Porch Group, Inc. (“Porch Group” or “the Company”)
(NASDAQ: PRCH), a leading vertical software company reinventing the
home services and insurance industries, today reported second
quarter results for the Company as of June 30, 2023, with total
revenue of $98.8 million, which increased 39% compared to $70.9
million in the second quarter of 2022.
CEO Summary“We are pleased to deliver a solid
performance in the second quarter with 39% top-line growth and
continued focus on achieving profitability. We faced industry-wide
headwinds in our home insurance business with extreme weather
events toward the end of the quarter and in our software business
with a declining housing market. We are pleased to reiterate our
second half 2023 Adjusted EBITDA profitability outlook. We are
making good progress against key strategic initiatives, including
growing our high margin home warranty business, and leveraging our
unique data advantages to better serve homeowners.” Matt
Ehrlichman, Chief Executive Officer, Chairman and
Founder.
Second Quarter 2023 Financial Results
- Total revenue of $98.8 million, an increase of 39% or $27.9
million (second quarter of 2022: $70.9 million), driven by
Insurance Segment.
- Revenue less cost of revenue of $17.4 million, or 18% of total
revenue (second quarter 2022: $41.7 million, 59% of total revenue).
Impacted by continued industry-wide headwinds and weather-related
claims costs, including an $18 million loss from catastrophic
weather events in the Insurance Segment.
- GAAP net loss of $87.0 million, compared to $27.3 million for
the second quarter of 2022, which includes an $81.4 million gain on
extinguishment of debt, a $55.2 million goodwill impairment charge
and a $48.2 million net receivable write off in relation to a
reinsurance contract with Vesttoo for which the Company is pursuing
recovery.
- Adjusted EBITDA loss of $43.1 million, a decrease from the
prior year (second quarter of 2022: loss of $15.0 million) driven
by an $18 million loss from extreme weather events compared to
historic trends in the Insurance Segment, partially offset by
reduced G&A with strong expense control.
- Gross written premium for the quarter in our Insurance segment
was $143 million with approximately 358 thousand policies.
- $358 million unrestricted cash plus investments at the end of
the second quarter. This includes $102 million cash from the
issuance of $333 million senior secured notes in the quarter.
Second Quarter 2023 Operational Highlights
- Approved in 11 states to use our unique data in insurance
pricing which improves risk accuracy so we can better price
policies for customers.
- Promising partnership results with third-party insurance
agencies, expanding our distribution channels.
- Reciprocal Exchange application progressing, which is with the
Texas Department of Insurance for approval. Expect to launch Porch
Insurance following approval of the reciprocal, which offers a
unique value proposition for consumers.
- Warranty business entered new partnerships with Pepco, Atlantic
City Power and Delmarva Power, where we utilize a co-branded
journey to provide exclusive home service offerings to utility
customers including warranties.
The following table presents financial highlights of the
Company’s second quarter 2023 results compared to the second
quarter 2022 (dollars are in millions):
|
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|
Second Quarter 2023 |
|
Insurance |
|
Vertical Software |
|
Corporate |
|
Consolidated |
|
Revenue |
|
$ |
64.3 |
|
|
$ |
34.4 |
|
|
$ |
— |
|
|
$ |
98.8 |
|
|
Year-over-year growth |
|
|
127 |
% |
|
|
(19 |
)% |
|
|
— |
% |
|
|
39 |
% |
|
Revenue less cost of
revenue |
|
$ |
(8.3 |
) |
|
$ |
25.8 |
|
|
$ |
— |
|
|
$ |
17.4 |
|
|
Year-over-year growth |
|
|
(175 |
)% |
|
|
(16 |
)% |
|
|
— |
% |
|
|
(58 |
)% |
|
As % of revenue |
|
|
(13 |
)% |
|
|
75 |
% |
|
|
— |
% |
|
|
18 |
% |
|
GAAP net loss |
|
|
|
|
|
|
|
|
|
|
|
$ |
(87.0 |
) |
|
Adjusted EBITDA (loss)
(1) |
|
$ |
(31.2 |
) |
|
$ |
1.8 |
|
|
$ |
(13.8 |
) |
|
$ |
(43.1 |
) |
|
Adjusted EBITDA (loss) as a
percent of revenue (2) |
|
|
(48 |
)% |
|
|
5 |
% |
|
|
— |
% |
|
|
(44 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2022 |
|
Insurance |
|
Vertical Software |
|
Corporate |
|
Consolidated |
|
Revenue |
|
$ |
28.4 |
|
|
$ |
42.5 |
|
|
$ |
— |
|
|
$ |
70.9 |
|
|
Revenue less cost of
revenue |
|
$ |
11.1 |
|
|
$ |
30.5 |
|
|
$ |
— |
|
|
$ |
41.7 |
|
|
As % of revenue |
|
|
39 |
% |
|
|
72 |
% |
|
|
— |
% |
|
|
59 |
% |
|
GAAP net loss |
|
|
|
|
|
|
|
|
|
|
|
$ |
(27.3 |
) |
|
Adjusted EBITDA (loss)
(1) |
|
$ |
(5.6 |
) |
|
$ |
5.7 |
|
|
$ |
(15.0 |
) |
|
$ |
(15.0 |
) |
|
Adjusted EBITDA (loss) as a
percent of revenue (2) |
|
|
(20 |
)% |
|
|
13 |
% |
|
|
— |
% |
|
|
(21 |
)% |
|
(1) See
Non-GAAP Financial Measures section for the definition and Adjusted
EBITDA (loss) table for the reconciliation to GAAP net income
(loss) (2) Adjusted
EBITDA (loss) as a percent of revenue is calculated as Adjusted
EBITDA (loss) divided by Revenue
The following table presents the Company’s key performance
indicators.
