Porch Group Inc

Previous wording

•the uncertainty and significance of the known and unknown effects on our insurance carrier subsidiary, Homeowners of America Insurance Company (“HOA”), and us due to the termination of a reinsurance contract following of fraud committed by Vesttoo Ltd. (“Vesttoo”), including, but not limited to, the outcome of Vesttoo’s Chapter 11 bankruptcy proceedings; our ability to successfully pursue claims arising out of the fraud, the costs associated with pursuing the claims, and the timeframe associated with any recoveries; HOA's ability to obtain and maintain adequate reinsurance coverage against excess losses; HOA’s ability to stay out of regulatory supervision and maintain its financial stability rating;

Current wording

•the uncertainty and significance of the known and unknown effects on our insurance carrier subsidiary, Homeowners of America Insurance Company (“HOA”), and us due to the termination of a reinsurance contract following of fraud committed by Vesttoo Ltd. (“Vesttoo”), including, but not limited to, the outcome of Vesttoo’s Chapter 11 bankruptcy proceedings; our ability to successfully pursue claims arising out of the fraud, the costs associated with pursuing the claims, and the timeframe associated with any recoveries; HOA's ability to obtain and maintain adequate reinsurance coverage against excess losses; HOA’s ability to stay out of regulatory supervision and maintain its financial stability rating; and HOA’s ability to maintain a healthy surplus

Previous wording

•uncertainties related to regulatory approval of insurance rates, policy forms, insurance products, license applications, acquisitions of businesses, or strategic initiatives, including the reciprocal restructuring, and other matters within the purview of insurance regulators;

Current wording

•uncertainties related to regulatory approval of insurance rates, policy forms, insurance products, license applications, acquisitions of businesses, or strategic initiatives, including the reciprocal restructuring, and other matters within the purview of insurance regulators (including the discount associated with the shares contributed to HOA);

Previous wording

Porch Group, Inc., together with its consolidated subsidiaries, (“Porch Group,” “Porch,” the “Company,” “we,” “our,” “us”) is a leading homeowners insurance and vertical software 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.

Current wording

Porch Group, Inc., together with its consolidated subsidiaries, (“Porch Group,” “Porch,” the “Company,” “we,” “our,” “us”) is a leading homeowners insurance and vertical software platform and is positioned to be one of the best partners 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.

Previous wording

As a leader in the home services software-as-a-service (“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.

Current wording

As a leader in the home services software-as-a-service (“SaaS”) space, we’ve built deep relationships with approximately 29 thousand companies that are key to the home-buying transaction, such as home inspectors, mortgage companies, and title companies.

Previous wording

Vertical Software — Our Vertical Software segment provides software and services to inspection, mortgage, and title companies on a subscription and transactional basis, which was 62% of total vertical software revenue, and move and post-move services, which was 38% of total vertical software revenue for the three months ended March 31, 2024. The Vertical Software segment operates as several key businesses, including inspection software and services, title insurance software, mortgage software, moving services, mover and homeowner marketing, and measurement software for roofers.

Current wording

June 30, 2024, respectively. Move and post-move services were 44% and 41% of total vertical software revenue for the three and six months ended June 30, 2024, respectively. The Vertical Software segment operates as several key businesses, including inspection software and services, title insurance software, mortgage software, moving services, mover and homeowner marketing, and measurement software for roofers.

Previous wording

Insurance —Our Insurance segment provides consumers with insurance and warranty products to protect their homes, earning revenue through premiums collected on policies, policy fees and commissions. The Insurance segment includes Homeowners of America (“HOA”), a wholly owned insurance carrier, Porticus Reinsurance (“Porticus RE”), our Cayman Islands captive reinsurer, and Porch Warranty, among other warranty brands.

Current wording

Insurance —Our Insurance segment provides consumers with insurance and warranty products to protect their homes, earning revenue through premiums collected on policies, policy fees and commissions. The Insurance segment includes Homeowners of America (“HOA”), a wholly owned insurance carrier, other insurance-related legal entities, Porch Warranty, and other warranty brands.

Previous wording

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.

