Porch Group, Inc. (PRCH) Q3 2026 Earnings Call Transcript

John Campbell: Good afternoon, and thank you for participating in Porch Group's Quarter 26 Conference Call. Earlier today, we issued our earnings release and filed our related Form 8-Ks with SEC. The earnings release and today's presentation are available on our Investor Relations website at ir.porchgroup.com. Before we begin, I would like to review the company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 2000, which provides important cautions regarding forward-looking statements. Today's discussions, response to your questions, reflect management's views as of today, October 28, 2026, We undertake no obligation to update or revise these remarks. We will make forward looking statements that involve risks and uncertainties, and actual results may differ materially. Please refer to the information on this slide in our SEC filings for additional detail. We will also reference certain non-GAAP financial measures Reconciliations to the most directly comparable GAAP measures are included in today's earnings release available at ir.porchgroup.com. A replay of this webcast will also be available after this call on our Investor Relations site. So joining me here today are Matthew Ehrlichman, Porch's CEO, chairman, and founder, Shawn Tabak, Portia's CFO and Matthew Neagle, Portia's COO. With that, I will turn the call over to Matthew for his key updates.

Matthew Ehrlichman: Thanks, John. Good afternoon, everyone. Q3 was another strong quarter for Porch. And we are proud of the team's execution. Reciprocal policies written grew 42% year over year, Adjusted EBITDA, excluding the reciprocal, more than doubled. And insurance services delivered its sixth consecutive rule of 80 quarter, combining 39% revenue growth and 49% adjusted EBITDA margin. These results drove another healthy raise to our full year outlook. So in my view, the key takeaway is that our organic growth system is working well. We have significant capacity at the reciprocal, expanding distribution funnel. Rapid new customer growth, and disciplined underwriting. As that volume moves through our largely fixed porch cost structure, it generates higher earnings, strong cash flow, and an improving financial profile. Our performance allows us to complement organic growth selectively through M&A. We recently announced the pending acquisition of Allied Trust, a high quality regional insurance company, which is expected to add scale. Products, geographies, talent, and more than a decade of claims data. I will turn to Allied shortly, but first, let's review our strong third quarter results. Alright. Few highlights. Reciprocal written premium or RWP was $161 million. Up 17% year over year. Reciprocal policies written of 68 thousand grew 42% year over year, accelerated from Q2's 38% growth rate. As a reminder, we generate some of our insurance services revenue based on premium, and some based on the number of policies. RWA flow through to insurance services adjusted EBITDA at a 31% conversion rate. Reflecting continued operating leverage in insurance services. At the company wide level, adjusted EBITDA excluding the reciprocal was 28% of RWP. The strengthening earnings power is clear to see in the year over year comparison with adjusted EBITDA excluding the reciprocal of $44 million more than doubling from the prior year period. Taken together, the quarter provides another clear proof point that the model is working. The framework for scaling insurance services remains straightforward. The reciprocal statutory surplus provides capacity. Agencies and quote volume creates opportunities. Conversion turns those opportunities into policies and premium. Our proprietary data and underwriting discipline help determine which risks we want to win and at what price, producing leading loss ratios and more margin in the system. Let's look at total policy growth and then each component that builds to that result. Okay. You can see here in Q3, total reciprocal policies written across new and renewal grew 42% year over year to 68 thousand. The rate of growth accelerated from Q2, and we expect policy growth to remain strong in Q4. The expansion of the customer base is the purest indicator of our growth and momentum. Supporting continued growth begins with maintaining a strong capital position at the reciprocal, which we measure primarily through statutory surplus, as well as non emitted assets. Since the launch of the reciprocal, statutory surplus has increased by almost $75 million and in Q3 at $174 million. This is up $22 million from the prior year period, and higher sequentially for the sixth consecutive quarter. The expanding surplus demonstrates the strength of the underlying underwriting results and provides substantial capacity to support disciplined premium growth. Exiting this quarter, the reciprocal statutory surplus supports what is approaching $1 billion of premium. The reciprocal also holds nonadmitted assets, primarily port shares, which we can turn into statutory surplus at our discretion or use in M&A to create substantial value. Including non admitted assets, the reciprocal has the ability to support over $2 billion of premium. With that capacity in place, the next component of the growth engine is expanding the distribution funnel. Our land and expand strategy continues to add new producing agencies and deepen production within existing relationships. In Q3, producing agency branch locations increased 114% year over year. While quote volume grew 79%. And increased sequentially for the eighth consecutive quarter. We see a considerable runway to add producing agencies increase production within existing relationships, and expand into additional geographies. Next, conversion rate. Which was approximately flat versus Q2 and up 53% year over year. Conversion rate is 1 of the levers we use to manage the policy and premium growth needed to achieve our internal revenue and profit objectives. In certain hard market cycles, there will be more premium and less policies, and in soft markets, the inverse. The strength of our top of funnel, we are in a fantastic position. We can manage conversion, maintain exceptional loss ratios to maximize overall margin in the system, and achieve our goals. Conversion rates strengthened throughout October, supporting accelerating premium policy growth in Q4. While maintaining the underwriting discipline attractive earnings flow-through that are producing this year's substantial outperformance. Together, quotes and conversion produce RWP from new customers, which almost tripled year over year increasing 178%. And we are doing this while producing exceptional underwriting results. For the quarter, the reciprocal's overall gross loss ratio was 24%, and attritional losses exclude catastrophic weather events, was 18%. This excess margin in the system generates substantial cash flow which can be used to supplement organic growth with M&A. Speaking of which, a few weeks ago, we announced the proposed acquisition of Trust, an established regional insurance company with meaningful operations in Texas and Louisiana, and additional presence in The Carolinas. it is a strong strategic fit. Following closing, we expect to leverage Porch's proprietary property data to identify and reduce exposures that do not meet our internal targeted returns, improve pricing across the retained book, and focus future growth on the most attractive risks. We have constructed this deal to be efficient and accretive for Porch shareholders. The approximately $200 million of aggregate consideration or $140 million net of allied statutory surplus is separated between the reciprocal and Porch Group. The reciprocal is spending $105 million to acquire the insurance carrier. which is expected to have approximately $60 of statutory surplus at closing, which immediately comes back. Net of that acquired surplus, the reciprocal's effective purchase consideration expected to be approximately $45 million funded with a small amount of its non admitted port shares. Overall, the deal is expected to be approximately statutory surplus neutral for the reciprocal. Porch expects to spend $95 million to acquire Allied's managing general agency and captive reinsurance entities. $75 million in cash, and $20 million in stock. For Porch, this represents an acquisition multiple of less than 4x EBITDA given the approximately $25 million of adjusted EBITDA expected to accrue to Porch in the first full year following closing. Allied, similar to other homeowners insurance companies, generates lower premium to earnings conversion. Than what Porch sees today. Following closing, we expect to improve those economics by applying our data and unique capabilities as we did with HOA previously. We expect those benefits to develop progressively over 12 to 24 months following closing, And with this, we expect the cash earnings generated by Allied to repay Porch's investment within 3 years. We are not providing 2027 guidance until next quarter for our standard rhythm, we wanted to provide some initial visibility into what the baseline looks like next year, assuming a full year of Allied contributions. Our internal combined company 2027 target includes more than $900 million of RWP, more than 360 thousand reciprocal policies written, and more than $180 million of adjusted EBITDA excluding reciprocal. Overall, we are making substantial progress toward the medium term financial targets we established at our 24 Investor Day, of $3 billion of premium, $660 million of adjusted EBITDA. With that, I will turn the call over to Sean to review our financial results and updated 2026 outlook.

