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What changed in Porch Group, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Porch Group, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+619 added−699 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-16)

Top changes in Porch Group, Inc.'s 2023 10-K

619 paragraphs added · 699 removed · 273 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeItem 1. Business Unless the context otherwise requires, references in this section to “we,” “our,” “us,” the “Company”, “Porch Group” or “Porch” generally refer to Porch Group , Inc. and its consolidated subsidiaries. Company Overview Overview Who We Are Porch Group is a leading vertical software company reinventing the home services and insurance industries.
Biggest changeItem 1. Business Company Overview Introduction to Porch Group Porch Group, Inc., together with its consolidated subsidiaries, (“Porch Group,” “Porch,” the “Company,” “we,” “our,” “us”) is a leading vertical software and insurance platform and is positioned to be the best partner to help homebuyers move, maintain, and fully protect their homes.
Additionally, as we expand into the insurance business, which is highly regulated, we must comply with and maintain various licenses and approvals with individual state departments of insurance, and we are subject to state governmental regulation and supervision. State Regulation - Insurance Our insurance business is subject to extensive regulation, primarily at the state level.
Additionally, as we expand into the insurance business, which is highly regulated, we must comply with and maintain various licenses and approvals with individual state departments of insurance, and we are subject to state governmental regulation and supervision. Insurance State Regulation Our insurance business is subject to extensive regulation, primarily at the state level.
These rules have a substantial effect on our business and relate to a wide variety of matters including: insurance company licensing and examination; the licensing of insurance agents and adjusters; price setting or premium rates; trade practices; approval of policy forms; claims practices; restrictions on transactions between our subsidiaries and their affiliates, including the payment of dividends; investments; underwriting standards; advertising and marketing practices; capital adequacy; and the collection, remittance and reporting of certain taxes, licenses and fees.
These rules have a substantial effect on our business and relate to a wide variety of matters including: insurance company licensing and examination; the licensing of insurance agents and adjusters; price setting or premium rates; underwriting rules and restrictions; trade practices; approval of policy forms; claims practices; restrictions on transactions between our subsidiaries and their affiliates, including the payment of dividends; investments; underwriting standards; advertising and marketing practices; capital adequacy; and the collection, remittance and reporting of certain taxes, licenses and fees.
The speed with which we can change our rates in response to competition or in response to increasing costs depends, in part, on the willingness of state regulators to allow adequate rates for the business we write. Insurance Reserves - Insurance State insurance laws require that insurance companies analyze the adequacy of their reserves annually.
The speed with which we can change our rates in response to competition or in response to increasing costs depends, in part, on the willingness of state regulators to allow adequate rates for the business we write. Insurance Reserves State insurance laws require that insurance companies analyze the adequacy of their reserves annually.
Our appointed actuaries must submit an opinion that our statutory reserves are adequate to meet policy claims-paying obligations and related expenses. Exiting Geographic Markets; Canceling and Non-Renewing Policies - Insurance Most states regulate our carrier’s ability to exit a market. For example, states limit, to varying degrees, our ability to cancel and non-renew insurance policies.
Our appointed actuaries must submit an opinion that our statutory reserves are adequate to meet policy claims-paying obligations and related expenses. Exiting Geographic Markets; Canceling and Non-Renewing Policies Most states regulate our carrier’s ability to exit a market. For example, states limit, to varying degrees, our ability to cancel and non-renew insurance policies.
Investment Regulation - Insurance Our insurance business is subject to various state regulations requiring investment portfolio diversification and limiting the concentration of investments we may maintain in certain asset categories. Failure to comply with these regulations leads to the treatment of nonconforming investments as non-admitted assets for purposes of measuring statutory surplus.
Investment Regulation Our insurance business is subject to various state regulations requiring investment portfolio diversification and limiting the concentration of investments we may maintain in certain asset categories. Failure to comply with these regulations leads to the treatment of nonconforming investments as non-admitted assets for purposes of measuring statutory surplus.
Shared Market and Joint Underwriting Plans - Insurance State insurance regulations often require insurers to participate in assigned risk plans, reinsurance facilities and joint underwriting associations. These are mechanisms that generally provide applicants with various types of basic insurance coverage that may not otherwise be available to them through voluntary markets.
Shared Market and Joint Underwriting Plans State insurance regulations often require insurers to participate in assigned risk plans, reinsurance facilities and joint underwriting associations. These are mechanisms that generally provide applicants with various types of basic insurance coverage that may not otherwise be available to them through voluntary markets.
Federal Regulation - Insurance Although the federal government and its regulatory agencies generally do not directly regulate the business of insurance, federal initiatives and legislation often have an impact on our business.
Federal Regulation Although the federal government and its regulatory agencies generally do not directly regulate the business of insurance, federal initiatives and legislation often have an impact on our business.
These initiatives and legislation include tort reform proposals, proposals addressing natural catastrophe exposures, terrorism risk mechanisms, federal financial services reforms, various tax proposals affecting insurance companies, and possible regulatory limitations, impositions and restrictions arising from the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank").
These initiatives and legislation include tort reform proposals, proposals addressing natural catastrophe exposures, terrorism risk mechanisms, federal financial services reforms, various tax proposals affecting insurance companies, and possible regulatory limitations, impositions and restrictions arising from the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).
We believe that we generally have good relationships with our employees and contractors. Additional Information Our main consumer website is www. porch .com , and our corporate and investor relations website is located at www.porchgroup.com .
We believe that we generally have good relationships with our employees and contractors. Available Information Our main consumer website is www.porch.com , and our corporate and investor relations website is located at www.porchgroup.com .
You may access our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 with the Securities and Exchange Commission (the “SEC”) free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
You may access our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 with the Securities and Exchange Commission (the “SEC”) free of charge at www.porchgroup.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
Further, in some instances, state regulations require us to sell certain nonconforming investments. 17 Table of Contents Insurance Guaranty Associations – Insurance Each state has insurance guaranty association laws. Membership in a state's insurance guaranty association is generally mandatory for insurers wishing to do business in that state.
Further, in some instances, state regulations require us to sell certain nonconforming investments. Insurance Guaranty Associations Each state has insurance guaranty association laws. Membership in a state's insurance guaranty association is generally mandatory for insurers wishing to do business in that state.
Human Capital Management By staying true to: No Jerks/No Egos; Solve Each Problem; Be Ambitious; Care Deeply; and Together We Win, Porch Group has created a company where good people can do great work and drive shareholder value. These values guide us in everything we do, from individual everyday tasks to high-level strategic planning.
Human Capital Management By staying true to our core values (No Jerks/No Egos; Solve Each Problem; Be Ambitious; Care Deeply; and Together We Win), we have created a company where good people can do great work and drive shareholder value. These values guide us in everything we do, from individual everyday tasks to high-level strategic planning.
They foster a culture of dialogue, collaboration, and recognition that contributes to our long-term success. Porch is organized in a decentralized operating model, which allows our businesses to move quickly and entrepreneurially leveraging a common playbook and infrastructure that benefit from shared best practices as we scale.
They foster a culture of dialogue, collaboration, and recognition that contributes to our long-term success. We are organized in a decentralized operating model, which allows our businesses to move quickly and entrepreneurially leverage a common playbook and infrastructure that benefit from shared best practices as we scale.
Financial Solvency Ratios - Insurance The NAIC annually calculates 13 financial ratios to assist state insurance regulators in monitoring the financial condition of insurance companies. A "usual range" of results for each of these ratios is used by insurance regulators as a benchmark.
Financial Solvency Ratios The NAIC annually calculates 13 financial ratios to assist state insurance regulators in monitoring the financial condition of insurance companies. A “usual range” of results for each of these ratios is used by insurance regulators as a benchmark.
Policies written through these mechanisms may require different underwriting standards and may pose greater risk than those written through our voluntary application process. Statutory Accounting Principles - Insurance For public reporting, insurance companies prepare financial statements in accordance with U.S. generally accepted accounting principles ("GAAP").
Policies written through these mechanisms may require different underwriting standards and may pose greater risk than those written through our voluntary application process. 10 Table of Content s Statutory Accounting Principles For public reporting, insurance companies prepare financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”).
As part of an insurance holding company system, Homeowners of America Insurance Company (HOAIC), our insurance business, is required to register with the Texas Department of Insurance (the insurance supervisory agency of HOAIC’s state of domicile) and furnish information concerning the operations of companies within the holding company system that may materially affect the 16 Table of Contents operations, management or financial condition of the insurers within the system.
As part of an insurance holding company system, Homeowners of America Insurance Company (“HOAIC”), our insurance carrier, is required to register with the Texas Department of Insurance (the insurance supervisory agency of HOAIC’s state of domicile) and furnish information concerning the operations of companies within the holding company system that may materially affect the operations, management or financial condition of the insurers within the system.
Insurance Holding Company Regulation - Insurance Nearly all states have adopted the version of the Model Insurance Holding Company System Regulation Act and Regulation as amended by the NAIC in December 2010 (the "Amended Model Act").
Insurance Holding Company Regulation Nearly all states have adopted the Model Insurance Holding Company System Regulation Act and Regulation as amended by the NAIC in December 2010 (the “Amended Model Act”).
The method, extent and substance of such regulation varies by state, but generally has its source in National Association of Insurance Commissioners ("NAIC") model laws and regulations that establish standards and requirements for conducting the business of insurance and that delegate regulatory authority to a state regulatory agency.
The method, extent, and substance of such regulation varies by state but generally has its source in National Association of Insurance Commissioners ("NAIC") model laws and regulations that establish standards and requirements for conducting the business of insurance and may be adopted by each state regulatory agency.
As a result, the Company could be subject to claims based on negligence, unfair business practices, various torts and trademark and copyright infringement, among other actions. 15 Table of Contents As Porch Group receives, transmits, stores and uses a substantial amount of information received from or generated by consumers and service professionals, the Company is impacted by state laws and regulations governing privacy, the storage, sharing, use, processing, disclosure and protection of personal data and data breaches.
As a result, we could be subject to claims based on negligence, unfair business practices, various torts and trademark and copyright infringement, among other actions. 8 Table of Content s As we receive, transmit, store and use a substantial amount of information received from or generated by consumers and service professionals, we are impacted by state laws and regulations governing privacy, the storage, sharing, use, processing, disclosure and protection of personal data and data breaches.
Fostering a growth mindset facilitates a culture where all voices are heard and team members can take informed risks, ask questions, and seek creative solutions to tough problems. This approach helps us build a strong bench of leaders for tomorrow’s business challenges. We are a progressive organization which values environmental, social, and corporate governance (ESG).
We engage and empower our team with continued career and learning and development opportunities. Fostering a growth mindset facilitates a culture where all voices are heard and team members can take informed risks, ask questions, and seek creative solutions to tough problems. This approach helps us build a strong bench of leaders for tomorrow’s business challenges.
These laws impose data protection obligations on covered businesses, including consumer rights procedures and obligations, limitations on data uses, audit requirements for higher risk data, and constraints on certain uses of sensitive data. The majority of the CPRA provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.
These laws impose data protection obligations on covered businesses, including consumer rights procedures and obligations, limitations on data uses, audit requirements for higher risk data, and constraints on certain uses of sensitive data. The majority of the CPRA provisions were effective January 1, 2023.
In certain states, rate schedules, policy forms, or both, must be approved prior to use. While insurance laws vary from state to state, their objectives are generally the same: an insurance rate cannot be excessive, inadequate, or unfairly discriminatory.
While insurance laws vary from state to state, their objectives are generally the same: an insurance rate cannot be excessive, inadequate, or unfairly discriminatory.
We believe that our largest competition comes from the wide variety of companies focused on reaching consumers to help with key high-value services such as insurance.
We believe that our largest competition comes from the wide variety of companies focused on reaching consumers to help with key high-value services such as insurance. Strategic Pillars Our strategy is to provide the best services for homebuyers, led by advantaged underwriting in insurance, to protect the whole home.
We have a commitment throughout the organization for Porch to be a supportive and inclusive environment. We pride ourselves on our values driven culture that fosters employee engagement and creates an attractive home for top talent. We were certified as a Great Place to Work in 2022. As of February 2023, Porch had approximately 1,800 full-time employees and independent contractors.
We pride ourselves on our values-driven culture that fosters employee engagement and creates an attractive home for top talent. We were certified as a Great Place to Work in 2022 and 2023. As of December 31, 2023, we had a total of 895 employees, which includes 864 full-time employees. We also utilize independent contractors in the U.S. and other countries.
The amount of ordinary dividends that may be paid is subject to certain limitations, the amounts of which change each year. Price Regulation - Insurance Nearly all states have insurance laws requiring our carrier to file rate schedules, policy or coverage forms, and other information with the state's regulatory authority.
Price Regulation Nearly all states have insurance laws requiring our carrier to file rate schedules, policy or coverage forms, and other information within the state's regulatory authority. In certain states, rate schedules, policy forms, or both, must be approved prior to use.
Departure from the usual range on four or more of the ratios could lead to inquiries from individual state insurance departments as to certain aspects of a company's business. In addition to the financial ratios, states also require us to calculate a minimum capital requirement for each of our insurance companies based on individual company insurance risk factors.
Departure from the usual range on four or more of the ratios could lead to inquiries from individual state insurance 9 Table of Content s departments as to certain aspects of a company's business.
In addition, the Company enters into confidentiality and proprietary rights agreements with employees, consultants, contractors and business partners, and employees and contractors are also subject to invention assignment Government Regulation Porch Group is subject to laws and regulations that affect companies conducting business on the Internet generally and through mobile applications, including laws relating to the liability of providers of online services for their operations and the activities of users.
Organizational Efficiency We will control costs, mature systems, and optimize capital allocation. Government Regulation General We are subject to laws and regulations that affect companies conducting business on the Internet generally and through mobile applications, including laws relating to the liability of providers of online services for their operations and the activities of users.
Insurance companies must provide advance informational notice to the domicile state insurance regulatory authority prior to payment of any dividend or distribution to its shareholders. Prior approval from the state insurance regulatory authority must be obtained before payment of an "extraordinary dividend" as defined under the state's insurance code.
Restrictions on Shareholder Dividends Our insurance carrier’s capacity to pay dividends to shareholders is limited. Insurance companies must provide advance informational notice to the domicile state insurance regulatory authority prior to payment of any dividend or distribution to its shareholders.
We recently embarked on our ESG journey to create our ESG strategy that will reflect the relevant issues that are most important to Porch and our stakeholders, and which can influence our business success. Our diversity, equity, inclusion, and belonging efforts are based on the principle that all Porch team members can bring their whole selves to work and thrive.
Our diversity, equity, inclusion, and belonging efforts are based on the principle that all Porch team members can bring their whole selves to work and thrive. We have a commitment throughout the organization for Porch to be a supportive and inclusive environment.
These "risk-based capital" results are used by state insurance regulators to identify companies that require regulatory attention or the initiation of regulatory action. Restrictions on Shareholder Dividends - Insurance Our insurance carrier’s capacity to pay dividends to shareholders is limited.
In addition to the financial ratios, states also require us to calculate a minimum capital requirement for each of our insurance companies based on individual company insurance risk factors. These “risk-based capital” results are used by state insurance regulators to identify companies that require regulatory attention or the initiation of regulatory action.
In most cases, we integrate acquisitions into our (1) central data platform; (2) transactional monetization to drive our B2B2C revenues such as insurance and warranty; and (3) operational systems, such as accounting and payroll. 18 Table of Contents We engage and empower our team with continued career and learning and development opportunities.
When we acquire a company, our decentralized operating model helps us maintain momentum and entrepreneurial culture while mitigating the risks associated with integration. In most cases, we integrate acquisitions into our (1) central data platform; (2) transactional monetization to drive our business-to-business-to-consumer revenues such as insurance and warranty; and (3) operational systems, such as accounting and payroll.
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Porch Group’s mission is to partner with home service companies and together, delight homeowners from moving to improving and everything in between, Porch Group provides software and services to approximately 30,900 companies and small businesses, such as home inspectors, mortgage companies and loan officers, title companies, moving companies, real estate agencies, utility companies, roofers, insurance agencies, and others.
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We offer differentiated products and services, with homeowners insurance at the center of this relationship. We differentiate and look to win in the massive and growing homeowners insurance opportunity by 1) providing the best services for homebuyers, 2) led by advantaged underwriting in insurance, 3) to protect the whole home.
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Porch Group helps these service providers grow their business and improve their customer experience. Through these companies, Porch Group also gets introduced to their customers to help with other services, including insurance, to make the move and home maintenance simpler.
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As a leader in the home services software-as-a-service (“SaaS”) space, we’ve built deep relationships with approximately 30 thousand companies that are key to the home-buying transaction, such as home inspectors, mortgage companies, and title companies.
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Porch Group makes the moving process easier for homebuyers by helping them save time and make better decisions about critical services, including insurance, warranty, moving, security, TV/Internet, home repair and improvement. The Company provides home and personal property insurance policies through its own underwriting operations in 21 states and across the U.S. with its wholly-owned Insurance Agency.
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We have grown the utilization our software products across these industries; for example, more than 40% of home inspections in 2023 and approximately 40% of title transactions in 2023 are processed through our software. These relationships provide us with early insights to a majority of United States (“U.S.”) homebuyers.
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Our multi-faceted value proposition resonates with a broad customer demographic, regardless of home price, income level, geographic location or age. We acquire our customers through a variety of channels, including at the time of a real estate transaction through third parties, direct-to-consumer (“DTC”), and leads from other Porch Group businesses.
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In partnership with these companies, we have the ability to help simplify the move for consumers with services such as insurance, warranty, moving and more. Through our vertical software products we have unique insights into the majority of U.S. properties. This data helps feed our insurance underwriting models, better understand risk, and create competitive differentiation in underwriting.
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Porch Group has two reportable segments: the Vertical Software segment and the Insurance segment. Porch Group’s Vertical Software segment provides software and services to home services companies. Through these relationships, Porch earns fees, and gains a competitive advantage through unique and early access to homebuyers and homeowners.
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We provide full protection for the home by including a variety of home warranty products alongside homeowners insurance. We are able to fill the gaps of protection for consumers, minimize surprises, and deepen our relationships and value proposition. Porch’s Strategy to Win in Homeowners Insurance We have two reportable segments: the Vertical Software segment and the Insurance segment.
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This early access allows Porch to assist homebuyers and homeowners with critical moving services. In turn, Porch’s platform drives demand for other services.
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Vertical Software Segment The Vertical Software segment provides software and services to inspection, mortgage, and title companies on a subscription and transactional basis, which was 54% of total vertical software revenue in 2023, and move and post-move services, which was 46% of total vertical software revenue in 2023.
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The Vertical Software segment has three types of customers: (1) home services companies, such as home inspectors, mortgage companies and loan officers, and title companies, for whom Porch provides software and services to help them make their businesses run more efficiently and grow; (2) consumers, such as homebuyers and homeowners, whom Porch assists with the comparison and provision of various home services, such as moving, security, TV/Internet, and home repair and improvement; and (3) service providers, such as moving companies, security companies, title companies, mortgage companies and TV/Internet providers, who pay Porch for new customer sign-ups.
