# Porch Group, Inc. (PRCH) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from Porch Group, Inc.'s 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/1784535/000178453525000011/prch-20241231.htm Accession: 0001784535-25-000011 Filing date: 2025-02-25 Report date: 2024-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Company profile: /company/PRCH/ All MD&A years: /company/PRCH/mda/ Previous year: /company/PRCH/mda/fy2023/ (FY 2023) Next year: /company/PRCH/mda/fy2025/ (FY 2025) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Business Overview Porch Group, Inc., together with its consolidated subsidiaries, (“Porch Group,” “Porch,” the “Company,” “we,” “our,” “us”) is a new kind of homeowners insurance company. We differentiate and look to win in the massive and growing homeowners insurance opportunity by 1) advantaged underwriting utilizing unique property data, 2) being the best partner for homebuyers, and 3) providing more home protection. As a leader in the home software-as-a-service (“SaaS”) space, we’ve built deep relationships with approximately 29 thousand companies that are key to the home-buying transaction, such as home inspectors, title companies, and mortgage companies. These relationships provide us with early insights to United States (“U.S.”) homebuyers. In partnership with these companies, we have the ability to help simplify the move for consumers with services such as insurance, warranty, moving and more. We have unique insights into the majority of U.S. properties. This helps us better understand risk and create competitive differentiation in underwriting and pricing. We aim to be the best homeowners insurance partner for homebuyers by helping with more than just insurance. We provide moving services and offer a full moving concierge through the Porch app. We help make moving easier and assist with other important services such as security, TV/Internet, and more. We provide more protection for the home by including a variety of home warranty products alongside homeowners insurance. We are able to fill gaps in protection for consumers, minimize surprises, and deepen our relationships and value proposition. In 2024, we had two reportable and operating segments: Insurance and Vertical Software. Insurance — Our Insurance segment provides consumers with insurance and warranty products to protect their homes, earning revenue through premiums collected on policies, policy fees and commissions. The Insurance segment includes Homeowners of America (“HOA”), a wholly owned insurance carrier, other insurance-related legal entities, Porch Warranty, and other warranty brands. Vertical Software — Our Vertical Software segment provides software and services to customers, including but are not limited to inspection, mortgage, title, roofing, and contractor companies on a subscription and transactional basis. These accounted for 60% of total Vertical Software segment revenue in 2024. Additionally, the Vertical Software segment provides move and post-move services, which accounted for 40% of total Vertical Software segment revenue in 2024. The Vertical Software segment operates as several key businesses, offering products including inspection software and services, title insurance software, mortgage software, moving services, mover and homeowner marketing, and measurement software for roofers. See “Item 1. Business,” Strategic Growth Pillars, for more information about changes to our business in 2025. Basis of Presentation The consolidated financial statements and accompanying notes include the accounts of Porch Group, Inc., and its wholly owned subsidiaries and were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All significant intercompany accounts and transactions are eliminated in consolidation. Key Performance Measures and Operating Metrics In the management of these businesses, we identify, measure and evaluate various operating metrics. The key performance measures and operating metrics used in managing the businesses are discussed below. These key performance measures and operating metrics are not prepared in accordance with GAAP and may not be comparable to or calculated in the same way as other similarly titled measures and metrics used by other companies. 49 Table of Contents The following table summarizes operating metrics for each of the periods indicated. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2024","","2023","","% Change"],["Gross Written Premium (in millions)","(1)","$","452","","","$","525","","","(14)","%"],["Policies in Force (in thousands)","","206","","","310","","","(34)","%"],["Annualized Revenue per Policy (unrounded)","","$","1,541","","","$","984","","","57","%"],["Annualized Premium per Policy (unrounded)","","$","2,470","","","$","1,884","","","31","%"],["Premium Retention Rate","","105","%","","96","%"],["Gross Loss Ratio","","65","%","","69","%"],["Attritional Loss Ratio","(2)","22","%","","34","%"],["Gross Combined Ratio","","79","%","","88","%"],["Average Companies in Quarter (unrounded)","(3)","28,604","","","30,476","","","(6)","%"],["Average Monthly Revenue per Account in Quarter (unrounded)","(3)","$","1,275","","","$","1,184","","","8","%"],["Monetized Services (unrounded)","","935,736","","","903,455","","","4","%"],["Average Quarterly Revenue per Monetized Service (unrounded)","(3)","$","396","","","$","404","","","(2)","%"]] [[/GREPCENT_TABLE]] _________________________________________________________ (1)Gross Written Premium included our insurance agency, Elite Insurance Group (“EIG”), which was sold in January 2024. (2)Attritional loss is considered a non-GAAP financial measure. See Non-GAAP Financial Measures section for a description and reconciliation to the comparable GAAP financial measure. (3)Amounts for periods that include more than one quarter are calculated as the average of the quarters within the period. Gross Written Premium — We define Gross Written Premium as the total premium written by our licensed insurance carrier(s) (before deductions for reinsurance); premiums from our home warranty offerings (for the face value of one year’s premium); and premiums of policies placed with third-party insurance companies for which we earn a commission. Policies in Force — We define Policies in Force as the number of in-force policies at the end of the period for the Insurance segment, including policies and warranties written by us and policies and warranties written by third parties for which we earn a commission. Annualized Revenue per Policy — We define Annualized Revenue per Policy as quarterly revenue for the Insurance segment, divided by the number of Policies in Force in the Insurance segment, multiplied by four. Annualized Premium per Policy — We define Annualized Premium per Policy as the total direct earned premium for HOA, our insurance carrier, divided by the number of active insurance policies at the end of the period, multiplied by four. Premium Retention Rate — We define Premium Retention Rate as the ratio of our insurance carrier’s renewed premiums over the last four quarters to base premiums, which is the sum of the preceding year’s premiums that either renewed or expired. Gross Loss Ratio — We define Gross Loss Ratio as our insurance carrier’s gross losses divided by the gross earned premium for the respective period on an accident year basis. Attritional Loss Ratio — We define Attritional Loss Ratio as Gross Loss Ratio excluding