Q1 2024 Porch Group Inc Earnings Call

Unknown Executive: Good afternoon, everyone, and thank you for participating in Porch Group's first quarter 2024 conference call. Today we issued our earnings release and related Form 8K to the FEC. The press release can be found on our investor relations website at ir.porchgroup.com. Joining me here today are Matt Ehrlichman, Porch Group CEO, Chairman, and Founder, Shawn Tabak, Porch Group CFO, Matthew Neagle, Porch Group COO, and Ethan Ware, President and GM of Homeowners of America, Porch Group Insurance Carrier.

Good afternoon, everyone and thank you for that.

Unknown Executive: Cool cool Twenty-twenty Paul.

Unknown Executive: We issued our earnings release.

Unknown Executive: Okay.

Unknown Executive: The press release can be found on our Investor Relations website.

Unknown Executive: The wholesale dot com.

Unknown Executive: Joining me here today are not adequate.

Unknown Executive: And then of course, you need to see I, chairman and founder.

Unknown Executive: Do you want to back.

Unknown Executive: Hi, Matthew.

Unknown Executive: Matthew Mango.

Unknown Executive: Alright.

Unknown Executive: And why that's been in Jan.

Unknown Executive: Baca will keep insurance carrier.

Unknown Executive: 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 Mitigation 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, May 8th, 2024. We do not undertake any obligations to update or revise this information.

Unknown Executive: Before we go further I would like to take a moment to be the company's safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995.

Unknown Executive: Because by the important cautions regarding forward looking statements.

Unknown Executive: Today's discussion and clean Earth.

Unknown Executive: Welcome to your questions reflects management's views as of today may eight 2024.

Unknown Executive: We do not undertake any obligations to update or revise this information.

Unknown Executive: Additionally, we will make forward-looking statements about our expected future financial or business performance, business strategy, and plans, including the application for 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 forward-looking statements. We disclaim any obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.

Unknown Executive: Additionally, we will make forward looking statements about our expected future financial condition business strategy and plans, including applications never think next.

Unknown Executive: Change based on current expectations and assumptions.

Unknown Executive: These statements are subject to risks and uncertainties, which could cause our actual results to differ materially from these forward looking statements.

Unknown Executive: We disclaim any obligation to update publicly any forward looking statements whether in response to new information future events or otherwise, except as required by applicable law.

Unknown Executive: 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, please contact us at the CAUDAR results to get the materials from Current Expectations. We will reference both GAAP and non-GAAP financial measures on today's call. Please refer to today's press release, Reconciliations of Non-GAAP Measures, for the most comparable GAAP measures discussed during this earnings call, which are available on our website.

Unknown Executive: Encourage you to consider the risk factors and other risks announced that we've described in our SEC filings as well as respect to my information when they fly.

Unknown Executive: For additional information concerning factors that would cause our results to differ materially from current expectations.

Unknown Executive: We will reference both GAAP and non-GAAP financial measures on today's call.

Unknown Executive: Today's press release reconciliations of non-GAAP measures the most comparable GAAP measures discussed here.

Unknown Executive: All of which are available on our website.

Unknown Executive: The financial information provided today is preliminary, unaudited, and subject to revision upon completion of the closing and audit processes. As a reminder, this webinar will be available for replay along with presentations shortly after this call from the company's website at ir.porchgroup.com. I'll now turn the call over to Matt Willardman, CEO, Chairman, and Founder of Porch Group.

Unknown Executive: Financial information provided today is preliminary unaudited and subject to revision upon completion of crazy pricing.

Matt Willardman: As a reminder, this will be available for replay along the presentation. Shortly after the call on the company's website at all it out accordingly.

Matt Willardman: I'll now turn the call out when it man CEO, Chairman and founder of course, Greg <unk>.

Matt Willardman: <unk> not.

Matt Willardman: Thanks, Louis Good afternoon, everybody thanks for joining.

Matthew Ehrlichman: Good afternoon, everybody. Thanks for joining us. We're pleased with how the business performed in the first quarter and how we're set up for the 2024 year. We've delivered strong operating execution across our businesses and saw year-over-year improvements of more than 30% revenue growth, $5 million adjusted EBITDA improvement, and continued best-in-class growth loss and combined ratios versus peers. We're advancing the work across our data platform successfully.

Matthew Ehrlichman: We're pleased with how the business performed in the first quarter and how we're set up for the 2024 year.

Matthew Ehrlichman: We delivered strong operating execution across our businesses and so on a year over year improvements of more than 30% revenue growth.

Matthew Ehrlichman: The $5 million adjusted EBITDA improvement.

Matthew Ehrlichman: And continued best in class gross loss and combined ratios versus peers.

Matthew Ehrlichman: We're advancing the work across our data platform successfully we're very pleased with our April one reinsurance renewals and are seeing continued progress in price increases with our software businesses all of which we'll discuss today.

Matthew Ehrlichman: We're very pleased with our April 1st reinsurance renewals and are seeing continued progress and price increases with our software businesses, all of which we'll discuss. With the reinsurance coverage placed and strong execution across our business, providing increased confidence in the remainder of 2024, this results in us raising our full year Adjusted EBITDA guidance. And this full-year guidance raise is despite the Texas spring storm season starting early this year. A $20 million Texas hailstorm developed in the second half of March and caused Q1 claims from catastrophic weather events to be $8 million worse than we had expected.

Matthew Ehrlichman: With reinsurance coverage placed and strong execution across our business providing increased confidence in the remainder of 2024. This resulted in us raising our full year adjusted EBITDA guidance today.

Matthew Ehrlichman: And as full year guidance raise is despite the Texas spring storm season, starting early this year.

Matthew Ehrlichman: The $20 million, Texas Hailstorm developed in the second half of March and caused Q1 claims from catastrophic weather events to be $8 million worse than we had expected.

Matthew Ehrlichman: If it wasn't for this, the year-over-year improvement in adjusted EBITDA would have been even greater, and we're excited because we expect our reinsurance renewals and operating results to more than make this up. Shawn, we'll take you through this quickly.

Matthew Ehrlichman: If it wasn't for this the year over year improvement in adjusted EBITDA would have been even greater and we're excited because we expect our reinsurance renewals and operating results to more than make this up.

Matthew Ehrlichman: Sean will take you through this shortly.

Matthew Ehrlichman: For those new to what we're building, Porch is a new kind of homeowner's insurance company. What is unique about our strategy is that we power leading software platforms for home inspectors, title agents, and loan officers. Maintaining our strong client retention with these companies through ongoing product innovation creates long-term competitive advantages, including valuable introductions to homebuyers and unique insights into property. At Porch, we are building a homeowner's insurance company with lower volatility and higher margins, and will win with our three differentiators highlighted here in yellow.

Shawn: For those new to what we're building is a new kind of homeowners insurance company.

Matthew Ehrlichman: What is unique to our strategy is that we power leading software platform for homes vectors idle agents and loan officers.

Matthew Ehrlichman: Maintaining our strong client retention with these companies through ongoing product innovation creates long term competitive advantages, including valuable introductions to homebuyers and unique insights into properties.

Matthew Ehrlichman: A porch, we are building a homeowners insurance company with lower volatility and higher margins.

Matthew Ehrlichman: We will win with our three differentiators highlighted here in yellow.

Matthew Ehrlichman: Advantaged underwriting, the ability to price more accurately than others, and being the best insurance partner for homebuyers by being more than just insurance and helping them with their entire move, and providing whole home protection with various products designed to protect the consumer's largest assets. Okay, so our insurance profitability actions continue to improve our performance year over year, but, as we discussed, the first quarter saw seasonally higher claims related to weather. So in the first quarter, revenue grew 32% to $115 million.

Matthew Ehrlichman: Advantaged underwriting the ability to price more accurately than others.

Matthew Ehrlichman: Being the best insurance partner for Homebuyers.

Matthew Ehrlichman: By being more than just insurance and helping them with their entire move.

Matthew Ehrlichman: And providing a whole home protection with various products designed to protect the consumers largest asset.

Matthew Ehrlichman: Yes.

Matthew Ehrlichman: Okay. So our insurance profitability actions continue to improve our performance year over year, but as we discuss the first quarter saw seasonally higher claims related to weather.

Matthew Ehrlichman: So in the first quarter revenue grew 32% to $115 million.

