Earnings call transcript Q1 2023

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Lois Perkins

Good afternoon, everyone and thank you for participating in Porch Group’s First Quarter 2023 Conference Call. Today, we issued our first quarter earnings release and related Form 8-K to the SEC. The press release can be found on our Investor Relations website at ir.porchgroup.com today.

Joining me here today are Matt Ehrlichman, Porch Group’s CEO, Chairman and Founder; Shawn Tabak, Porch Group’s CFO; Matthew Neagle, Porch Group’s COO; and Nicole Pelley, SVP of Product and Technology.

Before we go further, I’d like to take a moment to read the company’s Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995, which provides important cautions regarding forward-looking statements.

to XX, reflects XXXX. responses of views include May today, discussion your management’s questions, as Today’s We update information. or not revise do undertake this any obligations to

Additionally, on plans, you to risk forward-looking to including our cause expected pending application results are about differ performance forward-looking subject statements. mix risks actual conditions, described We these and the our for well we encourage change. in the uncertainties, assumptions, the filings which or statements Based or could and slides financial expectations business in consider our strategy business for will make current and materially future to statements information. factors factor risk as from these additional SEC as information the these

both call. and on the release GAAP today’s press most measures financial during Please call. discussed reconciliations measures to this reference of measures today’s for non-GAAP earnings comparable We non-GAAP to refer will GAAP

webcast presentation replay this ir.porchgroup.com. for will available this reminder, company’s at the after a on shortly As website be the with along call

that, turn Chairman Over the CEO, to Ehrlichman, Porch Matt of Founder and you, will with Matt. to I call over And Group.

Matt Ehrlichman

Thanks, Lois. since And last has long that hasn’t Good It March. to business we in progressed you everybody. time, the which look today. been in nicely, spoke forward we with afternoon, discussing

as home And Overall, and headwinds. insurance is operating we home as we not The and well. environment QX by the them weather XXXX. service XXXX experienced industries QX dissimilar were to in what sales impacted faced expected,

well-positioned join given pleased advantages. demand substantial opportunity to some am growing quarter from to data trends to As areas. this through are advancement the the today insurance creates last homeowners I in have industry market, evolve, not it we leader in but Nicole talk our a these of become a us weather and unique insurance and only

The our review revenue million, warranty grew solid revenue level the XX% the in So well. X financials. EBITDA growth with performing businesses. XXXX loss business insurance moving high QX In $XX $XX is to to adjusted to underlying million. and Slide homeowners first quarter, was

into as However, expected plan, market XXXX has our and the built hardened. reinsurance

renewals successful, past performance, impact in $XX QX have relative While profitability increased excluding our given were our approximately by would April market, reinsurance insurance million our XXXX of segment. the strong

reminder, a on mitigate insurance we weather with operating and capital both associated portion rely offset risk of As a carrier. to reinsurance requirements homeowner’s a to the

ensure XX% over are our of and our So consumers. the through market as insurance increased while transitory saw entity, gross ratio impact our prices premium improve performance, will will until strong We And in and XXXX our profitable Porch continue the believe what in not, net increases offered a results carriers in price fully have to and reinsurance on the time raise and the loaded weighs business costs into gross really by policyholders. has dynamics carrier flowed fact, past. other combined reinsurance all is it costs s if these to all

happy growth. direct released year has that HOA of carrier fastest markets based expected weather written measured only premium. challenged homeowners to XXXX the until insurance how by carriers basis, last am compared think I be quarter the third. insurance performance, growing through of share insurance XXXX business year was XX business ranked also capabilities the the our Best I full XXXX. and in helpful price compressed the on because industry in that reinsurance XXXX profitable a insurance in up. we not now was were note highlight the AM report peers our gross homeowners as third ended quarter homeowners ranking XXXX and to show the gross is of Margins our to to the written catches in mentioned But because on it to premium we but different rest

addition growing gross we ratio. combined in to a though, leading demonstrated rapidly, Importantly

can see chart of Carriers HOA slide, performer. shows PURE as bottom was in in XXXX. so also XX HOA And third report And in combined on Best the you best gross the ratio market the share here, AM the

Although carefully to this there also premium performance. are our business two capabilities slower better profitability. ratios, manage is our to premium ability insurers Again, those to to strong companies strategy much use drive mentioned, to had with our underlying we in grow growth. unique XXXX loss our as And growth while demonstrates our maintaining

we As mentioned, a the made have of number quarter. I successes in

XXXX on announced the quarter in First, fourth are the initiatives track. strategic of insurance

application treaties we our non-renewing the is in we seeding of sense Exchange, of believe captive fill Reciprocal any key to our in reinsurer Insurance, the of touch XX,XXX weather needs it a system leverage the Exchange Department reinsurance on within I reducing will XX% which where efficient approximately the January, reinsurance reinsurance to with moved To shortly successfully in excess this Reciprocal form continuing higher we to makes April, which So are volatility for filed in of the earnings. facilitate approximately reinsurance our to more transition March, policies. process rates loss our in placed the Texas further our and to to more risk

and will the and launching and year-over-year take today’s whole touch also in February. ongoing launched impact presentation. home. new warranty businesses Nicole appliances software note is and demand that in covers in software and capabilities more services lower industry businesses. happy to QX our successfully will the on XX% home presentation. to later share This home progress I systems on am to to sales will environment, our this our own Porch in declined I comment our Despite share modules continues the Nicole moving continue iterate within this that Warranty we product

a the it Group’s a a by transaction unsecured notes Finally, It’s convertible Porch of to our the maintaining million million XXXX. the with the which money. X.XX% And same great than more for of due share of X-year million $XX the approval. us Reciprocal tied $XXX is in rate capital per after also September the as while note, at secured pay-down senior replacing our it a new capital quarter transfer new we provides that end, debt cost $XXX will much conversion a for coupon secured $XXX price maturity existing extension which on increases on of

to Finally, reminder about Exchange. I Reciprocal a want to spend our provide moment to a a form strategy