Shawn Tabak: Thank you, Matthew. it is an exciting time at Porch. Strong results, confidence in our growth outlook, and M&A execution underway. The Allied transaction also expands our premium and EBITDA scale improves our 2027 cash flow profile, and creates more attractive refinancing options generating additional shareholder value. Okay. Let's dig into Q3 financials starting with a high level summary. Our insurance services segment is the growth and cash flow engine for Porch. And was the principal driver of our financial performance again in Q3. As Matt discussed, reciprocal policies written grew 42%. Expanding the current customer base and the future renewal opportunity. RWP of $161 million and policies written of 68 thousand drove adjusted EBITDA excluding the reciprocal of $44 million. Growth of 116% year over year. And as it does, cash and investments for Porch shareholders increased in line with adjusted EBITDA. We also delivered a significant improvement in GAAP profitability. Net income attributable to Porch was $12 million, up $23 million over the prior year. These results demonstrate the operating leverage in the model. As policies and RWP scale a meaningful portion of incremental insurance services revenue can flow through to adjusted EBITDA and cash for Porch shareholders. Okay. Let's walk through the revenue and segment results supporting that profitability. First, with revenue. Total consolidated GAAP revenue was $144 million, up 13% year over year. Revenue for the Porch-owned segments, excluding the reciprocal, was $141 million up 22% year over year. Insurance services was again the primary growth driver. With segment revenue up 39% year over year to $103 million. The insurance services growth and cash flow engine are the key drivers of our performance. So let's take a closer look at that segment. Insurance services revenue of $103 million grew 39% year over year, driven by higher fee based revenue with higher policies written, RWP volume, and new customer additions. In the quarter, we saw 42% growth in policies written year over year. Which was a 400 basis point acceleration from the Q2 growth rate. Gross profit increased 46% year over year $91 million. Gross margins in this segment are strong and predictable at 89% for Q3. Insurance services adjusted EBITDA was $50 million up 98% year over year. Adjusted EBITDA margin was 49%, driven primarily by strong fee based revenue growth and operating leverage. And as a reminder, the majority of the management fee is recognized upfront with a portion deferred over 18 months. As 2025 was the reciprocal's first year, 2026 is when we first benefit from that deferred revenue in March. Overall, the Rule of 80 when adding the 39% revenue growth with the 49% adjusted EBITDA margin. Let's now turn to our other businesses, which provide strategic advantages for insurance. Software and data revenue was $22 million. The year over year decline primarily reflects the previously announced exit from a lower value product serving small home service contractors. Adjusted EBITDA was $4 million. Consumer services revenue was $18 million with adjusted EBITDA of $3 million benefiting modestly from the timing of certain operating expenses. As insurances scale, we are prioritizing these teams for their strategic impact. Data, distribution, and customer access. Over pure P&L performance. Overall, an easy way to think about our business insurance services is the primary earnings engine. As the housing market recovers over time, software and data and consumer services earnings should largely offset corporate expenses. Making insurance services adjusted EBITDA a close proxy for total company adjusted EBITDA excluding the reciprocal. Okay. Shifting now to the reciprocal statutory surplus remains very strong. $174 million at the end of Q3. Up $22 million year over year. Our objective is profitable growth with strong underlying loss ratios at the reciprocal, supported by our data advantage. We are pleased with the underwriting performance in Q3 Gross loss ratio was 24%, while the attritional loss ratio was 18%. Remaining in the teens for the eighth consecutive quarter. As we shared when we announced the Allied acquisition, we also expect to establish an at the market or ATM program. This would allow the reciprocal to sell a portion of its existing port shares over time Because these shares are largely non admitted assets, selling them converts that value into statutory surplus, which then supports further premium growth capacity. Shifting to the balance sheet, we present porch and reciprocal liquidity separately so investors can clearly understand the capital available to each entity. Porch ended Q3 with $165 million in cash and investments. Up $38 million versus Q2. The increase was driven by the adjusted EBITDA in the quarter of $44 million partially offset by the final payoff of our 2026 $8 million. Adjusted EBITDA to cash flow conversion continues to be very strong. I am also pleased to share that our net leverage is now 2.4x trailing 12 month adjusted EBITDA. Within our target range of 2 to 3x. This was a key goal we first outlined our 2 thousand 24 Investor Day that we have now delivered. Shifting to the reciprocal cash and investments was $333 million at the end of Q3. The combination of higher earnings stronger cash generation, and growing liquidity provides Porch with increasing financial flexibility as we look ahead. Shifting to guidance. We are pleased to provide another annual guidance raise. Given our Q3 outperformance and expectations for the remainder of the year, we are raising the midpoint across each guidance measure driven by insurance services. We are increasing guidance for Porch-owned segments revenue which excludes the reciprocal, to a range of $518 million to $523 million. The midpoint of $521 million represents a 24% year over year growth rate up from the 22% growth implied in the prior guidance mid We are increasing guidance for gross profit excluding the reciprocal to a range of $438 million to $443 million. Now representing 28% growth at the midpoint. Up from 23% growth at the prior midpoint. This now represents an 85% gross margin at the midpoint. We are increasing our guidance for adjusted EBITDA, excluding the reciprocal, to a range of $135 million to $140 million. The midpoint of $138 million represents 79% year over year growth. Up from 59% growth at the prior midpoint. The increase in the guidance here is driven by insurance services. Based on Q3 performance and our expectations for a strong close to the year. For the full year, we continue to expect positive net income attributable to Porch. Now I will turn the call over to Matthew for an update on our strategic and operating updates. Thank you, Shawn.