Matthew Ehrlichman: Revenue Left, Cost of Revenue Group, 10% to $40 million. This included a 71% gross loss ratio for the quarter, of which approximately half of the claims were from catastrophic weather, and the balance from a 33% attritional loss ratio, which improved from 40% in the same quarter last year. We continue to demonstrate our ability to achieve best-in-class loss ratios. Adjusted EBITDA loss was $17 million, a $5 million improvement compared to Q1 2023.

Matthew Ehrlichman: Revenue less cost of revenue grew 10% to $40 million. This included a 71% gross loss ratio for the quarter of which approximately half of the claims are from catastrophic weather and the balance from a 33% attritional loss ratio, which improved from 40% in the same quarter prior year.

Matthew Ehrlichman: We continue to demonstrate our ability to achieve best in class loss ratios.

Matthew Ehrlichman: Adjusted EBITDA loss was $17 million or $5 million improvement compared to Q1 2023.

Matthew Ehrlichman: The best way to compare insurance combined ratios is to look at reputable third-party data published annually. Today, we're pleased to share the AM VEST report covering 2023 performance. Out of the top 50 U.S. homeowners insurance carriers by direct written premium, we had the fifth best direct combined ratio, and we were the top performer in Texas, our largest state.

Matthew Ehrlichman: The best way to compare the insurance combined ratios is to look at reputable third party data published annually.

Matthew Ehrlichman: Today, we're pleased to share that am best report covering 2023 performance.

Matthew Ehrlichman: Out of the top 50 U S homeowners insurance carriers by direct written premium we had the fifth best direct combined ratio.

Matthew Ehrlichman: And we were the top performer in Texas, our largest state.

Matthew Ehrlichman: We again outperformed our peers, which is a testament to our risk strategy and insurance profitability actions, where we were ahead of the market in implementing price increases. We used our unique data and risk modeling to non-renew higher-risk policies and roll out other underwriting actions. All of this equates to strong results. I want to provide a few highlights across some of our businesses.

Matthew Ehrlichman: We again outperformed our peers, which is a testament to our risk strategy and insurance profitability actions, where we were ahead of the market and implementing price increases.

Matthew Ehrlichman: We use our unique data and risk modeling to non renew higher risk policies and rollout other underwriting actions all of this equates to strong results.

Matthew Ehrlichman: I wanted to provide a few highlights across some of our businesses.

Matthew Ehrlichman: First, as I mentioned, our reinsurance placement is renewed on April 1st, and we are pleased with the favorable terms we negotiated, demonstrating the strength of our underwriting. We secured better terms for our excess of loss reinsurance, which helps protect against significant events. The quota share reinsurance terms were also better than expected, resulting in seeding levels slightly higher than we had anticipated.

Matthew Ehrlichman: First as I mentioned, our reinsurance placements renewed on April 1st and we are pleased with the favorable terms, we negotiated demonstrating the strength of our underwriting.

Matthew Ehrlichman: We secured better terms for our excess of loss reinsurance, which helps protect against significant events.

Matthew Ehrlichman: The quota share reinsurance terms were also better than expected, resulting in seeding levels slightly higher than we had anticipated.

Matthew Ehrlichman: Overall, it's great news and helps tighten the 2024 revenue guidance range and increase adjusted EBITDA guidance given the clarity and contracts now in place. Next, our software businesses continue to roll out new products and enhancements to maintain our strong client retention. As discussed last quarter, Rhino successfully rolled out its latest product, Rhino Verify, and its corresponding price increase of more than 20%. ISN, our largest inspection software brand, launched more than 20 core feature enhancements last year.

Matthew Ehrlichman: Overall, it's great news and helps tighten the 'twenty 'twenty four revenue guidance range and increased adjusted EBITDA guidance, given the clarity and contracts now in place.

Matthew Ehrlichman: Next our software businesses continue to rollout new products and enhancements to maintain our strong client retention as discussed last quarter, Brian has successfully rolled out our latest product Rhino verifying and its corresponding price increase of more than 20%.

Matthew Ehrlichman: <unk>, our largest inspection software brand launched more than 20 core feature enhancements last year.

Matthew Ehrlichman: This included additional report writer capabilities, a Florida wind mitigation inspection template, and flex fund enhancements to allow customers to pay for inspection services at close. As a note, inspectors that use FlexFund typically see increased invoice sizes by 30% or more as it makes it easier for consumers to purchase more of their services. As a result of the product innovations, ISN increased its transaction fees by approximately 20% and increased its monthly minimum fees as well.

Matthew Ehrlichman: This included additional report writer capabilities of Florida, wind mitigation inspection template and flex fund enhancements to allow customers to pay for inspection services at close.

Matthew Ehrlichman: As a note inspectors that use flex fund typically see increased invoice sizes by 30% plus as it makes it easier for consumers to purchase more of their services.

Matthew Ehrlichman: As a result of the product innovations ISN increase as transaction fees by approximately 20% and increased monthly minimum fees as well.

Matthew Ehrlichman: Next, we received approximately $35 million in cash in the quarter from the AON Business Collaboration Agreement and the sale of EIG, which we mentioned last quarter. And lastly, we continue to pursue parties in relation to FESDU-related claims. We mentioned previously that we had engaged a top-tier contingent fee law firm, and we are vigorously enforcing our rights and pursuing damages. Now, over to you, Shawn.

Matthew Ehrlichman: Next we received approximately $35 million in cash in the quarter from the Aon business collaboration agreement and the sale of <unk>, which we mentioned last quarter and lastly, we continue to pursue parties in relation to best you related claims. We mentioned previously that we had engaged a top tier contingent fee law firm and we are.

Matthew Ehrlichman: Vigorously enforcing our rights and pursuing damages.

Shawn: Now over to you Shaun.

Shawn Tabak: Thanks, Matt, and good afternoon, everyone. I'm moving to slide 11 to get into the financials here. Revenue was $115.4 million in the first quarter of 2024, a 32% increase over the prior year, driven by our insurance segment, which grew 50%. Revenue less cost of revenue was $39.6 million, with a margin of 34% of revenue, which decreased over the prior year, primarily driven by faster growth in our insurance segment compared to our vertical software segment.

Shawn: Thanks, Matt and good afternoon, everyone.

Shawn Tabak: Moving to slide 11 to get into the financials here.

Shawn Tabak: Revenue was $115 $4 million in the first quarter of 2024 or 32% increase over the prior year driven by our insurance segment, which grew 50%.

Shawn Tabak: Revenue less cost revenue was $39 $6 million with a margin of 34% of revenue.

Shawn Tabak: Which decreased over the prior year, primarily driven by faster growth in our insurance segment compared to our vertical software segment.

Shawn Tabak: In vertical software, the revenue-less cost to revenue margin increased by approximately 600 basis points to 82% due to price increases and strong costs. The Justity Vidal loss was $16.8 million, a $5.1 million improvement over the prior year, driven by the insurance profitability actions, which Matthew will discuss in more detail shortly. The quarter included $36 million of net catastrophic weather losses, resulting in $8 million of additional cost of revenue for catastrophic weather compared to our expectation.

Speaker Change: And vertical software the revenue less cost of revenue margin increased by approximately 600 basis points to 82% due to price increases and strong cost control.

Shawn Tabak: Adjusted EBITDA loss was $16 8 million or $5 $1 million improvement over the prior year driven by the insurance profitability actions, which Matthew will discuss in more detail shortly.

Shawn Tabak: The quarter included $36 million of net catastrophic weather loss costs.

Shawn Tabak: Resulting in $8 million of additional cost of revenue for cat weather compared to our expectations.

Shawn Tabak: The risk-ridden premium was $83 million, a decrease from the prior year as we reduced risk through non-renewals of higher-risk policies in Q1, and after the sale of our in-house agency, EIG, in January, any policies purchased by our homeowners but ridden by third-party carriers are now excluded from the sale.

Shawn Tabak: Gross written premium was $83 million a decrease from the prior year as we reduced risk through non renewals of higher risk policies in Q1 and after the sale of our in House Agency AIG in January any policies purchased by our homeowners, but written by third party carriers are now.

Shawn Tabak: Excluded from this number.

