting
instruction cardinstructions form provided by your broker, bank or other nominee for further details.
Can I change my vote or revoke my proxy?
You may change your vote or revoke your proxy at any time before it is voted at the Annual Meeting. If you are a stockholder of record, you may change your vote or revoke your proxy by:
| ■ | delivering to the attention of the General Counsel and Secretary at the address on the first page of this proxy statement a written notice of revocation of your proxy; |
| ■ | delivering to us an authorized proxy bearing a later date (including a proxy over the Internet or by telephone); or |
| ■ | attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not, by itself, revoke a proxy. |
■delivering to us an authorized proxy bearing a later date (including a proxy over the Internet or by telephone); or■attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not, by itself, revoke a proxy.
If your shares are held in the name of a bank, broker or other nominee, you may change your vote by submitting new voting instructions to your bank, broker or other nominee. Please note that if your shares are held of record by a bank, broker or other nominee, and you decide to attend and vote at the Annual Meeting, your vote in person at the Annual Meeting will not be effective unless you present a legal proxy, issued in your name from the record holder (your bank, broker or other nominee).
What is a broker non-vote?
Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain “routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect to “non-routine” matters, the broker, bank or other nominee is not permitted to vote shares for a beneficial owner without timely received voting instructions. The only routine matter to be presented at the Annual Meeting is
the proposalProposal 2 to ratify the appointment of
Ernst & Young LLPGrant Thornton as our independent registered public accounting firm for the fiscal year ending December 31,
2022 (Proposal 6).2024. The other proposals are non-routine matters.
A broker non-vote occurs when a broker, bank or other nominee does not vote on a non-routine matter because the beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other nominee exercise their discretionary voting authority on Proposal
6,2, such shares will be considered present at the Annual Meeting for quorum purposes and broker non-votes will occur as to Proposals 1
- 5,and 3, or any other non-routine matters that are properly presented at the Annual Meeting. Broker non-votes will have no impact on the voting results.
What constitutes a quorum?
The presence at the Annual Meeting, either in person or by proxy, of holders of a majority of the aggregate number of shares of our issued and outstanding common stock entitled to vote thereat as of the record date
shallwill constitute a quorum for the transaction of business at the Annual Meeting.
Earnout Shares (as defined above) will be counted forThe record date is the
purposeclose of
determining the presence of a quorum and holders thereof will be entitled to vote their Earnout Shares at the Annual Meeting.business on April 15, 2024. Abstentions,
withhold votes, and broker non-votes will be counted as present for the purpose of determining whether a quorum is present at the Annual Meeting.
What vote is required to approve each matter to be considered at the Annual Meeting?
Proposal
PROPOSAL 1:
Election of the Class II Directors Named in this Proxy StatementELECTION OF THE EIGHT DIRECTOR NOMINEES NAMED IN THIS PROXY STATEMENT
Our
Amended and Restated Bylaws provide for a plurality voting standard for the election of directors. This means that the
director nominee witheight directors receiving the
most votes for a particular seat is elected for that seat. An abstention or a broker non-vote on Proposal 1 will not have any effect on the election of a director.PROPOSAL 2: APPROVE the DECLASSIFication AMENDMENT
The Declassification Amendment must be approved by the affirmative vote of at least 66.7% in voting power of the outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class. In determining whether Proposal 2 has received the requisitehighest number of votes abstentions and broker non-votes will have the same effect as votes “against” Proposal 2.
PROPOSAL 3: APPROVE the Elimination of the Supermajority Voting Standard Amendment
The Elimination of the Supermajority Voting Standard Amendment must be approved by the affirmative vote of at least 66.7% in voting power of the outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, in the election of Directors at the Annual Meeting is requiredwill be elected; however, any director nominee who receives more “WITHHOLD” votes than “FOR” votes will tender his or her resignation to approvethe Board promptly following certification of the stockholder vote. See "Corporate Governance, Structure and Responsibility—Plurality Plus Voting for Directors; Director Resignation Policy" for more information. Brokers do not have discretion to vote on this proposal. In determining whether Proposal 3 has received the requisite number ofWithhold votes abstentions and broker non-votes are not treated as votes cast and, therefore, will have no effect on this proposal.
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2024
The majority of votes cast by the
same effectstockholders present in person at the Annual Meeting or represented by proxy at the Annual Meeting and entitled to vote is required for the approval of Proposal 2. Abstentions are not treated as votes
“against” cast and, therefore, will have no effect on this proposal. Brokers will have discretionary authority to vote on this proposal. Accordingly, there will not be any broker non-votes on Proposal
3.2.
PROPOSAL
4: 3: ADVISORY (NON-BINDING) VOTE ON “SAY ON PAY”“SAY-ON-PAY”
The
affirmative vote of a majority of
votes cast by the
votes duly cast on this itemstockholders present in person at the Annual Meeting or represented by proxy at the Annual Meeting and entitled to vote is required
for the approval of Proposal 3. Brokers do not have discretion to
approvevote on this proposal. Abstentions and broker non-votes are not treated as votes cast and, therefore, will have no effect on this proposal.
PROPOSAL 5: ADVISORY VOTE ON “SAY ON FREQUENCY” OF PAY
The option of one year, two years, or three years that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on executive compensation that has been recommended by stockholders. Abstentions and broker non-votes will have no effect on this proposal. Although the advisory vote is non-binding, we will review the results of the vote and take them into account in making a determination concerning the frequency of advisory votes on executive compensation.
