Q1 2025 Porch Group Inc Earnings Call
Speaker Change: [inaudible] John Campbell, John Campbell,
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Speaker Change: I'd like to take a moment to read the company's stay part of the statement within the meaning of the private security's litigation reform act of 1995, which provides important portions regarded forward living statements.
Speaker Change: Today's discussion, including responses to your questions, affects management views as of today May 6th of 2025, we do not undertake any obligations to update or revise this information.
Speaker Change: Additionally, we will make bulletin statements that are expected future financial or business support conditions, business, business strategy and plans. These statements are subject to recent uncertainties which could cause our actual results to give the maternity
Speaker Change: Did you part the information on this slide? And you know, FEC pilings, important disclaimers?
Speaker Change: We will reference both gaps and non-GAAP financial measures on today's call. Here's your bar to today's press release for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during this ironing call which are available on our website.
Speaker Change: Joining me here today on Mark Ehrlichman, Porch Group CEO , Chairman of Founders, Shawn Tabak, Porch Group CFI, and Matthew Neagle, Porch Group CLA. Thank you, on our technical over to Mark with key updates.
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Good afternoon, everyone. Thanks for joining us.
Speaker Change: I've never been more excited to report on quarterly earnings as I am here for Q1 2025.
Speaker Change: After launching the member-owned reciprocal exchange on January 1st and the corresponding sale of our homeowners of America insurance carrier into the reciprocal, this is the first quarter in which our business is in our view optimally structured.
Speaker Change: We've fully transformed to a simpler, commission and fee-based, higher margin model that is more predictable for shareholders.
Speaker Change: Because of the standout Q1 results and the trends we're seeing, we are again increasing 2025 guidance.
Speaker Change: As I look ahead to the next several years, my expectation is very clear that we will grow profitability and cash flow faster than previously anticipated.
Speaker Change: Shawn will take you through the results, the increase in our guidance and increase in our long-term model and margins shortly.
Speaker Change: So this quarter marks a special time for the company. It's the moment poor shareholders are no longer in the catastrophic weather claims business, while still participating in the attractive growth of the homeless insurance industry and with durable competitive advantages.
Speaker Change: This quarter demonstrates how effectively our business is now structured to scale.
Overall, we delivered results for poor shareholders that are exciting.
Speaker Change: Revenue of $85 million, generated predominantly from $97 million of premium written at the Recurrier, which will label reciprocal written premium. Both of these numbers exceeded expectations.
Speaker Change: Now as the manager of the reciprocal rather than the carrier itself, revenue isn't apples apples when comparing year-to-year, given our transformation. However, gross profit in the Joseph de Badaf certainly are good to look at to assess your of your growth and performance.
Speaker Change: And so we're having a report on the Q1, we realized 82% gross margins, which we expect will continue forward, demonstrating what we've been saying about the high margin nature of our go-forward business.
Speaker Change: This produced Q1 gross profit of $69 million, which was a $32 million or 86% increase compared to gross profit in Q1, 2024.
Speaker Change: Our business is now highly profitable. Net income attributable to Porch was positive at $8 million.
Speaker Change: We produced our highest ever Q1 Adjusted Evidah of $17 million, which is a 20% margin and above expectations.
This was a $34 million increase over the prior year.
Resulting from this, I'm excited to share that...
Speaker Change: We not only generated positive cash for port shareholders, but significantly so, at $27 million.
Speaker Change: of Positive Cashflow from Operations for Port shareholders in the quarter, which includes $7 million collected related to the past best due pursuits.
Speaker Change: Operationally we perform strongly new business premium at our insurance business is performing well our software and consumer service operations are progressing nicely and we are investing more aggressively across these businesses
Finally, the reciprocal remains healthy.
Speaker Change: The reciprocal April 1st re-insurance renewals were strong, Lord It's catastrophic weather risk, and provides poor shareholders certainty and clarity as we move forward.
Speaker Change: This reciprocal cost of re-insurance decreased year-to-year, given our strong underwriting results in 2024, and porches unique home factors property data.
Speaker Change: Meanwhile, the reciprocal is healthy, with $198 million of surplus combined with non-emitted assets at the end of Q1.
Speaker Change: Similar to a strong comparison we shared about 2023 performance, I'm pleased to share the AM best report comparing results across carriers for 2024, the final year in which we owned homeowners of America.
Speaker Change: As you can see on the slide, the carrier was number one in direct combined ratio performance in Texas, out of insurance premiums in the state.
Speaker Change: Across a U.S. wide comparison of carriers with more than $350 million of premium, our carrier was number three.
Speaker Change: This outperformance versus the market demonstrates the ability for the reciprocal to pay attractive management fees to Porch Group ongoing while continuing to build surplus.
Speaker Change: and it reinforces our differentiated capabilities that will sustain advantages for the long term.
Thank you. Thank you. Thank you.
Speaker Change: We believe Porch is an excellent company to own during a turbulent time in the markets. First, we do not believe tariffs will have a significant impact on our business. We expect a mid-single-digit, adjusted EBITDA impact at most, which has been built in and assumed in the increased guidance, Shawn will share shortly.
Speaker Change: Second, if there is a recession, we believe our business is well protected and may even benefit.