Shawn Tabak: The insurance segment was 76% of total revenue in the first quarter, an increase from 67% in the first quarter of 2020. Revenue from our insurance segment was $87.9 million, a 50% increase over the prior year, driven by a 33% increase in premium for policy increases and lower reinsurance. Vertical software revenue was $27.5 million, a slight decline compared to the prior year, driven by moving services and lower demand for corporate relocation, and offset by software and service subscription revenue, which increased slightly year over year.

Shawn Tabak: The insurance segment was 76% of total revenue in the first quarter, an increase from 67% in the first quarter of 2023.

Shawn Tabak: Revenue from our insurance segment was $87 9, million% to 50% increase over the prior year, driven by 33% premium per policy increases and lower reinsurance ceding.

Shawn Tabak: Vertical software revenue was $27 5 million, a slight decline compared to the prior year, driven by moving services and lower demand for corporate relocations and offset by software and service subscription revenue, which increased slightly year over year.

Shawn Tabak: Before we move on to Adjusted EBITDA, I'll provide additional color on our insurance segment, cost of revenue, and overall. We have two main types of losses arising from insurance. The first is attritional losses, which are primarily driven by the home's condition and often predictable perils like fire or water damage. These losses are relatively consistent by quarter and over time and typically represent approximately half of annual losses. The second type is catastrophic weather, which are generally midsize events and, most commonly for us, severe convection storms, which drive wind and hail conditions.

Speaker Change: Before we move onto adjusted EBITDA I'll provide additional color on our insurance segment cost of revenue and claims.

Shawn Tabak: Overall, we have two main types of losses arising from insurance claims. The first is attritional losses, which are primarily driven by the Holmes condition, and often predictable apparel like fire or water damage.

Shawn Tabak: These losses are relatively consistent by quarter and overtime and typically represent approximately half of annual claims.

Shawn Tabak: The second type is catastrophic weather, which are generally mid size events and most commonly for us severe convection storms, which drive wind and hail conditions.

Shawn Tabak: Cat losses are seasonal, and the Texas spring storm season is a key contributor. Although timing can vary from month to month, overall, cat losses typically average in the mid to low 30% range for the year. And when a large and unusual event does occur, excess of loss reinsurance kicks in, such as we saw in 2021 with winter storm Uri, where we were well protected. On this slide, I've split out the cost of revenue for our insurance segment between attritional and other costs and catastrophic weather.

Shawn Tabak: Cat losses are seasonal and the Texas Spring storm season is a key contributor.

Shawn Tabak: Although timing can vary from month to month overall cat losses, typically average in the mid to low 30% range for the year.

Shawn Tabak: And when a large and unusual event does occur excess of loss reinsurance kicks in such as we saw in 2021 with winter storm here, where we were well protected.

Shawn Tabak: On this slide I've split out cost of revenue for our insurance segment between Attritional and other costs and catastrophic weather losses.

Shawn Tabak: The cost of revenue for our insurance segment was $71 million, with $35 million driven by attritional and other costs and $36 million driven by catastrophic weather loss, the majority of which came from a $20 million gross Texas hailstorm that occurred throughout the second half of March.

Shawn Tabak: Cost of revenue for our insurance segment was $71 million.

Shawn Tabak: With $35 million, driven by Attritional, and other costs and $36 million driven by catastrophic weather losses, the majority of which came from a $20 million gross Texas hailstorm that realized throughout the second half of March.

Shawn Tabak: For Q1, we expected $28 million of cat losses based on a historic average. So we had approximately $8 million in additional revenue costs based on the earlier Texas spring storms net of reintegration. Moving to adjusted EBITDA by segment, overall adjusted EBITDA loss was $16.8 million.

Shawn Tabak: For Q1, we expected $28 million of Cat losses based on historic average in trends. So we had approximately $8 million in additional cost of revenue based on the earlier, Texas spring storms net of reinsurance.

Shawn Tabak: Moving to adjusted EBITDA by segment overall, adjusted EBITDA loss was $16 8 million.

Shawn Tabak: The insurance segment adjusted EBITDA loss was $2.9 million in the first quarter of 2024, an improvement of $4.3 million compared to the prior year. The vertical software adjusted EBITDA was $1.1 million, a $1.5 million improvement over the prior year, driven by price increases in our software and subscriptions business. Corporate expenses were $15 million, for 13% of total revenue, a 300 basis point improvement over the prior year. Operating cash flow was positive $8 million in the first quarter of 2024, and included the cash we received from the Aeon deal of approximately $25 million.

Shawn Tabak: The insurance segment adjusted EBITDA loss was $2 $9 million in the first quarter of 2024, an improvement of $4 $3 million compared to the prior year.

Shawn Tabak: The vertical software adjusted EBITDA was $1 1 million, a $1 $5 million improvement over the prior year, driven by price increases and our software and subscription businesses.

Shawn Tabak: Operating expenses were $15 million or 13% of total revenue a 300 basis point improvement over the prior year.

Shawn Tabak: Operating cash flow was positive $8 million in the first quarter of 2024 and included the cash we received from the Aon deal of approximately $25 million.

Shawn Tabak: As of March 31, 2024, we had $413 million in cash, cash equivalents, and investments, excluding the $301 million at HOA. Porch held $112 million, an increase from $87 million in the prior year. In addition, and incremental to these totals, Porch Group held $37 million in restricted cash and cash equivalents, primarily for our captive and warranty business. Porch Group also holds a $49 million surplus note from HBO. HOA's surplus on March 31st was $36 million.

Shawn Tabak: As of March 31, 2024, we had $413 million in cash cash equivalents and investments.

Shawn Tabak: Excluding the $301 million at HOA porch held $112 million, an increase from $87 million in the prior quarter.

Shawn Tabak: In addition, an incremental to these totals sports group held $37 million restricted cash and cash equivalents, primarily for our captive and warranty businesses.

Shawn Tabak: Ports group also holds a $49 million surplus note from HLA.

Shawn Tabak: HOA as surplus at March 31 was $36 million consistent with historic norms surplus declines in Q1, and Q2 with the seasonality trend and grows again in the second half of the year with increased profitability.

Shawn Tabak: Consistent with historic norms, the surplus declines in Q1 and Q2, with the seasonality trend, and grows again in the second half of the year with increased profits. And lastly, we've been asked about our plans to address the $217 million 2026 unsecured debt. The management team and board certainly discuss options, of which we have several. But we don't expect to transact on these until sometime in 12 to 24 months. Right now, given the exceptionally low coupon, we are remaining patient. Moving on to guidance,

Shawn Tabak: And lastly, we've been asked about our plans to address the $217 million 2026 unsecured notes.

Shawn Tabak: The management team and board certainly discuss options of which we have several.

Shawn Tabak: But we do expect to transact on these until some time in 12 months to 24 months.

Shawn Tabak: Right now given the exceptionally low coupon we are remaining patient.

Shawn Tabak: Today, we are pleased to update our full year 2024 outlook, increasing our revenue-less cost of revenue and adjusted EBITDA expectations, following strong business execution and increased confidence for the full year. The terms available in our reinsurance renewals on April 1st resulted in us placing our quota share ceding slightly higher than anticipated. Generally, this lowers revenue, decreases risk, and given the terms, increases expected profit.

Shawn Tabak: Moving onto guidance today, we are pleased to update our full year 2024 outlook, increasing our revenue less cost of revenue and adjusted EBITDA expectations. Following strong business execution and increased confidence in the full year performance.

Shawn Tabak: The terms available in our reinsurance renewals on April one resulted in us, placing our quota share ceding slightly higher than anticipated.

Shawn Tabak: Generally this lowers revenue <unk>.

Shawn Tabak: Decreases risk and given the terms increases expected profitability.

Shawn Tabak: With this reinsurance in place, we are updating revenue guidance and now expect $450 million to $470 million with growth of 5% to 9%. We expect year-over-year revenue growth to be front-end weighted as Q3 2023, in particular, had lower reinsurance seeding and thus higher revenue immediately post the best-to-fraud disclosures. We are increasing the lower end of our range of expectations for revenue, less cost of revenue, to $230 million to $240 million. We assume a 63% gross loss ratio for the full year, which aligns with our five-year weighted average.

Shawn Tabak: With this reinsurance in place we are updating revenue guidance and now expect $450 million to $470 million with growth of 5% to 9%.

Shawn Tabak: We expect year over year revenue growth to be front end weighted as Q3 2023 in particular had lower reinsurance ceding and thus higher revenue immediately post divest to fraud discovery.