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The Vertical Software segment operates several key businesses, including: 5 Table of Content s Inspection Software and Services This includes the Inspection Support Network (“ISN”), Home Inspector Pro and Palm-Tech brands which are leading SaaS solutions for inspectors with easy-to-use tools.
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Porch Group’s Insurance segment offers various property-related insurance policies through our risk-bearing carrier, independent agency, and risk-bearing home warranty companies. We earn insurance policy premiums collected from insured homeowners for our insurance products, policy fees when policies are sold and renewed, and commissions when we cede premiums to reinsurance companies.
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These three solutions provide a range of offerings for inspection businesses, and together represent more than 40% of all U.S. home inspections in 2023. ISN has grown to be the most comprehensive CRM and workflow solution in the inspection industry.
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Additionally, when we sell a homeowner an insurance policy through a carrier other than our own, these third-party insurance companies pay new business and renewal commissions to Porch’s insurance agency. The Insurance segment also includes home warranty, from which Porch receives premiums paid by homeowners for Porch’s home warranty products.
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It allows inspection companies to accept orders online from their website and helps automate business tasks such as emailing customers, collecting payments, delivering inspection agreements, and collecting signatures. ISN is extensible, offering integrations with the largest number of inspection and technology partners in the industry and all the prominent report-writing platforms.
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Porch Group operates under several brands in both the Vertical Software and Insurance segments, such as: ● Vertical Software segment: 5 Table of Contents o Porch, the overarching brand for our consumer experience, including helping consumers with their move and ongoing services for their homes, o Floify, a point-of-sale (”POS”) software for mortgage companies and loan officers for engaging their customers and helping them through the loan process, o HireAHelper TM , provides software and demand for moving companies, o Home Inspector Pro (“HIP”) and Palm-Tech, are easy-to-use mobile home inspection report writing tools, o Inspection Support Network (“ISN”), provides Porch’s enterprise resource planning (“ERP”) and customer relationship management (“CRM”) software for inspectors, o iRoofing LLC (“iRoofing”), provides measurement software for roofers, o Rynoh, is a financial management and fraud prevention software for title and real estate companies, and o Porch Group Media, provides audiences, media execution, and analytics to support brands to complete more effective marketing to movers and homeowners . ● Insurance segment: o American Home Protect (“AHP”) and Residential Warranty Services (“RWS”) are providers of home warranty policies and services, o Elite Insurance Group, (“EIG”) is Porch’s licensed insurance agency, o Homeowners of America (“HOA”) is Porch’s insurance managing general agency and licensed property and casualty insurance carrier operating in 21 states, and o Porticus Reinsurance Ltd.
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ISN also provides powerful business reporting so that office staff and the business owner can understand how the business is performing at the individual inspector, real estate agent, or office level. Title Insurance Software Rynoh software helps settlement agents protect the real estate transaction. Rynoh software was utilized in approximately 40% of all real estate closings in 2023.
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(“Porticus Re”), the Company’s wholly owned captive insurer that provides reinsurance for Homeowners of America Insurance Company (HOAIC), HOA's licensed insurance carrier. The Porch Platform Porch Group provides software and services to home services companies, and, through these relationships, gains a competitive advantage through unique and early access to homebuyers and homeowners, as well as unique insights to property data.
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Through the homebuyer’s settlement agent, Rynoh’s cloud-based financial management system, supports financial protection for each real estate transaction by tracking critical disbursements and automating reconciliations daily. Due to the manual and labor-intensive processes in the industry, settlement agent’s escrow accounts are more vulnerable to the rising risks of fraud, embezzlement, cyberattacks, and unintentional errors.
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Porch then assists homebuyers and homeowners with critical services such as insurance and moving.
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Rynoh’s products intend to save customers time and money while reducing risk. Mortgage Software Floify is a software company helping mortgage companies and loan officers create a better mortgage and refinancing experience for consumers. Floify offers market-leading digital mortgage point-of-sale solutions to mortgage professionals.
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In turn, Porch’s platform drives demand back to companies using Porch’s software as part of our value proposition. ​ 6 Table of Contents ​ Software and Services for Home Services Companies Porch Group’s platform provides home services companies with software and services to help them grow their business and provide a better customer experience.
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Including advanced digital loan application, secure document portal, automated borrower and agent notification platform, fully customizable workflows, and other productivity integrations. Moving Services Porch Moving Group includes the SML, Moving Staffers and HireAHelper brands, and is primarily a marketplace offering labor-only moving services which has recently expanded to offer all moving-related services.
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This value proposition can be divided into three components. First, Porch Group offers industry-leading vertical-specific software that includes a wide range of functionality required by home services companies, e.g., home inspectors, mortgage companies, title companies, roofers, and moving services providers to run a successful business.
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Other Additional businesses include Porch Media Group, a leader in mover and homeowner marketing, and iRoofing LLC, which provides measurement software for roofers. The software and services businesses receive both subscription and transactional revenues. Software and subscription revenues were 54% of total 2023 Vertical Software segment revenue and are less exposed to seasonality.
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These software solutions, which vary by industry, include features such as configurable dashboards, calendars and scheduling, online booking, payment processing, dispatch and routing optimization, customer relations and communications, point of sale interfaces, flexible reporting, industry integrations, report writing, quoting and more. Companies use this software for their customers and transactions, managing their employees and tracking their partners.
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The moving business relies on home industry moves which are traditionally higher in the spring and summer months. Businesses within the Porch Group ecosystem benefit from early access to consumers at a low cost of acquisition. Consumers also benefit from a free app and concierge to assist with insurance, warranty, move and post-move services.
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The depth of functionality varies among industry-specific products. Because this software is used in so many aspects of day-to-day management by home services companies such as home inspectors, Porch sees high retention rates among our software customers.
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Insurance Segment Our Insurance segment provides consumers with insurance and warranty products to protect their homes, earning revenue through premiums collected on policies, policy fees and commissions. The Insurance segment includes Homeowners of America (“HOA”), a wholly owned insurance carrier, Porticus Reinsurance (“Porticus RE”), our Cayman Islands captive reinsurer, and Porch Warranty, among other warranty brands.
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Second, Porch offers a concierge service that home services companies can then offer to their end customers to improve the moving and home improvement experience.
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Insurance Through HOA, we offer property-related insurance products in 22 states. HOA uses unique property data to assess home factors, underwrite risk, and effectively price homeowners insurance policies. Information about properties includes features such as type of piping, roof, plumbing, floor and water heater location.
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Porch’s Moving Concierge service assists the home services company’s end customer with the remaining aspects of their move and, in the future, with ongoing home maintenance. through the use of a customer self-service dashboard in which the customer manages their moving “to do” list.
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HOA uses this data to create a pricing advantage for well-maintained homes and increase prices for homes that are higher risk. Property insurance claims fluctuate with seasonal weather; the highest exposure to catastrophic weather has historically occurred in the first and second quarters.
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In addition, a Moving Concierge representative will contact the customer to talk about their home inspection, answer questions, collect a review for the company, and chart out all upcoming services with which Porch can assist, including comparing prices and making decisions about critical services such as insurance (as both a licensed, nationwide insurance agent and a carrier in certain states), moving, security, and TV/Internet.
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While HOA retains insurance underwriting risk, a portion of the risk is ceded to 6 Table of Content s third party reinsurance companies. Porticus RE reinsures risk from HOA when economically attractive versus using a third-party reinsurer. Warranty Our warranty business offers various products such as whole-home, 90-day, service line and extended labor warranties in 49 states and Washington, D.C.
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Porch’s Moving Concierge service creates a positive end-customer experience that can benefit the home services company.
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The warranty business typically acquires customers through partnerships, including real estate, home inspection, distributors, utilities, and home insurance. We offer warranty products predominately through the Porch Warranty, American Home Protect (“AHP”), and Residential Warranty Services (“RWS”) brands.
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In 2022, Porch launched the Porch smartphone app to enhance and expand the customer experience and home-related features, including recall monitoring for appliances and other systems, as well as to do lists for ongoing home projects. 7 Table of Contents Third, Porch can help home services companies grow their business through new customer acquisition.
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Our warranty business differs from competitors and we believe has a long-term advantage due to several factors. • We offer bundled handyman services, which appeal to customers who maintain their home to prevent future issues.
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Porch does this through its various digital and concierge experiences and marketing solutions. Home services companies can pay for Porch’s software and specific modules with business-to-business (“B2B”) SaaS fees. Through a variety of products Porch can also get introduced to these companies’ consumers who are often in the process of buying a home.
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Customers pay a deductible against services such as gutter or dryer vent cleaning. • Unique channel access, in addition to traditional warranty channels such as real estate and direct-to-consumer, by being part of Porch Group also means products can be cross-sold through inspectors, contractors and other businesses, providing lower customer acquisition costs and increased lifetime value. • Our 90-day warranty product is provided largely through inspectors to homebuyers during the home purchase process to offer protection.
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This allows Porch Group to generate business-to-business-to-customer (“B2B2C”) transaction fees by offering high-value products and services such as insurance or warranty contracts to these end customers. We believe the combination of B2B SaaS fees and B2B2C transaction revenue is compelling; it allows Porch Group to achieve a very strong home services company lifetime value to acquisition cost ratio.
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This provides early access to a high volume of customers. • Utilities partnerships, where we partner with large electric and gas utilities to provide a variety of services to their customers, include targeted and full-home warranties. Core Differentiation Our strategy is led by differentiation, which stems from our unique property data.
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Consumer Services Porch Group connects consumers with home services companies nationwide and offers a full range of products and services where homeowners can, among other things: (1) compare and buy home insurance and warranty policies (along with auto, flood and umbrella policies from third party carriers) with competitive rates and coverage; (2) arrange for moving labor to load or unload a truck or full-service, long-distance movers; (3) discover and install home automation and security systems; (4) compare and purchase Internet and television options for their new home; (5) book small handyman jobs at fixed, upfront prices, and more.
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Developing and enhancing vertical SaaS products is critical to unlocking this data and gaining early access to consumers to cross-sell key home services, such as insurance, warranty, moving and other services for consumers to protect and maintain their home.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor more information, see below for more detailed descriptions of each risk factor. ● Our brands and businesses, including our insurance business, operate in an especially competitive and evolving industry. ● Our success will depend, in part, on our ability to manage our growth and maintain and/or enhance our existing brands, and the brands of our recently acquired companies. ● We rely on strategic, proprietary relationships with third parties to provide us with access to personal data and product information. ● We rely on our ability to reach home services companies’ customers and home service-related consumers earlier than our competitors, and throughout the homebuying and homeownership journey. ● Our future growth is dependent in part on increasing our revenue by increasing the number of sales of home related services per customer and consumer, and cross-sale of our other products and services to these customers and consumers. ● Our brands and businesses are sensitive to general economic events, trends and conditions, including those related to, without limitation, the housing and financial markets, which impacts the demand and costs for a portion of our products and services. 19 Table of Contents ● Our success depends, in part, on the integrity, quality, efficiency and scalability of our systems, technology and infrastructure, and those of third parties. ● Our success depends, in part, on our ability to develop and monetize versions of our products and services for mobile and other digital devices. ● Our businesses are subject to various federal, state and local laws and regulations, and we must comply with such laws, regulations and regulatory interpretations and any changes or stricter interpretations of any of the foregoing (whether through private litigation or governmental action). ● Our insurance business and operations are subject to a variety of uncertainties, including, without limitation, regulatory approval of insurance rates, policy forms, insurance products, license applications, acquisitions of businesses or strategic initiatives, including our planned formation of the reciprocal exchange, and other matters within the purview of insurance regulators. ● The incidence, frequency and severity of weather events, extensive wildfires, and other catastrophes, particularly occurring where Porch has a concentration of homeowners insurance policyholders, or that adversely impact consumer confidence and spending behavior in the industries we serve, could have a material effect on our results of operations and financial condition. ● Reinsurance may be unavailable at current levels and prices, which may limit our ability to write new business.
Biggest changeWe may not succeed in these efforts. • The incidence, frequency and severity of weather events, extensive wildfires, and other catastrophes, particularly occurring where Porch has a concentration of homeowners insurance policyholders, or that adversely impact consumer confidence and spending behavior in the industries we serve, could have a material effect on our results of operations and financial condition. • Our insurance business and operations are subject to a variety of uncertainties, including, without limitation, regulatory approval of insurance rates, policy forms, insurance products, license applications, acquisitions of businesses or strategic initiatives, including our planned formation of the reciprocal exchange, and other matters within the purview of insurance regulators. • We rely on strategic, proprietary relationships with third parties to provide us with access to personal data and product information. • We may not be able to protect our systems, technology and infrastructure from cyberattacks and cyberattacks experienced by third parties may adversely affect us. • If personal, confidential, or sensitive user information or property data that we maintain and store is breached or otherwise accessed by unauthorized persons, it may be costly to mitigate, and our reputation could be harmed. • We rely on our ability to reach home services companies’ customers and home service-related consumers earlier than our competitors, and throughout the home buying and homeownership journey. • Our efforts to develop new insurance products, expand in targeted insurance markets, improve business processes and workflows, or make acquisitions may not be successful and may create enhanced risk. • Our brands and businesses are sensitive to general economic events, trends and conditions, including those related to, without limitation, the housing and financial markets, which impacts the demand and costs for a portion of our products and services. • Our businesses, including our insurance business, are subject to various federal, state and local laws and regulations, which could limit growth and impose additional costs on us, and we must comply with such laws, regulations and regulatory interpretations and any changes or stricter interpretations of any of the foregoing (whether through private litigation or governmental action). • We may be unable to access the capital markets when needed, which could adversely affect the ability to take advantage of business opportunities as they arise and to fund operations in a cost-effective manner. • We may face negative consequences from the actions and omissions of our service providers, and our terms and conditions may not adequately protect us from claims. • We may fail to adequately protect our intellectual property rights or may be accused of infringing the intellectual property rights of third parties. • Termination of a reinsurance contract due to distress at one of HOA’s reinsurers may expose HOA and the Company to various risks that could materially and adversely affect HOA’s and the Company’s business, financial condition, and results of operations. • Our insurance company subsidiary is dependent on the use of reinsurance.
Any such decreases could result in turnover of our consumer and service provider base and/or adversely impact the breadth of services offered through our service market platform, our home-related services, and our warranty and insurance products. Demand for certain of our products and services generally decrease as the number of housing purchasing and refinance transactions decrease.
Any such decreases could result in turnover of our consumer and service provider base and/or adversely impact the breadth of services offered through our service market platform, our home-related services, and our warranty and insurance products. Demand for certain of our products and services generally decreases as the number of housing purchasing and refinance transactions decrease.
Any of these advantages could enable these competitors to reach more consumers and service providers than we do, offer products and services that are more appealing to consumers and service providers than our products and services, and respond more quickly and/or cost effectively than we do to evolving market opportunities and trends, any of which could adversely affect our business, financial condition and results of operations.
Any of these advantages could enable these competitors to reach more consumers and service providers than we reach, offer products and services that are more appealing to consumers and service providers than our products and services, and respond more quickly and/or cost effectively than we respond to evolving market opportunities and trends, any of which could adversely affect our business, financial condition and results of operations.
We rely on strategic relationships with third parties, including home services companies, to provide us with personal information, including property data, about their customers in exchange for giving such companies access to our ERP and CRM services or other value.
We rely on strategic relationships with third parties, including home services companies, to provide us with access to derive personal information, including property data, about their customers in exchange for giving such companies access to our ERP and CRM services or other value.
Furthermore, we bear the cost of paying insured claims. As a result, the likelihood of being significantly affected by the risks inherent to the insurance industry, and the magnitude of such risks, are increased.
We bear the cost of paying insured claims. As a result, the likelihood of being significantly affected by the risks inherent to the insurance industry, and the magnitude of such risks, are increased.
Such laws and regulations are usually overseen and enforced by various insurance departments, as well as through private rights of action and by state attorneys general.
Such laws and regulations are usually overseen and enforced by various insurance departments, as well as through private rights of action and by some state attorneys general.
Any lawsuit or action by a regulatory agency for an actual or alleged violation of applicable law or regulation by us or our third-party partners may have an adverse effect on our business, results of operations and financial condition. All US jurisdictions require insurers to maintain control of their marketing materials.
Any lawsuit or action by a regulatory agency for an actual or alleged violation of applicable law or regulation by us or our third-party partners may have an adverse effect on our business, results of operations and financial condition. All U.S. jurisdictions require insurers to maintain control of their marketing materials.
Failure to increase revenue per customer or consumer may slow our growth, which could in turn have an adverse impact on our business, financial condition and results of operations. Our growth therefore depends on our ability to attract new customers, maintain existing customers and sell additional products and services to existing customers.
Failure to increase revenue per customer or consumer may slow our growth, which could in turn have an adverse impact on our business, financial condition and results of operations. Our growth therefore depends, in part, on our ability to attract new customers, maintain existing customers, sell additional products and services to existing customers, and increase prices.
In particular, certain laws, regulations, and rules our customers are subject to, and with which may or do facilitate compliance, directly or indirectly, include: ● the Truth in Lending Act, or TILA, and Regulation Z promulgated thereunder, and similar state laws, which require certain disclosures to borrowers regarding the terms and conditions of their loans and credit transactions, and require creditors to comply with certain lending practice restrictions as well as the TILA-RESPA Integrated Disclosure rule, or TRID, which imposes specific requirements around the collection of information, charging of fees, and disclosure of specific loan terms and costs upon receipt of an application for credit; ● the Real Estate Settlement Procedures Act, or RESPA, and Regulation X, which, among other matters, prohibits giving or accepting any fee, kickback or a thing of value for the referral of real estate settlement services or accepting a portion or split of a settlement fee other than for services actually provided; for affiliated business relationships, prohibits receiving anything other than a legitimate return on ownership, requiring use of an affiliate, and failing to provide a disclosure of the affiliate relationship; ● the Equal Credit Opportunity Act, or ECOA, and Regulation B promulgated thereunder, and similar state fair lending laws, which prohibit creditors from discouraging or discriminating against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, the fact that all or part of the applicant’s income derives from any public assistance program or the fact that the applicant has in good faith exercised any right under the federal Consumer Credit Protection Act; ● the Fair Credit Reporting Act, or FCRA, and Regulation V promulgated thereunder, which impose certain obligations on consumer reporting agencies, users of consumer reports and those that furnish information to consumer reporting agencies, including obligations relating to obtaining consumer reports, marketing using consumer reports, taking adverse action on the basis of information from consumer reports and protecting the privacy and security of consumer reports and consumer report information; ● Section 5 of the Federal Trade Commission Act, or the FTC Act, which prohibits unfair and deceptive acts or practices in or affecting commerce, and Section 1031 of the Dodd-Frank Act, which prohibits unfair, deceptive 45 Table of Contents or abusive acts or practices in connection with any consumer financial product, warranty contract or service, and analogous state laws prohibiting unfair, deceptive or abusive acts or practices; ● the Gramm-Leach-Bliley Act, or GLBA, and Regulation P promulgated thereunder, which include limitations on financial services firms’ disclosure of nonpublic personal information about a consumer to nonaffiliated third parties, in certain circumstances requires financial services firms to limit the use and further disclosure of nonpublic personal information by nonaffiliated third parties to whom they disclose such information, and requires financial services firms to disclose certain privacy notices and practices with respect to information sharing with affiliated and unaffiliated entities as well as to safeguard personal borrower information, and other privacy laws and regulations; ● the Home Mortgage Disclosure Act, or HMDA, and Regulation C, which require reporting of loan origination data, including the number of loan applications taken, approved, denied and withdrawn; ● the Fair Housing Act, or FHA, which prohibits discrimination in housing on the basis of race, sex, national origin, and certain other characteristics; ● the Secure and Fair Enforcement for Mortgage Licensing, or the SAFE Act, which imposes state licensing requirements on mortgage loan originators; ● the Electronic Signatures in Global and National Commerce Act, or ESIGN Act, and similar state laws, particularly the Uniform Electronic Transactions Act, or UETA, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures and which require financial services firms to obtain a consumer’s consent to electronically receive disclosures required under federal and state laws and regulations; ● the Americans with Disabilities Act, or ADA, which has been interpreted to include websites as “places of public accommodations” that must meet certain federal requirements related to access and use; ● the Bank Secrecy Act, or BSA, and the USA PATRIOT Act, which relate to compliance with anti-money laundering, borrower due diligence and record-keeping policies and procedures; ● the regulations promulgated by the Office of Foreign Assets Control, or OFAC, under the U.S.