Current wording

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

Previous wording

As a result of its findings, and in accordance with the terms of the reinsurance agreement, HOA terminated the associated contract on August 4, 2023, with an effective date of July 1, 2023. Had the contract not been terminated, the contract would have expired on December 31, 2023, and HOA would have been contracted to pay approximately $20 million in additional premium payments during July through December 2023. Following the effective date of the termination, HOA seized available liquid collateral in the amount of approximately $47.6 million from a reinsurance trust, of which HOA was the beneficiary and recognized a charge of $36.0 million in provision for doubtful accounts in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2023. In addition, HOA is evaluating and intends to pursue all available legal claims and remedies to enforce its rights under the letter of credit required by the reinsurance agreement in the amount of $300 million as additional collateral. We are also seeking recovery of all losses and damages incurred as a result of terminating the reinsurance agreement due to allegations of fraudulent activity by third parties.

Current wording

As a result of its findings, and in accordance with the terms of the reinsurance agreement, HOA terminated the associated contract on August 4, 2023, with an effective date of July 1, 2023. Had the contract not been terminated, the contract would have expired on December 31, 2023, and HOA would have been contracted to pay approximately $20 million in additional premium payments during July through December 2023. Following the effective date of the termination, HOA seized available liquid collateral in the amount of approximately $47.6 million from a reinsurance trust, of which HOA was the beneficiary and recognized a charge of $48.2 million in provision for (recovery of) doubtful accounts in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the six months ended June 30, 2023. In addition, HOA is evaluating and intends to pursue all available legal claims and remedies to enforce its rights under the letter of credit required by the reinsurance agreement in the amount of $300 million as additional collateral. We are also seeking recovery of all losses and damages incurred as a result of terminating the reinsurance agreement due to allegations of fraudulent activity by third parties.

Previous wording

On January 19, 2024, we entered intoa five-year business collaboration agreement with Aon Corp. and Aon Re, Inc. ("Aon"), resulting in payments to us of approximately $25 million in January 2024 and additional cash payments through the end of the contract term. Of the cash payments that we have or will receive through the end of the contract term, $8.7 million is non-refundable and immediately recognized in other income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss. A portion of the remaining amount is potentially refundable to Aon if we breach the agreement, including if wedirectly or indirectly place reinsurance with brokers unaffiliated with Aon, subject to customary cure rights. The remaining amount will be recognized in other income, net, over the term of the agreement. As part of this agreement, Aon and Porch also signed a mutual release of claims arising from the Vesttoo fraud. Porch has not released any claims against non-Aon parties related to these matters and intends to vigorously pursue recovery. In addition to this arrangement, we have also received cash recoveries from other parties in the amount of$3.0 million during thethree months ended March 31, 2024.

Current wording

On January 19, 2024, we entered intoa five-year business collaboration agreement with Aon Corp. and Aon Re, Inc. ("Aon"), resulting in payments to us of approximately $25 million in January 2024 and additional cash payments through the end of the contract term. Of the cash payments that we have or will receive through the end of the contract term, $8.7 million is non-refundable and immediately recognized in other income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss. A portion of the remaining amount is potentially refundable to Aon if we breach the agreement, including if wedirectly or indirectly place reinsurance with brokers unaffiliated with Aon, subject to customary cure rights. The remaining amount will be recognized in other income, net, over the term of the agreement. As part of this agreement, Aon and Porch also signed a mutual release of claims arising from the Vesttoo fraud. Porch has not released any claims against non-Aon parties related to these matters and intends to vigorously pursue recovery. In addition to this arrangement, we have also received cash recoveries from other parties in the amount of$3.0 million during thesix months ended June 30, 2024.

Previous wording

On January 31, 2024, we sold our insurance agency, Elite Insurance Group (“EIG”). The estimated price is $12.2 million of which we have received $10.3 million in cash and recorded a receivable of $1.8 million as of March 31, 2024. We recorded an estimated loss of $5.2 million in other income, net, in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The final price and amount of loss on sale will be determined after post-closing adjustments have been finalized, which is expected to occur in the second quarter of 2024.

Current wording

On January 31, 2024, we sold our insurance agency, Elite Insurance Group (“EIG”). The sale price was $12.2 million of which we have received $10.9 million in cash and recorded a receivable of $1.2 million as of June 30, 2024. We recorded a loss of $5.3 million in other income, net, in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Previous wording

In 2023, we filed an application to form and license a Texas reciprocal exchange (the “Reciprocal”) with the Texas Department of Insurance (“TDI”). If approved by the TDI, our insurance underwriting business will be conducted through the Reciprocal. A Porch subsidiary would serve as the operator (or “attorney-in-fact”) for the Reciprocal. In that role it would perform underwriting, claims, and management services for the Reciprocal and receive a management fee calculated as a percentage of its premiums. Porch subsidiaries would act as general agents for the Reciprocal and HOA and would receive fees and commissions. There can be no assurance that the Reciprocal will receive regulatory approval, and if obtained, that the approval would be based on terms as proposed or subject to additional requirements that may not be acceptable to us. If the application is approved, we intend to launch Porch Insurance, a new brand and product to be offered by the Reciprocal, including unique benefits for consumers such as a free 90-day warranty and proprietary discounts to customers within the Porch ecosystem.