Shawn Tabak: We are increasing the lower end of our range of expectations for revenue less cost of revenue to $230 million to $240 million.

Shawn Tabak: We assume a 63% gross loss ratio for the full year, which aligns with our five year weighted average.

Shawn Tabak: Of course, any cat events exceeding historical experiences are not included in our guidance and would negatively affect the range.

Shawn Tabak: Of course, any CAT events exceeding historical experiences are not included in our guidance and would negatively affect us. Overall, based on our reinsurance renewals and the performance across the business, we are increasing adjusted EBITDA profit to two and a half million dollars to twelve and a half. And finally, we expect gross written premiums of $460 million to $480 million. We are managing premiums roughly flat on an apples to apples basis. As a reminder, the prior year includes EIG, our in-house agency. Going forward, third-party carrier written premiums are: Thank you all for your time today, and now I'll hand over to Matthew to cover our KPIs. Thank you.

Shawn Tabak: Overall based on our reinsurance renewals and the performance across the business, we are increasing adjusted EBITDA profit guidance to.

Matthew Ehrlichman: $2 5 million to $12 5 million.

Matthew Ehrlichman: And finally, we expect gross written premiums of $460 million to $480 million we.

Matthew Ehrlichman: We are managing premiums roughly flat on an apples to apples basis.

Matthew Ehrlichman: As a reminder, the prior year includes AIG, our in House agency and going forward third party carrier written premiums are excluded.

Shawn Tabak: Thank you all for your time today, and now I'll hand over to Matthew to cover our Kpis.

Matthew Neagle: Thanks, Shawn. Hello, everyone.

Matthew Ehrlichman: Thanks, Shannon and Hello, everyone first of all of our Kpis.

Matthew Neagle: First, our KPIs. The average number of companies was 30,000 in the first quarter, broadly unchanged from prior quarters; average revenue per company per month increased 36% to $1,294 compared to Q1 2023, driven by lower seating and premium per policy increase. We had 241,000 monetized services in the quarter, an increase of 12% despite the 3% lower housing market sales. Finally, average revenue per monetized service was $422, up 29% from the prior year due to continued growth in insurance.

Matthew: The average number of companies was 30000 in the first quarter broadly unchanged from prior quarters.

Matthew Neagle: Average revenue per company per month increased 36%.

Matthew Neagle: $1294 compared to Q1 2023, driven.

Matthew Neagle: Driven by lower seating and premium per policy increases.

Matthew Neagle: We had 241000 monetize services in the quarter, an increase of 12% despite the 3% lower housing market sales.

Matthew Neagle: Finally average revenue per monetized service was $422 up 29% from prior year due to continued growth in insurance.

Matthew Neagle: Looking now at our Insurance Segment KPI. As a reminder, and as Shawn mentioned, our insurance saving KPIs include EIG in 2023, which we have since divested. At the end of 2023, EIG had a third-party gross rent premium of $45 million. Under the new third-party agency partner model, these premiums will no longer be included.

Matthew Neagle: Looking now at our insurance segment Kpis as a reminder, and as Sean mentioned, our insurance saving Kpis include AIG in 2023, which we have since divested at.

Matthew Neagle: At the end of 2023.

Matthew Neagle: <unk> had third party gross written premium of $45 million.

Matthew Neagle: Under the New third Party agency partner model. These premiums will no longer be included.

Matthew Neagle: So on the KPIs, gross written premium was $83 million from 253,000 policies in force. For our guidance, Shawn just shared, we are looking to manage premium to approximately flat on a full year basis in 2024 before beginning to grow nicely in 2025. 2024 Non-Renewal Actions were concentrated in the early part of this year.

Matthew Neagle: So on the Kpis gross written premium was $83 million from 253000 policies in force.

Matthew Neagle: Per our guidance, Sean just shared we are looking to manage premium to approximately flat on a full year basis in 2024 before beginning to grow nicely in 2025.

Matthew Neagle: 2024, non renewal actions were concentrated in the early part of this year.

Matthew Neagle: Annualized revenue per policy was $1,375, an increase of 125% from the prior year, driven by increases in premium and lower seating. Focusing now on HOA, our insurance carrier, annualized premium for a policy increased 33% to $1,948. Premium retention was 90% lower than the prior year, driven by the non-renewals and the other underwriting actions we've discussed. Our gross loss ratio was 71% in the first quarter. Our attritional growth loss ratio, which excludes losses from catastrophic weather events, was 33%, a reduction from 40% in the prior year.

Matthew Neagle: Annualized revenue per policy was $1375, an increase of 125% from the prior year driven by increases in premium and lower ceding.

Matthew Neagle: Focusing now on HLA, our insurance carrier annualized premium per policy increased 33% to $1948.

Matthew Neagle: Premium retention was 90% lower than prior year, driven by the non renewals and the other underwriting actions we've discussed.

Matthew Neagle: Our gross loss ratio was 71% in the first quarter.

Matthew Neagle: Our attritional gross loss ratio, which excludes the losses from catastrophic weather events was 33% a reduction from 40% in the prior year.

Matthew Neagle: As Shawn mentioned earlier, this type of loss is generally consistent quarter over quarter. This is where we outperform homeowners insurance peers, which is driven by insurance profitability actions and our ability to assess price risk effectiveness. The quarter was impacted by seasonal poor weather, which resulted in an overall current accident year gross loss ratio of 71%. This is still an improvement of 8% from 79% last year. Average claims costs per policy in the first quarter were $360, an increase of 35% compared to our five-year average of $267.

Matthew Neagle: As Sean mentioned earlier this type of losses generally consistent quarter over quarter.

Matthew Neagle: This is where we outperform homeowners insurance peers, which is driven by insurance profitability actions and our ability to assess and price risk effectively.

Matthew Neagle: The quarter was impacted by seasonal cat weather, which resulted in an overall current accident year gross loss ratio of 71%.

Matthew Neagle: This is still an improvement of 8%.

Matthew Neagle: From 79% last year.

Matthew Neagle: Average claims costs per policy in the first quarter were $360, an increase of 35% compared to our five year average of $267.

Matthew Neagle: Our gross combined ratio in the first quarter was 97%, an improvement from 107% in the prior year. Digging into our underwriting performance, I'll recap insurance profitability actions, which include the three P's. First, product. Effective underwriting is critical to insurance profitability. Leveraging our unique data helps us improve our risk segmentation and evaluation by adding factors such as water heater location, type of pipes, presence of wood flooring, and much more. Second, front.

Matthew Neagle: Our gross combined ratio in the first quarter was 97% an improvement from 107% in the prior year.

Matthew Neagle: Digging into our underwriting performance I'll recap insurance profitability actions, which include the three PS first is product effective underwriting as critical to insurance profitability leveraging our unique data helps us improve our risk segmentation and evaluation by adding factors such as.

Matthew Neagle: What are your location type of pipes presence of wood flooring and much more.

Matthew Neagle: Second press.

Matthew Neagle: HOA has a history of ensuring we price for profitability. Following the hardening reinsurance markets, inflationary changes, and increased catastrophic weather, it was key to adjust rates significantly to ensure we achieve our target margins now and in the future. Over the last couple of years, we have taken significant rate increases where possible to optimize profitability in each state. Our underwriting team reviews state-level pricing monthly, and last quarter, we continued the progress here, announcing an 18% increase following Texas, which is now effective for both new and renewal policies.

Matthew Neagle: <unk> has a history of ensuring we priced the profitability.

Matthew Neagle: Following the hardening reinsurance market inflationary changes and increased catastrophic weather.

Matthew Neagle: With key to adjust rates significantly to ensure we achieve our target margins now and in the future.

Matthew Neagle: Over the last couple of years, we have taken significant rate where possible to optimize profitability in each state.

Matthew Neagle: Our underwriting team reviews state level pricing monthly and last quarter, we continued the progress here.

Matthew Neagle: Announcing an 18% increase followed in Texas, which is now effective for both new and renewal policies.

Matthew Neagle: Third, the portfolio. As indicated by our data and modeling, we have taken action against higher-risk policies and those we expect to be unprofitable. As we refine our advantage underwriting and pricing, we are choosing to reopen certain geographies and grow our fulfillment. Thanks, everyone. Now I'll hand over to

Matthew Neagle: Third is portfolio as indicated by our data and modeling we have taken action against higher risk policies and those we expect to be unprofitable.

