Porch (PRCH) Q1 2026 Earnings Call Transcript

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DATE

Tuesday, April 28, 2026, at 5 p.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Matt Ehrlichman
• Chief Financial Officer — Shawn Tabak
• President and Chief Operating Officer — Matthew Neagle

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TAKEAWAYS

• Porch Shareholder Interest Revenue -- $109 million in Q1 2026, representing 29% growth year over year, with 68% from Insurance Services, 20% from Software and Data, and the remainder from Consumer Services.
• Gross Profit -- $91 million in Q1 2026, reflecting an 83% gross margin, with Insurance Services yielding an 85% gross margin and Software and Data at 75%.
• Adjusted EBITDA -- $20 million, or an 18% margin, with Insurance Services providing a 37% segment margin and Software and Data at $4.6 million.
• Reciprocal Written Premium (RWP) -- $114 million, up 18% year over year, with premium from new customers approximately tripling year over year, and total policies written rising 33% to nearly 48,000.
• RWP Growth Drivers -- Producing agency branch locations increased 181%, quote volumes grew 69%, and conversion rates nearly doubled year over year, with only a 5% decline in premium per new customer.
• Statutory Surplus -- $165 million at quarter end, up 59% and $61 million year over year, supporting more than $1.25 billion of premium when including non-admitted assets.
• Reinsurance Cost -- The reciprocal's April 1 reinsurance renewal resulted in an approximately 20% decrease in excess of loss reinsurance costs, citing "strong underwriting results and improved risk performance."
• Loss Ratios -- "Gross loss ratios in Q1 was 24%. Attritional loss ratios was 19%."
• Porch Insurance Launch -- Product launched in Texas at the start of the year, designed for a roughly 10% higher price than legacy offerings, offering higher commissions, a warranty, and bundled moving services.
• Segment Trends -- Software and Data revenue was $22 million with 22,000 companies served and average annualized revenue per company up 8%; Consumer Services revenue was $15 million with 69,000 monetized services and annualized revenue per service of $220.
• Balance Sheet -- Cash plus investments stood at $134 million at quarter end, up $13 million from December 31, 2025, with $20 million in operating cash flow in the quarter.
• Share Repurchases -- 334,000 shares were repurchased in March for $2.5 million, exhausting Board authorization, at an average of $7.48 per share, the maximum permitted by the 2028 notes indenture.
• Guidance Raised -- Full-year guidance increased: revenue raised to $495 million-$507 million (20% growth at midpoint), gross profit to $401 million-$413 million (81% margin at midpoint), and adjusted EBITDA to $103 million-$109 million (21% margin at midpoint).
• AI Adoption -- AI is improving engineering productivity, customer support efficiency, report quality, and fraud monitoring across core products, with "real productivity gains" observed. The company sees no fundamental AI disruption risk in insurance.
• Home Factors Commercialization -- Active external carrier testing continues, with management expecting only modest early-stage revenue contribution in 2026 but a larger longer-term opportunity.
• Agency Distribution -- Management described significant remaining runway; Texas remains early-stage, and opportunities to expand into additional states are expected to accelerate over time.

SUMMARY

Porch Group (NASDAQ:PRCH) delivered Insurance Services-driven growth in revenue, gross profit, and adjusted EBITDA, raising full-year guidance on each measure. Distribution expansion and improved conversion rates, enabled by margin-rich proprietary data, powered premium growth, with agency branch locations showing triple-digit increases and quote volume rising 69% year over year. Strategic investments in artificial intelligence are yielding measurable efficiency improvements across engineering and operations. The company repurchased the maximum allowable shares under its current authorization in the quarter, completed a reinsurance renewal with a 20% cost reduction, and highlighted robust statutory surplus growth to fund scaling and potential M&A. No material negative operational or financial risks were explicitly cited by management or indicated in the reported results.

• Porch Insurance, launched in Texas, is expected to provide price and margin tailwinds as volume scales, with agents showing "a lot of excitement" due to bundled services and commissions.
• The company’s data platform now covers approximately 90% of U.S. residential properties, and tracks early insight on 90% of homebuyers monthly, strengthening pricing and underwriting differentiation.
• Management plans further software and data product sunsetting for small contractors, resulting in a short-term revenue headwind, but anticipated margin benefit in that segment.
• Cash and investments rose sequentially despite seasonally breakeven performance at the Reciprocal, while surplus grew $10 million in Q1, positioning the company for future insurance-driven expansion.

INDUSTRY GLOSSARY

• Reciprocal Written Premium (RWP): Insurance premiums written by a reciprocal exchange, reflecting the total policy volume underwritten by that entity.
• Statutory Surplus: Excess of assets over liabilities, as defined by insurance regulators, available to support policyholder obligations and premium growth.
• Attritional Loss Ratio: The ratio of insurance losses, excluding catastrophic events, to premiums earned, commonly used to measure underlying underwriting profitability.
• Agency Branch Locations: Individual office locations of insurance agencies producing written business for the carrier.

