Porch Group, Inc. Q3 FY2026 earnings call

• Organic Growth Engine: Reciprocal policies written grew 42% year-over-year to 68,000, accelerating from Q2’s 38% growth rate. Reciprocal Written Premium (RWP) reached $161 million, up 17% year-over-year.
• Profitability & Margins: Insurance services delivered its sixth consecutive 'Rule of 80' quarter. Adjusted EBITDA excluding the reciprocal more than doubled to $44 million. Gross loss ratio was 24%, with an attritional loss ratio of 18%.
• Distribution Expansion: Producing agency branch locations increased 114% year-over-year, while quote volume grew 79%. The conversion rate remained flat sequentially but is up 53% year-over-year.
• Capital Strength: Statutory surplus at the reciprocal stood at $174 million, up $22 million year-over-year, supporting nearly $1 billion in premium capacity. Porch Group ended Q3 with $165 million in cash and investments.
• M&A Strategy: Announced the pending acquisition of Allied Trust for approximately $200 million aggregate consideration. The deal is expected to be statutory surplus neutral for the reciprocal and accretive for Porch shareholders, targeting a payback period of three years through operational improvements.

Insurance Services: Revenue was $103 million, up 39% year-over-year. Adjusted EBITDA was $50 million, up 98% year-over-year, with a margin of 49%. This segment represents approximately 72% of the company's total consolidated revenue excluding the reciprocal. Software and Data: Revenue was $22 million, down year-over-year due to the exit from a lower-value product for small home service contractors. Adjusted EBITDA was $4 million. Consumer Services: Revenue was $18 million. Adjusted EBITDA was $3 million.

• FY 2026 Raised Guidance: Management raised the midpoint for full-year adjusted EBITDA excluding the reciprocal to $138 million (range $135–$140 million), representing ~79% YoY growth.
• Revenue Growth: FY 2026 guidance for Porch-owned segments revenue (excluding reciprocal) was raised to a range of $518–$523 million, implying 24% YoY growth.
• Gross Profit: FY 2026 gross profit excluding the reciprocal was raised to a range of $438–$443 million, representing an 85% gross margin at the midpoint.
• FY 2027 Baseline Targets: Provided initial visibility for 2027 assuming a full year of Allied contributions: >$900 million RWP, >360,000 reciprocal policies written, and >$180 million adjusted EBITDA excluding the reciprocal.

• Market Softening: The insurance market is currently softening due to decreased reinsurance costs and competition, leading to downward pressure on pricing for new customers.
• Customer Mix Impact: New customers represent a larger share of growth and typically start at lower premium levels, which affects the average premium per policy metrics in the short term.
• Integration Risks: The Allied Trust acquisition involves integrating different operational models; there is a risk that the lower premium-to-EBITDA conversion ratios inherent in Allied’s book may take 12–24 months to improve to Porch’s standards.

Q: Analyst asked about the room for improvement in Allied Trust’s lower premium-to-EBITDA conversion ratios and expected churn. / A: CEO stated that all acquired companies initially have lower conversion ratios than Porch’s unique model. He expects 12–24 months to apply Porch’s data and underwriting discipline to prune poor risks and adjust pricing, similar to the HOA integration. Regarding churn, he noted it is TBD until the deal closes, but emphasized Allied is a strong, well-run carrier with an exceptional rating, suggesting minimal disruption.

Q: Analyst inquired if the Allied acquisition impacts organic growth aggressiveness or capital capacity given the ATM program potential. / A: CEO clarified that the acquisition does not change their organic management strategy. They have substantial capital capacity ($174M surplus + non-admitted assets) to support rapid organic growth regardless of M&A. They expect premium and policy growth to accelerate in Q4 and continue strongly into 2027, treating Allied as additive to their existing trajectory.

Q: Analyst questioned how agencies are signing on despite market softness and if Allied opens new distribution opportunities. / A: COO explained that growth is driven by "blocking and tackling," emphasizing Porch’s differentiated tools, good products, and agent treatment. Regarding Allied, he noted it provides immediate entry into Louisiana, a new state for Porch. There will be synergies allowing cross-selling between Allied’s agencies and Porch’s network, accelerating growth in both directions.

Q: Analyst asked about the sustainability of the gap between RWP dollar growth and policy count growth, and long-term RWP targets. / A: CEO explained that they manage premium and policy counts to hit internal financial goals. In soft markets, they may accept higher policy counts with slightly lower premiums per new customer (down only 2% YoY). He reaffirmed the long-term organic RWP growth target remains above 20%, noting that tailwinds from 2025 new business renewals will support continued acceleration in Q4 and beyond.

Q: Analyst asked about the drivers of the soft market and how Porch’s structure protects margins during volatility. / A: CEO attributed the soft market to lower reinsurance prices and competition. He highlighted that Porch’s system is designed to absorb weather volatility because the reciprocal retains the risk but manages it via data. This allows Porch to maintain stable results regardless of weather events or reinsurance price spikes, making them a standout performer in hard cycles while still competing effectively in soft cycles.