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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from                      to

Commission File Number: 001-39142

Porch Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware

83-2587663

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

2200 1st Avenue S., Suite 300, Seattle, WA 98134

(Address of Principal Executive Offices) (Zip Code)

(855) 767-2400

(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading symbol

Name of Exchange on which registered

Common Stock, par value $0.0001 per share

PRCH

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

The number of outstanding shares of the Registrant’s Common Stock as of November 8, 2021 was 98,064,108.

Table of Contents

Table of Contents

    

    

Page

Part I.

Financial Information

3

Item 1.

Financial Statements

3

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

3

Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020

4

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020

5

Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2021 and 2020

6

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

8

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

43

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

59

Item 4.

Controls and Procedures

60

Part II.

Other Information

62

Item 1.

Legal Proceedings

62

Item 1A.

Risk Factors

62

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

66

Item 3.

Defaults Upon Senior Securities

66

Item 4.

Mine Safety Disclosures

66

Item 5.

Other Information

66

Item 6.

Exhibits

67

Exhibit Index

67

Signatures

68

2

Table of Contents

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

PORCH GROUP, INC.

Condensed Consolidated Balance Sheets

(all numbers in thousands, except share amounts)

    

September 30, 2021

    

December 31, 2020

Assets

 

(unaudited)

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

410,217

$

196,046

Accounts receivable, net

 

33,641

 

4,268

Short-term investments

10,142

Reinsurance balance due

246,170

Prepaid expenses and other current assets

 

8,636

 

4,080

Restricted cash

4,614

11,407

Total current assets

 

713,420

 

215,801

Property, equipment, and software, net

 

7,656

 

4,593

Goodwill

 

170,427

 

28,289

Long-term investments

58,646

Intangible assets, net

 

91,650

 

15,961

Restricted cash, non-current

 

1,000

 

Long-term insurance commissions receivable

7,159

3,365

Other assets

 

368

 

378

Total assets

$

1,050,326

$

268,387

 

  

 

  

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable

$

5,525

$

9,203

Accrued expenses and other current liabilities

 

57,274

 

9,905

Deferred revenue

 

190,137

 

5,208

Refundable customer deposit

 

1,509

 

2,664

Current portion of long-term debt

 

107

 

4,746

Losses and loss adjustment expense reserves

87,737

Other insurance liabilities, current

34,819

Total current liabilities

 

377,108

 

31,726

Long-term debt

 

417,976

 

43,237

Refundable customer deposit, non-current

 

 

529

Earnout liability, at fair value

39,811

50,238

Private warrant liability, at fair value

17,706

31,534

Other liabilities (includes $2,849 and $3,549 at fair value, respectively)

 

5,449

 

3,798

Total liabilities

 

858,050

 

161,062

Commitments and contingencies (Note 11)

 

  

 

  

Stockholders’ equity

 

  

 

  

Common stock, $0.0001 par value:

 

10

 

8

Authorized shares – 400,000,000 and 400,000,000, respectively

 

  

 

  

Issued and outstanding shares – 97,332,998 and 81,669,151, respectively

Additional paid-in capital

 

596,156

 

424,823

Accumulated other comprehensive income

113

Accumulated deficit

 

(404,003)

 

(317,506)

Total stockholders’ equity

 

192,276

 

107,325

Total liabilities and stockholders’ equity

$

1,050,326

$

268,387

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

Table of Contents

PORCH GROUP, INC.

Condensed Consolidated Statements of Operations

(all numbers in thousands, except share amounts, unaudited)

    

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2021

    

2020

    

2021

    

2020

Revenue

$

62,769

$

21,507

$

140,852

$

53,703

Operating expenses(1):

 

  

 

  

 

  

 

  

Cost of revenue

 

19,158

 

5,361

 

44,587

 

13,252

Selling and marketing

 

22,874

 

8,803

 

60,636

 

30,443

Product and technology

 

11,317

 

5,701

 

34,158

 

18,124

General and administrative

 

22,034

 

5,490

 

66,463

 

15,539

Gain on divestiture of businesses

 

 

 

 

(1,442)

Total operating expenses

 

75,383

 

25,355

 

205,844

 

75,916

Operating loss

 

(12,614)

 

(3,848)

 

(64,992)

 

(22,213)

Other income (expense):

 

  

 

  

 

  

 

  

Interest expense

 

(1,857)

 

(3,952)

 

(4,296)

 

(10,329)

Change in fair value of earnout liability

7,413

(15,388)

Change in fair value of private warrant liability

2,692

(17,521)

Gain (loss) on extinguishment of debt

(3,133)

(2,532)

5,110

1,077

Investment income and realized gains, net of investment expenses

248

448

Other income (expense), net

 

316

 

1,418

 

225

 

(2,050)

Total other income (expense)

 

5,679

 

(5,066)

 

(31,422)

 

(11,302)

Loss before income taxes

 

(6,935)

 

(8,914)

 

(96,414)

 

(33,515)

Income tax benefit (expense)

 

1,836

 

(9)

 

9,917

 

(33)

Net loss

$

(5,099)

$

(8,923)

$

(86,497)

$

(33,548)

Loss per share - basic

$

(0.05)

$

(0.25)

$

(0.93)

$

(0.95)

Loss per share - diluted (Note 13)

$

(0.08)

$

(0.25)

$

(0.93)

$

(0.95)

 

  

 

  

 

  

 

  

Shares used in computing basic loss per share

 

96,839,292

 

35,809,973

 

92,544,137

 

35,294,839

Shares used in computing diluted loss per share

 

97,545,942

 

35,809,973

 

92,544,137

 

35,294,839

(1)Amounts include stock-based compensation expense, as follows:

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2021

    

2020

    

2021

    

2020

Cost of revenue

    

$

    

$

1

$

1

$

1

Selling and marketing

 

1,382

 

88

 

4,888

 

186

Product and technology

 

1,367

 

115

 

5,522

 

619

General and administrative

 

3,135

 

303

 

18,950

 

735

$

5,884

$

507

$

29,361

$

1,541

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

Table of Contents

PORCH GROUP, INC.

