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DATE

Wednesday, July 29, 2026 at 5:00 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer, Chairman, and Founder - Matt Ehrlichman
• Chief Financial Officer - Shawn Tabak
• Chief Operating Officer - Matthew Neagle

TAKEAWAYS

• Revenue (Excluding Reciprocal) -- $131.8 million, up 23% year over year, led by expansion in the Insurance Services segment.
• Insurance Services Revenue -- $92.9 million, up 38% year over year, driven by higher fee-based revenue from increased policies written and new customer additions.
• Net Income -- $5.6 million attributable to shareholders, marking a milestone for the company compared to $2.6 million in the prior year period.
• Adjusted EBITDA (Excluding Reciprocal) -- $39.1 million, up 150% from $15.6 million, reflecting significant operating leverage as premium and policy volumes scaled.
• Rule of 50 Achievement -- 53% combined revenue growth and adjusted EBITDA margin in the second quarter, with the Insurance Services segment alone delivering a 48% adjusted EBITDA margin.
• Full-Year 2026 Guidance -- increased to a range of $506 million to $517 million in revenue and $119 million to $125 million in adjusted EBITDA, representing a 59% growth rate at the guidance midpoint.
• Reciprocal Written Premium (RWP) -- $139.8 million, up 16% year over year, consistent with the annual target of $600 million.
• Reciprocal Policies Written -- 58,700 policies, up 38% year over year, driven by a 206% increase in RWP from new customers.
• RWP per Policy Written -- $2,383, down 16% year over year due to a mix shift toward a higher percentage of new customers versus higher-priced renewing customers.
• Statutory Surplus -- $169.9 million at the reciprocal, up 33% year over year, supporting premium capacity approaching $2 billion.
• Agency Distribution -- 148% growth in producing agency branch locations and an 87% increase in quote volumes, marking the seventh straight quarter of sequential growth.
• Insurance Services Adjusted EBITDA -- $44.4 million, up 126% year over year, including a $3 million nonrecurring expense true-up benefit.
• Insurance Services Gross Profit -- $81.2 million, up 40% year over year, with gross margins remaining stable at 87%.
• Software & Data Performance -- $23.1 million in revenue and $5.2 million in adjusted EBITDA, reflecting the planned sunset of legacy products serving 4,000 small home service contractors.
• Consumer Services Performance -- $18.1 million in revenue and $3.2 million in adjusted EBITDA, with monetized services of 83,900 down 4% year over year.
• Premium per New Customer -- down 4% year over year, as the company adjusted pricing to maintain conversion rates in a softer insurance market.
• Leverage Ratio -- expected to be better than 3x for the full year 2026, aligned with the long-term target range of 2x to 3x.
• Porch Cash and Investments -- $126.8 million, down from $134.1 million in the first quarter due to bi-annual interest payments and share purchases.
• Reciprocal Cash and Investments -- $331.0 million, up from $288.0 million at the end of the first quarter.
• Share Repurchase from Reciprocal -- 2.1 million shares purchased from the reciprocal for approximately $15 million to move capital from nonadmitted assets into statutory surplus.
• Home Factors Data -- 100 attributes now identified in the proprietary data platform, covering 90% of U.S. residential properties and early signals into 90% of homebuyers.
• Reciprocal Catastrophe Bond -- $100 million inaugural issuance in June 2026, providing fully collateralized reinsurance for low-likelihood events.
• Loss Ratios -- 38% gross loss ratio and 18% attritional loss ratio in the second quarter, reflecting disciplined underwriting and proprietary data advantages.
• Annualized Revenue per Company -- $4,926 in the Software & Data segment, up 24% year over year due to a higher mix of larger customers.
• Revenue per Monetized Service -- $216 in Consumer Services, up 7% year over year, driven by cross-sell and upsell efforts.

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RISKS

• Ehrlichman stated, "conversions stepped down a tick in May without actions on our side simply due to competitors being more aggressive in their pricing," which required targeted pricing adjustments to recover momentum.
• Ehrlichman noted, "The risk is simply, in a given month, the execution and filing time required," to manage pricing elasticity and maintain growth goals during market shifts.

SUMMARY

Management reported that **Porch Group, Inc.** (PRCH +2.65%) achieved Rule of 50 status in the second quarter, supported by 23% revenue growth and 30% adjusted EBITDA margin excluding the reciprocal. The company raised its full-year 2026 financial guidance across all primary metrics, citing strong operating leverage as the Insurance Services segment scales. Strategic focus remains on expanding the insurance distribution funnel through independent agencies and leveraging AI to enhance engineering productivity and data-driven risk pricing. Management highlighted the milestone of positive net income attributable to shareholders and projected continued profitability through 2027.

• COO Neagle reported a "2.4x increase in lines of code changed and a 73% increase in merge requests created" following the broad implementation of AI tooling across the engineering organization.
• CEO Ehrlichman attributed sales momentum to the distribution engine, noting producing agency branch locations grew 148% as the company continues a land-and-expand strategy.
• The company used AI to identify underutilized compute resources, resulting in net savings approaching 10% across targeted cloud infrastructure.
• Texas conversion rates reached high watermarks in the final week of June following targeted pricing adjustments to counteract competitor aggression.
• Customer satisfaction metrics improved across software products, with Rynoh reaching an NPS of 71 and Floify increasing 23% year over year to 61.
• The reciprocal now holds 16.2 million Porch shares as nonadmitted assets, providing future capital flexibility as the company executes its statutory surplus management playbook.
• Management confirmed the company is on track for medium-term targets of $3 billion in premium and $660 million in adjusted EBITDA excluding the reciprocal.

