Porch Group Inc
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
PRCH$19.73-2.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0001784535-24-000115
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0001784535-24-000140
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 156 previous paragraphs and 161 current paragraphs.
79 unchanged; 66 reworded; 14 added; 7 removed; 4 previous and 2 current paragraphs rearranged.
Tables are not compared: 9 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
•the ability of the Company and its affiliates to consummate the sale of HOA to the reciprocal exchange and to commence operations of the reciprocal exchange;
Current report
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”). Our application was approved by the TDI on October 25, 2024, subject to customary administrative closing procedures that are expected to conclude this year. We expect to fund the Reciprocal during the fourth quarter of 2024 with a surplus note. We expect to sell HOA to the Reciprocal for an additional surplus note in the first quarter of 2025. Porch will operate the Reciprocal, providing services. The services to be provided include, but are not limited to, all matters related to underwriting, policy renewal, risk management, insurance portfolio management, financial management, and setting investment guidelines. In addition, Porch will maintain the Reciprocal’s books and records and be responsible for its accounting and financial reporting. In exchange for the services to be provided, Porch will receive fees. The Reciprocal will pay all claims and claims adjustment expenses, reinsurance costs, agency commissions, and taxes and license fees. With the TDI approval, we intend to launch Porch Insurance, a new brand and product to be offered by the Reciprocal, including unique benefits for consumers. There is no impact to our consolidated financials for both the three and nine months ended September 30, 2024.
Current report
In September 2024, we repurchased $43.2 million aggregate principal amount of our 2026 Notes. We paid $20.2 million, or an average of 47% of par value, plus accrued interest. We recognized a $22.5 million gain on extinguishment of debt, calculated as the difference between the reacquisition price and the net carrying amount of the portion of the 2026 Notes that was extinguished.
Current report
•We repurchased $51.2 million of our 2026 senior convertible notes, at an average par value of 45.3%, for $23.2 million during the nine months ended September 30, 2024.
Current report
•Launched new Home Factors insights as we continue to test which property characteristics correlate to predicting losses and risk.
Current report
•Continue to roll out further product enhancements in our Vertical Software businesses as we increase pricing while maintaining high customer retention.
Current report
Revenue. Total revenue decreased by $18.4 million, or 14%, from $129.6 million in the three months ended September 30, 2023, to $111.2 million in the three months ended September 30, 2024. The decrease in revenue was driven by our Insurance segment as a result of higher reinsurance ceding and a reduction in policies in force. Prior year Insurance revenue increased as a result of the cancellation of the Vesttoo-related reinsurance coverage which decreased the impact of ceding. This change offset organic growth in the Insurance segment, including a 25% increase in premium per policy.
Current report
Selling and marketing. Selling and marketing expenses decreased by $12.9 million, or 32%, from $40.1 million in the three months ended September 30, 2023, to $27.2 million in the three months ended September 30, 2024. The decrease is primarily related to a decrease in the Insurance segment’s variable policy acquisition and marketing expenses due to decrease in commission rates, the elimination of expenses in the current year due to the sale of the EIG business in the first quarter as described in Note 15 of the unaudited Notes to Condensed Consolidated Financial Statements, and a decrease in Vertical Software segment costs consistent with the decrease in revenue in that segment. As a percentage of revenue, selling and marketing expenses represented 24% of revenue in the three months ended September 30, 2024 compared with 31% in the three months ended September 30, 2023.
Current report
General and administrative. General and administrative expenses decreased by $3.8 million, or 13%, from $28.7 million in three months ended September 30, 2023, to $24.9 million in the three months ended September 30, 2024, primarily due to decreases in Insurance segment expenses, including a $1.5 million decrease in professional fees and a one-time $1.2 million guarantee assessment to the TDI that occurred in 2023.
Current report
Other income, net. Other income, net, increased by $0.8 million from $1.2 million in the three months ended September 30, 2023, to $2.0 million in the three months ended September 30, 2024. The increase is primarily due to $1.3 million of recoveries on reinsurance contracts in the three months ended September 30, 2024.