Current wording

On July 29, 2024, we filed a new and updated application to form and license a Texas reciprocal exchange (the “Reciprocal”) with the Texas Department of Insurance (“TDI”). If approved by the TDI, our insurance underwriting business will be sold to the Reciprocal for an increased surplus note, with then all homeowner insurance underwriting being performed within the Reciprocal. A Porch subsidiary would serve as the operator (or “attorney-in-fact”) for the Reciprocal. In that role it would perform underwriting, claims, and management services for the Reciprocal and receive a management fee calculated as a percentage of its premiums. Porch subsidiaries would act as general agents for the Reciprocal and HOA and would receive fees and commissions. There can be no assurance that the Reciprocal will receive regulatory approval, and if obtained, that the approval would be based on terms as proposed or subject to additional requirements that may not be acceptable to us. If approved, we intend to launch Porch Insurance, a new brand and product to be offered by the Reciprocal, including unique benefits for consumers such as a free 90-day warranty and proprietary discounts to customers within the Porch ecosystem.

Previous wording

We have been implementing our strategy as a vertical software platform for the home by providing software and services to approximately 30 thousand pre-and-post move home service providers including inspectors, real estate, title, and mortgage companies. Our Insurance segment continues to grow in scale through both premium growth and geographic expansion. The following key factors affected our operating results in the three months ended March 31, 2024:

Current wording

We have been implementing our strategy as a vertical software platform for the home by providing software and services to approximately 29 thousand pre-and-post move home service providers including inspectors, real estate, title, and mortgage companies. Our Insurance segment continues to grow in scale through both premium growth and geographic expansion. The following key factors affected our operating results in the three and six months ended June 30, 2024:

Previous wording

Revenue. Total revenue increased by $28.1 million, or 32%, from $87.4 million in the three months ended March 31, 2023, to $115.4 million in the three months ended March 31, 2024, driven by revenue in our Insurance segment as a result of lower reinsurance ceding and an increase in average premium per policy. This increase was partially offset by a 4%, or $1.1 million, decrease in revenue in our Vertical Software segment due to a 3.5% reduction in year-over-year industry home sales which adversely affected our moving business in particular.

Current wording

Revenue. Total revenue increased by $12.1 million, or 12%, from $98.8 million in the three months ended June 30, 2023, to $110.8 million in the three months ended June 30, 2024. The increase in revenue, driven by our Insurance segment as a result of lower reinsurance ceding and an increase in average premium per policy, was partially offset by a reduction in policies in force.

Previous wording

Cost of revenue. Cost of revenue increased by $24.6 million, or 48%, from $51.3 million in the three months ended March 31, 2023, to $75.8 million in the three months ended March 31, 2024. The increase was primarily the result of the reduction in reinsurance ceding in the Insurance Segment. As a percentage of revenue, cost of revenue represented 66% of revenue in the three months ended March 31, 2024, compared with 59% in the three months ended March 31, 2023.

Current wording

Cost of revenue. Cost of revenue increased by $10.3 million, or 13%, from $81.3 million in the three months ended June 30, 2023, to $91.6 million in the three months ended June 30, 2024. The increase was primarily the result of more extreme weather in the current quarter along with the reduction in reinsurance ceding in the Insurance Segment. As a percentage of revenue, cost of revenue represented 83% of revenue in the three months ended June 30, 2024, compared with 82% in the three months ended June 30, 2023.

Previous wording

Impairment loss on intangible assets and goodwill. In the three months ended March 31, 2023, we recorded impairment losses on intangible assets totaling $2.0 million in our Vertical Software segment. These impairment charges reflected inflationary pressures and a deterioration of the macroeconomic environment in the housing and real estate industry. There were no impairment losses on intangible assets and goodwill in the three months ended March 31, 2024.