Matthew Neagle: I will start with a few overarching business updates. And then walk through the key KPIs across our segments. Starting with insurance services, we continue to broaden distribution and provide a strong agent experience. With agent NPS, now at 48. We are also modernizing certain core insurance infrastructure investments in policy administration, data science platform, and claim systems are designed to improve speed, and results. AI is enabling us to take on more ambitious projects faster. Our software and data and consumer services businesses provide important strategic advantages that strengthen the insurance strategy. For example, we have now productized more than 100 home factors for use within our insurance operations. Together with our moving and warranty capabilities, these businesses provide valuable data customer access, and unique capabilities that strengthen insurance services and the reciprocal. I will now turn to our segment KPIs. Starting with insurance KPIs, the key operating story remains volume growth. For Q3, Reciprocal policies written of approximately 68 thousand Reciprocal written premium was $161 million. And RWP per policy written was $2.38 thousand. RWP per policy remains lower year over year primarily due to customer mix. New customers represented a significantly larger share of policies written and generally began at lower premium levels than renewing customers. Importantly, premium per new customer declined just 2% year over year. As these newer customer cohorts mature, and move into renewal periods, we expect the mix comparison to become more balanced over time. Moving to software and data in consumer services, the KPI trends are comparable to what we have seen in recent quarters. For software and data, the average number of companies served of approximately 18 thousand was lower than the prior year period driven largely by the previously mentioned planned sunset of a legacy product for small home service contractors. Which resulted in the removal of roughly 4 thousand companies. The positive offset from the focus on higher value customers is evident in the annualized average revenue per company KPI, which grew 17% year over year to $4.84 thousand. In consumer services, the number of monetized services declined 11% year over year. Largely due to continued housing and moving softness. Average revenue per monetized service grew 6% year over year. The revenue per service improvement reflects continued upsell and cross sell execution, I will now pass it back to Matthew to wrap us up.