Current report
For the three months ended September 30, 2024, Vertical Software segment revenue was $31.3 million or 28% of total revenue. For the three months ended September 30, 2023, Vertical Software segment revenue was $34.3 million or 26% of total revenue. The decrease in Vertical Software segment revenue was primarily driven in our moving business, which exited an unprofitable corporate relocations offering, redirecting focus to higher-margin services. This decline and was partially offset by price increase in our SaaS businesses, within software and service subscriptions.
Current report
Nine Months Ended September 30, 2024, compared to the Nine Months Ended September 30, 2023
Current report
Selling and marketing. The 12% decrease in year-to-date selling and marketing expenses compared to prior year is due to a decrease in Vertical Software segment costs consistent with the decrease in revenue in that segment and a decrease in costs in the Insurance segment related to the sale of the EIG business as described in Note 15 of the unaudited Notes to Condensed Consolidated Financial Statements. As a percentage of revenue, selling and marketing expenses represented 28% of revenue in the current year-to-date period compared to 34% of revenue in the same period last year.
Current report
(3)Required under regulatory guidelines in 22 states and 19 states as of September 30, 2024 and December 31, 2023, respectively.
Removed paragraphs (7)
Previous report
•theability to consummate the proposed formation of the reciprocal exchange and the satisfaction of the conditions precedent to consummation of the proposed formation of such exchange, including the ability to secure regulatory approvals (on a state by state basis and initially in Texas) on the terms expected, at all or in a timely manner;
Previous report
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 report
•We repurchased $8.0 million of our 2026 Convertible Notes for $3.0 million, or 37.5% of par value.
Previous report
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 report
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 report
Corporate expenses were $12.2 million in the second quarter of 2024, a $1.5 million decrease from the same period in the prior year due to a concerted effort to lower professional fees. Corporate expenses decreased to 11% of total revenue for the three-month period ended June 30, 2024, from 14% in the same period in the prior year.
Previous report
Six Months Ended June 30, 2024, compared to the Six Months Ended June 30, 2023
Reworded paragraphs (66)
Previous wording
Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the date herein. Unless specifically indicated otherwise, the forward-looking statements in this Quarterly Report do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that have not been completed as of the date of this filing. You should understand that the following important factors, among others, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:
Current wording
Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the date herein. Unless specifically indicated otherwise, the forward-looking statements in this Quarterly Report do not reflect the potential impact of any future transactions that have not been completed as of the date of this filing, including the licensure and formation of the reciprocal, the sale of our insurance carrier subsidiary, Homeowners of America Insurance Company (“HOA”), to the reciprocal, and the commencement of the reciprocal’s operations. You should understand that the following important factors, among others, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:
Previous wording
•the possibility that a decline in our share price would result in a negative impact to our insurance carrier subsidiary’s, Homeowners of America Insurance Company (“HOA”), surplus position and may require further financial support to enable HOA to meet applicable regulatory requirements and maintain financial stability rating;
Current wording
•the possibility that a decline in our share price would result in a negative impact to HOA’s surplus position and may require further financial support to enable HOA to meet applicable regulatory requirements and maintain financial stability rating;
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; and HOA’s ability to maintain a healthy surplus
Current wording
•the uncertainty and significance of the known and unknown effects on 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
•our ability to successfully operate its businesses alongside a reciprocal exchange;
Current wording
•our ability to successfully operate our businesses alongside a reciprocal exchange;
Previous wording
•our ability to implement our plans, forecasts and other expectations with respect to the reciprocal exchange business after the completion of the formation and to realize expected synergies and/or convert policyholders from its existing insurance carrier business into policyholders of the reciprocal exchange;
Current wording
•our ability to implement our plans, forecasts and other expectations with respect to the reciprocal exchange business after the completion of the formation and to realize expected synergies and/or convert policyholders from our existing insurance carrier business into policyholders of the reciprocal exchange;
Previous wording
•other risks and uncertainties discussed in Part II, Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2023, as well as those discussed elsewhere in this report and in subsequent reports filed with the Securities and Exchange Commission (“SEC”), all of which are available on the SEC’s website at www.sec.gov.
Current wording
•other risks and uncertainties discussed in Part II, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2023, and in Part II, Item 1A, “Risk Factors,” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, as well as those discussed elsewhere in this report and in subsequent reports filed with the Securities and Exchange Commission (“SEC”), all of which are available on the SEC’s website at www.sec.gov.