the losses due to catastrophic weather. Catastrophic weather events include, without limitation, hurricanes, tornados, earthquakes, hailstorms, wildfires, high winds, and winter storms. Gross Combined Ratio — We define Gross Combined Ratio as being the sum of the loss ratio including loss adjustment expense and expense ratio. This is on a statutory basis for our insurance carrier. Average Companies in Quarter — We define Average Companies in Quarter as the straight-line average of the number of companies as of the end of period compared with the beginning of period across all of our home services verticals that (i) generate recurring revenue and (ii) generated revenue in the quarter. For new acquisitions, the number of companies is determined in the initial quarter based on the percentage of the quarter the acquired business is a part of Porch. Average Monthly Revenue per Account in Quarter — We view our ability to increase revenue generated from existing customers as a key component of our growth strategy. Average Monthly Revenue per Account in Quarter is defined as the average revenue per month generated across all home services company customer accounts in a quarterly period. Average Monthly Revenue per Account in Quarter is derived from all customers and total revenue. 50 Table of Contents Monetized Services — We connect consumers with home services companies nationwide and offer a full range of products and services where homeowners can, among other things: (1) compare and buy home insurance policies (along with auto, flood and umbrella policies) and warranties with competitive rates and coverage; (2) arrange for a variety of services in connection with their move, from labor to load or unload a truck to full-service, long-distance moving services; (3) discover and install home automation and security systems; (4) compare internet and television options for their new home; (5) book small handyman jobs at fixed, upfront prices with guaranteed quality; and (6) compare bids from home improvement professionals who can complete bigger jobs. We track the number of monetized services performed through our platform each quarter and the revenue generated per service performed in order to measure market penetration with homebuyers and homeowners and our ability to deliver high-revenue services within those groups. Monetized Services is defined as the total number of services from which we generated revenue, including, but not limited to, new and renewing insurance and warranty customers, completed moving jobs, security installations, TV/Internet installations or other home projects, measured over the period. Average Quarterly Revenue per Monetized Service — We believe that shifting the mix of services delivered to homebuyers and homeowners toward higher revenue services is an important component of our growth strategy. Average Quarterly Revenue per Monetized Service is the average revenue generated per monetized service performed in a quarterly period. When calculating Average Quarterly Revenue per Monetized Service, average revenue is defined as total quarterly service transaction revenues generated from monetized services. Recent Developments Reciprocal Exchange On July 29, 2024, we filed a new and updated application to form and license a Texas reciprocal exchange with the Texas Department of Insurance (“TDI”). Our application was approved by the TDI on October 25, 2024. On January 1, 2025, we completed the formation of Porch Insurance Reciprocal Exchange (“PIRE”). In connection with the formation, we completed the sale of our homeowners insurance carrier, Homeowners of America (“HOA”), to PIRE for a purchase price equal to HOA’s estimated surplus at December 31, 2024, of approximately $105 million, less $58 million of principal and unpaid interest under a surplus note issued by HOA to Porch in 2023. The purchase price was financed by a surplus note issued by PIRE to Porch, bringing the total surplus notes held by Porch to approximately $106 million. Following the sale, HOA became a wholly owned subsidiary of PIRE. Porch will manage and operate PIRE, providing services related, but not limited, to underwriting, policy renewal, risk management, insurance portfolio management, financial management, and setting investment guidelines. In addition, Porch will maintain PIRE’s books and records and be responsible for its accounting and financial reporting. In exchange for these services, Porch will receive commissions and fees. PIRE will pay all claims and claims adjustment expenses, reinsurance costs, agency commissions, and taxes and license fees. Debt Repurchase During 2024, we repurchased $51.2 million aggregate principal amount of our 2026 Notes in a series of private and open market transactions. We paid $23.2 million cash, or an average of 45.3% of par value, plus accrued interest. We recognized a $27.4 million gain on extinguishment of debt, calculated as the difference between the reacquisition price and the net carrying amount of the portion of the 2026 Notes that was extinguished. These repurchases reduced the outstanding principal on the 2026 Notes from $225.0 million as of December 31, 2023 to $173.8 million as of December 31, 2024. Sale of Business On January 31, 2024, we sold our insurance agency, Elite Insurance Group (“EIG”). The sale price was $12.2 million of which we have received $10.9 million in cash and recorded a receivable of $1.2 million as of December 31, 2024. We recorded a loss of $5.3 million in other income, net, in the Consolidated Statements of Operations and Comprehensive Loss. Weather Impact Late in the first quarter of 2024, a Texas hailstorm resulted in approximately $16.0 million of gross losses. During the second quarter of 2024, a large hurricane-like windstorm affected Houston with straight-line and long-lived winds up to 100 miles per hour. This event resulted in approximately $19.5 million of gross losses. In July 2024, Hurricane Beryl made landfall in Texas as a category 1 hurricane and impacted the Houston area, resulting in approximately $50.5 million of gross losses. In September 2024, Hurricane Helene resulted in approximately $5.8 million of gross losses. 51 Table of Contents Recoveries of Losses on Terminated Reinsurance Contract During 2023, HOA discovered that Vesttoo Ltd (“Vesttoo”), which arranged capital for one of our reinsurance contracts, faced allegations of fraudulent activity in connection with collateral it provided to HOA and certain other third parties, which allegations have since been confirmed. We have communicated and met with regulators and other key stakeholders regarding the evolving situation. This reinsurance agreement provided partial quota share coverage as well as up to approximately $175.0 million in a catastrophic event. As a result of its findings, and in accordance with the terms of the reinsurance agreement, HOA terminated the associated contract on August 4, 2023, with an effective date of July 1, 2023. Had the contract not been terminated, the contract would have expired on December 31, 2023, and HOA would have been contracted to pay approximately $20.0 million in additional premium payments during July through December 2023. Following the effective date of the termination, HOA seized available liquid collateral in the amount of approximately $47.6 million from a reinsurance trust, of which HOA was the beneficiary, and recognized a charge of $36.0 