In addition, we and our partners, vendors, and other service providers must comply with laws and regulatory regimes that apply to us directly and our partners, vendors, and other service providers indirectly, such as through certain of our products and/or our contractual relationships with our customers. 32 Table of Content s In particular, certain laws, regulations, and rules our customers are subject to, and with which may or do facilitate compliance, directly or indirectly, include: • the Truth in Lending Act, or TILA, and Regulation Z promulgated thereunder, and similar state laws, which require certain disclosures to borrowers regarding the terms and conditions of their loans and credit transactions, and require creditors to comply with certain lending practice restrictions as well as the TILA-RESPA Integrated Disclosure rule, or TRID, which imposes specific requirements around the collection of information, charging of fees, and disclosure of specific loan terms and costs upon receipt of an application for credit; • the Real Estate Settlement Procedures Act, or RESPA, and Regulation X, which, among other matters, prohibits giving or accepting any fee, kickback or a thing of value for the referral of real estate settlement services or accepting a portion or split of a settlement fee other than for services actually provided; for affiliated business relationships, prohibits receiving anything other than a legitimate return on ownership, requiring use of an affiliate, and failing to provide a disclosure of the affiliate relationship; • the Equal Credit Opportunity Act, or ECOA, and Regulation B promulgated thereunder, and similar state fair lending laws, which prohibit creditors from discouraging or discriminating against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, the fact that all or part of the applicant’s income derives from any public assistance program or the fact that the applicant has in good faith exercised any right under the federal Consumer Credit Protection Act; • the Fair Credit Reporting Act, or FCRA, and Regulation V promulgated thereunder, which impose certain obligations on consumer reporting agencies, users of consumer reports and those that furnish information to consumer reporting agencies, including obligations relating to obtaining consumer reports, marketing using consumer reports, taking adverse action on the basis of information from consumer reports and protecting the privacy and security of consumer reports and consumer report information; • Section 5 of the Federal Trade Commission Act, or the FTC Act, which prohibits unfair and deceptive acts or practices in or affecting commerce, and Section 1031 of the Dodd-Frank Act, which prohibits unfair, deceptive or abusive acts or practices in connection with any consumer financial product, warranty contract or service, and analogous state laws prohibiting unfair, deceptive or abusive acts or practices; • the Gramm-Leach-Bliley Act, or GLBA, and Regulation P promulgated thereunder, which include limitations on financial services firms’ disclosure of nonpublic personal information about a consumer to nonaffiliated third parties, in certain circumstances requires financial services firms to limit the use and further disclosure of nonpublic personal information by nonaffiliated third parties to whom they disclose such information, and requires financial services firms to disclose certain privacy notices and practices with respect to information sharing with affiliated and unaffiliated entities as well as to safeguard personal borrower information, and other privacy laws and regulations; • the Home Mortgage Disclosure Act, or HMDA, and Regulation C, which require reporting of loan origination data, including the number of loan applications taken, approved, denied and withdrawn; • the Fair Housing Act, or FHA, which prohibits discrimination in housing on the basis of race, sex, national origin, and certain other characteristics; • the Secure and Fair Enforcement for Mortgage Licensing, or the SAFE Act, which imposes state licensing requirements on mortgage loan originators; • the Electronic Signatures in Global and National Commerce Act, or ESIGN Act, and similar state laws, particularly the Uniform Electronic Transactions Act, or UETA, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures and which require financial services firms to obtain a consumer’s consent to electronically receive disclosures required under federal and state laws and regulations; • the Americans with Disabilities Act, or ADA, which has been interpreted to include websites as “places of public accommodations” that must meet certain federal requirements related to access and use; • the Bank Secrecy Act, or BSA, and the USA PATRIOT Act, which relate to compliance with anti-money laundering, borrower due diligence and record-keeping policies and procedures; • the regulations promulgated by the Office of Foreign Assets Control, or OFAC, under the U.S.
Any erosion of our competitive advantage in access to home services companies’ customers and home service-related consumers may impair future opportunities to monetize those customers, which in turn could adversely impact our business, financial condition and results of operations.
Any erosion of our competitive advantage in access to home services companies’ customers and home service-related consumers may impair future opportunities to monetize those customers and impact our retention rates, which in turn could adversely impact our business, financial condition and results of operations.
Risks Relating to Personnel and Service Providers We face risks associated with our independent contractors. We have personnel that we classify as independent contractors for U.S. federal, state and international employment law purposes in certain positions in our business.
Risks Relating to Personnel We face risks associated with our independent contractors. We have personnel that we classify as independent contractors for U.S. federal, state and international employment law purposes in certain positions in our business.
Ceded reinsurance arrangements do not discharge the Company as the primary insurer and if reinsurers are unable or unwilling to pay or if we do not purchase sufficient reinsurance, it could seriously impact our insurance subsidiaries. Additionally, our net premiums written and earned will be impacted by the amount of premiums we cede under our reinsurance transactions.
Ceded reinsurance arrangements do not discharge us as the primary insurer and if reinsurers are unable or unwilling to pay or if we do not purchase sufficient reinsurance, it could seriously impact our insurance company subsidiary. Additionally, our net premiums written and earned will be impacted by the amount of premiums we cede under our reinsurance transactions.
These third parties may be subject to similar 27 Table of Contents cyberattacks and there can be no assurance that such third parties have adequate cybersecurity infrastructure to prevent breaches of the personal data sold to them by us. We may not have adequate insurance coverage to compensate for losses resulting from any of the above events.
These third parties may be subject to similar cyberattacks and there can be no assurance that such third parties have adequate cybersecurity infrastructure to prevent breaches of the personal data sold to them by us. We may not have adequate insurance coverage to compensate for losses resulting from any of the above events.
Downgrades in the credit ratings of fixed income securities could also have a significant negative effect on the market valuation of such securities. 40 Table of Contents Such factors could reduce our insurance businesses’ net investment incomes and result in realized investment losses, as well as negatively impact its statutory capital.
Downgrades in the credit ratings of fixed income securities could also have a significant negative effect on the market valuation of such securities. Such factors could reduce our insurance businesses’ net investment incomes and result in realized investment losses, as well as negatively impact its statutory capital.
Additionally, to the extent multiple U.S. state-level laws are introduced with inconsistent or conflicting standards and there is no federal 47 Table of Contents preemption of such laws, compliance could be even more difficult to achieve and our potential exposure to the risks discussed above could increase.
Additionally, to the extent multiple U.S. state-level laws are introduced with inconsistent or conflicting standards and there is no federal preemption of such laws, compliance could be even more difficult to achieve and our potential exposure to the risks discussed above could increase.
This may make our products, services and pricing for such products and services less appealing to consumers and service providers, which in turn may lead to reduced utilization of our products and 21 Table of Contents services. To the extent any of the foregoing occurs, our business, financial condition and results of operations may be adversely impacted.
This may make our products, services and pricing for such products and services less appealing to consumers and service providers, which in turn may lead to reduced utilization of our products and services. To the extent any of the foregoing occurs, our business, financial condition and results of operations may be adversely impacted.
Further, there is additional risk in our ability to accurately forecast our operational and financial performance and provide earnings guidance as a result of evolving economic downturn, continued inflationary cost increases and uncertainty of frequency and severity of weather events and related 33 Table of Contents claims.
Further, there is additional risk in our ability to accurately forecast our operational and financial performance and provide earnings guidance as a result of evolving economic downturn, continued inflationary cost increases and uncertainty of frequency and severity of weather events and related claims.
States have adopted legislation defining and prohibiting unfair methods of competition and unfair or deceptive practices in the business of insurance. 48 Table of Contents Prohibited practices include but are not limited to, misrepresentations, false advertising, coercion, disparaging other insurers, unfair claims settlement practices and procedures, and discrimination in the business of insurance.
States have adopted legislation defining and prohibiting unfair methods of competition and unfair or deceptive practices in the business of insurance. Prohibited practices include but are not limited to, misrepresentations, false advertising, coercion, disparaging other insurers, unfair claims settlement practices and procedures, and discrimination in the business of insurance.
If an audit, self-assessment, or other assessment indicates that we need to take steps to remediate any deficiencies, such remediation efforts may distract our management team and require us to undertake costly and time-consuming remediation efforts, and we could lose our payment card acceptance privileges. Our marketing efforts are subject to a variety of federal and state regulations.
If an audit, self-assessment, or other assessment indicates that we need to take steps to remediate any deficiencies, such remediation efforts may distract our management team and require us to undertake costly and time-consuming remediation efforts, and we could lose our payment card acceptance privileges. 34 Table of Content s Our marketing efforts are subject to a variety of federal and state regulations.
The CCPA became effective January 1, 2020, and imposes strict requirements and restrictions on the use of personal information with respect to California consumers, including mandating that companies provide consumers with information with respect to personal information being collected about them and how it is being used upon request, as well granting consumers significant control over the use of their personal information (including the right to have such information deleted and the right to object to the “sale” (as defined in the CCPA) of such information) and mandating new operational requirements for businesses (primarily providing consumers with enhanced privacy-related disclosures).
The CCPA imposes strict requirements and restrictions on the use of personal information with respect to California consumers, including mandating that companies provide consumers with information with respect to personal information being collected about them and how it is being used upon request, as well granting consumers significant control over the use of their personal information (including the right to have such information deleted and the right to object to the “sale” (as defined in the CCPA) of such information) and mandating new operational requirements for businesses (primarily providing consumers with enhanced privacy-related disclosures).
These laws also are often subject to changes that 46 Table of Contents could severely limit the operations of our business model. Further, changes in the regulatory application and/or judicial interpretation of the laws and regulations applicable to our businesses could also impact the manner in which we conduct our business.
These laws also are often subject to changes that could severely limit the operations of our business model. Further, changes in the regulatory application and/or judicial interpretation of the laws and regulations applicable to our businesses could also impact the manner in which we conduct our business.
Despite these measures, challenges to our intellectual property rights could still arise, third parties 29 Table of Contents could copy or otherwise obtain and use our intellectual property without authorization, and/or laws regarding the enforceability of existing intellectual property rights could change in an adverse manner.
Despite these measures, challenges to our intellectual property rights could still arise, third parties could copy or otherwise obtain and use our intellectual property without authorization, and/or laws regarding the enforceability of existing intellectual property rights could change in an adverse manner.
The failure to accurately and timely pay claims 38 Table of Contents could lead to regulatory and administrative actions or material litigation, undermine our insurance businesses’ reputation in the marketplace and materially and adversely affect their businesses, financial conditions and results of operations.
The failure to accurately and timely pay claims could lead to regulatory and administrative actions or material litigation, undermine our insurance businesses’ reputation in the marketplace and materially and adversely affect their businesses, financial conditions and results of operations.
Any adverse publicity resulting from actual or potential litigation, regulatory enforcement actions or regulatory investigations may also materially and adversely affect our reputation, which in turn could adversely affect our business, financial condition and results of operations. See “
Any adverse publicity resulting from actual or potential litigation, regulatory enforcement actions or regulatory investigations may also materially and adversely affect our reputation, which in turn could adversely affect our business, financial condition and results of operations. See “Item 3.
We also license data from third-party data brokers and other data suppliers. However, we cannot assure you that we will continue to be able to access, collect or use personal information or property data provided by consumers, service providers and commercial partners as we currently do or may want to do in the future.
We also license data from third-party data brokers and other data suppliers. However, we cannot provide assurance that we will continue to be able to access, collect or use personal information or property data provided by consumers, service providers and commercial partners as we currently do or may want to do in the future.
If we are unable to collect information from our customers or our service providers and commercial partners do not continue to provide us with information of their customers, or if applicable laws prohibit or materially impair our use of such information, our ability to provide services to consumers and drive consumer access to service providers may be materially impacted.
If we are unable to collect information from our customers or our service providers and commercial partners do not continue to provide us with information of their customers, or if applicable laws prohibit or materially impair our use of such information, our ability to provide services to consumers and drive consumer access to service providers may be materially 15 Table of Content s impacted.
As a result of noncompliance, regulators could impose fines or other penalties, including cease-and-desist orders for an individual state, or all states, until the identified noncompliance is rectified. Our insurance businesses are also subject to examinations by the insurance departments of corresponding to the state where domiciled.
As a result of noncompliance, regulators could impose fines or other penalties, including cease-and-desist orders for an individual state, or all states, until the identified noncompliance is rectified. Our insurance businesses are also subject to examinations by the insurance departments of any state where our insurance businesses are domiciled or licensed to sell insurance.
As a result, we are subject to certain additional risks related to independent contractors in foreign jurisdictions, including risks related to misclassification of such independent contractors under local law, compliance with other applicable local labor laws, resistance of commercial partners to off-shoring of customer service functions and related consumer data, fluctuations in foreign currencies, changes in the economic strength of Mexico, Costa Rica, India and Canada, difficulties in enforcing contractual obligations and intellectual property rights, economic sanctions and social, political and economic instability.
As a result, we are subject to certain additional risks related to independent contractors in foreign jurisdictions, including risks related to misclassification of such independent contractors under local law, compliance with other applicable local labor laws and changes in applicable local labor laws, resistance of commercial partners to off-shoring of customer service functions and related consumer data, fluctuations in foreign currencies, changes in the economic strength of foreign countries, difficulties in enforcing contractual obligations and intellectual property rights, economic sanctions and social, political and economic instability.
As it relates to our insurance carrier entity, we will be exposed to a portion of these losses directly.
For example, as it relates to our insurance carrier entity, we will be directly exposed to a portion of these losses.
We may not have adequate insurance coverage to compensate for 26 Table of Contents losses resulting from these claims, and too many or certain types of claims may result in increased premiums or denial of coverage.
We may not have adequate insurance coverage to compensate for losses resulting from these claims, and too many or certain types of claims may result in increased premiums or denial of coverage.
Numerous aspects of our insurance businesses are subject to regulation, including premium rates, mandatory covered risks, limitations on the ability to renew or elect not to renew business, prohibited exclusions, licensing and appointment of agents, restrictions on the size of risks that may be insured under a single policy, policy forms and coverages, advertising and other conduct, including restrictions on the use of credit information and other underwriting factors, as well as other underwriting and claims practices.
Numerous aspects of our insurance businesses are subject to regulation, including premium rates, mandatory covered risks, limitations on the ability to not renew business, prohibited exclusions, licensing and appointment of agents, restrictions on the size of risks that may be 30 Table of Content s insured under a single policy, policy forms and coverages, advertising and other conduct, including restrictions on the use of credit information and other underwriting factors, as well as other underwriting and claims practices.
We may not be able to obtain financing on acceptable terms, or at all. If we require capital but cannot raise it or cannot obtain financing on acceptable terms, our business, financial condition, and results of operations may be materially adversely affected, and we may be unable to execute our long-term growth strategy.
If we require capital but cannot raise it or cannot obtain financing on acceptable terms, our business, financial condition, and results of operations may be materially adversely affected, and we may be unable to execute our long-term growth strategy.
In particular, severe weather events and the effects of climate change, including, extensive wildfires, drought, flooding and other catastrophes, and the frequency of such events, as well as the impacts of future global pandemics and other health crises, may harm our insurance business.
In particular, severe weather events and the effects of climate change, including, tornado and hail events, hurricanes extensive wildfires, drought, storms, flooding, and other catastrophes, and the frequency of such events, as well as the impacts of future global pandemics and other health crises, may harm our insurance business.
Although these capital requirements are generally less constraining than U.S. capital requirements, failure to satisfy these requirements could result in regulatory actions from the CIMA or loss of or modification of Porticus Re’s Class B(iii) insurer license, which could adversely impact our ability to improve our overall capital efficiency and support our “capital-light” model.
Although these capital requirements are generally less constraining than U.S. capital requirements, failure to satisfy these requirements could result in regulatory actions from the CIMA or loss of or modification of Porticus Re’s Class B(iii) insurer license, which could adversely impact our ability to improve our overall capital efficiency.
Except for the fees and commissions paid to the AIF, [MGA] and EIG, Porch will derive no cash flow benefit from profitable operating results in the Reciprocal or HOAIC. Nothing in the laws governing Texas reciprocal exchanges makes an attorney-in-fact liable for losses incurred by a reciprocal exchange.
Except for the fees and commissions paid to the AIF and Homeowners of America MGA, Inc, Porch will derive no cash flow benefit from profitable operating results in the Reciprocal or HOAIC. Nothing in the laws governing Texas reciprocal exchanges makes an attorney-in-fact liable for losses incurred by a reciprocal exchange.
Although reinsurance would make the reinsurer liable to us to the extent the risk is transferred to the reinsurer or we have coverage under an excess of loss reinsurance arrangement, it will not relieve us of our liability to our policyholders.
Although reinsurance would make the reinsurer liable to us to the extent the risk is transferred to the reinsurer or we have coverage 21 Table of Content s under an excess of loss reinsurance arrangement, it will not relieve us of our liability to our policyholders.
The number of housing transactions in which certain of the Company’s products and services are purchased have been, and may continue to be impacted by the following situations, among others: ● high, volatile or rising mortgage interest rates; ● availability of credit, including commercial and residential mortgage funding; ● real estate affordability, housing supply rates, home building rates, housing foreclosures rates, multi-family housing fundamentals, and the pace of home price appreciation or the lack of it; ● slow economic growth or recessionary conditions and other macroeconomic conditions, which may be impacted by national or global events (such as the COVID-19 pandemic); ● local, state and federal government intervention in the financial markets; ● increased unemployment or declining or stagnant wages; ● changes in household debt levels and disposable income; ● changing trends in consumer spending; ● fewer homebuyers electing to get a home inspection; and ● changing expectations for inflation and deflation. ​ Any adverse impact on a macro level to the housing or financial markets generally could have an adverse impact on our business, results of operations and financial condition.
