Good afternoon everyone and thank you for participating in Porch Group's Third Quarter 2022 Conference Call. Today, we issued our third quarter earnings press release and related Form 8-K to the SEC. The press release can be found on our Investor Relations website on ir.porchgroup.com Joining us here today are Matt Ehrlichman; Marty Heimbigner, Porch Group’s CFO; Matthew Neagle, Porch Group’s COO; Adam Kornick, President of our Insurance Division; and Malcolm Conner, VP and Group GM of our Warranty Division. Before we go any further, I'd like to read the company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995, which provides important cautions regarding our forward-looking statements. Today’s discussion, including in response to your questions, management’s views as of today, November 8, 2022. We do not undertake any obligations to update or revise this information. Additionally, we will make forward-looking statements about our future financial or business performance or conditions, business strategy and plans and anticipated impacts from pending or completed acquisitions based on current expectations and assumptions. These statements are subject to risks and uncertainties, which could cause our actual results to differ materially from those forward-looking statements. We encourage you to consider the risk factors described in our SEC filings for additional information. We will reference both GAAP and non-GAAP financial measures on today’s call. Please refer to today’s press release for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during this earnings call. As a reminder, this webcast will available for a replay shortly after the conclusion of this presentation on the Investor Relations section of the company’s website at ir.porchgroup.com. The slide presentation will follow the presenters’ commentary and can be found on the website. Today, in addition to covering third quarter 2022 results, updated full year 2022 guidance and KPIs, Adam Kornick is here to provide an overview of the third quarter insurance results. And Malcolm Conner will join us to provide an update on our warranty business. And with that, I'll turn the call over to Matt Ehrlichman, CEO, Chairman and Founder of Porch Group. Matt?

Thank you, Emily. Appreciate it. Good afternoon everyone. Thank you for joining us for our third quarter 2022 earnings call. Certainly, 2022 has been evolving year for what we've seen with the stock market, housing market, atypical weather and inflation impacts on insurance costs. At the same time, this has been a year of focused work by the Porch teams and the progress made leaves me more confident than ever about what's ahead Based on the quality of our team's work this year, we should have continued our strings of beats and raises. However, given the headwinds we'll discuss here today, we have adjusted our financial guidance for 2022. I'll start first with the challenges. So first, while we do not sell our own insurance products in Florida, Hurricane Ian, which is one of the largest storms this country has seen, did flow through South Carolina, which is our second largest state in terms of gross written premium. Hurricane Ian and an increased number of summer weather events drove losses out of our insurance division the quarter. Inflation further impacted gross losses and resulted in a Q3 2022 gross loss ratio of 74% of Homeowners of America, which is substantially higher than the historical Q3 results. I'll note in a moment how this has created an opportunity around future pricing for homeowner policies that we expect to drive growth and profitability going forward. Second, unless challenges the housing market continue to decline more than industry groups like the National Association of Realtors or NAR had forecasted. So for the third quarter, existing home sales declined over 22% on a year-over-year basis, a result of the continuous rise in interest rates. This is significantly higher than what was predicted at the beginning of the year, pulling further than what was forecasted…

Thanks Matt and good afternoon, everyone. I will start off with our third quarter financials, which you can see here on Slide 11. Third quarter revenue increased 20% from prior year to $75.4 million, driven primarily by our insurance and warranty businesses and contributions from acquisitions made over the last year. Year-to-date revenue is $208.7 million, an increase of 48% from the prior year. As Matt mentioned, Q3 revenue is lower than our expectations due to there being fewer home sales than anticipated at the start of the quarter. Our vertical software segment reported $44.5 million in revenue, the 5% increase from prior year. This segment includes our move related transaction revenue, which is most impacted by the volume of home buyers. Our insurance segment reported revenues of $30.9 million for the quarter, a 51% increase from the prior year. With upcoming insurance pricing increases rolling through, we expect this portion of our business to continue to grow nicely. Company revenue less cost of revenue margin was 56% and adjusted EBITDA loss margin was negative 17% compared to the prior years, 69% and positive 1% respectively. Higher cost of revenue was caused by an increase in insurance claims cost primarily due to inflation and atypical weather events in Q3 including Hurricane Ian, which made landfall in South Carolina on the last day of the quarter. The change in adjusted EBITDA was due almost entirely from this increase in insurance claims costs. Finally, when you review our GAAP financials, you'll notice we recorded a non-cash, goodwill and intangible impairment of $57 million in the third quarter. This included a $39.4 million goodwill impairment at our insurance segment driven by the disruptions in the equity markets specifically for property and casualty insurance companies, largely due to recent weather related catastrophe events and…