Matthew Ehrlichman: Thank you, Matthew. I want to wrap up briefly by reinforcing the most important messages from today. First, the organic growth system is working. The customer base continues to expand rapidly with reciprocal policies written up 42% year over year. Insurance services delivered its sixth consecutive rule of 80 quarter. Adjusted EBITDA more than doubled, and we generated strong cash flow. Second, both Porch and the reciprocal are operating from positions of strength. At Porch, rising earnings and strong cash conversion, increased liquidity, and reduced net leverage to 2.4 times. On the lower end of the target range established at our last Investor Day. Separately, the reciprocal has far more capital than it needs, and an exceptional 18% attritional loss ratio in the quarter. Third, the proposed acquisition of Allied Trust represents an exciting step forward. It creates additional opportunities to apply Porch's strategic advantages, to create more margin and growth as we look to the future. As I said, assuming a full year of Allied contributions, our initial 2027 combined company target includes more than $900 million of RWP, more than 360 thousand policies written, and more than $180 million of adjusted EBITDA, excluding the reciprocal. And it is kind of fun just looking back, just 2024 when we did $7 million of adjusted EBITDA. In 2025 when we did $77 million, and now we have raised guidance for 2026 from $102 million at the start of the year to now $138 million. So this 2027 baseline will represent significant progress toward our medium term target of $660 million of adjusted EBITDA with substantial opportunities still ahead. Thereafter. Proud of the team's execution and the company we are building and remain focused on creating long term shareholder value. With that, John, please open the call for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. At this time, I would like to remind everyone in order to ask a question, please press pound. And if you would like to withdraw your question, press pound again. Our first question comes from the line of Daniel Kurnos with StoneX Financial Inc. Please go ahead.

Daniel Kurnos: Awesome. Thanks. Good afternoon, guys. Another phenomenal quarter. I guess, Matthew, I am sure you are going to get a bunch of questions on Allied. So I will ask kind of the 2 sort of primary ones, which are, 1, just as you look at their book, obviously, having an A-rating from Demotech is excellent. So just as you think about having to reevaluate their book, I assume that you are not anticipating a ton of churn on policies. And 2, you kinda outlined this in your prepared remarks, but their conversion ratios are lower than yours. Are there any and you are. I think I can still do math. it is early in earning season, but 3 years on $25 million implies higher EBITDA for them over time. So just how much room is there and sort of how should we think about them getting to your ratios over time?

Matthew Ehrlichman: Yeah. Thanks, Daniel. Good, good to get those questions. So, maybe I will take the second 1 first. I think everyone in the industry has lower premium to EBITDA conversion ratios. than us. So just as I suppose set expectations. I think company in the category that we would acquire, expect to have lower conversion ratios. that is part of the. What we built, you know, the uniqueness of what we built. And so we are excited about being able to apply our data as I mentioned, you know, I expect 12 to 24 months to be able to you know, apply the data, prune, you know, the policies that are not the right fits. Able to make the right adjustments with pricing. But we would expect it to be able to move toward what we have shown we can do at HOA in terms of the conversion rate of premium to revenue and premium to EBITDA. So that would be our initial expect. Expectations. In terms of the first question, you know, I made comments previously that as we look at different M&A opportunities, the bar would be very high. You know? And we have been looking things that truly would be exceptional, you know, fits. You know, we think this is. This certainly falls in into that category. To your point, Allied is a rated exceptional. It is a strong company, a well run company. We think the people there are gonna be great fits, you know, into our team. And we are gonna simply be able to help it with the unique data and capabilities that Port has. Just help it grow faster and more profitably, you know, as we look ahead. But it is a it is a strong company. How much of the policies we will. You know, we would nonrenew or prune, that is TBD. I mean, we obviously have to go and get the get the deal closed, you know, and then we can start to do that evaluation. So, you know, TBD, but, And then maybe just but it but it is a strong company to your point.

Daniel Kurnos: I guess, more theoretically, Matthew, as you look forward here, so you have done the deal. You gotta digest it. You know, the market I think, you know, Matthew said you are down 2% on a like for like basis. it is really just been mixed to new customers that is been driving price down. You have talked about getting a little more aggressive to get the policies that you want. So just how do you think about remaining aggressive knowing that you have this acquisition coming in and knowing that you can now fund the surplus more with the ATM?

Matthew Ehrlichman: Yeah. It really does not. Having this acquisition come in does not really impact what we are you know, what we are doing or what we are managing to this year or even ahead from an organic perspective. We expect to continue to grow our business, you know, very effectively, in terms of premium and in terms of policies. I mentioned we expect premium and policies both to accelerate nicely here in the fourth quarter. We think it is set up, you know, for continued strong performance in 2027. I am not sure if it really impacts, you know, impacts us, towards what we would have done anyway. You know, 1 of the points that I made is that we have lots of capacity at the reciprocal. there is there is there is plenty of capital for us to be able to grow at a really nice clip. Like, we have we have talked about in the past. So this really is just additive to what we what we would have done anyway.