Full Conference Call Transcript

Matt Ehrlichman: Thank you, John. Good afternoon, everyone. We are pleased to report a strong start to 2026. Q1 results exceeded expectations, and we're raising our full year guidance for Porch shareholder interest revenue, gross profit and adjusted EBITDA. Porch has been a vas simpler, higher-margin fee and commission-based business, one that's built to compound premium and cash flow over time without the earnings volatility, often associated with risk-bearing insurance carriers. Last year, we proved out the profitability of our business model. 2026 is the first year with tangible year-over-year comparables for Porch shareholder interest results, and we demonstrated significant and sustainable growth, especially in Insurance Services, which delivered 50% year-over-year revenue growth in the quarter.

From here, our strategy is straightforward, scale rapidly and with discipline and continue to invest in the differentiated assets that strengthen our moat, our data advantage, our underwriting and pricing capabilities and our differentiated products for consumers. Okay. So for the first quarter, we delivered results for Porch shareholder interest that reflected continued strength in Insurance Services and continued discipline across the business. Specifically, you can see here, reciprocal written premium, or RWP, was $114 million, up 18% year-over-year. Revenue was $109 million, up 29% year-over-year. Q1 gross profit was $91 million, resulting in an 83% gross margin. Q1 adjusted EBITDA was $20 million, an 18% margin. Earlier, I said, we intend to scale rapidly and with discipline.

The clearest way to see that is through our insurance growth engine, capacity, top-of-funnel and conversion as well as the latest underwriting results. Over the next 4 slides, you'll see the progress we've made. And importantly, after seeing these drivers in sequence, I think it becomes clear why we're confident in continued RWP growth acceleration. So first, here, capacity. Statutory surplus is the key guidepost and you can see the progress over the last year, growth of 59% and $61 million year-over-year. The takeaway is that the capital foundation is far stronger today and supports our growth plans not just this year but well into the future.

Q1 statutory surplus of $165 million supports north of $800 million in premiums, well above our $600 million RWP target for this year. When including incremental non-admitted assets of a little north of $100 million, the reciprocal -- then has the ability to support more than $1.25 billion of premium. The Reciprocal's reinsurance program is in place to protect this capital across cycles. On April 1st, the reciprocal wrapped up a very successful renewal of its reinsurance program. Similar to prior years, this included a panel of 40-plus A-rated partners, offering catastrophic weather protection.

We're happy to report that the reciprocal will benefit from an approximately 20% decline in costs for excess of loss reinsurance, driven by strong underwriting results and improved risk performance which further bolsters its surplus and overall margin in the system. To have capacity in place, the next driver is distribution, and this starts with agency growth. Think of this as a land and expand strategy. We're growing our agency footprint and expanding production across our existing partners' locations. That's why we highlight producing agency branch locations. It's a metric we use internally to gauge distribution depth as we expand our reach in existing agencies, this translates to quote volumes.

For Q1, you can see here producing agency branch locations increased 181% year-over-year, while quote volumes grew 69% year-over-year and improved on an absolute basis for the sixth straight quarter. All in, the funnel is expanding, and we're increasing the pool of potential new customers. Moving down the funnel, conversion is the lever that turns quote volumes into new customers and premium. The Reciprocal's stellar pricing and underwriting results means we have more margin in the system than other carriers.

Given that and our understanding of the elasticity of the conversion rate curve, we can take targeted actions like those we started in November to bring in more low-risk consumers and grow premium at our targeted rates while maintaining the Reciprocal's exceptional underwriting outcomes and profitability. In the chart here, you can see the clear step-up in conversion that began in Q4 following the activation actions. That improvement continued into Q1 and year-over-year conversion rates have almost doubled. Note that we've only seen a 5% year-over-year decline in premium per new customer, while producing these Q1 gains. At the start of 2026, we launched Porch Insurance in Texas.

Over time, Porch Insurance will serve as another tailwind for conversion as its product differentiation helps open us up to new segments of consumers. All right. So now the results. And this is probably the most important message today, when capacity top-of-funnel and conversion improved together, it shows up in new customer growth. As this chart shows, RWP, from new customers stepped up meaningfully, approximately tripling year-over-year, which is the clearest proof that the growth engine is working. We're certainly excited about continuing this momentum. We've reached an inflection point for growth. But what's notable is the way we are driving this growth.

In Q1, total policies written across new and renewal grew 33% year-over-year, another clear proof point that the growth engine is on track. Matthew will cover this in more detail later in the call. All right. So we just walked through the premium drivers and now -- and how the system is designed to deliver rapid growth, and now we move into the discipline and sustainability side of it, which you can see through the Reciprocal's underwriting results. These charts depict the 2025 AM Best Annual Market Share data. The takeaway is simple. The Reciprocal continues to perform among the best in its peer set, top quartile nationally and in Texas for the combined ratios.

Here's what's so exciting about these combined ratios. This includes all of the margin paid via fees to Porch Group as part of the Reciprocal's expenses. In 2025, Porch Insurance Services segment saw a margin of adjusted EBITDA to RWP of 21%. So you can do the math. If you were to reduce the expenses, and thus the combined ratio, by this amount, it truly is exceptional combined ratio results. Putting all this together, our goal is simple. We aim to drive compounded Porch shareholder interest earnings growth while maintaining strong health at The Reciprocal. As we deliver on those two key objectives, we can scale this business rapidly and profitably for decades to come.