Speaker Change: The majority of our business and income is generated from homeowners insurance premiums at the reciprocal. As you can see in the chart on this slide, historically homeowners insurance premiums just continue to grow in all economic cycles.
Speaker Change: It's an attractive industry to be playing in, especially in a commission and fee model without absorbing the weather volatility.
John Campbell, John Campbell,
Speaker Change: If interest rates come down amidst the slowing economy, it could spark a housing market pickup, which would be attractive for our software, consumer service and insurance businesses.
Speaker Change: Third, if inflation picks up, we expect homeowner's insurance price increases will accelerate directly increasing our high margin management fees.
Speaker Change: and finally of weather worsens. They can now hope our business. Courts doesn't absorb nor pay for the catastrophic weather claims under this reciprocal structure. More weather-related claims means premiums will increase over time, growing fees produced for porch and for our shareholders.
Speaker Change: I think it's generally homeowners' needs, homeowners' insurance, so we don't see risk of this industry as a whole doing anything but continuing to grow. And our competitive advantages help us to consistently stand out.
Speaker Change: I'll now turn it over to Shawn to cover our strong financial results and raise guidance.
Thank you, Matt, and good afternoon everyone.
Speaker Change: And previously discussed, we changed our segments as of January 1st, 2025 to align with the new business model following the launch of insurance services in the Porch reciprocal exchange.
Speaker Change: I'll focus my comments today on the Porch Shareholder's component of our Q1 25 financials.
Speaker Change: As a reminder, and as we discussed last quarter and at our investor day, there are three segments that generate cash for Porch shareholders, insurance services, software and data, and consumer services, offset by corporate.
We call this Porch Shareholder Interest.
Speaker Change: and since generating cash for Port Shareholders is our ultimate goal and how we measure our success. This is what we will focus our commentary on in this earnings call and on-going.
Speaker Change: As a reminder, under Gap, for the time being, we are consolidating the Porch Reciprocal Exchange, given the surplus note relationship between the reciprocal and our business.
Speaker Change: We do provide a reconciliation in our 10-2 and press release between Porch's shareholder interest and gap consolidated financials, with the difference being the reciprocal segment.
Speaker Change: We're relevant. We will present the prior financials on a comparative basis so folks can better understand the trends in our business.
Speaker Change: for software and data and consumer services, the comparison will be Apple's tablets.
Speaker Change: But because the reciprocal model didn't exist in 2024, the comparison for insurance services and therefore poor poor shareholder interest will not be out on staffs.
Speaker Change: Okay, with that background, let's get into our strong Q1 results which exceeded expectations.
Speaker Change: 2021-2025 Port Sherola Rancher's Revenue was $84.5 million, with 59% of revenue from insurance services, 26% from software and data, and the remainder from consumer services.
Speaker Change: Associated Gross Profit was $69.1 million, with a gross margin of 82%.
Speaker Change: Insurance Services had an 85% gross margin, software and data was at 75% and Consumer Services 83%.
Overall, Gross Profit grew 86% year-over-year . . .
Q1, 2025, Port Sherholder, Interest, Adjusted EBITDA was $16.9 million.
Speaker Change: A $33.6 million improvement over the prior year driven by the shift to the insurance services business model.
Speaker Change: As Matt mentioned, we see the year-over-year improvements in growth, profit, and the Justin Ibidop as the clearest way to understand the increase in our results.
Speaker Change: We're off to a strong start in delivering what we said we would as the operator of the reciprocal higher margins and predictable results.
Now let's dig into the segment [inaudible]
Starting with Insurance Services
Speaker Change: There are a number of ways that Porch's Insurance Services business generates economics.
Speaker Change: Management fees paid by the reciprocal based on a percentage of its written premium policy fees paid directly by the policy holders .
Speaker Change: Non-catastrophic Quotish Air Reinsurance, provided by Porch's captive re-insurer to improve capital efficiency for the reciprocal. And as a reminder, this re-insurance only is on attritional losses and does not include catastrophic leather.
Speaker Change: From the $97 million of the reciprocal is written premium, Porch Insurance Services generated revenue of approximately 50% or $49.8 million, which is high margin and predictable.
Speaker Change: Associated Rose Profit was $42.3 million, with a gross margin of 85%.
Adjusted EBITDA with $25.8 million, with a margin of 52%.
Thank you for watching. See you next time.
Shifting Now to Software and Data
Speaker Change: Revenue was $22 million, a 4% increase over the prior year, driven by product launches and associated price increases at several of our software businesses, and partially offset by non-referring revenue transaction.
Speaker Change: We expect growth in this segment to accelerate in Q2 to high single digits as we normalize for the Q1 non-recurring item.
Gross Profit was $16.5 million dollars with a 75% gross margin.
Speaker Change: And Justin Ivanov was $4.6 million, a $2 million increase over the prior year.
Speaker Change: As a note in Q1 2025, the housing market existing home sales were 2% lower than prior here with continued slow turnover.
Speaker Change: As interest rates decline in the future, we expect to see tailwinds driven by the pens up demand but for now we remain cautious and are assuming a flat housing market for the year.
John Campbell, John Campbell, John Campbell, John Campbell,
Shifting now to Consumer Services
Speaker Change: Revenue was $14.7 million, a 9% decrease over the prior year driven by the closure of our lower margin moving products such as corporate relocation in the third quarter of 2024.