Daniel Kurnos: Got it. Well, thanks for all the color, and, congratulations. Appreciate it. Thanks.

Operator: Our next question comes from the line of Jason Helfstein with Oppenheimer and Co. Please go ahead.

Jason Helfstein: Thanks. So I guess maybe for high level about the industry, I mean, to the extent that if the pricing dynamic in the industry stays where it is into next year, I guess, like, you kinda given us the gross premium outlook for next year, but just how could that change if the pricing dynamic kind of does not change, I guess? Just so maybe opine there. And then on the take rate, Shawn, you have obviously come in meaningfully better, I think, each last few quarters than the implied guide. We can obviously see what the implied guide for the fourth quarter is But I guess, how should we think about, like, take rate for next year prior to the acquisition impact? Kind of Just give us some help there because I think most people are modeling it a little bit weaker next year, but you are you are just coming in better. Thank you.

Matthew Ehrlichman: Why do not you take that 1, Sean, and then I can loop it behind with the first question?

Shawn Tabak: Yeah. You know, overall with guidance, I would just say it starts focusing and closing out this year. We are really pleased with what we are seeing. Matthew mentioned you know, we started the year with $102 million of adjusted EBITDA at the midpoint. And we have raised guidance every quarter this year. And so we are seeing great momentum here, also accelerating growth as we are closing out the year. And so we were pleased today to update our guidance again $138 million of adjusted EBITDA, at the midpoint. With respect to the take rate, you know, we do not guide at the segment level. But if I do look back over the last 4 quarters, that take rate has ranged from 60% to 64-66%. This quarter, it came in at 64%. So kind of toward the middle of that range. And then with respect to next year and going forward, we will provide an update, you know, with our normal cadence in February for guidance for next year. But for now, I just point folks to kind of the trailing 4 quarter trend.

Matthew Ehrlichman: In terms of the first question, 1 great thing that we have certainly to provide you know, tailwinds is very significant agency and quote growth. And so we can continue to grow premium. You know, just because there is more opportunities having to make meaningful changes, you know, in terms of pricing and conversion rates And again, Matthew noted, per new per new customer was down only 2%. You know, year over year this quarter. So that we think is you know, a great data point in terms of kind of how comparable that really is. Obviously, the market did soften, you know, this last year. And, you know, we manage, you know, manage to, you know, where the market is. I would just make the point that we are able to manage to our growth goals. Our financial results while being very disciplined in terms of our underwriting. And you can see that in the attritional loss ratios. In particular, that still are just exceptional. So we would expect to continue that going forward.

Operator: Our next question comes from the line of Jason Kreyer with Craig-Hallum. Please go ahead.

Jason Kreyer: Thank you. Great results, guys. Wanted to focus on the 100-plus percent growth in agency locations and 80% growth in, quote request. So just what is it that drives that? Like, what is it that makes more carriers and more agencies wanna sign on and work with Porch? And then maybe how do you think about that after the acquisition? Do you think that opens up even greater opportunities in terms of branch locations and quotes?

Matthew Neagle: I can take that. It is a lot of blocking and tackling. there is not a magic there is not a magic solution to it. We just go talk to agencies And I think we have shared this previously, there is still a lot of room for us to grow agencies. We still only have you know, a subset of the total agency population. What I will say is we have gotten very good at talking about why we are special. And why we are differentiated, and agents wanna work with carriers who are differentiated, and we treat them well and we have great tools. And so those are the things that they care about. A good product, good tools, and to be treated well. In terms of Allied, there are certainly some synergies there. They open up distribution for us in Louisiana. So it is a whole new state where we can go and build our growth engine. We have not done a full analysis yet, but we believe there are gonna be agencies where we can coordinate in cross sell. So agencies that they have we do not have, agencies that we have, that they do not have. And so that is gonna help both of the companies to grow more quickly.

Jason Kreyer: Thank you. And then just a follow-up on the Allied Trust acquisition. So you called this out as being surplus neutral. Surplus ended at a 174 million in the quarter. If we take that 5x ratio to that, that gets you to kind of $900 million that you called out for 2027. So just maybe help us understand your comfort with that capacity. Or what objectives you have in place over the next year to help, you know, create incremental capacity to maintain the current growth trajectory?

Shawn Tabak: Yeah. We are set up really well from a capacity perspective. To your point, Jason, the statutory surplus at the end of Q3 here was $174 million. The year's not over yet. So we expect that to continue to go up, with Q4 here being especially the low seasonal, claims, period for the reciprocal. So. And 1 other note just for folks as a reminder, it is actually. And I think we said this is better than 5-to-1, and so we. We are set up really well from a capacity perspective. Understood. Thanks, John.

Operator: Our next question comes from the line of Randy Binner with Texas Capital Securities. Please go ahead.