HOA with years such higher We exposure move Department HOA business we have from receive objective been to ago insurance approval from and acquired the coupon-bearing since cash to the direct as thinking to without margins investments its to as and Texas Provided be the its first of through volatility as weather. we and new this X the Porch the be entity Insurance, In which carrier terms by liabilities move well members. the will of will business assets policyholder note, approval. a will including provided all following receive exchange, the its owned

insurance Reciprocal to continue weather profitability means such place, the will policies and is Exchange we fees in the operate the processing Reciprocal. We lose business once selling This claims good conditions. in managing the for upside in the as from return potential

and when claims events, our the and and However, are result, predictable. we steady as severe and there do frequent are revenue a have weather profitability downside same not

approval Insurance second are and this anticipate We in with the later Department discussions in Texas of year. of active still half now the

you, to financial I over Shawn? will performance now to hand guidance. cover Over Shawn our the and to call

Shawn Tabak

market. segment, Thanks, solid software XXXX, offset $XX.X first XX% increase partially prior quarter in segment Matt. in which which everyone and to housing impacted soft by growth an year Revenue Hello, by at over the was by is afternoon. be million of good the the and insurance driven of the continues the

reminder, one and with the a weather with claims for historically quarter costs most events. highest the period two typically quarter As HOA have two being the

HOA XX% prior gross compared year. of to of the ratio million, less which revenue loss is XXXX, was In Revenue XX% the was first of for XX% $XX.X cost quarter the in revenue.

a hardened have less markets in year. the in expected, revenue reinsurance approximately as XXXX by reduction of in the prior quarter mentioned, to Matt the million which revenue $XX first cost compared resulted As

which second we this half of the have previously, impact the Our disclosed given underway of will larger rolled year being renewals are in price policies. well a the out, increases, underlying which for and timing

was by Adjusted driven soft with of the lesser the market in prior segment. a to on the EBITDA extent, a from housing million decrease impact noted in $XX.X as software year, line expectations, reinsurance loss our

EBITDA the adjusted have reinsurance And finally, prior $XXX Excluding dynamic million, approximately XX% market million. $X the loss compared to year, would first an of quarter year. over the premium written in was the prior increase been gross

the our first and of prior revenue quarter in from growth revenue million, segment by XXXX, over our Moving on warranty the of on business was and in insurance strong due based growth XXX% year, less in $XX.X the driven by demand revenue balance to segment, operational increases in segment well as from seeding. due renewals insurance to Approximately the of premium lower to policy reinsurance as half the lens. was per and seeding the HOA growth

housing XX% group, segment year revenue revenue. industry-wide Group Insurance was of XXXX. decline to these XX% million, impacts of biggest declining $XX.X a from of to headwinds in moving XX% quarter over which our revenue total was the Software macro of the total have prior the continues XXXX due decrease market impact revenue in The the first services to Vertical the its increased market year-over-year. on revenue first of Porch of XX% housing directly quarter

in pricing year-over-year flat housing offsetting revenue key software impacts. with relatively the growth was market BXB Our share initiatives market

insurance adjusted our loss EBITDA $X.X level, At a was segment segment million.

$XXX,XXX. margin expense reducing the to Matt basis to driven mentioned, increased was XXXX, by total quarter year loss reinsurance. contribution year, compared underlying the Software control. the XX% impacts in million $XX.X The first excluding by our of Vertical from EBITDA expenses the As strong insurance adjusted prior XX% Corporate points XXX prior were the in carrier of of HOA when in revenue

$XXX the we provided of to to of unusual for a home included $XXX the Now our are excess on year. weather have loss today, assumes will where a year cumulative our Adjusted ago. half the impact in weather $XXX from sales written line events beyond. full million the XXXX million where events XX% greater to be an historical the decline with of where million And not easier. gross to in of for the million. in XX% half we and market reiterating second in of less the full of expect loss ratio guidance our on $XX the year half Any norms second cat assumption. This ranging $XXX in gross expect be EBITDA profitable adjusted in historical premiums $XX averages. XXXX catastrophic the guidance EBITDA outlook, Revenue from ranging million weeks the finally, million, comps basis, we assumed difficult X million, are become to year on versus a to ranging our when revenue $XXX we with year the year cost Revenue housing first from continue and

Shifting to the carrier we the first investments. expect balance sheet, the our will transfer that million to million includes with of Reciprocal cash and $XXX and investments of cash This quarter insurance we ended launched. and $XXX approved when in HOA

HOA, of held quarter. Excluding and $XXX cash of Porch at million the first the end investments

In repurchased relation HOA, quarter in warranty share as $XX held million approximately and support $X.X in provide next restricted to of Matt can we earlier, to And cash businesses. it reinsurance addition, and cash repurchase we XX captive sense of million returns. this, this existing months. to strong by the are we finally, will of collateralize placement us restricted million first the such makes under And expect as remain show loss the million of To XXXX, our excessive mentioned captive for we where amount to therefore it shares hold for in program. quarters and future $XX X.X the cash provided and Porch’s increasing

whether repurchase best or We will think shareholders. evaluate or so when of if shares will and is to it interest transact in continue notes and to in do we otherwise the

of update million issuance brief new convertible our closed $XXX end related finally, quarter. of the secured we senior a notes, And after to which the in April the