Speaker Change: Gross Profit was $12.2 million, with an 83% gross market.
Speaker Change: Adjusted even at all loss with $700,000, a $2.2 million decrease over the prior year, driven by investments to drive growth in 2026 and beyond.
Thank you. Bye.
Speaker Change: We've reduced corporate expenses significantly over the last couple of years as we move to lower cost location and reduced GNA back office type costs.
Speaker Change: You can see here the benefit of our cost control actions. Corporate expenses decreased $2.2 million to $12.8 million in Q1 2025 compared to $15 million in the prior year.
Speaker Change: Moving on to the balance sheet, there are several benefits from the shift toward the commission and fee-based insurance services business model. It's simpler, higher margin and asset length.
Speaker Change: As a reminder, our focus is on generating cast report shareholders, which aligns closely with
Speaker Change: In Q1, we have also provided additional information on cash flow from operations of the Port
Speaker Change: Forch Cash Plus Investments was $114 million at March 31, 2025.
Speaker Change: Fortshire Older Interest cash flow from operations was $27 million, driven by a Justity Vida in the quarter of $17 million and $70 million of cash from the Vestu bankruptcy process, with potential for more over time.
Speaker Change: Additionally, our litigation against other parties remains ongoing and we will keep you posted as things developed.
Jason Kreyer, John Campbell, John Campbell, John Campbell,
Now for our updated 2025 guidance for Porch-Shareholder interests.
Speaker Change: Now that we are through our first full quarter, post the launch of the reciprocal and our transition to a high margin operator, we've seen the results. Good news, the model is performing even better than we had previously expected.
Speaker Change: And despite the macroeconomic turmoil in tariffs, which have been factored in, we are increasing our 2025 guidance across the board.
Speaker Change: We are increasing our 2025 revenue guidance by $10 million and now ranging from $400 million to $420 million.
Speaker Change: We are increasing our 2025 Gross Profit Guidance by $10 million and now ranging from $320 million to $335 million. Still within an associated gross margin of approximately 80%.
Speaker Change: We are increasing our adjusted EBITDA guidance by $5 million, now ranging from $60 million to $70 million.
Speaker Change: This increase in adjusted EBITDA guidance reflects three things. First, Q1 2025 adjusted EBITDA was ahead of our internal expectations by approximately $5 million.
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Speaker Change: Second, we are pleased with our insurance services segments performance post reciprocal transition.
Speaker Change: So we are raising guidance for the rest of the year by $5 million.
Matt Ehrlichman: which factors in the mid-single digit millions of terra-related impact Matt had mentioned.
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Matt Ehrlichman: Finally, those increases are partially offset by an approximately $5 million of additional 2025 investments to accelerate growth in 2026 and beyond.
Matt Ehrlichman: Starting April 1, when we renewed our re-insurance contracts, we improved the terms of the non-catastrophic quota share contract for the reciprocal to build even more surplus cushion there and scale insurance
Matt Ehrlichman: With this change, Q2, and Justin Ibadah for Porch, is expected to be approximately 5 to $7 million lower than Q1.
Matt Ehrlichman: and continue to grow nicely in Q3 and again in Q4.
Matt Ehrlichman: Given this as our first quarter with actual results and our go-forward structure, we wanted to provide what we shared at our investor day, we wanted to update what we shared at our investor day in December .
Matt Ehrlichman: As a quick note, we won't be updating the long-term model quarterly, but since it was the first quarter of results, we thought it was relevant.
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Matt Ehrlichman: If we apply that higher conversion to our long-term $3 billion premium target and our long-term
Our long-term target, Fort Sherable, the revenue is 2.3 billion dollars.
Matt Ehrlichman: Aligned with our 2-1 results, we still anticipate 80% gross margins and a 30% adjusted EBITDA
Matt Ehrlichman: This means that at $3 billion a premium, we now expect adjusted EBDA of $660 million.
Matt Ehrlichman: I'll now hand it over to Matthew to discuss a strategic update and review our KPIs.
Matthew Neagle: Thank you, Shawn. I'd like to start by providing an update on our four strategic focus areas to drive revenue growth for the business.
Matthew Neagle: First is the scale insurance premiums. In Q1 2025, new business growth accelerated during by strong execution across geographies, pricing and distribution.
Matthew Neagle: Most zip codes across our largest states are reopened at this time [inaudible]
Matthew Neagle: Texas, our largest state, implemented a 16% rate increase, reinforcing our commitment to pricing discipline.
Matthew Neagle: We remain careful and risk evaluation on both new and renewal policies to ensure profit targets are hit, therefore keeping the reciprocal healthy and growing surplus.
During the times, most premium growth comes from price increases.
Matthew Neagle: generating more reciprocal written premium and thus management fees for Porch without increasing risk.
Matthew Neagle: Key Hiders has strengthened our insurance leadership team and we successfully placed its new re-insurance program with over 40 investment grade partners reducing the reciprocal's risk.
Matthew Neagle: Importantly, poor shareholders are no longer in the catastrophic weather claims business.
Matthew Neagle: The second area of revenue growth is software innovation, where we have made meaningful progress against our roadmap. In Q1, Rhino implemented a 20% price increase in line with our strategic pricing goals.