The number of housing transactions in which certain of the Company’s products and services are purchased have been, and may continue to be, impacted by the following situations, among others: • high, volatile or rising mortgage interest rates; • availability of credit, including commercial and residential mortgage funding; • real estate affordability, housing supply rates, home building rates, housing foreclosures rates, multi-family housing fundamentals, and the pace of home price appreciation or the lack of it; • slow economic growth or recessionary conditions and other macroeconomic conditions, which may be impacted by national or global events (such as the COVID-19 pandemic); • local, state and federal government intervention in the financial markets; • increased unemployment or declining or stagnant wages; • changes in household debt levels and disposable income; • changing trends in consumer spending; • fewer homebuyers electing to get a home inspection; and • changing expectations for inflation and deflation.
Rating agencies could change or expand their requirements or could find that our insurance subsidiaries no longer meet the criteria established for current ratings.
Rating agencies could change or expand their requirements or could find that our insurance company subsidiary no longer meet the criteria established for current ratings.
The effects of these and other unforeseen emerging claim and coverage issues are difficult to predict and could harm our insurance businesses and materially adversely affect their results and operations. Our insurance subsidiaries are dependent on the use of reinsurance. The Company’s consolidated financial statements reflect the effects of reinsurance transactions.
The effects of these and other unforeseen emerging claim and coverage issues are difficult to predict and could harm our insurance businesses and materially adversely affect their results and operations. Our insurance company subsidiary is dependent on the use of reinsurance. Our consolidated financial statements reflect the effects of reinsurance transactions.
The primary purpose of reinsurance is to protect the Company, at a cost, from losses in excess of the amount it is prepared to accept and to protect the Company’s capital. Reinsurance is placed on both a quota-share and excess-of-loss basis.
The primary purpose of reinsurance is to protect us, at a cost, from losses in excess of the amount it is prepared to accept and to protect our capital. Reinsurance is placed on both a quota-share and excess-of-loss basis.
Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations. 20 Table of Contents Risks Relating to the Company’s Business and Industry Our brands and businesses, including our insurance business, operate in an especially competitive and evolving industry.
Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations. Risks Relating to Porch’s Business and Industry Our brands and businesses, including our insurance business, operate in an especially competitive and evolving industry.
As a result, reinsurance does not eliminate the obligation of our insurance subsidiaries to pay all claims, and we are subject to the risk that one or more of our reinsurers will be unable or unwilling to honor its obligations, that the reinsurers will not pay in a timely fashion, or that our losses are so large that they exceed the limits specified in our reinsurance contracts, limiting recovery.
As a result, reinsurance does not eliminate the obligation of our insurance company 25 Table of Content s subsidiary to pay all claims, and we are subject to the risk that one or more of our reinsurers will be unable or unwilling to honor its obligations, that the reinsurers will not pay in a timely fashion, or that our losses are so large that they exceed the limits specified in our reinsurance contracts, limiting recovery.
The housing market is seasonal, cyclical and affected by significant conditions beyond the Company’s control.
The housing market is seasonal, cyclical and affected by significant conditions beyond our control.
Fluctuations in our quarterly operating results or guidance may be due to a number of factors, including, but not limited to, those listed below: ● economic trends related to high growth software companies, companies not yet profitable, home-related companies, companies that went public through a special purpose acquisition company (SPAC) transaction, the home services and insurance industries, and general economic, industry and market conditions; ● seasonality; ● the extent to which home services companies, service providers and consumers employ our platform; ● the extent to which new home services companies, consumers, service providers, and commercial partners are attracted to our solutions to satisfy their (and in the case of home services companies and commercial partners, their customers’) needs; ● the timing, commitment levels, and revenue share rates at which we enter into agreement for our solutions with home services companies and service providers, along with their ongoing capacity and fulfillment performance to handle volume and the effectiveness of our marketing and affiliate channels to drive volume to our network; ● the volume of consumer referrals that home services companies and commercial partners send to us, and the addition or loss of large home services companies or commercial partners, including through acquisitions or consolidations; ● the mix of home services companies and commercial partners across small, mid-sized and large organizations; ● changes in our pricing policies or those of our competitors, including loss of customers due to increased price of our policies; ● volatility in commissions from our insurance business; ● severe weather events, extensive wildfires and other catastrophes, and the frequency of any of the foregoing, including the effects of climate change and global pandemics; ● volatility, as well as severity, in claims from our insurance business; ● widespread claim costs associated with P&C claims; ● losses resulting from actual policy experience that is adverse to assumptions made in product pricing; ● the timing and delay in introducing new policy pricing due to seeking regulatory approval for price changes ● losses resulting from a decline in the value of our invested assets; ● declines in value and/or losses with respect to companies and other entities whose securities we hold and counterparties with whom we transact business or to whom we have credit exposure, including reinsurers, and declines in the value of investments; ● the financial health of our home services companies, consumers, service providers, and commercial partners; ● the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure; ● the timing and success of new solutions introduced by us; ● the timing and success of current and new products and services introduced by our competitors; ● other changes in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners; ● our ability to manage our existing business and future growth, including increases in the number of customers on our platform and new geographic regions; and ● various other factors, including those related to significant disruptions in our systems and platform infrastructure risks related to independent contractors, and privacy and data security breaches, each of which is described elsewhere in this “ Risk Factors ” section. ​ Our earnings guidance and resulting external analyst estimates are largely based on our view of our business and the broader housing, housing services and insurance markets.
Fluctuations in our quarterly operating results or guidance may be due to a number of factors, including, but not limited to, those listed below: • economic trends related to software companies, companies not yet profitable, home-related companies, companies that went public through a special purpose acquisition company (SPAC) transaction, the home services and insurance industries, and general economic, industry and market conditions; • seasonality; • the extent to which home services companies, consumers, service providers, and commercial partners are attracted to our solutions to satisfy their (and in the case of home services companies and commercial partners, their customers’) needs; • the timing, commitment levels, and revenue share rates at which we enter into agreement for our solutions with home services companies and service providers, along with their ongoing capacity and fulfillment performance to handle volume and the effectiveness of our marketing and affiliate channels to drive volume to our network; • the volume of consumer referrals that home services companies and commercial partners send to us, and the addition or loss of large home services companies or commercial partners, including through acquisitions or consolidations; • the mix of home services companies and commercial partners across small, mid-sized and large organizations; • changes in our pricing policies or those of our competitors, including loss of customers due to increased price of our policies; • volatility in commissions from our insurance business; • severe weather events, including tornado and hail events, hurricanes, extensive wildfires and other catastrophes, and the frequency of any of the foregoing, including the effects of climate change and global pandemics; • volatility, as well as severity, in claims from our insurance business; • widespread claim costs associated with P&C claims; • losses resulting from actual policy experience that is adverse to assumptions made in product pricing; • our insurance carrier being placed under regulatory supervision or losing or receiving a downgrade its credit rating; • the timing and delay in introducing new policy pricing due to seeking regulatory approval for price changes • losses resulting from a decline in the value of our invested assets; • declines in value and/or losses with respect to companies and other entities whose securities we hold and counterparties with whom we transact business or to whom we have credit exposure, including reinsurers, and declines in the value of investments; • the financial health of our home services companies, consumers, service providers, and commercial partners; • the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure; 28 Table of Content s • the timing and success of new solutions introduced by us; • the timing and success of current and new products and services introduced by our competitors; • other changes in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners; • our ability to manage our existing business and future growth, including increases in the number of customers on our platform and new geographic regions; and • various other factors, including those related to significant disruptions in our systems and platform infrastructure risks related to independent contractors, and privacy and data security breaches, each of which is described elsewhere in this “Item 1A.
A material weakness 31 Table of Contents is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.
The effects of emerging claim and coverage issues in the insurance industry are uncertain. As industry practices, economic, legal, judicial, social, and other environmental conditions change, unexpected issues related to claims and coverage may emerge. These issues may adversely affect our insurance businesses by either extending coverage beyond the underwriting intent or by increasing the number and size of claims.
As industry practices, economic, legal, judicial, social, and other environmental conditions change, unexpected issues related to claims and coverage may emerge. These issues may adversely affect our insurance businesses by either extending coverage beyond the underwriting intent or by increasing the number and size of claims.
If we are unable to compete effectively against new competitors, services or products or unable to establish or maintain a consumer brand that resonates with customers, maintain high customer satisfaction, or compete with the pricing offered by our competitors, could result in decreases in the size and level of engagement of our consumer and service provider bases, any of which could adversely affect our business, financial condition and results of operations.
If we are unable to compete effectively against competitors, services or products or if we are unable to establish or maintain a consumer brand that resonates with customers and/or enhance our existing brands and the brands of our recently acquired companies, or if we are unable to maintain high customer satisfaction or compete with the pricing offered by our competitors, the result could be decreases in the size and level of engagement of our consumer and service provider bases, any of which could adversely affect our business, financial condition and results of operations.
Matters within the scope of the TDI’s review include but are not limited to those listed below: ● the adequacy of the Reciprocal's and HOAIC’s capitalization and methods used to capitalize it; ● the terms of the Reciprocal's governing documents, including the compensation paid to the attorney-in-fact; ● the premiums to be charged by the Reciprocal and the benefits offered to its subscribers; ● the amount and duration of the subscriber contribution paid by its subscribers ● the Reciprocal’s relationship with Porticus Re, HOA’s managing general agency and EIG, including reinsurance premium, commissions and fees charged by them for services as general agent; ● the powers and composition of the Reciprocal’s subscribers' committee; and ● the terms of sale of HOAIC to the Reciprocal. ​ Insurance is regulated on a state-by-state basis.
Matters within the scope of the TDI’s review include but are not limited to those listed below: • the adequacy of the Reciprocal's and HOAIC’s capitalization and methods used to capitalize it; 22 Table of Content s • the terms of the Reciprocal's governing documents, including the compensation paid to the attorney-in-fact; • the premiums to be charged by the Reciprocal and the benefits offered to its subscribers; • the amount and duration of the subscriber contribution paid by its subscribers • the Reciprocal’s relationship with Porticus Re and HOA’s managing general agency, including reinsurance premium, commissions and fees charged by them for services as general agent; • the powers and composition of the Reciprocal’s subscribers' committee; and • the terms of sale of HOAIC to the Reciprocal.
Financial strength ratings reflect a rating agency’s opinion of our insurance subsidiaries’ financial strength, operating performance, strategic position and ability to meet obligations to policyholders. Our ratings are subject to periodic review and there is no assurance that our ratings will not be changed.
The financial strength ratings of our insurance company subsidiary could be downgraded. Financial strength ratings reflect a rating agency’s opinion of our insurance company subsidiary’s financial strength, operating performance, strategic position and ability to meet obligations to policyholders. Our ratings are subject to periodic review and there is no assurance that our ratings will not be changed.
Our business depends, in part, on our ability to satisfy our home services companies, consumers and service providers, both by providing access to services that address the needs of consumers and service providers and providing services and software-based solutions to home services companies that address their business needs. Our customer support personnel also sell our products and services.
Our business depends, in part, on our ability to satisfy our home services companies, consumers and service providers, both by providing access to services that address the needs of consumers and service providers and providing services and software-based solutions to home services companies that address their business needs.
Our efforts to develop new products, expand in targeted insurance markets, improve business processes and workflows, or make acquisitions may require us to make substantial expenditures and may not be successful, and even if successful, they may create additional risks: ● Changes to our business processes or workflow, including the use of new technologies, may give rise to execution risk. ● Models underlying automated underwriting and pricing decisions may not be effective. ● Demand for new products or expansion into new markets may not meet our expectations. ● New products or services and expansion into new markets may change our risk exposures, and the data models we use to manage such exposures may not be as effective as those used in existing markets or with existing products. ● Acquisitions may not be successfully integrated, resulting in substantial disruption, costs, or delays, and adversely affecting our ability to compete, and may also result in unforeseen liabilities or impact our credit ratings, and ● In connection with the conversion of policyholders to a new product, some policyholders’ pricing may increase, while the pricing for other policyholders may decrease, the net impact of which could negatively impact retention and profit margins. ​ These efforts may require substantial expenditures, which may negatively impact results in the near term and if not successful, could materially and adversely affect our business, financial condition, and results of operations Marketing efforts designed to drive traffic to our brands and businesses may not be successful or cost-effective.
Our efforts to develop new products, expand in targeted insurance markets, improve business processes and workflows, or make acquisitions may require us to make substantial expenditures and may not be successful, and even if successful, they may create additional risks including, but not limited to: • Changes to our business processes or workflow, including the use of new technologies, may give rise to execution risk. • Models underlying automated underwriting and pricing decisions may not be effective. • Demand for new products or expansion into new markets may not meet our expectations. • New products or services and expansion into new markets may change our risk exposures, and the data models we use to manage such exposures may not be as effective as those used in existing markets or with existing products. 17 Table of Content s • Acquisitions may not be successfully integrated, resulting in substantial disruption, costs, or delays, and adversely affecting our ability to compete, and may also result in unforeseen liabilities or impact our credit ratings, and • In connection with the conversion of policyholders to a new product, some policyholders’ pricing may increase, while the pricing for other policyholders may decrease, the net impact of which could negatively impact retention and profit margins.
To the extent such costs increase, we may be prevented, in whole or in part, from passing these cost increases through to our existing and prospective customers, which could have a material adverse impact on our consolidated business, financial position, results of operations and cash flows.
To the extent such costs increase, we may be prevented, in whole or in part, from passing these cost increases through to our existing and prospective customers, which could have a material adverse impact on our consolidated business, financial position, results of operations and cash flows. The effects of emerging claim and coverage issues in the insurance industry are uncertain.
Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it.
Furthermore, if any issues in complying with those requirements are identified (for example, our auditors have in the past and may in the future identify material weaknesses or significant deficiencies in our internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it.
As we grow and mature as a public company, we may find it difficult to maintain our corporate culture. If we do not continue to foster our corporate culture or maintain our core values as we grow and evolve, we may be unable to support the passion, creativity, teamwork, focus and innovation we believe we need to support our growth.
If we do not continue to foster our corporate culture or maintain our core values as we grow and evolve, we may be unable to support the passion, creativity, teamwork, focus and innovation we believe we need to support our growth.
Attracting home services companies and consumers to our brands and businesses involves considerable expenditures for online and offline marketing and sales. We have made, and expect to continue to make, significant marketing expenditures, primarily for digital marketing such as paid search engine marketing, display advertising and third-party affiliate agreements.
Attracting home services companies and consumers to our brands and businesses involves considerable expenditures for online and offline marketing and sales. We have made, and expect to continue to make, significant marketing expenditures, primarily for digital marketing such as paid search engine marketing, display advertising and third-party affiliate agreements. These efforts may not be successful or cost-effective.
While we intend to manage our risk via reinsurance, there can be no guarantee this will adequately reduce our exposure to losses, including, but not limited to, the inability to negotiate reinsurance contracts at renewal at acceptable terms or at all, large catastrophes that exceed the our aggregate reinsurance coverage limits, the inability or unwillingness of counterparties to pay us reinsurance receivables we believe we are owed, and multiple losses in a single year that exceed our ability to reinstate reinsurance contracts.
While we intend to manage our risk via reinsurance, there can be no guarantee this will adequately reduce our exposure to losses due to various risks inherent in reinsurance generally and with our reinsurance program, including, but not limited to, the inability to negotiate reinsurance contracts at renewal at acceptable terms or at all, our limited number of reinsurance partners, large catastrophes that exceed our aggregate reinsurance coverage limits, the inability or unwillingness of counterparties to pay us reinsurance receivables we believe we are owed, multiple losses in a single year that exceed our ability to reinstate reinsurance contracts, and the potential for fraud or misrepresentation committed by our reinsurance partners.
In addition, although such agents/agencies are appointed as independent contractors with the authority to solicit and bind insurance policies on HOA’s behalf any misconduct on their part could have an adverse effect on our business, financial conditions, reputation and results of operations. The financial strength ratings of our insurance subsidiaries could be downgraded.
In addition, although such agents/agencies are appointed as independent contractors with the authority to solicit and bind insurance policies on HOA’s behalf any misconduct on their part could have an adverse effect on our business, financial conditions, reputation and results of operations. We are also subject to the cyclical nature of the insurance industry.
The success of the Company’s captive reinsurance program is dependent on a number of factors outside the control of the Company, including, but not limited to, continued access to financial solutions, a favorable regulatory environment, and the overall tax position of the Company. If the captive reinsurance program is not successful, the Company’s financial condition could be adversely impacted.
The success of the Company’s captive reinsurance program is dependent on a number of factors outside the control of the Company, including, but not limited to, weather events, continued access to financial solutions, a favorable regulatory environment, and the overall tax position of the Company.
Nevertheless, Porch, through its ownership of the AIF, will have an interest in the financial condition of the Reciprocal. If the Reciprocal fails to maintain acceptable levels of financial strength and ratings, its competitive position in the market would be adversely affected. Anything that adversely affects premium income to the Reciprocal results in decreased fee revenue to the AIF.
Nevertheless, Porch, through its ownership of the AIF, will have an interest in the financial condition of the Reciprocal. If the Reciprocal fails to maintain acceptable levels of financial strength and ratings, its competitive position in the market would be adversely affected.
As of December 31, 2022, we had net operating loss carryforwards for U.S. federal income tax purposes and state income tax purposes of $410.9 million and $250.1 million, respectively, available to offset future taxable income.
As of December 31, 2023, we had net operating loss carryforwards for U.S. federal income tax purposes and state income tax purposes of $425.1 million and $260.4 million, respectively, available to offset future taxable income.
We may be attacked by perpetrators of malicious technology-related events, such as the use of botnets, malware or other destructive or disruptive software, distributed denial of service attacks, phishing, attempts to misappropriate user information and account login credentials, ransomware attempts, and other similar malicious activities. The incidence of events of this nature is on the rise worldwide.
We may be attacked by perpetrators of malicious technology-related events, such as the use of botnets, malware or other destructive or disruptive software, distributed denial of service attacks, phishing, attempts to misappropriate user information and account login credentials, ransomware attempts, and other similar malicious activities including malicious activities from internal bad actors.
As an emerging entrant to the insurance industry, we may face additional capital and surplus requirements as compared to those of our larger and more established competitors. Failure to maintain adequate risk-based capital at the required levels could result in increasingly onerous reporting and examination requirements and could adversely affect our ability to maintain regulatory authority to conduct our business.
As a mid-sized carrier expanding its national presence, we may face additional capital and surplus requirements as compared to those of our larger and more established competitors. Failure to maintain adequate risk-based capital at the required levels could result in increasingly onerous reporting and examination requirements and could adversely affect our ability to maintain regulatory authority to conduct our business.
We incurred operating losses of $177.0 million, $83.1 million and $42.2 million for the years ended December 31, 2022, 2021 and 2020, respectively, and as of December 31, 2022, we had an accumulated deficit of $585.0 million.
We incurred operating losses of $190.4 million, $177.0 million and $83.4 million for the years ended December 31, 2023, 2022 and 2021, respectively, and as of December 31, 2023, we had an accumulated deficit of $722.1 million.