Previous wording
You should not rely upon on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described above and elsewhere in this Quarter Report on Form 10-Q. We disclaim any obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.
Current wording
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described above and elsewhere in this Quarter Report on Form 10-Q. We disclaim any obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.
Previous 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.
Current wording
As a leader in the home services software-as-a-service (“SaaS”) space, we’ve built deep relationships with approximately 28 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, while also providing move and post-move services. Software and services were 56% and 59% of total vertical software revenue for the three and six months ended
Current wording
Vertical Software —Our Vertical Software segment provides software and services to inspection, mortgage, and title companies on a subscription and transactional basis, while also providing move and post-move services.
Previous 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.
Current wording
Software and services were 59% and 59% of total vertical software revenue for the three and nine months ended September 30, 2024, respectively. Move and post-move services were 41% and 41% of total vertical software revenue for the three and nine months ended September 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, other insurance-related legal entities, Porch Warranty, and 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 HOA, a wholly owned insurance carrier, other insurance-related legal entities, Porch Warranty, and other warranty brands.
Previous wording
The financial information herein should be read in conjunction with the consolidated financial statements for the year ended December 31, 2023, contained in our Annual Report on Form 10-K for the year ended December 31, 2023, and the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report.
Current wording
The financial information herein should be read in conjunction with the consolidated financial statements for the year ended December 31, 2023, contained in our Annual Report on Form 10-K for the year ended December 31, 2023, and the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report. Unless otherwise noted herein, all numbers are in thousands, except per share amounts.
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
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 (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.
Previous wording
During the second quarter of 2023, HOA discovered that Vesttoo Ltd (“Vesttoo”), which arranged capital for one of our reinsurance contracts, faced allegations of fraudulent activity in connection with collateral it provided to HOA and certain other third parties, which allegations have since been confirmed. We have communicated and met with regulators and other key stakeholders regarding the evolving situation. This reinsurance agreement provided partial quota share coverage as well as up to approximately $175 million in a catastrophic event.
Current wording
During the second quarter of 2023, HOA discovered that Vesttoo Ltd (“Vesttoo”), which arranged capital for one of our reinsurance contracts, faced allegations of fraudulent activity in connection with collateral it provided to HOA and certain other third parties, which allegations have since been confirmed. We communicated and met with regulators and other key stakeholders regarding the fraud committed and the terminated reinsurance contract. This reinsurance agreement provided partial quota share coverage as well as up to approximately $175 million in a catastrophic event.
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 $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.
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 Income (Loss) for the nine months ended September 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 have been appointed to the statutory committee of unsecured creditors in the Chapter 11 bankruptcy of Vesttoo and are pursuing recovery of all losses and damages incurred as a result of terminating the reinsurance agreement due to fraud committed 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 thesix months ended June 30, 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 Income (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 the nine months ended September 30, 2024.
Previous 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.
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 September 30, 2024. We recorded a loss of $5.3 million in other income, net, in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
Previous wording
Late in the first quarter of 2024, a Texas hailstorm resulted in approximately $17.5 million of gross losses. During the second quarter of 2024, a large hurricane-like windstorm affected Houston with straight-line and long-lived winds up to 100 miles per hour. This event resulted in approximately $25 million of gross losses. This sort of event impacts Houston at this level of severity once in every 10 years. In July 2024, Hurricane Beryl made landfall in Texas as a category 1 hurricane and impacted the Houston area, where HOA writes policies. We are currently in the process of assessing the financial impact of Hurricane Beryl.
Current wording
Late in the first quarter of 2024, a Texas hailstorm resulted in approximately $16.5 million of gross losses. During the second quarter of 2024, a large hurricane-like windstorm affected Houston with straight-line and long-lived winds up to 100 miles per hour. This event resulted in approximately $20.5 million of gross losses. This sort of event impacts Houston at this level of severity once in every 10 years. In July 2024, Hurricane Beryl made landfall in Texas as a category 1 hurricane and impacted the Houston area, where HOA writes policies. Hurricane Beryl resulted in approximately $44.9 million of gross losses. In September 2024, Hurricane Helene resulted in approximately $4.6 million of gross losses.