Matthew Neagle: As we refine our advantaged underwriting and pricing we are choosing to reopen in certain geographies and grow our portfolio.

Matthew Neagle: Thanks, everyone now I'll hand over to Jeff.

Ephraim Ware: Thanks, Matthew. And hello, everyone.

Speaker Change: Thanks, Matthew and Hello, everyone.

Matthew: From where president and general manager of homeowners of Americas <unk>.

Ephraim Ware: I'm Ephraim Ware, President and General Manager of Homeowners of America. I've been a leader at HOA for almost 10 years, and my background is with large carriers such as Allstate, Safeco, and Assurance. I have worked in product, operations, and underwriting. I work closely with Adam Kornick in leading our insurance business. I led HOA, and Adam led the insurance segment until his departure after the sale of BIT.

Matthew: <unk> been a leader in HOA for almost 10 years and my background is with large carriers, such as Allstate Safeco insurance.

Ephraim Ware: I've worked in product operations and underwriting.

Ephraim Ware: We'll work closely with Adam Corning, and leading our insurance business.

Ephraim Ware: I'll, let HOA and Adam led to insurance segment until his departure after the sale of <unk>.

Ephraim Ware: <unk>.

Ephraim Ware: Through HOA, we offer property-related insurance products in 22 states. We combine Porch's unique data with HOA's 18 years of claims history to assess property risk, underwrite, and effectively price homeowners insurance policies. We couldn't be prouder of the AMBEST data that Matt mentioned earlier.

Ephraim Ware: Through HOA, we offer property related insurance products in 22 states.

Ephraim Ware: We combined <unk> unique data.

Ephraim Ware: And HOA 18 years of claims history to assess property risks underwrite and effectively price homeowners insurance policies.

Ephraim Ware: We couldnt be prouder of the a M best data that Matt mentioned earlier.

Ephraim Ware: I will share insights into our unique data, which we have labeled Home Factors, and information on the reinsurance renewals we just secured. As a reminder, we are rated A, exceptional by DEMATEC, for our financial stability rating. Slide 24 highlights our advantage when predicting and pricing risk. There are two key risk insights that we and many insurance companies use to evaluate and price policies. Personal information, such as past claims history, the consumer's insurance score, and the number of people in the household, and geographic information, such as the zip code of the home, distance to the coast, the potential wildfire risk, and historical weather patterns in that area. Carriers also consider construction and inflation costs, which can vary geographically.

Ephraim Ware: I will share insights into our unique data, which we have labeled hold factors and information on the reinsurance renewals, we just secured.

Ephraim Ware: As a reminder, we are re today exceptional by <unk> for our financial stability rating.

Ephraim Ware: Slide 24 highlights our advantage when predicting and pricing risk.

Ephraim Ware: There are two key risks insights that we have many insurance companies use to evaluate and price policies.

Ephraim Ware: Personal information such as past claims history consumers insurance score and the number of people in the household.

Ephraim Ware: And geographic information such as the ZIP code of the whole distance the coast the potential wildfire risks and historical weather patterns in that area.

Ephraim Ware: Carriers also consider construction and inflation costs, which can vary geographically.

Ephraim Ware: Interior and exterior insights are where we use our unique property data combined with historical claims information to provide advanced information. With all of these home factors, we have a clearer picture of the risk and can price it more accurately. With our data, we have verified insight into a large number of properties. We have so much data that we can then effectively model and predict home factors on virtually all properties across the U.S. For example, if we know the type of piping, roof material, and location of the water heater for a particular home, of a similar nearby home, was built in the same year by the same builder with high confidence, we can create home factors for those other properties, expanding our data advantages exponentially.

Ephraim Ware: Interior and exterior insights.

Ephraim Ware: We're really use our unique property data combined with historical claims information to provide advances advantages.

Ephraim Ware: With all of these home factors, we have a clearer picture of the risk and can price more accurately.

Ephraim Ware: With our data we have verified insights into a large number of properties. We have so much data that we can then effectively model and predict whole factors or virtually all properties across the U S.

Ephraim Ware: For example, if we know the type of piping.

Ephraim Ware: Root material and location of the water heater for a particular home.

Ephraim Ware: That's a similar nearby home.

Ephraim Ware: Bill in the same year by the same builder with high confidence, we can curate pull factors for those other properties expanding our data advantages exponentially.

Ephraim Ware: To date, we have only used Verified Property Insights in our underwriting model. Moving forward, there are opportunities for us to expand our advantages to every property we quote, providing discounts for lower-risk policies and surcharges for higher-risk. We are still early in the journey, and I'm excited about the year ahead.

Ephraim Ware: To date, we have only used by property insights in our underwriting models.

Ephraim Ware: Moving forward there are opportunities for us to expand our advantages to every property week flow, providing discounts for lower risk policies and surcharges for higher risk warrants.

Ephraim Ware: We are still early in the journey and I am excited about the year ahead.

Ephraim Ware: We have built the data platform between Porch and HOA where we can now create and test a new home factor every few weeks and expect to accelerate our work and evaluate approximately 20 new home factors in 2024, again with insights and different confidence levels applicable to virtually every U.S. project. We anticipate our book mix continuing to trend towards lower-risk customers who receive home factor discounts. We are just starting to reopen zip codes that we have paused as we manage our premiums which are flat year over year. Our 2025 expectation is to grow nicely and, importantly, to grow profitably.

Ephraim Ware: We have built the data platform between ports in HOA, where we can now create and test a new home factor every few weeks and expect to accelerate our work and evaluate approximately 20, new home factors in 2024.

Ephraim Ware: Again with insights and different confidence levels applying to virtually every U S property.

Ephraim Ware: We anticipate our books mix continuing to trend towards lower risk customers, who receive home factor discounts. We are just starting to reopen zip codes that we a pause as we managed our premiums are flat year over year or <unk> 45 expectation is to <unk>.

Ephraim Ware: So nicely and importantly to grow profitably.

Ephraim Ware: As mentioned previously, we had a successful April 1st reinsurance renewal, placing the right partners for Excess Abloss, also known as XOL, and Portisheer Reinsurance. Reassurance provides us as a carrier the ability to share risk in exchange for premium. In return, related to XOL, we realize one, reduced weather risk, and, in particular, lowering exposure to significant catastrophic events, and two, more stable results.

Ephraim Ware: As mentioned previously we had a successful April one reinsurance renewals.

Ephraim Ware: <unk> the right partners for excess of loss.

Ephraim Ware: So not only is ex ol and quota share reinsurance.

Ephraim Ware: Reinsurance provide.

Ephraim Ware: As a carrier the ability to share risk in exchange for premiums.

Ephraim Ware: In return related to extra well, we realise one reduced weather risk and in particular lowering exposure to the significant catastrophic events and to more stable results, while there will be a level of seasonality at least until the reciprocal.

Ephraim Ware: While there will be a level of seasonality, at least until the reciprocal exchange is launched, XOL reinsurance minimizes some volatility. And related to the quality share of reinsurance, we first receive a commission, which helps offset expenses including underwriting, sales, and claims-related expenses. Secondly, decrease risk by passing a percentage of premiums and losses along to the reinsurer. And lastly, we receive surplus support, reducing the capital required by the carrier. Even after the reciprocal exchange is launched, when Porch Group's results will have less exposure to volatility and seasonality.

Ephraim Ware: <unk> launched <unk> reinsurance and minimizes some volatility.

Ephraim Ware: And related to quota share reinsurance, we first receive a commission, which helped offset expenses, including underwriting sales and claims related expenses.

Ephraim Ware: Secondly decreased risk by passing a percentage of premiums and losses along to the reinsurer and lastly, we received surplus support reducing the capital required by the carrier.

Ephraim Ware: Even after the reciprocal exchange has launched imports group's results, while the less exposure to volatility and seasonality.

Ephraim Ware: We will continue to manage the reinsurance purchases of the reciprocal to ensure it is well-protected and has long-term stability. This year's reinsurance program has a simplified structure and improved year-over-year. This is a testament to our industry-leading underwriting results. We now have approximately 50 reinsurers who are A-rated with whom we have long-term relationships. Additionally, our profitability actions have effectively reduced our risk in catastrophe-exposed areas and on other high-risk policies. The probable maximum loss, or PML, is an industry term for the modeled maximum loss for a given return period.