With that, I'll turn it over to Shawn to cover the financials and guidance.

Shawn Tabak: Thank you, Matt. Good afternoon, everyone. I'll start off with a high-level summary of our financials. Overall, we're pleased with our first quarter results. which exceeded expectations across Reciprocal written premium, revenue, gross profit and adjusted EBITDA. We raised our outlook for the year, driven by our Insurance Services segment. Insurance Services delivered strong Q1 results, particularly in RWP, driven by new customer additions. The team continues to add agencies and quotes and we saw higher quote-to-bind conversion rates, as Matt noted. Two quick housekeeping items before we dive deeper into the results. First, as a reminder, we launched the Reciprocal on January 1, 2025, and we updated our segment reporting at that time.

As a result, this Q1 2026 represents the first period with tangible year-over-year comps for RWP, as well as port shareholder interest and insurance services financials. And second, related to that, Q1 2025 was the final quarter of the legacy captive reinsurance terms that benefited the prior year quarter by $16 million. So while adjusted EBITDA still grew nicely this quarter, Q1 2025 is our last tough comp. Okay. Similar to Matt's remarks, my comments focus on Porch shareholder interest since generating cash for shareholders remains our ultimate objective. Under GAAP, we consolidate the Reciprocal exchange financials, which are included in the press release and our 10-Q. Q1 2026 Porch shareholder interest revenue was $109 million.

Insurance Services contributed 68%, software and data 20% with the remainder from Consumer Services. Associated gross profit was $91 million with an 83% gross margin, driven by Insurance Services 85% gross margin. Adjusted EBITDA was $20 million, ahead of expectations with Insurance Services, delivering a 37% adjusted EBITDA margin. Okay, now let's move a little deeper into the segment results, starting with Insurance Services. Insurance Services revenue was $75 million, growth of 50% over the prior year and exceeding expectations, driven by higher fee-based revenue with higher RWP volume and new customer additions. As Matt highlighted, premium from new customers almost tripled year-over-year, and we saw a 33% increase in total reciprocal policies written.

Gross profit was $64 million, delivering a strong 85% gross margin. Adjusted EBITDA was $27 million, or a 37% margin. While we continue to see strong incremental EBITDA margins from revenue growth, particularly the fee revenue that has a relatively fixed cost base, the year-over-year margin decline simply reflects the changes to our captive reinsurance terms that I mentioned. Overall adjusted EBITDA as a percentage of RWP, was 24% in Q1, reflecting a strong margin as we scale RWP, and continued operating leverage in insurance services. On a trailing 12-month basis, adjusted EBITDA as a percentage of RWP, was 20%. Okay, shifting to software and data. As a reminder, most of our Vertical Software businesses charge per transaction.

So results do remain tied to U.S. housing activity, which continues to be at near cyclical trough levels. And we do expect tailwinds as housing recovers. In the first quarter of 2026, results were relatively flat year-over-year. Software and data revenue was $22 million. Gross profit was $17 million with a 75% gross margin. Adjusted EBITDA was $4.6 million. Consumer Services also reflects softer housing conditions. Segment revenue was $15 million, increasing slightly over the prior year. Gross profit was $13 million, an 87% gross margin and up 390 basis points year-over-year, driven by mix shift to higher quality revenue. And finally, adjusted EBITDA was approximately breakeven. Moving now to the balance sheet.

We ended Q1 with cash plus investments of $134 million, up $13 million from December 31, 2025. Porch shareholder interest cash flow from operations was $20 million in the quarter. As a reminder, cash flow timing is seasonal, we pay interest on our notes in the second and fourth quarters of each year. In March, we exhausted the share repurchase authorized by the Board and repurchased 334,000 shares for $2.5 million or an average of $7.48 per share. And as a reminder, this was the maximum amount allowed by our 2028 notes indenture. Our 2026 notes have a remaining balance of $7.8 million, which we expect to settle at maturity on September 15, 2026, with cash from the balance sheet.

Okay. And shifting to our 2026 guidance for Porch shareholder interest. Our 2026 target of $600 million organic RWP represents 25% year-over-year growth. Given the strong start to the year, we are raising our guidance for revenue, gross profit and adjusted EBITDA. We are raising our revenue guidance to a range of $495 million to $507 million, representing 20% year-over-year growth at the midpoint, up 400 basis points versus prior guidance. We are raising our gross profit guidance to a range of $401 million to $413 million, still with an 81% gross margin at the midpoint.

We are raising our adjusted EBITDA guidance to a range of $103 million to $109 million, still a 21% adjusted EBITDA margin at the midpoint. From a modeling perspective, we continue to expect trough-like U.S. housing conditions and thus, flattish year-over-year results in Software and Data and Consumer Services, with the guidance increase attributable to strength in insurance services. And I'll now hand over to Matthew to provide a strategic update and the KPI review.

Matthew Neagle: Thank you, Shawn. I'll start by giving a brief business update, and then dig into our KPIs. I first want to touch briefly on AI, both how we're using it and why we believe it strengthens rather than threatens our position. Across Porch, AI is meaningfully improving our engineering velocity and our operations. Our engineers are shipping faster and with higher quality, and we are seeing productivity gains that are fundamentally changing how we build software. In customer support, AI is now handling a significant share of initial customer contacts, reducing costs and improving response times. We are seeing real productivity gains across the business. On the disruption question, let me be clear.