Thanks Marty. Hello everyone. Great to be with you today. In my mind 2022 has been an incredibly exciting and impactful year for our business and with what is teed up for 2023, we expect another big year ahead. I want to make sure it is understood that despite macro pressures and unusual weather impacts seeing this quarter, the fundamentals of the business are strong and the team is performing well. First, I'd like to make sure our path to profitability in the second half of 2023 is clear. Let's then take a look at our quarterly KPIs. We continue to feel confident in achieving adjusted EBTIDA profitability for the second half of 2023, even while assuming continued and substantial weakening in the housing market in higher insurance claims costs from continued inflation. We expect the $28 million plus year-over-year adjusted improvement between the second half of 2022 and the second half of 2023 will be driven by a few different things. First, an anticipated $10 million H2 improvement that will come from higher insurance pricing and lower distribution costs to agents. We have received regulatory approval and these are being rolled through new sales and renewals as we speak. Second, there is a $10 million improvement by assuming unusual weather including Hurricane Ian does not happen again and we see third quarter weather consistent with the last five years. Considering Ian is estimated to be one of the strongest one that ever to hit the U.S. Mainland, we feel this is a reasonable assumption. As Matt noted earlier, our teams are focused on furthering initiatives to reduce volatility over time. Third, we anticipate $5 million in cost savings year-over-year, largely from G&A related costs such as lower SOX costs, which are significant in H2 this year. Also, lower D&O…

Thanks, Matthew. I want to provide more context on our third quarter insurance results and provide some insights on what our team is doing to offset the headwinds we face this year due to weather and inflation. Our HOA business ended the third quarter of 2022 with a gross loss ratio of 74% higher than the 41% gross loss ratio in 2021, and the approximately 30% to 40% recorded in the third quarter for the years prior to acquisition by Porch. The change in gross loss ratio was driven by several factors. First, throughout the third quarter, we were impacted by higher weather-related claims than we have seen historically and on the last day of the quarter, Hurricane Ian made landfall in South Carolina our second largest state. Specifically the third quarter weather events drove a 15.4 point increase in gross loss ratio from the same quarter prior year. Inflation also impacted gross loss ratio as our average cost per claim of approximately 10% when compared to 2021 on a year to date basis. The balance of the increase in gross loss ratio was due to smaller weather events that occurred at higher rates than previous years. While these impacts were significant, we believe our reinsurance and underwriting strategies, which include avoiding underwriting in the state of Florida, allowed us to show relatively small losses when compared to a Hurricane Ian event that has been estimated at $40 billion to more than $60 billion of total losses. Based on the claims received in the days following Hurricane Ian’s landfall in South Carolina and our expectations for IBNR incurred claims that have yet to be reported by our customers, our financials reflect our expected expenses related to this event. Despite these impacts, we currently estimate an expected full year 2022 gross…

Thanks, Adam. Happy to be here today. I’m excited to share more detail about our Warranty business as we believe we are well positioned to become a leader in this space. Prior to joining Porch more than a year ago, I previously led and scaled American Water’s Warranty business to greater than $130 million in organic revenue over four years. I was excited about joining Porch given our unique assets that we believe provide a long-term advantage, low cost access to consumers, data to improve pricing, a variety of channels to sell warranties through, and a team and culture that can execute rapidly to get great work done. As you know, Porch provides homeowners with insurance and warranty offerings that fully protect the home from the roof to the service line and nearly everything in between. Where Homeowner’s assurance covers unforeseen events like fires, escape of water and wind damage, a home warranty protects the consumer against the natural wear and tear that your home suffers from standard usage. By integrating American Home Protect and RWS warranty brands into the Porch platform, we’re able to offer homeowners convenience and better financial protection. Our warranty span from specialty coverage that target a specific system in the home, a short-term 90 day inspection warranty for new home buyers to a multi-year full home warranty. As part of Porch, we have included maintenance services such as gutter cleaning or dry event cleaning at the cost of the deductible to create more value for every consumer. This has actually led to a substantial improvement in retention rates versus what American Home Protect was seeing pre-acquisition, generating strong and consistent recurring revenues for Porch. Turning to Slide 25, let’s talk about a couple of the things we’re working on. First, let’s take a look at…