Matthew Neagle: Our inspection business launched an expanded partnership with one of the largest inspection franchises in the country. Flow-fi, our mortgage SaaS business launched a new product, Flow-fi Quick Apply, which auto fills up to 80% of a mortgage application.
Streamlining borrower onboarding and driving adoption.
Next is the growth of our data business.
Matthew Neagle: We continue to expand home factors, our unique property insights product, adding further value for the reciprocal and third party carriers.
Matthew Neagle: Lastly, accessing more home buyers. We've made strategic progress in reaching and monetizing high value home buyers and launch new offerings such as packing services to make their move easier.
Thank you.
Speaker Change: Before we delve into our key performance indicators for insurance services, I want to provide a few important reminders regarding our segment reporting in prior year comparisons.
Matthew Neagle: Early in the first quarter of last year, we divested our EIG business.
Additionally, our prior insurance segment included our warranty business.
Matthew Neagle: which has now been strategically aligned with our new consumer services segment.
Matthew Neagle: This realignment allows for greater focus on the distinct growth and profitability drivers of each business.
Matthew Neagle: These changes in our business structure make direct year-rear comparisons to previously disclosed KPIs less relevant as they are based on a different basis.
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Matthew Neagle: Furthermore, in support of our profitability objectives, we executed material non-renules that extended through the first half of last year.
Matthew Neagle: This will naturally impact our every year comparisons for the current period. With these factors in mind, let's now turn to our new key performance indicators.
Matthew Neagle: Reciprocal Written Premium, or RWP, which represents premium written by the reciprocal before any policy holder
Matthew Neagle: We are in a management seat based out of percentage of this RWP. In the first quarter, our reciprocal rent premium reached $97 million.
Reflecting an approximate 10% increase compared to the primary year.
Matthew Neagle: Looking ahead, we anticipate continued growth in RWP throughout the remainder of the year. This expectation is driven by the historic seasonality of renewal policies.
Matthew Neagle: where the first quarter typically sees lower volumes compared to the second, third, and fourth quarters due to the typical patterns of home by our activity in new construction during the spring, summer, and fall months.
Matthew Neagle: Moreover, our ongoing efforts to expand our distribution channels and implement strategic price increases are expected to further contribute to RWP growth.
Thank you.
Matthew Neagle: Reciprocal Policy's written reflects the total number of new and renewal insurance policies written by the reciprocal during the period. We generate policy fee revenue directly from these policy holders.
Reciprocal rent policies were $36,000 in Q1. [inaudible]
Matthew Neagle: Given Q1 has historically the fewest renewal policies written looking ahead to the second quarter weeks back to reciprocal policies written to be north of 50,000 policies in that quarter.
Matthew Neagle: This anticipated increase is driven by the historical seasonality and the improving momentum in our new business growth engine.
Thank you.
Matthew Neagle: RWP for Policy Written is calculated by dividing the reciprocal written premium by the total number of reciprocal policies written.
Matthew Neagle: In the first quarter, RWP for Policy Written stood at $2,682.
Matthew Neagle: As mentioned before, we are encouraged by the momentum we are building in our new business initiatives. In the first quarter of 2025, we saw reciprocal new business premium double.
Matthew Neagle: on an apples-to-apples comparison to the prior year. Demonstrating the effectiveness of our efforts to expand our reach and attract new policy holders.
Matthew Neagle: While we continue to see some residual impacts on our renewal rates from our prior profitability initiatives,
Grine Renaud Premium represents a significant opportunity for growth. [inaudible]
Matthew Neagle: We are actively focused on enhancing our renewal strategies and expectancy improvement in these rates as we progress through the year.
Matthew Neagle: Finally, as Matt mentioned, the poetry's typical exchange maintains a strong financial position with a healthy surplus combined with non-minute assets totaling 198 million.
Matthew Neagle: For software and data, we have the number of companies in the annualized revenue for company or ARPA.
Matthew Neagle: In Q1, we serve 24,000 companies with an annualized revenue per company of $3,644.
Matthew Neagle: Reminder, this only includes companies related to our software and data segment and no longer includes moving companies or insurance agencies.
Matthew Neagle: On that basis, the number of companies has been relatively flat and we expect that to continue until the housing market picks up.
Matthew Neagle: As we discussed previously, strategic price increases are driving increases in revenue per company and we expect that to continue.
For Consumer Services, we have the Monitized Services.
and Annualized Revenue for Monetized Service.
Matthew Neagle: In Q1, we have 71,000 monotype services with annualized revenue per monotype service of $207.
Matthew Neagle: Reminder, this only includes monetized services relating to our consumer services segment and does not include insurance policies nor transactions in the software segment.
Matthew Neagle: I'll pass it back to Matt now to wrap us up.
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Speaker Change: Thanks, Matthew. I'll quickly wrap just by reinforcing the most important messages from today and then we'll dive into the Q&A. First, delivering quarterly adjusted EBITDA of $17 million in Q1 2025. Again, a $34 million increase year over year.
Speaker Change: Number two, it's translated to $27 million dollars of positive, sports, shareholder and cash flow operations. Again, we think that's a really important stat.
Speaker Change: Number three, we increased our 2025 Adjusted EBITDA guidance by $5 million to $65 million in the midpoint.