Proposal 6: Ratification of the Appointment of Ernst & Young LLP as Our Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2022
The affirmative vote of the majority of our shares of common stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required for the approval of Proposal 6. An abstention on Proposal 6 will have the same effect as a vote “AGAINST” Proposal 6. Brokers will have discretionary authority to vote on this proposal. Accordingly, there will not be any broker non-votes on Proposal 6.
What is the deadline for submitting a proxy?
To ensure that proxies are received in time to be counted prior to the Annual Meeting, proxies submitted by Internet or by telephone should be received by 11:59 p.m. Pacific Time on the day before the Annual Meeting, and proxies submitted by mail should be received by the close of business on the day prior to the date of the Annual Meeting.
What does it mean if I receive more than one Internet Notice or proxy card?
If you hold your shares in more than one account, you will receive an Internet Notice or proxy card for each account. To ensure that all of your shares are voted, please complete, sign, date and return a proxy card for each account or use the Internet Notice or proxy card for each account to vote by Internet or by telephone. To ensure that all of your shares are represented at the Annual Meeting, we recommend that you vote every Internet Notice or proxy card that you receive.
How will my shares be voted if I return a blank proxy card or a blank voting instruction
card?form?
If you are a holder of record of
ourthe Company’s common stock and you sign and return a proxy card or otherwise submit a proxy without giving specific voting instructions, your shares will be voted:
| ■ | “FOR” the election of each director nominee. |
| ■ | “FOR” the approval of the amendment to our Certificate of Incorporation to declassify our Board. |
| ■ | “FOR” the approval of the amendment to our Certificate of Incorporation to eliminate the supermajority voting requirement therein. |
| ■ | “FOR” the approval of, on an advisory (non-binding) basis, the compensation of our Named Executive Officers; |
| ■ | The approval of, on an advisory (non-binding) basis, “ONE YEAR” for the frequency of future advisory votes to approve the compensation of our Named Executive Officers; |
| ■ | “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022. |
■“FOR” the ratification of the appointment of Grant Thornton as our independent registered public accounting firm for the fiscal year ending December 31, 2024; and■“FOR” the approval of, on an advisory (non-binding) basis, the compensation of our NEOs.
If you hold your shares in street name via a broker, bank or other nominee and do not provide the broker, bank or other nominee with voting instructions (including by signing and returning a blank voting instruction card)form), your shares:
■will be counted as present for purposes of establishing a quorum;
■will be voted in accordance with the broker’s, bank’s or other nominee’s discretion on “routine” matters, which includes only the proposal to ratify the appointment of Grant Thornton as our independent registered public accounting firm for the fiscal year ending December 31, 2024 (Proposal 2); and
■will not be counted in connection with the election of the eight director nominees named in this proxy statement (Proposal 1) and approval of, on an advisory (non-binding basis), the compensation of our NEOs (Proposal 3), or any other non-routine matters that are properly presented at the Annual Meeting. For each of
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| ir.porchgroup.com | ■ | will be counted as present for purposes of establishing a quorum;73 |
| ■ | will be voted in accordance with the broker’s, bank’s or other nominee’s discretion on “routine” matters, which includes only the proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022 (Proposal 6); and |
| ■ | will not be counted in connection with the election of the Class II directors named in this proxy statement (Proposal 1), or any other non-routine matters (Proposals 2 – 5) that are properly presented at the Annual Meeting. For each of these proposals, your shares will be treated as “broker non-votes.” A broker non-vote will have no impact on voting results. |
these proposals, your shares will be treated as “broker non-votes.” A broker non-vote will have no impact on voting results.
The Board knows of no matter to be presented at the Annual Meeting other than Proposals 1, 2
3, 4, 5 and
6.3. If any other matters properly come before the Annual Meeting upon which a vote properly may be taken, shares represented by all proxies received by us will be voted with respect thereto as permitted and in accordance with the judgment of the proxy holders.
Who is making this solicitation and who will pay the expenses?
This proxy solicitation is being made on behalf of
ourthe Board. All expenses of the solicitation, including the cost of preparing and mailing the Internet Notice or this proxy statement, will be borne by the Company.
Will a stockholder list be available for inspection?
A list
The names of stockholders of record entitled to vote at the Annual Meeting will be available at the Annual Meeting and, for 10to such stockholders ten days prior to the Annual Meeting for any purpose reasonably relevant to the meeting, during normal business hours at Porch Group, Inc.the Company's principal place of business located at 411 First1st Avenue South,S., Suite 501, Seattle, WA 98104 between the hours of 9:00 a.m. and 5:00 p.m. Pacific Time.98104. The stockholder list will also be available to stockholders of record for examination during the Annual Meeting at www.virtualshareholdermeeting.com/PRCH2022PRCH2024. You will need the control number included on your Internet Notice, proxy card, or voting instructioninstructions form, or otherwise provided by your bank, broker or other nominee. What is “householding” and how does it affect me?
We have adopted a procedure approved by the SEC, called “householding.” Under this procedure, we send only one proxy statement and one annual report to eligible stockholders who share a single address, unless we have received instructions to the contrary from any stockholder at that address. This practice is designed to eliminate duplicate mailings, conserve natural resources, and reduce our printing and mailing costs. Stockholders who participate in householding will continue to receive separate proxy cards.
If you share an address with another stockholder and receive only one set of proxy materials but would like to request a separate copy of these materials to be received now or in the future, please contact our mailing agent, Broadridge Financial Solutions, Inc., by calling (866) 540-7095 or writing to Broadridge Householding Department, 51 Mercedes Way, Edgewood, NY 11717 and an additional copy of proxy materials will be promptly delivered to you. Similarly, if you receive multiple
copies of the proxy materials and would prefer to receive a single copy, in the future, you may also contact Broadridge Financial Solutions, Inc. at the above telephone number or address. If you own shares through a bank, broker, or other nominee, you should contact the nominee concerning householding procedures.