In insurance, AI does not change the fundamental nature of what we do. Insurance is a balance sheet promise. It is regulated, capital-intensive and requires real financial backing. AI will make underwriting claims and customer interaction more efficient, and we are investing aggressively to lead there, but it does not alter the structure of the industry or eliminate the need for the product. We think we are well positioned here. So why do we think our Vertical Software businesses are well positioned in an AI world? Well, these are systems of records built on decades of real transaction data inside regulated industries where compliance audit trails and security are nonnegotiable.

They are the bones of a home purchase or a refinance transaction and are not optional tools. Our customers rely on them deeply, which shows up in high NPS scores, and we wrap meaningful services around the software itself. For inspectors, that includes payment processing, warranties, recall check monitoring and a call center, making us much harder to displace in a stand-alone SaaS product, and we are not standing still. We are investing and innovating faster than we ever have. In our inspection software, we're using AI to improve report quality and speed, defect detection, narrative assistance embedded directly into the workflow inspectors already use.

In Rynoh, our title insurance software, we're applying AI to high-stakes workflows like reconciliation, verification and fraud monitoring, where accuracy and auditability are everything. In Floify, our mortgage point-of-sale platform, we're moving towards letting a borrower generate a preapproval letter from their phone in just a few clicks. Lender customers are expressing real excitement and willingness to pay for this as a premium feature. Finally, we believe AI will disproportionately benefit companies with unique data assets like ours. Underlying our entire business is our data platform with proprietary data covering approximately 90% of U.S. residential properties and early insight into 90% of homebuyers each month. Simply put, AI is additive to Porch's long-term position. Let's move to Q1 insurance KPIs.

Reciprocal written premium was $114 million, ahead of expectations, and up 18% versus prior year. Reciprocal policies written was nearly 48,000 policies, up 33% year-over-year and continuing the momentum we saw in Q4. RWP per policy written was $2,386. This was down on a year-over-year basis, but I want to be clear on what's driving this. It is largely a function of mix shift, not competition or price. The premium per new customer is always less than premium per renewing customer. As new customer growth has accelerated, they represent a larger share of the mix, which pulls the average down.

To put a number on it, premium per new customer was only 5% lower on a year-over-year basis, meaning that we have been able to increase conversion rates without meaningful decreases in price or profitability. In total, when you pair the top-of-funnel strength, with the conversion rate improvements we've put in place, you arrive at a very strong outcome in new customer RWP, which was 3x higher versus the prior year. Moving to Software and Data. The housing market remains challenging, but that's not slowing our pace of innovations. At the start of the new year, we launched Rynoh product hub, the new central home for all Rynoh products and services.

In March, Floify released Dynamic Apps 2.0 to allow mortgage teams to tailor borrower applications. We continue to see strong interest in home factors and compelling new data customers, and we'll share more here when we are able to. In terms of Software and Data KPIs. In Q1, we served approximately 22,000 companies with annualized revenue per company of $3,918. As a reminder, as part of our strategy to focus on larger customers, we sunset certain legacy software products that serve very small contractors, which is expected to lead to a few million dollar revenue headwind, but a slight positive effect to segment profitability.

For Q1, the wind-down resulted in roughly 1,800 less companies in the quarter, however, as you can see from the 8% year-over-year increase in annualized average revenue per company, there was a fairly limited effect on segment revenue. In Consumer Services, our moving group focus is twofold: drive better monetization per move today and build a scalable demand engine for the next leg of growth. In Q1, moving group's upsell and cross-sell efforts drove a 9% year-over-year increase in average revenue per move. On the demand side, we're investing in exciting new partnerships, direct-to-consumer expansion and the moving Place platform.

Like Software and Data, we feel our targeted investments and lean cost structure positions us well for when the housing cycle turns. As for the KPIs, in Q1, we had 69,000 monetized services with annualized revenue per monetized service of $220. I'll now pass it back to Matt to wrap us up.

Matt Ehrlichman: Thank you, Matthew. For closing the call, I do want to comment briefly on the macro environment. It's useful to re-anchor on why the homeowners insurance industry remains durable across cycles and why our operating model is built for the long term. First, demand is structurally embedded. The majority of U.S. households have a mortgage where homeowners insurance is required by the lender, regardless of the economy. More broadly, homeowners insurance is carried by nearly 90% of U.S. homes on an annual basis, not surprising, given the home is often a family's largest financial asset. Second, the homeowners insurance premium pool has grown through cycles.

You can see on the chart on the left, it makes it clear, and it has natural tailwinds. Inflation tends to scale premiums over time. And if the weather gets worse, it only means the homeowners' insurance industry will grow faster. In the current environment, there's talk of a softening market and competition, but we're really not seeing that in any meaningful way in our Q1 results and strengthening funnel demonstrate that. Third, what's important for Porch is our model. We're able to participate in that growing industry premium pool, while separating Porch's financial results and profitability from weather volatility and risk.

