Good afternoon, everyone, and thank you for participating in Porch Group's Second Quarter 2025 Conference Call. Today, we issued our earnings release and filed our related Form 8-K with the SEC. The press release can be found on our Investor Relations website at ir.porchgroup.com. I'd like to take a moment to review the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995, which provides important cautions regarding forward-looking statements. Today's discussion, including responses to your questions, reflect management's views as of today, August 5, 2025. We do not undertake any obligations to update or revise this information. Additionally, we will make forward-looking statements about our expected future financial or business performance or conditions, our business strategy and plans. These statements are subject to risks and uncertainties, which could cause our actual results to differ materially from these forward-looking statements. Please refer to the information on this slide and in our SEC filings for important disclaimers. We will reference both GAAP and non-GAAP financial measures on today's call. Please refer to today's press release for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during the earnings call, which are also available on our website. As a reminder, this webcast will be available for replay along with the presentation shortly after this call on the company's website at again, ir.porchgroup.com. So joining me here today are Matt Ehrlichman, Porch Group's CEO, Chairman and Founder; Shawn Tabak, Porch Group's CFO; and Matthew Neagle, Porch Group's COO. With that, I'm going to turn the call over to Matt for his key updates.

John estimated that he's listened to almost 1,000 of those statements in his career. John, we're happy to have you reading it on the other side. Good afternoon, everyone. Thanks for joining us. It continues to be an exceptionally exciting time here at Porch, and I'm thrilled to provide an update on strong results, which exceeded expectations across the board, increased guidance and what's ahead. At the start of 2025, we launched the member-owned Porch Reciprocal Exchange, which is a key milestone for both our company and our shareholders. This transformed Porch into a simpler commission and fee-based model. It's designed to deliver predictable and high-margin financial results for Porch Group shareholders. Our go-forward structure is playing out better than expected and positions Porch to benefit from the massive now over $170 billion U.S. homeowners insurance market, which is attractive customer retention and is expected to grow high single digits annually over the next 10 years. So similar to last quarter, our Q2 financial results were ahead of expectations, straightforward and reflective of a business that we believe is in the early innings of long-term sustainable and high-margin growth. To highlight a few key metrics for Porch shareholder interest. Revenue was $107 million, generated predominantly from $121 million of reciprocal written premium. Q2 gross profit came in at a healthy $89 million, a 431% increase and $72 million improvement over the prior year. We're happy to report that our gross margins remain north of 80%. Q2 adjusted EBITDA of $16 million was led again by the strength in insurance services and was an improvement of $50 million versus the prior year and resulted in a 15% margin. As we've said, adjusted EBITDA is largely expected to translate to cash flow. And in Q2, we realized $15 million of cash flow…

Thank you, Matt, and good afternoon, everyone. Similar to Matt's overview, my comments will address performance of the porch shareholder interest since generating cash for Porch shareholders is our ultimate goal and how we measure our success. As a reminder, under GAAP, we are consolidating the reciprocal exchange financials, which you can find throughout the press release and our 10-Q. With that background, let's get into our Q2 performance. Q2 2025 porch shareholder interest revenue was $107 million with an 83% gross margin, producing $89.2 million in gross profit. Adjusted EBITDA of $15.6 million was ahead of expectations. The GAAP consolidated results are on the right-hand side of this slide. Overall, we saw another quarter of strong performance in our Insurance Services segment, driving total company results above expectations. And while Software and Data and Consumer Services segments continue to provide strategic advantages that help our insurance business succeed, the financial results of these segments continue to be impacted by a soft housing market. Given the outperformance in Insurance Services, we are increasing our outlook for the year, which I'll cover shortly. The port shareholder interest revenue of $107 million was comprised of Insurance Services at 63%, followed by Software and Data at 22% and the remainder from Consumer Services. We continue to see the year-over-year improvements in gross profit and adjusted EBITDA as the clearest way to understand the increases in our results, and we're pleased with the progress. Q2 Porch shareholder interest gross profit was $89.2 million with an 83% gross margin. This was a $72.4 million increase over the prior year, driven by insurance services. Q2 adjusted EBITDA was $15.6 million, a $50.4 million increase over the prior year, driven by the transition to the high-margin insurance services reciprocal operator business model. Now let's move a little…