million in provision for doubtful accounts in the Consolidated Statements of Operations and Comprehensive Loss. In 2023, the Company purchased all rights from HOA for potential claims related to the fraud connected to Vesttoo and others. Subsequently, we were appointed to the statutory committee of unsecured creditors in the Chapter 11 bankruptcy of Vesttoo. We are pursuing all available legal claims and remedies to enforce our rights under the $300.0 million letter of credit required by the reinsurance agreement, and seeking recovery of all losses and damages incurred as a result of terminating the reinsurance agreement due to fraud committed by third parties. On January 19, 2024, we entered into a five-year business collaboration agreement with Aon Corp. and Aon Re, Inc. (“Aon”), resulting in payments to us of approximately $25 million in January 2024 and additional cash payments through the end of the contract term. Of the cash payments that we have or will receive through the end of the contract term, $8.7 million is non-refundable and immediately recognized in other income, net in the Consolidated Statements of Operations and Comprehensive Loss. A portion of the remaining amount is potentially refundable to Aon if we breach the agreement, including if we directly or indirectly place reinsurance with brokers unaffiliated with Aon, subject to customary cure rights. The remaining amount will be recognized in other income, net, over the term of the agreement. As part of this agreement, Aon and Porch also signed a mutual release of claims arising from the Vesttoo fraud. Porch has not released any claims against non-Aon parties related to these matters and intends to vigorously pursue recovery. In addition to this arrangement, we have also received cash recoveries from other parties in the amount of $3.0 million during the year ended December 31, 2024. Porch Common Shares Issued to HOA During 2024, we completed contributions totaling 18.3 million newly issued shares of our common stock to HOA. These contributions supported the transition of Porch’s insurance underwriting business to a reciprocal exchange and helped to bolster HOA’s balance sheet strength and rating after the Texas May 2024 weather impacted surplus. In addition, the contribution increased HOA’s long-term surplus position, which better positions HOA for any future third party surplus note capital raise, and is expected to support premium growth in 2025 and beyond. Should Porch’s share price increase going forward, this would increase HOA’s surplus net of regulatory and statutory limitations, thereby supporting higher premium levels. While this increases HOA’s surplus, there is no impact to the consolidated financial statements for the year ended December 31, 2024. Critical Accounting Estimates Our significant accounting policies, including the assumptions and judgment underlying them, are disclosed in Note 1, Description of Business and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. As disclosed in Note 1, Description of Business and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements, the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates and assumptions, and those differences could be material to the consolidated financial statements. We believe that the following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, and complex judgments. Revenue Recognition Our non-insurance performance obligations primarily include move-related transactions and post-move transactions such as delivery of homeowner leads and performance of home project services and providing access to our software platforms. The transaction price is determined based on the amount to which we expect to be entitled in exchange for providing the promised services to the customer. The transaction price in the contract is allocated to each distinct performance obligation 52 Table of Contents on a relative standalone selling price basis. In certain transactions, the transaction price is considered variable, and we record an estimate of the constrained transaction price. Changes in variable consideration may result in an increase or a decrease to revenue. Contract payment terms vary from due upon receipt to net 30 days. Collectability is assessed based on a number of factors including collection history and creditworthiness of the customer. If collectability of substantially all consideration to which we are entitled under the contract is determined to be not probable, revenue is not recorded until collectability becomes probable at a later date. Fair Value Measurements Fair value is an exit price representing the expected amount that an entity would receive to sell an asset or pay to transfer a liability in an orderly transaction with market participants at the measurement date. Fair value principles prioritize valuation inputs across three broad levels. An asset or liability’s classification within the various levels is determined based on the lowest level input that is significant to the fair value measurement. Business Combinations We have engaged in mergers and acquisitions in the past and intend to continue to make acquisitions a part of our long-term strategy. We account for business acquisitions using the acquisition method of accounting and record any identifiable intangible assets separate from goodwill. Intangible assets are recorded at fair value based on estimates as of the date of acquisition. Goodwill is recorded as the residual amount of the purchase price consideration less the fair value assigned to the individual identifiable assets acquired and liabilities assumed as of the date of acquisition. The accounting estimates associated with acquisitions are complex due to judgments and assumptions involved in determining (1) the total consideration paid because we have used cash, equity, and earnouts and (2) the value of assets acquired and liabilities assumed. We allocate the purchase price of the acquisition to the assets acquired and liabilities assumed based on estimates of the fair value at the dates of the acquisitions. Contingent consideration, which represents an obligation to make additional payments or equity interests to the former owner(s) as part of the purchase price if specified future events occur or conditions are met, is accounted for at the acquisition date fair value either as a liability or as equity depending on the terms of the acquisition agreement. Impairment of Long-Lived Assets We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. Events that trigger a test for recoverability include a significant decrease in the market price for a long-lived asset, significant negative industry or economic trends, an accumulation of costs significantly in excess of the amount originally expected for the acquisition, a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset, or a sustained decrease in share price. When a triggering event occurs, a test for recoverability is performed, comparing projected undiscounted future cash flows to the carrying value of the asset group. If the test for recoverability identifies a possible impairment, the asset group’s fair value is measured relying primarily on an income approach. An impairment charge is recognized for the amount by which the carrying value of the asset group exceeds its estimated fair value. Management identifies the asset group that includes the potentially impaired long-lived asset, at the lowest