Porch Group - Earnings Call - Q4 2024

Executive Summary

• Record profitability despite lower reported revenue: Q4 2024 Adjusted EBITDA was $41.8m (42% margin) and GAAP net income was $30.5m, both sharply improved vs prior year, while revenue declined 12% due to prior-year Vesttoo-related non-recurring reinsurance effects and a $5m year-end adjustment in Q4 2024.
• Business model transformation completed: Formation of Porch Insurance Reciprocal Exchange (PIRE) on Jan 1, 2025 and sale of HOA into PIRE shifts Porch to a higher-margin, commission-and-fee model with expected ~80% gross margins in 2025; management raised FY2025 guidance (Revenue $390–$410m, Gross Profit $310–$325m, Adjusted EBITDA $55–$65m) and reaffirmed 2026 $100m EBITDA target.
• Operational outperformance: Insurance segment attritional loss ratio improved to 16% (from 30%), gross loss ratio to 21% (from 36%); premium per policy up 31%; new business premiums +50% in Q4 and “double” early in Q1 2025 as agencies re-engage post-PIRE approval.
• Balance sheet positioning: $350.4m cash, cash equivalents, and investments at 12/31/24; post-sale, Porch holds ~$106m surplus notes bearing 9.75% + SOFR and expects ~ $7m Vesttoo bankruptcy cash later in Q1 2025, supporting interest income that substantially offsets debt service.

What Went Well and What Went Wrong

What Went Well

• Record quarterly Adjusted EBITDA ($41.8m) and GAAP net income ($30.5m) driven by “operational excellence,” advantaged underwriting, SaaS pricing, and cost control; CEO: “pivotal shift toward sustainable profitable growth”.
• Insurance KPIs improved: attritional loss ratio 16% vs 30% prior year; gross loss ratio 21% vs 36%; premium retention 105%; premium per policy +31%.
• Strategic restructuring completed: Formation of PIRE and sale of HOA to PIRE; CFO: model becomes simpler, higher margin, asset-light; raised FY2025 guidance and confirmed 2026 $100m EBITDA target.

What Went Wrong

• Reported revenue decreased 12% YoY to $100.4m due to prior-year non-recurring Vesttoo-related reinsurance effects ($26m uplift in Q4’23) and a $5m non-recurring year-end adjustment; absent these, management cites ~20% organic growth trends (29% in Insurance).
• Policies in force declined 34% YoY to 206k given targeted non-renewals and EIG divestiture; management expects PIF growth to be mostly flat in 2025, picking up in 2026.
• Q4 included legacy reinsurance complexities and continued hurricane impacts across 2024; management highlighted the transition away from direct weather risk via PIRE to reduce volatility.

Transcript

Operator (participant)

Good afternoon, everyone, and thank you for participating in Porch Group's Fourth Quarter 2024 conference call. Today, we issued our earnings release and filed our related Form 8-K with the SEC. The press release can be found on our Investor Relations website at ir.porchgroup.com. I would like to take a moment to review the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995, which advises important cautions regarding forward-looking statements. Today's discussion, including responses to your questions, reflects management's views as of today, February 25, 2025. We do not undertake any obligations to update or revise this information. Additionally, we will make forward-looking statements about our expected future financial or business performance or conditions, business strategy, and plans. These statements are subject to risks and uncertainties, which could cause our actual results to differ materially from these forward-looking statements.

Please refer to the information on this slide and in our SEC filings for important disclaimers. We will reference both GAAP and non-GAAP financial measures on today's call. Please refer to today's press release for reconciliation with non-GAAP measures to the most comparable GAAP measures discussed during this earnings call, which are available on our website. As a reminder, this webcast will be available for replay, along with a presentation shortly after this call on the company's website at ir.porchgroup.com. Joining me here today are Matt Ehrlichman, Porch Group CEO, Chairman and Founder, Shawn Tabak, Porch Group CFO, and Matthew Neagle, Porch Group COO. Thank you. I'll now turn the call over to Matt for his key updates.