Thank you, Malcolm. Good to have you here. It was just over a year ago now that we announced your acquisition of American Home Protect. And with how quickly our Warranty business is growing, it’s clear to me and to us that we can better help consumers looking to protect their home. So much runway here and we expect to continue to grow this business rapidly for a very long time. To wrap up today’s call, we would note to our long-term shareholders that we continue to ignore the short-term noise that can come along with the stock market in a public company. Our teams are executing and we are at the very beginning of building a large and durable company. It’s been a choppy year in a number of ways caused by the macro market, but as we look ahead into 2023, I’m excited about our ability to demonstrate clearly to the markets that our strategy is working. I can’t wait to show the results that we’ll produce over time. And with that the management team will now take questions. Emily, if you can please open the line for Q&A.

Thank you. It looks like we have a little less than 30 minutes for questions here today. We’ll start by taking question from our Porch sell-side analyst and attempt to respond to other questions that have been submitted through the analyst chat as time permits today. Our first question that we have on the list here today is with Dan Kurnos from Benchmark. Dan? We’ll move to John Campbell with Stephens. John?

Thanks, guys. On the Insurance business, the higher replacement costs, the claims, they’ve heard everybody in the channel seems like a few quarters now. It does seem like investors tend to overlook kind of that ripple effect of the higher renewal pricing. So I’m glad you guys have highlighted that. But I’m curious about how you’re thinking about that tailwind just over the next kind of coming quarters? You’ve got obviously two big price increases. And what I think at least by our math are far and away your two largest states, I know there’s some moving pieces around renewals and stuff like that. But just as you see it right now, could you maybe frame up the type of revenue lift you’re maybe expecting in just those two states alone?

Adam, do you want to take it? It’s tied your business.

Yes, sure, of course. So Jason, we don’t break out at the business unit level. But I would say that while since those prices were approved this year, they generally won’t affect prices during the current year because it’ll take time to earn in. But we expect that those percentages will be fully recognized over time as new policies initiate and earn in over 12 months and then as existing policies renew. And so I think you can use that to make your assessments and you’re correct that those are our two largest states.

Okay. And then Adam just broadly, the incremental margins on that kind of renewal pricing, is that typically 100% flow through?

So I don’t think we disclose margins by individual businesses, but we would expect to fully earn those increases as the policies renew over that period of time.

Okay. And then one more entrance here. I don’t know if you guys can help shortcut this, I just hadn’t had the time to run through it. But if you’re gross loss ratio this quarter was similar to last quarter or maybe just kind of the industry average, what was the swing in EBITDA just in this quarter?

Matt, I don’t know if we have that. Do we?

Yes. Well, we did mention Q3 was obviously substantially different than Q3 last year. There’s a 41% gross loss ratio in Q3 2021 and a 74% gross loss ratio from our Insurance segment here in 2022 third quarter. We also noted John, the past year’s it’s been 30% to 40% gross loss ratios in the third quarter. Third quarter is typically a really good quarter from weather perspective in the regions that HOA operates primarily. Obviously this quarter was unique and different. I don’t think we’ve broken down specifically, but that there gives you enough to be able to go and certainly triangulate the total impact. Overall though for the second half of the year that swing in EBITDA from where we were our previously $30 million guidance, negative $30 million guidance to now negative $48 million, almost all of that swing, $15 million of that swing is directly tied to weather and inflation, Hurricane Ian. And so the majority of that is obviously from it.

That’s what I was looking for. Thanks guys.

Thanks, John. We’ll move to Jason Helfstein with Oppenheimer. Jason?

Thanks. I’ll ask two. So I think industry forecast suggests housing volume is going to be negative through 2023 and kind of even worse than we’ve seen this quarter, next quarter, et cetera. So just how are you thinking about vertical software revenue and EBITDA next year? And then just second, you sound very confident you can get the breakeven EBITDA by the middle of next year kind of through – kind of whatever it takes. So if that’s the case, why not repurchase some of your convertible debt given the large discount right now in the market and your strong cash position? Thanks.

Well, on the repurchase, let me take that first and then Matthew, if you want to take the housing market question, that would be great. But I think Jason, last quarter we had noted that we’re thinking about it and talking about repurchase options with our Board. And obviously between then and now our Board did approve a repurchase. So we have authorization at this point from our Board for a $15 million repurchase. So we basically agreed 10% of the market cap was the right place, approximately 10% of the market cap.