level at which there are separate, identifiable cash flows. We evaluate corporate assets or other long-lived assets that are not asset group-specific at the consolidated level. We estimate the fair value of an asset group using the income approach. Such fair value measurements are based predominately on Level 3 inputs. Inherent in our development of cash flow projections are assumptions and estimates derived from a review of our operating results, business plan forecasts, expected growth rates, and cost of capital, similar to those a market participant would use to assess fair value. We also make certain assumptions about future economic conditions and other data. Many of these factors used in assessing fair value are outside the control of management and these assumptions and estimates may change in future periods. Impairment of Goodwill We test goodwill for impairment annually or more frequently when events or changes in circumstances indicate the fair value of a reporting unit may be less than its carrying amount. We have the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Factors that indicate the fair value of a reporting unit may be less than its carrying amount include industry and market considerations such as a deterioration in the economic environment or a decline in market-dependent multiples or metrics, overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings, increased cost factors that have a negative effect on earnings and cash flows, or a sustained decrease in share 53 Table of Contents price. The process for evaluating potential impairment of goodwill is highly subjective and requires significant judgment. If factors indicate that the fair value of the reporting unit is less than its carrying amount, we perform a quantitative assessment and the fair value of the reporting unit is estimated. If the fair value of a reporting unit is less than its carrying amount, an impairment loss is recorded to the extent that fair value of the reporting unit is less than its carrying amount. We have selected October 1 as the date to perform our annual impairment test. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions to evaluate the impact of operating and macroeconomic changes on each reporting unit. The fair value of each reporting unit was estimated using a combination of income and market valuation approaches using publicly traded company multiples in similar businesses. Such fair value measurements are based predominately on Level 3 inputs. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally developed forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. Losses and Loss Adjustment Expenses Reserves The liability for losses and loss adjustment expenses (“LAE”) is an estimate of the amounts required to cover known incurred losses and LAE and is developed through the review and assessment of loss reports, along with the analysis of known claims. These reserves include management’s estimate of the amounts for losses incurred but not reported (“IBNR”). IBNR is reviewed regularly using a variety of actuarial techniques. We update the reserve estimates as historical loss experience develops, additional claims are reported and/or settled and new information becomes available. Any changes in estimates are reflected in operating results in the period in which the estimates are changed. Although management believes that the balance of these reserves is adequate, such liabilities are necessarily dependent on estimates, the ultimate expense may be more or less than the amounts presented. The approach and methods for developing these estimates and for recording the resulting liability are continually reviewed. Any adjustments to this reserve are recognized in the Consolidated Statements of Operations and Comprehensive Loss. Losses and LAE, less related reinsurance is charged to expense as incurred. Results of Operations Key Factors Affecting Operating Results The following key factors affected our operating results. •Gross loss ratio of 65%, an improvement from 69% in the prior year, driven by strong attritional loss ratio performance of 22%, an improvement from 34% in the prior year. •We repurchased $51.2 million of our 2026 Notes, at an average par value of 45.3%, for $23.2 million during the year ended December 31, 2024. •We continued our cost savings initiatives by hiring highly qualified individuals to replace external contracting services. •Effective April 1, 2024, we entered into a new simplified quota share reinsurance program and renewed all necessary excess of loss reinsurance contracts. •We had cash recoveries on terminated reinsurance contracts of approximately $28 million in the year ended December 31, 2024. •Continue to roll out further product enhancements in our Vertical Software businesses as we increase pricing while maintaining high customer retention. •ISN, Porch’s largest inspection brand, implemented price increases, following more than 20 feature enhancements. •We are now approved in 19 states to use Home Factors to improve risk accuracy in pricing policies for our customers. This means we can charge a lower price for policies which are low-risk and more accurately price higher risk policies. 54 Table of Contents Consolidated Results of Operations [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["","(dollar amounts in thousands)"],["Revenue","$","437,848","","","$","430,302","","","$","7,546","","","2","%"],["Operating expenses:"],["Cost of revenue","225,627","","","220,243","","","5,384","","","2","%"],["Selling and marketing","122,873","","","144,307","","","(21,434)","","","(15)","%"],["Product and technology","55,274","","","58,502","","","(3,228)","","","(6)","%"],["General and administrative","98,406","","","103,192","","","(4,786)","","","(5)","%"],["Provision for doubtful accounts","239","","","37,180","","","(36,941)","","","(99)","%"],["Impairment loss on intangible assets and goodwill","\u2014","","","57,232","","","(57,232)","","","(100)","%"],["Total operating expenses","502,419","","","620,656","","","(118,237)","","","(19)","%"],["Operating loss","(64,571)","","","(190,354)","","","125,783","","","(66)","%"],["Other income (expense):"],["Interest expense","(42,536)","","","(31,828)","","","(10,708)","","","34","%"],["Change in fair value of earnout liability","\u2014","","","44","","","(44)","","","(100)","%"],["Change in fair value of private warrant liability","691","","","(444)","","","1,135","","","(256)","%"],["Change in fair value of derivatives","5,869","","","(4,261)","","","10,130","","","(238)","%"],["Gain on extinguishment of debt","27,436","","","81,354","","","(53,918)","","","(66)","%"],["Investment income and realized gains and losses, net of investment expenses","13,697","","","8,285","","","5,412","","","65","%"],["Other income, net","28,702","","","3,893","","","24,809","","","637","%"],["Total other income","33,859","","","57,043","","","(23,184)","","","(41)","%"],["Loss before income taxes","(30,712)","","","(133,311)","","","102,599","","","(77)","%"],["Income tax provision","(2,117)","","","(622)","","","(1,495)","","","240","%"],["Net loss","$","(32,829)","","","$","(133,933)","","","$","101,104","","","(75)","%"]] [[/GREPCENT_TABLE]] Revenue The overall 2% increase in revenue for the year ended December 31, 2024, when compared with the year ended December 31, 2023, was primarily driven by a 4%, or $13.0 million, increase in our Insurance