Thank you, Shawn. I'll start by giving a brief business update and an overview of the KPIs across shareholder interest, 3 operating segments. We are back on offense in insurance and focused on growing premiums while also growing surplus at the reciprocal. Q2 reciprocal written premium grew 25% over Q1 with tremendous capacity for ongoing growth. We believe we are on track to exceed 2025 target of $500 million. Agencies serve as our main distribution channel. So extending and deepening our partner base is a key focus for us. Since the launch of the reciprocal, we've grown our sales account management headcount from just 2 to 26 employees. The investment has led been ahead of schedule pace for the number of independent insurance agencies we're working with. In the quarter, we announced a handful of notable wins, including a renewed partnership with Goosehead as well as new relationships with Romely, Evertree and MastDrive, among other confidential nationwide partners. In addition, we are expanding geographies again, nearing the launch of a new state in Michigan. And as I touched on last call, most of the ZIP codes across our existing states have been reopened at this stage. Additionally, we'll grow with differentiated product. The new Porch insurance product has been designed to be truly differentiated. Like our HOA product, it will leverage our unique property data to provide pricing advantages. But in addition, we are including other important benefits for homebuyers, in particular, such as a full home warranty and 4 hours of moving service. Moving to the insurance KPIs. Reciprocal written premium in Q2 was $191 million. Reciprocal policies written reflects a total number of new and renewal insurance policies driven by the reciprocal during the period. We generated policy fee revenue directly from these policyholders. In the quarter, we…

Thank you, Matthew. I'll wrap up by reinforcing the most important messages from today. So first, certainly, we delivered quarterly adjusted EBITDA of $16 million in Q2 2025, a $50 million increase year-over-year. Again, this translates to $15 million in Porch shareholder interest cash flow from operations in the quarter and $42 million in the first half of the year. Second, we increased our 2025 adjusted EBITDA guidance midpoint to $67.5 million for the year; third, gross margins, which remained north of 80% with $89 million gross profit, up $72 million year-over-year. Next, we are very pleased with the continued increasing health of the reciprocal, as we discussed. From a capacity standpoint, we are at a record level of surplus and have tremendous room to grow premium and Porch profits. Our flywheel is working and is just getting started. And lastly, we've shifted back to offense as we add agencies, and we're excited about what the future holds for our differentiated Porch insurance offering. All right. Thanks for your time today. We're in the early stages of building a truly great company, and we're glad to have you along for the ride. With that, JR, please go ahead and open up the call for questions.

[Operator Instructions] The first question comes from the line of Daniel Kurnos with The Benchmark Company.

Obviously, another fantastic quarter for you guys. Apologies if I missed this one because my phone cut out for a second. But Shawn, did you address why the take rate in insurance went to almost 56% from 51.5% in the quarter and how we should be thinking about that because that's a pretty big step function.

Yes, happy to take that one. I guess, overall -- and Dan, great to -- thanks for the question. Overall, we're continuing to be quite pleased with the model and how it's working out. The reciprocal written premium to your -- the basis of your question is very efficiently transferring into porch shareholder interest revenue and better than we expected there in the quarter. So just pleased with how it's working and continue to not only see the revenue flow through, but importantly, the EBITDA and cash flow also flow through from how that's all working out.

It's a good place to follow up, Shawn. I appreciate the color because Matt, I know you're managing to margin here, like sales and marketing is pretty high in insurance. I'm just kind of curious the areas of investment you're making there. You clearly have plenty of cushion to do whatever you want, but just maybe how to think about that because that also ticked up because you're clearly flexing some internal muscle at the moment?

We talked a bit last quarter about making additional investments across our insurance business as well as software and consumer services. We are making investments. I mean we are set up, to your point, and we have room to be able to position ourselves well for growth as we look ahead. We also had mentioned that starting April 1, we shifted the quota share program that our captive reinsurer provides to the reciprocal to also pay a bit higher commission back to the reciprocal, and that shows up in the sales and marketing line as well. And that's another way that we can drive more surplus back into the reciprocal. And Dan, to your question, it's why we're really excited about the results because we were able to generate really strong economics at Porch Group for our shareholders. and really strong growth in surplus at the reciprocal, which allows for more growth as we look ahead. But that's the other driver there.

Got it. And just last for me. I know it's super early since you just got TDI approval. We kind of talked about this last time, but just thinking about attach rates to warranty and moving. I don't think we had contemplated that before. Obviously, it's super smart on the flywheel side. But is there any kind of directional color we should be thinking about in terms of additional growth coming now that you have approval there from those vectors?

