Porch Group's Q3 2025 Earnings Call: Contradictions Emerge on Premium Growth, State Expansion, M&A, and Housing Market Assumptions

Date of Call: November 5, 2025

Financials Results

• Revenue: $115.1M (Q3 2025; composition: Insurance Services 64%, Software & Data 21%, Consumer Services remainder)
• Gross Margin: 82% (Q3 2025; Q3 gross profit $94.2M; Insurance Services gross margin 84%)

Guidance:

• Full-year 2025 adjusted EBITDA expected to be $70 million.
• Q4 priority: prioritize surplus generation at the reciprocal over scaling premium.
• Updated 2025 guidance: gross profit midpoint raised by $2.5M to a range of $335M–$340M; revenue range tightened to $410M–$420M.
• Expect typical seasonality with RWP decreasing from Q3 to Q4.
• No 2026 guidance provided at this time.

Business Commentary:

* Record Profitability and Cash Flow: - Porch Group reported Q3 adjusted EBITDA of $21 million and cash flow from operations of $29 million. - The company surpassed $53.1 million in adjusted EBITDA in the first nine months of 2025, exceeding the initial target of $50 million for the year. - This performance is attributed to the shift to a commission and fee-based model and strong execution in managing the business.

• Surplus Growth and Capital Expansion:
• The reciprocal surplus increased by $100 million in Q3 to reach $412 million, due to strong net income and stock price appreciation.
• The surplus supports approximately $2 billion in premium, setting the stage for future growth.
• The capital expansion supports the company's strategy to scale premium sustainably while maintaining strong financial margins.

• Software and Data Innovation:
• Software and data segment revenue was $24.6 million, a 7% increase over the prior year.
• The company is integrating AI into its product suite and expanding its Home Factors, now totaling 89 unique property characteristics.

• Investments in product innovation and AI are poised to drive future growth, particularly as the housing market recovers.

• Agent and Quote Volume Expansion:

• The number of agency appointments has increased significantly, with more than 48,000 policies written in Q3.
• This increase supports a growing top-of-funnel activity, which is integral to scaling premium and expanding market share in the future.
• The company's agent recruitment and account management efforts are driving this growth, positioning Porch Group for continued insurance business expansion.

Sentiment Analysis:

Overall Tone: Positive

• Management: "we delivered $21 million in adjusted EBITDA and $29 million in cash flow" and "reciprocal surplus ... increased more than $100 million quarter-over-quarter to now $412 million." CFO: raised gross profit midpoint and tightened revenue range, noting strong Insurance Services margins (84%) and 18% conversion of RWP to adjusted EBITDA in Q3.

Q&A:

• Question from Daniel Kurnos (The Benchmark Company, LLC, Research Division): On RWP heading into Q4 — why not accelerate premium growth through seasonality and what's your pricing posture into 2026?
  Response: Management will prioritize long-term shareholder value by maximizing surplus and controlled, profitable premium growth rather than aggressively scaling premium now; they can accelerate growth by lowering prices but choose patience.

• Question from Daniel Kurnos (The Benchmark Company, LLC, Research Division): Do you have a view on renewals/premium into 2026?
  Response: Management declined to disclose detailed renewal growth metrics now, saying underlying indicators look strong and will be unpacked at a future Analyst Day.

• Question from Jason Helfstein (Oppenheimer & Co. Inc., Research Division): Can you unpack Q4 guide vs Q3 and whether housing was a Q3 tailwind that won't flow through?
  Response: CFO said Q3 outperformance was driven by stronger RWP-to-adjusted-EBITDA conversion (18%); housing remains weak so management is conservative and not assuming a sustained housing tailwind.

• Question from Jason Helfstein (Oppenheimer & Co. Inc., Research Division): Are you taking your foot off the gas in Q4?
  Response: Management is being patient to maximize surplus given current strong loss ratios and EBITDA generation, delaying aggressive growth levers until it aligns with long-term value creation.

• Question from Cal Bartyzal (Craig-Hallum Capital Group LLC, Research Division): Any learnings applying AI to Home Factors — can it become a leading AI-enabled platform for carriers?
  Response: AI is accelerating extraction of insights (including visual data), speeding product development and enabling partners to integrate data into AI-driven underwriting workflows.

• Question from Cal Bartyzal (Craig-Hallum Capital Group LLC, Research Division): How do you think about unlocking more agencies and converging capital and agencies in 2026?
  Response: Company is expanding growth teams and agent appointments steadily; there is substantial runway to add agencies and further leverage incentives and pricing levers to scale distribution.

• Question from Adam Hotchkiss (Goldman Sachs Group, Inc., Research Division): Regarding the $500M premium target from Investor Day, what's changed and why not accelerate premium given low attritional loss ratios?
  Response: Management noted industry-leading loss ratios (22% gross, 17% attritional) and prefers to build surplus first; accelerating premium is possible by adjusting pricing but they choose to prioritize capital generation for long-term optionality.

• Question from Adam Hotchkiss (Goldman Sachs Group, Inc., Research Division): Update on data licensing/Home Factors in states you don't operate in?
  Response: Home Factors has growing carrier engagement and tests showing strong ROI; management expects revenue to begin ramping in 2026 as sales cycles complete.