Condensed Consolidated Statements of Comprehensive Loss

(all numbers in thousands, unaudited)

    

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2021

    

2020

    

2021

    

2020

Net loss

$

(5,099)

$

(8,923)

$

(86,497)

$

(33,548)

Other comprehensive income (loss):

 

 

 

 

Current period change in net unrealized gain (loss), net of tax

(154)

 

 

113

 

Comprehensive loss

$

(5,253)

$

(8,923)

$

(86,384)

$

(33,548)

5

Table of Contents

PORCH GROUP, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(all numbers in thousands, except share amounts, unaudited)

Accumulated

Additional 

Other

Total 

Common Stock

 

Paid-in 

 

Accumulated 

 

Comprehensive

 

Stockholders’

Shares

Amount

 

Capital

Deficit

Income

 

Equity (Deficit)

Balances as of December 31, 2020

 

81,669,151

$

8

$

424,823

$

(317,506)

$

$

107,325

Net loss

 

 

 

 

(65,101)

 

 

(65,101)

Other comprehensive income

 

 

Stock-based compensation

 

 

 

4,462

 

 

 

4,462

Stock-based compensation - earnout

 

12,373

12,373

Issuance of common stock for acquisitions

 

90,000

 

 

1,169

 

 

 

1,169

Reclassification of earnout liability upon vesting

 

 

 

25,815

 

 

25,815

Vesting of restricted stock units

2,078,102

Exercise of stock warrants

8,087,623

1

93,007

93,008

Exercise of stock options

 

593,106

 

 

355

 

 

355

Income tax withholdings

 

(1,062,250)

 

 

(16,997)

 

 

(16,997)

Transaction costs

(402)

(402)

Balances as of March 31, 2021

91,455,732

$

9

$

544,605

$

(382,607)

$

$

162,007

Net loss

(16,297)

(16,297)

Other comprehensive income

267

267

Stock-based compensation

2,466

2,466

Stock-based compensation - earnout

4,176

4,176

Issuance of common stock for acquisitions

1,292,441

21,687

21,687

Contingent consideration for acquisitions

6,685

6,685

Reclassification of private warrant liability upon exercise

16,843

16,843

Vesting of restricted stock units

33,182

Exercise of stock warrants

2,862,312

1

33,761

33,762

Exercise of stock options

946,392

2,227

2,227

Income tax withholdings

(296,643)

(5,194)

(5,194)

Transaction costs

140

140

Balances as of June 30, 2021

96,293,416

$

10

$

627,396

$

(398,904)

$

267

$

228,769

Net loss

(5,099)

(5,099)

Other comprehensive income

(154)

(154)

Stock-based compensation

1,641

1,641

Stock-based compensation - earnout

4,243

4,243

Issuance of common stock for acquisitions

102,636

1,937

1,937

Reclassification of private warrant liability upon exercise

14,505

14,505

Vesting of restricted stock units

271,432

Exercise of stock warrants

557,816

Exercise of stock options

339,150

934

934

Income tax withholdings

(231,452)

(1,587)

(1,587)

Capped call transactions

(52,913)

(52,913)

Balances as of September 30, 2021

 

97,332,998

$

10

$

596,156

$

(404,003)

$

113

$

192,276

6

Table of Contents

PORCH GROUP, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) - Continued

(all numbers in thousands, except share amounts, unaudited)

Accumulated

Additional 

Other

Total 

Common Stock

 

Paid-in 

 

Accumulated 

 

Comprehensive

 

Stockholders’

    

Shares

Amount

 

Capital

Deficit

Income

 

Equity (Deficit)

Balances as of December 31, 2019(1)

 

34,197,822

$

3

$

203,492

$

(263,474)

$

$

(59,979)

Net loss

 

 

 

 

(18,367)

 

 

(18,367)

Other comprehensive income

 

 

3,856

3,856

Stock-based compensation

 

 

 

672

 

 

 

672

Issuance of Series C redeemable convertible preferred stock(1)

 

671,836

 

 

4,714

 

 

 

4,714

Conversion of convertible notes to Series C redeemable convertible preferred stock(1)

 

198,750

 

 

1,436

 

 

 

1,436

Vesting of restricted stock awards issued for acquisitions

 

472,141

 

 

 

 

 

Issuance of common stock warrants

44

44

Exercise of stock options

 

8,409

 

 

1

 

 

 

1

Balances as of March 31, 2020

35,548,958

$

3

$

210,359

$

(281,841)

$

3,856

$

(67,623)

Net loss

(6,258)

(6,258)

Other comprehensive income

(3,856)

(3,856)

Stock-based compensation

362

362

Issuance of common stock for acquisitions

11,744

39

39

Exercise of stock options

1,174

Balances as of June 30, 2020

35,561,876

$

3

$

210,760

$

(288,099)

$

$

(77,336)

Net loss

(8,923)

(8,923)

Stock-based compensation

507

507

Issuance of Series C redeemable convertible preferred stock(1)

10,703

122

122

Repurchase of redeemable convertible stock(1)

(75,162)

(480)

(480)

Issuance of common stock for acquisitions

396,713

1,790

1,790

Shareholder contribution

300

300

Exercise of stock options