Analyst: Hey there. Thanks for this. it is really helpful to hear about Allied, I guess. I have been trying to ask this question maybe a little more directly than the previous analyst just on the pricing expectation. With the with the guide of accretion from Allied because and maybe it is more a question of how pricing is expected to be in Louisiana in their book, but seems like if you add that number of policies, if you get to 360 thousand that you. The kind of the figure rate should. Would stabilize if I am running the numbers correctly. So I guess, am I running that correctly? You know, are you expecting to see kind of, you know, better rate activity in the book And just more broadly, as you diversify away from Texas, you know, how is pricing? Your kind of your core business and then what you expect to add with Allied?

Matthew Neagle: I can take that. You guys can layer on. The first thing I would kind of refer back to is you know, it is a softening market, but when you look like for like for new customers, we are down just 2%. So we are being selective and strategic in how we respond to the softening market. Now we are. We do have a strong growth engine, and what is great about that is the premium will compound. On itself. So right now, the level of growth that we have is relatively larger compared to our renewal book, and so you are seeing the softening in the overall price. But as we build up that renewal book, there will be less of that, and we will see it balance out over time. The other dynamic is in the industry, you know, the price per policy tends to be lower newer customers. And then as they stay with you, the discounts unwind the age of the home increases, and so you naturally you know, premium per policy increase over time with your book.

Operator: But, Randy, to your question, you can do the math.

Matthew Ehrlichman: You said better than 900 million of premium and better than 360 thousand policies. And so your point, you know, that is pretty straightforward math in terms of what the average premium is gonna be per customer. Let me just make 1 quick comment. This topic generally. Which is what I am excited about, and we will just continue to prove it as well. Know, certainly what we prove with HOA, and we will do it again here. Is it is not that difficult to grow policies quickly. Not be very profitable. Similarly, it is not that difficult to not grow policies, but to be profitable. And what we are able to do uniquely is to be able to grow very rapidly at very exceptional, you know, margins. And, you know, really, it is just a very small set of customers, generally speaking. If you are perfect at predicting, risk, a very small set are going to file a claim. Each year. And so if you can have unique advantages to be able to identify who those people are, either make sure they are priced correctly, you know, a meaningfully higher priced or just not carrying that risk. Well, you can transform, you know, the margins of the business, You can actually have the price be a little bit lower for the really good risk customers. Especially those new customers. And you can then grow while maintaining or even improving margins. And so for us, that is what the system does. And so we are we are excited to be able to demonstrate that again. here. Okay. that is super helpful to kind of understand and how the business is running versus maybe the way it is running through our spreadsheet. And I also had a question on Ally, just in regard to the potential share issuance that would finance it there is a deferred consideration piece for the for the for the reciprocal acquisition. And then there is which is, you know, $50 million which could include forward shares owned by the reciprocal. And then for the MGA piece, I believe it is just you know, yes, it is plainly stated that it is 20 million dollars in port shares. So like those shares, I think, would all be unregistered. I think we will probably assume the 20 million in our forward numbers, but maybe a little more color on the piece that is the deferred consideration and how we might think about how those shares would work their way into the share count. Thank you. You wanna take it, Sean, or shall I? Yeah. If they Yeah. Go ahead. Go ahead. No. You got it. Got it. Pretty simple. I was just gonna say, yeah, the. They are being issued to the counterparty as part of the consideration. So, ultimately, eventually, we will be included in the share count. Yeah. Just to make sure it is clear, Randy, the dollars of Porch stock that is that is used. Paid by Porch upfront. You know, those are shares that we would issue. You know, the reciprocal right now is 16 million shares. We will use a very small set of those shares know, for that deferred purchase price. So just. But it. So it. The deferred consideration will be in port shares? We have the option, but I think that is reasonable to assume that. Got it. Okay. Very helpful. Appreciate it.

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

Ryan Tomasello: The 42% growth in policies written, obviously, really solid. Solid. Nice to see the sequential acceleration on that as well. The gap between growth in written premium dollars versus policies continues to widen over the last few quarters. How should we think about that gap persisting And with RWP dollar growth running into high teens, just help us understand if there is anything that is changed around how you are thinking about the organic RWP CAGR targets that you originally set out? I think, you know, you had talked about 20 plus percent. It sounds like you are expecting acceleration in the fourth quarter, but just how are we thinking about the gap between those 2 growth drivers here over the next year? Thanks.

Matthew Ehrlichman: Sure. Yeah. I mean, generally, in terms of what we talked about in terms of premium for the year, yeah, we continue to be on track. Toward the objective. New businesses performing well, like we mentioned. And to your point, yeah, we are seeing a really nice acceleration RWP and policy growth in October. And expect as such for Q4. 1 reminder on that, Ryan. It was Q4 of 25 when we really started increasing new business. Sales, And you know, those policies are now renewing. And lapping here, and so that does provide tailwinds in terms of both, you know, policy and premium. Growth. You know, reminder, and this is probably good for everybody, but just how we run the business. We manage to our financial results and our results are driven by both premium and policy count. And so we are just managing premium policies to hit our internal goals. In certain markets. Again, it might be, like I said, higher premium or less policies. So if we were to have less premium, would just mean because we have more policies, you know, coming through. Because, again, we are just managing the balance of those 2. To get to our objectives. Sean, if there is anything else that you would want to layer on, you know, there. No. I think that is. I mean, longer term, we have talked about you know, organic growth of 20 plus percent. Premium growth. I think you asked about that. You know, that. that is still the same. No changes there.