No, I was asking about the convertible debt.

Yes. So basically the Board approved the repurchase to be either stock or convertible debt. And so now the question is management has discretion and we’ll do the math and make sure we make the right choices there. What’s interesting is both are very attractive in our mind. The stock or the convertible debt, there’s a break point in which the stock is the more attractive way to go versus the convertible debt, obviously is lower risk, repurchase. But both we view as very attractive IRRs. So we haven’t obviously disclosed now the next steps, but we obviously sharing today that there is that authorization in place for us to be able to action against should we choose.

I can speak to the vertical software. I’ll share a few points. First, despite the market declining that segment is still growing. But it does have some impact, right? So the first thing – the second thing I would say is that as we are forecasting for next year, we are looking very closely at the industry data. And so we have already built in some decline for next year because we have been looking at the forecast that have been coming through from the different industry groups. When we see decline, not all of our business is impacted. So keep in mind there are parts of our business, insurance and warranty that are recurring businesses. There are parts of our vertical software businesses that are recurring. What we – where we do see an impact, one is there are some move-related services. And so when there are fewer movers, we do see some softening in move-related services. And then parts of our vertical software business that are transactional in nature, we’ll see some impact. And what we’re seeing a little bit in the mortgage industry is, certain mortgage brokers may sit out or reduce the number of brokers in their business. But again, when we put together our forecast for next year, we’ll build it off of what we’re assuming from the industry forecast. And that assumes already a decline in next year.

Three more just very quick points. One, Jason, we did – it was a 22% year-over-year decline in home sales in the third quarter. We agree with you. And that’s what external folks say, which is 2023 expect to continued decline. And we certainly expect material weakness to go ongoing. And so as we’re planning for breakeven in the second half of next year, we are certainly assuming, that being the case. And we’re not assuming a rosy picture from a housing market. I do want to remind, Insurance segment at this point is 44% of revenue. And that is really the fastest growing part of our business. And that portion isn’t materially impacted by the housing market, given the vast majority of this revenue is recurring revenue from the existing customers, and those existing customers are also moving less frequently, so just as a reminder.

Thank you.

Thank you. We’ll now go back to – we’ll go to Mike Grondahl with Northland. Mike?

Thanks, guys. Two questions for me. Any quick update on Floify and Matthew, I was trying to understand, did you say that vertical SaaS revenue is kind of expected to be down in 2023 or just the housing market in general and that’s something you’re going to have to work through?

No, the housing market in general will be down. Our Vertical Software segment is still growing both in 2022 and we expect it will continue to grow in 2023. Within our Vertical Software segment, Mike, if you recall our move-related services, that portion of the revenue, the transaction revenue, that’s the portion that’s most impacted by the housing market. It’s low 20% of total revenue this year that was around flat year-over-year here in the third quarter. So it’s not declining as there’s far fewer home buyers, but it’s not growing nearly as fast as obviously it would in a normal market. But the overall Vertical Software segment is growing. We expect that will continue to grow. And Matt do you want to update Floify?

Mike, and then, so for Floify, we’re excited about the opportunity there because it’s going to allow us to integrate insurance directly into the closing process with mortgages. And so what we have been doing, and this is what we always do is we are rolling this out in a controlled manner and we’re doing that to ensure the experience for consumers and loan officers is great. We have been expanding the number of Floify customers for which we have integrated insurance into the mortgage checklist and the early feedback is positive. And so we’re excited about that opportunity, just that opportunity to make that insurance purchase much, much easier through the integration we have with Floify.

And I’ll just give one more brief update, which is and the team’s doing a really nice job, really excited about the work that’s happening there. It is harder to be a software company in the mortgage space right now. Clearly mortgage companies are hurting and they have fewer customers than they did a year ago. But despite that we’re really pleased overall with where that business is and still the opportunity that’s ahead.

Got it. Thanks guys and good luck.

Thanks, Mike. There’s Dan.

We can now go over to Dan Kurnos with Benchmark. Dan?

Yes. Sorry, it’s a – Matt, it’s a bit of a selfish question, but I’ve been running around just now it looks like Nicole was coming at house, so have you guys considered that into your guidance? It also looks it might go up the Coast, so I’m wondering if that’s included for Q4?

Adam, do you want to take it?