And lastly, like Matthew just talked about, we don't see AI disruption risk as it relates to the foundational elements of the insurance industry. Again, insurance is a balance sheet promise, not a workflow while regulation and capital requirements create real moats. We see AI enhancing the advantages for companies with unique data, and we've built our entire business around our data platform. I want to wrap up by briefly reinforcing the most important messages from today. First, we're off to a strong start in 2026. There's no doubt. Second, we've raised our outlook meaningfully for the year. Third, we're seeing momentum because the insurance growth engine is working.

Capacity, distribution, conversion are all moving in concert and in the right direction. Overall policy count is growing rapidly as is premium from new customers, and we're accomplishing this while maintaining some of the top underwriting results in the entire homeowners insurance industry. This creates differentiated margins and as a result, a stronger growth engine as we look ahead. Thanks, everybody, for your time today. I just want to thank, in particular, my fellow shareholders for their support and belief in our organization. We can't control market volatility, but we can -- we will control our focus, strategy and execution. In just a little over a year, we've transformed Porch into a simpler high-margin cash-generative business.

We've built the foundation, and now we scale profitably and fast. With that, John, please open the call for questions.

Operator: [Operator Instructions] Our first question comes from the line of Dan Kurnos with StoneX.

Daniel Kurnos: The results obviously speak for themselves, guys. It's a hell of a quarter. I guess the kind of question, I just want to anchor to, Matt, a little bit either Matt or Matthew, is there any thoughts on kind of the RWP guide for the year? Is that a little bit higher now just given the increase in revenue and given what you guys put up in Q1? And to sort of unpack what you guys are talking about, and I appreciate the color on the premium per new policy written. Obviously, we've all been excited for Porch Insurance to kind of get launched into the market.

But if your blended policy, premium per policy is down because of mix and Porch Insurance is kind of a higher price point, and obviously, you guys can correct me if I'm wrong on that. Do we think that like the initial start to this year is actually driven by real strength in the legacy products even across agents as you turn them back on and Porch Insurance is then going to be incrementally on top of that, and we should see the premium per policy start to blend up as that comes into the market, or am I thinking about that wrong?

Matt Ehrlichman: Yes, I'll just take the second one first. It's a good question. Porch Insurance will make a bigger, bigger impact as we go throughout the year and it is ongoing as we have more and more agencies activated and turned on using it. I do think as you look forward, yes, the Porch Insurance products designed to be, give or take, 10% higher all-up price than the homeowners of America product and that includes a lot more value for the consumer, right? The warranty, the moving services, and then actually higher commission as well for the agencies to have additional incentive. And so -- and as an aside, it does also create more margin.

So you're right, as Porch insurance becomes -- just continues really through its journey, and we're very excited about what's ahead there. Yes, I think that can create tailwinds to your question, Dan, on the premium per new policy. Overall, though, obviously, you heard us emphasize it, we are very pleased with the gains in conversion rates, and how we've been able to just drive premium growth without meaningful decreases in the premium per new customer, that's a big deal. And again, it just emphasizes that we're going to be able to continue to grow margin across the system in really attractive ways, second question. On the first one, Shawn, maybe you can take the RWP guide question.

Shawn Tabak: Yes. I mean, I'd say a couple of things. First of all, Dan, thanks for the remarks. I'd say a couple of things. One, it's early in the year, so I'll just note that. Two, I'd say we were quite pleased with the funnel performance in the first quarter. I think as we talked about throughout each of the metrics, agents, quotes, conversion, we saw outperformance. And so that gives us confidence. Now we did today, increase the revenue guidance 4 percentage points of growth at the midpoint. So now the revenue guidance is a 20% year-over-year growth.

And again, that's all driven by just adding -- continuing to add in new customers and the increased confidence that we see there. And sorry, maybe I'll just leave it there. And...

Matt Ehrlichman: Thanks, Dan.

Daniel Kurnos: That's fine, Shawn. Thanks. Yes. I appreciate it. And Matt, I think the point I was trying to make is that you guys did this without really Porch Insurance filtering into the market yet. So obviously, stellar results at the start of the year.

Operator: Our next question comes from the line of Jason Kreyer with Craig-Hallum Capital Group.

Jason Kreyer: And I'll echo congrats on an excellent quarter here. Wondering if you could talk about loss ratios or combined ratio trends for Q1, and just how that compares to historic quarters?

Matt Ehrlichman: Yes. I mean, we continue just to perform exceptionally well. Gross loss ratios in Q1 was 24%. Attritional loss ratios, which, as a reminder, for those on the call, is losses not including catastrophic weather. That was 19%. And -- so just exceptional results. Actually, the team have gone looked, we're in the top handful across the country and Texas in terms of top performers as it relates to loss ratios. Actually a little titbit, Jason, that was interesting to us. Some of the areas carries attractive loss ratios, and then we'll have really bad loss ratios the next year as it bounced around with some volatility.

We are the only company in the homeowners insurance industry that's been in the top handful each of the last several years. We think that's really telling. Just there's that consistency of having just exceptional loss ratio and attritional loss ratio results.

