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Porch Group, Inc. (PRCH)·Q3 2025 Earnings Summary

Executive Summary

  • Revenue beat and margin expansion: Q3 2025 consolidated revenue was $118.1M, above consensus, with gross margin rising to 74% from 64% in Q2 and 56% in Q3 2024, driven by Insurance Services performance and improved conversion of Reciprocal Written Premium (RWP) to EBITDA .
  • EPS miss despite operational strength: Reported GAAP EPS (basic) was -$0.10 vs a smaller expected loss; fair value changes and interest expense weighed on GAAP EPS even as Adjusted EBITDA rose to $20.6M (17% margin) .
  • Guidance raised: Gross Profit midpoint increased by $2.5M and Adjusted EBITDA set to $70M; revenue range tightened to $410–$420M, reflecting confidence in operating leverage while prioritizing surplus growth at the Reciprocal .
  • Strategic catalyst: Reciprocal surplus plus non-admitted assets increased to $412.0M (+$112.8M q/q), enabling capacity to scale premiums in 2026 with a rule-of-thumb support for ~$2B premiums and significant future EBITDA potential .

What Went Well and What Went Wrong

What Went Well

  • Insurance Services drove outperformance: RWP-to-Insurance Services Adjusted EBITDA conversion improved to 18% in Q3 (from 16% in Q2), enhancing profitability; segment Adjusted EBITDA margin reached 34% .
  • Strong cash conversion and EBITDA: Porch Shareholder Interest cash flow from operations was $28.8M, and Adjusted EBITDA reached $20.6M, with company-wide gross margin at 82% for Porch Shareholder Interest .
  • Surplus expansion positions 2026 scaling: Reciprocal surplus plus non-admitted assets reached $412.0M; management emphasized capital build to support premium growth and future value creation (“adding more than $100M of capital supports additional Adjusted EBITDA of more than $100M annually”) .
    • Quote: “We will continue to prioritize Reciprocal surplus generation through Q4, creating the capacity to scale premiums and profits rapidly in 2026 and beyond.” — CEO Matt Ehrlichman .

What Went Wrong

  • GAAP EPS missed consensus: Despite revenue beat, GAAP EPS was negative; OI&E headwinds included interest expense (-$13.96M) and private warrant fair value changes (-$5.70M), and a tax provision (-$4.32M) drove net loss attributable to Porch .
  • Housing remains a headwind for transaction-based businesses: Software & Data and Consumer Services saw modest growth but remain constrained by trough housing market activity; management is cautious on near-term housing recovery .
  • Revenue growth decelerated sequentially at consolidated level: Q3 revenue was $118.1M vs $119.3M in Q2, reflecting seasonality in insurance and disciplined pricing prioritizing surplus generation over near-term premium growth .

Financial Results

Consolidated Results (Actuals)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$104.745 $119.295 $118.082
Gross Profit ($USD Millions)$65.448 $75.873 $86.947
Gross Margin %62% 64% 74%
Adjusted EBITDA ($USD Millions)$16.861 $15.630 $20.626
Adjusted EBITDA Margin %16% 13% 17%
EPS (Basic, $USD)$0.08 $0.03 -$0.10

Q3 2025 Results vs Consensus (SPGI)

MetricConsensusActualDeltaBeat/Miss
Revenue ($USD Millions)$114.415*$118.082 +$3.667Bold beat
Primary EPS ($USD)-$0.0457*-$0.10 -$0.0543Bold miss

Values retrieved from S&P Global.*

Segment Breakdown – Q3 2025

SegmentRevenue ($USD Millions)Gross Profit ($USD Millions)Gross Margin %Adjusted EBITDA ($USD Millions)Adjusted EBITDA Margin %
Insurance Services$73.845 $62.250 84% $25.300 34%
Software & Data$24.635 $18.155 74% $5.128 21%
Consumer Services$19.367 $16.609 86% $2.493 13%
Corporate$0.000 $0.000 n/a-$12.295 n/a
Porch Shareholder Interest Total$115.074 $94.242 82% $20.626 18%
Consolidated$118.082 $86.947 74% $20.626 17%

KPIs

KPIQ1 2025Q2 2025Q3 2025
Reciprocal Written Premium (RWP, $USD Millions)$96.9 $120.7 $137.5
Reciprocal Policies Written (000s)36.1 42.5 47.7
RWP per Policy Written ($USD)$2,683 $2,843 $2,884
Software & Data: Avg # Companies (000s)24.1 24.2 23.8
Software & Data: Annualized ARPC ($USD)$3,644 $3,974 $4,140
Consumer Services: Monetized Services (000s)71.0 87.2 93.9
Consumer Services: Avg Rev per Monetized Service ($USD)$207 $202 $206

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (Porch Shareholder Interest)FY 2025$405M–$425M (as of Q2) $410M–$420M Tightened; midpoint unchanged
Gross Profit (Porch Shareholder Interest)FY 2025$328M–$342M (as of Q2) $335M–$340M Raised midpoint by $2.5M
Adjusted EBITDA (Porch Shareholder Interest)FY 2025$65M–$70M (as of Q2) $70M Raised midpoint by $2.5M

