Porch Group, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Launched the member-owned Porch Reciprocal Exchange in 2025, transforming Porch to a commission and fee-based model for predictable high-margin results.
• Q2 2025 revenue was $107 million, gross profit $89 million (431% increase y-o-y), adjusted EBITDA $16 million. Reciprocal written premium was $121 million.
• Surplus at the reciprocal ended Q2 at $299 million, a $102 million increase from Q1. The reciprocal had capital to support potential $1.5 billion in premium.
• Agency distribution channel growing, sales team scaled from 2 to 26 employees; Home factors data business progressing with carriers testing.
• Software and Data revenue up due to product innovation and price increases; Consumer Services margin improved despite revenue decrease.

Segment Performance

• Insurance Services: Generated revenue of $67.4 million from $121 million reciprocal written premium, with an 86% gross margin, $57.9 million gross profit, and segment adjusted EBITDA of $19.7 million (29% margin). Revenue conversion from reciprocal written premium was 56%.
• Software and Data: Revenue was $24 million (4% increase y-o-y), with a 76% gross margin, $18.2 million gross profit, and adjusted EBITDA of $5.5 million (a $1.5 million increase y-o-y).
• Consumer Services: Revenue was $17.7 million (6% decrease y-o-y), with an 86% gross margin, $15.2 million gross profit, and adjusted EBITDA of $2 million (an $800,000 increase y-o-y).

Guidance

• Raised 2025 revenue guidance to $405 million to $425 million, gross profit to $328 million to $342 million, and adjusted EBITDA midpoint to $67.5 million (range $65 million to $70 million).
• Reciprocal written premium Q2 grew 25% over Q1, on track to exceed 2025 target of $500 million.

Risks

• Impact of macroeconomic factors like interest rates, inflation, and housing market conditions.
• Weather events and reinsurance exposure, though reinsurance renewal lowered retention to $23 million to mitigate large event impact.

Question and Answer

• Q: Why did the take rate in insurance go to almost 56% from 51.5%?

A: Efficient transfer of reciprocal written premium to Porch shareholder interest revenue, better than expected.

• Q: Investment in sales and marketing for insurance?

A: Investments to drive surplus back to the reciprocal, including a quota share program change that impacts sales and marketing.

• Q: Attach rates to warranty and moving?

A: Strategic to differentiate product, with more metrics to be shared as they become available.

• Q: Applications of Home factors data outside underwriting?

A: Use in media campaigns with shorter sales cycles compared to carrier underwriting.

• Q: Reciprocal reception in markets?

A: Attractive markets, expanding states; carriers exiting some states create opportunities.

• Q: Loss ratio for reciprocal in Q2?

A: Gross loss ratio was 34% in Q2, vs a loss of ~$30 million in Q2 2024, with net income ~$6 million.

• Q: Home factors adoption timeline?

A: Interest strong, carriers engaged, progress on track with no revenue needed for 2025 targets.

• Q: Software price taking and EBITDA margins?

A: Ongoing price increases expected, with margin expansion expected while investing in business for long-term growth.