Ryan Tomasello: Great. And then I know you already mentioned a few things around the take rate dynamics, but just entertaining another question there. I would assume given these policyholder fees that is accretive to the take rate when you are seeing know, accelerating growth and an accelerating contribution from new customers So let me know if that logic is off. But as the book continues to roll here and more premium comes from renewals, how should we think about the impact of the take rate if that inevitably comes down as the premium in force continues to scale and renewals are driving a greater portion of growth.

Shawn Tabak: Yeah. Yeah. I mean, look. I think as I was mentioning, we are really pleased with insurance services and the conversion that we are seeing to EBITDA there has been really strong from the RWP. And you know, with respect to the take rate itself, now mind you, we do not we do not guide to segment level. But, you know, as I mentioned over the last you know, year or so, it is ranged from 60% to that mid sixties range. And then when we come back in February, you know, when we do Q4 earnings, we will give our guidance for next year at that time. But for now, I guess, I would just look again, point back to that 60 to mid sixties range. Appreciate that.

Ryan Tomasello: But just not looking for guidance here, but just in terms of the logic else equal is what I laid out makes sense in terms of that relationship on the mix higher mix of new customers being a driver?

Matthew Ehrlichman: Yes. Yeah. Yeah. Okay. Thank you, guys. You bet.

Operator: Have a next. Our next question comes from the line of Timothy D'Agostino with B. Riley Securities. Please go ahead.

Timothy D'Agostino: Yeah. Hi, there. Thanks for taking the question. Just given the allied acquisition and that Louisiana is a new state, Because Allied has already underwritten in that state, can you be a little bit more aggressive in the policy growth in Louisiana? I guess trying to think about, you know, when you enter a state more organically like Michigan, versus when you enter a state like Louisiana through an acquisition? Does that allow you to be more aggressive in policy growth?

Matthew Neagle: Yes. it is a great you can take it. Go ahead. Yeah. You know, 1 of the benefits of entering states through acquisition is you acquire a lot of know-how and data. A lot of what drives effective pricing is building models based off of historical claims, and then combining it with the data that we have, which, you know, we are national in terms of our home factors data. You have built in relationships with agencies. You have customer brand. We have certain strategies that we have built for our growth engine. That we can apply directly to the Allied distribution network. And so, certainly, it is an accelerant and a meaningful 1 to enter a state via an acquisition with an established brand distribution network and claims history, a set of claims data.

Timothy D'Agostino: Okay. Great. And if I can ask a second question here. Just on the 2026 updated guidance at the adjusted EBITDA level, I think at the midpoint, it implies around $34 million of adjusted EBITDA in 4Q. Is that step down quarter over quarter mostly seasonal? Are there any 1 time items you might wanna flag there? And then also just thinking into 2027 with the closing of the Allied acquisition, if that seasonality is being shown in this guidance for fourth quarter, would you expect to potentially outgrow that seasonality again in 2027? As Allied, you know, rolls into porch?

Shawn Tabak: Yeah. So overall, on the. There is some additional factors to consider there. And, again, we do not guide at the segment level, but I did mention today in the prepared remarks that consumer services benefited from some expense timing in Q3, and so you have some of that you know, going the other way in Q4. You know, there is seasonality, especially in the noninsurance businesses. Almost all of the revenue there and EBITDA, therefore, is tied to home transactions, which, you know, are at a seasonal lower point. In Q4 relative to Q3. And so we would expect, you know, typical decline there. And then also just we mentioned today on the call that, you know, some of our non insurance businesses have seen declines in revenue at least year over year because we have shut down some of those businesses. And then I guess the last point that I would make, we are continuing to invest. Matthew talked about some of the items on the call that we are continuing to invest in to accelerate growth. So I think all those are probably relevant.

Timothy D'Agostino: Okay. Great. Thank you so much for taking the questions today. Thank you.

Operator: Our next question comes from the line of Oscar Nieves with Stephens Inc. Please go ahead.

Analyst: My first 1 is, you have talked about a soft insurance market. I just wanted to touch on that and what is behind it. Is it mostly competition, or is it reinsurance cost and capacity? And related to that, how long do you think that lasts? And what does that mean for your growth margins and the Reciprocal's, return and surplus.