Matt Ehrlichman (CEO)

Good afternoon, everyone. Thank you for joining us. We demonstrated exceptional progress this last quarter toward our objective of being a new kind of homeowners insurance company differentiated by, one, advantaged underwriting with unique data, two, early access to home buyers, and three, a customer experience that makes the move in homes simple. Our vertical software powers 40% of the home inspection industry, 40% of title transactions, and operates in key sectors including mortgage and roofing. Our data platform now includes Home Factors for 90% of U.S. properties and early insights into 90% of U.S. home buyers. We are a leader nationwide in providing moving labor and expanded long-term partnerships with major moving companies, utilities, insurance agencies, and more. With these advantages, we aim to build one of the largest and most profitable homeowners insurance companies. I believe this update today will demonstrate we're on our way to doing so.

So now on to the key highlights, and there are a number of them that I'm excited to share. Three years ago, we set an important goal to hit Adjusted EBITDA profitability for the second half of 2023 and the full year 2024. I am proud to share that we achieved that goal, delivering $7 million in Adjusted EBITDA for the full year 2024. This means that in the fourth quarter, profitability was meaningfully better than guidance. Adjusted EBITDA was a record $42 million. Net income was $30 million. The progress we've made is even more clear as we look ahead. For full year 2025, we are providing Adjusted EBITDA guidance of $60 million at the midpoint, a 15% Adjusted EBITDA margin, and more than a $50 million increase over 2024. More, we are increasing our outlook for revenue, gross profit, and Adjusted EBITDA for 2025.

2025 revenue guidance is $400 million at the midpoint. Going forward, our revenue is much higher quality given our transition away from holding weather risk toward a simpler commission and fee-based higher margin model. Case in point, we are guiding to approximately 80% gross margins in 2025. At our December Investor Day, we highlighted our 2026 target of $100 million of adjusted EBITDA. Given this is our first earnings call since our Investor Day, I do want to confirm that we are on track and remain confident in achieving this goal. Importantly, we expect Porch to generate cash for shareholders this year. We expect to deliver positive adjusted EBITDA every quarter going forward. This is an exciting time for the company. So the end of 2024 marked an important moment for Porch.

On January 1st, 2025, we completed the formation of the Porch Insurance Reciprocal Exchange, which we may refer to as PIRE, and the sale of our Homeowners of America insurance carrier into PIRE. This transforms the financial results for Porch Group shareholders to be more predictable and higher margin. The member-owned design of the reciprocal means both PIRE and HOA will operate as a separate entity outside of Porch Group. Porch will receive commission and fees for operating PIRE, benefiting from higher margins and more predictable earnings. I do want to zoom out here just for a second and provide some context on our journey. In the last few years, we have focused on profitability, and certainly, I'm pleased with the progress. We've now entered this next chapter, one focused on growing rapidly while simultaneously expanding margins.

Now that we've completed the optimal structuring of our insurance business, we've reopened geographies and reactivated distribution partners. We've already seen substantial growth in new business premium here in Q1. Thank you to our employees for your work to get us here. Thank you to our shareholders for your support. We are excited to deliver spectacularly for you all. Now, Shawn, over to you to provide the financial details.

Shawn Tabak (CFO)

Thank you, Matt. Good afternoon, everyone. As a reminder, Q4 2024 revenue has a tough comparison due to two items. First, in the fourth quarter of 2020, in the fourth quarter, excuse me, of 2023, revenue was $26 million higher due to lower reinsurance ceding following the Vesttoo matter. Second, in the first quarter of 2024, we sold EIG, our legacy in-house agency. With that consideration, total revenue in the fourth quarter of 2024 was $100.4 million, a $14.2 million, or a 12% decrease from the prior year. In addition, in the fourth quarter of 2024, there was a $5 million non-recurring year-end adjustment, which reduced revenue and Adjusted EBITDA related to the wrap-up of some legacy reinsurance complexity in light of Vesttoo. Absent these non-recurring items, the business performed well and has strong 20% organic growth trends led by the insurance segment.