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|
|
|
|
|
|
|
Key Performance Indicators (1) |
|
Q2 2023 |
|
Q2 2022 |
|
|
Change |
Gross Written Premium (in millions) |
|
$ |
143.0 |
|
|
$ |
145.0 |
|
|
|
(1 |
)% |
Policies in Force (in
thousands) |
|
|
358 |
|
|
|
379 |
|
|
|
(6 |
)% |
Annualized Revenue per Policy
(unrounded) |
|
$ |
517 |
|
|
$ |
286 |
|
|
|
81 |
% |
Premium Retention Rate |
|
|
104 |
% |
|
|
102 |
% |
|
|
|
Gross Loss Ratio |
|
|
120 |
% |
|
|
81 |
% |
|
|
|
Average Companies in Quarter
(unrounded) |
|
|
30,691 |
|
|
|
28,773 |
|
|
|
7 |
% |
Average Revenue per Account
per Month in Quarter (unrounded) |
|
$ |
1,073 |
|
|
$ |
822 |
|
|
|
31 |
% |
Monetized Services in Quarter
(unrounded) |
|
|
244,605 |
|
|
|
333,596 |
|
|
|
(27 |
)% |
Average Revenue per Monetized
Service in Quarter (unrounded) |
|
$ |
331 |
|
|
$ |
158 |
|
|
|
109 |
% |
(1) Definitions
of the key performance indicators presented in this table are
included on page 9 of this release.
Balance Sheet Information
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|
|
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
|
Change |
|
Cash and cash equivalents |
|
$ |
265.6 |
|
|
$ |
215.1 |
|
|
23 |
% |
Investments |
|
|
92.7 |
|
|
|
91.6 |
|
|
1 |
% |
Cash, cash equivalents and
investments |
|
|
358.3 |
|
|
|
306.7 |
|
|
17 |
% |
The Company ended the second quarter of 2023 with unrestricted
cash plus investments of $358 million. Of this, the insurance
carrier, Homeowners of America Insurance Company (“HOA”), had
unrestricted cash of $99 million and investments of $93 million. In
addition, the Company held $39 million of restricted cash,
primarily for its captive and warranty businesses.
As of June 30, 2023 convertible debt on the balance
sheet was $558 million. This includes $333 million of the new 6.75%
Senior Secured Convertible Notes due 2028 (the “2028 Notes”) and
$225 million of the existing 0.75% Convertible Senior Notes due
2026 (the “2026 Notes”).
Subsequent Event
In the third quarter of 2023, Homeowners of America (“HOA”), a
subsidiary of Porch Group, 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. We immediately
began investigating the rapidly evolving situation and have been
moving quickly to analyze the impact on our business. Additionally,
we have communicated and met with regulators and other key
stakeholders regarding the evolving situation. The agreement with
this reinsurer provided partial quota share coverage as well as up
to approximately $175 million in a catastrophic event.
As a result of its findings, and in accordance with the terms of
the reinsurance agreement, HOA terminated its reinsurance contract
with the reinsurer 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. 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. We recognized in the second
quarter a charge of $48.2 million in provision for doubtful
accounts in the unaudited condensed consolidated statements of
operations to reduce the net recorded balance receivable from the
reinsurance contract as of June 30, 2023, to equal the $47.6
million collateral we subsequently collected from the trust in the
third quarter. In addition, HOA is evaluating and intends to pursue
all available legal claims and remedies to enforce its rights with
respect to the letter of credit required by the reinsurance
contract in the amount of $300 million as additional collateral,
and to seek recovery of all losses and damages incurred as a result
of terminating the reinsurance agreement due to allegations of
fraudulent activity by third parties.
Although advisors to the issuing bank have alleged the letter of
credit is invalid, HOA received the original letter of credit
documents from one of the bank’s branches and believed its partners
had performed appropriate due diligence on the bank and the letter
of credit. HOA is currently seeking to understand its rights under
the letter of credit.
HOA has already secured supplemental reinsurance coverage in the
amount of approximately $42 million and is currently seeking
additional supplemental reinsurance coverage (whether from Porch
Group’s captive reinsurer, third parties or a combination thereof)
in order to maintain adequate coverage in future periods against
potential excess losses in the event of a severe weather event, and
to satisfy regulatory and rating agency requirements. There can be
no guarantee or assurance that HOA will be successful in obtaining
sufficient supplemental coverage. Regardless of whether additional
supplemental coverage is obtained, HOA will continue to remain
responsible and committed with respect to all claims and claim
settlement expenses under its policies, including claims incurred
but not yet reported for prior periods and claims and expenses that
are no longer subject to the reimbursement rights in favor of HOA
under the terminated reinsurance contract. Full Year 2023
Financial Outlook
Porch Group revises its previously provided full year 2023
guidance based on current market conditions and expectations.