So we'll share more metrics as we go, obviously. But just strategically, it's a big deal for us because we want to not only have fundamental advantages with the data, the differentiated data that lets us price the insurance products more accurately than the market, -- we not only want to have advantages with the structure and the margins that we're able to create, and we're demonstrating that to your earlier question that we're able to simply generate a lot of value out of our insurance business for our shareholders. But we also want to differentiate with the fundamental product that's in the market. And so now having product, just look ahead, where you can have products in the market that it's not only about just providing insurance, but we can provide full protection for your home that includes warranty coverage for all of the Porch insurance customers, but we can also provide moving service for homebuyers. And we really do want Porch insurance to end up being known as the best insurance product for homebuyers. And so that's a big deal for us just strategically to be able to help just extend the long-term advantages that we're going to have there.

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

A few. So maybe talk a little bit more just about how you're thinking about growth versus margin expansion. Obviously, you've seen very strong financial performance this year. And just what's the philosophy, I guess, as we're kind of thinking -- I'm not asking for '26 guidance, but kind of growth versus margin. Question number two, again, revenue is not the best proxy, but you beat Tech Motor revenue, at least beat us by $11 million. You're only raising the full year by $5 million. So just -- is there anything you're seeing in third quarter that's giving you pause or again, revenue is not the best way to typically look at insurance? And then lastly, just any commentary on the weather impacts on 2Q, thanks [indiscernible] if it was actually favorable.

Perhaps I'll take the first one. Shawn, why don't you take the second and Matthew perhaps take the third. So real quick, just in terms of philosophy. With the model that we have and the business we have now, Jason, we are set up and very optimistic about our ability to be able to consistently grow at a really nice clip. We talked back in the Investor Day, grow north of 20% annually for an extended period of time. We expect to be able to go and do that as we look ahead while also showing margin expansion each year. You can see our gross margins are more than 80%, but you look at the adjusted EBITDA margins, in our view, there's a lot of room to be able to continue to grow our adjusted EBITDA margins over time. But we do want to manage it. We don't need to max out growth this year or max out adjusted EBITDA margin this year. We want to show nice, consistent sequential improvement for both of those 2 metrics for a long, long, long period of time. And that's how we believe we'll be able to create the most value over time for shareholders. Shawn, do you have to take the second question?

Yes. The second question was about Q2 revenue and revenue for the second half of the year implied in our guidance. And I think both are strong is the key takeaway there. Q2 was above our expectations. I know it was more above the -- maybe consensus from the Street's expectations. But from our internal, it was above our expectations. And we also increased guidance for the rest of the year. So actually, we feel really good going into the second half of the year. A lot of the things that Matthew talked about on the growth side and continuing to scale premiums at the reciprocal. That's a key driver. Actually, Dan's question was another one. We're seeing the premium convert to revenue and adjusted EBITDA very strongly in Porch Insurance Services. And then I guess the third thing I would just quickly highlight, I know the question is more on revenue, but we're increasing our adjusted EBITDA midpoint by 2.5%. That's while we're continuing to invest in growth within operating expenses for 2026 and beyond. So as a team, we're quite pleased with the performance and happy to be able to raise guidance across the board today.

Sure. I'll take the third one. I think I heard comments on Q2 weather. The first thing I'll say is, overall, the weather felt normalized as we compare to 2024 Q2, but what's also important to just emphasize so that everybody who's on the call is clear, is Porch Group shareholders would not have been directly impacted by the weather in Q2 had it been not more normal weather. And then I'd also reiterate comments from the prepared remarks, which is we've done a lot of work with our reinsurance partners to lower our retention, which is the max amount we would pay if there were a large event, and we've lowered that to $23 million. So even if there would have been a significant event in Q2. It wouldn't have impacted Porch Group directly. And to the extent it would have impacted the reciprocal, we would have had a really strong reinsurance protection. The last thing I would say is we have done a lot of work to get the right risk into our portfolio, leveraging our data. And so that has also contributed to the overall performance in Q2 where we felt like we had a really strong underwriting performance quarter.

Let me just tack on one more thing real quick because Jason, you might have also been thinking about Q3 weather just so far. Around the 4th of July weekend, there were flash floods in Texas and just so sad and our hearts go out to the families that were impacted by that. It's just terrible. Related to the business and the reciprocal, the volume of claims was not material at all. It was nominal. And just as a reminder, flood is typically not a covered event in homeowners insurance, and it isn't for us. So there's not exposure to events like that. But anyway, if you were thinking about the Q3 weather earlier in July, it was not -- it's not a material event. Obviously, it's not an event for Porch Group, but it's not an event for the reciprocal either.

Next question comes from the line of Jason Kreyer with Craig-Hallum.

Great. This is Cal on for Jason. So maybe to start, good to hear the update on Home factors, but I'm just kind of curious if you can speak to applications of this data outside of just licensing for underwriting. Just curious the opportunity you're seeing in other industries like media campaigns and there's any difference in the sales cycle with these other industries relative to the more elongated sales cycles when you're working with carriers?