How can I find out the results of the voting at the Annual Meeting?
We will announce preliminary voting results at the Annual Meeting. We will also disclose voting results on a Current Report on Form 8-K that we will file with the SEC within four business days after the Annual Meeting.
Who is soliciting my vote, and who bears the expense?
The Board is soliciting your proxy, as a holder of our common stock, for use at the Annual Meeting and any adjournment or postponement of such meeting.
The Company will bear the entire cost of preparing, assembling, and mailing the proxy materials. The Company may supplement our solicitation of proxies by mail with telephone, e-mail or personal solicitation by our officers or other regular employees and no additional compensation will be made to any of our employees for such solicitation services. We have requested banks, brokers and other nominees to forward the proxy materials to, and to obtain proxies from, the beneficial owners and we will reimburse such record holders for their reasonable out-of-pocket expenses in doing so upon request.
When are stockholder proposals due for next year’s annual meeting of the stockholders?
Our stockholders are entitled to present proposals for action at a forthcoming meeting if they comply with the requirements of our Certificate of Incorporation, our
Amended and Restated Bylaws, and the rules established by the SEC.
Under
Rule 14a-8 under the Securities Exchange Act of 1934,SEC rules, if
you wanta stockholder wants us to include a proposal in
our proxy statement and form of proxy for presentation at our 2025 annual meeting of stockholders (pursuant to Rule 14a-8 of the
proxy materials for our 2023 Annual Meeting of Stockholders,Exchange Act), we must receive the proposal at our
principal executive offices
at(Corporate Secretary, Porch Group, Inc. 411
First1st Avenue South, Suite 501, Seattle, WA
98104 no later than98104) by the close of business on December
30, 2022.Pursuant to our Amended and Restated Bylaws,31, 2024. As the rules of the SEC make clear, simply submitting a proposal does not guarantee that it will be included.
Any stockholder director nomination or proposal of other business submitted outsideintended to be presented for consideration at the 2025 annual meeting of stockholders, but not intended to be considered for inclusion in our proxy statement and form of proxy relating to such meeting (i.e., not pursuant to Rule 14a-8 of the process established in Rule 14a-8 and nominations of directorsExchange Act), must be received no earlierby us at the address stated above not less than 90 days and not more than 120 days before the first anniversary of the date of the Annual Meeting. Therefore, such notice must be received between February 8, 202313, 2025 and the close of business on March 14, 2025, to be considered timely. However, if our 2025 annual meeting occurs more than 30 days before or 60 days after June 12, 2024, we must receive nominations or proposals (A) not later than March 10, 2023the close of business on the later of the 90th day prior to the date of the 2025 annual meeting of stockholders or the 10th day following the day on which public announcement is made of the date of the 2025 annual meeting of stockholders, and (B) not earlier than the 120th day prior to the 2025 annual meeting of stockholders.
The above-mentioned proposals must
otherwisealso comply with
our Bylaws and the
proxy solicitation rules of the SEC and Nasdaq, including but not limited to the information requirements set forth in our
Amended and Restated Bylaws.
Any proposal or nomination should be addressed to the attention of our General Counsel and Secretary, and we suggest that it be sent by certified mail, return receipt requested.In addition, to satisfying the foregoing requirements under our by-laws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than Porch Group’sthe Company’s nominees must provide notice that sets forthalso comply with the information required byadditional requirements of Rule 14a-19 under14a-19(b) of the Exchange Act, no later than April 9, 2023.
to the extent applicable. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with the foregoing and other applicable requirements.
Whom can I contact for further information?
If you would like additional copies, without charge, of this proxy statement or if you have questions about the Annual Meeting, the proposals, or the procedures for voting your shares, you should contact our General Counsel and Secretary at Porch Group, Inc.
, 411
First1st Avenue South, Suite 501, Seattle, WA 98104 or by telephone at (855) 767-2400.
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We have no knowledge of any other matters that may come before the Annual Meeting and do not intend to present any other matters. However, if any other matters shall properly come before the meeting or any adjournment, our representatives will have the discretion to vote as they see fit unless directed otherwise. If you do not plan to attend the Annual Meeting, in order that your shares may be represented and in order to assure the required quorum, please sign, date and return your proxy promptly. In the event you are able to attend the Annual Meeting, at your request, we will cancel your previously submitted proxy.
APPENDIX A
CERTIFICATE OF AMENDMENT TO THE SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF PORCH GROUP, INC.
* * * *
AdoptedAppendix A: Use of Non-GAAP Financial Measures
Non-GAAP Financial Measures
Porch’s annual and quarterly reports include non-GAAP financial measures, such as Adjusted EBITDA (Loss) and Adjusted EBITDA (Loss) as a percent of revenue.
We define Adjusted EBITDA (Loss) as net income (loss) adjusted for interest expense; income taxes; depreciation and amortization; gain or loss on extinguishment of debt; other expense (income), net; impairments of intangible assets and goodwill; provision for doubtful accounts related to reinsurance, or related recoveries; impairments of property, equipment, and software; stock-based compensation expense; mark-to-market gains or losses recognized on changes in the value of contingent consideration arrangements, earnouts, warrants, and derivatives; restructuring costs; acquisition and other transaction costs; and non-cash bonus expense. Adjusted EBITDA (Loss) as a percent of revenue is defined as Adjusted EBITDA (loss) divided by total revenue.
