Porch Group, Inc.

(1)Adjusted EBITDA (Excluding Reciprocal) is a non-GAAP measure. See Non-GAAP Financial Measures section for definition.

Revenue. Total consolidated revenue including the Reciprocal increased by $16.6 million, or 13%, from $127.3 million in the three months ended September 30, 2025, to $143.9 million in the three months ended September 30, 2026. The increase resulted from increased premium revenue, net of ceded premiums, and increased fee revenue. Both increased as a result of more Reciprocal Policies Written, partially offset by a slight reduction in RWP per Policy Written, as described in the following individual segment operating results sections and by our strategic shift to focus on higher profit services, resulting in less revenue as we shutter lower-profit offerings in our Software & Data and Consumer Services segments. See Key Performance Measures and Operating Metrics for definition of Reciprocal Policies Written and RWP per Policy Written metrics.

Cost of revenue. Total consolidated cost of revenue including the Reciprocal increased by $4.9 million, or 16%, from $31.1 million in the three months ended September 30, 2025, to $36.0 million in the three months ended September 30, 2026. Approximately 7% of the increase was due to a reduction in losses ceded by the Reciprocal Segment. Under the new reinsurance program effective April 1, 2026, (see Note 12, Reinsurance for the Reciprocal, in the unaudited Notes to Condensed Consolidated Financial Statements), the Reciprocal cedes a smaller share of losses to reinsurers than it did in the prior-year period. The remaining approximately 9% of the increase was driven by growth in the number of Reciprocal Policies Written, which increases the volume of exposures in force. As a percentage of revenue, cost of revenue represented 25% of revenue in the three months ended September 30, 2026, compared with 24% in the three months ended September 30, 2025.

Selling and marketing. Total consolidated selling and marketing expenses including the Reciprocal increased by $4.1 million, or 10%, from $39.4 million in the three months ended September 30, 2025, to $43.5 million in the three months ended September 30, 2026. The increase was driven by higher commission rates to third-party insurance agencies as well as an increase in the number of agencies. As a percentage of revenue, selling and marketing expenses represented 30% of revenue in the three months ended September 30, 2026, compared with 31% in the three months ended September 30, 2025.

Product and technology. Total consolidated product and technology expenses including the Reciprocal increased by $2.5 million, or 19%, from $13.4 million in the three months ended September 30, 2025, to $15.9 million in the three months ended September 30, 2026. The increase was driven by investments in new software for the Reciprocal and higher personnel-related costs. As a percentage of revenue, product and technology expenses represented 11% of revenue in the three months ended September 30, 2026, compared with 11% in the same period in 2025. The dollar increase is consistent with the rate of increase in revenue.

General and administrative. Total consolidated general and administrative expenses including the Reciprocal increased by $3.4 million, or 12%, from $27.1 million in three months ended September 30, 2025, to $30.4 million in the three months ended September 30, 2026. The increase was driven by higher personnel-related costs.

Interest expense. Interest expense increased by $1.2 million, or 8%, from $14.0 million in the three months ended September 30, 2025, to $15.1 million in the three months ended September 30, 2026. The increase was driven by higher non-cash amortization of debt issuance costs and discounts associated with our convertible notes. The amount of amortization increases over the life of the notes as their carrying value accretes towards the principal amount at maturity. The following table details the components of interest expense on the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss):

Change in fair value of private warrant liability. We recognized a loss on change in fair value of the private warrant liability of $5.7 million in the three months ended September 30, 2025. The private warrants expired in December 2025; therefore, there was no corresponding gain or loss in the current year.

Change in fair value of derivatives. The fair value of derivatives did not change in the three months ended September 30, 2026, compared to a decrease in the derivative liability balance resulting in a gain during the three months ended September 30, 2025. The fair value of derivatives is driven by various factors, including the fair value of the underlying debt, stock price, and assumptions regarding timing of possible repurchase events. See Note 6 in the unaudited Notes to Condensed Consolidated Financial Statements.