Jason Kreyer: Impressive stuff. When you look at the levers that you can pull, just in terms of price and promotion, agency commission, and stuff like that. I wanted to ask about those levers in terms of existing customers. Any changes to the strategy of the existing customer base and any changes to the trend as far as retention or attrition rates.

Matthew Neagle: I can speak to that. We've taken a number of steps across our distribution strategy and our product strategy to position ourselves for growth. And as Matt said in his remarks, we think we have a growth engine built and now it's time to scale. We are still early in building out our distribution when you consider the number of agents that we have and the number of agents that are available. We always have the lever to tweak price to drive up conversion rate. And I do think there is room there when you look at our cost and our margin structure. We haven't had to be that aggressive so far to be able to hit our growth numbers.

And then as Dan mentioned earlier, we are excited about what Porch Insurance could do. So in terms of the biggest product strategy, being able to have a premium product in the market that has higher commissions that has the wraparound value of a warranty and moving services and other things to the consumer, we think gives us another lever to drive growth.

Matt Ehrlichman: Let me just layer one thing on just to make sure that it landed clearly just on this topic. Fundamentally, what the whole advantage comes down to is that we have more margin across the entire system than other carriers do. And it's because we have unique insights about properties, which allow us to be able to win more low-risk customers and not win higher-risk customers, they're going to have lots of losses. Fundamentally, those insights allow us to create more margin. And you can see that showing up in both the private margins at Porch Group plus how much surplus is growing at the Reciprocal because the margin is the combination of those two things.

And that's a big deal because like Matthew just noted, because you have more margin in the system, if we wanted to, we could tweak pricing down, still create tremendous margin and be able to grow conversion rate and premium faster. Right now, we're very pleased with the outputs that we're seeing in terms of premium growth, but it is certainly nice to be in that position and have those controls.

Operator: Our next question comes from the line of Jason Helfstein with Oppenheimer.

Jason Helfstein: I guess two questions. Just when -- to start with the less exciting one. But -- so like the Reciprocal looks like you burned, I guess, cash flow from operations like about $7 million in the quarter. How do you think about like where that comment potentially shakes out, I guess, annually? And just like broadly, I guess the point is like over time, right? Obviously, you have a cushion, but that should number become positive over time? And then any update on home factors, we kind of haven't really heard you talk about it in a little while. Is it still a business opportunity, or are you more focused on using the data for first-party underwriting?

Matt Ehrlichman: Why don't, Shawn, you take the first one, and Matthew, maybe the second?

Shawn Tabak: Yes, cash flow timing for the Reciprocal is just seasonal. It's just working capital inflows and outflows. The thing I would point to there is the statutory surplus at the Reciprocal increased $10 million from the end of Q4 to the end of Q1. And that's with the value of the Porch shares coming down. So the operating profit from the Reciprocal was in the mid-teens there in terms of millions of dollars. That's a big deal in Q1 for the Reciprocal. Typically, we're a little -- we're around breakeven in the first quarter. And then obviously, Q2 is when many of the claims come. So to generate incremental statutory surplus in Q1 is a great result for the Reciprocal.

It means that the statutory surplus is even stronger to support growth in future years. And so we feel well positioned from that perspective. As a reminder, since I'm talking about the Reciprocal surplus, Q2 is typically when we see most of the weather, just as a reminder, and that results in more claims and put some pressure on statutory. We do expect that, and we plan for it. And if it doesn't come, that's great. But we do diligently plan for it and expect that.

Matt Ehrlichman: Ongoing, I'd be more focused on that, the stat surplus and there's lots of cash in the Reciprocal. But really, we are focused on that stat surplus number that Shawn is noting there.

Shawn Tabak: Yes, over $300 million of cash and investments at the Reciprocals. So it's definitely cash, I would say.

Matthew Neagle: And then on home factors, you pointed out two opportunities for us. One is how we leverage it internally, and then be able to commercialize it externally. Just firstly on internally, we are using it and do see a significant impact, and you're seeing that showing up in our results. And we are bullish on the midterm opportunity. The thing that I would point to that gives us confidence we have a very active and increasing pipeline of carriers, who are in the testing process. And the test results are showing in ROI.

And I think what we're seeing, which is what we expected is just that the sales cycle because you have to go through testing and procurement in some of these carriers that it will take time to be able to bring those into a formal contract and revenue. With all that said, we remain optimistic that we can build up a business, tied to home factors. What we've said in the past remains true, which is we do expect modest early-stage revenue contribution in 2026 back on track, and then we expect it to build over time.

The last thing that I would just mention is there are faster ways we could go to market, so we could partner with certain providers in the space. We've intentionally chosen not to take that route because we're convicted in the long-term opportunity of being able to go direct, and we want to make sure we maintain kind of control over how the data is distributed in the market.

Operator: Our next question comes from the line of Adam Hotchkiss with Goldman Sachs.

Adam Hotchkiss: Matt or Shawn, I would love to just go back to price. Matt, I know you took some pricing action, I think, late last year and possibly again in the beginning of this year. Obviously, the conversion rates have improved. Could you maybe parse out for us how much of the conversion rate improvement was things like agency branch location increases in the 181% year-over-year increase that you showed versus the pricing action? And maybe just any learnings from the pricing action itself and in the sort of visibility that gives you to the conversion curve. That would be helpful.