Our management uses these non-GAAP financial measures as supplemental measures of our operating and financial performance, for internal budgeting and forecasting purposes, to evaluate financial and strategic planning matters, and to establish certain performance goals for incentive programs. We believe that the use of these non-GAAP financial measures provides investors with useful information to evaluate our operating and financial performance and trends and in comparing our financial results with competitors, other similar companies and companies across different industries, many of which present similar non-GAAP financial measures to investors. However, our definitions and methodology in calculating these non-GAAP measures may not be comparable to those used by other companies. In addition, we may modify the presentation of these non-GAAP financial measures in the future, and any such modification may be material.
You should not consider these non-GAAP financial measures in isolation, as a substitute to or superior to financial performance measures determined in accordance with
GAAP. The principal limitation of these non-GAAP financial measures is that they exclude specified income and expenses, some of which may be significant or material, that are required by GAAP to be recorded in our consolidated financial statements. We may also incur future income or expenses similar to those excluded from these non-GAAP financial measures, and the
provisionspresentation of §242 of the General Corporation Law
of the State of Delaware
* * * *
The undersigned, beingthese measures should not be construed as an authorized officer of Porch Group, Inc., a corporation duly organized and existing under andinference that future results will be unaffected by virtue of the laws of the State of Delaware (the “Corporation”), does hereby certify as follows:
FIRST: That the original Certificate of Incorporation of the Corporation was filed with the Delaware Secretary of State on July 31, 2019 under the name PropTech Acquisition Corporation.
SECOND: That an Amended and Restated Certificate of Incorporation was filed with the Delaware Secretary of State on November 21, 2019. The Second Amended and Restated Certificate of Incorporation was filed with the Delaware Secretary of State on December 23, 2020 (such certificate, as so amended and restated, the “Certificate of Incorporation”).
THIRD: That Article V of the Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:
Section 5.1. Board Powers. The business and affairs of the Corporation shall be managed by,unusual or under the direction of, the Board.non-recurring items. In addition, tothese non-GAAP financial measures reflect the powersexercise of management judgment about which income and authority expressly conferred upon the Board by statute, this Second Amended and Restated Certificate, as it may be further amended from time to time,expense are included or the Amended and Restated By-Laws of the Corporation (as amended from time to timeexcluded in accordance with the provisions hereof and thereof, the “By-Laws”), the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL and this Second Amended and Restated Certificate.
Section 5.2. Number, Election and Term.
(a) The number of directors of the Corporation, other than those who may be elected by the holders of one or more series of the Preferred Stock voting separately by class or series, shall be fixed from time to time in the manner provided in the By-laws.
(b) Subject to Section 5.5 hereof, until the 2024 annual meeting of the stockholders of the Corporation (the “2024 Annual Meeting”), the Board shall be divided into three classes, as nearly equal in number as possible and designated Class I, Class II and Class III. Following the effectiveness of this Certificate of Amendment to the Second Amended and Restated Certificate, (i) each director elected at the 2021 annual meeting of the stockholders of the Corporation shall continue to serve for a three-year term expiring at the 2024 Annual Meeting, (ii) each director elected at the 2022 annual meeting of the stockholders of the Corporation shall be elected for a two-year term expiring at the 2024 Annual Meeting and (iii) each director elected at the 2023 annual meeting of the stockholders of the Corporation shall be elected for a one-year term expiring at the 2024 Annual Meeting and, in each case, until the election and qualification of his or her respective successor in office, subject to such director’s earlier death, resignation or removal. Commencing at the 2024 Annual Meeting, and at each annual meeting of stockholders of the Corporation thereafter, the classification of the directors shall terminate and all directors shall be elected for a one-year term expiring at the next annual meeting of the stockholders and until the election and qualification of their respective successors in office, subject to their earlier death, resignation or removal. Subject to Section 5.5 hereof, if the number of directors that constitute the Board is changed prior to the 2024 Annual Meeting, any increase or decrease shall be apportioned by the Board among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors constituting the Board shorten the term of any incumbent director. Subject to the rights of the holders of one or more series of Preferred Stock, voting separately by class or series, to elect directors pursuant to the terms of one or more series of Preferred Stock, the election of directors shall be determined by a plurality of the votes cast by
determining these non-GAAP financial measures.
the stockholders present in person or represented by proxy at the meeting and entitledThe following table reconciles net loss to vote thereon.
(c) Subject to Section 5.5 hereof, a director shall hold office (i) prior to the 2024 Annual Meeting, until the annual meeting for the year in which his or her term expires and (ii) from and after the 2024 Annual Meeting, until the annual meeting of the stockholders held in the year following the year of his or her election and, in each case, until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal. There shall be no limit on the number of terms a director may serve on the Board.
(d) Unless and except to the extent that the By-Laws shall so require, the election of directors need not be by written ballot. The holders of shares of Common Stock shall not have cumulative voting rights with regard to the election of directors.
Section 5.3. Newly Created Directorships and Vacancies. Subject to Section 5.5 hereof, newly created directorships resulting from an increase in the number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely and exclusively by a majority vote of the remaining directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office (i) prior to the 2024 Annual Meeting, for the remainder of the full term of the class of directors to which the new directorship was added or in which the vacancy occurred and (ii) from and after the 2024 Annual Meeting, until the next annual meeting of the stockholders and, in each case, until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.