Absolutely, yes. So people who don’t know, again, referring to subtropical storm Nicole that is predicted to impact the East Coast of Florida. And so what I would say is we are very conscious about not writing business in Florida among other locations. We’re very focused on being prudent in our reinsurance relationships and then managing our mixer risks. So I point you back in our prepared remarks, the impact Ian had on us, given the scale it had for the overall industry. So we can’t control the weather, but we can control how we prepare for it and we feel good about the actions we’ve taken in those strategies many months in advance in the anticipation of events like that, not knowing exactly when they’ll occur.

All right. Fair enough. I mean, I guess we’ll see kind what path that follows after it hits Mainland. Matt, couple things, good update on sort of the data on insurance, getting it through the regulators, I know that’s always been kind of a topic focal point here. You said there was more coming, you’ve now given us, you have more. How do we think about kind of progression from here and what do we think in terms of being able to take share in terms of market share and being able to be aggressive with that pricing, but offset by insurance costs. Like how do we think that kind of plays out?

I’ll give quick thought and Adam, if you want to layer on with anything, please feel free. I’m excited about the work here. Just like we’ve talked about before the game of insurance in our view, homeowner’s insurance certainly is around who can access the consumer at the right time at a lower cost, and then who has unique data to build a price more effectively. And certainly that proved to be true in auto insurance over the years and built two very large companies that are very successful companies. We think we have this amazing opportunity. And so we certainly have been investing aggressively. I think it’s just this really about systematic and consistent kind of approach to our investments there. So just pulling in more data, getting it structured, being able to use it like Adam was talking about in our filings. Now Adam, if you want to just kind of update specifically on filings or anything that you’re excited about there.

Yes. I mean, I would say I share Matt’s enthusiasm and he’s 100% right. I mean, it’s all about that methodical approach to the teams working together, identifying data we might use, extracting it at scale, building the models, filing them, getting approval. And so we have a really clear roadmap quarter-by-quarter of how we do that. And so I strongly believe in that just each quarter will be able to keep moving that forward and that really is how the game of insurance is won, is by having that more accurate pricing and just building that advantage over time.

And maybe one more quick thought, which is maybe Dan to some of your question, some of the consumers, right? As you go through that process and you match all of our data with historic claims, some consumers will be able to get discounts, right? And get lower pricing and therefore, you will be able to grow faster in terms of being able to access more consumers that that we know have better risk. Some consumers will get surcharges, right, because it’s a higher risk than others realize. And so either you may not win that piece of consumers where it was going to be bad risk anyway or you’re going to win it at the appropriate price, right? So that it can still be profitable for us And so you’re going to see impacts really on both sides, both growth and margin for us. I would just say we’re in the early days, like we’re going to – we’re doing really impactful interesting things, hot water heater location. We’re excited about that alone. And that’s just one piece of data. But we’re in the early days of how much we’re going to do. And so this will just be a multiyear journey as we continue to execute and make progress there.

And the last, if I could just sneak kind of one more in Matt, just on the app, right? I mean, I know obviously you guys have out a path to profitability in the second half of next year and a lot of it doesn’t include any sort of incremental insurance growth. I think we can see how you get there, but just how you’re thinking about balancing, and I think I maybe asked this last time, ongoing investment and things like that. How much has already been kind of underwritten at this point? And how much you need to continue to invest in that part of the business? Or do you pull back on that if things get worse? I just want people to understand, kind of the underlying trajectory in there?

Yes, I can take that. We – first thing I want everybody to know is we are taking a very cautious approach to investments. We have slowed down a lot of our investments. The app is very strategic for us long-term because it creates a lot more access to consumers and it really brings to life the data that we have, for some of you to see. It's really powerful to see what it looks like when your inspection report and all the data we have is presented in a very useful way on the app. So today, we are still committed to building out the app. It is already live. We're actually turning it on for more and more of our inspectors that's on a steady rollout and the early feedback is very positive and we're getting a lot of great feedback on how we can improve that experience and it'll be a differentiated experience that nobody else would really be able to provide.

Awesome. Thanks so much. And keep your fingers crossed for me.

Thanks Dan.

We’ll go to Justin Ages of Berenberg. Justin?

Hi. Thanks for taking the questions. First, just hoping you could give a little more color on what initiatives you're doing to reduce volatility in the insurance just because it seems like these once in a century, once in a lifetime events like Hurricane Ian are happening a lot more frequently than that.

Sure. Adam, I’m sure can tag team this, we highlighted two of those, maybe Adam, if you want to just kind of restate and provide any additional detail you'd like on the two things that we're working through.