Previous wording
We recently completed a contribution of a total of 18.3 million newly issued shares of our common stock to HOA. The contribution was completed across two issuances: 13.8 million shares on July 31, 2024, and 4.5 million shares on June 26, 2024. This contribution supports the planned transition of Porch’s insurance underwriting business to a reciprocal exchange and helps to bolster HOA’s balance sheet strength and rating after Texas May weather impacted surplus. In addition, the contribution increases HOA’s long-term surplus position, which better positions HOA for any future third party surplus note capital raise, and is expected to support premium growth in 2025 and beyond. Should Porch’s share price increase going forward, this would grow HOA’s surplus, thereby supporting higher premium levels. While this increases HOA’s surplus, there is no GAAP impact to the condensed consolidated financial statements.
Current wording
We recently completed a contribution of a total of 18.3 million newly issued shares of our common stock to HOA. The contribution was completed in two transactions: 13.8 million shares on July 31, 2024, and 4.5 million shares on June 26, 2024. This contribution supports the planned transition of Porch’s insurance underwriting business to a reciprocal exchange and helps to bolster HOA’s balance sheet strength and rating after Texas May weather impacted surplus. In addition, the contribution increases HOA’s long-term surplus position, which better positions HOA for any future third party surplus note capital raise, and is expected to support premium growth in 2025 and beyond. Should Porch’s share price increase going forward, this would grow HOA’s surplus, thereby supporting higher premium levels. While this increases HOA’s surplus, there is no impact to the condensed consolidated financial statements.
Previous 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:
Current wording
We have been implementing our strategy as a vertical software platform for the home by providing software and services to approximately 28 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 nine months ended September 30, 2024:
Previous wording
•Non-catastrophe gross loss ratio improved 14 percentage points from the prior year, driven by premium per policy increases and non-renewal of higher risk policies in insurance.
Current wording
•Non-catastrophe gross loss ratio improved 11 percentage points from the prior year, driven by premium per policy increases and non-renewal of higher risk policies in insurance.
Previous wording
•We had cash recoveries on terminated reinsurance contracts of approximately $28 million.
Current wording
•We had cash recoveries on terminated reinsurance contracts of approximately $28 million in the nine months ended September 30, 2024.
Previous wording
•We are now approved in 13 states to use our unique data to improve risk accuracy in pricing policies for our customers. This means we can charge a lower price for policies which are low-risk and more accurately price higher risk policies.
Current wording
•We are approved in 16 states to use our unique data to improve risk accuracy in pricing policies for our customers. This means we can charge a lower price for policies which are low-risk and more accurately price higher risk policies.
Previous 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.
Current wording
Cost of revenue. Cost of revenue decreased by $5.9 million, or 11%, from $53.0 million in the three months ended September 30, 2023, to $47.1 million in the three months ended September 30, 2024. The decrease was primarily the result of higher reinsurance ceding in the Insurance Segment. As a percentage of revenue, cost of revenue represented 42% of revenue in the three months ended September 30, 2024, compared with 41% in the three months ended September 30, 2023.
Previous wording
Provision for (recovery of) doubtful accounts. In the second quarter of 2023, we charged to provision for doubtful accounts approximately $48.2 million of reinsurance balance due from a reinsurer as described in Note 10 of the unaudited Notes to Condensed Consolidated Financial Statements. In the second quarter of 2024, we reduced the provision for doubtful accounts related to Vesttoo by $1.1 million after experiencing improvement in loss reserves.
Current wording
Provision for (recovery of) doubtful accounts. In the second quarter of 2023, we charged to provision for doubtful accounts approximately $48.2 million of reinsurance balance due from a reinsurer as described in Note 10 of the unaudited Notes to Condensed Consolidated Financial Statements. In the third quarter of 2023, we reduced the provision for doubtful accounts related to Vesttoo by $7.0 million after experiencing improvement in loss reserves. In the three months ended September 30, 2024 we continued experiencing improvement in loss reserves and reduced the provision by $0.3 million.
Previous 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.
Current wording
Change in fair value of private warrant liability. The fair value of the private warrant liability changed less in the three months ended September 30, 2024, than in the three months ended September 30, 2023. Our common stock price drove the change and was relatively unchanged during the three months ended September 30, 2024, compared to a decrease in the three months ended September 30, 2023.
