Porch Group, Inc.

afternoon everyone and thank you for participating in Forge Group's third quarter 2022 conference call. Today we issued our third quarter earnings press release and related Form 8K to the SEC. The press release can be found in our investor relations website on ir.forgegroup.com. Joining us here today are Matt Ehrlichman, Marty Heiminger, Forge Group's CFO, Matthew Nagel, Forge Group's COO, Adam Kornick, President of our Insurance Division, and Malcolm Connor, VP and Group GM of our Warranty Division. Before we go any further, I'd like to read the company's Safe Harbor Statement within the meaning of the Private Securities Litigation Reform Act of 1995, which provides important cautions regarding our forward-looking statements. Today's discussion, including responses to your questions, management's views as of today, November 8, 2022. We do not undertake any obligations to update or revise this information. Additionally, we will make forward-looking statements about our future financial or business performance or conditions, business strategy and plans, and anticipated impacts from pending or completed acquisitions based on current expectations and assumptions. These statements are subject to risks and uncertainties, which could cause our actual results to differ materially from these forward-looking statements. We encourage you to consider the risk factors described in our SEC filings for additional information. We will reference both GAAP and non-GAAP financial measures on today's call. Please refer to today's press release for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during this variance call. As a reminder, this webcast will be available for replay shortly after the conclusion of this presentation on the investor relations section of the company's website at ir.forgegroup.com. The slide presentation will follow the presenter's commentary and can be found on the website. Today, in addition to covering third quarter 2022 results, updated full year 2022 guidance, and KPIs, Adam Kornick is here to provide an overview of the third quarter insurance results, and Malcolm Connor will join us to provide an update on our warranty business. And with that, I'll turn the call over to Matt Ehrlichman, CEO, Chairman, and Founder of Forge Group. Matt?

Thank you, Emily. Appreciate it. Good afternoon, everyone. Thank you for joining us for our third quarter 2022 earnings call. Certainly, 2022 has been a volatile year for what we've seen with the stock market, housing market, atypical weather, and inflation impacts on insurance costs. At the same time, this has been a year of focused work by the porch teams, and the progress made leaves me more confident than ever about what's ahead. Based on the quality of our team's work this year, we should have continued our strings of beats and raises. However, given the headwinds we'll discuss here today, we have adjusted our financial guidance for 2022. I'll start first with the challenges. So first, while we do not sell our own insurance products in Florida, Hurricane Ian, which was one of the largest storms this country has seen, did flow through South Carolina, which is our second largest state in terms of gross written premium. Hurricane Ian and an increased number of summer weather events drove losses out of our insurance division in the quarter. Inflation further impacted gross losses and resulted in a Q3 2022 gross loss ratio of 74% at homeowners of America, which is substantially higher than the historical Q3 results. I'll note in a moment how this has created an opportunity around future pricing for homeowner policies that we expect to drive growth and profitability going forward. Second on the list of challenges, the housing market continued to decline more than industry groups like the National Association of Realtors or NAR had forecasted. So for the third quarter, existing home sales declined over 22% on a year-over-year basis, a result of the continuous rise in interest rates. This is significantly higher than what was predicted at the beginning of the year, falling further than what was forecasted at the end of the second quarter. We've noted that much of our business is not impacted by the housing market, and you can see this based on how our business continues to grow nicely. However, we are seeing slower growth in move-related services and certain portions of our B2B software revenue. Third, due in part to the degree of drop in our stock price and the market changes over the last nine months, We are taking a non-cash goodwill and intangible impairment charge of $57 million this quarter. Marty will touch more on this later. So in total, because of these impacts, we're updating our full year 2022 revenue guidance to $275 million, which will be 43% year-over-year growth or 23% pro forma growth using the same methodology as we've used in the past. Additionally, with the incremental insurance claims costs and weather seen this quarter, we are updating adjusted EBITDA guidance to negative $48 million for the year. Now let's flip over and talk about the successes. We're entering the fourth quarter in a strong financial position with over $276 million in cash at quarter end, $16 million of which is restricted. Some of the most important and impactful initiatives that will contribute to the results in the future for our business have lined up very nicely for us. So first off, we continue to be confident in becoming adjusted EBITDA profitable starting in the second half of 2023 and ongoing thereafter. Matthew's going to share some additional detail on this important milestone here shortly. Second, in part due to our higher claims costs, insurance pricing increases have been approved. in our two largest states. So Texas of 25% increases and South Carolina of 35% increases. These start at each customer's next renewal with the following 12 months then showing higher recognized revenue. The higher prices are expected to aid in the profitability, certainly of our insurance business in 2023 and ongoing, as well as likely adding tailwinds to overall company revenue growth. Third in the list of successes, our teams are making real progress on initiatives that we expect will allow us to operate a more capital-efficient P&L at our insurance division. By exploring options like a reciprocal structure or deepening relationships with our key reinsurance partners, both of which Adam will touch on later, we're optimistic about the potential to further improve capital efficiency and significantly reduce or eliminate volatility over time. And fourth, execution around key initiatives continues to be strong. So during the quarter, we made the Porch app accessible across a broader inspection consumer base. Consumers so far are delighted with the tool we've built here, and we believe this product will be impactful over time. So even though the stock market continues to experience significant volatility over the next several quarters, we're convicted in getting to profitability in the near term and are excited about what's ahead for the company. As such, and as we announced just earlier today, our board has authorized management to spend up to $15 million, which is approximately 10% of our market capitalization, on repurchases of common stock or convertible notes. We'll assess which will provide the best returns for long-term shareholders, and you can find more on our new repurchase plan in today's press release in Form 8K. Before handing the call over to Marty to go through our financial performance in more detail, let me first reiterate our company strategy and priorities briefly. Looking here at slide seven, Borch provides software and services to select strategic verticals to help companies grow. By doing so, we generate B2B recurring software revenue, as well as gain early and ongoing access to home buyers who we help with key services such as homeowners insurance and warranty. Starting at the top of slide eight, Our company priorities have been consistent throughout the year. One, sell vertical software to more companies where we become deeply embedded. Two, provide key services and consumer experiences in our software products to get in front of more consumers. Three, extend our experiences, our digital tools, our app to consumers with the aim to be their partner for their home and increase our B2B2C transactions. Four, grow our insurance and warranty businesses both rapidly and profitably, including launching new products, new geographies, and furthering our capital-line approach. Five, build out our data platform and leverage Porch's unique insights to improve pricing for our insurance and warranty products. And finally, our priority for M&A continues to be the integration, SOX controls, and growth of past acquisitions. Lastly here, I'm excited to welcome some new members to our team. As we announced last week, Sean Tabak, who joins us with 20 plus years of experience across the industry, will start tomorrow as our new CFO. Huge thanks to Marty for his time in this role and for helping with the transition. In addition, Nicholas Graham started a month ago as the GM of our moving division. Nicholas had previously led the hot wire business at Expedia Group for a number of years. Finally, we also welcome two new independent board members this quarter. Amanda Rierson, and Camila Velasquez, who bring with them extensive experience in insurance, home services, and vertical software. Very excited to have you all on board. With that, I'll turn it over to Marty Heimbinger to discuss Q3 in greater detail. Marty?