Revenue less cost for revenue was $89.3 million, an 89% margin. Q4 Adjusted EBITDA was $41.8 million. That's a $30.1 million increase over the prior year and ahead of our expectations, driven by strong execution, risk selection, capital allocation, and cost control. I want to take a second to show appreciation and highlight the performance of the team. This is quite a significant improvement in Adjusted EBITDA year over year. Gross written premium was $112 million, broadly flat compared to the prior year, with premium per policy increases offset by the divestiture of our legacy insurance agency, EIG, in the first quarter of 2024. The reciprocal approval and formation took a bit longer than originally anticipated, but we reopened for growth late last year. Matthew will talk through the progress shortly. Now, looking at our results by segment, in insurance, revenue was $72 million.

The items I discussed above for total revenue all apply to the insurance segment. Absent these non-recurring items, the insurance segment performed well and has strong 29% organic growth trends driven by increases in premium per policy. In vertical software, revenue was $29.3 million, a 6% increase from the prior year driven by SaaS price increases. Moving on to adjusted EBITDA. Insurance adjusted EBITDA was $48.8 million, a $17.2 million increase over the prior year driven by our insurance profitability actions and advantage underwriting, which have helped us select the right risks to insure. Vertical software adjusted EBITDA was $5 million, a $5.3 million increase over the prior year driven by the SaaS price increases and strong cost control. There was a 500 basis point increase in revenue less cost revenue margin in this segment.

Finally, corporate expenses were $12 million, $8 million lower than the prior year as we continue to manage costs and see the benefit of the actions we've taken. Now, let's take a step back and look at our full year performance. Total revenue for the full year 2024 was $437.8 million, a 2% increase over the prior year driven by the insurance segment. As a reminder, in the prior year, the Vesttoo matter resulted in approximately $55 million of incremental revenue in the 2023 comparative period. Revenue less cost revenue was $212.2 million, representing a margin of 48%. Adjusted EBITDA was $7.2 million for the full year, better than our expectations driven by strong execution across all segments. This was an increase of $51.7 million over the prior year. Gross written premium decreased from the prior year driven by the divestiture of EIG in Q1.

Otherwise, we managed HOA gross written premiums to our plan of roughly flat compared to the prior year. Now, moving on to the balance sheet. There are several benefits from the shift toward the commission and fee-based insurance services business model. It is simpler, higher margin, and asset-light. Excluding HOA, we ended 2024 with cash, cash equivalents, and investments of $70 million. At that time, Porch Group also held a $49 million surplus note in HOA that yields a coupon equal to 9.75% plus over. Following the sale of HOA to PIRE on January 1, 2025, as of month end January, cash and investments was approximately $93 million, and the surplus note balance increased to $106 million.

Additionally, following the period end, there was positive progress with our Vesttoo claims, and we now expect to receive approximately $7 million of additional cash later in Q1 from the Vesttoo bankruptcy process, with potential for more over time. Additionally, our litigation against other parties remains ongoing, and we will keep you posted as things develop. At the so far current rates, these surplus notes would generate approximately $15 million of interest income annually for Porch shareholders, which substantially offsets our debt interest payments. Now, looking ahead to 2025, first, I wanted to remind about a few changes starting in Q1 consistent with what we laid out at our Investor Day. First, we will continue to focus on generating cash for the Porch shareholders as the primary measure of value creation.

While we will consolidate PIRE and HOA into our GAAP financials for the time being, adjusted EBITDA will exclude the results of PIRE and HOA as they do not contribute to cash available to Porch shareholders. Adjusted EBITDA will include results of the segments that contribute to generating Porch cash, which will include insurance services, software and data, and consumer services offset by corporate expenses. We will call this Porch shareholder interest and provide guidance on this basis for revenue, gross profit, and adjusted EBITDA. We expect to introduce new KPIs in 2025, which align with our go-forward business segments. Starting with Q1 2025, we plan to report gross profit instead of revenue less cost of revenue. This requires a reclassification of approximately $10 million of depreciation and amortization expense into cost of revenue, predominantly in the software and data segment.