These have are $XX, by with of $XXX million was same earning due sheet maturity future the a new new price minimize $XXX for of and our cash. shareholders. secured which cash are and medium-term X.XX% million adding X% of million $XXX $XXX This are dilution currently October offset deposits. for interest balance the We pleased the maintain interest from bolsters increased million important we debt bearing notes to coupon is reduces by deal, September XXXX conversion on partially secured which coupon the to approximately The notes XXXX. us payment of

your for time Matthew over all you now to I hand And today. Thank our cover KPIs. to will it

Matthew Neagle

to look slightly Thanks, have to Shawn. slide XX, Right, turning here. different we our introduced Slide KPI a

in are the an same the to revenue appendix, XX,XXX increase XX% slides in in per premiums, insurance quarter, Average which in companies a first higher over quarter XXXX from our reinsurance company QX of in year. $XXX, seeding by the business. change the of reference, The average XX% trend show year. driven time. prior increase and growth similar per month was For increased original revenue per to same the generating This was KPI customer, insurance quarter prior number more and warranty our rapid the the

We monetized quarter, have a last XXX,XXX the in from small services increase quarter.

average revenue the increased per monetized to same Finally, of year. increase versus quarter an service last $XXX, XX%

to highest services warranty. value such to continue on as the focus insurance selling We consumers and

was quarter. in the XX% by written increasing lower This insurance look $XXX business was increased per reinsurance levels XXXX. Gross and KPIs. year-over-year. revenue was warranty $XXX, policies per an force first XXX,XXX policy premium in $XXX This business. now our seeding QX at from was from increase growth Let’s premium policy, produced rapid in Annualized of XX% million, our in driven

the in was XXX% group. premium mentioned impact on XX-month a increases disclosure align of increased Shawn QX we XXXX, pricing demonstrate and with XXX% Premium from our peer and driven QX policy. are an As is for help introducing in retention basis XXXX by March, basis per the to a increase retention premium on

have to XX,XXX retention which a started will rates. reminder, impact we high-risk As policies, non-renew short-term

hailstorms had is in average XX% of and a XX% worse ratio business usual March QX, trends. in our related insurance little tornadoes loss the Overall, above historic gross cat of events. with than historic to This a which

As peers. includes HOA’s year. reiterated gross guidance, outperforming Shawn significantly earlier, loss is Matt Today, gross which ratio our ratio assumption mentioned XX% loss the has a full for

the the half year, through. in improves increased second the per of weather roll impact of policy premium As changes

Slide want strategic recap priorities. to our XX, Finally, I quickly XXXX on

will our Software plan to will up-sell software Vertical develop and the software to solutions, Nicole companies talk First, for use through shortly. bundled we more to new continue who which

online our engage finding Between consumers better per are and homebuyer. be recall We to them app, are monitoring check extending help with services. our to we more experiences increasing other services, to revenue ways able

offerings. our per improving We in are and insurance premium policy warranty

a the margin We the launch launched approved creating risk, for higher Porch Porch the offerings insurance business brand expect Warranty year, brand we getting have and differentiated now consumers. to focused Insurance on moving the are this And structure later to lower Reciprocal business.

hand few to now a key will things product I all. Nicole you updates. Thank over to highlight

Nicole Pelley

work quarter. leverage hello I technology key our and highlight help and our responsible lead experiences the will I everyone. successes Porch first accelerate businesses and teams them product and and today Matthew rate. consumer Thanks, product platform for data across the growth their and platform to from some and velocity

models. like where pricing First, into to insights homebuyers, our I insights and properties homebuyers. We would into of take approximately insurance touch have we U.S. XX% our on

insurance categories, XX have history across In water, theft. various and fire addition, we years of such HOA from claims as

learning and generated risk this using machine data advanced is model our pricing of that feeds All techniques.

while accuracy key. on their will at improving pricing, accurate losses, effective allows models businesses And always rely prediction predicting Successful which be risk. there are is insurance for how

for not will going creates is the our to data XX%. high Anything in This to risk to we segmenting experience. risk reasons, improve accuracy biggest impacts, on meaningful details in improvement. in the While measure accuracy key risk been a have team’s to single-digits competitive insurance provide a way we pricing categories what XX% our approximately by common through in is be able

and accurately all pricing policies, that to getting leading lower this more this margins a risk conversion increasing are see low improvement subset. model policies price high-risk can our just lower we for to low And started. and What in higher, So really price of policies either risk means conversion we are appropriate or double-digit is accuracy. excited we charge on

growth. All is expected to this of lead profitable long-term to

insights model unique the information includes information insurance about and appliance such as model potential borrowers, pricing mentioned. feeds The have and about This we issues just short age homes. specific I properties

age We other the the type quality, heater characteristics. flooring states and and been has of as the the use type expanded water on insights include have and location. of approval piping now This information such X type roof, of in to to

Virginia use in pleased data to three Texas. have approval and We are Arizona, to this states:

submitted and our insights. in also to have We filings of all Nevada use Illinois

value at is company. would for increase for We these develop using and the Software. module various to least focus Vertical the with our work companies per create Porch revenue products more both per year developments key to new want three for to business like A call I brands. once new out launch continually across of companies companies a new to each the to of type for we