So, we talked about reinsurance, which I think many of you are familiar with, but I might address. The other thing mentioned is a reciprocal exchange. Reciprocal exchange is a structure in the U.S. or several brand name companies? We mentioned Farmers, Erie, USAA, there are others. And so the reciprocal exchange is an unincorporated entity. It would not be owned by Porch. It's affiliation of the policyholders or subscribers. And that reciprocal exchange would hold all of the underwriting the capital, the premiums essentially the balance sheet of the insurance and there is a second entity that would be owned by Porch, the attorney in fact, which would manage the business and receive a fee in return from managing it. And that entity would be staffed by the employees we have and largely run the business as we do today. So that's one of the things, we don't know if it'll happen yet, but in doing that bifurcation, we think it has the potential to reduce volatility if we decide to pursue it. Matt?

Yes, I would just say just at a high level to the question, because I think it's a good one. We agree and our strategy is focused on making really good choices here, in terms of how we're going to manage the volatility. Adam right now is meeting circle with reinsurers and that's just core part of what we do. Core partners that we operate, with is to make sure that we have our business well protected so we can run our business, reduce volatility over time and have just consistent results.

All right, thanks. And then the next one, as we look ahead into this softening housing market in 2030, has there been a shift in SaaS versus B2B2C and what should we expect in that?

A shift from SaaS to B2B2C, there's dynamics that play out in different ways. And so one of the – we have certain vertical software businesses that do rely on transactions, so you'll see lower SaaS revenue in those businesses. And then as we have fewer movers, it does have a softening impact on our move related services because we have less folks who are moving, going through the kind of going through the platform, which as Matt mentioned in our fastest and largest key parts of our business warranty and insurance are less impacted by that and we have a really strong recurring nature to those businesses.

I'll also just add that we've gotten better and better at moving away from what we had talked about two years ago of getting paid with either SaaS fees or B2B transaction revenue and really being able to get paid with both, right. Where we get SaaS fees, we've introduced more modules for these companies, we generate consistent SaaS revenue from them and continue to get access to consumers through more and more tactics. There's a variety of things we're doing like the app like integrating insurance with both and others to be able to get access to more and more consumers over time and be able to generate revenue in both ways.

All right. That's really helpful. Thank you both for the answers.

Thank you.

We’ll go to Danny Pfeiffer with JPMorgan. Danny?

Hey, thanks for the questions. I'm on for Cory Carpenter. I just have two quick ones. On the Porch Consumer app, do you plan on transitioning it to become a main acquisition funnel over time for Porch? And then the second one is, do you plan on raising rates in any other states you write insurance policies in persistent inflation? Thanks.

Sure. On the Consumer app, we are certainly planning for it to be acquisition channel for consumers. I think given the way our business is set up, we actually have a variety of different channels for us to be able to access consumers. But certainly we think the consumer app provides some unique benefits because of the experience that we can provide. There are things that we're going to be able to do with our data to personalize that experience that nobody else is going to be able to do. So we think there's a very powerful way for us to both acquire and engage consumers. The other point that I would remind the group is the way that our ISN platform works is consumers download their app through our platform. And so, we have opportunities for them to access their inspection report through the app, which we think will aid adoption in downloading of the app. So we're excited about it remains one of our priorities.

And we'll be continuing to really primarily focus for the near-term on B2B2C approach using our companies to introduce consumers as the way to download and not going direct-to-consumer and marketing and advertising them. We have so many consumers across so many companies, and those consumers are at the ideal moment in time for us to meet them, that really is the focus of our teams is to just take full advantage of that opportunity. Adam, do you want to go to the second question around rates in other states?

Again, we have a process. We regularly and frequently look at the indication for each state, so what are our current estimates of cost and what's our future estimate of cost, whatever the source of that cost is and based on that process, we regularly and frequently make changes to our pricing in each state. And so we highlighted Texas and South Carolina because they're large and meaningful, but absolutely we will charge an actually justified rate in every geography and in order to be profitable.

Thanks.

Let's move to Josh Siegler with Cantor. Josh?

Yes. Hi, Thanks for taking my question. I know it's still early stages, but I'm curious if you're seeing any early evidence that your unique data advantage is helping the business, whether this turbulent macro environment better than say some competitors who lack similar proprietary data. Thank you.