Current wording

Impairment loss on intangible assets and goodwill. In the three months ended June 30, 2023, we recorded a goodwill impairment charge of $55.2 million in our Insurance segment. These impairment charges reflected inflationary pressures, our common stock value, and broad disruptions in the equity markets, specifically for technology and property and casualty insurance companies. There were no impairment losses on intangible assets and goodwill in the three months ended June 30, 2024.

Previous wording

Interest expense. Interest expense increased by $8.6 million, or 393%, from $2.2 million in the three months ended March 31, 2023, to $10.8 million in the three months ended March 31, 2024. The increase is mainly due to interest at a higher weighted average rate on a higher aggregate debt balance after issuance of the 2028 Notes in April 2023. The non-cash amortization of debt discount and issuance costs also contributed to the increase.

Current wording

Interest expense. Interest expense increased by $1.6 million, or 18%, from $8.8 million in the three months ended June 30, 2023, to $10.3 million in the three months ended June 30, 2024. The increase is mainly due to interest at a higher weighted average rate on a higher aggregate debt balance after issuance of the 2028 Notes in April 2023. The non-cash amortization of debt discount and issuance costs also contributed to the increase.

Previous wording

Change in fair value of private warrant liability. The fair value of the private warrant liability increased in the three months ended March 31, 2024, compared to a decrease in the three months ended March 31, 2023. The increase in our common stock price drove the change for the three months ended March 31, 2024, compared with a decrease in stock price for the three months ended March 31, 2023.

Current wording

Change in fair value of private warrant liability. The fair value of the private warrant liability changed more in the three months ended June 30, 2024, than in the three months ended June 30, 2023. The decrease in our common stock price drove the change and was more pronounced during the three months ended June 30, 2024, than in the three months ended June 30, 2023.

Previous wording

For the three months ended March 31, 2024, Vertical Software segment revenue was $27.5 million or 24% of total revenue. For the three months ended March 31, 2023, Vertical Software segment revenue was $28.6 million or 33% of total revenue. The decrease in Vertical Software segment revenue was primarily driven by a 3.5% reduction in year-over-year industry home sales which adversely affected our moving business.

Current wording

For the three months ended June 30, 2024, Vertical Software segment revenue was $32.6 million or 29% of total revenue. For the three months ended June 30, 2023, Vertical Software segment revenue was $34.4 million or 35% of total revenue.

Previous wording

Insurance segment revenue was $87.9 million or 76% of total revenue for the three months ended March 31, 2024. Insurance segment revenue was $58.7 million or 67% of total revenue for the three months ended March 31, 2023. The increase is mainly driven by lower reinsurance ceding and a 33% increase in Annualized Premium per Policy.

Current wording

Insurance segment revenue was $78.3 million or 71% of total revenue for the three months ended June 30, 2024. Insurance segment revenue was $64.3 million or 65% of total revenue for the three months ended June 30, 2023. The increase was mainly driven by lower reinsurance ceding and as a 28% increase in Annualized Premium per Policy. These were partially offset by a reduction in policies in force.

Previous wording

Segment Adjusted EBITDA (Loss) is defined as revenue less the following expenses associated with each segment: cost of revenue, selling and marketing, product and technology, and general and administrative expenses. Segment Adjusted EBITDA (Loss) also excludes non-cash items or items that management does not consider reflective of ongoing core operations. See Note 16, Segment Information, in the notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report for reconciliations to GAAP consolidated financial information for the periods presented.

Current wording

Segment Adjusted EBITDA (Loss) is defined as revenue less the following expenses associated with each segment: cost of revenue, selling and marketing, product and technology, general and administrative expenses, and provision for doubtful accounts. Segment Adjusted EBITDA (Loss) also excludes non-cash items or items that management does not consider reflective of ongoing core operations. See Note 16, Segment Information, in the notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report for reconciliations to GAAP consolidated financial information for the periods presented.

Previous wording

Our Insurance segment had a Segment Adjusted EBITDA (Loss) of $2.9 million in the first quarter of 2024, representing 17% of Adjusted EBITDA (Loss) for the same period. The improvement over the same period last year was a result of our insurance profitability actions, including premium per policy increases of 33%, increasing deductibles, introducing certain coverage exclusions for select risks, and a reduction in ceded reinsurance. See Note 10 in the notes to the unaudited condensed consolidated financial statements for tabular presentation of premiums and net losses.