Overall, the business is performing in line with expectations and
the teams are executing well, including price increases in
insurance and software verticals. The Company reiterates Revenue
guidance for the year.
Additionally, the Company has experienced extreme weather and
continues to be cautious around profitability metrics of Revenue
less cost of revenue and Adjusted EBITDA. The Company made two
adjustments to that guidance.
- First, the Company’s initial
guidance did not include catastrophic weather events in excess of
historical trends, such as the $18 million loss incurred in Q2 2023
mentioned above. Therefore, the Company updated guidance to include
these weather events as they have occurred.
- Second, the Company also widened the
ranges by $5 million to reflect the continued weather volatility,
and reinsurance market headwinds impacting the Insurance
Segment.
The Company also reiterated its Adjusted EBITDA profitability
target in the second half of the year and beyond. This assumes cat
weather is in line with historic trends with a 41% gross loss
ratio. Typically, weather is better sequentially in Q3 and then
again in Q4 with less cat events. Therefore, Adjusted EBITDA is
expected to increase as the year comes to an end. Catastrophic
weather events in excess of historic trends occurring in the second
half of the year are excluded from guidance and from this
target.
Revised 2023 guidance is as follows:
|
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|
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2023 Guidance |
|
|
Revenue ~$330m to
$350m>20% YoY (unchanged) |
|
|
Revenue Less Cost of
Revenue ~$145m to
$160m(previously: ~$170m to $180m) |
|
|
Adj. EBITDA1 ~$(65)m
to $(50)m(previously: ~$(40)m to $(30)m) |
|
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2023 Gross Written
Premium2 ~$500m(unchanged) |
|
1 Adjusted EBITDA is a non-GAAP measure.2 2023 gross written
premium (“GWP”) guidance is stated as the expected full-year GWP
for 2023 and is the total premium written by our licensed insurance
carrier(s) (before deductions for reinsurance); premiums from our
home warranty offerings (for the face value of one year’s premium);
and premiums of policies placed with third-party insurance
companies for which we earn a commission.
Porch Group is not providing reconciliations of expected
Adjusted EBITDA (loss) for future periods to the most directly
comparable measures prepared in accordance with GAAP because the
Company is unable to provide these reconciliations without
unreasonable effort because certain information necessary to
calculate such measures on a GAAP basis is unavailable or dependent
on the timing of future events outside of the Company’s
control.
Conference CallPorch Group management will host
a conference call today August 8, 2023, at 5:00 p.m. Eastern time
(2:00 p.m. Pacific time). The call will be accompanied by a slide
presentation available on the Investor Relations section of the
Company’s website at ir.porchgroup.com. A
question-and-answer session will follow management’s prepared
remarks.
All are invited to listen to the event by registering for the
webinar here. A replay of the webinar will also be available in the
Investor Relations section of the Porch Group’s corporate website
at ir.porchgroup.com.
About Porch GroupPorch Group, Inc.
(“Porch Group,” “Porch” or the “Company”) the vertical software
platform, is a values-driven company whose mission
is to simplify the home with insurance at the
center. Porch Group provides software and services to
approximately 30,700 home services providers including home
inspectors, mortgage brokers, title companies, and moving
companies. Porch Group simplifies the home closing process and the
move, by providing high-value services including homeowners
insurance and warranty, and ongoing support with our app which
saves consumers time and helps them make better
decisions. To achieve this, Porch Group hires and retains
great people, invests in the right opportunities, and leverages our
unique capabilities such as early and privileged access to
homebuyers and deep insights into properties. To learn more
about Porch Group, visit porchgroup.com or
porch.com.
Investor Relations Contact:Lois Perkins, Head
of Investor Relations Porch Group,
Inc. Loisperkins@porch.com
Forward-Looking Statements
Certain statements in this release may be considered
“forward-looking statements” within the meaning of the “safe
harbor” provisions of the United States Private Securities
Litigation Reform Act of 1995. Although the Company believes that
its plans, intentions, and expectations reflected in or suggested
by these forward-looking statements are reasonable, the Company
cannot assure you that it will achieve or realize these plans,
intentions, or expectations. Forward-looking statements are
inherently subject to risks, uncertainties, assumptions, and other
factors which could cause actual results to differ materially from
those expressed or implied by such forward-looking statements.
Generally, statements that are not historical facts, including
statements concerning the Company’s possible or assumed future
actions, business strategies, events, or results of operations, are
forward-looking statements. These statements may be preceded by,
followed by, or include the words “believes,” “estimates,”
“expects,” “projects,” “forecasts,” “may,” “will,” “should,”
“seeks,” “plans,” “scheduled,” “anticipates,” “intends,” or similar
expressions.
These forward-looking statements are based upon estimates and
assumptions that, while considered reasonable by the Company and
its management at the time they are made, are inherently uncertain.
