Porch Group, Inc.

Corch Group CFO, Matthew Nagel, Corch Group COO, and Jim Weld, GM of Rhino, Corch's title software company. Before we go further, I would like to take a moment to review the company's safe harbor statement within the meaning of the private securities litigation reformat 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 7th, 2024. 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, including the application for the reciprocal exchange, 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 four different statements. We encourage you to consider the risk factors and other risks and uncertainties described in our SEC filings, as well as the risk factor information in these slides, for additional information including factors that could cause our results to differ materially from current expectations. We will reference both GAAP and non-GAAP financial measures on today's calls. These refer to today's press release for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during this earnings call, which are available on our website. The financial information provided today is preliminary, unaudited, and subject to revision upon completion of the closing and audit processes. 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.portrait.com. I'll now turn the call over to Matt Ehrlichman, CEO, Chairman and Founder of Porch Group. Over to you, Matt.

Thanks, Lois. Good afternoon, everybody. Thanks very much for joining. I couldn't be more proud of the achievements and execution of the Porch team over the last year. Despite a sharp increase in interest rates over the last couple of years, higher cost of reinsurance and claims, contraction in the real estate market and historically challenging weather events, The team stuck together, stayed focused, and performed. We implemented our insurance profitability actions, which you'll hear throughout today's presentation. This includes enhancing underwriting activities, increasing premium per policy, and non-renewing higher risk policies. We launched porch warranty and new products for our software customers, increasing pricing while maintaining our high customer retention. And we reduced costs across our business while continuing investment across key growth initiatives. And as a result of the work we've done, financial results were strong and exceeded expectations. Revenue in the fourth quarter grew 79% to $115 million, $15 million above our prior guidance. Revenue less cost of revenue grew 82% to $80 million, $20 million above guidance. And Q4 adjusted EBITDA profit was $12 million, an increase of $25 million compared to the fourth quarter 2022, and $8 million above guidance. In every measure here, it was a great quarter. A few other key updates for the fourth quarter before we dive into the presentation. One, we handily beat the second half 2023 profitability target we set two years ago. with second half adjusted EBITDA of $21 million. Next, we had no material weaknesses. Huge thanks to Sean and the team for the expertise and leadership. This was a top priority for us as we completed system implementations and improved our control environment. A truly great achievement and well done team. Next, our business continues to make meaningful progress across many areas. In Q4 alone, We launched a new Rhino product for title companies. We landed a new utilities partnership, released a new HVAC micro warranty and a CRM product for smaller inspectors. Our moving business is executing a local full service offering, expanding on our leadership position and providing moving labor to consumers. This product increases the size of our market opportunity and provides a higher margin offering. Next, we released our first ESG report, which is available on our IR website. We look forward to sharing more on this in the future. And finally, we were admitted into Deloitte Technologies Fast 500 for 2023. Now over to you, Sean, on the financials.

Thanks, Matt. And good afternoon, everyone. As Matt mentioned, we are extremely pleased to accomplish our second half 2023 adjusted EBITDA target despite market headwinds. I wanted to thank our teams for their contribution and hard work to achieve this critical milestone. Moving to slide nine here to get into the financials. Revenue was $114.6 million in the fourth quarter of 2023, growth of 79% over the prior year, driven by our insurance sector, which grew 179%, partially offset by the vertical software sector. Revenue less cost of revenue was $79.9 million, resulting in a margin of 70% of revenue, which is a 120 basis point increase over the prior year, driven by the insurance profitability actions and software price increases. Adjusted EBITDA was $11.7 million, a 10% margin, and a $25 million increase over the prior year, driven by the insurance segment and strong cost controls. Gross written premium was $112 million, a decrease compared to prior year, as we focus on profitability and reducing risk for non-renewals and new business restrictions and higher risk zip codes. This is partially offset by an increase in premium per policy. The insurance segment was 76% of total revenue in the fourth quarter, an increase from 49% in the prior year. Revenue from our insurance segment was $86.9 million, growth of 179% over the prior year, driven by a 34% increase in premium per policy and lower reinsurance seating. Approximately one-third of the growth was from increases in premium per policy and two-thirds from the lower seating, partially offset by attrition with the non-renewals. Vertical software revenue was $27.7 million, a decline compared to the prior year, driven by the housing market headwinds, which particularly impacts moving services along with lower demand in corporate relocations. SaaS revenue remained resilient. Moving to adjusted EBITDA by segment, insurance segment adjusted EBITDA was $31.6 million in the fourth quarter of 2023. a 36% margin driven by insurance profitability actions, which drove a lower gross loss ratio compared to the prior year. Vertical software adjusted EBITDA loss was $300,000 with continued market pressure and moving services. Corporate expenses were $19.7 million, or 17% of total revenue, a 600 basis point improvement compared to the prior year.