Section 5.4. Removal. Subject to Section 5.5 hereof and except as otherwise required by law, (i) prior to the 2024 Annual Meeting, any or all of the directors may be removed from office at any time, but only for cause and only by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, and (ii) from and after the 2024 Annual Meeting, any or all of the directors may be removed from office at any time with or without cause by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
Section 5.5. Preferred Stock - Directors. Notwithstanding any other provision of this Article V, and except as otherwise required by law, whenever the holders of one or more series of the Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors, the term of office, the filling of vacancies, the removal from office and other features of such directorships shall be governed by the terms of such series of the Preferred Stock as set forth in this Second Amended and Restated Certificate (including any Preferred Stock Designation).
FOURTH: That the terms and provisions of this Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation were duly adopted by the Board of Directors and the stockholders of the Corporation in accordance with Section 242 of the General Corporation Law of the State of Delaware.
* * * * *
IN WITNESS WHEREOF, the undersigned does hereby certify under penalties of perjury that this Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation is the act and deed of the undersigned and the facts stated herein are true and accordingly has hereunto set his or her hand this ___ day of _________, 2022.
Porch Group, Inc., a Delaware corporation
APPENDIX B
CERTIFICATE OF AMENDMENT TO THE SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF PORCH GROUP, INC.
* * * *
Adopted in accordance with the provisions
of §242 of the General Corporation Law
of the State of Delaware
* * * *
The undersigned, being an authorized officer of Porch Group, Inc., a corporation duly organized and existing under and by virtue of the laws of the State of Delaware (the “Corporation”), does hereby certify as follows:
FIRST: That the original Certificate of Incorporation of the Corporation was filed with the Delaware Secretary of State on July 31, 2019 under the name PropTech Acquisition Corporation.
SECOND: That an Amended and Restated Certificate of Incorporation was filed with the Delaware Secretary of State on November 21, 2019. The Second Amended and Restated Certificate of Incorporation was filed with the Delaware Secretary of State on December 23, 2020 (such certificate, as so amended and restated, the “Certificate of Incorporation”).
THIRD: That Article X of the Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:
The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Second Amended and Restated Certificate (including any Preferred Stock Designation), and other provisions authorized by the laws of the State of Delaware at the time in force that may be added or inserted, in the manner now or hereafter prescribed by this Second Amended and Restated Certificate and the DGCL; and, except as set forth in Article VIII, all rights, preferences and privileges of whatever nature herein conferred upon stockholders, directors or any other persons by and pursuant to this Second Amended and Restated Certificate in its present form or as hereafter amended are granted subject to the right reserved in this Article X. Notwithstanding any other provisions of this Second Amended and Restated Certificate or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Corporation required by law or by this Second Amended and Restated Certificate or any Preferred Stock Designation filed with respect to a series of Preferred Stock, (i) prior to the 2024 Annual Meeting, the affirmative vote of the stockholders holding at least 66.7% of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Article V and (ii) from and after the 2024 Annual Meeting, the affirmative vote of the stockholders holding at least a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Article V.
FOURTH: That the terms and provisions of this Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation were duly adopted by the Board of Directors and the stockholders of the Corporation in accordance with Section 242 of the General Corporation Law of the State of Delaware.
* * * * *
IN WITNESS WHEREOF, the undersigned does hereby certify under penalties of perjury that this Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation is the act and deed of the undersigned and the facts stated herein are true and accordingly has hereunto set his or her hand this ___ day of _________, 2022.
Porch Group, Inc., a Delaware corporation
APPENDIX C: USE OF NON-GAAP FINANCIAL MEASURES
PORCH GROUP,INC.
Reconciliation of Adjusted EBITDA (Loss) to Net Income (Loss)
Year Ended December 31, 2021
(all numbersfor the periods presented (dollar amounts in thousands)
| | | | | | | | | | | | | |
| | Corporate | | Insurance | | Vertical
Software | | Consolidated | |
Adjusted EBITDA (loss) | | $ | (53,760) | | $ | 9,007 | | $ | 20,733 | | $ | (24,020) | |
Adjusted EBITDA (loss) as a percentage of revenue | | | N/A | | | 16.3 | % | | 15.1 | % | | (12.5) | % |
Less: | | | | | | | | | | | | | |
Interest expense | | | 4,739 | | | 508 | | | 510 | | | 5,757 | |
Income tax benefit | | | (8,139) | | | (1,788) | | | (346) | | | (10,273) | |
Depreciation and amortization | | | 2,915 | | | 3,432 | | | 10,039 | | | 16,386 | |
Gain on extinguishment of debt | | | (5,099) | | | — | | | (11) | | | (5,110) | |
Non-cash long-lived asset impairment charge | | | 252 | | | — | | | 298 | | | 550 | |
Non-cash stock-based compensation expense | | | 33,179 | | | 876 | | | 4,537 | | | 38,592 | |
Revaluation of contingent consideration | | | (2,807) | | | — | | | 563 | | | (2,244) | |
Revaluation of earnout liability | | | 18,519 | | | — | | | — | | | 18,519 | |
Revaluation of private warrant liability | | | 15,389 | | | — | | | — | | | 15,389 | |
Acquisition and related expense | | | 5,331 | | | 29 | | | — | | | 5,360 | |
Other income, net | | | (81) | | | — | | | (259) | | | (340) | |
Net income (loss) | | $ | (117,958) | | $ | 5,950 | | $ | 5,402 | | $ | (106,606) | |