Factors that may cause actual results to differ materially from
current expectations include, but are not limited to: (1) expansion
plans and opportunities, and managing growth, to build a consumer
brand; (2) the incidence, frequency, and severity of weather
events, extensive wildfires, and other catastrophes; (3) economic
conditions, especially those affecting the housing, insurance, and
financial markets; (4) expectations regarding revenue, cost of
revenue, operating expenses, and the ability to achieve and
maintain future profitability; (5) existing and developing federal
and state laws and regulations, including with respect to
insurance, warranty, privacy, information security, data
protection, and taxation, and management’s interpretation of and
compliance with such laws and regulations; (6) the Company’s
reinsurance program, which includes the use of a captive reinsurer,
the success of which is dependent on a number of factors outside
management’s control, along with reliance on reinsurance to protect
against loss; (7) the Company’s ability to obtain supplemental
reinsurance coverage (whether from Porch Group, third parties, or a
combination thereof) in order to maintain adequate coverage against
excess losses and to satisfy regulatory or rating agency
requirements, following the termination of its reinsurance contract
with one of its external reinsurers due to allegations of
fraudulent activity committed by such reinsurer, and uncertainty of
the extent and significance of any effects on HOA and the Company
due to such termination; (8) 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; (9) reliance on
strategic, proprietary relationships to provide the Company with
access to personal data and product information, and the ability to
use such data and information to increase transaction volume and
attract and retain customers; (10) the ability to develop new, or
enhance existing, products, services, and features and bring them
to market in a timely manner; (11) changes in capital requirements,
and the ability to access capital when needed to provide statutory
surplus; (12) the increased costs and initiatives required to
address new legal and regulatory requirements arising from
developments related to cybersecurity, privacy, and data governance
and the increased costs and initiatives to protect against data
breaches, cyber-attacks, virus or malware attacks, or other
infiltrations or incidents affecting system integrity,
availability, and performance; (13) retaining and attracting
skilled and experienced employees; (14) costs related to being a
public company; and (15) other risks and uncertainties discussed in
Part I, Item 1A, “Risk Factors,” in the Company’s Annual Report on
Form 10-K (“Annual Report”) for the year ended December 31, 2022,
and in Part II, Item 1A, “Risk Factors,” in our Quarterly Reports
on Form 10-Q for the quarters ended March 31, 2023 and June 30,
2023, as well as those discussed 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.
Nothing in this release should be regarded as a representation
by any person that the forward-looking statements set forth herein
will be achieved or that any of the contemplated results of such
forward-looking statements will be achieved. You should not place
undue reliance on forward-looking statements, which speak only as
of the date of this release. Unless specifically indicated
otherwise, the forward-looking statements in this release 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 release. Porch does not undertake
any duty to update these forward-looking statements, whether as a
result of changed circumstances, new information, future events or
otherwise, except as may be required by law.
Non-GAAP Financial Measures
This release includes non-GAAP financial measures, such as
Adjusted EBITDA (loss) and Adjusted EBITDA (loss) as a percent of
revenue.
Porch Group defines Adjusted EBITDA (loss) as net income (loss)
adjusted for interest expense; income taxes; depreciation and
amortization; gain or loss on extinguishment of debt; other expense
(income), net; impairments of intangible assets and goodwill;
provision for doubtful accounts related to reinsurance, or related
recoveries; impairments of property, equipment, and software;
stock-based compensation expense; mark-to-market gains or losses
recognized on changes in the value of contingent consideration
arrangements, earnouts, warrants, and derivatives; restructuring
costs; acquisition and other transaction costs; and non-cash bonus
expense. Adjusted EBITDA (loss) as a percent of revenue is defined
as Adjusted EBITDA (loss) divided by total revenue.
Porch Group management uses these non-GAAP financial measures as
supplemental measures of the Company’s operating and financial
performance, for internal budgeting and forecasting purposes, to
evaluate financial and strategic planning matters, and to establish
certain performance goals for incentive programs. Porch Group
believes that the use of these non-GAAP financial measures provides
investors with useful information to evaluate the Company’s
operating and financial performance and trends and in comparing
Porch Group’s financial results with competitors, other similar
companies and companies across different industries, many of which
present similar non-GAAP financial measures to investors. However,
Porch Group's definitions and methodology in calculating these
non-GAAP measures may not be comparable to those used by other
companies. In addition, the Company may modify the presentation of
these non-GAAP financial measures in the future, and any such
modification may be material.
You should not consider these non-GAAP financial measures in
isolation, as a substitute to or superior to financial performance
measures determined in accordance with GAAP. The principal
limitation of these non-GAAP financial measures is that they
exclude specified income and expenses, some of which may be
significant or material, that are required by GAAP to be recorded
in Porch Group’s consolidated financial statements. The Company may
also incur future income or expenses similar to those excluded from
these non-GAAP financial measures, and the Company’s presentation
of these measures should not be construed as an inference that
future results will be unaffected by unusual or non-recurring
items. In addition, these non-GAAP financial measures reflect the
exercise of management judgment about which income and expense are
included or excluded in determining these non-GAAP financial
measures.
You should review the tables accompanying this release for
reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measure. The Company is not
providing reconciliations of non-GAAP financial measures for future
periods to the most directly comparable measures prepared in
accordance with GAAP. The Company is unable to provide these
reconciliations without unreasonable effort because certain
information necessary to calculate such measures on a GAAP basis is
unavailable or dependent on the timing of future events outside of
its control.