Current wording

Our Insurance segment had a Segment Adjusted EBITDA (Loss) of $(27.3) million in the second quarter of 2024, representing 79% of Adjusted EBITDA (Loss) for the same period. The improvement over the same period last year was a result of lower non-catastrophic losses and our insurance profitability actions, including premium per policy increases of 28%, increasing deductibles, non-renewals of higher risk policies, and introducing coverage exclusions for select risks. These improvements were partially offset by the effects of extreme weather events. See Note 10 in the unaudited Notes to Condensed Consolidated Financial Statements for tabular presentation of premiums and net losses.

Previous wording

Gain on extinguishment of debt. In connection with the partial repurchase of the 2026 Notes, we recognized an $4.9 million gain on extinguishment of debt. See Note 7 in the notes to the unaudited condensed consolidated financial statements.

Current wording

Gain on extinguishment of debt. In connection with the issuance of the 2028 Notes and partial repurchase of the 2026 Notes, we recognized an $81.4 million gain on extinguishment of debt during the six months ended June 30, 2023. For the six months ended June 30, 2024, we recognized an $4.9 million gain on extinguishment of debt related to the partial repurchase of the 2026 Notes. See Note 7 in the unaudited Notes to Condensed Consolidated Financial Statements.

Previous wording

Investment income and realized gains, net of investment expenses. Investment income and realized gains, net of investment expenses, were $3.6 million and $0.8 million in the three months ended March 31, 2024 and 2023, respectively. Total investments balance was $134.1 million at March 31, 2024, and $93.1 million at March 31, 2023. A higher investment balance was the primary reason for the increased investment income.

Current wording

Investment income and realized gains, net of investment expenses. Investment income and realized gains, net of investment expenses, were $7.2 million and $2.0 million in the six months ended June 30, 2024 and 2023, respectively. Total investments balance was $135.6 million at June 30, 2024, and $92.7 million at June 30, 2023. A higher investment balance was the primary reason for the increased investment income.

Previous wording

Other income, net. Other income, net, increased by $21.9 million from $0.8 million in the three months ended March 31, 2023, to $22.7 million in the three months ended March 31, 2024. The increase is due to recoveries of losses on reinsurance contract of $12.6 million and gain on settlement of contingent consideration of $14.9 million. These are offset by loss on the sale of EIG business of $5.2 million. See Note 12 in the notes to the unaudited condensed consolidated financial statements for detail of other income, net, for each period presented.

Current wording

Other income, net. Other income, net, increased by $22.7 million from $2.3 million in the six months ended June 30, 2023, to $25.1 million in the six months ended June 30, 2024. The increase is due to recoveries of losses on reinsurance contract of $13.5 million and gain on settlement of contingent consideration of $14.9 million. These are offset by loss on sale of EIG business of $5.3 million. See Note 12 in the unaudited Notes to Condensed Consolidated Financial Statements for detail of other income, net, for each period presented.

Previous wording

The following table reconciles Net loss to Adjusted EBITDA (Loss) for the three months ended March 31, 2024 and 2023 (dollar amounts in thousands).

Current wording

The following table reconciles Net loss to Adjusted EBITDA (Loss) for the three and six months ended June 30, 2024 and 2023 (dollar amounts in thousands).

Previous wording

(1)Difference from Other Income, net in Condensed Consolidated Statements of Operations and Comprehensive Loss is primarily due to a portion of the income resulting from the Aon business collaboration agreement, disclosed in Note 10, that is not a non-GAAP adjustment.

Current wording

(2)Difference from Other Income, net in Condensed Consolidated Statements of Operations and Comprehensive Loss is primarily due to a portion of the income resulting from the Aon business collaboration agreement, disclosed in Note 10, that is not a non-GAAP adjustment.

Previous wording

(2)Primarily consists of costs related to forming a reciprocal exchange.

Current wording

(3)Primarily consists of costs related to forming a reciprocal exchange and share contributions to HOA (see Note 8)

Previous wording

Adjusted EBITDA (Loss) for the three months ended March 31, 2024, was $(16.8) million, a $5.1 million improvement from Adjusted EBITDA (Loss) of $(21.9) million for the same period in 2023. The improvement in Adjusted EBITDA (Loss) in 2024 is primarily driven by underwriting enhancements at our insurance business, including price increases implemented over the last year, as well as cost reductions across the business. The improvement was partially offset by the effects of extreme weather events, lower ceding, and the macro housing environment affecting primarily the moving business in our Vertical Software segment. Continued investments in sales and marketing and investments in IT systems further impacted Adjusted EBITDA (Loss).