First, within sale origination an integrated of for great a to by all-in-one are features our flow partners. the that point offer solution mortgage combines able mortgage we brokers our unit, five loan system business now of with

addition, will new faster able loans which and products mortgage provide have mortgage in a In help we powerful are solution. customers. companies, two we close which to more Customer combination, With launched helps for this get best Closing companies Capture, Accelerator, market customers

a have new redesigned released home a we interface enhanced Secondly, and writer for for companies. inspection fully small user This serve all-in-one an solution release new as inspectors. provides functionality that modern report can

faster of mobile will allows and voice site. new writer for to report The our and media on integration the with multiple new also processing inspectors other platform create tighter such enable editing, support commands, modules, app. with Porch some as Our reports inspectors payment

a the unclaimed escheatment helps title accordance ensuring comply process out launching and regulations. notified accounts to new is in reporting funds. on each seamlessly with agents includes state’s reporting of cloud regulations have to within that based for unclaimed facilitate Lastly, to our escheatment module an funds need we alongside the with This RynohEscheat, follow title easy-to-use price customers. bank integrates business state The software complex that is businesses with increases products rolled these title process are

I work will now to shift consumers. our for

now out key monitoring additional engaging app by cross is the companies. nearly who has report services is and for provides. from use sell that rolled recall our to functions consumers access inspection to Porch Our app, We been eligible check this that appliances. home opportunity This data to inspection generated report the other ISN all their their then

at look moving for We also continue to can journey the both make simpler how companies consumers. and moving we

pay in launched their to number rate. in for costs first up year. moving an last and sign and by that including thereby permits. margins often expensive confidence of consumers the a through their our such our we is Scope, a module Jack for This launched the as offer, allows hourly price services Funds build services, them more Sewer rather gives product Asbestos to for, or gives not increases time Radon into called our packing period have to the of business, our home pay lock than they up-selling will third-party them services inspection inspection and they fixed up us fixed per already In product home close an Plus. are This inspection purchasing mortgage giving the roll price consumers Flex flexibility ISN wrapping customer payment. consumers movers allow the their cost Giving to increase more such more This businesses. as Testing, and confidence moving move

XXXX. are product momentum to with look in We gained strong XXXX how and growth pleased and has this forward

mentioned in launched February. Porch earlier, Warranty Matt As we

business continue to service this is high-value as of grow launched This utilities such a this branded high ours across and by excited rapidly. are channels estate. as We warranty help and product consumers margin for being real multiple it’s will

lower Porch us a sell channels, has addition inspectors the In allows and which traditional others, acquisition access Group to customer cost. to at warranties to

variety value maintenance enhanced provide consumers services handyman also differentiation. We to and coverage by a our including receive of the

hand will I back Matt. it everyone. Thanks, to now

Matt Ehrlichman

guys. Thanks, Nicole. Thanks,

not us by are team wrap like but building, is The will our well. will. first staying the stock the have These the looking to in headwinds, remain launch work. time, post We and the forward Thank We both reflects on Porch do second we insurance executing and team think moments forward market are that the adjusted of been they are something facing saying our in half what looking I year, which this and we for excited but really many that confident is you for market during particularly both I team for expect the offerings and focused we about are to time. and businesses. for up am to accurately in great ahead. EBITDA journey and our important positive some for Reciprocal over advance we structure strategy, working the

open the remarks. Lois, please you call ahead, So Q&A. for if with the And prepared let’s that, wrap go

Lois Perkins

comes Matt. one Benchmark. line Instructions] at [Operator Daniel. Great. The Daniel is now for Thanks, from question open Go ahead, Q&A. The

Dan Kurnos

know even on if great. talking just about software and the on kind we challenged, little forecast messy there, been of different given remarks, a stuff and also market mix a the into in that Matt, we the a seeing, of of of obviously can about for but Thanks. I Hey, are than through housing what and of of get group? of normalized lot think trends just of the you anticipating and sort his talk Nicole’s dynamics of a maybe spent more in some maybe we the outlook maybe some a have once has double bit second some little originally the bit help of has through talked upsell the insurance time there kind just longer some been Matt and us click some commentary you but, purchasing tail

Matt Ehrlichman

first of give maybe Matthew, and you term, ahead. take don’t the what’s my part longer why in thoughts I’ll the question, the

Matthew Neagle

velocity product point that the increasing, I of say mean, I’d categories all in is, position and have our Yes. is right. good we first our market

market us reposition. and offer are soft forth. to And more bring which also opportunity our teeing to just we I things it’s so up So to now, headwinds an some to right a creates the that customers market in will for bringing market, new compelling. But on think we are or make bring

we have market up a when offering. greater will the So back picks

those focused worried It are in are are excited long-term. have about the categories. we little a what soft, and we teams just not planned about but is So we

Matt Ehrlichman

to going Hey, to times be how I’d is to the come is share both when testament to the particular, I company like ballpark per to time. quarters, per the happen. housing that the will new a just they long it back, transactions software flat before generating we to transaction, in remaining And moment is to bringing up. or are market it going I there adding down our are kudos transaction. to products market team. more takes mean, market, add market – flat give either you business in going Well, that see is start I clearly, ramp is that over more just increasing it that’s would back it are in But even really is, per use because these but and revenue, does

As is things are transactions wind unique important last the up real some increase, companies at obviously, we these building companies. and thing and backs. really are to we our to these to well for innovating to set more And have new become get