The following tables reconcile net income (loss) to Adjusted
EBITDA (loss) for the periods presented (dollar amounts in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
Net loss |
|
$ |
(86,963 |
) |
|
$ |
(27,325 |
) |
|
|
$ |
(125,703 |
) |
|
$ |
(36,610 |
) |
|
Interest expense |
|
|
8,775 |
|
|
|
1,925 |
|
|
|
|
10,963 |
|
|
|
4,352 |
|
|
Income tax provision (benefit) |
|
|
29 |
|
|
|
468 |
|
|
|
|
(82 |
) |
|
|
290 |
|
|
Depreciation and amortization |
|
|
6,214 |
|
|
|
6,416 |
|
|
|
|
12,229 |
|
|
|
12,899 |
|
|
Gain on extinguishment of debt |
|
|
(81,354 |
) |
|
|
— |
|
|
|
|
(81,354 |
) |
|
|
— |
|
|
Other expense (income), net |
|
|
(1,578 |
) |
|
|
162 |
|
|
|
|
(2,340 |
) |
|
|
107 |
|
|
Impairment loss on intangible assets and goodwill |
|
|
55,211 |
|
|
|
— |
|
|
|
|
57,232 |
|
|
|
— |
|
|
Loss on reinsurance contract (1) |
|
|
48,244 |
|
|
|
— |
|
|
|
|
48,244 |
|
|
|
— |
|
|
Impairment loss on property, equipment, and software |
|
|
254 |
|
|
|
— |
|
|
|
|
254 |
|
|
|
70 |
|
|
Stock-based compensation expense |
|
|
6,404 |
|
|
|
9,702 |
|
|
|
|
13,298 |
|
|
|
15,556 |
|
|
Mark-to-market losses (gains) |
|
|
279 |
|
|
|
(5,184 |
) |
|
|
|
(220 |
) |
|
|
(23,347 |
) |
|
Restructuring costs |
|
|
1,093 |
|
|
|
— |
|
|
|
|
2,077 |
|
|
|
— |
|
|
Acquisition and other transaction costs |
|
|
258 |
|
|
|
357 |
|
|
|
|
386 |
|
|
|
1,322 |
|
|
Non-cash bonus expense |
|
|
— |
|
|
|
(1,526 |
) |
|
|
|
— |
|
|
|
— |
|
|
Adjusted EBITDA (Loss) |
|
$ |
(43,134 |
) |
|
$ |
(15,005 |
) |
|
|
$ |
(65,016 |
) |
|
$ |
(25,361 |
) |
|
Adjusted EBITDA (Loss) as a
percentage of revenue |
|
|
(44 |
)% |
|
|
(21 |
)% |
|
|
|
(35 |
)% |
|
|
(19 |
)% |
|
1 Loss on reinsurance contract relates to one reinsurer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Segment Adjusted EBITDA
(Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Vertical Software |
|
$ |
1,816 |
|
|
$ |
5,652 |
|
|
$ |
1,420 |
|
|
$ |
8,536 |
|
Insurance |
|
|
(31,181 |
) |
|
|
(5,609 |
) |
|
|
(38,366 |
) |
|
|
(5,394 |
) |
Subtotal |
|
|
(29,365 |
) |
|
|
43 |
|
|
|
(36,946 |
) |
|
|
3,142 |
|
Corporate and other |
|
|
(13,769 |
) |
|
|
(15,048 |
) |
|
|
(28,070 |
) |
|
|
(28,503 |
) |
Adjusted EBITDA (Loss) |
|
$ |
(43,134 |
) |
|
$ |
(15,005 |
) |
|
$ |
(65,016 |
) |
|
$ |
(25,361 |
) |
The following table presents segment adjusted EBITDA (loss) as a
percentage of segment revenue for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Segment Adjusted EBITDA
(Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Vertical Software |
|
|
5.3 |
% |
|
|
13.3 |
% |
|
|
2.3 |
% |
|
|
11.1 |
% |
|
Insurance |
|
|
(48.5 |
)% |
|
|
(19.8 |
)% |
|
|
(31.2 |
)% |
|
|
(9.4 |
)% |
|
Key Performance Indicators
In the management of these businesses, we identify, measure and
evaluate various operating metrics. The key performance measures
and operating metrics used in managing the businesses are discussed
below. These key performance measures and operating metrics are not
prepared in accordance with generally accepted accounting
principles in the United States (“GAAP”) and may not be comparable
to or calculated in the same way as other similarly titled measures
and metrics used by other companies.
-
Gross Written Premium
— We define Gross Written Premium as the total
premium written by our licensed insurance carrier(s) (before
deductions for reinsurance); premiums from our home warranty
offerings (for the face value of one year’s premium); and premiums
of policies placed with third-party insurance companies for which
we earn a commission.
- Policies
in Force — We
define Policies in Force as the number of in-force policies at the
end of the period for the Insurance segment, including policies and
warranties written by us and policies and warranties written by
third parties for which we earn a commission.
- Annualized
Revenue per
Policy — We define Annualized
Revenue per Policy as quarterly revenue for the Insurance segment,
divided by the number of Policies in Force in the Insurance
segment, multiplied by four.