.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | Three Months Ended December 31, | | Six Months Ended December 31, |
| 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| Net loss | $ | (133,933) | | $ | (156,559) | | $ | (2,486) | | $ | (35,473) | | $ | (8,230) | | $ | (119,949) |
| Interest expense | 31,828 | | 8,723 | | 10,598 | | 2,219 | | 20,865 | | 4,371 |
| Income tax provision (benefit) | 622 | | 842 | | 588 | | 574 | | 704 | | 552 |
| Depreciation and amortization | 24,415 | | 27,930 | | 5,914 | | 6,356 | | 12,186 | | 15,031 |
| Gain on extinguishment of debt | (81,354) | | — | | — | | — | | — | | — |
| Other expense (income), net | (3,893) | | (571) | | (368) | | (608) | | (1,553) | | (678) |
| Impairment loss on intangible assets and goodwill | 57,232 | | 61,386 | | — | | 4,329 | | — | | 61,386 |
Loss (gain) on reinsurance contract | 36,042 | | — | | (5,159) | | — | | (12,202) | | — |
| Impairment loss on property, equipment, and software | 254 | | 637 | | — | | 535 | | — | | 567 |
| Stock-based compensation expense | 20,709 | | 27,041 | | 432 | | 6,396 | | 7,411 | | 11,485 |
| Mark-to-market losses (gains) | (1,003) | | (21,364) | | 774 | | 1,585 | | (783) | | 1,983 |
Restructuring costs (1) | 4,015 | | 647 | | 1,226 | | 647 | | 1,938 | | 647 |
| Acquisition and other transaction costs | 552 | | 1,687 | | 144 | | 104 | | 166 | | 365 |
| Adjusted EBITDA (Loss) | $ | (44,514) | | $ | (49,601) | | $ | 11,663 | | $ | (13,336) | | $ | 20,502 | | $ | (24,240) |
| Adjusted EBITDA (Loss) as a percentage of revenue | (10) | % | | (18) | % | | 10 | % | | (21) | % | | 8 | % | | (17) | % |
______________________________________(1)Primarily consists of costs related to forming a reciprocal exchange.
APPENDIX D: USE OF NON-GAAP KEY PERFORMANCE MEASURES
PORCH GROUP, INC.
Appendix B: Use of Key Performance Measures
Years Ended December 31, 2021
Key Performance Measures and
2020
Operating Metrics
In the management of our businesses, we identify, measure and evaluate a variety of operating metrics. The key performance measures and operating metrics
we useused in managing our businesses are
set forthdiscussed below. These key performance measures and operating metrics are not prepared in accordance with generally accepted accounting principles in the United States (“GAAP”)
, and may not be comparable to or calculated in the same way as other similarly titled measures and metrics used by other companies.
| ● | Average Companies in Quarter — Porch provides software and services to home services companies and, through these relationships, gains unique and early access to homebuyers and homeowners, assists homebuyers and homeowners with critical services such as insurance, warranty and moving. Porch’s customers include home services companies, for whom Porch provides software and services and who provide introductions to homebuyers and homeowners. Porch tracks the average number of home services companies from which it generates revenue each quarter in order to measure our ability to attract, retain and grow our relationships with home services companies. Porch management defines the average number of companies in a quarter as the straight-line average of the number of companies as of the end of period compared with the beginning of period across all of Porch’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 in their initial quarter based on the percentage of the quarter they were a part of Porch. |
| ● | Average Revenue per Account per Month in Quarter — Management views Porch’s ability to increase revenue generated from existing customers as a key component of Porch’s growth strategy. Average Revenue per Account per Month in Quarter is defined as the average revenue per month generated across all our home services company customer accounts in a quarterly period. Average Revenue per Account per Month in Quarter is derived from all customers and total revenue; not only customers and revenues associated with Porch’s referral network. |
The following table summarizes operating metrics for each of the periods indicated.
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2023 | | 2022 | | % Change |
| Gross Written Premium (in millions) | | $ | 525 | | | $ | 536 | | | (2) | % |
| Policies in Force (in thousands) | | 310 | | | 389 | | | (20) | % |
| Annualized Revenue per Policy (unrounded) | | $ | 984 | | | $ | 872 | | | 13 | % |
| Annualized Premium per Policy (unrounded) | | $ | 1,884 | | | $ | 1,215 | | | 55 | % |
| Premium Retention Rate | | 96 | % | | 107 | % | | |
| Gross Loss Ratio | | 69 | % | | 72 | % | | |
| Average Companies in Quarter (unrounded) | (1) | 30,476 | | | 29,032 | | | 5 | % |
| Average Monthly Revenue per Account in Quarter (unrounded) | (1) | $ | 1,184 | | | $ | 794 | | | 49 | % |
| Monetized Services (unrounded) | | 903,455 | | | 1,128,223 | | | (20) | % |
| Average Quarterly Revenue per Monetized Service (unrounded) | (1) | $ | 404 | | | $ | 184 | | | 119 | % |
(1)Amounts for periods that include more than one quarter are calculated as the average of the quarters within the period.
Gross Written Premium. We define Gross Written Premium as the total premium written by our licensed insurance carrier(s) (before deductions for reinsurance); premiums from our home warranty offerings (for the face value of one year’s premium); and premiums of policies placed with third-party insurance companies for which we earn a commission.
Policies in Force. We define Policies in Force as the number of in-force policies at the end of the period for the Insurance segment, including policies and warranties written by us and policies and warranties written by third parties for which we earn a commission.
Annualized Revenue per Policy. We define Annualized Revenue per Policy as quarterly revenue for the Insurance segment, divided by the number of Policies in Force in the Insurance segment, multiplied by four.
Annualized Premium per Policy. We define Annualized Premium per Policy as the total direct earned premium for HOA, our insurance carrier, divided by the number of active insurance policies at the end of the period, multiplied by four.