Speaker Change: We demonstrated what we said. We are now a high margin business and produced 82% gross margins.
Speaker Change: Again, we're proud of our $69 million of Q1 gross profit being an 86% year-over-year increase.
John Campbell, John Campbell, John Campbell, John Campbell,
Speaker Change: We completed the reinsurance renewals at the reciprocal, as we said, reducing its exposure to catastrophic weather claims and lowering reinsurance costs.
Speaker Change: Poor shareholders, not being in the catastrophic weather claims business is great and I do want to express appreciation to the great partnerships with more than 40 a rated high quality
Speaker Change: Our premium growth plan is on track and we're seeing strong signs related to new business growth.
Speaker Change: Lastly, there are no significant impacts from tariffs. The majority of our business is homeowners insurance, which is stable in a recession.
Speaker Change: So folks, we're off to a strong start and we look forward to a fun and exciting year and years ahead and thank you to our shareholders for your continued support.
With that Lisa, please open the call for questions.
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Speaker Change: Thank you, sir, and everyone. If you would like to ask a question today, please press star one on your telephone keypad. Once again, that is star one. If you have a question today and we'll take the first question from Daniel Kurnos, Benchmark.
Speaker Change: Yeah, great. Thanks, Matt. Looks not a lot to say here. It's a fantastic quarter, especially from the insurance side.
Speaker Change: Can I just get some clarity because I think I'm going to miss this from Shawn just why the cake rate was so high in the quarter and I know you have some built in with the TDI.
Speaker Change: But just, you know, is that a result of the surplus or what exactly drove that? And then just as we think about your willingness here, Matt, given the strong start of the year to kind of lean in, you know, you guys gave an initial GWP guide.
Speaker Change: He once crushed it, you guys are clearly leaving it to Agent Carter and so, and getting, you know, new policies written
Speaker Change: I just, what's your willingness to accelerate from here? Because it sounds like you're, there's a little bit of reinvestment, willingness, incremental willingness at this point given how strong that you're started. Thanks.
Speaker Change: Thanks, Dan. Shawn, why don't you take the first one and Matthew, maybe you can take the second one, premium growth? Yep!
Speaker Change: Yes, you're happy to have the reciprocal written premium converted to revenue at about 50%. We do expect that to be close to the ongoing rate there. A couple of things on that, first of all.
Speaker Change: Porch Arrow, Porch Insurance Services segment, does receive policy views directly from the policy of the older. So that's included there.
Speaker Change: as well. And then second, there are management fees that are paid by the reciprocal as well as the captive arrangement, the captive reinsurance arrangement that insurance services has with the reciprocal.
Speaker Change: The thing to remember about the captive is the ports also pays a commission in sales and marketing, and a portion of the nutritional losses back to the reciprocal.
Speaker Change: So, you can see that all flowing through the Porch Insurance Services P&L that we broke out.
Speaker Change: The main thing I think we think about with respect to the reciprocal is it's in a really healthy spot from a surplus perspective. We ended the quarter with almost $200 million of...
Speaker Change: That's the highest that metric has ever been for the reciprocal. We do expect it to move around from quarter to quarter, especially as there's weather claims after reciprocal, but all in all, a very healthy spot for the reciprocal to be in there. We do expect that to be highest at Q4.
Speaker Change: And then I can speak to the plans of how we're thinking about premium growth.
Speaker Change: Just kind of reiterating some of the prepared comments. We've seen RWP grow 10% on an Apple Tablet's basis every year.
Speaker Change: But the area we leaned into, in particularly in Q4, which is around our agency distribution of pointing and reactivating new agents, has led to Q1 being more than 100% in new business premium growth.
There are a variety of levers that we still have...
Speaker Change: to grow our WP over time. And as Shawn mentioned in his comments, we have started to make more investments.
Speaker Change: And so I'll show some of those opportunities we have some are shorter term and some are our medium term.
Speaker Change: We will continue to invest in our growth team to be able to reach out and engage agents in making sure our commissions and incentives are competitive and attractive for our agents.
Speaker Change: We are now looking at new geographies and looking at additional states where we can offer our products.
Speaker Change: We are in the infancy of our porch insurance product which offers a entirely different type of value prop to the consumer and to the agent and we are going to lean into building that out.
Speaker Change: There are choices we can make around our product that can make us even more attractive in the market.
Speaker Change: We'll do that a little bit in the near term, but we are making bigger investments into how we leverage our data and increase our sophistication of pricing which will allow us to be more aggressive around growth and pricing in a way that gives us confidence that we will be profitable. [inaudible]
and so there is a lot of opportunity for us.
Speaker Change: And we have started to take midterm investments in terms of bringing on additional talent, senior talent to our team, and starting to put in place some of the systems.
Speaker Change: That will allow us to scale as we go after that $3 billion in premium in the next seven to ten years. So there's a lot ahead for us.
Speaker Change: Matthew, can I just follow up on one thing super quickly, like if replacement value were to go up as a result of tariffs or, you know, just in the general market and given that you guys have a lot more of a dynamic model with your gated advantage. Thank you.
Speaker Change: Would AU be confident in being able to pass through premium increases and do you think it would make you more advantage relative to others given that you have a lot more visibility into the actual products themselves? Yeah, that's what I'm talking about.