Even with this change, we expect gross margins to be substantially improved in 2025. Now, for our 2025 guidance for Porch shareholder interest. We expect 2025 revenue of $390 million-$410 million, better than previously communicated. This is a slight decrease year over year given the shift to the lower revenue but higher margin reciprocal operating services model. Case in point, we expect gross profit to grow approximately 50% compared to 2024 revenue less cost of revenue. We expect 2025 gross profit of $310-$325 million, with an associated margin of approximately 80%, highlighting the more profitable and predictable model. Overall, we expect Adjusted EBITDA of $55 million-$65 million. At the midpoint, this is approximately a 15% Adjusted EBITDA margin and a $53 million increase over 2024.

Our higher Adjusted EBITDA guidance includes increasing sales and product investments in the first half of 2025 to drive faster growth in 2026 and beyond across each of our segments. I'll now hand over to Matthew to discuss a strategic update and review our KPIs.

Matthew Neagle (COO)

Thank you, Shawn. I'd like to start by highlighting our four focus areas to drive revenue growth for the business. First is to scale insurance premiums. We expect the massive homeowners insurance market to increase rapidly for years to come. We focus on home buyers and low-risk homes. Home buyers make up about 40% of homeowners insurance purchases each year. Low-risk homes are what everybody in the industry wants. We just have the advantage to identify and price them more effectively given our unique property data. Toward the end of Q4, after the PIRE approval was received, we restarted premium growth after a period of managing premiums to flat. We've been reopening geographies, hiring sales leadership, reengaging legacy agency partners, and adding new agencies to expand distribution. Momentum is building, and in fact, we saw 50% growth in new business premium in Q4.

Already in Q1, we are seeing new business double versus the prior year. Most of our premiums, though, will come through renewals, so rate increases make a big impact. We will continue to take rate and expect average rate and premium per policy nearing $3,000 at the end of 2025, an increase of approximately 20% over the prior year. Overall, we're excited about the momentum towards our $500 million gross rate and premium target for 2025. We expect premium growth to continue to accelerate throughout the year. The second area of revenue growth is innovation in our vertical software businesses. We are executing our product roadmap, which supports our strong customer retention and our strategic price increases.

Q4 key advancements include an AI-powered assistant to accelerate inspection report building, advanced reporting capabilities for Rhino, Floify Verify for streamlined income and employment verification, and a new Measurement as a Service product in our roofing software. Retention and satisfaction rates remain strong, and as the housing market stabilizes, we expect solid revenue growth. Next is the growth of our data business. Launched in 2024, Home Factors has the potential to become a big and profitable business. Our work with HOA and third-party carriers clearly indicates that Home Factors improves risk selection. We're adding new Home Factors each quarter, increasing value for PIRE and HOA, and driving third-party revenue. Lastly, there is a real opportunity to access more home buyers and help them with more high-value home services. In December, we launched MovingPlace, a marketplace that simplifies moving.

We also signed new warranty and moving partnerships, which expands our access to high-value home buyers early in their journey. Strategically, this is important as it creates more leads for our insurance agency partners and incentivizes them to sell PIRE and HOA insurance products. Now to KPIs. 2024 KPIs are presented on the legacy segments and will be updated in Q1 2025 to reflect the go-forward business segments. Looking at the legacy KPIs for Q4 2024, first, the average number of companies was 27,000. Average revenue per company per month was $1,236. We had 219,000 monetized services in the quarter, and the average revenue per monetized service was $390. Looking now at our insurance segment KPIs, as a reminder, this segment currently includes HOA and warranty. From Q1 2025, warranty will be included in our consumer services segment.

Also, when comparing year-over-year figures, a reminder that we divested our insurance agency, EIG, in January 2025. In Q4 2024, gross rate and premium was $112 million, roughly flat compared to the prior year. Policies in force was 206,000. As we previously discussed, our strategy has been to use tactics such as targeted non-renewals to manage a decline in policies over the last couple of years while maintaining premium roughly flat. Annualized revenue per policy was $1,396, an increase of 25% from the prior year driven by premium per policy increases. Focusing on HOA, the annualized earned premium per policy increased 31% to $2,446. Premium retention was 105%. Lastly, HOA is healthy with a record surplus as it transitions to the reciprocal structure. As of December 31, 2024, it held $157 million of surplus combined with non-admitted assets that include a portion related to Porch sales held by HOA.