If our insurer financial strength ratings were to be downgraded, our agents might find it more difficult to market our products or might choose to emphasize the products of other carriers and lenders would be likely to not accept our 36 Table of Contents insurance as sufficient to protect their collateral.
If our insurer financial strength ratings were to be downgraded, our agents might find it more difficult to market our products or might choose to emphasize the products of other carriers and lenders would be likely to not accept our insurance as sufficient to protect their collateral. Either or both could have severe financial consequences for our insurance company subsidiary.
A Texas receiver may also bring action against an attorney-in-fact within a receivership proceeding based on available theories of damages arising from the attorney-in-fact's management of the reciprocal exchange.
A Texas receiver may be able to compel the attorney-in-fact to continue providing services to a reciprocal exchange that is involved in a receivership proceeding. A Texas receiver may also bring action against an attorney-in-fact within a receivership proceeding based on available theories of damages arising from the attorney-in-fact's management of the reciprocal exchange.
We are also subject to the cyclical nature of the insurance industry. The financial performance of the insurance industry has historically fluctuated with periods of lower premium rates and excess underwriting capacity resulting from increased competition followed by periods of higher premium rates and reduced underwriting capacity resulting from 41 Table of Contents decreased competition.
The financial performance of the insurance industry has historically fluctuated with periods of lower premium rates and excess underwriting capacity resulting from increased competition followed by periods of higher premium rates and reduced underwriting capacity resulting from decreased competition.
Under existing GAAP, we expect the Reciprocal will consolidate with Porch for financial reporting purposes. While deconsolidation of the Reciprocal from Porch is a goal, there is no assurance that our plan for achieving deconsolidation will be successful, nor can there be any assurance that deconsolidation will be achieved in the future.
While deconsolidation of the Reciprocal from Porch is a goal, there is no assurance that our plan for achieving deconsolidation will be successful, nor can there be any assurance that deconsolidation will be achieved in the future.
Although our current remote work environment facilitates our ability to attract talent across a wider geographic base, we must adopt new techniques and tools to effectively train and integrate new hires and preserve our culture.
Although our current remote work environment facilitates our ability to attract talent across a wider geographic base, we must adopt new techniques and tools to effectively train and integrate new hires and preserve our culture. As we grow and mature as a public company, we may find it difficult to maintain our corporate culture.
Either or both could have severe financial consequences for our insurance subsidiaries. Increases in parts, appliance and home system prices and other operating costs could adversely impact our business, financial position, results of operations and cash flows.
Increases in parts, appliance and home system prices and other operating costs could adversely impact our business, financial position, results of operations and cash flows.
Laws and regulations that limit cancellations and non-renewals of policies or that subject withdrawal plans prior to approval requirements may significantly restrict our insurance businesses’ ability to exit unprofitable markets.
Laws and regulations that limit cancellations and non-renewals of policies or that subject withdrawal plans prior to approval requirements may significantly restrict our insurance businesses’ ability to exit unprofitable markets. Such actions and related regulatory restrictions may limit their ability to reduce potential exposure to hurricane-related losses.
These events and trends could also result in decreased marketing and advertising expenditures by service providers or cash flow problems for service providers that could affect their ability to pay us subscription fees, their ability to purchase leads from us and the success of any revenue sharing arrangements with them or could result in service providers decreasing and/or delaying subscription fees paid for our platform or being more likely to default on incurred fees, which would result in decreased revenue . 24 Table of Contents Any of these events that could negatively affect the home industries we serve and could adversely affect our business, financial condition and results of operations.
These events have in the past and could in the future negatively affect the economy in general, and the housing and home services markets in particular. 14 Table of Content s These events and trends could also result in decreased marketing and advertising expenditures by service providers or cash flow problems for service providers that could affect their ability to pay us subscription fees, their ability to purchase leads from us and the success of any revenue sharing arrangements with them or could result in service providers decreasing and/or delaying subscription fees paid for our platform or being more likely to default on incurred fees, which would result in decreased revenue.
If consumers or service providers do not agree to our terms and conditions for any reason, we may face increased litigation risk, which could in turn adversely affect our business, financial condition and results of operations.
If consumers or service providers do not agree to our terms and conditions for any reason, we may face increased litigation risk, which could in turn adversely affect our business, financial condition and results of operations. Our success depends, in part, on our ability to develop and monetize versions of our products and services for mobile and other digital devices.
HOA obtains reinsurance to help manage its exposure to property and casualty insurance risks. Although our reinsurance counterparties are liable to us according to the terms of the reinsurance policies, we remain primarily liable to our policyholders as the direct insurers on all risks reinsured.
Although our reinsurance counterparties are liable to us according to the terms of the reinsurance policies, we remain primarily liable to our policyholders as the direct insurers on all risks reinsured.
Furthermore, certain states require insurers to participate in guaranty funds for impaired or insolvent companies. These funds periodically assess losses against all insurance companies doing business in the state. During 2022, HOAIC was subject to guaranty fund assessments in Texas and South Carolina. Our results of operations and financial condition could be adversely affected by any of these factors.
Furthermore, certain states require insurers to participate in guaranty funds for impaired or insolvent companies. These funds periodically assess losses against all insurance companies doing business in the state. For example, in 2022 HOAIC was subject to guaranty fund assessments in Texas and South Carolina.
Treasury Department related to the administration and enforcement of sanctions against foreign jurisdictions and persons that threaten U.S. foreign policy and national security goals, primarily to prevent targeted jurisdictions and persons from accessing the U.S. financial system; and ● other federal, state-specific and local laws and regulations. ​ In addition to the laws, regulations, and rules that apply to our customers and others, and that we facilitate compliance with, we may be deemed to be subject to certain laws, regulations, and rules through our relationships with our customers or others including RESPA, FCRA, FTC Act, GLBA, FHA, TSR, ESIGN Act, ADA, OFAC, and other federal and state-specific laws and regulations, including those that impose requirements related to unfair or deceptive business practices and consumer protection, as well as other state laws relating to privacy, information security, and conduct in connection with data breaches.
In addition to the laws, regulations, and rules that apply to our customers and others, and that we facilitate compliance with, we may be deemed to be subject to certain laws, regulations, and rules through our relationships with our customers or others including RESPA, FCRA, FTC Act, GLBA, FHA, TCPA, TSR, ESIGN Act, ADA, OFAC, and other federal and state-specific laws and regulations, including those that impose requirements related to unfair or deceptive business practices and consumer protection, as well as other state laws relating to privacy, information security, and conduct in connection with data breaches.
As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline. Our quarterly operating results may fluctuate as a result of a variety of factors, many of which are outside of our control.
Our quarterly operating results may fluctuate as a result of a variety of factors, many of which are outside of our control. If our quarterly operating results or guidance fall below the expectations of research analysts or investors, the price of our common stock could decline substantially.
If personal, confidential, or sensitive user information or property data that we maintain and store is breached or otherwise accessed by unauthorized persons, it may be costly to mitigate, and our reputation could be harmed.
We may not be able to protect our systems, technology and infrastructure from cyberattacks and cyberattacks experienced by third parties may adversely affect us. If personal, confidential, or sensitive user information or property data that we maintain and store is breached or otherwise accessed by unauthorized persons, it may be costly to mitigate, and our reputation could be harmed.
For example, state law requires all companies licensed to write property insurance in Texas to be a member of the Texas Windstorm Insurance Association (TWIA). TWIA provides basic property coverage to applicants in certain designated catastrophe areas who are unable to obtain insurance in the private market. Carrier participation is based on the amount of a company’s voluntary market share.
TWIA provides basic property coverage to applicants in certain designated catastrophe areas who are unable to obtain insurance in the private market. Carrier participation is based on the amount of a company’s voluntary market share.
In addition, we accept payments (including recurring payments) from home services companies, consumers and service providers. The manner in which we share, store, use, disclose and protect this information is determined by the respective privacy and data security policies of our various businesses, as well as federal and state laws and regulations and evolving industry standards and practices.
The manner in which we share, store, use, disclose and protect 31 Table of Content s this information is determined by the respective privacy and data security policies of our various businesses, as well as federal and state laws and regulations and evolving industry standards and practices.
These efforts may not be successful or cost-effective. 23 Table of Contents Our ability to market our brands on any given property or channel is subject to the policies of the relevant third-party seller or publisher of advertising or marketing affiliate.
Our ability to market our brands on any given property or channel is subject to the policies of the relevant third-party seller or publisher of advertising or marketing affiliate.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe do not anticipate any future problems renewing or obtaining suitable leases for us or any of our businesses. ​ Item 3. Legal Proceedings TCPA Proceedings . Porch and/or an acquired entity, GoSmith.com, are party to twelve legal proceedings alleging violations of the automated calling and/or Do Not Call restrictions of the Telephone Consumer Protection Act of 1991.
Biggest changeWe do not anticipate any future problems renewing or obtaining suitable leases for us or any of our businesses.
Removed
Some of these actions allege related state law claims. The proceedings were commenced as mass tort actions by a single plaintiffs’ law firm in December 2019 and April/May 2020 in federal district courts throughout the United States. One of the actions was dismissed with prejudice and was appealed to the Ninth Circuit Court of Appeals.
Removed
On October 12, 2022, in a split decision, the Ninth Circuit Court of Appeals reversed. The remaining cases were consolidated in the United States District Court for the Western District of Washington, where Porch resides. The Court has set a brief schedule on Defendants’ forthcoming motion to dismiss. The case is stayed pending resolution of Defendants’ motion.
Removed
Plaintiffs seek actual, statutory, and/or treble damages, injunctive relief, and reasonable attorneys’ fees and costs. These actions are at an early stage in the litigation process. It is not possible to determine the likelihood of an unfavorable outcome of these disputes, although it is reasonably possible that the outcome of these actions may be unfavorable.
Removed
Further, it is not possible to estimate the range or amount of potential loss (if the outcome should be unfavorable). Porch intends to contest these cases vigorously. Kandela Proceeding .
Removed
In May 2020, the former owners of Kandela, LLC filed complaints against Porch in the Superior Court of the State of California, alleging a breach of contract related to the terms and achievement of an earnout agreement related to the acquisition of the Kandela business and related fraudulent inducement claims.
Removed
Claimants sought to recover compensatory damages based on an asset purchase agreement entered into with Porch and related employment agreements. Claimants also sought punitive damages, attorney’s fees and costs. Certain claimants settled their claims, and this settlement is within the range of the estimated accrual. Arbitration of the remaining claims occurred in March 2022.
Removed
In July 2022, the Arbitrator issued his Final Award finding no merit to any of the claims asserted by claimant Kandela, LLC and determined Porch to be the prevailing party on all counts.
Removed
The Arbitrator also awarded Porch and its insurers legal fees and costs in the amount of $1.4 million as the prevailing party and, if recovered in full, a significant portion of which would be expected to be allocable to its corporate insurance providers.
Removed
On October 12, 2022, the Los Angeles Superior Court confirmed the Arbitration Award and entered Judgment in Porch’s favor . As required by the order, Kandela has failed to pay the judgement in Porch’s favor. On January 18, 2023, Porch filed a fraudulent claim against Kandela and its members for wrongfully distributing assets that could have satisfied the judgement.
Removed
Putative Wage and Hours Class Action Proceeding . A former employee of HireAHelper™ filed a complaint in San Diego County Superior Court in November 2020, asserting putative class action claims for failure to pay overtime, failure to pay compensation at the time of separation and unfair business practices in violation of California law.
Removed
HireAHelper™ was served with the complaint in December 2020 and on January 28, 2021, defendants removed the case to the United States District Court for the Southern District of California.
Removed
The plaintiff seeks to represent all current and former non-exempt employees of HireAHelper™ and Porch (prior to the December 23, 2020 merger) and Porch’s other affiliated companies in the State of California during the relevant time period. Plaintiffs sought damages for unpaid wages, liquidated damages, penalties, attorneys’ fees and costs.
Removed
The parties recently attended mediation, which was successful, and a deal was reached. The parties have executed the long form settlement agreement and obtained final approval of the settlement from the court on August 11, 2022. Porch paid the individual settlement in September 2022, 57 Table of Contents and Plaintiff’s individual claims were dismissed and released.
Removed
Porch also funded the class action settlement in September 2022 and the settlement payments to the class were distributed in October 2022. The settlement is now final, and the class action release runs through April 25, 2022. The settlement checks expire in 180 days, at which point the case will be closed.
Removed
In addition, in the ordinary course of business, Porch and its subsidiaries are (or may become) parties to litigation involving property, personal injury, contract, intellectual property and other claims, as well as stockholder derivative actions, class action lawsuits and other matters. The amounts that may be recovered in such matters may be subject to insurance coverage.
Removed
Although the results of legal proceedings and claims cannot be predicted with certainty, neither Porch nor any of its subsidiaries is currently a party to any legal proceedings the outcome of which, we believe, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition or results of operations. ​ Item 4.
Removed
Mine Safety Disclosures Not applicable. ​ PART II

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

0 edited+8 added−104 removed0 unchanged
Removed
Item 3. Legal Proceedings ” for additional information with respect to material litigation and other proceedings to which we are party. Our moving services business is subject to state regulations and certain state regulatory structures do not address our business model for moving services.
Added
Item 3. Legal Proceedings Cases Under Telephone Consumer Protection Act . Porch and/or an acquired entity, GoSmith.com, are party to a legal proceeding alleging violations of the automated calling and/or internal and National Do Not Call restrictions of the Telephone Consumer Protection Act of 1991 and a related Washington state law claim.
Removed
Compliance with required licensure and other regulatory requirements could be costly and any inability to comply could harm our business. Our moving services business is subject to licensure and bonding requirements that various states impose in connection with the performance of certain services and trades.
Added
The proceedings were commenced as thirteen separate mass tort actions brought by a single plaintiffs’ law firm in December 2019 and April/May 2020 in federal district courts throughout the United States. One of the actions was dismissed with prejudice and appealed to the Ninth Circuit Court of Appeals.
Removed
Additionally, in some jurisdictions, the existing regulatory structures do not contemplate our hybrid business model of marketplace (where consumers search for providers on our platform and book moving services themselves) and managed services (where we manage moving services on consumers’ behalf).
Added
While the appeal was pending, the remaining cases were consolidated in the United States District Court for the Western District of Washington, where Porch resides. On October 12, 2022, in a split decision, the Ninth Circuit Court of Appeals reversed. Following remand, that case was also consolidated with the Western District of Washington action.
Removed
Furthermore, interest groups in certain jurisdictions have lobbied and may in the future lobby for regulations that make our hybrid model more difficult or impossible to maintain in those jurisdictions. Any future changes to (or judicial or regulatory interpretations of) these regulations, whether due to lobbying efforts or otherwise, could impose significant compliance costs.
Added
Plaintiffs then filed a motion for leave to file a second amended complaint, which was granted in part and denied in part. The Second Amended Complaint was filed in July 2023. In September 2023, Defendants filed a Motion to Strike the Second Amended Complaint; this motion was denied. Defendants’ Motion to Dismiss was filed on February 15, 2024.
Removed
Any failure to obtain or maintain required licensure and otherwise comply with applicable regulations in relevant jurisdictions could inhibit or prohibit our ability to operate our moving services business in those jurisdictions.
Added
The parties’ filed a required Joint Status Report and Discovery Plan on February 16, 2024. Plaintiffs seek actual, statutory, and/or treble damages, injunctive relief, and reasonable attorneys’ fees and costs. The action is at an early stage in the litigation process.
Removed
Additionally, we may be deemed, correctly or incorrectly, a contractor with respect to our service providers, which may subject us to licensure and/or bonding requirements and may subject us to penalties for past operations. Any of the foregoing could have a negative impact on our business, financial condition and results of operations.
Added
It is not possible to determine the likelihood of an unfavorable outcome of these disputes, although it is reasonably possible that the outcome of these actions may be unfavorable. Further, it is not possible to estimate the range or amount of potential loss (if the outcome should be unfavorable). We intend to contest this case vigorously.
Removed
Moreover, any failures by us, contracted operators, or third-party carriers, to comply with the various applicable federal safety laws and regulations, or downgrades in our safety rating, could have a material adverse impact on our operations or financial condition, and could cause us to lose customers, as well as the ability to obtain insurance coverage for certain moving services. 49 Table of Contents Our primary operating subsidiary may not be qualified to do business in all jurisdictions in which we have sufficient nexus of operations to require qualification.
Added
In addition, in the ordinary course of business, us and our subsidiaries are (or may become) parties to litigation involving property, personal injury, contract, intellectual property and other claims, as well as stockholder derivative actions, class action lawsuits and other matters. The amounts that may be recovered in such matters may be subject to insurance coverage.
Removed
While we offer products and services to home services companies, service providers and consumers in all 50 states, Porch.com, Inc., our primary operating subsidiary, is qualified to do business only in Washington, Texas and Delaware.
Added
Although the results of legal proceedings and claims cannot be predicted with certainty, neither us nor any of our subsidiaries are currently a party to any legal proceedings the outcome of which, we believe, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition or results of operations.
Removed
Failure by us or any of our subsidiaries to qualify as a foreign corporation in a jurisdiction where we are required to do so could subject us to penalties and the obligation to pay taxes for prior periods, and could result in our inability to enforce contracts in such jurisdictions.
Removed
Any such failure could have a material adverse effect on our business, results of operations and financial condition. Risks Relating to Our Acquisition Strategy The Company’s earnings growth strategy is partially dependent on the acquisition and successful integration of other businesses. The Company has a history of acquiring businesses as part of its earnings growth strategy.
Removed
Typically, the Company considers acquiring companies that can be integrated within an existing business. Acquisitions of this type involve numerous risks, which may include a failure to realize expected revenue growth and operating and cost synergies from integration initiatives, increasing dependency on the markets served by the combined businesses or increased debt to finance the acquisitions.
Removed
The Company also considers the acquisition of businesses that may operate independent of existing businesses.
Removed
Acquisitions of this type involve risks similar to those encountered when acquiring companies that can be integrated within an existing business, including a failure to realize expected revenue growth or operating and cost reductions within the acquired business, and could increase the possibility of diverting corporate management’s attention from its existing operations.
Removed
The successful realization of revenue growth, cost reductions and synergies with our existing businesses, and within acquired stand-alone businesses, and increases in profitability overall, are dependent upon successful integration initiatives. If these integration initiatives are not fully realized, there may be a negative effect on the Company’s business, financial condition, results of operations and cash flows.
Removed
We may experience risks related to acquisitions. We have made acquisitions in the past and we continue to seek to identify potential acquisition candidates to expand our business generally in the future. If we do not identify suitable acquisition candidates or complete acquisitions with satisfactory pricing and other terms, our growth could be adversely affected.
Removed
Even if we complete what we believe to be suitable acquisitions, we may experience related operational and financial risks.
Removed
As a result, to the extent that we continue to grow through acquisitions, we will need to: ● properly identify, value, and complete prospective acquisitions, especially those of companies with limited operating histories; ● successfully integrate acquired businesses to the extent and in a manner that aligns with our strategy; ● successfully identify and realize potential synergies among acquired and existing business; ● retain or hire senior management and other key personnel at acquired businesses; and ● successfully manage acquisition-related strain on our management, operations and financial resources. ​ We may not be successful in addressing these challenges or any other problems encountered in connection with historical and future acquisitions.