• Question from Ryan Tomasello (Keefe, Bruyette, & Woods, Inc., Research Division): Current appetite for M&A and can reciprocal capital be leveraged for inorganic growth?
  Response: Management is considering M&A (process restarted) but has no announcements; increased surplus provides strategic optionality for future inorganic opportunities.

• Question from Ryan Tomasello (Keefe, Bruyette, & Woods, Inc., Research Division): Of the $113M surplus increase, how much was due to stock price appreciation?
  Response: CFO: roughly 80% of the increase was from stock price appreciation and ~20% from reciprocal net income/operations.

• Question from Timothy D'Agostino (B. Riley Securities, Inc., Research Division): Are you still operating in 22 states and how long to expand into new states?
  Response: Still in 22 states; expansion varies by state but is months (not years), and existing infrastructure plus national agencies can accelerate go-live and initial writing.

• Question from Timothy D'Agostino (B. Riley Securities, Inc., Research Division): What percentage of reciprocal written premium is coming from Texas?
  Response: CFO: Approximately 60% of reciprocal written premium comes from Texas.

• Question from Timothy Greaves (Loop Capital Markets LLC, Research Division): Are you on pace to reach 100 Home Factors by year-end?
  Response: Company has added 8 factors since last update to reach 89, continues to identify new insights and leverage AI to accelerate additions—progressing toward the goal.

• Question from Timothy Greaves (Loop Capital Markets LLC, Research Division): What percentage of new policies come from leads Porch provides versus third parties?
  Response: Management does not break out the percentage; they said homebuyer/third-party leads are an important part of the insurance strategy but no specific split provided.

Contradiction Point 1

Premium Growth Strategy

It involves the company's approach to premium growth, which is crucial for understanding its financial strategy and investor expectations.

What are the key drivers of RWP growth in Q4 and the 2026 premium scaling pricing strategy? - Daniel Kurnos (The Benchmark Company)

2025Q3: We are very intentional about driving a premium upside through surplus generation. We're making a very conscious choice to focus on that over scaling -- driving scale quickly. The trade-off is we could accelerate premium growth, but we choose to optimize surplus generation. And we feel like that's the better choice for our long-term shareholders. - Matt Ehrlichman(CEO)

Can you clarify the impact of growth versus margin expansion on third-quarter revenue expectations? - Jason Helfstein (Oppenheimer & Co.)

2025Q2: We are optimistic about our ability to grow consistently at a nice clip while demonstrating margin expansion each year. And so, we are investing in growth within operating expenses, and that's why they're up year over year. - Shawn Tabak(CFO)

Contradiction Point 2

Expansion into New States

It pertains to the company's plans for geographic expansion, which impacts growth opportunities and market penetration.

What is the process for expanding into new states, and what percentage of RWP comes from Texas? - Timothy D'Agostino (B. Riley Securities)

2025Q3: I think it's not surprising. It's been -- we have been saying for a long time, it's going to happen in Q4 that we're going to expand into new states. And we're not going to be giving a specific timeline. We're going to be very -- I would say conservative in our guidance. We're going to be patient about the growth. - Matt Ehrlichman(CEO)

Are there specific states or regions where the reciprocal program is succeeding, and how are agents responding to it? - Randy Binner (B. Riley Securities)

2025Q2: We are very excited about the opportunity to expand beyond Texas. We will be expanding Porch Insurance into additional states in 2022. Importantly, we are not building out from scratch. We're building upon existing relationships in states where we already have a presence. - Matthew Neagle(COO)

Contradiction Point 3

M&A Strategy

It involves the company's approach to mergers and acquisitions, which could influence strategic growth and financial outcomes.

What are the drivers of the current premium target and how do they relate to surplus creation and loss ratios? - Adam Hotchkiss (Goldman Sachs Group, Inc., Research Division)

2025Q3: So, I think about that in terms of an engine. And we've been very adamant that we are not going to just acquire for the sake of acquiring. - Matt Ehrlichman(CEO)

How does M&A align with growth priorities and support scaling the insurance business? - Ryan Tomasello (Keefe, Bruyette, & Woods, Inc., Research Division)

2024Q4: M&A is an option, and we feel we have the capabilities to integrate acquisitions effectively. M&A could be used to accelerate insurance industry growth, but again, no specific details are shared at this time. - Matt Ehrlichman(CEO)

Contradiction Point 4

Housing Market Assumptions

It involves the company's expectations regarding the housing market, which can directly impact revenue and customer engagement.

Could you clarify the fourth-quarter guidance and how it compares to Q3 performance? - Jason Helfstein (Oppenheimer & Co. Inc., Research Division)

2025Q3: And I feel really good about the macro environment. I feel good about the housing market. We've been conservative for a long time around our housing market assumptions. - Matt Ehrlichman(CEO)

How will the mild real estate market impact Porch's performance in 2025? - Cal Bartyzal (Craig-Hallum Capital Group LLC, Research Division)

2024Q4: The business is conservative in its housing market assumptions, not accounting for potential rebound. If housing market normalization occurs, Porch can benefit, but the current guidance assumes flat housing market growth. - Matt Ehrlichman(CEO)