And us looking that so about how positions forward. am I here excited

Dan Kurnos

per And warranty it’s original are with quarterly made not some then excited of out? revenue it’s policy Porch you and mean, when come. branded that called and too you insurance I early, I and at you helpful. KPIs component. I we Porch looking color some I were I just you huge the but when branded entry maybe have That’s on into policies initially mean, there started know, expansion, it now more we remember of super am to the the market. sure kind that guys

sort this point investing, and and some puts at year? the So kind business the that and to maybe year the just much us kind of over you guess are how contribution next about help takes of scale of into I of balance think

Shawn Tabak

I take that. can Yes,

about interesting We We rapidly. that mentioned things are We today, about mentioned today, it’s warranty margin. of in our hot a couple the warranty a We product. Porch space. it’s One today we are have branded business. mentioned high opportunity new – excited warranty growing the

The products is going be to first to are able market. multiple bring we to

think we in warranties. the are also products to can we XX bring annual multiple channels. And have day other for X-year warranties, access we warranties already to inspectors, But we with So are market there market.

we And And real working for we that so we have direct-to-consumer estate channels engaged opportunity with we have think us. inspectors, in an are utilities. are

to we key warranty the grow it terms warranty investing a and we business the and business part of In in forward. strategy seeking our growing, as of investment, are see actively going

Matt Ehrlichman

Yes, we the had say, certainly first is opportunities business I ago that about we will lots we warranty ahead. get had with, talked out working when of that Dan, however there thesis was, long

We have not the started in warranties. to of for into use our unique pricing any data kind material way,

so over demand channels, And advantages just clearly there our our Right there opportunities now, have access, are time. we big through there.

And taking so the team is advantage of it.

Dan Kurnos

data Yes, I angle, just have that. on was you covered the to follow-up going but

appreciate So it.

sure…. am I off, jump I Before

Matt Ehrlichman

asked of XX like questions. sort You

Dan Kurnos

just Matt, for convert. there just wanted buy think you clarify, to old convert, literally, I I was was the guys about to to you to be carve-out ask going able meaning Okay. the a

versus point? So, the just your stock thoughts on repurchasing the convert at legacy this

Matt Ehrlichman

question? want take you the Shawn, to convert

Shawn Tabak

Yes.

the million best $XXX Obviously our some overall of medium-term maturities just over we to reduce there a flexibility, company. the coming I to And the very good balance gives for the of at the especially options positive sheet, while us So, to able will have our same with obviously think were was the etcetera, shareholders adding And tough which what’s in is we interest I over our value and for the years. there. that headwinds, markets. part number create of think months reinsurance cash deal I do time shareholders macro think here we is

that’s So at we’re where today.

Dan Kurnos

quick the guess and Awesome. I the professional apologies for Thanks for interruption. color rude and

Matt Ehrlichman

it. Appreciate Dan. Thanks,

Operator

Next, Jason we Jason. ahead, from have Oppenheimer. Go

Jason Helfstein

are you? How there. Hi

Matt Ehrlichman

Jason. Hi,

Jason Helfstein

two ask I’ll questions.

context expected and So from improvement driving the timing one, Reciprocal versus your the milestones the XX% with two question the just getting to that housing any this call guidance? your And ratio pick just, tailwinds I’ll in XX% full the year Thank in of within loss go-live in what’s quarter? competence you. one review and that Exchange.

Matt Ehrlichman

don’t to great why that in take Shawn ratio on the the Reciprocal, there. take you I’ll gross housing. want the assumptions question tack That’s you loss

the track progress process relates the the No I expect, our line, say as Insurance timing making this on still terms surprising are the expected as with I of out We it with Jason the of this of second in timing coming of would far. to would year, nothing in would the Texas kind expect expect half we Reciprocal, changes we process. but Department that for finish that of

Shawn Tabak

on the in the gross the loss call QX have business. we know with to respect XX% for insurance what QX seasonality HOA our expected quarter. we assumption full worst mentioned the and QX that way typically that that’s the carrier ratio, that With QX works year, in-line relatively we today, the was

we guidance so again, ratio actually was, the loss for And today expecting gross year. XX% the we that that reiterated

higher go policies the other off roll with as also progresses through XX,XXX, thing is, we I’ll mentioned here The to year along pricing we will know increases year. the risk that as continue the

will year. an those So we have get more through the impact as of

question loss So that’s first ratio. the on gross

our out home seasonality couple think, housing business one, in our I was on throughout in also second of year. sales. things a we do there, point And market industry-wide and the The some I’ll see

comp normal to around call starts thing a it was to pick which a QX little is of quarter. As from relatively QX out it, the summer this a expect and was more. you there I’ll relevant then bit year And QX point last up months, perspective, a

year-over-year the we’re to said rest year, year. we expect for comp to assumption of and the we progress as relatively easier, reiterated line. expect do we in go XX% the get as in we declined was full so But as again, the year. we Basically, our QX throughout tighten And the the

Jason Helfstein

you. Thank

Matt Ehrlichman

you. Thank

Operator

John from to Stephens. go we Next,

John Campbell

comes Hi, since is hot drag can my off some question bit a level. guys policies Zoom dynamic having you attrition on you square I’m it’s up those I pretty revenue have good your if little that more you things is as earnings revenue pricing take season Yes, reiterated the a moving trying insurance big that’s beat you’ve the growth mics got of be XQ, guys, some from full afternoon. am for this to pieces a guidance. I and just at that the which shutting a the year have bit. spice impactful. obviously But you thinking quarter, still and up here coming revenue guidance, But on stable high the conservatism. base, a

comes right? annualized think flattish a for expect year-over-year XX% take said of on you saw that So total so guys it’s rest million. XX%, implying revenue, maybe wouldn’t So I that $XXX as much, the that down, relatively the I maybe software if you business guidance that to be I vertical down year-over-year. that, the

stepped XQ the larger something insurance So am here? am what from down I a level, taking I missing missing here is