- Premium Retention Rate
— We define Premium Retention Rate as the ratio of our
insurance carrier’s renewed premiums over the last four quarters to
base premiums, which is the sum of the preceding year’s premiums
that either renewed or expired.
- Gross
Loss Ratio — We
define Gross Loss Ratio as our insurance carrier’s gross losses
divided by the gross earned premium for the respective period.
- Average Companies in
Quarter — We define Average Companies in Quarter as the
straight-line average of the number of companies as of the end of
period compared with the beginning of period across all of our home
services verticals that (i) generate recurring revenue and (ii)
generated revenue in the quarter. For new acquisitions, the number
of companies is determined in the initial quarter based on the
percentage of the quarter the acquired business is a part of
Porch.
- Average
Revenue per
Account per
Month in Quarter
— We view our ability to increase revenue
generated from existing customers as a key component of our growth
strategy. Average Revenue per Account per Month in Quarter is
defined as the average revenue per month generated across all home
services company customer accounts in a quarterly period. Average
Revenue per Account per Month in Quarter is derived from all
customers and total revenue.
- Monetized
Services in Quarter — We connect consumers with home
services companies nationwide and offer a full range of products
and services where homeowners can, among other things: (1) compare
and buy home insurance policies (along with auto, flood and
umbrella policies) and warranties with competitive rates and
coverage; (2) arrange for a variety of services in connection with
their move, from labor to load or unload a truck to full-service,
long-distance moving services; (3) discover and install home
automation and security systems; (4) compare internet and
television options for their new home; (5) book small handyman jobs
at fixed, upfront prices with guaranteed quality; and (6) compare
bids from home improvement professionals who can complete bigger
jobs. We track the number of monetized services performed through
our platform each quarter and the revenue generated per service
performed in order to measure market penetration with homebuyers
and homeowners and our ability to deliver high-revenue services
within those groups. Monetized Services in Quarter is defined as
the total number of unique services from which we generated
revenue, including, but not limited to, new and renewing insurance
and warranty customers, completed moving jobs, security
installations, TV/Internet installations or other home projects,
measured over a quarterly period.
- Average Revenue per
Monetized Service in Quarter — We believe that shifting
the mix of services delivered to homebuyers and homeowners toward
higher revenue services is an important component of our growth
strategy. Average Revenue per Monetized Services in Quarter is the
average revenue generated per monetized service performed in a
quarterly period. When calculating Average Revenue per Monetized
Service in Quarter, average revenue is defined as total quarterly
service transaction revenues generated from monetized
services.
PORCH GROUP,
INC.Unaudited Condensed Consolidated
Balance Sheets (all numbers in thousands, except share
amounts)
|
|
|
|
|
|
|
|
|
June 30, 2023 |
|
December 31, 2022 |
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
265,573 |
|
|
$ |
215,060 |
|
Accounts receivable, net |
|
|
24,715 |
|
|
|
26,438 |
|
Short-term investments |
|
|
26,151 |
|
|
|
36,523 |
|
Reinsurance balance due |
|
|
272,467 |
|
|
|
299,060 |
|
Prepaid expenses and other current assets |
|
|
29,665 |
|
|
|
20,009 |
|
Restricted cash |
|
|
39,277 |
|
|
|
13,545 |
|
Total current assets |
|
|
657,848 |
|
|
|
610,635 |
|
Property, equipment, and
software, net |
|
|
14,768 |
|
|
|
12,240 |
|
Operating lease right-of-use
assets |
|
|
3,698 |
|
|
|
4,201 |
|
Goodwill |
|
|
191,907 |
|
|
|
244,697 |
|
Long-term investments |
|
|
66,579 |
|
|
|
55,118 |
|
Intangible assets, net |
|
|
96,826 |
|
|
|
108,255 |
|
Long-term insurance
commissions receivable |
|
|
13,502 |
|
|
|
12,265 |
|
Other assets |
|
|
2,015 |
|
|
|
1,646 |
|
Total assets |
|
$ |
1,047,143 |
|
|
$ |
1,049,057 |
|
|
|