Well, let me just quickly just say a couple things and then Adam, you're closest to it and take Mike. But couple things that I'm certainly proud of, in this market that we're in right now for the business to look at 65% gross loss ratio, 87% combined ratio, those are really good results considering Hurricane Ian and just what's happened on the third quarter in particular from weather perspective. And so just want to provide a credit to that team despite, the choppiness that we saw certainly in the third quarter, whether like those are good results. And set us up well with reinsurance relationships, one. Two, when you go back in that actuarial team looks at our data like hot water heater location and combines it with the historic claims data. Like we're not sharing publicly for competitive reasons like the impact that we see, but I mean, it's noteworthy, it's something that we are excited about just because that is one of many things that can cause an impact. So Adam, anything else you want to offer there?

Yes, I think I might point you back to, I can't remember what quarter it was, but we shared some data by peril that we're able to collect, whether it was of a roof and the percent of client names have a relative importance of the roof, for example, to weather claims, where it was plumbing and the importance of plumbing to the cable wire apparel. I don't have it in front of me, but I know that we shared it. And so what I'd tell you is that's part of this very methodical approach to say, that matters. And so what we're committed to is making progress every quarter, continuing to file to build those models and then file them. And that's probably what I would point you back to is that we're really clear minded on how those things will lead to improvement by individual apparel that Matt talked about. And as you said, we don't share for competitive reasons some of the details, but we can see that and it's something I am very enthusiastic about.

Looks like Josh froze. Let's move to Ryan Tomasello [KBW]. Ryan will close us out today.

Thanks guys for taking the questions. Regarding the insurance price increases, can you say how you're thinking about the impact to attrition as you push those through on renewals? And on the flip side of that, if you think rising churn that we're likely to see across the industry as competitors are pushing through the same price increases, there's an opportunity for you guys to pick up share on the back end of that.

I can talk about that. I mean, so I'd say we disclosed our Insurance segment renewal rate and so when we raise prices, we expect that to decline. I think we've been pleased that given the overall market conditions that it has held up. But certainly, if we increase prices, we do have some belief that based on elasticity, we'll see renewal go down. But then as you alluded, we believe that overall, the market will have to charge about prices that are warranted. And that will lead to a stabilization and renewal, all things equal. And then as you said, that's going to drive shopping, and that's something we can benefit from. But the only thing I'd point you to is we disclose every quarter our insurance renewal rates and that's the best way for you to see how we're performing as those increases are seen in renewals.

And then beyond the pieces of the Vertical software segment that you called out that have the direct sensitivity to housing and mortgage. Maybe you can just speak more broadly about the sales environment across the different brands, whether you're seeing any softness or hesitancy there on the part of, I guess, largely SMB customers, given the uncertainty that's out there for next year.

Yes. Yes, our teams are very focused on our go-to-market. We do have unique things that we can bring to our customers that other folks can that I think gives us an advantage, but it's still a difficult market. There's a lot of small businesses, a lot of sole proprietors who get heavily impacted when there's a significant slowdown. And so we saw a pretty good growth in our average companies this last quarter. And I think we expect that pace is often some during the slowdown.

Thanks for taking the questions.

Thanks.

Thanks everyone. We only have one question here that was submitted through the analyst portal. And that was a question for Marty. Marty, could you please give us an update on the cash position of the company? And maybe an update on the company's NOL.

Certainly, Emily, we did indicate in our prepared remarks that we ended the quarter with $276 million of cash on hand, of which $16 million of that was restricted cash. In addition, our Homeowners of America business has a long-term and – short-term and long-term investment portfolio of $62 million. We believe the cash that we have on hand positions us well for our operations and the buyback of stock or convertible debt that was discussed. And with respect to our net operating loss, we're anticipating that we'll have NOL carryforward of $374 million at the end of 2022.

Great. Thank you. And to Matt.

I will close us. Didn't get the stock market question this quarter. I'm just going to give you a quick thought, which is we continue to be convicted in what we're doing. And so it is – certainly, Porch is involved in industries that have gotten impacted just broadly. We're really excited about just what the future looks like for the company. So, thank you to long-term shareholders. I also just say thank you to whoever joined the call here today. We appreciate the interest, ongoing interest in Porch Group. We are at the very beginning of the journey, like I said, and I do want to just shout out to the Porch team in its entirety for their continued focus, we're living our values, the great work that's happening every day for being focused on the task at hand. Let's go build a great company and everything else is going to take care of itself. Also shout out in particular, Marty, for the role that you play. Thank you, sir.

With that, thank you all. Take care. Have a great rest of the day.