Premium Retention Rate. We define Premium Retention Rate as the ratio of our insurance carrier’s renewed premiums over the last four quarters to base premiums, which is the sum of the preceding year’s premiums that either renewed or expired.
Gross Loss Ratio. We define Gross Loss Ratio as our insurance carrier’s gross losses divided by the gross earned premium for the respective period on an accident year basis.
Average Companies in Quarter. We define Average Companies in Quarter as the straight-line average of the number of companies as of the end of period compared with the beginning of period across all of our home services verticals that (i) generate recurring revenue and (ii) generated revenue in the quarter. For new acquisitions, the number of companies is determined in the initial quarter based on the percentage of the quarter the acquired business is a part of Porch.
Average Monthly Revenue per Account in Quarter. We view our ability to increase revenue generated from existing customers as a key component of our growth strategy. Average Monthly Revenue per MonthAccount in Quarter for each of the quarterly periods indicated:
| | | | | | | | | | | | |
| | 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 | | $ | 637 | | $ | 1,000 | | $ | 1,022 | | $ | 699 |
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| | 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 |
| ● | Monetized Services in Quarter — Porch connects consumers with home services companies nationwide and offers a full range of products and services where homeowners can, among other things: (i) compare and buy home insurance policies (along with auto, flood and umbrella policies) and warranties with competitive rates and coverage; (ii) arrange for a variety of services in connection with their move, from labor to load or unload a truck to full-service, long-distance moving services; (iii) discover and install home automation and security systems; (iv) compare Internet and television options for their new home; (v) book small handyman jobs at fixed, upfront prices with guaranteed quality; and (vi) compare bids from home improvement professionals who can complete bigger jobs. Porch 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’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 we generated revenue, including, but not limited to, new and renewing insurance and warranty customers, completed moving jobs, security installations, TV/Internet installations or other home projects, measured over a quarterly period. |
| ● | Average Revenue per Monetized Service in Quarter — Management believes that shifting the mix of services delivered to homebuyers and homeowners toward higher revenue services is a key component of Porch’s growth strategy. Average revenue per monetized services in quarter is the average revenue generated per monetized service performed in a quarterly period. When calculating Average Revenue per Monetized Service in quarter, average revenue is defined as total quarterly service transaction revenues generated from monetized services. |
The following table summarizes our monetized services and average revenue per month generated across all home services company customer accounts in a quarterly period. Average Monthly Revenue per Account in Quarter is derived from all customers and total revenue.
Monetized Services. We connect consumers with home services companies nationwide and offer a full range of products and services where homeowners can, among other things: (1) compare and buy home insurance policies (along with auto, flood and umbrella policies) and warranties with competitive rates and coverage; (2) arrange for a variety of services in connection with their move, from labor to load or unload a truck to full-service, long-distance moving services; (3) discover and install home automation and security systems; (4) compare Internet and television options for their new home; (5) book small handyman jobs at fixed, upfront prices with guaranteed quality; and (6) compare bids from home improvement professionals who can complete bigger jobs. We track the number of monetized services performed through our platform each quarter and the revenue generated per service performed in order to measure market penetration with homebuyers and homeowners and our ability to deliver high-revenue services within those groups. Monetized Services is defined as the total number of services from which we generated revenue, including, but not limited to, new and renewing insurance and warranty customers, completed moving jobs, security installations, TV/Internet installations or other home projects, measured over the period.
Average Quarterly Revenue per Monetized Service. We believe that shifting the mix of services delivered to homebuyers and homeowners toward higher revenue services is an important component of our growth strategy. Average Quarterly Revenue per Monetized Service is the average revenue generated per monetized service performed in a quarterly period. When calculating Average Quarterly Revenue per Monetized Service, average revenue is defined as total quarterly service transaction revenues generated from monetized services.
Appendix C: Additional Information Additional Information Regarding Change of Independent Registered Public Accounting Firm
As reported on the Company’s Current Report on Form 8-K dated October 2, 2023, the Audit Committee engaged Grant Thornton LLP (“Grant Thornton”) on October 2, 2023 as the Company’s independent registered public accounting firm for eachthe Company’s fiscal year ending December 31, 2023. Also on October 2, 2023 and effective as of such date, the Company dismissed Ernst & Young LLP (“EY”) as the Company’s independent registered public accounting firm. The Audit Committee approved both the appointment of Grant Thornton and dismissal of EY.
■EY’s audit reports on the financial statements of the quarterly periods indicated:
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| | 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 | | $ | 92 | | $ | 129 | | $ | 144 | | $ | 132 |
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| | 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 |
Company for the years ended December 31, 2022 and 2021 contained an unqualified opinion on the Company's consolidated financial statements and an adverse opinion on the Company’s internal control over financial reporting; however they did not include a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the Company’s two most recent fiscal years and in the subsequent interim period through October 2, 2023, there have been no disagreements with EY on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of EY, would have caused it to make reference to the subject matter of the disagreement in connection with its reports.