In Q4, our gross loss ratio was exceptional at 21%, down from 36% last year. Our attritional loss ratio sets the bar for the industry at 16% compared to 30% in the prior year. November and December saw the lowest claims volumes for many years. We have effectively targeted and retained the homes with lower risk over the last few years. Also note that the insurance carrier has no exposure in California. For the full year, we delivered a 65% gross loss ratio, lower than 69% in the prior year, despite Hurricane Beryl, one of HOA's larger weather events. As you can see in the chart, we improved despite the increase in catastrophic weather costs driven by a 22% attritional loss ratio compared to a 34% in the prior year.

Gross combined ratio was 79% in 2024, an improvement from 88% in the prior year, and a fantastic result for the year. All of these metrics reflect our success in targeting and retaining lower-risk homes through the strength of our advantaged underwriting and strategic actions over the last couple of years. I'll now hand it back to Matt for closing remarks.

Matt Ehrlichman (CEO)

Thank you, Matthew. We believe the numbers speak for themselves and that our performance ahead will clearly demonstrate the value in what we're building. We believe the homeowners insurance industry presents a huge and exciting growth opportunity with highly sticky and valuable customers. With our insurance services, commission, and fee structure, we're positioned for consistent and sustained profitable revenue growth with approximately 80% expected gross margins and mitigation from weather volatility. Our unique data drives long-term pricing and underwriting advantages. We laid out our objectives clearly in our recent Investor Day to achieve $100 million of Adjusted EBITDA in 2026, to scale our insurance business to $3 billion in premiums over time, to build a large and defensible data business, grow our software and consumer services divisions, and generate a consistent and increasing amount of cash for shareholders. I'll wrap up by reinforcing the most important messages from today.

First, delivering record quarterly Adjusted EBITDA of $42 million in Q4 2024 and full-year Adjusted EBITDA of $7 million. Second, we increased our 2025 Adjusted EBITDA guidance to $60 million at the midpoint and reaffirmed our $100 million 2026 Adjusted EBITDA target. Three, the formation of PIRE and the sale of HOA occurred as expected. Four, we opened geographies and commenced our premium growth plan and are seeing strong early signs. We expect some fantastic years ahead. Thank you again to our shareholders for your continued support, and with that, John, please open up the call for questions.

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. If you are called upon to ask a 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. Your first question comes from the line of Dan Kurnos with The Benchmark Company. Please go ahead.

Dan Kurnos (Managing Director, Internet and Media Equity Research)

Great. Thanks. Good afternoon. Matt, the Investor Day was a little over two months ago, and we're already starting to tweak numbers up in 2025. So can we just get some more color on what's informing that enthusiasm that you have out of the gate, specific segments, gross rate and premium trends? If there's anything to start, it would be helpful.

Matt Ehrlichman (CEO)

Yeah, maybe I'll kick it off, and Shawn, go ahead and layer in. I think a few things. One, the plan has just come together as we had intended. So actually getting through the formation of the reciprocal, completing the sale of HOA's plan, obviously, we would leave a bit of cushion there until those events actually occurred. And so it's nice to see those things again happening as expected. Two, Matthew mentioned just as we activated our growth plan, we're just seeing really good signs there. And so certainly comforting and exciting to see the growth happening as intended and as expected. And then lastly, I would just say across the board, we're seeing strong execution, continued strong execution from our business units and the leaders. We feel really good about where the team is and just the day-to-day, week-to-week, month-to-month execution.

Anything else that you'd like to layer in there, Shawn?

Shawn Tabak (CFO)

Yeah, I'll just maybe touch on the insurance segment in particular. I think at the Investor Day, we talked about a 40% conversion of insurance premium to revenue there. We also talked about our ability to toggle up that conversion rate as well with other opportunities. And so as we progress with PIRE, to Matt's point, given the very strong out of the gate early progress on a number of things, we're seeing those opportunities ahead. The other point I'll make there is that is a very high gross profit margin as well as adjusted EBITDA margin business that we're able to drive.