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
|
$ |
9,330 |
|
|
$ |
6,268 |
|
Accrued expenses and other current liabilities |
|
|
33,873 |
|
|
|
39,742 |
|
Deferred revenue |
|
|
256,617 |
|
|
|
270,690 |
|
Refundable customer deposits |
|
|
19,929 |
|
|
|
20,142 |
|
Current debt |
|
|
5,439 |
|
|
|
16,455 |
|
Losses and loss adjustment expense reserves |
|
|
165,709 |
|
|
|
100,632 |
|
Other insurance liabilities, current |
|
|
112,849 |
|
|
|
61,710 |
|
Total current liabilities |
|
|
603,746 |
|
|
|
515,639 |
|
Long-term debt |
|
|
426,965 |
|
|
|
425,310 |
|
Operating lease liabilities,
non-current |
|
|
2,137 |
|
|
|
2,536 |
|
Earnout liability, at fair
value |
|
|
44 |
|
|
|
44 |
|
Private warrant liability, at
fair value |
|
|
347 |
|
|
|
707 |
|
Derivative liability, at fair
value |
|
|
26,820 |
|
|
|
— |
|
Other liabilities (includes
$21,328 and $24,546 at fair value, respectively) |
|
|
23,826 |
|
|
|
25,468 |
|
Total liabilities |
|
|
1,083,885 |
|
|
|
969,704 |
|
Commitments and contingencies
(Note 12) |
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
Common stock, $0.0001 par
value: |
|
|
10 |
|
|
|
10 |
|
Authorized shares – 400,000,000 and 400,000,000,
respectively |
|
|
|
|
|
|
Issued and outstanding shares – 98,168,956 and 98,455,838,
respectively |
|
|
|
|
|
|
Additional paid-in
capital |
|
|
683,151 |
|
|
|
670,537 |
|
Accumulated other
comprehensive loss |
|
|
(6,076 |
) |
|
|
(6,171 |
) |
Accumulated deficit |
|
|
(713,827 |
) |
|
|
(585,023 |
) |
Total stockholders’ equity |
|
|
(36,742 |
) |
|
|
79,353 |
|
Total liabilities and stockholders’ equity |
|
$ |
1,047,143 |
|
|
$ |
1,049,057 |
|
PORCH GROUP,
INC.Unaudited Condensed Consolidated
Statements of Operations(all numbers in thousands, except
share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Revenue |
|
$ |
98,765 |
|
|
$ |
70,915 |
|
|
$ |
186,134 |
|
|
$ |
134,482 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
81,330 |
|
|
|
29,251 |
|
|
|
132,605 |
|
|
|
54,467 |
|
Selling and marketing |
|
|
34,637 |
|
|
|
29,160 |
|
|
|
67,222 |
|
|
|
55,237 |
|
Product and technology |
|
|
15,495 |
|
|
|
15,777 |
|
|
|
29,445 |
|
|
|
30,009 |
|
General and administrative |
|
|
22,779 |
|
|
|
28,297 |
|
|
|
48,608 |
|
|
|
54,896 |
|
Provision for doubtful accounts |
|
|
48,718 |
|
|
|
108 |
|
|
|
48,955 |
|
|
|
207 |
|
Impairment loss on intangible assets and goodwill |
|
|
55,211 |
|
|
|
— |
|
|
|
57,232 |
|
|
|
— |
|
Total operating expenses |
|
|
258,170 |
|
|
|
102,593 |
|
|
|
384,067 |
|
|
|
194,816 |
|
Operating loss |
|
|
(159,405 |
) |
|
|
(31,678 |
) |
|
|
(197,933 |
) |
|
|
(60,334 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(8,775 |
) |
|
|
(1,925 |
) |
|
|
(10,963 |
) |
|
|
(4,352 |
) |
Change in fair value of earnout liability |
|
|
— |
|
|
|
2,587 |
|
|
|
— |
|
|
|
13,766 |
|
Change in fair value of private warrant liability |
|
|
15 |
|
|
|
4,078 |
|
|
|
360 |
|
|
|
14,267 |
|
Change in fair value of derivatives |
|
|
(2,950 |
) |
|
|
— |
|
|
|
(2,950 |
) |
|
|
— |
|
Gain on extinguishment of debt |
|
|
81,354 |
|
|
|
— |
|
|
|
81,354 |
|
|
|
— |
|
Investment income and realized gains, net of investment
expenses |
|
|
1,249 |
|
|
|
243 |
|
|
|
2,007 |
|
|
|
440 |
|
Other income (expense), net |
|
|
1,578 |
|
|
|
(162 |
) |
|
|
2,340 |
|
|
|
(107 |
) |
Total other income
(expense) |
|
|
72,471 |
|
|
|
4,821 |
|
|
|
72,148 |
|
|
|
24,014 |
|
Loss before income taxes |
|
|
(86,934 |
) |
|
|
(26,857 |
) |
|
|
(125,785 |
) |
|
|
(36,320 |
) |
Income tax benefit
(provision) |
|
|
(29 |
) |
|
|
(468 |
) |
|
|
82 |
|
|
|
(290 |
) |
Net loss |
|
$ |
(86,963 |
) |
|
$ |
(27,325 |
) |
|
$ |
(125,703 |
) |
|
$ |
(36,610 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted (Note 15) |
|
$ |
(0.91 |
) |
|
$ |
(0.28 |
) |
|
$ |
(1.32 |
) |
|
$ |
(0.38 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic and diluted net loss per share |
|
|
95,731,850 |
|
|
|
97,142,163 |
|
|
|
95,472,277 |
|
|
|
96,611,294 |
|
The following table summarizes the classification of stock-based
compensation expense in the unaudited condensed consolidated
statements of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Selling and marketing |
|
$ |
896 |
|
$ |
1,270 |
|
$ |
1,941 |
|
$ |
1,902 |
Product and technology |
|
|
1,254 |
|
|