segment as a result of increases in premium per policy. Insurance revenue for the year ended December 31, 2023, was impacted by the Vesttoo matter when insurance revenue increased by about $55 million as a result of the cancellation of the Vesttoo-related reinsurance coverage. Revenue from our Vertical Software segment decreased by a 4%, or $4.5 million, primarily driven by moving services which shifted to higher profit but lower revenue services and the shutdown of our corporate relocation business. Selling and marketing The 15% decrease in selling and marketing expenses for the year ended December 31, 2024, when compared with the year ended December 31, 2023, is primarily related to a decrease in the Insurance segment’s variable policy acquisition and marketing expenses due to a decrease in commission rates, the sale of the EIG business in the current year as described in Note 12 of the Notes to Consolidated Financial Statements, and a decrease in Vertical Software segment costs consistent with the decrease in revenue in that segment. As a percentage of revenue, selling and marketing expenses represented 28% of revenue in the current year compared to 34% of revenue in the prior year. Provision for doubtful accounts In 2023, we charged to provision for doubtful accounts approximately $36.0 million of reinsurance balance due from a reinsurer as described in Note 14, Reinsurance, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. During 2024, we experienced improvement in loss reserves related to Vesttoo of $1.3 million. We had no significant charges to the provision for doubtful accounts during 2024. 55 Table of Contents Impairment loss on intangible assets and goodwill In 2023, we recorded a goodwill impairment charge of $55.2 million in our Insurance segment and a $2.0 million impairment charge on intangible assets in our Vertical Software segment. These impairments followed a sustained decrease in stock price, increased costs due to inflationary pressures, hardening of the reinsurance markets, volatile weather, and a deterioration of the macroeconomic environment in the housing and real estate and insurance industries. There were no impairment losses on intangible assets and goodwill during the year ended December 31, 2024. Interest expense Interest expense increased by $10.7 million, or 34%, from $31.8 million for the same period in 2023. The increase is primarily due to interest at a higher weighted average rate on a higher aggregate debt balance after issuance of the 2028 Notes in April 2023. The following table details the components of interest expense, on the Consolidated Statements of Operations and Comprehensive Loss: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["","2024","","2023"],["Contractual interest expense","$","24,047","","","$","18,242"],["Amortization of debt issuance costs and discount","19,094","","12,952"],["Capitalized Interest and Other","(605)","","634"],["Total interest expense","$","42,536","","","$","31,828"]] [[/GREPCENT_TABLE]] Change in fair value of derivatives The derivative liability decreased by $5.9 million for the year ended December 31, 2024, compared to an increase of $4.3 million for the year ended December 31, 2023. The value is driven by various factors, including the fair value of the underlying debt and the assumptions regarding timing of possible repurchase events. See Note 4 in the Notes to Consolidated Financial Statements. Gain on extinguishment of debt For the year ended December 31, 2024, we recognized an $27.4 million gain on extinguishment of debt related to the partial repurchases of the 2026 Notes. See Note 7, Debt, of the Notes to Consolidated Financial Statements. In connection with the partial repurchase of the 2026 Notes in the year ended December 31, 2023, we recognized an $81.4 million gain on extinguishment of debt. See Note 7, Debt, of the Notes to Consolidated Financial Statements. Investment income and realized gains and losses, net of investment expenses Investment income and realized gains, net of investment expenses increased by $5.4 million from $8.3 million for the year ended December 31, 2023, to $13.7 million for the year ended December 31, 2024. Total investments balance as of December 31, 2024, was $182.8 million compared to $139.2 million as of December 31, 2023. A higher investment balance was the primary reason for the increase in investment income. Other income, net Other income, net, increased by $24.8 million from $3.9 million for the year ended December 31, 2023, to $28.7 million for the year ended December 31, 2024. The increase is due to recoveries of losses on reinsurance contract of $15.7 million and gain on settlement of contingent consideration of $14.9 million. These are offset by loss on sale of EIG business of $5.3 million. See Note 12 in the unaudited Notes to Consolidated Financial Statements for detail of other income, net, for each period presented. Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2023 Annual Report on Form 10-K as filed with the SEC on March 15, 2024, for the comparison of the results of operations for the years ended December 31, 2023 and 2022. Segment Results of Operations We operate our business as two reportable segments that are also our operating segments: Vertical Software and Insurance. For additional information about our segments, see Note 18, Segment Information, of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. 56 Table of Contents Segment Revenue [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Vertical Software segment"],["Software and service subscriptions","$","71,944","","","$","67,697","","","$","4,247","","","6","%"],["Move-related transactions","31,892","","","40,350","","","(8,458)","","","(21)","%"],["Post-move transactions","16,771","","","17,069","","","(298)","","","(2)","%"],["Total Vertical Software segment revenue","120,607","","","125,116","","","(4,509)","","","(4)","%"],["Insurance segment"],["Insurance and warranty premiums, commissions and policy fees","318,190","","","305,186","","","13,004","","","4","%"],["Total Insurance segment revenue","318,190","","","305,186","","","13,004","","","4","%"],["Intersegment revenue (1)","(949)","","","\u2014","","","(949)","","","N/A"],["Total revenue","$","437,848","","","$","430,302","","","$","7,546","","","2","%"]] [[/GREPCENT_TABLE]] _________________________________________________________ (1)Intersegment revenue relates to sales of software and service subscriptions from the Vertical Software segment to the Insurance segment. For the year ended December 31, 2024, Vertical Software segment revenue was $120.6 million or 28% of total revenue for the same period. For the year ended December 31, 2023, Vertical Software segment revenue was $125.1 million or 29% of total revenue for the same period. The decrease in Vertical Software segment revenue was primarily driven by moving services which shifted to higher profit but lower revenue services and the shutdown of our corporate relocation business, within the move-related transactions, and was partially offset by price increases in our SaaS businesses, within software and service subscription. Insurance segment revenue was $318.2 million for the year ended December 31, 2024, and represented 73% of total revenue for the same period. For the year ended December 31, 2023, Insurance segment revenue was $305.2 million or 71% of total revenue for the same period. The