Thanks, Matt, and good afternoon, everyone. I will start off with our third quarter financials, which you can see here on slide 11. Third quarter revenue increased 20%, from prior year to 75.4 million, driven primarily by our insurance and warranty businesses and contributions from acquisitions made over the last year. Year to date revenue is 208.7 million, an increase of 48% from the prior year. As Matt mentioned, Q3 revenue is lower than our expectations due to there being fewer home sales than anticipated at the start of the quarter. Our vertical software segment reported 44.5 million in revenue, a 5% increase from prior year. This segment includes our move related transaction revenue, which is most impacted by the volume of home buyers. Our insurance segment reported revenues of 30.9 million for the quarter, a 51% increase from the prior year. With upcoming insurance pricing increases rolling through, We expect this portion of our business to continue to grow nicely. Company revenue, less cost revenue margin was 56%, and adjusted EBITDA loss margin was negative 17%, compared to the prior year's 69% and positive 1%, respectively. Higher cost of revenue was caused by an increase in insurance claims costs, primarily due to inflation, and atypical weather events in Q3, including Hurricane Ian, which made landfall in South Carolina on the last day of the quarter. The change in adjusted EBITDA was due almost entirely from this increase in insurance claims costs. Finally, when you review our GAAP financials, you will notice we recorded a non-cash, goodwill, and intangible impairment of $57 million in the third quarter. This included 39.4 million goodwill impairment at our insurance segment, driven by the disruptions in the equity markets, specifically for property and casualty insurance companies, largely due to recent weather-related catastrophe events, and a 17.7 million intangible impairment at our vertical software segment. We determined that this impairment was appropriate considering the current macroeconomic environment and the continued deterioration in our equity market. It's important to note this is a non-cash charge without no impact to our business and no relation to our core underwriting operations. In slide 12, you can see our updated 2022 guidance. Top line revenue has been adjusted from 290 million to 275 million and adjusted EBITDA from negative 30 million to approximately negative 48 million for the year. Again, on a full year basis, same story. Of the 18 million expected change in adjusted EBITDA, the largest impact was atypical weather, including Hurricane Ian, and inflationary pressures on claims costs, which has contributed 15 million to this change. And slower than expected revenues due to the housing market contributed an additional 3 million. This guidance includes us assuming Q4 will continue to demonstrate inflationary pressure on insurance claims costs, continued steep declines in home purchases, and typical lower Q4 weather seasonality. The full change in revenue was caused by lower than expected home sales, which impacted move-related service and software revenues. You can see that revenue distribution here on slide 13. We now expect 44% of total 2022 revenue to come from our insurance segment. 27% from our B2B software and service subscription revenue, and the balance from move and post-move transaction revenue. Our insurance segment is the fastest growing part of our business, and we expect that to continue into 2023 and the foreseeable future. Long-term, our ability to profitably grow our business has not changed. We remain confident in our ability to grow while achieving our long-term 25% EBITDA margin targets. And with that, I'll turn it over to Matthew Nagel, our Chief Operating Officer, to discuss our key performance indicators for the quarter. Matthew?