Ephraim Ware: We will continue to manage through reinsurance purchases other super cool to ensure it is well protected and has long term stability.

Ephraim Ware: This year's reinsurance program has a simplified structure and improved year over year terms.

Ephraim Ware: This is a testament to our industry, leading underwriting results. We now have approximately 50 reinsurers, who are a rated with whom we have long term relationships.

Ephraim Ware: Additionally, our profitability actions have effectively reduced our risks in catastrophe exposed areas and on other high risk policies.

Ephraim Ware: Probable maximum loss or <unk> of the industry term for the modeled maximum loss for given return period.

Ephraim Ware: Are Model 2024 PMLs reduced 50% compared to 2022? Under the reinsurance coverage, third-party equality share perspective seating is approximately 27.5%, which is a little higher than we had anticipated given the more favorable terms. In addition, we secured better excess of loss coverage at better rates than 2020. Thanks, everyone. I'll hand it over to Matt to wrap up.

Ephraim Ware: Our model 2024, PMA will reduce 50% compared to 2022.

Matt: So under the reinsurance coverage third party quota share perspective seating is approximately 27, 5%, which is a little higher than we had anticipated given the more favorable terms.

Matt: In addition, we secured better excess of loss coverage at better rates than 2023.

Ephraim Ware: Thanks, everyone I'll hand, it over to Matt to wrap up.

Matthew Ehrlichman: Thanks, Ephraim. Thanks to you and the team for the continued great work and execution. Insurance remains at the center of our strategy. The team is committed to continuous improvement in our underwriting performance, and this will remain our priority in 2024 as we position ourselves for the reciprocal exchange ahead. We expect approval later this year, at which point we'll host an investor day to provide more information about the financials and our move towards becoming a less volatile and higher margin business.

Matt: Thanks, Safra, Thanks to you and the team for their continued great work and execution.

Matthew Ehrlichman: Insurance remains at the center of our strategy.

Matthew Ehrlichman: The team is committed to continuous improvement in our underwriting performance and this will remain our priority in 2024, as we position ourselves for the reciprocal exchange head.

Matthew Ehrlichman: We expect approval later this year at which point, we'll host an investor day to provide more information about our financials and our move towards becoming a less volatile and higher margin business.

Matthew Ehrlichman: Looking into our plan's future, after launching the reciprocal, reporting on whether on a quarter-to-quarter basis won't be a focus given claims and losses will be paid by a different entity that is not owned by Porch. Until then, we'll certainly continue to provide visibility as it's our largest concept. Everyone shared more today on the home factors. We will continue to expand these capabilities across more insights and states and build on its positive impact on our underwriting. It's early days, but there will be ways to monetize home factors in states where we do not write policies ourselves.

Matthew Ehrlichman: Looking into our planned future after launching the reciprocal reporting on whether on a quarter to quarter basis won't be a focus given claims and losses will be paid by a different entity that is not owned by porch. Until then we'll certainly continue to provide visibility as it is our largest cost item.

Matthew Ehrlichman: Everyone shared more today on the home factors, we will continue to expand these capabilities across more insights in states and build on its positive impact on our underwriting.

Matthew Ehrlichman: It's early days, but there will be ways to monetize home factors in states, where we do not write policies ourselves.

Operator: We remain focused on profitability and achieving our full-year adjusted EBITDA profitable target. This will be a key milestone, and we are well-positioned to deliver. With that, we'll wrap up the prepared remarks and pass the call to the operator. Rob, please go ahead and open the call for Q&A. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.

Matthew Ehrlichman: We remain focused on profitability and achieving our full year adjusted EBITDA profitable target.

Rob: This will be a key milestone and we are well positioned to deliver.

Operator: With that we'll wrap the prepared remarks and pass the call to the operator, Rob. Please go ahead and open the call for Q&A.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Our first question comes from a line from John Campbell from Stevens. Your line is open.

Operator: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.

Operator: To withdraw your question simply press Star one again, if you are called upon to ask your question and our listening via loud speaker on your device. Please pick up your handset and ensure that your phone is not on mute when asking your question.

Operator: Our first question comes from the line of John Campbell from Stephens. Your line is open.

Operator: Hey, guys. This is Jonathan on for John Campbell, Thanks for taking my questions.

John Campbell: So obviously you guys raised the pricing with Brian <unk> and the first part of the year can you guys maybe dig in on how you think about pulling the pricing lever for your software businesses and do you guys see more pricing opportunities elsewhere in the software offerings.

Unknown Executive: Yeah, I can take that. You know, the first thing I'd say is that what we're focused on is delivering value to our software customers. And we feel that when we can deliver value, we have the opportunity to get price increases. And so we've been very focused on the velocity of our product innovation and have been able to do a number of price increases over the last year or so across our different businesses.

John Campbell: I can take that.

Unknown Executive: The first thing I'll say is what we're focused on is delivering value to our software to customers and we feel when we can deliver value we have the opportunity to get price increases and so we've been very focused on the velocity of our product innovation and have been able to do a number of price increases or.

Unknown Executive: Over the last year or so across our businesses.

Unknown Executive: You know, the other thing that I'll share is that as we have done that, our retention has remained very stable, and we do see some opportunity going forward. In the last earnings release, we shared a little bit about the product roadmap for Rhino and how we see additional rollouts of products that we think could merit price increases and help really drive the profitability of that business. And, you know, the last thing that I'll just share about that is, because of price increases and cost controls and product innovation, our software businesses have been relatively stable from a revenue perspective, even though there have been pretty significant market declines, both in the number of transactions and the number of providers. And so that makes us very optimistic about how those businesses are positioned as the market recovers. And I'll just add, just to get it for folks that weren't on the call last week.

Unknown Executive: The other thing that I'll share is.

Unknown Executive: As we have done that.

Unknown Executive: Our retention has.

Unknown Executive: Remained very stable.

Unknown Executive: And we do see some opportunity going forward.

Unknown Executive: Last earnings release, we shared a little bit about the product roadmap of rail and how do we see additional rollouts of products that we think could merit price increases and help really drive the profitability of that business.

Unknown Executive: And the last thing that I'll just share on that is.

Unknown Executive: <unk>.

Unknown Executive: The price increases and cost controls and the product innovation, our software businesses have been relatively safe.

Unknown Executive: Stable from a revenue perspective, even though there's been pretty significant market declines both in the number of transactions and the number of providers.

Unknown Executive: And so that makes us very optimistic about how those businesses are positioned as the market recovers.

Unknown Executive: And I'll just add, just because for folks that weren't on the call last quarter, but like Matthew was noting, we did provide a deep dive on one of our core software businesses, Rhino. You know, this year, even when it oppressed the housing market, Rhino is expected to do around $8 million of adjusted EBITDA.

Unknown Executive: And I'll just add just because for folks that weren't on the call last quarter, but Mike Mathews, noting we didn't do it provide a deep dive on one of our core software businesses Rhino.

Unknown Executive: This year, even when the depressed housing market Rhino is expected around $8 million of adjusted EBITDA. So it's a nice high margin business for us but to your question. There is a multi year roadmap of additional major products that we're going to be launching across each of these core software businesses.

Unknown Executive: So it's a nice, high-margin business for us. But to your question, there is a multi-year roadmap of additional major products that we're going to be launching across each of these core software businesses. And we'll couple price increases with those. And so between the transaction volume coming even somewhere close to what it has been in the past, along with those price increases, we talked last quarter about how we'd expect Rhino to go from $8 million in EBITDA now to about $35 million in EBITDA at that point. So it's going to be a fun multi-year run we expect ahead with the tailwinds we have.

Unknown Executive: Well couple of price increases with those and so between that the just the transaction volume come even somewhere close to what it's been in the past along with those price increases we talked last quarter about how we would expect in 2028 Reno to be go from $8 million and EBITDA now to about $35 million and EBITDA at that point, so it's going to be fun.

Unknown Executive: Altria run we expect ahead, but the tailwind.

Speaker Change: That's great. Thank you guys.

Speaker Change: Thank you.

Operator: Your next question comes from a line of Ryan Tomasello from KBW. Your line is open.

Unknown Executive: Your next question comes from the line of Ryan Tomasello from K B W. Your line is open.