increase was mainly driven by increases in Annualized Premium per Policy of 31%. This was partially offset by a reduction in policies in force during the year and the impact of the Vesttoo matter in the last half of 2023 when insurance revenue increased by about $55 million as a result of the cancellation of the Vesttoo-related reinsurance coverage. As of December 31, 2024, we had 206 thousand Policies in Force, a 34% decrease compared to 310 thousand Policies in Force as of December 31, 2023. The decrease in the number of Policies in Force predominantly resulted from the sale of EIG in January 2024 and non-renewals of policies that are expected to be unprofitable. Segment Adjusted EBITDA (Loss) Segment Adjusted EBITDA (Loss) is defined as revenue less the following expenses associated with each segment: cost of revenue, selling and marketing, product and technology, general and administrative expenses, and provision for doubtful accounts. Segment Adjusted EBITDA (Loss) also excludes non-cash items or items that management does not consider reflective of ongoing core operations. See Note 18, Segment Information, of the Notes to Consolidated Financial Statements for reconciliations to GAAP consolidated financial information for the periods presented. [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["","2024","","2023"],["Segment Adjusted EBITDA (Loss):"],["Vertical Software","$","16,030","","","$","4,307"],["Insurance","43,436","","","12,320"],["Subtotal","59,466","","","16,627"],["Corporate and other","(52,295)","","","(61,141)"],["Adjusted EBITDA (Loss)","$","7,171","","","$","(44,514)"]] [[/GREPCENT_TABLE]] Our Insurance segment had a Segment Adjusted EBITDA (Loss) of $43.4 million for the year ended December 31, 2024, compared to $12.3 million in the same period last year. The improvement from the prior year was due to lower attritional 57 Table of Contents losses, as a result of improved underwriting, and our insurance profitability actions, including premium per policy increases of 31% increasing deductibles, non-renewal of higher risk policies, and introducing coverage exclusions for select risks. The improvements were partially offset by the effects of severe weather events. See Note 14 in the Notes to Consolidated Financial Statements for tabular presentation of premiums and net losses. Our Vertical Software segment’s Adjusted EBITDA (Loss) was $16.0 million for the year ended December 31, 2024, which improved compared to prior year due to pricing increases and strong cost control, including a reduction in workforce and stronger emphasis on our more profitable services in our moving business. Corporate expenses were $52.3 million in the year ended December 31, 2024, a $8.8 million decrease from the prior year primarily due to successful cost reduction efforts related to professional fees. Corporate expenses decreased to 12% of total revenue for the year ended December 31, 2024, from 14% in 2023. Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2023 Annual Report on Form 10-K as filed with the SEC on March 15, 2024, for the comparison of the results of operations for the years ended December 31, 2023 and 2022. Non-GAAP Financial Measures This Annual Report includes non-GAAP financial measures, such as Adjusted EBITDA (Loss), Adjusted EBITDA (Loss) as a percent of revenue, and Attritional Loss Ratio. Our management uses these non-GAAP financial measures as supplemental measures of our operating and financial performance, for internal budgeting and forecasting purposes, to evaluate financial and strategic planning matters, and to establish certain performance goals for incentive programs. We believe that the use of these non-GAAP financial measures provides investors with useful information to evaluate our operating and financial performance and trends and in comparing our financial results with competitors, other similar companies and companies across different industries, many of which present similar non-GAAP financial measures to investors. However, our definitions and methodology in calculating these non-GAAP measures may not be comparable to those used by other companies. In addition, we may modify the presentation of these non-GAAP financial measures in the future, and any such modification may be material. You should not consider these non-GAAP financial measures in isolation, as a substitute to or superior to financial performance measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude specified income and expenses, some of which may be significant or material, that are required by GAAP to be recorded in our consolidated financial statements. We may also incur future income or expenses similar to those excluded from these non-GAAP financial measures, and the presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or non-recurring items. In addition, these non-GAAP financial measures reflect the exercise of management judgment about which income and expense are included or excluded in determining these non-GAAP financial measures. Adjusted EBITDA We define Adjusted EBITDA (Loss) as net income (loss) adjusted for interest expense; income taxes; depreciation and amortization; gain or loss on extinguishment of debt; other expense (income), net; impairments of intangible assets and goodwill; loss on reinsurance contract; impairments of property, equipment, and software; stock-based compensation expense; mark-to-market gains or losses recognized on changes in the value of contingent consideration arrangements, earnouts, warrants, and derivatives; restructuring costs; acquisition and other transaction costs; and non-cash bonus expense. Adjusted EBITDA (Loss) Margin is defined as Adjusted EBITDA (Loss) divided by total revenue. 58 Table of Contents The following table reconciles net loss to Adjusted EBITDA (Loss) for the periods presented (dollar amounts in thousands). [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["","2024","","2023"],["Net loss","$","(32,829)","","$","(133,933)"],["Interest expense","42,536","","31,828"],["Income tax provision","2,117","","622"],["Depreciation and amortization","25,522","","24,415"],["Gain on extinguishment of debt","(27,436)","","(81,354)"],["Other income, net (1)","(23,208)","","(3,893)"],["Impairment loss on intangible assets and goodwill","\u2014","","57,232"],["Loss (gain) on reinsurance contract (2)","(1,324)","","36,042"],["Impairment loss on property, equipment, and software","\u2014","","254"],["Stock-based compensation expense","27,181","","20,709"],["Mark-to-market gains","(10,002)","","(1,003)"],["Restructuring costs (3)","4,185","","4,015"],["Acquisition and other transaction costs","429","","552"],["Adjusted EBITDA (Loss)","$","7,171","","$","(44,514)"],["Adjusted EBITDA (Loss) Margin","2","%","","(10)","%"]] [[/GREPCENT_TABLE]] ______________________________________ (1)Difference from Other Income, net in Consolidated Statements of Operations and Comprehensive Loss is primarily due to a portion of the income resulting from the Aon business collaboration agreement, disclosed in Note 14, that is not a non-GAAP adjustment. (2)See Note 14, Reinsurance, of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. (3)Primarily consists of costs related to forming a reciprocal exchange. Adjusted EBITDA (Loss) for the year ended December 31, 2024, was $7.2 million, a $51.7 million improvement from Adjusted EBITDA (Loss) of $(44.5) million for the same period in 