Matthew Ehrlichman: Yeah. So it is tied to both, you know, the reinsurance market and competition. Reinsurance prices come down. Generally, there is just less cost, you know, that, you know, carriers have. Therefore, they are able to lower the price, you know, sequentially for, you know, for new customers. And so those, I would say, are linked and certainly a factor. You know, we were able to experience a meaningful decline in our reinsurance cost because we were able to include our data. So our savings on reinsurance actually more than what the what the market experience. But still, that applies, and that then softens, you know, it creates a softening market. Call it this is where. Okay. it is a it is a huge advantage to have just more margin in the system. You know, like we do, where you can really then just manage to the outcomes that we want. So you saw certainly throughout this year, we are able to still manage to our to our targets and our results you know, despite changes in the market. And so, you when there is time, when there is, you know, bad weather or reinsurance prices go up, for us, it is gonna be, you know, we are gonna be a real standout performer in those market cycles. Because do not have that weather volatility. You know, on our P&L. And so our results would be exactly the same regardless what happened in terms of weather or reinsurance, you know, pricing. But, again, that is part of the beauty of how the how the system was designed. Thank you.

Analyst: My next 1 is on capital structure. Looking out over the next year or 2, how are you thinking about capital structure? And I am thinking about the 2028 converts the surplus notes, and you talked about leverage earlier. And, also, what are the priorities you guys have for cash for the cash that the business is generating and you guys expect to continue to generate?

Shawn Tabak: Yeah. I can take that 1. So I think as we talked about today, we have done, I think, a pretty good job getting our leverage within the target range and actually know, toward the lower end of our target range there. You know, as we as we look ahead to next year, we will look at refinancing, know, the converts ahead of, obviously, when they are coming due. And so we think we are set up really well. Obviously, you know, today, we talked. We updated our guidance again. So this year, it is you know, a $138 million at the midpoint. And then on top of that, you also add in you know, pro forma, the $25 million of additional from Allied, which will come, you know, next year. So we think we are we are set up really well there. The company's know, in moving in a in a great spot. And then on the surplus notes, you know, with the. You know, we have with the reciprocal, you know, no changes expected there. We really like the setup, the way things are working. And it is, you know, working really well.

Matthew Ehrlichman: Also just asked about cash. And, you know, the business is, to your point, I suppose, generating a lot of cash. And we think there is gonna be very attractive places for us to be able to deploy that excess cash. Obviously, you know, we announced the Allied acquisition here just recently. But M&A is 1 of those places that we do think we could deploy cash in a in a very attractive way for shareholders. Okay. And, the last 1 I have is related to Allied. You mentioned how that deal gets you closer to your medium term targets. that is $3 billion of premium and $660 million of adjusted EBITDA. So what is the time frame that you have in mind now, and what are the biggest swing factors in getting there? Versus before, you had those you had Allied in the picture. Well, I am not gonna tell you the specific timeline, but we certainly have a good sense for what that is gonna be. And, you know, I am sure that when we did the investor day back in 2024, in fact, I remember conversations with people you know, about how we were gonna be able to get there. And I know that they are realizing that it is gonna be a lot faster than they had expected. In that point in time. But, clearly, we have made great progress. Again, from $7 million in EBITDA to, you know, $180 million, you know, just in a in a in a few years. You know? And so not. We are not commenting on specific time frames. You know, for us, it is just about continue execution. We, you know, we do not you know, certainly need, you know, other acquisitions to be able to go and get it is just when there is an opportunity like Allied or anything else in the future, that certainly just. Can just accelerate the pace. Alright. Very helpful. Thank you so much.

Operator: Thank you. And our next question comes from the line of Matthew VanVleet with Cantor Fitzgerald. Please go ahead.

Mason Marion: Hi, there. This is Mason Marion on for Matthew. Thanks for taking our question here. So does the Allied deal and other potential future deals change your thoughts around selling HomeFactors data to other insurers?

Matthew Ehrlichman: I mean, not. it is a it is a good question. Not. No. The you know, certainly, insurance business is growing fast and, you know, to your point, not only organically, but with M&A is gonna grow very, very fast, and we expect that to continue here as we look ahead. We obviously want to be able to give our insurance business unique advantages. And so we certainly are limiting type of data we would make available to anyone else, you know, in terms of geographies and if ensuring that it is not competitive. So you know, that is certainly something that we are we are thinking about. We will continue to be thinking about. But no changes, here today.

Operator: Thank you. And that is all the time we for Q&A. I would now like to turn the call back over to Matthew Ehrlichman for closing remarks.

Matthew Ehrlichman: I will just say I really appreciate the time, You know, certainly appreciate the continued execution and support from our employees and partners and customers and shareholders You know, I mentioned in the prepared remarks just, you know, the journey over the last few years. You know, we are excited about where we are. We are really excited about how we are entering this next phase of growth and margin and doing so from a true position of strength. You know, getting the business, you know, progressed to where it is, a balance sheet perspective, you know, from a margin and earnings perspective just gives us lots of tools now. Lots of flexibility to make great choices. We can continue to deliver meaningful share. Shareholder value with that, appreciate it. Have a great rest of the day. See you soon.

Operator: Ladies and gentlemen, this concludes the meeting. You may now disconnect.