■During the Company’s two most recent fiscal years and in the subsequent interim period through October 2, 2023, EY did not advise the Company of any of the events requiring reporting in this Current Report on Form 8-K under Item 304(a)(1)(v) of Regulation S-K, except for (a) the material weaknesses of internal control over financial reporting disclosed by the Company in Part II, Item 9A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 related to the design and implementation of information technology general controls in the areas of user access and program change-management for systems, and related process-level automated controls, supporting the Company’s internal control processes; the identification, design, implementation, and retention of evidence of control activities, including controls over the completeness and accuracy of information produced by the entity that is used in the operation of its control activities; and the quantity of personnel across the organization to design and operate internal controls commensurate with the nature, growth, and complexity of our business and (b) the material weakness of internal control over financial reporting disclosed by the Company in Part II, Item 9A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 related to the ineffective design and operation of information technology (“IT”) general controls over the IT systems supporting the Company’s subsidiary, Homeowners of America (HOA), and the ineffective business process controls (automated and manual) that are dependent on the ineffective IT systems.■The Company requested that EY furnish a letter addressed to the SEC stating whether or not it agrees with the above statements. EY furnished the letter confirming its agreement with the above statements. A copy of EY’s letter, dated October 2, 2023, is filed as Exhibit 16.1 to the Company’s Form 8-K dated October 2, 2023.
■The Company has been advised by Grant Thornton that it will have a representative present at the Annual Meeting and that such representative will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
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| VIEW MATERIALS & VOTE w SCAN TO PORCH GROUP, INC. 411 FIRST AVENUE SOUTH, SUITE 501 SEATTLE, WA 98104 VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on June 7, 2022. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/PRCH2022 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on June 7, 2022. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D81876-P72588 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PORCH GROUP, INC. The Board of Directors recommends you vote FOR the following: For Withhold For All AllAllExcept To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. ! ! ! 1. To elect two Class II directors to serve until the 2025 Annual Meeting of Stockholders. Nominees: 01) Alan Pickerill 02) Regi Vengalil For Against Abstain The Board of Directors recommends you vote FOR proposals 2, 3, 4 and 6 and EVERY YEAR for Proposal 5. ! ! ! Every ! ! ! Every ! ! ! Abstain 2. To approve an amendment to the Second Amended and Restated Certificate of Incorporation of Porch Group, Inc. (the “Certificate of Incorporation”) to declassify our board of directors. To approve an amendment to our Certificate of Incorporation to eliminate the Supermajority Voting Standard (as defined in the enclosed proxy statement). 3. 4. To approve of, on an advisory (non-binding) basis, the compensation of our Named Executive Officers (as defined in the enclosed proxy statement). Every Year 2 Years 3 Years ! ! ! ! 5. To approve of, on an advisory (non-binding) basis, the frequency of future advisory votes to approve the compensation of our Named Executive Officers. For Against Abstain ! ! ! 6. To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for Porch Group, Inc. for the year ending December 31, 2022. NOTE: The proxies are authorized to vote at their discretion upon any other matter that may properly come before the meeting or any adjournment or postponement thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Form 10-K and Proxy Statement are available at www.proxyvote.com. D81877-P72588 PORCH GROUP, INC. Annual Meeting of Stockholders June 8, 2022, 9:00 AM PDT The stockholder(s) hereby appoint(s) Matthew Ehrlichman and Matthew Cullen, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of PORCH GROUP, INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 9:00 AM PDT on June 8, 2022, at www.virtualshareholdermeeting.com/PRCH2022 and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. Continued and to be signed on reverse side
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| Your Vote Counts! PORCH GROUP, INC. 2022 Annual Meeting Vote by June 7, 2022 11:59 PM ET PORCH GROUP, INC. 411 FIRST AVENUE SOUTH, SUITE 501 SEATTLE, WA 98104 D81886-P72588 You invested in PORCH GROUP, INC. and it’s time to vote! You have the right to vote on proposals being presented at the Annual Meeting. This is an important notice regarding the availability of proxy material for the stockholder meeting to be held on June 8, 2022. Get informed before you vote View the Form 10-K and Proxy Statement online OR you can receive a free paper or email copy of the material(s) by requesting prior to May 25, 2022. If you would like to request a copy of the material(s) for this and/or future stockholder meetings, you may (1) visit www.ProxyVote.com, (2) call 1-800-579-1639 or (3) send an email to sendmaterial@proxyvote.com. If sending an email, please include your control number (indicated below) in the subject line. Unless requested, you will not otherwise receive a paper or email copy. Smartphone users Point your camera here and vote without entering a control number Vote Virtually at the Meeting* June 8, 2022 9:00 AM PDT Virtually at: www.virtualshareholdermeeting.com/PRCH2022 *Please check the meeting materials for any special requirements for meeting attendance. V1.1 For complete information and to vote, visit www.ProxyVote.com Control #
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| Vote at www.ProxyVote.com THIS IS NOT A VOTABLE BALLOT This is an overview of the proposals being presented at the upcoming stockholder meeting. Please follow the instructions on the reverse side to vote these important matters. Board Recommends Voting Items Year D81887-P72588 Prefer to receive an email instead? While voting on www.ProxyVote.com, be sure to click “Sign up for E-delivery”. 1. To elect two Class II directors to serve until the 2025 Annual Meeting of Stockholders. Nominees: 01) Alan Pickerill 02) Regi Vengalil For 2. To approve an amendment to the Second Amended and Restated Certificate of Incorporation of Porch Group, Inc. (the “Certificate of Incorporation”) to declassify our Board of Directors. For 3. To approve an amendment to our Certificate of Incorporation to eliminate the Supermajority Voting Standard (as defined in the enclosed proxy statement). For 4. To approve of, on an advisory (non-binding) basis, the compensation of our Named Executive Officers (as defined in the enclosed proxy statement). For 5. To approve of, on an advisory (non-binding) basis, the frequency of future advisory votes to approve the compensation of our Named Executive Officers. Every 6. To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for Porch Group, Inc. for the year ending December 31, 2022. For NOTE: The proxies are authorized to vote at their discretion upon any other matter that may properly come before the meeting or any adjournment or postponement thereof.
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