Note: Guidance reflects Porch Shareholder Interest (excludes Reciprocal future results) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Insurance profitability & conversionNew Reciprocal model launched; strong margins; RWP $96.9M (Q1); conversion model emphasized . Q2 RWP $120.7M; conversion rate cited at ~16% for Insurance Services .RWP $137.5M; conversion improved to 18%; Insurance Services Adj. EBITDA margin 34% .Improving operating leverage; higher conversion drives EBITDA .
Surplus build & capital for growthReciprocal surplus $198M (Q1) and $299.2M (Q2) .Surplus plus non-admitted assets $412.0M (+$112.8M q/q); ~80/20 driver between stock price and net income .Accelerating capital build; increased capacity to scale premiums .
Housing market impactsTransaction-driven segments constrained by trough housing; cautious outlook (Q2) .Continued caution; limited change in housing activity; modest growth in Software & Data and Consumer Services .Stable headwind; cautious stance maintained .
AI/data & Home FactorsTargeting ~100 Home Factors by year-end; ARPC rising (Q2) .89 Home Factors; AI accelerates insight extraction (e.g., electrical panel location, roof life stage) .Product innovation progressing; growing adoption and ROI evidence .
Capital structure & notesRepurchases of 2026 notes; issuance of 2030 notes (Q2) .Remaining 2026 notes ~$7.8M; board authorized repurchase; gain recognized on Q3 extinguishment .Deleveraging progress; improved flexibility .
Geographic footprintNoted build in distribution; partnerships (Q2) .Operating in 22 states; ~60% of book in Texas; expanding agencies and appointments .Broadening distribution; still early in agency expansion .

Management Commentary

  • CEO: “We’re proud to report another strong quarter—one in which we delivered Adjusted EBITDA of $20.6 million... and further increased surplus combined with non-admitted assets to $412.0 million at the Reciprocal.” — Matt Ehrlichman .
  • CFO: “Q3 adjusted EBITDA was $20.6 million... Insurance Services segment posting a 34% adjusted EBITDA margin... we are raising our gross profit midpoint by $2.5 million... revenue midpoint remains the same” — Shawn Tabak .
  • COO: “Reciprocal written premium in Q3 was $138 million, up 14% versus last quarter... 89 total home factors now in the market after recently launching eight new home factors” — Matthew Neagle .

Q&A Highlights

  • Premium growth pacing: Management prioritized surplus generation over immediate premium acceleration; steep pricing elasticity allows controlled growth cadence into 2026, aiming for sustained EBITDA expansion rather than short-term spikes .
  • Surplus increase drivers: ~80/20 split between stock price impact on Reciprocal-held shares and strong Reciprocal net income; 18.3M Porch shares held by the Reciprocal offer a tracking rule-of-thumb .
  • AI enablement in Home Factors: AI accelerates extraction of insights (e.g., visual data), facilitating carrier workflow integration and future AI-driven underwriting .
  • Distribution build: Continued agency appointments and recruiter buildout; opportunity to expand national agencies; Texas ~60% of Reciprocal’s book; in 22 states with potential additions in 2026 .
  • Seasonality: RWP seasonality (stronger in Q2/Q3, softer in Q4); Q4 focus remains on surplus generation rather than price cuts to chase volume .

Estimates Context

  • Q3 revenue beat: Actual $118.1M vs consensus $114.4M — driven by higher RWP-to-EBITDA conversion, strong Insurance Services margins, and disciplined pricing .
  • Q3 EPS miss: Actual basic EPS -$0.10 vs consensus -$0.0457 — headwinds from interest expense and fair value changes despite operating strength; non-GAAP Adjusted EBITDA rose to $20.6M .
  • Trajectory vs prior quarters: Q1 beat (EPS 0.08 vs estimate -0.132) and Q2 beat (EPS 0.03 vs estimate -0.114) suggest improved operational consistency under the new model; Q3 GAAP EPS headwinds reflect OI&E/tax items rather than core operations .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Operating model delivering high margins: Insurance Services Adj. EBITDA margin at 34% with improved conversion (18%) underscores durable unit economics and leverage .
  • Capital setup for 2026: Surplus plus non-admitted assets at $412.0M provides capacity to scale premiums materially; management indicated rule-of-thumb ability to support ~$2B of premium .
  • Guidance quality improved: Gross Profit midpoint raised and EBITDA guided to $70M while keeping revenue range tight, signaling confidence in mix/efficiency over volume .
  • Expect Q4 seasonality, but strategy favors surplus: Management intends to prioritize capital build over aggressive pricing, implying near-term revenue moderation but stronger medium-term scaling potential .
  • Watch for AI/data monetization in 2026: Home Factors at 89 attributes; demonstrated >20x ROI for carriers, pipeline expanding — potential incremental revenue in states where Porch doesn’t operate .
  • Deleveraging optionality: Remaining 2026 notes ~$7.8M authorized for repurchase; continued balance sheet actions reduce risk and interest burden .
  • Housing remains a swing factor: Transaction-based segments should benefit when housing activity normalizes; current strategy doesn’t rely on near-term recovery .