Porch Group, Inc.

participating in Port Group's full-year 2022 conference call. Today, we issued our fourth quarter earnings release and related form 8K to the SEC. The press release can be found on our investor relations website at ir.portgroup.com. Joining me here today are Matt Ehrlichman, Port Group's CEO, Chairman and Founder, Sean Kabak, Port Group's CFO, Matthew Nagel, Port Group's COO, and Adam Kornick, Pret President of Porch Group's Insurance Division. Before we go further, I would like to take a moment to read the company's safe harbour statement within the meaning of the Private Securities Litigation Reform Act of 1995, which provides important cautions regarding forward-looking statements. Today's discussion, including responses to your questions, reflects management's views as of today, March 14th, 2023. We do not undertake any obligations to update or revise this information. Additionally, we will make forward-looking statements about our expected 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, as well as the risk factor information in these slides 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 earnings call. As a reminder, this webcast will be available for replay along with a presentation shortly after this call on the company's website at ir.porchgroup.com. And with that, I'll turn the call over to Matt Ehrlichman, CEO, Chairman, and Founder of Porch Group. Over to you, Matt.

Thank you, Lois. Welcome aboard. Good afternoon, everybody. I founded Porch a decade ago now with the mission to simplify homeownership. and over the years we have focused on building sustainable advantages that would allow us to win in key areas of focus the most valuable services for the home now with homeowners insurance at the center so first off i want to welcome sean our new cfo fantastic to have you on board and i'll just start by saying that i am proud of the work and contributions from the entire porch team in 2022 as we dealt with the impacts of inflation, challenging capital markets, unusual weather volatility, and the housing market that slowed substantially. Many, if not all, home service and insurance businesses faced these same headwinds, but we stayed focused on what we can control, and we took advantage of 2022 to move forward in our strategy and toward near-term profitability. We extended our market position and our software products in key verticals, We grew our insurance business with improved underwriting and increasing policies. We successfully integrated past acquisitions, we matured our financial systems, and we diversified our board by adding strong new members. So quickly looking at the financials, we ended 2022 with Q4 results of $64 million in revenue and $13 million in adjusted EBITDA loss. Q4 adjusted EBITDA would have been $7 million better if it hadn't been for Storm Elliott, which occurred in the last week of the year. For the 2022 full year, year-over-year revenue growth was 43%. Over the two years since we've been a public company, we've now grown revenue at a CAGR of 95%. Sean's going to share more details on the financial results here shortly. I'd like to reflect on 2022 as there were some key successes that really did move us forward. During the last year, our software division expanded its leadership position in the home inspection industry. We acquired Home Inspector Pro, an inspection software company that strengthened our SaaS offerings and residential warranty services, which has deepened our capabilities with home inspectors and home warranties. By selling software to now more than 30,000 home service companies, we have visibility into approximately 80% of all home buyers, as well as unique insights into the underlying properties. In 2022, we launched our well-received Porch app, which extends the experience we provide for consumers and continues to gain traction. We made great progress accessing more unique demand and data, a core competitive advantage, which gives us the opportunity to build a delightful consumer experience, and eventually the most effectively priced homeowners insurance. To accelerate our expansion into homeowners insurance, in 2021, we acquired Homeowners of America, or HOA, a company that provided us with both a regional insurance carrier and a managing general agency, or MGA. We've expanded that business both with new geographies and distribution, and I'm proud to share that in 2022, HOA was the fastest growing homeowners insurance carrier in the U.S. through the third quarter of the year. We accomplished this while having 2022 gross loss ratios of 72% better than other carriers, despite unexpected severe weather in our largest regions during the year. One of the reasons we chose HOA as the company to acquire is that it uniquely had the characteristics that we liked. Both an MGA and carrier business, a great leadership team, greater capital efficiency and less volatility than most by ceding much of the premiums to reinsurance companies, strong historic underwriting results, 15 years of historic claims data, and a healthy financial position. So we have the ambition to become an insurance company with a higher margin commission and fee-based model and to operate with limited seasonality and large swings in results from weather, all of which we believe would effectively create value for our shareholders long-term. While we continue to invest in strategic partnerships with reinsurance companies, we have been working for some time on the formation, structuring, and strategy programming and pricing of a reciprocal exchange. We will imminently file an application with the Texas Department of Insurance to create this reciprocal. If approved on the terms proposed by Porch, the Porch Insurance Reciprocal Exchange would be formed in Texas as an association owned by its policyholder members and not by Porch Group and our shareholders. This new entity would purchase our HOA insurance carrier and would hold ongoing premiums and ordinary course claims costs. Initially, Porch Group would provide the required capital to operate the reciprocal, and Adam's going to discuss the expected benefits and key considerations related to this strategy shortly in our deep dive. We have been looking forward to sharing more today, as we believe this is a key time for our company. and an attractive structure which allows us to better leverage our advantages and improve profitability over time. So I'll now hand it over to Adam Kornick, president of our insurance division, who will kick off with this deep dive into this launch and to provide further context before Sean takes over to cover results and guidance. So Adam, over to you. Thanks, Matt.

By way of background, I've been in the insurance industry for two decades, and 2022 was one of the most difficult years in my experience. We saw inflation increasing claims costs along with storms, with Hurricane Ian in Key 3 and Winter Storm Elliot in Key 4, plus increases in reinsurance pricing. We'll share updates today on how we are positioned for growth and profitability and our plans to mitigate volatility. First, let me take a step back and provide clarity on five different ways one could operate in the home insurance industry. So you can better understand how we operate today and how that compares to a reciprocal. So one, selling leads. It is a simpler business, less regulated, but it lacks annuity revenue streams and the ability to deliver a great consumer experience. Two, as a retail insurance agency. So agencies' commissions are limited, and they also rely on carriers for underwriting risk. Three, your third is a managing general agency, or MGA. Here, companies underwrite in price for uninsurance products and use the capacity of insurers and reinsurers. Commissions increase, but there is exposure to reinsurance cycles. Four, the fourth is a carrier. Insurance carriers write their own products and hold all or some of the premiums and risks, depending on where to see its reinsurers.