Speaker Change: Yeah, those are I can I look at those sort of two vectors the first is we do look at replacement value on an ongoing basis and we do update replacement value on an ongoing basis
Speaker Change: And as we do that, it does bring up price through just the fact that you're getting more coverage.
Speaker Change: To your second point, it is certainly our thesis and belief that as we get more and more data into our pricing which we're every you know all the time.
Speaker Change: and there's opportunities for us to invest more into the sophistication of our pricing.
Speaker Change: We do believe that those two things, the privileged data that we have in combination with increasing
Speaker Change: will allow us to target segments that we know to be lower risk, but where we can command attractive pricing in the market, and that is certainly the strategy we're pursuing, and we will keep chipping away at that.
Now and into the, you know, into the future.
Dan: Awesome, thanks for sticking with me and appreciate all the color. Two for two, Mr. Ehrlichman, we'll be done. Thanks, and we appreciate it.
John Campbell from Steven's Inc. has the next question.
John Campbell: Hey guys, good afternoon. I'll echo the sentiment. It's a great start to the year. It's like you guys got the momentum building and I think we're definitely seeing what you guys message as far as life. Life can look like under the new or typical so nice work all around.
Thank you.
Speaker Change: But I just wanted to get a few insights to kind of relate to what you guys are experiencing in the trenches so far with reciprocal. I don't know maybe to explain some of the higher take rate but within taxes just from a new policy standpoint just broadly what percent of consumers are selecting HOA versus fortune insurance and how is that kind of fair versus expectations. Thank you very much.
Yeah, I'd say...
Speaker Change: We don't provide a specific metric on that, although Matthew did obviously provide just kind of overall new business, you know, growth metric, which we're clearly excited about. I will say John though that we...
We have positioned our products [inaudible]
Speaker Change: You know, for certain segments where we really are focused, you know, home buyers, like Matthew mentioned. We want to be known as being the best.
and a homeowner insurance company for home buyers.
Speaker Change: You know, those consumers who represent, you know, almost 40, actually 40% of all the homeowner's insurance purchases that happen each year are by home buyers generally.
Speaker Change: And so we've actually convert really well, you know, for those customers. New construction is another segment, you know, we convert really well for obviously, you know, because of our data, you know, homes that are better maintained, your lower risk, we're naturally going to play better. So I will say the answer to your question would vary.
Speaker Change: You know, depending on the different kind of sub segments, you know, within Texas, but clearly overall we feel like we're in a good spot given how a new business, you know, premium is growing.
Speaker Change: Okay, that's helpful. And then on the HOA surplus, you guys had mentioned the 198, 198 million. And then I think you targeted 100 million by end of year. I don't know if those are apples to apples. Maybe if you could shut the idle mat and then just broadly, you know, how much surplus kind of typically draws down throughout the year?
Speaker Change: Yeah, I think I'm in that. So as the end of last year, December 31st,
Speaker Change: surplus combined with non-emitted assets which is a key metric that we kind of look at.
was $157 million. So it actually went up in Q1.
Speaker Change: The carrier has been in the first half of the year, you typically have losses driven by catastrophic weather. And then in the second half of the year, that typically flips around and you generate income. Now if you look at the net income, even in the financials that we issue today, the reciprocal itself had a really strong Q1, actually net income or net loss, excuse me, for the reciprocal improved like $10 million year over year.
Speaker Change: and I think it just speaks to some of the underlying advantages that we talked about, home factors, and some of those other items.
Speaker Change: So as I mentioned, we do expect surplus combined with non-admitted assets to move around from quarter to quarter based on the carrier's business, but overall a very healthy position at the beginning of the area here.
Speaker Change: Okay, that's helpful and then one more to add, just relative to the porch chairs within HLA for the surplus.
Speaker Change: You know, you guys have been pretty clear about the flywheel effect which is super enticing. I'm just trying to get a sense for how that's calculated at the regular level. If you're able to capture all that appreciation, or is it capped to some extent?
Speaker Change: Yeah, there is some cap that's included in the surplus number that gets filed. One of the things that we look at is surplus combined with the full value of the port shares that's in there. Effectively, I think it is effectively the net assets of the business.
Speaker Change: of the reciprocal. And so we think that's a good indication of the overall value there. The amount of technical surplus that gets filed is around $105 million.
Speaker Change: or they're about so also a very strong number with obviously a lot more upside on top of that if you include the full net assets.
And just let me layer on one thing. Okay.
Speaker Change: John , the reason we think that the surplus plus the non-emitted asset number of the 198 is the best number is obviously if we want to do the reciprocal could go sell some of those shares.
Speaker Change: Right. And so, now that's not what we're planning to do, because we anticipate, and we hope, that the stock will, you know, fairly value the company as we continue to build the company. And so...
Um...
Speaker Change: So, but we got, you know, it's a way, I think it's the right number to focus on and then quickly to your point on the flywheel.
Speaker Change: I mean, we are excited about how that flywheel is working. I mean, the reality is, now with this structure, I think you can probably see it, you know, as the boardstock, you know, price is higher.
Speaker Change: That net asset number, you know, is higher. It can then support more premium growth, right? So we would, you know, anticipate growing the premium faster. [inaudible]
Speaker Change: and you see today, I think investors can see today how that premium can translate into cash
Speaker Change: which we would expect will help to value the company appropriately. As we look ahead and so, it's an exciting time to go to the post-ocorder and just demonstrate what we've said there is happening and we expect we'll continue to happen.