Dan Kurnos (Managing Director, Internet and Media Equity Research)

That's super helpful. If I can just follow up on that point, and maybe Matthew Neagle, if you want to step in too, just you commented on new business being strong. Just any way to give us some directional color on agencies turned back on, how receptive they are to driving PIRE and new business. And just obviously, that's going to layer into how we should think about surplus and take rate. So just directionally, some initial, I know it's really early, but directional thoughts would be helpful. Thank you.

Matthew Neagle (COO)

Yeah. So we, as Shawn mentioned, we turned back on growth towards the end of Q4. Just to share, give you a little color of what that means. First, we reopened geographies. We took a closer look at our commission plans to make sure we're incenting the type of behavior that we wanted. We started to invest in our growth team, which is a team that goes out and onboards new agents and engages our existing agents. We hired a phenomenal leader from Farmers. He was a VP of growth there. He led a region that did over $3 billion in premium and also brings his own set of contacts in the agency industry. Right now, the color that I would give additionally is agents are excited about PIRE. There's a number of exciting things about the Porch Insurance product in terms of the value it can provide to consumers.

And what we're seeing is just people getting re-engaged with HOA after a period where we were quiet, intentionally quiet. So a lot of it is just being open for business, telling folks we want to grow. And all of that is encouraging. And so we're seeing it in the number of policies, the number of new policies. We're starting to see it in the number of agencies being active. And we're certainly seeing it in the number of agents that we're onboarding. And then, of course, as we onboard those agents, there's sort of a ramp-up period before they get fully appointed, and then they start running the business, and that business starts to get active. It is early, but I think we're encouraged by how things are shaping up out the gate.

Dan Kurnos (Managing Director, Internet and Media Equity Research)

All right. I'll jump back in queue, but it's a nice start to the year, guys, obviously. Well done.

Matt Ehrlichman (CEO)

Thanks, Dan.

Operator (participant)

Your next question comes from the line of Jason Helfstein with Oppenheimer. Please go ahead.

Jason Helfstein (Analyst)

Thanks. I guess I want to ask it similar, but just how are you thinking about leaning more into growth or leaning into growth now that PIRE has closed? I think you addressed some of the, I guess, organic benefits you'll get and some of the uncertainty around HOA is kind of gone. But just what proactively can you do kind of with your own investments to drive more growth in the business broadly? Thank you.

Matthew Neagle (COO)

I'll take that, Matt and Shawn, if you guys want to layer on. Some of what I want to reiterate is what I just shared and what we talked about at the Investor Day. But our go-to-market in insurance is through agents. And there are many, many more agents that are out there than are currently engaged or appointed with HOA. And so a lot of the focus is just how do we go reactivate that agent channel. And it's a lot of blocking and tackling. It's getting people on the team. It's having conversations with agents. And it's getting the right incentives in place, which we feel we have done and are able to do. There's also a little bit of benefit that we've talked about just from the natural rate increases that we're getting. A lot of those from 2024 are still flowing through into 2025.

We already have some planned for 2025. So from an insurance standpoint, it'll take some time, and it requires us to execute. But kind of the path is there for us. And the goal is $500 million gross written premium for this year, $600 million for next year. But our real ambition is we think we can get to $3 billion over the next 5-10 years. When we look beyond the insurance business, we are starting to invest in more growth. Shawn did mention that we've introduced some investments into sales and marketing, in particular in our consumer services group, but also some in our software group. And then also starting to invest more in just the strategic product roadmap that we have where we're trying to consistently roll out new features that are then paired with price increases.

We think we have a good enough understanding of kind of the mechanics there and the economics where all of those investments that we're going to do this year, we went through and did the analysis and found really good returns. I still think insurance is a big opportunity for us, but there is growth opportunity across other parts of the business as we look 2025, certainly into 2026 and 2027.