2023. The improvement in Adjusted EBITDA (Loss) in 2024 is primarily driven by insurance profitability actions, including price increases implemented over the last year, as well as cost reductions across the business. These improvements were partially offset by the effects of severe weather events and the decline of the corporate relocation business in our Vertical Software segment. Attritional Loss Ratio The Attritional Loss Ratio is calculated by deducting the Gross Loss Ratio related to catastrophic weather events from total Gross Loss Ratio. Catastrophic weather events include, without limitation, hurricanes, tornados, earthquakes, hailstorms, wildfires, high winds, and winter storms. We believe the Attritional Loss Ratio is useful to investors and use this financial measure to reveal trends in our Gross Loss Ratio that may be obscured by catastrophe losses as such events cannot be accurately predicted and may cause our Gross Loss Ratio to vary significantly between periods as a result of their incidence of occurrence and magnitude. We have adopted the industry-wide catastrophe classifications of storms and other events published by Insurance Services Office, Inc. (“ISO”) to track and report losses related to catastrophes. ISO classifies an event as a catastrophe when the event causes $25 million or more in direct losses. The following table reconciles Gross Loss Ratio to Attritional Loss Ratio. [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["","2024","","2023"],["Gross Loss Ratio","65","%","","69","%"],["Less: Impact of losses due to catastrophic weather","(43)","%","","(35)","%"],["Attritional Loss Ratio","22","%","","34","%"]] [[/GREPCENT_TABLE]] 59 Table of Contents Liquidity and Capital Resources In our early years, we raised capital primarily through equity investments. As a publicly traded company, we have relied on convertible debt as our primary source of capital. As of December 31, 2024, and 2023, we had $507.3 million and $558.7 million, respectively, of aggregate principal amount outstanding in convertible notes, promissory notes, line of credit, term loan facility, and advance funding arrangement. 2026 Convertible Senior Notes In September 2021, we completed a private offering of $425.0 million aggregate principal amount of 0.75% Convertible Senior Notes due on September 15, 2026 (the “2026 Notes”). As of December 31, 2024, outstanding principal was $173.8 million. The 2026 Notes are redeemable at our option after September 20, 2024. We may redeem for cash all or any portion of the 2026 Notes, at our option, on or after September 20, 2024, if the last reported sale price of the common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide a notice of redemption, at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2026 Notes. The 2026 Notes are convertible at an initial conversion rate of 39.9956 shares of common stock per one thousand dollars principal amount of 2026 Notes, which is equivalent to an initial conversion price of approximately $25.00 per share of common stock (the “Conversion Rate”). The Conversion Rate is subject to customary adjustments for certain events as described in the indenture governing the 2026 Notes. We may settle the conversion option obligation with cash, shares of our common stock, or any combination of cash and shares of our common stock. Holders of the 2026 Notes may convert the 2026 Notes at their option (in whole or in part) on or after June 15, 2026, until the close of business on the second trading day immediately preceding the maturity date of September 15, 2026. In addition, holders of the 2026 Notes may convert the 2026 Notes at their option (in whole or in part) at any time prior to the close of business on the business day immediately preceding June 15, 2026, only under certain circumstances described in Note 7, Debt, of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. 2028 Convertible Senior Notes In April 2023, we issued $333.3 million of 6.75% Senior Secured Convertible Notes due in 2028 in a private placement transaction (the “2028 Notes”). We used a portion of the net proceeds from these 2028 Notes to repurchase $200.0 million of the 2026 Notes and to fund the repayment of the term loan facility, in each case plus accrued and unpaid interest thereon and related fees and expenses. In connection with the partial repurchase of the 2026 Notes, we recognized an $81.4 million gain on extinguishment of debt, calculated as the difference between the reacquisition price and the net carrying amount of the portion of the 2026 Notes that was extinguished. The 2028 Notes are convertible into cash, shares of common stock, or a combination of cash and shares of common stock at our election at an initial conversion rate of 39.9956 shares of common stock per one thousand dollars principal amount of the 2028 Notes, which is equivalent to an initial conversion price of approximately $25.00 per share. The 2028 Notes will mature on October 1, 2028, unless earlier repurchased, redeemed or converted. Prior to the close of business on the business day immediately preceding July 1, 2028, the 2028 Notes will be convertible at the option of the holders only upon the satisfaction of certain conditions and during certain periods. Thereafter, until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2028 Notes will be convertible at the option of the holders at any time regardless of these conditions. Additionally, if more than $30.0 million aggregate principal amount of 2026 Notes remain outstanding on June 14, 2026, the holders of the 2028 Notes have the right to require us to repurchase for cash on June 15, 2026, all or any portion of the 2028 Notes, in principal amounts of $1,000 or an integral multiple thereof, at a repurchase price equal to 106.5% of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date. Advance Funding Arrangement During 2023 and 2022, we participated in an advance funding arrangement with third-party financers that provide us with contract premiums upfront for certain home warranty contracts. We remained obligated to repay these premiums to the third-party financer if a customer cancelled its warranty contract prior to full repayment of the advance funding amount received by us. In the first quarter of 2024, our obligation was completely satisfied with the third-party financers, and we had an outstanding balance of $0 as of December 31, 2024. 