Matt Ehrlichman: Yes. I mean the growth in agencies really doesn't impact the conversion rate. I mean, certainly, as you build and deepen your relationships with those agencies, yes, they will lead with you more or -- and so it does have influence, but I would say the largest impact in terms of conversion rate is being able to take certain actions to be able to be more attractive for the right customers. And that's really the key is through our data, and through our insights into where the conversion rate curve is steep, and where are those attractive sets of customers.

You can be surgical with being able to increase conversion rate for the right customers that we want and you saw the results, which is -- and we can do that without having meaningful changes in the price per new customer overall. Again, like you highlight, it's a big deal because the system is going to be very, very healthy, very, very profitable, and we doubled conversion rate year-over-year. But yes, those actions that we've taken have been the primary drivers, I would say, tied to conversion rate, but all the work that the distribution team has done with agencies certainly has been a tailwind in health there.

Adam Hotchkiss: Okay. Yes, that's really helpful color. And then, Shawn, just on RWP seasonality, I think the $600 million does imply that things do accelerate a bit year-over-year into the last three quarters, sort of what gives you confidence there? And then when we think about just premium seasonality through the last three quarters. Should we expect that curve to look a lot like last year, or any changes that you would expect? I appreciate it.

Shawn Tabak: Yes. The seasonality of RWP, some of that is -- a lot of that was driven by when customer homeowners buy their homes and therefore, either buy homeowners insurance or in subsequent years, renew their homeowners insurance. And so obviously, most folks are buying their homes, therefore, owners insurance and renewals in Q2 and in Q3. And then I'd say from there, probably Q4, and then lease them out in Q1, actually. So I guess, seasonally adjusted, this is the lowest quarter Q1 is. What gives us confidence in the ramp is the funnel. We talked about in Q1, we were pleased that really, we exceeded expectations -- our own expectations even throughout each metric in the funnel.

So we -- agency additions was really strong, not driving quotes and the conversion. And so all of those things also bolster future quarters, RWP. And so that's the key thing that we saw in Q1.

Operator: Our next question comes from the line of Ryan Tomasello with KBW.

Unknown Analyst: This is Juan on for Ryan. Congrats again on the print. Thanks for walking through the productivity gains from AI earlier, and how the insurance itself is insulated from AI disruption. But what do you think about that potential top-of-funnel disruption from AI on the insurance side. On the one hand, these tools could affect that great high-intent funnel that you have at closing. But on the other, it also could expand distribution to a broader audience. So do you see Porch is like a net AI beneficiary here?

Matt Ehrlichman: So yes, for us, it doesn't really matter where the consumer is buying homeowners insurance. We want to be plugged into those channels. And so if digital agencies or our existing agency partners as they will get integrated into the various AI systems, that's great. We're just one of the options that's there for the consumers and because we have more insights about that consumer's home. If it's a lower-risk consumer, we're going to be a very attractive option for them.

And so we are focused on partnering with all of these different great agencies that are out there, having really deep relationships and partnerships with them being a great partner for them in helping these agencies to grow their business. And we believe insurance as a product that is a complex product to buy and that consumers need and want a licensed agent to work with them. And if consumer behavior changes, we're going to be where those consumers are, whether it's digital agencies or other.

But being the actual insurance product for us in this role is a great place to be and being an insurance product that has differentiated data and therefore, differentiated pricing is a really great place to be because at the end of the day, insurance -- consumers need insurance, and we're going to be a really good option for them.

Unknown Analyst: Got it. Yes, that makes a lot of sense. And are there any changes in your appetite to deploy the excess surplus at the Reciprocal for M&A?

Matt Ehrlichman: Perhaps. I mean, we mentioned last quarter that -- actually, we really mentioned several quarters ago that we're turning on the M&A engine and starting to build the pipeline. And so certainly, we're executing against that part of the strategy. We do expect over time that when there is the right opportunity, that we will take advantage of it. Certainly, the capital exists, as we talked about today, at the Reciprocal to be able to execute against the right opportunities. We're excited about that. We're excited about our capabilities to do some really good things there.

But we're going to be very disciplined and pragmatic about it and make sure that the first things we do are right down the middle of the fairway. So but yes, I do -- it's certainly an opportunity, and we'll share more when it's the right time.

Operator: Our next question comes from the line of Timothy D'Agostino with B. Riley Securities.

Timothy D'Agostino: Congrats on the quarter. Do you want to touch back on the rollout of the Porch Insurance product? And you all have provided really helpful commentary. But I guess, at the start of 2Q, so in the sample time line, compared to January when it originally rolled out, could you maybe provide some more color to us on are you seeing more agents interact with it? Are you getting better feedback just overall just color, as we enter the second quarter with this product, what agents are saying and maybe what homeowners you're saying? That would be great color.

Matthew Neagle: Sure. We remain excited about the Porch Insurance offering that we just rolled out here a little while ago to agents. And what I would say is, there's a lot of excitement from the agents. We're learning a lot from having the product in market. And we do expect it to ramp over time, both as we get new policies in, and then we get renewal policies there. Some of what agents are excited about, it is the only product in the market that has a warranty attached to it. It is also a product that is designed for home buyers, in that we provide free moving services and a moving concierge.