Matt Ehrlichman (CEO)

Two quick things, Jason, just to layer on. Matthew mentioned the additional investments that we're making. The return profile of those investments is really attractive and strong. And so we set a certain kind of threshold for what kind of returns we want to be able to deploy more capital into our businesses. And it's attractive. And so we're excited, clearly, to be able to deploy more capital and still increase EBITDA guidance like we are. And then the second thing is I would just say that the market is set up really well for us. We're not assuming anything in our plan here in terms of big housing market bounce backs or anything. So if and as that happens, that will just be tailwinds for us. But in the insurance industry as well, it's a very attractive market dynamic where certain carriers are wanting to write less.

We've done the work to get out ahead and to get things priced correctly so that we can generate the types of margins that we are and add surplus to the insurance business, and with the reciprocal structure, we get to participate in this attractive insurance market, which will just naturally lead to solid growth.

Operator (participant)

Your next question comes from the line of John Campbell with Stephens. Please go ahead.

John Campbell (Analyst)

Hey, guys. Good afternoon. Congrats on a great quarter and a good close to the year.

Matt Ehrlichman (CEO)

Thank you.

John Campbell (Analyst)

It was great to see you guys raise your EBITDA guidance. I mean, obviously, in just two months, your stock is trading at a pretty silly low multiple off the 2026 EBITDA guidance. So this is definitely a nitpick-like question if you keep that stuff in mind. But I saw that you guys reiterated the 2026 guidance despite the 2025 raise. Maybe it's a desire not to get over your skis, which I'm assuming that probably is the case. But I'm curious why you wouldn't go ahead and raise the 2026 guidance by a similar amount.

Shawn Tabak (CFO)

Yeah. Sure. Happy to. We're certainly seeing, as I think as we just talked about, really great progress and momentum in the business, and the execution has been really, really wonderful. It really is, I think, what you're thinking about there, John. $100 million is a really important target for us in Adjusted EBITDA for next year. The business is certainly marching towards that. Today, we're happy to increase the 2025 guidance to $60 million. We'll provide; we'll just leave it there for now.

Matt Ehrlichman (CEO)

Let me add one more thing, which is, John, it is really just about not getting over our skis. I think you said it really well. We don't want every quarter to be updating on the next year's guidance. That's not our plan, just to update on this year's guidance. We feel good, like I said, about how we're set up for 2026.

But we'll update and change that number as we get closer to 2026.

John Campbell (Analyst)

Yeah. Makes sense. You know how we do on the sell side. We'll run away without your numbers. So smart move. On Home Factors, I saw in the press release you guys are growing the pipeline for testing. That's great to hear. I'm curious how the product's performing versus maybe your original expectations, and then for the 2026 targets, if you can maybe shed any kind of light on the Home Factors rev you've kind of baked in or just maybe more generally just the shape of the curve or maybe the trajectory of growth out to 26.

Matthew Neagle (COO)

Yeah. I can speak to that. We see very strong evidence in using it in our own underwriting and pricing. We're now engaged with multiple carriers in a deep way to either test or to begin using the HomeFactors data. And the early signal is there is interest that it does have an impact on their pricing and underwriting. The other point I would just mention is we're still building out more HomeFactors. We release HomeFactors every quarter, really faster than that. And we think we'll have over 100 by the end of 2025. We're investing in the go-to-market teams. In fact, we just identified a leader that'll start in the next month or so. And that will accelerate our pipeline building. We have communicated that it is a laddering process of getting more and more carriers engaged. And the sales cycle does take time.

You got to work through some of these larger carriers. You got to get a test. And then they got to kind of roll it out. So we haven't assumed really much revenue for 2025. We start to assume some in 2026. And then we see a bigger opportunity in 2027 and 2028. And right now, we're just focused on executing and adding more HomeFactors and talking to more carriers. It's still early, but I would say the energy internally and the people we're talking to is very strong and encouraging.

John Campbell (Analyst)

Okay. It's very helpful. Good work, guys. Thanks.

Matt Ehrlichman (CEO)

Thanks, John.

Operator (participant)

Your next question comes from the line of Ryan Tomasello with KBW. Please go ahead.