Unknown Executive: Hi, everyone. Thanks for taking the questions. I'm just diving back into some of the heat dive on HOA, talked about the different levers you pull to improve underwriting, you know, between unique data and Price Increases, and Derisking the Higher Risk Policies, curious if you're able to really parse out how much of the benefit and underwriting you're actually getting on the data side, you know, if there's any quantification of that from a gross loss ratio perspective, just to be helpful to frame, you know, how impactful that's been to date.

Ryan John Tomasello: Hi, everyone. Thanks for taking the questions.

Unknown Executive: Moving back into some of the <unk>.

Unknown Executive: Dive on an HOA.

Unknown Executive: Talked about the different levers you pull to improve underwriting between unique data in.

Unknown Executive: Price increases.

Unknown Executive: And derisking the higher risk policies. During this review are able to really parse out how much of a benefit in underwriting youre actually getting on the data side.

Unknown Executive: Any quantification of that from a gross gross loss ratio perspective, just to be helpful to frame.

Unknown Executive: Impactful thats been today.

Unknown Executive: Yeah, I would say we've not provided a specific breakout, although we have provided some of the feedback, Ryan, as I'm sure you kind of tracked on the different tests of how, you know, the impact of kind of risk accuracy prediction impacts a metric, and a tracker called the Gini coefficient kind of measures the accuracy of our pricing. And we've mentioned it's, you know, significant in terms of what our proprietary data has.

Speaker Change: Yes, I would say.

Speaker Change: We've not provided a specific breakout although we have provided some of the feedback Ryan as I'm sure you can attract on the different tests.

Unknown Executive: The impact to kind of risk accuracy prediction.

Unknown Executive: <unk>.

Unknown Executive: A metric.

Unknown Executive: Tracker called Gini coefficient kind of measures the accuracy of our pricing.

Unknown Executive: It is, of course, mixed in with all the other underwriting actions that we're taking, you know, pricing, deductibles, you know, non-renewals, like you mentioned, and there's not, you know, not one of those that is the dominant, you know, driver of the results that we're seeing. We do believe long-term, especially given how, in our view, early we are in using our proprietary data, that that is going to continue to make a bigger and bigger impact.

Unknown Executive: And we've mentioned.

Unknown Executive: It's significant in terms of what our proprietary data has it is of course mixed in to all the other underwriting actions that we're taking pricing deductibles non-renewals like you mentioned and there's not not one of those but as the dominant.

Unknown Executive: Driver of the results that we're seeing we do believe long term, especially just given how.

Unknown Executive: For us, it's fun to look at because we can see multiple years ahead of just continuing to be able to use more of that data and building it into rate filings and furthering the advantage we have there. Last comment is I do expect, and we've talked internally, Ryan, at some point, we will be having in our backlog to do a deep dive on one of these calls around, you know, the data specifically. And so I would say more to come on that certainly as we go. Ryan, there is one additional thing.

Unknown Executive: <unk> early we are in using our proprietary data.

Unknown Executive: <unk> is going to continue to make a bigger and bigger impact for us. It's fun to look at because we can see multiple years ahead of just continuing to be able to use more of that data and billing into rate filings and furthering the advantage. We have there last comment is I do expect and we've talked internally at <unk>.

Unknown Executive: Some point, we will have it in our backlog to do a deep dive in one of these calls around the data specifically and so I would say more to come certainly on that as we as we go.

Unknown Executive: Ryan, the one additional thing I would just highlight is there are different ways we can take advantage of that. So one way could be by underwriting lower risk and driving a better gross loss ratio. The other way is by offering a lower price and taking more market share and supporting our growth. And so there will be different ways we take advantage of that that can show up differently in our numbers.

Ryan: Brian the one additional thing I would just highlight is there are different ways. We can take advantage of that so one way could be by underwriting lower risk and driving a better gross loss ratio. The other way is by offering a lower price and taking more market share and supporting our growth and so there were.

Unknown Executive: Will be different ways, we take advantage of that and show up differently in our numbers.

Unknown Executive: Okay, great. Thanks for that.

Ryan: Okay, great. Thanks for that and just two more follow ups on the insurance side.

Unknown Executive: Carriers broadly have obviously begun to reopen.

Unknown Executive: <unk> markets and get back into growth mode here.

Unknown Executive: Profitability gets back into shape are you seeing any impact in your core market just from a competitive standpoint, and then in terms of hoa's surplus position.

Unknown Executive: I think you said $37 million do you feel like that's been a strong enough place to efficiently yet.

Unknown Executive: Yet the reciprocal transaction Don at this stage.

Unknown Executive: And in general how does HOA surplus position play into the timing of the reciprocal and just how that is being evaluated from our regulators.

Speaker Change: Why don't you take what you are seeing on the first question was growth and what we're seeing from other carriers magnetic second month with the reciprocal.

Unknown Executive: And just two more follow-ups on the insurance side. You know, carriers broadly have obviously begun to reopen, you know, additional markets and get back into growth mode here, profitability getting back into shape. Are you seeing any impact?

Speaker Change: Sure. Thanks for the question.

Unknown Executive: We are like.

Unknown Executive: Like many others have done a lot of work for towards profitability.

Unknown Executive: Both are in underwriting and deductible work as Matt mentioned earlier as well as pricing given all of that work Ryan we are in a position, where we can evaluate and reopened in very specific geographies competition.

Unknown Executive: In our space.

Unknown Executive: Always entering coming and going.

Unknown Executive: Given that we are the 11th largest carrier in the state of Texas.

Speaker Change: Prime example, we still have a relatively small market share hovering around a little bit over 2%. So just in our home state we still have plenty of room to grow despite the competition.

Unknown Executive: And we continue to look at other geographies, where we can reopen and.

Unknown Executive: Grow our business.

Unknown Executive: in your core markets just from a competitive standpoint. And then, in terms of HOAs, the surplus position of, I think you said 37 million. Do you feel like that's in a strong enough place to efficiently get the reciprocal transaction done at this stage? And, in general, how does HOA's surplus position play into the timing of the reciprocal and just how that is being evaluated from the regulators? Thanks.

Unknown Executive: In terms of the.

Unknown Executive: A reciprocal I'd say, yes, we're.

Unknown Executive: We're on track with where we would anticipate being from a surplus as we noted in surplus does generally go down first and second quarter, and then goes up meaningfully in the third and fourth quarter and Thats, what we would expect this year.

Unknown Executive: We've through this whole process over the last year, we've built a strong relationship with the TDI they understand our business well, we provided them all of the forecast and so I think we're in a good spot in terms of executing on our plans here for later this year.

Speaker Change: Great. Thanks for taking my questions. Thank.

Speaker Change: Thank you.

Unknown Executive: Again, if you would like to ask a question over the phone press star one on your telephone keypad.

Matthew Ehrlichman: Ephraim, why don't you take what you're seeing in the first question, just growth and what we're seeing from other careers, and I can take the second one with the reciprocal. Sure.

Unknown Executive: Your next question comes from the line of Mark Chapelle from Loop capital markets. Your line is open.

Ephraim Ware: Sure. Thanks for the question.

Ephraim Ware: Hi, Thank you for taking my question I was wondering if you could walk through some of the puts and takes in your vertical software business. This quarter, specifically with respect to the.

Ephraim Ware: We, like many others, have done a lot of work on forest profitability, both with underwriting and deductible work, as Matt mentioned earlier, as well as pricing. Given all that work, Ryan, we are in a position where we can evaluate and reopen very specific geographies. Competition in our states is always entering, coming, and going, but given that we're the 11th largest carrier in the state of Texas, as a prime example, we still have a relatively small market share, hovering around a little bit over 2%. So just in our home state, we still have plenty of room to grow, despite the competition, and we continue to look at other geographies where we can reopen and grow our business.

Ephraim Ware: The products in that segment that are doing well when maybe the ones that are struggling a little bit.

Speaker Change: Sure I can take a first first cut at that.

Matthew Ehrlichman: In terms of the Reciprocal, I'd say, yeah, Ryan, we're on track with where we would anticipate being from a surplus. As we noted, surplus does generally go down in the first and second quarter and then goes up meaningfully in the third and fourth quarter.

Ephraim Ware: We have shared kind of how we are currently seeing in the market.