Matt Ehrlichman

I’ll I thinks take these are handful thoughts, Yes, this. of

So feel the one, we we that guidance ago. set weeks in we And provided for year. we’re year, like only good early we’re up about still feel X how the annual

this we year, in we’re to number point. And so your early moving see There [indiscernible] to want are a the how there. out pieces, of

consumers. there going increases Obviously, So we policies XX,XXX through the roll year. to course price the off we the have that are over of

guidance. housing and market got we’ve just – conservative Naturally, by handle feel when we provided market I we going market, terms to we its expect say, higher right the we’re ago with to housing in I what were we’re let we see we’re out had terms of have see consumers so year. they months year ago, like to rolled the And play surprised way uncertainty XX And now. what those in XXXX there conservative is a as a it, the and but did we as this also while housing we year, what from that price, on gets last good our just the it – estimates, through attrition expect naturally consumers. be think with to with first

up a we’re that guide that, right about for And I the and so naturally going quarterly, year now. confident give don’t full just ourselves think, more will build so let this to and let little how year this reiterating – don’t We say all early. hopeful just play But we we’re set out. to I year time, this obviously are

John Campbell

a hopeful that’s Okay, rundown.

said said on don’t if quarter, the splitting it think like sounds year. by Exchange. here. the But last end question QX. later I you of Reciprocal Matt, this Next you initially know hairs I I’m

haircut? there. revenue then still if if secondly, So on directionally I the just path don’t still timeline a it’s on expecting you’re modest probably I are And we early know know, just MGA seen Reciprocal from leakage to examples looks for as of you carrier to Exchange, like? past kind but that you’ve generally or a converting too speaking, guys of what tell, over typically

Matt Ehrlichman

Yes.

with I not control, Insurance. Texas say in obviously, terms are communicated fully change it’s of Department working quarter, we no as would we that So of last timing. in expectations what our the in something is But

to the year the we half expect And would so in second it approved. be of

But third the benefit that of after not through we’re pin work unreasonable is quarter a little of a flexibility hard an The on to for with the TDI. process that putting kind team bit provide assumption. clearly, not

is that When to through depends the everything is of revenue of of through business some. for degree kind bit John, of those to our we’re Reciprocal But now really positive ahead we will did way, the be we we not also of of It guiding improve. It lands that in of to that approved, right obviously, just levels terms impact do announced Texas walk And time obviously impacts overall the the plan the like fully Reciprocal. do be won’t a changes revenue a lower, will presentation on process. quarter, last some that a gross with where Insurance, the would Department In margins and margin the that. our XXXX. meaningfully, reason

focus that So through walk out. how settling would let kind we know once and that approved, of everybody

John Campbell

Okay, very helpful. Matt. Thanks,

Operator

Thanks.

we to Cantor Next, go Josh from

Josh Siegler

housing those to dive ongoing software first to my maintain Yes, deeper hi, love question. flattish you vertical your And into revenue on despite I’d for ability guys. headwinds. the Good that taking thank afternoon.

cross of the thinking products, current So are products, still all expansion of given in the sell rollout untapped about the and these existing vertical? potentially the you how opportunity exists, that

Matt Ehrlichman

that. I’ll take

a So of dynamics. there couple are

which is, opportunity which to one we’re of [indiscernible] example earlier, increase creates as product in gave completes. us to gives for an an out I We one seeing opportunities mentioned module today cross title sell. velocity, So bring new a

to conditions The roll-out other with some new due due to partly is products. market partly inflation dynamic

places, able more of we couple We and see opportunities, that we’ve opportunities. variety do a have pricing a been in to

so a long-term we because still from And and then revenue business opportunity for that we’re right company. perspective. And help marketing, investing the in will that think the sales it’s

still we’re And people there, in verticals. what out doing so those we’re about excited getting

Josh Siegler

That’s helpful. Thank you. And then I’d like to turn attention over to profitability.

progress seasonality of year, as you through us Can throughout these your you expect higher start benefit to mentioned, risk see the to how you So play the out we you the profitability throughout walk roll off on the pricing. insurance continue policies as year?

Matt Ehrlichman

want take you to Shawn, it?

Shawn Tabak

Yes.

claims driven frankly, largely So in where variability of that first that’s today, weather is also earlier on the And of at the year. driven the the obviously, see in EBITDA first is the I largely mentioned most half is which that see seasonality weather. we the we by the by well, we HOA, because as year half see,

I as relatively was line expectations. in said So with our today, QX

look the – XX% on previous profitable and that that expect gross talked we adjusted so, year. year, half $XX expected And the track weather claims second and obviously largely to continue we loss we expect key that And about, would on the line year. loss comparable as be And are to an which million for then $XX to million is as to then the ratio for our guidance with our basis. of assumes EBITDA in are with that assumption we EBITDA

had goes underwriting savings see on we the renewing, that were one we have of on. policies that year some will that pricing expect about the that I have that well we the as – we some You done the of talked changes as including things increased the were the noted made, previously the the as that G&A that mention third to

Josh Siegler

Great. Thank you, Shawn.