1,840 |
|
|
2,703 |
|
|
2,977 |
General and
administrative |
|
|
4,254 |
|
|
6,592 |
|
|
8,654 |
|
|
10,677 |
Total stock-based compensation
expense |
|
$ |
6,404 |
|
$ |
9,702 |
|
$ |
13,298 |
|
$ |
15,556 |
PORCH GROUP,
INC.Unaudited Condensed Consolidated
Statements of Cash Flows(all numbers in thousands)
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
2023 |
|
2022 |
Cash flows from
operating activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(125,703 |
) |
|
$ |
(36,610 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities |
|
|
|
|
|
|
Depreciation and amortization |
|
|
12,229 |
|
|
|
12,899 |
|
Provision for doubtful accounts |
|
|
48,955 |
|
|
|
207 |
|
Impairment loss on intangible assets and goodwill |
|
|
57,232 |
|
|
|
— |
|
Gain on extinguishment of debt |
|
|
(81,354 |
) |
|
|
— |
|
Gain on remeasurement of private warrant liability |
|
|
(360 |
) |
|
|
(14,267 |
) |
Loss (gain) on remeasurement of contingent consideration |
|
|
(2,810 |
) |
|
|
4,686 |
|
Loss (gain) on remeasurement of earnout liability and
derivatives |
|
|
2,950 |
|
|
|
(13,766 |
) |
Stock-based compensation |
|
|
13,298 |
|
|
|
15,556 |
|
Interest expense (non-cash) |
|
|
9,828 |
|
|
|
2,339 |
|
Other |
|
|
805 |
|
|
|
1,916 |
|
Change in operating assets and liabilities, net of acquisitions and
divestitures |
|
|
|
|
|
|
Accounts receivable |
|
|
1,030 |
|
|
|
(7,483 |
) |
Reinsurance balance due |
|
|
(21,651 |
) |
|
|
(40,835 |
) |
Prepaid expenses and other current assets |
|
|
(9,656 |
) |
|
|
(7,090 |
) |
Accounts payable |
|
|
2,929 |
|
|
|
(4,226 |
) |
Accrued expenses and other current liabilities |
|
|
(10,906 |
) |
|
|
1,005 |
|
Losses and loss adjustment expense reserves |
|
|
65,077 |
|
|
|
26,945 |
|
Other insurance liabilities, current |
|
|
51,139 |
|
|
|
21,492 |
|
Deferred revenue |
|
|
(13,491 |
) |
|
|
38,167 |
|
Refundable customer deposits |
|
|
(8,061 |
) |
|
|
(457 |
) |
Long-term insurance commissions receivable |
|
|
(1,237 |
) |
|
|
(2,940 |
) |
Other |
|
|
980 |
|
|
|
(1,694 |
) |
Net cash used in operating activities |
|
|
(8,777 |
) |
|
|
(4,156 |
) |
Cash flows from
investing activities: |
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(672 |
) |
|
|
(1,539 |
) |
Capitalized internal use software development costs |
|
|
(4,735 |
) |
|
|
(3,496 |
) |
Purchases of short-term and long-term investments |
|
|
(23,602 |
) |
|
|
(13,561 |
) |
Maturities, sales of short-term and long-term investments |
|
|
23,033 |
|
|
|
12,241 |
|
Acquisitions, net of cash acquired |
|
|
(1,974 |
) |
|
|
(32,049 |
) |
Net cash used in investing activities |
|
|
(7,950 |
) |
|
|
(38,404 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
Proceeds from line of credit |
|
|
— |
|
|
|
1,000 |
|
Proceeds from advance funding |
|
|
316 |
|
|
|
10,690 |
|
Repayments of advance funding |
|
|
(2,683 |
) |
|
|
(8,840 |
) |
Proceeds from issuance of debt |
|
|
116,667 |
|
|
|
— |
|
Repayments of principal |
|
|
(10,150 |
) |
|
|
(150 |
) |
Cash paid for debt issuance costs |
|
|
(4,610 |
) |
|
|
— |
|
Proceeds from exercises of stock options |
|
|
8 |
|
|
|
692 |
|
Income tax withholdings paid upon vesting of restricted stock
units |
|
|
(883 |
) |
|
|
(1,922 |
) |
Proceeds from sale of common stock |
|
|
191 |
|
|
|
|
Payments of acquisition-related contingent consideration |
|
|
(276 |
) |
|
|
(1,625 |
) |
Repurchase of stock |
|
|
(5,608 |
) |
|
|
— |
|
Net cash provided by (used in) financing activities |
|
|
92,972 |
|
|
|
(155 |
) |
Net change in cash,
cash equivalents, and restricted cash |
|
$ |
76,245 |
|
|
$ |
(42,715 |
) |
Cash, cash
equivalents, and restricted cash, beginning of period |
|
$ |
228,605 |
|
|
$ |
324,792 |
|
Cash, cash
equivalents, and restricted cash end of period |
|
$ |
304,850 |
|
|
$ |
282,077 |
|
|
|
|
|
|
|
|
Supplemental schedule
of non-cash financing activities |
|
|
|
|
|
|
Non-cash reduction in advanced funding arrangement obligations |
|
$ |
7,848 |
|
$ |
— |
Supplemental
disclosures |
|
|
|
|
|
|
Cash paid for interest |
|
$ |
2,276 |
|
$ |
1,587 |
Income tax refunds received |
|
$ |
2,300 |
|
$ |
— |
Non-cash consideration for acquisitions |
|
$ |
— |
|
$ |
21,607 |
Cash payable for acquisition |
|
$ |
— |
|
$ |
5,000 |
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