Ryan Tomasello (Managing Director)

Hi, everyone. Thanks for taking the questions. Just wanted to dovetail on the Home Factors topic, and Matthew, I know you kind of already touched on it, but just if you can provide some more color on what there still is to chop on building out the go-to-market for that product. You mentioned, I think you just hired a new sales leader there, but what that go-to-market will look like, how much of that is being baked into some of the investments you're alluding to here in 2025?

Matthew Neagle (COO)

Yeah. It's certainly an investment area in 2025. It's not a massive infrastructure right now that's needed. It's a sales team that can go. There's four to five hundred targets. Our goal is to try to start conversations with all of them in some form. And then the proof of concepts and other things take time. There's some sales engineer work in order to support the test and roll it out. But the actual infrastructure is all done via APIs, and it's very scalable. Over time, we're already starting to kind of envision variations of products to meet particular use cases that we may invest in as those come up. But it's within our means. We just got to go execute, build out the team, and then just work the pipeline and work our way through the purchasing processes of insurance companies. But the interest is certainly there.

Ryan Tomasello (Managing Director)

Great. And then I recall from the Investor Day, it sounds like you are still interested in opportunistic M&A. So, Matt, I'm just curious where that ranks on the list of growth priorities currently. And among the ways that you can leverage M&A, it seems like scaling the insurance business is an interesting way to lean on that inorganic area. So just curious how you're thinking about M&A from here.

Matt Ehrlichman (CEO)

Yeah. Certainly, to be clear, the guidance we put out today is all organic. And so M&A would be incremental to what we're laying out. We are at a point where we can begin to start to talk about that again. We do believe we have a strong set of capabilities, the ability to integrate acquisitions effectively and to be able to accelerate growth given kind of the broad set of capabilities that we have. I agree with you. I think there's different ways that you could use the M&A capabilities to accelerate what we're doing in the insurance industry. And obviously, as we progress there, we'll provide more updates. But more to come. Nothing to share in terms of details here today.

Ryan Tomasello (Managing Director)

Great. Thanks, guys.

Matt Ehrlichman (CEO)

Thanks, Ryan.

Operator (participant)

Your next question comes from the line of Jason Kreyer with Craig-Hallum Capital Group. Please go ahead.

Jason Kreyer (Analyst)

Great. Thank you. This is Callum for Jason. Maybe to start, can you just talk about your expectations to grow policies and what a cadence for PIRE growth as 2025 progresses could look like?

Matthew Neagle (COO)

Sure. I can. So in terms of we're working towards the $500 million gross premium target, gross rate and premium target. We are assuming an increase in policy due to rate increases that are already filed that are still flowing through and also ones that we have planned for this year. In terms of growth, we aren't expecting a lot of growth in 2025. It's mostly flat. And then we'll start to see that pick up as we head into 2026. But we're excited.

Jason Kreyer (Analyst)

Thanks.

Matthew Neagle (COO)

Yeah. Go ahead. Go ahead.

Jason Kreyer (Analyst)

Sorry. I guess maybe just secondly, we've seen a bit more mild start to the real estate market this year. So just curious your thoughts on how this potentially impacts Porch trends as 2025 moves on?

Shawn Tabak (CFO)

I mean, we're conservative as it relates to just our assumptions that are built into our guidance as compared to kind of third-party estimates. We think that's the prudent place to kind of pick housing market growth. Again, like I said, we're not assuming much in terms of housing market bounce back. And like you see in our guidance, a flat year in the housing market, our businesses can perform really nicely. And when the housing market does come back and it will normalize, obviously, we'll benefit from that. But yes, we are being conservative as compared to what third parties expect at this point.

Jason Kreyer (Analyst)

Great. Thank you.

Operator (participant)

As there are no further questions at this time, I would like to turn the call back over to Matt for closing remarks.

Matt Ehrlichman (CEO)

I just would say I appreciate the questions. I appreciate the time. This is a great moment for the company. We've worked hard to be able to get the business structured what we believe is optimally, and you can start to see it in the results. We're clearly excited to get back together here for Q1 earnings and then to continue to share more as we progress through an important 2025. With that, we will close the call. Thank you all very much.