60 Table of Contents Cash and Cash Equivalents As of December 31, 2024, we had cash and cash equivalents of $167.6 million and $29.1 million of restricted cash and cash equivalents. The following table provides the components of restricted cash and cash equivalents on the Consolidated Balance Sheets: [[GREPCENT_TABLE]] [["","December 31, 2024","","December 31, 2023"],["Held as collateral by captive reinsurer for benefit of HOA (1)","$","20,608","","","$","28,341"],["Pledged to state departments of insurance (2)","895","","","1,340"],["Held for payment of possible warranty claims (3)","6,636","","","7,273"],["Other","1,000","","","1,860"],["Restricted cash and cash equivalents","$","29,139","","$","38,814"]] [[/GREPCENT_TABLE]] ______________________________________ (1)Held by our captive reinsurance business as collateral for the benefit of Homeowners of America (“HOA”). (2)Pledged to the Department of Insurance in certain states as a condition of our Certificate of Authority for the purpose of meeting obligations to policyholders and creditors. (3)Required under regulatory guidelines in 23 states and 19 states as of December 31, 2024 and December 31, 2023, respectively. Operations and Other Resources We have incurred losses since our inception, and we have an accumulated deficit at December 31, 2024 and 2023, totaling $754.9 million and $722.1 million, respectively. Based on our current operating and growth plan, management believes cash and cash equivalents at December 31, 2024, are sufficient to finance our operations, planned capital expenditures, working capital requirements and debt service obligations for at least the next 12 months. As our operations evolve and continue our growth strategy, including through acquisitions, we may elect or need to obtain alternative sources of capital, and we may finance additional liquidity needs in the future through one or more equity or debt financings. We may not be able to obtain equity or additional debt financing in the future when needed or, if available, the terms may not be satisfactory to us or could be dilutive to its stockholders. Porch Group, Inc. is a holding company that transacts a majority of its business through operating subsidiaries, including insurance subsidiaries. Consequently, our ability to pay dividends and expenses is largely dependent on dividends or other distributions from our subsidiaries. Our insurance company subsidiaries are highly regulated and are restricted by statute as to the amount of dividends they may pay without the prior approval of their respective regulatory authorities. As of December 31, 2024, HOA held cash and cash equivalents of $112.5 million and investments of $167.6 million. Insurance companies in the United States are also required by state law to maintain a minimum level of policyholder’s surplus. Insurance regulators in the states in which we operate have a risk-based capital standard designed to identify property and casualty insurers that may be inadequately capitalized based on inherent risks of the insurer’s assets and liabilities and its mix of net written premium. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action. See Note 14 in the Notes to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. We may, at any time and from time to time, seek to retire or purchase our outstanding debt or equity through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Since the date of our incorporation, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. 61 Table of Contents The following table provides a summary of cash flow data for the years ended December 31, 2024 and 2023. [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["","2024","","2023","","$ Change","","% Change"],["Net cash provided by (used in) operating activities","$","(31,682)","","","$","33,929","","","$","(65,611)","","","(193)","%"],["Net cash used in investing activities","(45,061)","","","(56,253)","","","11,192","","","(20)","%"],["Net cash provided by (used in) financing activities","(23,707)","","","90,951","","","(114,658)","","","(126)","%"],["Change in cash, cash equivalents and restricted cash and cash equivalents","$","(100,450)","","","$","68,627","","","$","(169,077)","","","(246)","%"]] [[/GREPCENT_TABLE]] Operating Cash Flows Net cash used in operating activities was $31.7 million for the year ended December 31, 2024. Net cash used in operating activities includes cash outflows to cover losses from severe weather during the year, timing of working capital disbursements, and interest on convertible debt. These outflows of cash were partially offset by positive cash flow from the non-recurring cash receipt of $25 million related to the Aon agreement (see Note 14 in the Notes to the Consolidated Financial Statements). Net cash provided by operating activities was $33.9 million for the year ended December 31, 2023. Net changes in working capital provided $88.9 million, primarily due to decreases in insurance-related receivables. Reinsurance balance due decreased as a result of shifting coverage from third-parties to our own captive reinsurer whose financial information is included in the Consolidated Financial Statements. The change in reinsurance balance due included cash proceeds in the amount of approximately $47.6 million liquid collateral received from a reinsurance trust. Investing Cash Flows Net cash used in investing activities was $45.1 million for the year ended December 31, 2024. Net cash used in investing activities is primarily related to purchases of investments of $110.9 million and investments to develop internal use software of $12.3 million. This was partly offset by the cash inflows related to maturities and sales of investments of $67.8 million. Net cash used in investing activities was $56.3 million for the year ended December 31, 2023. Net cash used in investing activities is primarily related to purchases of investments of $91.0 million and investments to develop internal use software of $9.2 million. This was partly offset by the cash inflows related to maturities and sales of investments of $46.8 million. Financing Cash Flows Net cash used in financing activities was $23.7 million for the year ended December 31, 2024. Net cash used in financing activities is primarily related to the repurchase of the 2026 Notes of $23.4 million. Net cash provided by financing activities was $91.0 million for the year ended December 31, 2023. Net cash provided by financing activities is primarily related to net proceeds from from issuance of the 2028 Notes debt issuance, net of fees, of $116.7 million. This was partially offset by repayment of the principal balance on the term loan facility and advance funding arrangement of $10.2 million and $4.1 million, respectively, and repurchase of stock of $5.6 million. Contractual Obligations and Commitments In addition to debt service payments, our principal commitments consist of obligations under leases for office space. For more information regarding our lease obligations, see Note 13, Leases, of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. In addition, we have a substantial level of debt. For more information regarding our debt service obligations, see Note 7, Debt, of the Notes to Consolidated Financial Statements. We also have certain non-cancellable purchase commitments primarily for data purchases. As of December 31, 2024, our other contractual commitments associated with agreements that are enforceable and legally binding and that specify all significant terms were payments of $10.4 million due in the next 12 months and $3.8 million due thereafter. For more information regarding our purchase commitments, see Note 17, Commitments and Contingencies, of the Notes to Consolidated Financial Statements. We expect to fund these obligations with cash flows from operations and cash on our balance sheet. We have made and expect to continue to make additional investments in our infrastructure to scale our operations and increase productivity. We plan to enhance the consumer experience, our app and digital platform and integration of data platform across Porch, to invest in development of additional modules across all vertical software businesses and to enhance our corporate systems. 62 Table of Contents Recent Accounting Pronouncements See Note 1, Description of Business and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report, for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.