Removed
Adverse reactions by potential acquisition targets could frustrate our ability to execute on our acquisition strategy as could the failure of our due diligence process to uncover material risks, legal or otherwise. We may also be negatively impacted by adverse reactions of home services companies, consumers, service providers and business partners to the disclosure or consummation of any acquisition.
Removed
In addition, the anticipated benefits of one or more acquisitions may not be realized. Also, future acquisitions could result in increased operating losses, dilutive issuances of equity securities and/or the assumption of contingent liabilities.
Removed
Additionally, acquisitions may be 50 Table of Contents compensated in part with future or contingent payments that will create future liabilities or dilution for us upon the consummation of such acquisitions. Lastly, the value of goodwill and other intangible assets acquired could be impacted by one or more continuing unfavorable events and/or trends, which could result in significant impairment charges.
Removed
The occurrence of any of these events could have an adverse effects on our business, financial condition and results of operations. The success of any acquisition depends on achieving anticipated synergies, benefits and cost savings, and further depends, in part, on our ability to successfully combine and integrate our culture and current operations with the acquired company’s culture and business.
Removed
It is possible that the integration process could result in higher than expected costs, diversion of management attention, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with customers, suppliers, vendors and employees, operating in a decentralized environment for longer than expected, or to achieve the anticipated benefits and cost savings of any particular acquisition.
Removed
If we experience difficulties with the integration process or other unforeseen costs, the anticipated benefits and cost savings of any acquisition may not be realized fully or at all, or may take longer to realize than expected. Management continues to refine its integration plan.
Removed
The integration planning and implementation process will result in significant costs and divert management attention and resources. These integration matters could have an adverse effect on our combined company for an undetermined period. Any of the foregoing may have a material and adverse effect on our business, results of operations and financial condition.
Removed
We may not be able to effectively manage our growth. Our future growth, if any, may cause a significant strain on our management and our operational, financial, and other resources. Our ability to manage our growth effectively will require us to implement and improve our operational, financial, and management systems and to expand, train, manage, and motivate our employees.
Removed
These demands may require the hiring of additional management personnel and the development of additional expertise by our management. Any increase in resources used without a corresponding increase in our operational, financial, and management systems could have a material adverse effect on our business, financial condition, and results of operations.
Removed
Risks Relating to our Convertible Notes due 2026 (the “2026 Notes”) and Indebtedness The conditional conversion feature of the 2026 Notes, if triggered, may adversely affect our financial condition and operating results. We completed an offering of the 2026 Notes in September 2021.
Removed
In the event the conditional conversion feature of the notes is triggered, holders of notes will be entitled to convert the notes at any time during specified periods at their option.
Removed
If one or more holders elect to convert their notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
Removed
In addition, even if holders do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
Removed
Conversion of our 2026 Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock. The conversion of some or all of our 2026 Notes may dilute the ownership interests of our stockholders.
Removed
Upon conversion of the notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock.
Removed
If we elect to settle our conversion obligation in shares of our common stock or a combination of cash and shares of our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
Removed
However, in connection with the pricing of the 2026 Notes, we entered into capped call transactions with certain option counterparties.
Removed
The capped call transactions are expected generally to reduce (but not eliminate) potential dilution to our common stock upon conversion of any notes and/or offset any cash payments we are required to make in excess of the 51 Table of Contents principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap.
Removed
Finally, the existence of the 2026 Notes may encourage short selling by market participants that engage in hedging or arbitrage activity, and anticipated conversion of the notes into shares of our common stock could depress the price of our common stock.
Removed
Certain provisions in the indenture governing the 2026 Notes may delay or prevent an otherwise beneficial takeover attempt of us. Certain provisions in the indenture governing the 2026 Notes may make it more difficult or expensive for a third party to acquire us.
Removed
For example, the indenture governing the notes requires us to repurchase the notes for cash upon the occurrence of a fundamental change (as defined in the indenture governing the notes) of us and, in certain circumstances, to increase the conversion rate for a holder that converts their notes in connection with a make-whole fundamental change (as defined in the indenture governing the notes).
Removed
A takeover of us may trigger the requirement that we repurchase the notes and/or increase the conversion rate, which could make it more costly for a potential acquirer to engage in such takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors.
Removed
Servicing our indebtedness requires a significant amount of cash, and we may not have sufficient cash flow from our business to make such payments.
Removed
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness now or in the future (including the 2026 Notes), depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
Removed
In addition, our ability to repurchase the 2026 Notes or to pay cash upon conversions of the notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our business may not continue to generate cash flow from operations in the future sufficient to service our indebtedness and make necessary capital expenditures.
Removed
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive.
Removed
Our ability to refinance indebtedness (including the 2026 Notes) will depend on the capital markets and our financial condition at such time.
Removed
Our failure to repurchase notes at a time when the repurchase is required by the indenture or to pay any cash payable on future conversions of the notes as required by the indenture would constitute a default under the indenture.
Removed
A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our future indebtedness.
Removed
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes or make cash payments upon conversions thereof.
Removed
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default the notes. The accounting method for the 2026 Notes could adversely affect our reported financial condition and results.
Removed
The accounting method for reflecting the 2026 Notes on our balance sheet, accruing interest expense for the notes and reflecting the underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition.
Removed
We expect that the notes will be reflected as a liability on our balance sheets, with the initial carrying amount equal to the principal amount of the notes, net of issuance costs.
Removed
The issuance costs attributable to the notes will be treated as a debt discount for accounting purposes, which will be amortized into interest expense over the term of the notes.
Removed
As a result of this amortization, the interest expense that we expect to recognize for the notes for accounting purposes will be greater than the cash interest payments we will pay on the notes, which will result in lower reported income.
Removed
In addition, we expect that the shares underlying the notes will be reflected in our diluted earnings per share using the “if converted” method. However, if reflecting the notes in diluted earnings per share is anti-dilutive, then the shares underlying the notes will not be reflected in our diluted earnings per share.
Removed
Accounting standards may change in the future in a manner that may adversely affect our diluted earnings per share. Furthermore, if any of the conditions to the convertibility of the notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the notes as current, rather than a long-term, liability.
Removed
This reclassification could be required even if no noteholders convert their notes and could materially reduce our reported working capital. 52 Table of Contents The capped call transactions may affect the value of the 2026 Notes and our common stock. In connection with the pricing of the 2026 Notes, we entered into capped call transactions with certain option counterparties.
Removed
The capped call transactions are expected generally to reduce potential dilution to our common stock upon conversion of any notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap.
Removed
In connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the notes.
Removed
In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so during any observation period related to a conversion of notes).
Removed
This activity could cause or avoid an increase or a decrease in the market price of our common stock or the notes, which could affect your ability to convert the notes and, to the extent the activity occurs following conversion or during any observation period related to a conversion of notes, it could affect the number of shares and value of the consideration that you will receive upon conversion of such notes.
Removed
Finally, if any such capped call transactions fail to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock and the value of the notes.
Removed
Additional Risks Relating to Ownership of Company Securities The price of the Company’s securities may change significantly, and investors could lose all or part of their investment as a result. The trading price of the Company’s common stock is likely to be volatile. The stock market recently has experienced extreme volatility.
Removed
This volatility often has been unrelated or disproportionate to the operating performance of particular companies.
Removed
You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in “ Risks Relating to Porch’s Business and Industry ” and the following: ● results of operations that vary from the expectations of securities analysts and investors; ● results of operations that vary from those of the Company’s competitors; ● the duration and impact of the COVID-19 pandemic and its continued effect on the Company’s business and financial conditions; ● changes in expectations as to the Company’s future financial performance, including financial estimates and investment recommendations by securities analysts and investors; ● declines in the market prices of stocks generally; ● strategic actions by the Company or its competitors; ● announcements by the Company or its competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; ● any significant change in the Company’s management; ● changes in general economic or market conditions or trends in the Company’s industry or markets; ● changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to the Company’s business; ● future sales of the Company’s common stock or other securities; ● investor perceptions or the investment opportunity associated with the Company’s common stock relative to other investment alternatives; ● the public’s response to press releases or other public announcements by the Company or third parties, including the Company’s filings with the SEC; ● litigation involving the Company, the Company’s industry, or both, or investigations by regulators into the Company’s operations or those of the Company’s competitors; ● guidance, if any, that the Company provides to the public, any changes in this guidance or the Company’s failure to meet this guidance; 53 Table of Contents ● additional dilution caused by the Company issuing additional equity, whether grants related to its Management Incentive Plan, stock provided to acquisitions as some or all of the purchase price, future fundraising events, or other issuances approved by the Company’s Board of Directors; ● the development and sustainability of an active trading market for the Company’s common stock; ● actions by institutional or activist stockholders; ● changes in accounting standards, policies, guidelines, interpretations or principles; and ● other events or factors, including those resulting from natural disasters, war, acts of terrorism, other global health crises and pandemics, or responses to these events. ​ These broad market and industry fluctuations may adversely affect the market price of the Company’s common stock, regardless of the Company’s actual operating performance.
Removed
In addition, price volatility may be greater if the public float and trading volume of the Company’s common stock is low. In the past, following periods of market volatility, stockholders have instituted securities class action litigation.
Removed
If the Company was involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from the Company’s business regardless of the outcome of such litigation.
Removed
Future sales, or the perception of future sales, by the Company or its stockholders in the public market could cause the market price for the Company’s common stock to decline.
Removed
The sale of shares of the Company’s common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of the Company’s common stock.
Removed
These sales, or the possibility that these sales may occur, also might make it more difficult for the Company to sell equity securities in the future at a time and at a price that it deems appropriate.
Removed
Lock-up agreements entered into by certain existing stockholders of the Company recently expired following the 12-month anniversary of the Company’s merger with PTAC and launch as a public company in December 2020. Shares held by such stockholders are currently eligible for resale, subject to volume, manner of sale and other limitations under Rule 144.
Removed
If such stockholders begin selling their shares or are perceived by the market as intending to sell them, the market price of the common stock could drop significantly. These factors could also make it more difficult for us to raise additional funds through future offerings of common stock or other securities.
Removed
In addition, common stock reserved for future issuance under our equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable.
Removed
As of December 31, 2022, the aggregate number of shares of common stock reserved for future issuance under our equity incentive plans is 11,189,745.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+13 added−0 removed2 unchanged
Biggest changePorch’s insurance company subsidiaries are highly regulated and are restricted by statute as to the amount of dividends they may pay without the prior approval of their respective regulatory authorities. Securities Authorized for Issuance Under Equity Compensation Plans See “
Biggest changeOur insurance company subsidiaries are highly regulated and are restricted by statute as to the amount of dividends they may pay without the prior approval of their respective regulatory authorities.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the NASDAQ Capital Market under the symbol “PRCH.” Holders There were 685 stockholders of record as of March 10, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the Nasdaq Capital Market under the symbol “PRCH.” Holders There were 554 stockholders of record as of March 8, 2024.
Added
Recent Sales of Unregistered Securities On April 17, 2023, we entered into convertible note subscription agreements (the “Subscription Agreements”) with certain institutional investors (the “Investors”), pursuant to which we agreed to issue and sell (at an issue price of 95% of par value) $333.3 million in aggregate principal amount of a new series of 6.75% convertible senior secured notes due 2028 (the “2028 Notes”) in a private placement to Investors (the “2028 Notes Offering”).
Added
On April 20, 2023, we consummated the 2028 Notes Offering.
Added
We received net cash proceeds of approximately $100 million from the 2028 Notes Offering after (i) the repurchase of $200.0 million aggregate principal amount of our existing 0.75% convertible senior notes due 2026 (the “2026 Notes”) in the 2026 Notes Repurchase (as defined below), (ii) repayment of $10 million principal amount of existing subsidiary secured indebtedness, and (iii) payment of accrued interest and related transaction fees and expenses.
Added
We issued the 2028 Notes under an indenture, dated as of April 20, 2023 (the “Indenture”), among the Company, certain subsidiaries of the Company, as Subsidiary Guarantors, and U.S. Bank Trust Company, National Association, in its capacity as trustee and as collateral agent thereunder.
Added
The 2028 Notes will be convertible into cash, shares of our common stock, or a combination of cash and shares of common stock at our election at an initial conversion rate of 39.9956 shares of common stock per one-thousand dollars principal amount of the 2028 Notes, which is equivalent to an initial conversion price of approximately $25.00 per share of common stock.
Added
A maximum of 13.3 million shares of our common stock may be issued upon conversion of the 2028 Notes, subject to customary adjustments.
Added
The 2028 Notes are convertible at the option of the holders (in whole or in part) at any time prior to the close of business on the business day immediately preceding July 1, 2028, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2023 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in Section 1.01 of the Indenture) per one thousand dollars principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of common stock and the conversion rate on each such trading day; (3) if we call any or all of the 2028 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of certain corporate events as specified in the Indenture.
Added
On or after July 1, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or a portion of their 2028 Notes at any time, regardless of the foregoing circumstances.
Added
On or after October 1, 2024, we may redeem (an “Optional Redemption”) for cash all or any portion of the 2028 Notes at a redemption price equal to the Applicable Percentage (as defined in the Indenture) of the principal amount of such 2028 46 Table of Content s Notes, plus accrued and unpaid interest to, but excluding, the applicable redemption date; provided, however, that if we elect to redeem fewer than all of the outstanding 2028 Notes, we must, in the case of each Optional Redemption, elect to redeem a minimum of $62.5 million in aggregate principal amount of 2028 Notes.
Added
No sinking fund is provided for the 2028 Notes. The 2028 Notes were not be registered under the Securities Act , and were issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering.
Added
Performance Graph The following graph depicts the total cumulative stockholder return on our common stock from January 13, 2020, the first day of trading of our common stock on the Nasdaq stock exchange, through December 31, 2023, relative to the performance of the Standard & Poor’s 500 Index “S&P 500 ” and S&P 500 Information Technology Sector Index “S&P 500 IT”.
Added
The graph assumes an initial investment of $100.00 at the close of trading on January 13, 2020. The performance shown in the graph below is not intended to forecast or be indicative of future stock price performance.
Added
January 13, December 31, 2020 2020 2021 2022 2023 Porch Group, Inc. $ 100 $ 145 $ 165 $ 15 $ 31 SP 500 Index 100 115 140 115 145 SP 500 IT Index 100 130 170 135 202 The performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

77 edited+97 added−120 removed16 unchanged
Biggest changeThe following table sets forth our historical operating results for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ $ ​ % ​ 2022 2021 Change ​ Change ​ (dollar amounts in thousands) Revenue $ 275,948 ​ $ 192,433 ​ $ 83,515 ​ 43 % Operating expenses: ​ ​ ​ ​ ​ Cost of revenue 107,577 ​ 58,725 ​ 48,852 ​ 83 % Selling and marketing 113,848 ​ 84,273 ​ 29,575 ​ 35 % Product and technology 59,565 ​ 47,005 ​ 12,560 ​ 27 % General and administrative 110,619 ​ 85,795 ​ 24,824 ​ 29 % Impairment loss on intangible assets and goodwill ​ 61,386 ​ ​ — ​ ​ 61,386 ​ NM ​ Gain on divestiture of businesses ​ — ​ ​ — ​ ​ — ​ NM ​ Total operating expenses 452,995 ​ 275,798 ​ 177,197 ​ 64 % Operating loss (177,047) ​ (83,365) ​ (93,682) ​ 112 % Other income (expense): ​ ​ ​ ​ Interest expense (8,723) ​ (5,757) ​ (2,966) ​ 52 % Change in fair value of earnout liability ​ 13,822 ​ ​ (18,519) ​ ​ 32,341 ​ NM ​ Change in fair value of private warrant liability ​ 14,486 ​ ​ (15,389) ​ ​ 29,875 ​ NM ​ Gain on extinguishment of debt ​ — ​ ​ 5,110 ​ ​ (5,110) ​ NM ​ Investment income and realized gains, net of investment expenses ​ 1,174 ​ ​ 701 ​ ​ 473 ​ 67 % Other income (expense), net 571 ​ 340 ​ 231 ​ 68 % Total other income (expense) 21,330 ​ (33,514) ​ 54,844 ​ NM ​ Loss before income taxes (155,717) ​ (116,879) ​ (38,838) ​ 33 % Income tax benefit (expense) (842) ​ 10,273 ​ (11,115) ​ NM ​ Net loss $ (156,559) ​ $ (106,606) ​ $ (49,953) ​ 47 % NM — percentage calculated is not meaningful. 71 Table of Contents Revenue Total revenue increased by $83.5 million, or 43% from $192.4 million for the year ended December 31, 2021, to $275.9 million in the same period in 2022.
Biggest changeConsolidated Results of Operations Year Ended December 31, 2023 2022 $ Change % Change (dollar amounts in thousands) Revenue $ 430,302 $ 275,948 $ 154,354 56 % Operating expenses: Cost of revenue 220,243 107,577 112,666 105 % Selling and marketing 144,307 113,848 30,459 27 % Product and technology 58,502 59,565 (1,063) (2) % General and administrative 103,192 109,814 (6,622) (6) % Provision for doubtful accounts 37,180 805 36,375 4,519 % Impairment loss on intangible assets and goodwill 57,232 61,386 (4,154) (7) % Total operating expenses 620,656 452,995 167,661 37 % Operating loss (190,354) (177,047) (13,307) 8 % Other income (expense): Interest expense (31,828) (8,723) (23,105) 265 % Change in fair value of earnout liability 44 13,822 (13,778) (100) % Change in fair value of private warrant liability (444) 14,486 (14,930) (103) % Change in fair value of derivatives (4,261) — (4,261) N/A Gain on extinguishment of debt 81,354 — 81,354 N/A Investment income and realized gains, net of investment expenses 8,285 1,174 7,111 606 % Other income, net 3,893 571 3,322 582 % Total other income 57,043 21,330 35,713 167 % Loss before income taxes (133,311) (155,717) 22,406 (14) % Income tax provision (622) (842) 220 (26) % Net loss $ (133,933) $ (156,559) $ 22,626 (14) % Revenue The overall 56% increase in revenue for the year ended December 31, 2023, when compared with the year ended December 31, 2022, was primarily driven by a 152%, or $184.2 million, increase in our Insurance segment as a result of increases in per-policy premiums and lower reinsurance ceding.
Events that trigger a test for recoverability include a significant decrease in the market price for a long-lived asset, significant negative industry or economic trends, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-live asset, a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or a sustained decrease in share price.
Events that trigger a test for recoverability include a significant decrease in the market price for a long-lived asset, significant negative industry or economic trends, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset, a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or a sustained decrease in share price.
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.
Average Monthly Revenue per Account in Quarter is defined as the average revenue per month generated across all home services company customer accounts in a quarterly period. Average Monthly Revenue per Account in Quarter is derived from all customers and total revenue.
The Company may not be able to obtain equity or additional debt financing in the future when needed or, if available, the terms may not be satisfactory to the Company or could be dilutive to its stockholders. Porch Group, Inc. is a holding company that transacts a majority of its business through operating subsidiaries, including insurance subsidiaries.