Shawn Tabak

Thanks, Josh.

Operator

Right.

Ryan from to Next, we KBW. go

Ryan Tomasello

taking questions. for the Thanks guys. Hey,

structure? the P&L the of change third-party P&L or with how this capitalization that like about kind about margin talk are new or of structure, the in are you post for can how may standpoint, you And the replace from to either Day capital the back of to capital lower company? terms necessary Do to Reciprocal drawn GAAP X you may in you going Exchange, and not light thinking transaction? timeline that the sheet or is balance capital Just feel underwriting effectuate to supplement risk bringing there here ultimately initial Porch’s the

Matt Ehrlichman

on the with we Shawn, a I’ll what how take going me that take capital do why in of the post-approval? we’ll you part So first terms the able display third-party It don’t part forward first. take third-party Ryan, P&L to second the of be let comment, capital. is choice,

much and reinsurance have calculations meet you capital the of you So level you insurance is that factor there have, those certain in growth. variety of calculations use, a how do things, to business, the

And grow in as so have we continue we to expect demonstrated premiums and the ability we believe the have rapidly we to past.

– and the expect come now and years say for insurers of thereby is we to capital returns availability high will you’d we is, X years, for premiums years, part very we in So what on expected the be now think see how of the in X very system. I more Again, because and what fast doesn’t time. would reinsurance also in It normalizing like choice last moment choose capital market. system, right unique dependent how X pricing is long to is the will are a very the is as grow state abnormal, that we

year So it That as help depend like be that to. we’d third-party or we with make fast whether investments, decision capital as sure be to to go late portion part note sometime that out market. grow for entity on that surplus will the not just certainly in is XXXX. Reciprocal the what that there pursue this could base to is We think would unlikely the of able happens of do and

question. the for So first Shawn, that part you to over of

Shawn Tabak

Yes.

we structure as an our business. is Reciprocal have we talked think attractive So, the about, for

different business results. weather. higher launched I the will into of about Reciprocal, our we provides it we gives to what so… Reciprocal, because the understand think we from ability think we consolidate shareholders able up what and when But structured consolidated may than the share information we expect reporting in I look results, that capabilities Porch to cash generation GAAP obviously, direct that cash our more Initially a and shareholders, on is the our margin regard like, us currently to as talked today end perspective, get closer, that important do to it generate an GAAP flow be Porch exposure to Reciprocal for which looking the mitigating would as we

Matt Ehrlichman

Yes.

Ryan, presentation insurance carrier of just on more will entity in liabilities the from Shawn that into HOA, entity. one At to the Reciprocal’s time make our the all the And just sheet, there, that Let like in be thing selling that created, balance clear. I and we over. of the sure it’s said see the move layer me capital approval

clear, be sheets. balance separate are Just to two they

cash separate shareholders the the from Porch Group in right. Reciprocal, So, cash is

out in clear those what to Over show Group from that perspective. as And Reciprocal entities, is our the it’s will Group, Porch creates what as be as as is what make Reciprocal’s perspective entity, sure soon then even as between will of perspective we we doing that P&L gate, here of company. a the And which is saying owes want entities, because because so is a via that sheet to both Shawn link separate those the we expect be standard the but us, would money we note, a producing and are a time, a has report, Porch a balance off, way. from we we would able to surplus GAAP sell paid right consolidated

Ryan Tomasello

obviously, Okay. transaction newer a some us. this That’s of Great. for Yes. is helpful. just And

bit all just and for transaction more that occurring? of Does you a exposure Reciprocal loss mechanics the could the impact, company have legacy – through timeline any or post the Porch kind that are the timeline policyholders post brand, capital So, that there is parent how of intensive at churn the transaction? the walking the about transitioning how here, each new thinking to

Matt Ehrlichman

in approval, out right would make State And the states of Insurance, then Texas. as of to I So, call the we the Insurance Porch out available approval start gate, be would available sell will roll for it Porch other and exchange well. to in Reciprocal

make don’t is they close in that that premium out them the remains variety be to consumers. Porch way, that that get the or at all Insurance, we Reciprocal And commission clean product. Again, are present there props to the premium, move will want value able of and right to attractive policyholders we consumers, resides to fee that of product premium, need gate, we to in renewal, in the our to model all be for certainly to a If it’s paid Porch right. of transaction, to. including opportunity that a entity, consumer able moved So, didn’t HOA, consumer that whether all Insurance the of that whole move, either and of from unique

much So, show But P&L. Group to Porch it that the matter a are doesn’t actually from fees and good commissions Insurance will Porch Porch to there up the facilitate perspective, reasons because migration to. help from Group’s really how that, HOA doesn’t impact the

Ryan Tomasello

Got it. guys. Thanks

Matt Ehrlichman

Thanks Ryan.

Operator

Jason we from up, have Next Craig-Hallum.