Current wording

Adjusted EBITDA (Loss) for the six months ended June 30, 2024, was $(51.6) million, a $13.5 million improvement from Adjusted EBITDA (Loss) of $(65.0) million for the same period in 2023. The improvement in Adjusted EBITDA (Loss) in 2024 is primarily driven by insurance profitability actions, including price increases implemented over the last year, as well as cost reductions across the business. These improvements were partially offset by the effects of extreme weather events, lower ceding, and the decline of the corporate relocation business in our Vertical Software segment.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $279.1 million and restricted cash of $36.8 million. Restricted cash equivalents as of March 31, 2024 includes $27.7 million held by our captive reinsurance business as collateral for the benefit of Homeowners of America Insurance Company (“HOA”), $1.4 million held in certificates of deposits and money market mutual funds pledged to the Department of Insurance in certain states as a condition of our Certificate of Authority for the purpose of meeting obligations to policyholders and creditors, $6.8 million in funds held for the payment of possible warranty claims as required under regulatory guidelines in 21 states, and $1.0 million related to acquisition indemnifications.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $274.2 million and restricted cash and cash equivalents of $11.1 million. Restricted cash equivalents as of June 30, 2024 includes $1.8 million held by our captive reinsurance business as collateral for the benefit of Homeowners of America Insurance Company (“HOA”), $1.6 million held in certificates of deposits and money market mutual funds pledged to the Department of Insurance in certain states as a condition of our Certificate of Authority for the purpose of meeting obligations to policyholders and creditors, $6.7 million in funds held for the payment of possible warranty claims as required under regulatory guidelines in twenty-one states, and $1.0 million related to acquisition indemnifications.

Previous wording

We have incurred net losses since our inception and have an accumulated deficit at March 31, 2024, and December 31, 2023, totaling $735.4 million and $722.1 million, respectively.

Current wording

We have incurred net losses since our inception and have an accumulated deficit at June 30, 2024, and December 31, 2023, totaling $799.7 million and $722.1 million, respectively.

Previous wording

Porch Group, Inc. is a holding company that transacts the majority of its business through operating subsidiaries, including insurance subsidiaries. Consequently, our ability to pay dividends and expenses is largely dependent on dividends or other distributions from our subsidiaries. Our insurance company subsidiaries are highly regulated and are restricted by statute as to the amount of dividends they may pay without the prior approval of their respective regulatory authorities. As of March 31, 2024, our insurance carrier, HOA, held cash and cash equivalents of $204.4 million and investments of $96.6 million.

Current wording

Porch Group, Inc. is a holding company that transacts the majority of its business through operating subsidiaries, including insurance subsidiaries. Consequently, our ability to pay dividends and expenses is largely dependent on dividends or other distributions from our subsidiaries. Our insurance company subsidiaries are highly regulated and are restricted by statute as to the amount of dividends they may pay without the prior approval of their respective regulatory authorities. As of June 30, 2024, our insurance carrier, HOA, held cash and cash equivalents of $194.7 million and investments of $98.1 million.

Previous wording

Insurance companies in the United States are also required by state law to maintain a minimum level of policyholder’s surplus. Insurance regulators in the states in which we operate have a risk-based capital standard designed to identify property and casualty insurers, or reinsurers, that may be inadequately capitalized based on inherent risks of the insurer’s assets and liabilities and its mix of net written premium. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action. See Note 10 in the notes to the unaudited condensed consolidated financial statements for a description of our reinsurance programs.

Current wording

Insurance companies in the United States are also required by state law to maintain a minimum level of policyholder’s surplus. Insurance regulators in the states in which we operate have a risk-based capital standard designed to identify property and casualty insurers, or reinsurers, that may be inadequately capitalized based on inherent risks of the insurer’s assets and liabilities and its mix of net written premium. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action. See Note 10 in the unaudited Notes to Condensed Consolidated Financial Statements for a description of our reinsurance programs.

Previous wording

The following table provides a summary of cash flow data for the three months ended March 31, 2024 and 2023:

Current wording

The following table provides a summary of cash flow data for the six months ended June 30, 2024 and 2023:

Previous wording

Net cash provided by (used in) operating activities was $8.5 million for the three months ended March 31, 2024. Net cash provided by (used in) operating activities consists primarily of positive cash flow from the non-recurring cash receipt of $25 million related to the Aon agreement (see Note 10 in the notes to the unaudited condensed consolidated financial statements) partially offset by net loss of $13.4 million during the three months ended March 31, 2024.