Agents are also excited about the premium commission that we can afford to pay as part of the Porch Insurance product. And so all of that has generated energy and excitement in the industry. And I think it will just take time as we build up our book. The HOA book, we've built up over 15 years now. And so we're going to start building and that has already started to happen.

Timothy D'Agostino: Okay. Great. And then I just wanted to turn to software and data and consumer services. I know there was some color about kind of the go-forward plan there. But I guess, when we do start to see an unthawing in the housing market, should we expect like the annualized average revenue per company and revenue per monetized transaction to continue to increase? Just kind of getting a better understanding of how we should think about these KPIs when we get to a point when the housing market starts to unfold a little bit.

Matthew Neagle: Sure. The -- so I'll separate from software and data KPIs versus consumer services. The software and data is more closely tied to transaction volumes in the housing market. As Shawn mentioned in the comments, most of those software services are priced on a per-transaction basis. And so we do expect that as housing market activity picks up, you would see an increase in the average revenue per company because each of those -- on average, those companies will do more transactions. We have taken steps over the last couple of years as the market has been slow to position those companies for growth. And so we've invested in innovation. We've invested in pricing.

And so we do believe that as the marketing -- or the housing activity picks up, we will see top line growth and that most of that top line growth can flow to the bottom. On the consumer services side, there are some parts of that business that are tied to housing market activity, most notably our moving group. And so you would see some tailwind in moving as housing activity picks up? And we see that in a number of transactions, not necessarily in the revenue per transaction.

Operator: Our next question comes from the line of Matt VanVliet with Cantor.

Matthew VanVliet: Maybe I wanted to narrow in on the forward trajectory of the metric around agency branch locations. I know that was a big driver over the last several quarters to build that number, but where are we in terms of saturation in your key markets? How much more room does that have to grow as a near-term driver?

Matthew Neagle: Yes. So the -- I'll take that, and Matt, you can add on if there's anything there. I would say we're still relatively early. We have invested in building out the distribution team. It's only been fairly recently that we've been at kind of the full capacity as we've built up that team. We've also invested in senior leadership there. And we can foresee several years of runway with the team that we have. Some of that is still in our core market of Texas, but there's a lot of room in the geographies outside Texas. And then you also have to think that over time, we can expand into additional geographies beyond the ones where we are today.

And so I don't see any near-term constraints on our ability to grow agent distribution.

Matt Ehrlichman: I'm going to just delve down on the last point to make sure it stuck, which is Texas, our largest most mature market, still has a long way to go, like we have just a fraction of the total agencies. The other states that are newer as very early in the number of agencies versus the total. And then like Matthew just talked about, there's lots of other states we want to expand into. And we're getting to that point where we can start to be able to reopen more states, and that will be an exciting time, certainly for us because that just opens up big new pools of opportunities.

But there's give or take, almost 40,000, I think it is independent agents. And so there's a lot of opportunity out there.

Matthew VanVliet: All right. Very helpful. And you drove very nice growth in the conversion rates, and it sounds like that was a big driver in the quarter, but you mentioned to one of the questions earlier that you really haven't necessarily used some of the levers you have there to drive maybe even greater quote, and then conversion rates. So what would you want to see in the market? What would you want to hear from maybe the agents to start using that lever a little bit more aggressively, whether that's through commission rates or just pure pricing or policies? Curious on what you're watching and when or if that might be a greater lever to pull?

Matt Ehrlichman: Yes. I mean, I think, the key thing there -- it's a really good question. The key thing there is that we and just personally me, I just want to do this for a long, long time. This is the last thing I'm going to do. And so to your question, it's a good one. Could we grow much, much faster this year? Yes. I mean there's plenty of capital, there's plenty of quote volume, plenty of margin in the system. We could grow much faster this year.

But we really want to be able to stack year after year after year after year of really attractive growth, expanding margins each year at Porch Group for shareholders, and then also continuing to grow statutory surplus. And so for us to be able to grow like we are, while also growing statutory surplus and seeing the margin expansion that we're going to be demonstrating here this year, that combination, we believe, if you just stack those years, it becomes really, really valuable here over time, and we'll just prove through the results, that we're able to go and deliver that. But for us, we think that turns into a really exceptional and very sustainable outcome over time.

And so that's really what we're trying to solve to. Yes, we could grow much faster. Yes, there may be opportunities in the market where we would pull that lever harder. But right now, I mean, you can see we're certainly pleased with kind of the type of growth. Without really having to move the price per new customer that much and be able to get the kind of results that we are.

Operator: And at this time, we have no further questions. That concludes our Q&A session. I will now turn the call back over to Matt Ehrlichman, for closing remarks.

Matt Ehrlichman: I'll just say I appreciate first of all the questions. Thank you all. I appreciate those that are along in this journey with us. This is an exciting time for the company. The feel of the company is fantastic. The energy is great. I do think the teams are executing really well and are excited about where we're going. It's clear to us these next several years are going to be really fun years, and I appreciate those that are with us on that ride. Have a great day, everybody. Talk to you soon.

Operator: This concludes today's conference call. You may now disconnect your lines. Have a pleasant day.

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