Porch Group, a prominent vertical software company revolutionizing the home services and insurance sectors, announced its third-quarter (Q3) financial results for the period ending September 30, 2023. The Company reported a total revenue of $129.6 million, marking a substantial 67% surge compared to the preceding year. Additionally, Porch Group revealed an Adjusted EBITDA of $8.8 million, reflecting a remarkable increase of $19.7 million from the previous year. Notably, the Company experienced a GAAP net loss of $(5.7) million, a significant improvement from the $(84.5) million loss in the corresponding period of the previous year.
The surge in Porch Group’s stock was palpable following the announcement of these positive financial results.
At the time of this publication, Porch Group Inc stock (PRCH) has witnessed a surge.
Porch Group Inc
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Porch Group Q3 2023 Financial Results – Key Highlights
– Total revenue reached $129.6 million, an impressive 67% increase or $52.2 million, compared to the third quarter of 2022, which saw revenues of $77.4 million. The surge was chiefly attributed to the Insurance Segment.
– Revenue less cost of revenue amounted to $76.6 million, constituting 59% of total revenue, in contrast to the third quarter of 2022, which reported $44.4 million, accounting for 57% of total revenue. This boost was primarily driven by premium per policy hikes and other strategic underwriting measures in the Insurance segment, coupled with a shift towards higher-margin businesses in the Vertical Software segment.
– Porch Group’s GAAP net loss for the third quarter of 2023 was $(5.7) million, a notable improvement from the $(84.5) million loss reported for the same period in the prior year.
– Adjusted EBITDA surged to $8.8 million, demonstrating a positive turnaround from the $(10.9) million loss in the third quarter of 2022. This improvement was evident in both segments and was attributed to robust expense management.
– The Insurance segment witnessed a gross written premium of $154 million for the quarter, encompassing approximately 334 thousand policies.
– As of September 30, 2023, Porch Group boasted unrestricted cash and investments totaling $458.4 million. Within this, the insurance carrier, Homeowners of America Insurance Company (HOA), held $253.9 million in unrestricted cash and $92.9 million in investments. Excluding HOA, Porch Group retained $89 million in unrestricted cash.
– In the third quarter of 2023, Porch Group invested $57 million in its wholly owned insurance carrier subsidiary HOA, aiming to bolster surplus. In return, Porch Group acquired a $49 million 10-year term surplus note, subject to interest (SOFR +9.75%), with provisions for principal payments and early redemption contingent on sufficient capitalization levels at HOA and approval from the Texas Department of Insurance (TDI). Additionally, Porch Group obtained all rights from HOA concerning potential claims linked to the fraud case involving Vesttoo and others.
– Outstanding principal for convertible debt amounted to $558 million as of September 30, 2023. This encompassed $333 million from the newly issued 6.75% Senior Secured Convertible Notes due October 2028 and $225 million from the existing 0.75% Convertible Senior Notes due September 2026.
Porch Group is revising its full-year 2023 guidance in light of prevailing market conditions and positive business trends. Taking into account the robust performance in the third quarter of 2023, the Company anticipates a significant increase in revenue and profitability. Furthermore, Porch Group reiterates its commitment to achieving Adjusted EBITDA profitability in the latter half of the year and in subsequent years on an annual basis. This projection is based on historical data, assuming a 35% gross loss ratio in the fourth quarter, equivalent to an average claims cost of approximately $160 per policy, up from the $110 5-year average. Notably, catastrophic weather events exceeding historical trends in the fourth quarter are excluded from this guidance and target.
Revised 2023 Guidance:
– Revenue: Approximately $415 million, projecting a year-over-year growth of approximately 50% (previously estimated at approximately $330 million to $350 million).
– Revenue Less Cost of Revenue: Approximately $190 million (previously estimated at approximately $145 million to $165 million).
– Adjusted EBITDA: Approximately $(52) million (previously estimated at approximately $(65) million to $(50) million).
– 2023 Gross Written Premium: Approximately $500 million (unchanged).
This revised guidance reflects Porch Group’s optimistic outlook and its confidence in the trajectory of its business operations for the remainder of 2023 and beyond.
In conclusion, the robust Q3 results of Porch Group underscore its position as a trailblazer in the vertical software industry, showcasing substantial growth and financial stability.