Sure. I can speak to it. We are -- we see a lot of interesting use cases for the data. We obviously are using it for our own underwriting. We've talked about home factors within the insurance space to help drive underwriting and pricing. When we look beyond that, it is certainly -- there's certainly potential when it comes reaching homeowners who are going through a real estate transaction and if there are homes that have certain conditions that may indicate certain types of work is likely to be needed such as roofing. And so we are working with potential partners and partners around those use cases. I would say the sales cycle is shorter than in insurance because generally there's a shorter testing period. There's still some sales cycle there, but it's something we are excited about. The last thing that I would say is over time, there's also opportunities for us to use that data to power the consumer experience tied to our Porch app and the Porch insurance value because we can bring in that data and help to educate and engage and empower homeowners with more information about their home.

I'm just going to tack on because I think it's an interesting one. I think Matthew hit all the key points, and there's lots of use cases outside of insurance. But with carriers, we are finding more and more opportunities for ways to be able to use the data and create value, obviously, for underwriting, obviously, for pricing upstream to be able to have more accurate pricing. We mentioned during our reinsurance renewal, how we're bringing in the data into our reinsurance submission, was able to lower cost materially. So there's opportunities with reinsurance. Carriers that are out there that are marketing to consumers, if we know which consumers are buying homes and which consumers have low-risk homes, clearly, that's valuable. And then lastly, insurance carriers out there spend a lot of money doing their own kind of reviews of homes post underwriting. And if we have that data and they can be able to speed up that process and be able to be more accurate, obviously, that creates a lot of value. So it's been fun as we have more and more tests going on because it's opening up lots of use cases. And again, like we mentioned in the prepared remarks, the results and the ROI so far have been very, very strong.

Great. I appreciate all the color there. And then maybe lastly for me, you announced some new insurance agency partnerships. Just curious if you can update us on the go-to-market agent reception, any additional distribution strategies you might be pursuing?

Sure. We are focused on the agency channel. There's massive untapped opportunity for us in terms of how much we've penetrated and how much is out there. We are investing in growth through the agency channel. We built out a team I mentioned we grew from 2 to just as of now, we're up to 26. We're ahead of pace in the number of agencies. And we're excited about the differentiated value product or value that we can bring with our Porch insurance product. Matt mentioned, we now have a set of member benefits that include a full warranty moving services that's on top of our moving concierge. We're in a position given our economics to pay competitive commissions. And so agents are excited to work with us and grow with us. And I would say we're very early stages, both in our outreach to grow the number of agents and to build those relationships with them so that we're a bigger and bigger part of their business. So excited, early, lots of growth ahead for us. Your next question comes from the line of Randy Binner with B. Riley.

I'm kind of picking up actually on the insurance side on the last question there, if that's okay. The -- I guess I'd just be interested to hear -- you've talked about the go-to-market adding agents and sales and distribution, and that's important. But I'd be interested just to hear if there's certain states or kind of broader geographies where you're seeing more success. I think homeowners rates are up a lot across the country. And so is -- are agents viewing the reciprocal as like a new market that has better pricing? Or is there certain areas where you're coming in and large carriers are going on? Just be interested kind of how the reciprocal is being received and where it's finding success so far.

Sure. Yes, there's a couple of things to hit on. I think it's a great question. Thanks for it. So first, just to make sure it's clear, in market, we continue to offer our homeowners insurance product. And then Porch Insurance will be a second product that's in market that will have -- and will have differentiated value propositions. We will continue to expand states. So right now, we're in 20 -- just 22 states, but there's a bunch of states that we are not in that we think are really attractive insurance markets. And so we'll expand both the Homeowners of America product and then eventually, over time, the Porch insurance product as we roll that out across the country. But again, very attractive markets that are out there. Within our existing states, some of them, Texas being one, we have seen other carriers exiting that state or slowing down new business. Obviously, that's great for us. Our underwriting results are very, very strong. And obviously, the fact that we know more about properties when we're pricing policies helps us to be able to have very strong underwriting results. And so for us, it creates a really attractive, I'd say, market dynamic because not only do consumers need our product, but agents need our product as well as they're going out to market. So net -- and I mentioned this a bit earlier on, we do think the homeowners insurance category as a whole is a beautiful place to be playing. It is -- to your point, it is growing, and it's expected to continue to grow really fast. And given that we can play in that market without having to take on the weather volatility on a month- to-month or quarter-to-quarter basis, you allow our business to grow with high margins and just participate in what's ahead for the category.