Previous wording
Change in fair value of derivatives. The fair value of the derivatives changed more in the three months ended June 30, 2024, than in the three months ended June 30, 2023. The value is driven by various factors, including the fair value of the underlying debt and assumptions regarding timing of possible repurchase events. See Note 4 in the unaudited Notes to Condensed Consolidated Financial Statements.
Current wording
Change in fair value of derivatives. The fair value of the derivatives decreased in the three months ended September 30, 2024, compared to increasing in the three months ended September 30, 2023. The value is driven by various factors, including the fair value of the underlying debt and assumptions regarding timing of possible repurchase events. See Note 4 in the unaudited Notes to Condensed Consolidated Financial Statements.
Previous 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 three months ended June 30, 2023. There was no corresponding debt extinguishments during the three months ended June 30, 2024.
Current wording
Gain on extinguishment of debt. In connection with the repurchase of a portion of the 2026 Notes, we recognized a $22.5 million gain on extinguishment of debt during the three months ended September 30, 2024. There was no corresponding debt extinguishment during the three months ended September 30, 2023. See Note 7 in the notes to the unaudited 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 $3.5 million and $1.2 million in the three 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 and well as reinvested securities at a higher interest rate were the primary reasons 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 $3.8 million and $2.5 million in the three months ended September 30, 2024 and 2023, respectively. Total investments balance was $197.8 million at September 30, 2024, and $115.4 million at September 30, 2023. A higher investment balance and well as reinvested securities at a higher interest rate were the primary reasons for the increased investment income.
Previous 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.
Current wording
Insurance segment revenue was $79.9 million or 72% of total revenue for the three months ended September 30, 2024. Insurance segment revenue was $95.2 million or 74% of total revenue for the three months ended September 30, 2023. The decrease was mainly driven by a reduction in policies in force and a higher reinsurance ceding in the current year as a result of the Vesttoo-related reinsurance coverage which decreased the impact of ceding in the prior year. This change offset organic growth in the Insurance segment, including a 25% increase in Annualized Premium per Policy.
Previous 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.
Current wording
Our Insurance segment had a Segment Adjusted EBITDA (Loss) of $24.8 million in the third quarter of 2024, representing 147% 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 25%, increasing deductibles, non-renewals of higher risk policies, and introducing coverage exclusions for select risks. These improvements were partially offset by the effects of hurricane Beryl. See Note 10 in the unaudited Notes to Condensed Consolidated Financial Statements for tabular presentation of premiums and net losses.
Previous wording
Vertical Software Segment Adjusted EBITDA (Loss) was $4.8 million in the second quarter of 2024, which improved compared to prior year due to pricing increases and strong cost control, including a reduction in workforce and stronger emphasis on our more profitable services in our moving businesses.
Current wording
Vertical Software Segment Adjusted EBITDA (Loss) was $5.1 million in the third quarter of 2024, which improved compared to prior year due to pricing increases and strong cost control, including a reduction in workforce and stronger emphasis on our more profitable services in our moving businesses.
Previous wording
Revenue. The overall 22% increase in year-to-date revenue compared to the same period last year was primarily driven by the 35%, or $43.1 million, increase in revenue in our Insurance segment as a result of an increase in average premium per policy and lower reinsurance ceding partially offset by a reduction in policies in force.
Current wording
Revenue. The overall 7% increase in year-to-date revenue compared to the same period last year was primarily driven by the 13%, or $27.8 million, increase in revenue in our Insurance segment as a result of an increase in average premium per policy and lower reinsurance ceding partially offset by a reduction in policies in force.
Previous wording
Cost of revenue. The 26% increase in year-to-date cost of revenue was primarily the result of more extreme weather in the current period along with the reduction in reinsurance ceding in the Insurance Segment. As a percentage of revenue, cost of revenue represented 74% of revenue in the six months ended June 30, 2024, compared with 71% in the same period of 2023.
Current wording
Cost of revenue. The 16% increase in year-to-date cost of revenue was primarily the result of more severe weather in the current period. These were partially offset by the decline of our corporate relocation business. As a percentage of revenue, cost of revenue represented 64% of revenue in the nine months ended September 30, 2024, compared with 59% in the same period of 2023.