We may not be able to obtain equity or additional debt financing in the future when needed or, if available, the terms may not be satisfactory to us or could be dilutive to its stockholders. Porch Group, Inc. is a holding company that transacts a majority of its business through operating subsidiaries, including insurance subsidiaries.
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’s consolidated financial statements.
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 our consolidated financial statements.
If factors indicate that the fair value of the reporting unit is less than its carrying amount, we perform a quantitative assessment and the fair value of the reporting unit is estimated by using a combination of market approaches based on peer performance and discounted cash flow methodologies.
If factors indicate that the fair value of the reporting unit is less than its carrying amount, we 52 Table of Content s perform a quantitative assessment and the fair value of the reporting unit is estimated by using a combination of market approaches based on peer performance and discounted cash flow methodologies.
Porch may also incur future income or expenses similar to those excluded from these non-GAAP financial measures, and Porch’s presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or non-recurring items.
We may also incur future income or expenses similar to those excluded from these non-GAAP financial measures, and the presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or non-recurring items.
We also have certain non-cancellable purchase commitments primarily for data purchases. As of December 31, 2022, our other contractual commitments associated with agreements that are enforceable and legally binding and that specify all significant terms were payments of $4.6 million due in the next 12 months and $4.6 million due thereafter.
We also have certain non-cancellable purchase commitments primarily for data purchases. As of December 31, 2023, our other contractual commitments associated with agreements that are enforceable and legally binding and that specify all significant terms were payments of $4.4 million due in the next 12 months and $5.2 million due thereafter.
Also during 2022, the Company participated in an advance funding arrangement with third-party financers that provide the Company with contract premiums upfront for certain home warranty contracts. We remain obligated to repay these premiums to the third-party financer if a customer cancels its warranty contract prior to full repayment of the advance funding amount received by the Company.
Advance Funding Arrangement During 2023 and 2022, we participated in an advance funding arrangement with third-party financers that provide us with contract premiums upfront for certain home warranty contracts. We remain obligated to repay these premiums to the third-party financer if a customer cancels its warranty contract prior to full repayment of the advance funding amount received by us.
If collectability of substantially all consideration to which the Company is entitled under the contract is determined to be not probable, revenue is not recorded until collectability becomes probable at a later date.
If collectability of substantially all consideration to which we are entitled under the contract is determined to be not probable, revenue is not recorded until collectability becomes probable at a later date.
Based on the Company’s current operating and growth plan, management believes cash and cash equivalents at December 31, 2022, are sufficient to finance the Company’s operations, planned capital expenditures, working capital requirements and debt service obligations for at least the next 12 months.
Based on our current operating and growth plan, management believes cash and cash equivalents at December 31, 2023, are sufficient to finance our operations, planned capital expenditures, working capital requirements and debt service obligations for at least the next 12 months.
The accounting estimates associated with acquisitions are complex due to judgements and assumptions involved in determining (1) the total consideration paid because we have used cash, stock and earnouts and (2) the value of assets acquired and liabilities assumed.
The accounting estimates associated with acquisitions are complex due to judgments and assumptions involved in determining (1) the total consideration paid because we have used cash, equity, and earnouts and (2) the value of assets acquired and liabilities assumed.
However, Porch’s definitions and methodology in calculating these non-GAAP measures may not be comparable to those used by other companies. In addition, Porch may modify the presentation of these non-GAAP financial measures in the future, and any such modification may be material.
However, our definitions and methodology in calculating these non-GAAP measures may not be comparable to those used by other companies. In addition, we may modify the presentation of these non-GAAP financial measures in the future, and any such modification may be material.
For more information regarding our purchase commitments, see Note 16 (Commitments and contingencies) to the accompanying consolidated financial statements included in Item 8 of this Annual Report. We expect to fund these obligations with cash flows from operations and cash on our balance sheet.
For more information regarding our purchase commitments, see Note 16, Commitments and Contingencies, of the Notes to Consolidated Financial Statements included in “ Item 8. Financial Statements and Supplementary Data,” of this Annual Report. We expect to fund these obligations with cash flows from operations and cash on our balance sheet.
Contingent consideration, which represents an obligation of the Company to make additional payments or equity interests to the former owner as part of the purchase price if specified future events occur or 69 Table of Contents conditions are met, is accounted for at the acquisition date fair value either as a liability or as equity depending on the terms of the acquisition agreement.
Contingent consideration, which represents our obligation to make additional payments or equity interests to the former owner as part of the purchase price if specified future events occur or conditions are met, is accounted for at the acquisition date fair value either as a liability or as equity depending on the terms of the acquisition agreement.
Porch believes that the use of these non-GAAP financial measures provides investors with useful information to evaluate Porch’s operating and financial performance and trends and in comparing Porch’s financial results with competitors, other similar companies and companies across different industries, many of which present similar non-GAAP financial measures to investors.
We believe that the use of these non-GAAP financial measures provides investors with useful information to evaluate our operating and financial performance and trends and in comparing our financial results with competitors, other similar companies and companies across different industries, many of which present similar non-GAAP financial measures to investors.
For more information regarding our lease obligations, see Note 13 (Leases) to the accompanying consolidated financial statements included in Item 8 of this Annual Report. In addition, we have a substantial level of debt. For more information regarding our debt service obligations, see Note 7 (Debt) to the accompanying consolidated financial statements included in Item 8 of this Annual Report.
For more information regarding our lease obligations, see Note 13, Leases, of the Notes to Consolidated Financial Statements included in “ Item 8. Financial Statements and Supplementary Data,” of this Annual Report. In addition, we have a substantial level of debt. For more information regarding our debt service obligations, see Note 7, Debt, of the Notes to Consolidated Financial Statements.
Net changes in working capital provided $37.2 million, primarily due to increases in insurance-related liabilities and deferred revenue. Investing Cash Flows Net cash used in investing activities was $79.7 million for the year ended December 31, 2022.
Net changes in working capital provided $37.2 million, primarily due to increases in insurance-related liabilities and deferred revenue. Investing Cash Flows Net cash used in investing activities was $56.3 million for the year ended December 31, 2023.
If approved by the TDI, the insurance underwriting business of Porch will be conducted through the Reciprocal. A Porch subsidiary would serve as the 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.
If approved by the TDI, our insurance underwriting business will be conducted through the Reciprocal. A Porch subsidiary would serve as the operator (or “attorney-in-fact”) for the Reciprocal. In that role it would perform underwriting, claims, and management services for the Reciprocal and receive a management fee calculated as a percentage of its premiums.
Change in fair value of private warrant liability Change in fair value of private warrant liability was $14.5 million (gain) for the year ended December 31, 2022 and $15.4 million (loss) in the same period in 2021.
Change in fair value of private warrant liability The change in fair value of the private warrant liability was a loss of $0.4 million for the year ended December 31, 2023, and a gain of $14.5 million in the same period in 2022.
The Company allocates the purchase price of the acquisition to the assets acquired and liabilities assumed based on estimates of the fair value at the dates of the acquisitions.
We allocate the purchase price of the acquisition to the assets acquired and liabilities assumed based on estimates of the fair value at the dates of the acquisitions.
Consequently, the Company’s ability to pay dividends and expenses is largely dependent on dividends or other distributions from its subsidiaries. Porch’s insurance company subsidiaries are highly regulated and are restricted by statute as to the amount of dividends they may pay without the prior approval of their respective regulatory authorities.
Consequently, our ability to pay dividends and expenses is largely dependent on dividends or other 59 Table of Content s distributions from our subsidiaries. Our insurance company subsidiaries are highly regulated and are restricted by statute as to the amount of dividends they may pay without the prior approval of their respective regulatory authorities.
The following are key factors affecting our operating results in 2022, 2021 and 2020: ● The U.S. housing market continues to see impacts from higher interest rates, existing home inventory tightening, and affordability challenges, impacting the Vertical Software segment.
The following key factors affected our operating results. • The U.S. housing market continues to see impacts from higher interest rates, existing home inventory tightening, and affordability challenges, impacting the Vertical Software segment.
Management’s Discussion and Analysis of Condition and Results of Operations ” in the 2021 Annual Report on Form 10-K as filed with the SEC on March 16, 2022 for the comparison of segment revenue for the years ended December 31, 2021 and 2020.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2022 Annual Report on Form 10-K as filed with the SEC on March 16, 2023, for the comparison of the results of operations for the years ended December 31, 2022 and 2021.
As the Company’s operations evolve and continues its growth strategy, including through acquisitions, the Company may elect or need to obtain alternative sources of capital, and it may finance additional liquidity needs in the future through one or more equity or debt financings.
As our operations evolve and continue our growth strategy, including through acquisitions, we may elect or need to obtain alternative sources of capital, and we may finance additional liquidity needs in the future through one or more equity or debt financings.
The Company tracks the number of monetized services performed through its platform each quarter and the revenue generated per service performed in order to measure market penetration with homebuyers and homeowners and the Company ’ s ability to deliver high-revenue services within those groups.
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.
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 the Company . ● Average Revenue per Account per Month in Quarter — Management views the Company ’ s ability to increase revenue generated from existing customers as a key component of Porch ’ s growth strategy.
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 Monthly Revenue per Account in Quarter — We view our ability to increase revenue generated from existing customers as a key component of our growth strategy.
Intangible assets are recorded at their fair value based on estimates as of the date of acquisition. Goodwill is recorded as the residual amount of the purchase price consideration less the fair value assigned to the individual identifiable assets acquired and liabilities assumed as of the date of acquisition.
Goodwill is recorded as the residual amount of the purchase price consideration less the fair value assigned to the individual identifiable assets acquired and liabilities assumed as of the date of acquisition.
EIG and HOA’s managing general agent would act as general agents for the Reciprocal and HOAIC and 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 the Company.
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.
Critical Accounting Policies and Estimates The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes.
As disclosed in Note 1, Description of Business and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements, the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
Porch management defines the average number of companies in a quarter as the straight-line average of the number of companies as of the end of period compared with the beginning of period 60 Table of Contents across all of the Company’s home services verticals that (i) generate recurring revenue and (ii) generated revenue in the quarter.
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.
We plan to enhance the consumer experience, our app and digital platform and integration of data platform across Porch, to invest in development of additional modules across all vertical software businesses and to enhance our corporate systems.
We have made and expect to continue to make additional investments in our infrastructure to scale our operations and increase productivity. We plan to enhance the consumer experience, our app and digital platform and integration of data platform across Porch, to invest in development of additional modules across all vertical software businesses and to enhance our corporate systems.
Due to COVID-19, some small companies put their business with the Company on hold which is reflected in lower number of total companies in 2020 and higher average revenue per account. 61 Table of Contents ● Monetized Services in Quarter — Porch connects consumers with home services companies nationwide and offers 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.
Monetized Services — 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.
As of December 31, 2022, cash and cash equivalents of $78.1 million and investments held by these companies was $91.6 million. Insurance companies in the United States are also required by state law to maintain a minimum level of policyholder’s surplus.
As of December 31, 2023, our insurance carrier, HOA, held cash and cash equivalents of $207.6 million and investments of $102.8 million. Insurance companies in the United States are also required by state law to maintain a minimum level of policyholder’s surplus.
We also make certain assumptions about future economic conditions and other data. Many of these factors used in assessing fair value are outside the control of management and these assumptions and estimates may change in future periods.
We also make certain assumptions about future economic conditions and other data. Many of these factors used in assessing fair value are outside the control of management and these assumptions and estimates may change in future periods. Impairment of Goodwill We test goodwill for impairment annually or whenever events or changes in circumstances indicate that an impairment may exist.
Porch management uses these non-GAAP financial measures as supplemental measures of Porch’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.
Adjusted EBITDA (Loss) as a percent of revenue is defined as Adjusted EBITDA (Loss) divided by total revenue. Our management uses these non-GAAP financial measures as supplemental measures of our 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.
Contract payment terms vary from due upon receipt to net 30 days. Collectability is assessed based on a number of factors including collection history and creditworthiness of the customer.
Changes in variable consideration may result in an increase or a decrease to revenue. 51 Table of Content s Contract payment terms vary from due upon receipt to net 30 days. Collectability is assessed based on a number of factors including collection history and creditworthiness of the customer.
Impairment loss on intangible assets and goodwill In the year ended December 31, 2022, the Company recorded impairment losses on intangible assets and goodwill totaling $61.4 million, which included a $43.7 million goodwill impairment at its Insurance segment, and a $17.7 million impairment of intangible assets within its Vertical Software segment.
In 2022, we recorded impairment losses on intangible assets and goodwill totaling $61.4 million, which included a $43.7 million goodwill impairment in our Insurance segment and a $17.7 million intangible impairment in our Vertical Software segment.
Change in fair value of earnout liability Changes in fair value of earnout liability were $13.8 million (gain) for the year ended December 31, 2022 and $18.5 million (loss) in the same period in 2021. The decrease in fair value was primarily due to the decline in the stock price at December 31, 2022 as compared to December 31, 2021.
Changes in fair value of the earnout liability for the year ended December 31, 2022, were $13.8 million and were primarily due to the decrease in the stock price during the year.
Financing Cash Flows Net cash provided by financing activities was $1.2 million for the year ended December 31, 2022. Net cash provided by financing activities is primarily related to proceeds from advance funding and debt issuance, net of fees of $33.6 million and exercises of options $1.1 million.
Net cash provided by financing activities is primarily related to proceeds from advance funding and debt issuance, net of fees, of $33.6 million.
Recent Accounting Pronouncements See Note 1 (Description of Business and Summary of Significant Accounting Policies) to the accompanying consolidated financial statements included in Item 8 of this Annual Report, for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.
Financial Statements and Supplementary Data,” of this Annual Report, for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations. 61 Table of Content s
Off-Balance Sheet Arrangements Since the date of our incorporation, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Since the date of our incorporation, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. The following table provides a summary of cash flow data for the years ended December 31, 2023 and 2022.
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.
These key performance measures and operating metrics are not prepared in accordance with GAAP and may not be comparable to or calculated in the same way as other similarly titled measures and metrics used by other companies. 48 Table of Content s The following table summarizes operating metrics for each of the quarterly periods indicated.
Management’s Discussion and Analysis of Condition and Results of Operations ” in the 2021 Annual Report on Form 10-K as filed with the SEC on March 16, 2022 for the comparison of the results of operations for the years ended December 31, 2021 and 2020. 73 Table of Contents Segment Results of Operations We operate our business as two reportable segments that are also our operating segments: Vertical Software and Insurance.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2022 Annual Report on Form 10-K as filed with the SEC on March 16, 2023, for the comparison of the results of operations for the years ended December 31, 2022 and 2021.
Monetized Services in Quarter is defined as the total number of unique services from which the Company 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 — Management believes that shifting the mix of services delivered to homebuyers and homeowners toward higher revenue services is an important component of Porch ’ s growth strategy.
Monetized Services is defined as the total number of services from which we generated revenue, including, but not limited to, new and renewing 49 Table of Content s insurance and warranty customers, completed moving jobs, security installations, TV/Internet installations or other home projects, measured over the period.
Basis of Presentation The consolidated financial statements and accompanying notes of Porch include the accounts of the Company and its consolidated subsidiaries and were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The company consolidates acquisitions as of the date on which the Company obtains controlling financial interest.
Basis of Presentation The consolidated financial statements and accompanying notes include the accounts of Porch Group, Inc., and its wholly owned subsidiaries and were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All significant intercompany accounts and transactions are eliminated in consolidation.
Financing Cash Flows Net cash provided by financing activities was $415.5 million for the year ended December 31, 2021. Net cash provided by financing activities is primarily related to the issuance of the 2026 Notes of $413.5 million, exercises of warrants of $126.7 million and exercises of options $4.3 million.
Financing Cash Flows Net cash provided by financing activities was $91.0 million for the year ended December 31, 2023. Net cash provided by financing activities is primarily related to the net proceeds from issuance of the 2028 Notes of $116.7 million.
These impairment charges reflect recent continued inflationary pressures, the Company’s common stock valuation, 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 same period in 2021.
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.
For additional information about our segments, see Note 17 (Segment Information) to the accompanying consolidated financial statements included in Item 8 of this Annual Report.
Segment Results of Operations We operate our business as two reportable segments that are also our operating segments: Vertical Software and Insurance. For additional information about our segments, see Note 17, Segment Information, of the Notes to Consolidated Financial Statements included in “ Item 8. Financial Statements and Supplementary Data,” of this Annual Report.
The key performance measures and operating metrics we use in managing our businesses are set forth below.
Key Performance Measures and Operating Metrics 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.
Key Factors Affecting Operating Results The Company has been implementing its strategy as a vertical software platform for the home, providing software and services to approximately 30,900 companies and small businesses, such as home inspectors, moving companies, utility companies, warranty companies and others. The Company’s Insurance segment continues to grow scale, through both policy count, and geographic expansion.
Results of Operations Key Factors Affecting Operating Results We have been implementing our strategy as a vertical software platform for the home by providing software and services to approximately 30 thousand pre-and-post move home service providers including inspectors, real estate, title, and mortgage companies. Our Insurance segment continues to grow in scale through both premium growth and geographic expansion.
The Company identifies performance obligations in its contracts with customers (excluding insurance and warranty), which primarily include move-related transactions and post-move transactions such as, delivery of homeowner leads and performance of home project services , and providing access to the Company’s software platforms.
Revenue Recognition Our non-insurance performance obligations primarily include move-related transactions and post-move transactions such as delivery of homeowner leads and performance of home project services and providing access to our software platforms. The transaction price is determined based on the amount to which we expect to be entitled in exchange for providing the promised services to the customer.
Segment Adjusted EBITDA (Loss) Segment Adjusted EBITDA (loss) is defined as revenue less operating expenses associated with our segments. Segment Adjusted EBITDA (loss) also excludes non-cash items, certain transactions that are not indicative of ongoing segment operating and financial performance and are not reflective of the Company’s core operations.
Segment Adjusted EBITDA (Loss) Segment Adjusted EBITDA (Loss) is defined as revenue less the following expenses associated with each segment: cost of revenue, selling and marketing, product and technology, general and administrative expenses, and provision for doubtful accounts. Segment Adjusted EBITDA (Loss) also excludes non-cash items or items that management does not consider reflective of ongoing core operations.
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. 75 Table of Contents See the reconciliation tables below for more details regarding these non-GAAP financial measures, including the reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.
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. 57 Table of Content s The following table reconciles net loss to Adjusted EBITDA (Loss) for the periods presented (dollar amounts in thousands).
This was partially offset by shares repurchased to pay income tax withholdings upon vesting of RSUs of $3.1 million, repurchases of stock of $1.8 million, payments of acquisition-related contingent consideration of $0.7 million and advance funding and debt repayments of $30.9 million and $5.2 million, respectively. 2021 Operating Cash Flows Net cash used in operating activities was $34.8 million for the year ended December 31, 2021.
This was partially offset by shares repurchased to pay income tax withholdings upon vesting of equity awards of $3.1 million, repurchases of stock of $1.8 million, and advance funding and debt repayments of $22.7 million and $5.2 million, respectively. Contractual Obligations and Commitments In addition to debt service payments, our principal commitments consist of obligations under leases for office space.