Unidentified Analyst

my Kyle, Hey. am I for here questions. for taking Thanks Jason. is This

I things wondering Could in a like mean just would me, the us look snapshot what maybe some like you of from QX, mentioned one place? Reciprocal give events, is fundamentals if that. First weather already was if I you

Matt Ehrlichman

appending, And are aren’t Texas of but the Insurance. right the is, agreement, will, terms of we Reciprocal you and approval the the the of is discussions Department that We Reciprocal, reason now. the

and expect detail. forward will have I So, all say margins sit well able have quite I gross not then be final to view. margins, approved, both bit yet. that where looking backward the we will both bit before mentioned post the be be it’s a a Revenue, clarity higher. and of would And to little that to EBITDA provided Reciprocal margin I are and then to us would as as able to of do generally like John. we all similar lower though, a Reciprocal, generally yes, to answer as just the we be But a and is certainty looking I as view soon had before, and provide the able in terms, provide terms down will

Unidentified Analyst

increases, of on came adds, just the then last policy quarter? just And from saw you new insurance? you And growth the maybe can new of of in Perfect. price one, geographies, what some down That’s of helpful. drill it kind how much

Matt Ehrlichman

as would driver increases. big That roll biggest The price those impact a Yes. through. be has obviously

have Texas taken. in in and Carolina, that the mentioned South material past We that, are we price have increases there

ahead changes. we the Now, us, foresight of would of the team, likely our those kind took I fortunately really, would to what industry, the had see with for say happen reinsurance

try market, prices the And up carriers to see also of we reinsurance the scrambling be to are changes would catch impacts. and the through that of now and of in the so lots biggest other we ahead but the increase industry

Matthew Neagle

Yes.

if I segment entire about take a step the grew XXX%. So, Insurance just back,

we million, couple growth, is the growth warranty the overall from So, growth also was call, it well. and XXX% operational and Matt XXX% as said, the was exactly half seeing the business was changes momentum then And reinsurance seeding half program a there. percentages pricing, on don’t of to about $XX other half And mentioned, that, the of just wins, the then really under the front. we of the doing I with that these and the that business things

Unidentified Analyst

Thank you much. guys very

Operator

Alright.

JPM. have from we Next, Daniel

Daniel Wolle

for the Thanks for I Carpenter. Cory on guys. Hey, am question.

about some Carolina North still you the and Texas rate the and rate hikes, applying And is launched? like you maybe for more states Reciprocal you seeing launched of hikes totally Thanks. the can then are and media on last talk in if So, with progress the but for I about talk Porch believe the the maybe are launch you one, was Group there? it quarter, second can made demand

Matt Ehrlichman

don’t rate second? you why carriers we take obviously, to Matthew, rate, you approvals. take continuing through the other first, the the just Yes, are states work like more for take will I those

the the homeowners that might are it insurance given might create Matthew? but face which in – how a market headwinds going certain just going to grow. see rate of that’s will I as become in We as that you and that something opportunity you system. into a is year view rates does short-term, is the how market more approved insurance perhaps through and ongoing out. that again think across increase, We will longer growing homeowners this rolled share TAM, flow things little meaningful will getting more term But start to terms generally

Matthew Neagle

Media, team, our say about. we Yes, I unique we excited is a where would and brands unique highlighted want business insights, where we which are the quarter have last but Group and I last, was Porch who it solution we it’s properties data Sure. to optimistic. reach are think to are early, we the movers

say is the slowing brands. just do. in a a have we what little So actively we more by But I active, of team differentiation market down marketing. there large cautious can about brands the say how of meter people invest of discussion, about of its excitement because discussions number unique the they only is with things number that can certainly, would then to interesting do. I bit, into little being we a And much with want in can a and

Daniel Wolle

Thanks.

Matt Ehrlichman

Thank you.

Lois Perkins

Thank you, everyone. Great.

read which questions, pre-submitted some I’ll have We out.

the what gross First loss pricing is what performance the on conversion? and P&L? up, a in model the improvement insurance XX% translate into And is impact ratio

Matt Ehrlichman

one? take to Nicole, do that you want

Nicole Pelley

pricing risk and factors into our that as impact then overall, many feeds And There’s we models, able accuracy are one. that understand But take I’ll we in sure, conversion. to modeling. pricing. that better our Yes, our improve

prices, and means higher, So can risk growth. what and with lower priced more leads more profitable then appropriately policies better we is risk policies higher lower that to that convert

We we have as price growth, want. think choices can right, we loss as we ratio, versus gross however about we price,

improvements continue expect us in accuracy drive Insurance segment. to overall, profitable so And model growth for the to allow we’d but

Lois Perkins

are are you. you shares why the think Thank priced And they is, second the do today? like question

Matt Ehrlichman

question. quarterly The

of can on our given We terms reflects start prepared really we that we build what So team, markets view of you to in I value don’t my of we the believe is, just the our until business. macro given be I prove we’ve there similar of of a market, to would sustained I’ve think markets, of do we told intrinsic mentioned built remarks. volatility value we valuation I reflects the to are I’ve first in and in and give profitable, that the the kind the which answer momentum. will our the it in play remarks, pressure continue stock, uncertainty Like all all, think plan don’t that past, the

is notes. think But long-term just and fear down, in job happen etcetera, this time. the we’re housing reinsurance nice competitive keeping the our doing will taking what that and a I that. our just doing So of given advantage time to uncertainty, we’re And and of again, heads expand

appreciation I the am see just [indiscernible], better times plus, really we having prices far shareholders, this use this it business. to this point so are milestones creation certainly I certainly last ahead value rocky for oriented away it. here long-term aren’t building at has that the away. I’ll understand We this ahead. of the do seeing what – I be our say And and stock over too year important could far your our excited, over don’t time consistent express support bit it that’s just the for and who shareholders here, what’s on ahead, from And done some really no opportunity a where but I’m know opportunity

Lois Perkins

you today. speaking everyone. We Thank forward concludes That thanks. time our you, Great, to soon. for look

You may now disconnect. Thank you.

Matt Ehrlichman

Thanks, everybody. care. Take

Porch (PRCH) 10 May 232023 Q1 Earnings call transcript