All right. And then just related, and I apologize if I missed this, but did you talk at all about the loss ratio for the reciprocal in the quarter? I know it doesn't accrued it to Porch shareholders. So just curious in kind of a normal or even better cat quarter for Texas if the -- if you can disclose kind of like how good the losses were in the quarter?

They were exceptional is the short answer. The gross loss ratio was 34% in the quarter. That to 117% last year. In Q2, remember, Q2 is usually when the majority of the losses come in because of that -- of the weather. And so tremendous result there. You also saw net income in the quarter for the reciprocal of just under $6 million compared to a loss of around $30 million last year. So just a really great quarter. And then I think that's -- as Matt talked about on the call today, that's what's underpinning that increase in surplus combined with non-admitted assets is a really strong underwriting performance there.

Yes. I'll just layer on it. attritional loss ratio as well, something we look at, was again just exceptional. And it just goes to show that we really have fundamental advantages with our ability to price and underwrite, but attritional loss ratio was in the second quarter down to 8%, which is a 1,300 basis point improvement versus the same quarter prior year. So again, just very, very strong results for the reciprocal.

Your next question comes from the line of Timothy Greaves with Loop Capital.

I guess I want to ask more about the home factors and the conversion there. I know you said that there's a lot more people testing the product. But what is the timeline on, I guess, adoption? And what is the conversion rate you're seeing in like people testing to adopting the product?

Sure. I can hit on that. What we're excited about is the interest and engagement across the broad set of carriers that are of all shapes and sizes. I'll just say that kind of the vibe we get from the carriers is very strong. In terms of the selling cycle, we, I would say, are seeing what we expect. These carriers want to test it. They have certain steps they have to take before they can formally introduce it into their pricing, in their underwriting. All of them remain very engaged. From a financial standpoint, we haven't -- we don't need any revenue from home factors to hit our 2025 targets. And I would say the progress is going well. We don't report on a conversion rate. We have shared kind of what we did with Bamboo. We don't expect to release every single new customer that we get. But I'll just reiterate, there's real interest and real excitement. The team is fired up. The vibes are good, and we're pushing really, really hard.

Yes. I would just layer on. I do think that carriers has ever they've gone to the test, really you feel like we're hitting the bull's-eye with the product that we have for them. So I concur. I think that it's set up well as we look ahead.

Your next question comes from the line of Graham Bundy with KBW.

I'm on for Ryan Tomasello today. First, you've had success taking price across many of your software brands over the last year or so. Going forward, will the approach be more consistent with annual price taking on renewals? Or should we expect your price taking to continue to be lumpy with a more multiyear approach?

Well, I'll take that. Our strategy is to continue to price the value. Our strategy is to continue to invest in innovation, continue to bring new features and products to the market. I don't want to say exactly when we'll do price increases, but it's certainly our expectation that we'll be able to have ongoing price increases across our businesses. And the upside to that is a lot of those businesses are driven by transaction volume. in the real estate market. And transaction volume is low, both for new home sales and for refinancings. And as the interest rates come down, our expectation is that, that market will get healthier, will get closer to normal. And then all the good work we've done around innovating on products and raising price will be a nice upside that will essentially drop to the bottom line on those businesses. So that's the strategy we're focused on.

Okay. Awesome. I appreciate the color there. And then my follow-up, which you all have already touched on slightly, but just in terms of EBITDA margins, you've obviously already told us how you're thinking about the longer-term potential. But over the near term, should we expect the pace of the margin expansion to be relatively consistent? Or do we also need to consider the potential for some opportunistic reinvestment that makes annual margin expansion a bit lumpier?

Obviously, we haven't provided 2026 guidance as we look ahead, but I'll just give you generally what we've talked about, which is we do expect to be able to show nice margin expansion while also investing in the business to be able to ensure that we're growing at the clips that we want to grow. So we don't expect it's going to need to be -- the improvement is going to need to be lumpy. We think that we are going to be able to manage the business to be able to create a lot of value for shareholders. And we think, again, like I said before, the combination of really nice growth with margin expansion each year for an extended period of time will produce that.

And it seems that we have no further questions for today. I would now like to turn the call back over to Matt Ehrlichman for closing remarks.

I just appreciate folks tuned it in and being with us on this journey. I think you can probably hear it come through, hopefully, but the team is fired up. We're in a good spot. The bids across the company are, I would say, excellent. And we're in the early days of building a really big exciting business. So we'll keep you up to speed as we continue to progress, but I appreciate everybody's time. Have a great rest of the day.

This concludes today's conference call. You may now disconnect.