Speaker Change: Absolutely, makes a lot of sense. Thanks, guys. Thanks, Shawn. Appreciate it.
The next question is from Jason Kreyer, Craig Hallum
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Jason Cryer: Great. Thank you guys, impressive work here. So I want to just ask about the reinsurance process. If you can give some more details there, if I'm understanding that right, you're now going to carry less risk but also paying less for reinsurance. And I'm curious as you went through the process, just if you can share some dialogue about the reinsurance appetite to work with Porch and how that's changed. Thank you.
Sure.
The
Jason Cryer: So, first things first, which is we are proud and appreciative of the relationships we have with these great reinsurance.
Jason Cryer: You know, companies. There's been long-standing relationships, you know, we look forward to working with these partners, you know, for years and years and years, you know, to come. Yes, we are pleased with how the reinsurance, you know, renewal went because, you know, to your point, you know, we've now set.
Speaker Change: The retention limit for the reciprocal, you know, $25 million, which you think is a really healthy spot for it to be, and so if there are large weather events. Thank you very much.
Speaker Change: You know, we have support, you know, from third party partners who would then be able to step in and really mitigate the the risk around catastrophic weather for the reciprocal, you know, itself.
Speaker Change: We share it today at the AMBest results in terms of how well the carrier has performed versus others and so clearly we share that data with third party reinsurers and so when it came down to pricing the reality is that our business does stand out.
Speaker Change: Leo versus other, you know, carriers. And so through that, we were able to get, you know, get benefit in just, you know, pricing overall and just the participation in that book. So,
John Campbell, John Campbell, John Campbell, John Campbell,
Thank you. Appreciate that, Palm.
Speaker Change: with the reciprocal written premium topic, and we've talked about that a little bit, but can you give any transparency on what we should expect on how that breaks out between rate increases versus all of the acquisition over the course of the year? Thank you very much.
Speaker Change: We don't, we don't break that out. We've shared that, you know, Texas has a 16% price increase.
I shared will continue to look for. [inaudible]
Speaker Change: Opportunities for price increases. It's an ongoing thing we look at very closely.
Speaker Change: But we do expect them to slow down. And then I shared, we're very focused on rebuilding our growth engine, and we're seeing great momentum with our new business premium, and we have opportunity over time to grow renewal premium.
Speaker Change: And then I also share just for clarity, we do expect reciprocal rent premium to increase in Q2 over $50 million and that's due to the combination of
Speaker Change: Historical seasonality of when we typically acquire policies and the momentum that we're seeing in our new business bringing.
Thank you.
Okay. Thank you.
We'll take the next question from Ryan Tomasello, KBW Thank you.
Ryan Tomasello: Hi, everyone, thanks for taking the questions. In terms of the growth lovers for the reciprocal
Can you say what percent of your prior active footprint?
Speaker Change: You know, it was essentially turned off when you guys pulled back and how much of those zip codes you've reopened again.
Speaker Change: And then as a follow up on the agent channel, if you can just maybe contextualize how large that is today maybe in terms of I guess the number of agents that you're working with and how that compares to where the prior peak was.
Speaker Change: Just help us understand how much low-hanging fruit there is here as you turn that back on.
Speaker Change: Yeah, certainly, you know, wide sets of areas that we were not taking business. And I would say for the most part at this point, those zip-goats have been fully reopened.
Matthew Neagle: So, we've started to do that in November , once we had approval around the reciprocal, and we've been executing against that. The only lot coming on geographies, and I'll turn over to Matthew, is there is a lot of additional geographic expansion.
Matthew Neagle: with New States. And so we do expect to continue to open up new geographies in New States and that will just be an ongoing process. So more to announce as we go there.
Speaker Change: Yeah. So we don't today disclose the number of active agents or the number of coding agents. It is growing nicely due to the efforts that we really kicked off just in Q4.
Speaker Change: The additional commentary I'd want you guys to keep in mind is…
Speaker Change: The historical numbers are kind of interesting, but what's more interesting is just the sheer number of agents that are out there, and I would say we're still very really...
Speaker Change: at engaging the full prospect list of potential agents, and that prospect list will grow as we expand in the new States.
Aye.
We see opportunity to get more engagement from agencies, and then on top of that, once we get...
Agents,
Speaker Change: involved with Porch. There's a whole nother lover, which is how do we become a top carrier within their book of business?
Speaker Change: And I would say that one, we are very early days. A lot of these agents that we're re-engaging or that we're appointed, we are not yet a significant part of their business. And so we have this big, clear path.
Speaker Change: Through the agency channel to go grow materially, that is through time, effort, blocking, and tackling, and continuing to provide good incentives, good products, and a good claims experience.
Speaker Change: and make it easy to do business with us, and that's what we're going to be focused on. But there's a lot of room still, I think it's the primary lessons.
Speaker Change: And then just wanted to clarify the numbers on the surplus that you talked about earlier, Shawn, so you mentioned I think 105 million is the statutory amount and then the 198 is statutory plus not admitted assets.