Matthew Ehrlichman: And that's what we would expect this year. We've, through this whole process over the last year, built a strong relationship with TDI. They understand our business well. We've provided them with all of the forecast. And so I think we're in a good spot in terms of executing on our plans here for later this year.

Matthew Ehrlichman: Overall, we're assuming the market is flat for this year, but if you look historically.

Matthew Ehrlichman: The number of transactions have dropped over 30% the number of.

Matthew Ehrlichman: Mortgage loan officers has dropped over 40%.

Matthew Ehrlichman: But our businesses held up fairly well, despite pretty significant declines in transactions and providers.

Unknown Executive: Great, thanks for taking the question. Thank you.

Matthew Ehrlichman: We're very excited about some of the products.

Unknown Executive: Talk to the <unk>.

Unknown Executive: Last quarter.

Operator: Again, if you would like to ask a question over the phone, press star 1 on your telephone keypad. Your next question comes from Mark Chappell from Loop Capital Markets. Your line is open. Hi, thank you for taking my question. Matt, I was wondering if you could walk through some of the

Unknown Executive: With our <unk> software, which provides now a suite of solutions to title companies and is really becoming a platform for title companies to automate many parts of their business and so we recently launched right now verify which automatically ensures that when you are processing.

Mark Chappell: <unk> payment as part of the title closing that.

Mark William Schappel: The identity of that recipient is the already identity.

Mark Chappell: Within our inspection space.

Mark Chappell: We have a whole platform software and services to power the entire business.

Mark William Schappel: We're excited to launch a new report writer under the <unk> brand, which is sort of the first piece of software.

Operator: You need an inspector to.

Operator: To help us better target all parts of the journey.

Mark Chappell: Inspector owning a business and we actually had a variety of launches in fact over.

Operator: 20 of the top.

Mark William Schappel: Requested features we were able to get out in the last three to six months.

Unknown Executive: I can take a first cut at that. You know, we have shared kind of how we're currently seeing the market. Overall, we're assuming the market is flat for this year. But if you look historically, the number of transactions have dropped over 30%, and the number of Morey's Loan Officers have dropped over 40%.

Mark Chappell: And then we're uniquely positioned in the.

Unknown Executive: With <unk> and the loan officer space.

Unknown Executive: Especially with some of the competitive one of our competitors was acquired and created an opportunity for us in the marketplace.

Unknown Executive: All of these things I think position us extremely well for when the market comes back and Theres more transactions and more providers who are.

Unknown Executive: Back into the space or at least ramping up their business.

Speaker Change: Great. Thank you and then I Wonder if you could just give us a quick update on the uptake rate youre seeing with the porch kos shares out.

Unknown Executive: But our businesses have held up fairly well despite pretty significant declines in transactions and providers. We're very excited about some of the products that we talked about last quarter with our Rhino software, which provides now a suite of solutions to title companies and is really becoming the platform for title companies to automate many parts of their business. And so we recently launched Rhino Verify, which automatically ensures that when you are processing payment as part of the title closing, that the identity of that recipient is the right identity.

Unknown Executive: Yes.

Speaker Change: We've not provided any specific metrics recently, but again, it's possible be done in the future, but I would say it continues to go well so across our software businesses. We continue to execute on the strategy you could access and introduced two more homebuyers and we continue to work with those homebuyers to help them with a variety of services.

Unknown Executive: Within our inspection space, you know, we have a whole platform of software and services to power the entire business. We were excited to launch a new report writer under the ISM brand, which is sort of the first piece of software that you need as an inspector to help us better target all parts of the journey as an inspector owning a business. And we actually had a variety of launches; in fact, over, you know, 20 of the top requested features we were able to get out in the last three to six months.

Unknown Executive: And then, you know, we're uniquely positioned in the, with Qualify, in the loan officer space, especially with some of the competitive, you know, one of our competitors was acquiring which created an opportunity for us in the marketplace. All of these things, though, I think position us extremely well for when the market comes back and, you know, there are more transactions and more providers who are coming back into the space and start reshuffling their business.

Unknown Executive: Yeah, we've not provided any specific metrics recently. But again, it's a possible deep dive in the future. But I would say it continues to go well. So you know, across our software businesses, we continue to execute on the strategy to get access to and introduce more homebuyers. And we continue to work with those homebuyers to help them with a variety of services. Some of the things that I have been excited about, for example, we all, you know, are moving services business. It certainly has been under pressure, just as the market has retracted over the last couple of years, but they've really used that time to be able to build out a new local full-service offering that is a really great product for consumers that we really didn't have before.

Unknown Executive: Some of the things that I have been excited about for example.

Unknown Executive: Our moving services business.

Unknown Executive: Certainly has been under pressure just as the market is.

Unknown Executive: We've tracked over the last couple of years, but they've really use that time to be able to build out a new local full service offering.

Unknown Executive: A really great product for consumers that we really didn't have before we really focused on labor only moves. So that's something we're now able to bring into these consumers to help add another product to those customers, obviously insurance and warranty you continue to be our focuses with consumers and we're seeing obviously very good growth.

Unknown Executive: We really focused on labor-only moves, so that's something we're now able to bring to these consumers to help add another product to those customers. Obviously, insurance and warranty continue to be our focuses with consumers, and we're seeing obviously very good growth in those two areas.

Unknown Executive: Those two areas.

Speaker Change: Thank you.

Operator: There are no further phone questions at this time. I will now pass it over to Lois for any written web questions.

Unknown Executive: There are no further phone questions at this time I will now pass it over to Lewis for any written web questions.

Lois Perkins: Thanks Ralph. The first question we have is what will build momentum in HOA over the next year? Sure, thank you for the questions.

Operator: Okay.

Lois Perkins: Last question I have I wont bore <unk> overall not small.

Ephraim Ware: Two of the things that I'm really excited about are one, the work that we're doing with Home Factors. We truly believe and expect that that will continue to be an advantage, and as we build upon that, a competitive advantage. The team is digging in.

Ephraim Ware: Sure. Thank you for the question.

Lois Perkins: Sure. Thank you for the question.

Ephraim Ware: Two other things.

Ephraim Ware: Really excited about.

Ephraim Ware: <unk> won the work that we're doing with all factors.

Ephraim Ware: We truly believe and expect that that will continue to be an advantage and as we build upon that.

Ephraim Ware: The competitive advantages that the team is digging in.

Ephraim Ware: We have made great progress, and as we mentioned in the prepared remarks, we've got, or are expecting to have 20 additional Home Factors this year to add to our pricing and segmentation through modeling. The second is the reciprocal exchange. I do believe it is the right business model for us. It will relieve some of the volatility that we see as an insurance carrier, so I'm excited about both of those two opportunities. Personally, for me, it's really just executing on both of those focus areas.

Ephraim Ware: We have made great progress in minutes as we mentioned in the prepared remarks, we've got or expecting to have 20 additional home factors this year.

Ephraim Ware: To add to our pricing segmentation through.

Ephraim Ware: Modeling the <unk>.

Ephraim Ware: Is the reciprocal exchange do believe it is the the right business model for us.

Ephraim Ware: It will relieve some of the volatility that we see.

Ephraim Ware: Insurance carriers, so I'm excited about both of those to whom.

Ephraim Ware: Opportunities and personally for me is really just executing well on both of those.

Ephraim Ware: Our focus areas.

Lois Perkins: That's all of the written questions we have.

Speaker Change: Okay I'll follow up.

Ephraim Ware: The recent questions we have.

Matthew Ehrlichman: Perfect. Then I'll just conclude, and I'll just say thanks to everybody for joining us. We do look forward to updating you on our progress as we move towards full-year profitability, a big milestone for the company, and toward approval of the reciprocal exchange, another milestone. We certainly appreciate the continued support. Look forward to speaking to you guys again in our Q2 earnings call in August. Until then, take care.

Speaker Change: Perfect and I will just conclude.

Speaker Change: So I'll just say thanks to everybody for joining.

Matthew Ehrlichman: Look forward to update you on our progress as we move towards full year profitability Big milestone for the company and toward approval of their Super Bowl exchange another milestone.

Matthew Ehrlichman: Certainly appreciate the continued support look forward to speaking to you guys again in our Q2 earnings call in August until then take care.

Matthew Ehrlichman: Okay.

Matthew Ehrlichman: [music].