Income tax benefit (expense). Income tax benefit of $1.0 million and income tax provision of $4.3 million were recognized for the three months ended September 30, 2026 and 2025, respectively, and the effective tax rates for these periods were (12.4)% and 129.4%, respectively. The difference between our effective tax rates for the three months ended September 30, 2026 and 2025, and the U.S. statutory rate of 21% was attributable to the impact of a full valuation allowance on our net deferred tax assets. Our consolidated effective tax rate decreased for the three months ended September 30, 2026, compared to the same period in the prior year due to a change in the mix of income between the Reciprocal and Porch, which are treated as separate reporting entities for income tax accounting purposes.

Net income (loss) attributable to Porch. Net income attributable to Porch for the three months ended September 30, 2026, was $12.2 million, a $23.0 million increase from Net loss attributable to Porch of $(10.9) million for the three months ended September 30, 2025. The increase was driven by growth in fee revenue associated with an increase in RWP and Reciprocal Policies Written and lower losses on revaluation of warrants, partially offset by higher operating expenses, higher interest expense, and lower derivative gains. See Key Performance Measures and Operating Metrics for definition of Reciprocal Policies Written and RWP per Policy Written metrics.

Adjusted EBITDA (Excluding Reciprocal). Adjusted EBITDA (Excluding Reciprocal), for the three months ended September 30, 2026, was $44.5 million, a $23.9 million improvement from $20.6 million for the same period in 2025. The year-over year improvement was due to an increase in fee revenue associated with increases in RWP and Reciprocal Policies Written. This improvement was partially offset by an increase in operating expenses resulting from higher ceded commissions at our captive reinsurer, increased investment in software, and higher personnel-related compensation costs. Adjusted EBITDA (Excluding Reciprocal), is a non-GAAP measure. See Non-GAAP Financial Measures section for definition.

INSURANCE SERVICES

(1)Insurance Services Adjusted EBITDA, Insurance Services Adjusted EBITDA Margin, and Insurance Services Adjusted EBITDA % of RWP are non-GAAP measures. See Non-GAAP Financial Measures section.

For the three months ended September 30, 2026, Insurance Services segment revenue increased by $29.0 million, or 39%, to $102.8 million compared to $73.8 million for the three months ended September 30, 2025. Our Insurance Services segment generates revenue in several ways: management fees from the Reciprocal based on a percentage of RWP, policy fees from policyholders based on the number of Reciprocal Policies Written, captive reinsurance premiums from the Reciprocal, and lead fees from third-party insurance agencies. Fee revenue represented approximately 21% of the increase which resulted from the 17% increase in RWP and 42% increase in Reciprocal Policies Written as discussed in the following Reciprocal Segment section. Reinsurance premiums from the Reciprocal represented 15% of the increase which resulted from an increase in ceding from the Reciprocal Segment.

For the three months ended September 30, 2026, Insurance Services segment gross profit increased by 46% compared to the three months ended September 30, 2025, which is consistent with the 39% increase in revenue for the same period. The $28.9 million increase in Insurance Services segment gross profit resulted from the $29.0 million increase in revenue as described above with only a slight increase in cost of revenue due to an increase in ceding activity from the Reciprocal Segment.

Insurance Services segment gross margin improved to 89% for the three months ended September 30, 2026, compared to 84% for the three months ended September 30, 2025, as gross profit increased at a higher rate than revenue as described above.

Insurance Services Adjusted EBITDA was $50.1 million for the three months ended September 30, 2026, which increased by $24.8 million compared to prior year due to the $28.9 million increase in gross profit described above.

Insurance Services Adjusted EBITDA Margin increased to 49% for the three months ended September 30, 2026, compared to 34% for the three months ended September 30, 2025. This increase was driven by higher fee-based revenue associated with growth in RWP and Reciprocal Policies Written while fixed operating costs remained relatively stable.

RECIPROCAL SEGMENT

(1)See Key Performance Measures and Operating Metrics for definitions of metrics.

The Reciprocal is a separate legal entity, owned by its member policyholders, and is not owned, wholly or in part, by the Company. The Reciprocal is consolidated in our financial statements solely as a result of the Company's variable interest in, and status as primary beneficiary of, the entity. We include the Reciprocal's results in this discussion for explanatory and informational purposes only, to give our investors a complete understanding of our business and of the amounts reflected in our consolidated results. Because the Company does not own the Reciprocal, the Reciprocal's results of operations, net income (loss), and equity are attributable to its member policyholders and do not accrue to the Company's shareholders. Nothing in the discussion that follows should be read to suggest that the economic results of the Reciprocal are available to, or accrue to the benefit of, the Company or its shareholders.