Current wording

Net cash used in operating activities was $17.5 million for the six months ended June 30, 2024. Net cash used in operating activities consists of net loss of $77.7 million, adjusted for non-cash items. Non-cash adjustments include stock-based compensation expense of $12.5 million, depreciation and amortization of $12.5 million, non-cash interest expense of $17.3 million, loss (gain) on settlement of contingent consideration of $(14.9) million, and loss (gain) on remeasurement of derivative liability of $6.7 million. Net loss and non-cash adjustments were partially offset by positive cash flow from the non-recurring cash receipt of $25 million related to the Aon agreement (see Note 10 in the notes to the unaudited condensed consolidated financial statements).

Previous wording

Net cash provided by (used in) operating activities was $(22.0) million for the three months ended March 31, 2023. Net cash provided by (used in) operating activities consists of net loss of $38.7 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include stock-based compensation expense of $6.9 million, depreciation and amortization of $6.0 million, non-cash interest expense of $1.5 million, loss (gain) on remeasurement of contingent consideration of $(0.2) million, and loss (gain) on remeasurement of private warrant liability of $(0.3) million. Net changes in working capital were net proceeds of cash of $0.2 million, primarily due to increases in deferred revenue, losses and loss adjustment expense reserves and other insurance liabilities, offset by higher reinsurance balance due.

Current wording

Net cash used in operating activities was $8.8 million for the six months ended June 30, 2023. Net cash used in operating activities consists of net loss of $125.7 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include impairment loss on goodwill and intangible assets of $57.2 million, stock-based compensation expense of $13.3 million, depreciation and amortization of $12.2 million, non-cash interest expense of $9.8 million, loss (gain) on remeasurement of contingent consideration of $(2.8) million, and loss (gain) on remeasurement of private warrant liability of $(0.4) million. Net changes in working capital were net proceeds of cash of $56.2 million, primarily due to increases in deferred revenue, losses and loss adjustment expense reserves and other insurance liabilities, offset by higher reinsurance balance due.

Previous wording

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

Current wording

Net cash provided by (used in) investing activities was $8.8 million for the six months ended June 30, 2024. Net cash provided by (used in) investing activities is primarily related to proceeds from sale of EIG of $10.9 million and maturities and sales of investments of $22.6 million offset by purchases of investments of $19.2 million and investments in developing internal-use software of $5.5 million.

Previous wording

Net cash provided by (used in) investing activities was $(5.1) million for the three months ended March 31, 2023. Net cash provided by (used in) investing activities is primarily related to acquisitions, net of cash acquired of $2.0 million, purchases of investments of $5.4 million, investments in developing internal-use software of $2.4 million, and purchases of property and equipment of $0.4 million..

Current wording

Net cash provided by (used in) investing activities was $(8.0) million for the six months ended June 30, 2023. Net cash provided by (used in) investing activities is primarily related to acquisitions, net of cash acquired of $2.0 million, purchases of investments of $23.6 million, investments in developing internal-use software of $4.7 million, and purchases of property and equipment of $0.7 million. This was offset by the cash inflows related to maturities and sales of investments of $23.0 million.

Previous wording

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

Current wording

Net cash provided by (used in) financing activities was $(3.1) million for the six months ended June 30, 2024. Net cash provided by (used in) financing activities is primarily related to the repurchase of the 2026 Notes of $3.0 million.

Previous wording

Net cash used in financing activities was $7.3 million for the three months ended March 31, 2023. Net cash provided by financing activities is primarily related to proceeds from a term loan and line of credit, partially offset by repayments of advance funding and debt.

Current wording

Net cash provided by (used in) financing activities was $93.0 million for the six months ended June 30, 2023. Net cash provided by financing activities is primarily related to proceeds from a term loan and line of credit, partially offset by repayments of advance funding and debt.

Previous wording

Our critical accounting policies, including the assumptions and judgements underlying them, are disclosed in the 2023 Annual Report, including those policies as discussed in Note 1 to the Notes to Consolidated Financial Statements include in the 2023 Annual Report. There have been no material changes to these policies during the three months ended March 31, 2024. .

Current wording

Our critical accounting policies, including the assumptions and judgements underlying them, are disclosed in the 2023 Annual Report, including those policies as discussed in Note 1 to the Notes to Consolidated Financial Statements include in the 2023 Annual Report. There have been no material changes to these policies during the six months ended June 30, 2024.