Speaker Change: Says the 105 include a haircut amount of the share value because by my math the share value it
Speaker Change: Mark's 31st was like 133 million, so I'm just trying to get to that plug of like what's in the 105 and then what's in the 198 if that makes sense?
Speaker Change: Yeah, so 198 to make sure it's clear for folks, 198 is a surplus combined with
Nine Minute Appets
Speaker Change: The highest number of 198, and you backed off the value of 18.3 million shares at the $7.20 and soft rice at the other quarter, that would get you to the surplus.
Speaker Change: You know, without any of the shares. So those are kind of the different components within it.
That helps. Hopefully. Got it. Thanks for the clarification.
Thanks Ron, appreciate it.
We'll pick the next question from Jason Helfstein, Oppenheimer [inaudible]
Speaker Change: And Shawn, I want to start out in your prepared remarks because something about for the time being
Speaker Change: You're consolidating that was difficult. So, take us through the steps of what would need to happen for you to have a kind of gap reported without your typical student.
You know, kind of potentially improving as-
Speaker Change: Howley, Margie, Jetson Locke, presumably at some point in the back of this year, and I guess I'll say we've seen pretty good momentum in the...
Speaker Change: You know, more affluent homes and kind of underperformance in the less affluent homes within housing transactions. So I don't know how that's all that ties together. Thank you.
Speaker Change: Yeah, we'll see the second one first, and then Shawn go to the first one, just briefly. On, I'll start us in a Matthew later on, maybe you can talk about some of the investments and growth opportunities, but just quickly, it doesn't matter to us really that much.
Speaker Change: Jason, if there's, you know, sales more for more flowing homes, you're let this not based on the total dollar amount it's really around the number of total transactions transaction.
Speaker Change: You know, they're running through, you know, the system, you are software products charge for transaction basis.
Speaker Change: You know, based on the number of existing home sales and also in some of our software businesses on the number of refinanced transactions and so obviously that also is just very very low right now and so as the transaction volume picks up, then we benefit, you know, and we will be able to fill those fill those tailwinds.
Speaker Change: Matthew, you just take one more minute on that question in terms of some of the investments, then Shawn, two on the first one.
Speaker Change: Yeah, so, as Matt mentioned, the transaction volume goes up, will benefit. In addition, for software and data, there are investments being made into home factors, both the product itself and the good market.
Speaker Change: and our core strategy with the software of businesses while the housing market has been flat, has been to invest in innovation, to be able to drive price increases so that it is...
Speaker Change: Transaction volume comes back. We are well positioned. We have been doing that and we've pulled the trigger to invest more into that innovation to support price increases, which will benefit us as the market comes back.
Speaker Change: On consumer services, we certainly have some impact related to housing volumes or moving business in some of our core channels around warranty or tied to new home buyers.
Speaker Change: and we have also decided there's opportunity to invest there in particular in trying to get access to more consumers.
Speaker Change: through our app, through a website called Moving Place, which will be a destination site for all types of moving services, we just launched packing there in Q1.
Speaker Change: and also looking at how can we better partner with real estate agents?
Thanks.
And then Shawn, you're on confirmation.
Yeah, so the question around-
Speaker Change: Consolidation of the reciprocal and the surplus note is one of the key reasons we are consolidating the reciprocal. I guess what I would say is that there is really pleased with the structure. I mean the surplus note is really attractive paper at 15% coupon and so we're not in a rush to change that.
Speaker Change: We could sell the surplus note at some point off in the future, but for now we're really pleased with what we're seeing in the business overall, as well as the reciprocal transition and the surplus note paper that we currently hold.
Thank you for your time, and I'll see you next time.
Thank you.
Thank you. We'll go next. We'll go next to Tim Graves, Loop Capital.
and your line is open. Please check your mute button.
John Campbell, John Campbell, John Campbell,
Hello, can you hear me?
Speaker Change: Yes, we hear you now. Okay, sorry, thank you for, yeah, thank you for taking the question. I guess my my question is around home factors. I definitely know like the strength of the pipeline as far as like
Speaker Change: The strength of the pipeline and home fractures and maybe more so that impact on the revenue going forward and what you see that. Thank you very much.
Speaker Change: Sure, I can speak to those. We actually, I think about pipeline in two ways. One is...
Conversations we're having with carriers.
Speaker Change: and what makes us really excited is we are engaging with carriers who are actively digging in to go through their own testing process with their own claims data to prove out that the home factors help them to better predict risk. That creates all sorts of opportunities for us.
Speaker Change: The second pipeline I think about is we are still building out new home factors.
Speaker Change: and the more home factors we build out, there's more opportunities.
for us to help carriers
Speaker Change: Engage, Improve their pricing and underwriting, which creates opportunity for us. In terms of revenue impact, what we've communicated in the past is not a lot for 2025 but starting to build in 2026.
John Campbell, John Campbell,
Thank you.
Okay, thank you.
Speaker Change: Thank you for the question. And everyone at this time, there are no further questions. I'd like to hand the conference back to Mr. Matt Ehrlichman for any additional or closing remarks.
Matt Ehrlichman: I'll just say thank you to thank you to all for joining us today. Thanks for those questions and to our shareholders. Thanks for the continued support. As you can tell, we are excited about how this year and years ahead are shaping up. With that, we will end the call. Have a great rest of the day. Take care.