Previous wording
Provision for (recovery of) doubtful accounts. In the second quarter of 2023, we charged to provision for doubtful accounts approximately $48.2 million of reinsurance balance due from a reinsurer as described in Note 10 of the unaudited Notes to Condensed Consolidated Financial Statements. During the six month ended June 30, 2024, we reduced the provision for doubtful accounts related to Vesttoo by $1.1 million after experiencing improvement in loss reserves.
Current wording
Provision for (recovery of) doubtful accounts. For the nine months ended September 30, 2023, we charged to provision for doubtful accounts approximately $41.2 million of reinsurance balance due from a reinsurer as described in Note 10 of the unaudited Notes to Condensed Consolidated Financial Statements. During 2024, we experienced improvement in loss reserves related to Vesttoo of $1.4 million. We had no significant charges to the provision for doubtful accounts during 2024.
Previous wording
Impairment loss on intangible assets and goodwill. In the six months ended June 30, 2023, we recorded a goodwill impairment charge of $55.2 million in our Insurance segment and a $2.0 million impairment charge on intangible assets in our Vertical Software segment. These impairments follow a sustained decrease in stock price, increased costs due to inflationary pressures, hardening of the reinsurance markets, volatile weather, and a deterioration of the macroeconomic environment in the housing and real estate and insurance industries. There were no impairment losses on intangible assets and goodwill in the six months ended June 30, 2024.
Current wording
Impairment loss on intangible assets and goodwill. In the nine months ended September 30, 2023, we recorded a goodwill impairment charge of $55.2 million in our Insurance segment and a $2.0 million impairment charge on intangible assets in our Vertical Software segment. These impairments followed a sustained decrease in stock price, increased costs due to inflationary pressures, hardening of the reinsurance markets, volatile weather, and a deterioration of the macroeconomic environment in the housing and real estate and insurance industries. There were no impairment losses on intangible assets and goodwill in the nine months ended September 30, 2024.
Previous wording
Interest expense. Year-to-date interest expense, increased by $10.2 million, or 93%, from $11.0 million in the same period in 2023. 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. Year-to-date interest expense, increased by $10.5 million, or 50%, from $21.2 million in the same period in 2023. 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 following table details the components of interest expense, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss):
Previous wording
Change in fair value of derivatives. The fair value of the derivatives changed more in the six months ended June 30, 2024, than in the three months ended June 30, 2023, as the current year includes a full six months of change whereas the prior year includes only the period of time after the 2028 Notes were issued in April 2023. The value is driven by various factors, including the fair value of the underlying debt and assumptions regarding timing of possible repurchase events. See Note 4 in the unaudited Notes to Condensed Consolidated Financial Statements.
Current wording
Change in fair value of derivatives. The fair value of the derivatives changed more in the nine months ended September 30, 2024, than in the three months ended September 30, 2023, as the current year includes a full nine months of change whereas the prior year includes only the period of time after the 2028 Notes were issued in April 2023. The value is driven by various factors, including the fair value of the underlying debt and assumptions regarding timing of possible repurchase events. See Note 4 in the unaudited Notes to Condensed Consolidated Financial Statements.
Previous 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.
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 nine months ended September 30, 2023. For the nine months ended September 30, 2024, we recognized an $27.4 million gain on extinguishment of debt related to the partial repurchases 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 $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.
Current wording
Investment income and realized gains, net of investment expenses. Investment income and realized gains, net of investment expenses, were $11.0 million and $4.5 million in the nine months ended September 30, 2024 and 2023, respectively. Total investments balance was $197.8 million at September 30, 2024, and $115.4 million at September 30, 2023. A higher investment balance was the primary reason for the increased investment income.
Showing the first 40 of 66 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
(1)Held by our captive reinsurance business as collateral for the benefit of Homeowners of America Insurance Company (“HOA”).
Current report — wording carried from elsewhere
(2)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.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
(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.
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
The decrease in Vertical Software segment revenue was primarily driven by the decline of our corporate relocation business, within move-related transactions, and was partially offset by price increase in our SaaS businesses, within software and service subscriptions.