For the year ended December 31, 2021, Vertical Software segment revenue was $137.2 million or 71% of total revenue for the same period. The increase in revenue in 2022 is driven by the 2022 and 2021 acquisitions of RWS in April 2022, Rynoh in May 2021 and Floify in October 2021.
Insurance segment revenue was $305.2 million for the year ended December 31, 2023, and represented 71% of total revenue for the same period. For the year ended December 31, 2022, Insurance segment revenue was $121.0 million or 44% of total revenue for the same period. The increase was mainly driven by increases in per-policy premiums and lower reinsurance ceding.
For information on our significant accounting policies, see Note 1 (Description of Business and Summary of Significant Accounting Policies) to the accompanying consolidated financial statements included in Item 8 of this Annual Report. Certain accounting policies have a more significant impact on our financial statements due to the size of the financial statement elements and prevalence of their application.
Recent Accounting Pronouncements See Note 1, Description of Business and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in “ Item 8.
Net cash used in investing activities is primarily related to acquisitions, net of cash acquired of $256.4 million, purchases of investment of $24.0 million, investments to develop internal use software of $3.7 million purchases of property and equipment of $1.0 million. This was partly offset by the cash inflows related to maturities and sales of investments of $21.7 million.
Net cash used in investing activities is primarily related to purchases of investments of $91.0 million and investments to develop internal use software of $9.2 million.
The decrease in fair value was primarily due to the decline in the stock price at December 31, 2022 as compared to December 31, 2021. During 2021, $31.7 million was reclassified to additional paid in capital as a result of warrant exercises. There were no exercises during 2022.
The increase in the fair value of the liability was primarily due to the recovery in the stock price at December 31, 2023, as compared to December 31, 2022.
Recent Developments Share Repurchases In October 2022, the Company’s Board of Directors approved a share repurchase program authorizing management to repurchase up to $15 million in the Company’s common stock and/or convertible notes. Repurchases under this program may be made from time to time on the open market between November 10, 2022 and June 30, 2023, at prevailing market prices.
We paid $3.0 million cash, or 37.5% of par, in the repurchase transaction. This transaction reduced the outstanding principal on the 2026 Notes from $225.0 million to $217.0 million. Share Repurchases In October 2022, our board of directors approved a share repurchase program authorizing management to repurchase up to $15.0 million in our common stock and/or convertible notes.
Investment income and realized gains, net of investment expenses Investment income and realized gains, net of investment expenses was $1.2 million for the year ended December 31, 2022, and $0.7 million in the same period in 2021.
See Note 7, Debt, of the Notes to Consolidated Financial Statements. 55 Table of Content s Investment income and realized gains, net of investment expenses Investment income and realized gains, net of investment expenses increased by $7.1 million from $1.2 million for the year ended December 31, 2022, to $8.3 million for the year ended December 31, 2023.
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.
When calculating Average Quarterly Revenue per Monetized Service, average revenue is defined as total quarterly service transaction revenues generated from monetized services. Recent Developments Convertible Notes Financing In April 2023, we issued $333.3 million of 6.75% Senior Secured Convertible Notes due in 2028 (the “2028 Notes”) in a private placement transaction.
Segment Revenue Comparison of Year Ended December 31, 2022 to Year Ended December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ Year Ended December 31, 2021 ​ Change, $ ​ ​ Vertical Software Segment ​ Insurance Segment ​ Vertical Software Segment ​ Insurance Segment ​ Vertical Software Segment ​ Insurance Segment Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Software and service subscriptions ​ $ 72,777 ​ $ — ​ $ 57,004 ​ $ — ​ $ 15,773 ​ $ — Move-related transactions ​ ​ 62,317 ​ ​ — ​ ​ 60,996 ​ ​ — ​ ​ 1,321 ​ ​ — Post-move transactions ​ ​ 19,821 ​ ​ — ​ ​ 19,150 ​ ​ — ​ ​ 671 ​ ​ — Insurance ​ ​ — ​ ​ 121,033 ​ ​ — ​ ​ 55,283 ​ ​ — ​ ​ 65,750 Total revenue ​ $ 154,915 ​ $ 121,033 ​ $ 137,150 ​ $ 55,283 ​ $ 17,765 ​ $ 65,750 ​ For the year ended December 31, 2022, Vertical Software segment revenue was $154.9 million or 56% of total revenue for the same period.
Segment Revenue Year Ended December 31, 2023 2022 $ Change % Change Vertical Software segment Software and service subscriptions $ 67,697 $ 72,777 $ (5,080) (7) % Move-related transactions 40,350 62,317 (21,967) (35) % Post-move transactions 17,069 19,821 (2,752) (14) % Total Vertical Software segment revenue 125,116 154,915 (29,799) (19) % Insurance segment Insurance and warranty premiums, commissions and policy fees 305,186 121,033 184,153 152 % Total Insurance segment revenue 305,186 121,033 184,153 152 % Total revenue $ 430,302 $ 275,948 $ 154,354 56 % For the year ended December 31, 2023, Vertical Software segment revenue was $125.1 million or 29% of total revenue for the same period.
Insurance segment’s Adjusted EBITDA (loss) in 2022 was a result of significantly higher claims costs caused by severe weather events in the second half of 2022. ​ Non-GAAP Financial Measures This Annual Report includes non-GAAP financial measures, such as Adjusted EBITDA (loss), Adjusted EBITDA (loss) as a percent of revenue, average revenue per monetized service and revenue less cost of revenue. ​ Porch defines Adjusted EBITDA (loss) as net income (loss) adjusted for interest expense, net, income taxes, other expenses, net, depreciation and amortization, impairment loss on intangible assets and goodwill, non-cash losses and impairment of property, equipment and software, stock-based compensation expense and acquisition-related impacts, amortization of intangible assets, gains (losses) recognized on changes in the value of contingent consideration arrangements, if any, gain or loss on divestures and certain transaction costs.
We define 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.
The Company has incurred losses since its inception, and has an accumulated deficit at December 31, 2022 and December 31, 2021 totaling $585.0 million and $424.1 million, respectively. As of December 31, 2022, and December 31, 2021 the Company had $451.1 million and $425.6 million aggregate principal amount outstanding of debt, respectively.
Operations and Other Resources We have incurred losses since our inception, and we have an accumulated deficit at December 31, 2023 and 2022, totaling $722.1 million and $585.0 million, respectively.
As of December 31, 2022, the principal balance of this advance funding arrangement is $15.7 million. See Note 7 (Debt). In September 2021, the Company completed a private offering of $425 million aggregate principal amounts of its 2026 Notes.
As of December 31, 2023, and 2022, we had $558.7 million and $451.1 million, respectively, of aggregate principal amount outstanding in convertible notes, promissory notes, line of credit, term loan facility, and advance funding arrangement. 2026 Convertible Senior Notes In September 2021, we completed a private offering of $425.0 million aggregate principal amount of 0.75% Convertible Senior Notes due on September 15, 2026.
Actual results could differ materially from those estimates and assumptions, and those differences could be material to the consolidated financial statements. At least quarterly, we evaluate our estimates and assumptions and make changes accordingly.
Actual results could differ materially from those estimates and assumptions, and those differences could be material to the consolidated financial statements. We believe that the following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, and complex judgments.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Business Overview Porch Group is a leading vertical software company reinventing the home services and insurance industries.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Business Overview Porch Group, Inc., together with its consolidated subsidiaries, (“Porch Group,” “Porch,” the “Company,” “we,” “our,” “us”) is a leading vertical software and insurance platform and is positioned to be the best partner to help homebuyers move, maintain, and fully protect their homes.
Claims costs for these events were driven higher due in part to inflation-related pressures. As a percentage of revenue, cost of revenue represented 39% of revenue for the year ended December 31, 2022, compared with 31% in the same period in 2021.
As a percentage of revenue, cost of revenue represented 51% of revenue in 2023 compared with 39% in 2022. 54 Table of Content s Selling and marketing The 27% increase in selling and marketing expenses for the year ended December 31, 2023, when compared with the year ended December 31, 2022, was due to higher costs in the Insurance segment’s variable policy acquisition and marketing expenses related to lower ceding percentages.
As a percentage of revenue, selling and marketing expenses represented 41% of revenue for the year ended December 31, 2022, compared with 44% in the same period in 2021. The improvement in selling and marketing expenses as a percentage of revenue is due to the growing economies of scale in the insurance, inspection and moving groups.
As a percentage of revenue, selling and marketing expenses represented 34% of revenue in the current year compared to 41% of revenue in the prior year.
Net cash used in operating activities consists of net loss of $106.6 million, adjusted for non-cash items and the effect of changes in working capital.
Net cash provided by operating activities consists of net loss of $133.9 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash charges primarily include stock-based compensation expense of $20.7 million, depreciation and amortization of $24.4 million, provision for doubtful accounts of $37.2 million, and impairment losses of $57.2 million.
Net changes in working capital provided $15.7 million, primarily due to increases in insurance-related liabilities. 79 Table of Contents Investing Cash Flows Net cash used in investing activities was $263.4 million for the year ended December 31, 2021.
This was partly offset by the cash inflows related to maturities and sales of investments of $46.8 million. 60 Table of Content s Net cash used in investing activities was $79.7 million for the year ended December 31, 2022.
Continued investments in sales and marketing and product and technology related to consumer experience, app build out, data platforms and investments in establishing and maintaining SOX and other internal controls across IT and accounting organizations further impacted Adjusted EBITDA (loss). This decline was partially offset by the impact of the 2022 and 2021 acquisitions.
Continued investments in sales and marketing and investments in establishing and maintaining the requirements of the Sarbanes-Oxley Act (“SOX”) and other internal controls across IT and accounting organizations further impacted Adjusted EBITDA (Loss). Liquidity and Capital Resources In our early years, we raised capital primarily through equity investments.
Interest expense, net Interest expense increased by $2.9 million, or 52% from $5.8 million for the year ended December 31, 2021, to $8.7 million in the same period in 2022.
Other income, net Other income, net, increased by $3.3 million from $0.6 million for the year ended December 31, 2022, to $3.9 million for the year ended December 31, 2023. The increase is due to larger cash balances in higher yield accounts. Refer to “ Item 7.
The following table provides a summary of cash flow data for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, $ % ​ ​ 2022 2021 Change Change ​ Net cash used in operating activities ​ $ (17,736) ​ $ (34,777) ​ $ 17,041 49 % Net cash used in investing activities ​ (79,678) ​ (263,433) ​ 183,755 70 % Net cash provided by financing activities ​ 1,227 ​ 415,549 ​ (414,322) 100 % Change in cash, cash equivalents and restricted cash ​ $ (96,187) ​ $ 117,339 ​ $ (213,526) NM ​ NM — percentage calculated is not meaningful. 2022 Net cash used in operating activities was $17.7 million for the year ended December 31, 2022.
Year Ended December 31, 2023 2022 $ Change % Change Net cash provided by (used in) operating activities $ 33,929 $ (17,736) $ 51,665 (291) % Net cash used in investing activities (56,253) (79,678) 23,425 (29) % Net cash provided by financing activities 90,951 1,227 89,724 7,312 % Change in cash, cash equivalents and restricted cash $ 68,627 $ (96,187) $ 164,814 (171) % Operating Cash Flows Net cash provided by operating activities was $33.9 million for the year ended December 31, 2023.
The transaction price is determined based on the amount which the Company expects to be entitled to in exchange for providing the promised services to the customer. The transaction price in the contract is allocated to each distinct performance obligation on a relative standalone selling price basis. Revenue is recognized when or as performance obligations are satisfied.
The transaction price in the contract is allocated to each distinct performance obligation on a relative standalone selling price basis. In certain transactions, the transaction price is considered variable, and we record an estimate of the constrained transaction price.
See Note 17 74 Table of Contents (Segment Information) to the accompanying consolidated financial statements included in Item 8 of this Annual Report for additional information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2022 ​ ​ 2021 ​ ​ 2020 Segment adjusted EBITDA (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ Vertical Software ​ $ 14,678 ​ $ 20,733 ​ $ 12,718 Insurance ​ ​ (5,499) ​ ​ 9,007 ​ ​ 405 Corporate and Other (1) ​ ​ (58,780) ​ ​ (53,760) ​ ​ (30,001) Divested Businesses ​ ​ — ​ ​ — ​ ​ (1,441) Total segment adjusted EBITDA (loss) (2) ​ $ (49,601) ​ $ (24,020) ​ $ (18,319) ​ (1) Includes costs that are not directly attributable to our reportable segments, as well as certain shared costs.
See Note 17, Segment Information, of the Notes to Consolidated Financial Statements for reconciliations to GAAP consolidated financial information for the periods presented. 56 Table of Content s Year Ended December 31, 2023 2022 Segment Adjusted EBITDA (Loss): Vertical Software $ 4,307 $ 14,678 Insurance 12,320 (5,499) Subtotal 16,627 9,179 Corporate and other (61,141) (58,780) Adjusted EBITDA (Loss) $ (44,514) $ (49,601) Our Insurance segment had a Segment Adjusted EBITDA (Loss) of $12.3 million for the year ended December 31, 2023, compared to $(5.5) million in the same period last year.
Removed
Porch Group provides software and services to approximately 30,900 companies and small businesses, such as home inspectors, mortgage companies and loan officers, title companies, moving companies, real estate agencies, utility companies, roofers, insurance agencies, and others, helping these service providers grow their business and improve the customer experience for their customers.
Added
We offer differentiated products and services, with homeowners insurance at the center of this relationship. We differentiate and look to win in the massive and growing homeowners insurance opportunity by 1) providing the best services for homebuyers, 2) led by advantaged underwriting in insurance, 3) to protect the whole home.
Removed
Through these relationships, we gain unique and early access to homebuyers and homeowners, to then assist these consumers with critical services such as insurance, home warranty, and moving.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA one percent increase in interest rates in our variable rate indebtedness would result in a nominal change in annual interest expense. As of December 31, 2022, the Company’s insurance subsidiary has a $91.6 million portfolio of fixed income securities and an unrealized loss of approximately $6.2 million, as described in Note 3 (Investments).
Biggest changeOther debt as of December 31, 2023, totaled $0.3 million and is variable-rate. A 1% increase in interest rates in our variable rate indebtedness would result in a nominal change in annual interest expense.
In addition, the effects of inflation on consumers’ budgets could result in the reduction of consumer spending habits, specifically in the move and post-move markets. If unable to take actions to effectively mitigate the effect of the resulting higher costs, the Company’s profitability and financial position could be materially and adversely impacted.
In addition, the effects of inflation on consumers’ budgets could result in the reduction of consumer spending habits, specifically in the move and post-move markets. If unable to take actions to effectively mitigate the effect of the resulting higher costs, our profitability and financial position could be materially and adversely impacted.
While the Company and its management teams take action, wherever possible, to reduce the impact of the effects of inflation, in the case of sustained inflation across several of the markets in which Porch operates, it could become increasingly difficult to effectively mitigate the increases to costs.
While we take action wherever possible to reduce the impact of the effects of inflation, in the case of sustained inflation across several of the markets in which we operate, it could become increasingly difficult to effectively mitigate the increases to costs.
In a rising interest rate environment, the portfolio would result in unrealized losses. At December 31, 2022, accounts receivable and reinsurance balances due were $26.4 million and $299.1 million, respectively, were not interest-bearing assets and are generally collected in less than 180 days. As such, the Company does not consider these assets to have material interest rate risk.
In a rising interest rate environment, the portfolio would result in unrealized losses. As of December 31, 2023, accounts receivable and reinsurance balances due were $24.3 million and $83.6 million, respectively, were not interest-bearing assets, and are generally collected in less than 180 days. As such, we do not consider these assets to have material interest rate risk.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. As of December 31, 2022, we have an interest-bearing debt principal of $451.1 million.
Interest Rate Risk The market risk inherent in our financial instruments and financial position represents the potential loss arising from adverse changes in interest rates. As of December 31, 2023, and 2022, we had interest-bearing debt of $558.7 million and $451.1 million, respectively.
General economic factors beyond its control, and changes in the global economic environment, specifically fluctuations in inflation, including the access to credit under terms favorable to the Company, could result in lower revenues, higher costs and decreased margins and earnings in the foreseeable future.
Inflation Risk We believe our operations have been negatively affected by inflation and the change in the interest rate environment. General economic factors beyond our control and changes in the global economic environment, specifically fluctuations in inflation, including access to credit under favorable terms, could result in lower revenues, higher costs, and decreased margins and earnings in the foreseeable future.
Porch’s activities to date have been conducted in the United States. ​ Other Risks We are exposed to a variety of market and other risks, including risks to the availability of funding sources, reinsurance providers, weather and other catastrophic hazard events, and specific asset risks. ​ ​ 81 Table of Contents
Other Risks We are exposed to a variety of market and other risks, including risks to the availability of funding sources, reinsurance providers, weather and other catastrophic hazard events, and specific asset risks. 62 Table of Content s
Foreign Currency Risk There was no material foreign currency risk for the years ended December 31, 2022, 2021 and 2020.
Foreign Currency Risk There was no material foreign currency risk for the years ended December 31, 2023, 2022 and 2021. Our activities to date have been conducted in the United States.
Our 2026 Notes have a principal balance of $425 million as of December 31, 2022, have a fixed coupon rate of 75 basis points, and the effective interest rate is 1.3%. As such, interest expense on the 2026 Notes will not change if market interest rates increase.
Our 0.75% Convertible Senior Notes due 2026 (the “2026 Notes”) had a principal balance of $225.0 million as of December 31, 2023, a fixed coupon rate of 0.75%, and an effective interest rate of 1.3%.
Removed
The capped call transactions entered into concurrently with the issuance of our 2026 Notes 80 Table of Contents were completed to reduce the potential dilution from the conversion of the 2026 Notes. Other debt as of December 31, 2022 totaled $10.5 million and is variable-rate.
Added
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to a variety of market and other risks, including the effects of changes in interest rates, and inflation, as well as risks to the availability of funding sources, hazard events, and specific asset risks.
Removed
Inflation Risk The Company believes its operations have been negatively affected by inflation, in addition to the change in the interest rate environment.
Added
Our 6.75% Senior Secured Convertible Notes due 2028 (the “2028 Notes”) had a principal balance of $333.3 million as of December 31, 2023, a fixed coupon rate of 6.75%, and an effective interest rate of 17.9%. Interest expense recognized related to the 2028 Notes was approximately $26.3 million in the year ended December 31, 2023.
Added
Interest expense includes $15.7 million contractual interest expense and $10.6 million amortization of debt issuance costs and discount for the year ended December 31, 2023. Because the coupon rates are fixed, interest expense on the 2026 Notes and the 2028 Notes will not change if market interest rates increase.
Added
As of December 31, 2023, our insurance segment has a $139.2 million portfolio of fixed income securities and an unrealized gain (loss) of $(3.9) million, as described in Note 3, Investments, of the Notes to Consolidated Financial Statements included in “ Item 8. Financial Statements and Supplementary Data,” of this Annual Report.

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