For the three months ended September 30, 2026, Reciprocal Segment revenue increased by $6.2 million, or 12%, to $58.1 million compared to $51.9 million for the three months ended September 30, 2025. The 12% increase in revenue resulted from increased RWP and the associated earned premium, net of ceded premium. RWP rose because of the 42% increase in the number of Reciprocal Policies Written, which was driven by an increase in the number of agencies and quotes, coupled with improved conversion rates from quotes to written policies for new policyholders. Premiums paid by new policyholders are typically lower than premiums on renewing policies; thus, the large increase in new policies is a significant driver of the 17% decrease in RWP per Policy Written.

For the three months ended September 30, 2026, Reciprocal Segment gross profit decreased by 8% to $37.2 million. The slight decrease in gross profit resulted from increased net losses compared to the same period in the prior year as the Reciprocal cedes less to reinsurers under the updated reinsurance program effective April 1, 2026. These higher losses offset the growth in revenue.

Gross margin for the Reciprocal Segment decreased from 78% for the three months ended September 30, 2025, to 64% for the three months ended September 30, 2026, because the Reciprocal retains more loss under the updated reinsurance program effective April 1, 2026.

Reciprocal Segment Net Income (Loss) was $(3.2) million for the three months ended September 30, 2026, compared to $9.9 million in the three months ended September 30, 2025. The change reflects the $3.2 million decrease in gross profit described above as well as higher management fees and reinsurance premiums paid to Insurance Services as discussed in the Insurance Services section above.

SOFTWARE & DATA

(1)Software & Data Adjusted EBITDA and Software & Data Adjusted EBITDA Margin are non-GAAP measures. See Non-GAAP Financial Measures section.

For the three months ended September 30, 2026, Software & Data segment revenue decreased by $2.3 million, or 9%, to $22.3 million compared to $24.6 million for the three months ended September 30, 2025, gross profit decreased by $1.4 million, or 8%, and Software & Data Adjusted EBITDA decreased by $0.9 million, or 18%. The decrease in revenue reflects the change in Average Number of Companies which decreased by 22% compared to the same period last year as we sunset certain legacy software products that serve very small home service contractor businesses to better support our strategy to focus on larger, more profitable, customers. Annualized Average Revenue per Company increased due to this shift toward larger customers as well as price increases on some of our software products.

CONSUMER SERVICES

(1)Consumer Services Adjusted EBITDA and Consumer Services Adjusted EBITDA Margin are non-GAAP measures. See Non-GAAP Financial Measures section.

For the three months ended September 30, 2026, Consumer Services segment revenue decreased by $1.1 million, or 5%, to $18.3 million compared to $19.4 million for the three months ended September 30, 2025, and gross profit decreased by $1.1 million, or 7%, to $15.5 million. The decrease in revenue reflects fewer customers in our warranty business, which is consistent with the decrease in the number of Monetized Services that was expected as we focus our strategy on more profitable services. This decrease was partially offset by an increase in Average Revenue per Monetized Service, particularly in our warranty business. Gross profit decreased as a result of the lower revenue, but gross margin held steady at 85%.

Consumer Services Adjusted EBITDA improved by $0.7 million for the three months ended September 30, 2026, when compared to the three months ended September 30, 2025, due to lower selling and marketing expense resulting from consumer marketing mailing cost efficiencies and lower personnel-related costs, including increased capitalization of software development labor costs associated with internally developed software.

Consumer Services Adjusted EBITDA Margin improved to 18% from 13% for the three months ended September 30, 2026, as Consumer Services Adjusted EBITDA increased while revenue decreased.

UNALLOCATED CORPORATE EXPENSES

Corporate selling and marketing expense and product and technology expense for the three months ended September 30, 2026, were materially consistent with the same period for 2025.

Corporate general and administrative expense increased by $3.4 million for the three months ended September 30, 2026, compared to the same period for 2025. The increase was driven by higher personnel-related costs.