INDUSTRY GLOSSARY

• Adjusted EBITDA (Excluding Reciprocal): A non-GAAP financial measure that removes the results of the policyholder-owned reciprocal to show the earnings of Porch-owned segments.
• Catastrophe Bond: A high-yield debt instrument designed to raise money for companies in the insurance industry in the event of a natural disaster.
• Home Factors: Proprietary data attributes used by the company to predict property risk and price insurance policies more accurately.
• Nonadmitted Assets: Assets that insurance regulators do not allow to be counted toward statutory surplus, such as certain equity holdings.
• Reciprocal Written Premium (RWP): The total premium volume written by the reciprocal exchange, including fees and surplus contributions, before reinsurance deductions.
• Rule of 50: A financial benchmark where the sum of a company's revenue growth rate and its EBITDA margin exceeds 50%.
• Statutory Surplus: The amount by which an insurance company's assets exceed its liabilities, serving as a capital cushion for writing new premiums.

Full Conference Call Transcript

John Campbell: Good afternoon, and thank you for participating in Porch Group's Second Quarter 2026 Conference Call. Earlier today, we issued our press release and filed our related Form 8-K with the SEC. The earnings release and today's presentation are available on our Investor Relations website at ir.porchgroup.com. Before we begin, I'd like to review the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995, which provides important cautions regarding forward-looking statements. Today's discussion, including responses to your questions, reflect management's views as of today, July 29, 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 and 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 be available shortly after the call, again, on our Investor Relations site. Joining me here today are Matt Ehrlichman, Porch's CEO, Chairman and Founder; Shawn Tabak, Porch's CFO; and Matthew Neagle, Porch's COO. With that, I'll turn the call over to Matt for his key updates.

Matt Ehrlichman: Thank you, John. Good afternoon, everyone. This will be another fun call here today. We are pleased to report a fantastic second quarter where we again delivered results that exceeded expectations and are raising guidance substantially across the board. We generated positive net income attributable to Porch in the quarter and expect that to be true for the full year 2026, 2027 and the years ongoing. I was excited to share this. Overall, now with Q2 revenue growth, excluding the reciprocal, at 23% and adjusted EBITDA margin, excluding the reciprocal, at 30%, we are now a Rule of 50 company.

Insurance Services, our core largest and fastest growing business stands out even more with 38% revenue growth and a 48% adjusted EBITDA margin this quarter. Policy growth at our insurance business grew by the same 38% year-over-year. This is a big deal. Our Insurance Service business generates its economics based, yes, on reciprocal written premium volume but also meaningfully based on total number of policies given the policy fees that are charged to each policyholder. We managed to our financial results based both on premium and policy count, which I'm not sure is fully appreciated. Incremental margins at Insurance Services are exceptional, which you can see based on the fact that incremental revenues flowed almost fully into higher adjusted EBITDA.

For our entire company, adjusted EBITDA, excluding the reciprocal, grew 2.5x year-over-year. The progress we've made on profitability is strengthening our balance sheet profile. We're announcing today increased 2026 guidance of $122 million of adjusted EBITDA at the midpoint. This puts our leverage below 3x this year. The reciprocal is healthier than it's ever been with statutory surplus growing quarter-over-quarter and loss ratios that continue to be truly exceptional. So the key message is that the system is working. We built a differentiated insurance platform with strong capacity, expanding distribution and proprietary data, which creates a fundamental margin advantage relative to competitors. So Q2 results were strong.

Shawn's going to dive in more deeply momentarily, but quickly just a few highlights. Reciprocal written premium, or RWP, was $140 million, up 16% year-over-year. First half RWP landed right in line with our internal targets at the start of the year. We're managing this well toward our $600 million annual target while sustaining strong margin across the system and doing so in a homeowners insurance market that is healthy but has softened. As I mentioned, written policies were up 38% year-over-year. These premium and policy volumes helped drive quarterly consolidated revenue of $141 million, up 12% year-over-year and our revenue, excluding the reciprocal, of $132 million, up 23% year-over-year, with continued strong gross margins of 85% for this quarter.

RWP flowed through to Insurance Services adjusted EBITDA at a 32% conversion rate, demonstrating the strong incremental margins of this business. In a new view, RWP flowed through to company adjusted EBITDA, excluding the reciprocal, at a 28% conversion rate. That translated, again, to overall adjusted EBITDA, excluding the reciprocal, of $39 million, up 2.5x the prior year period. Q2 showed the earnings power of the model we built with premium volumes certainly translating into high-margin earnings. Scaling our insurance business is straightforward. Statutory surplus creates capacity. Top of funnel consists of insurance agencies driving quote volume and quotes convert to policies written in RWP.

Over the next few slides, I'll walk through each piece of the growth engine and why we believe the foundation continues to strengthen. I'll start here with the result, which is the most important metric. In Q2, again, total reciprocal policies written across new and renewal grew 38% year-over-year to 59,000. We expect a rapid policy growth rate to continue throughout the year, ramping to more than 70,000 per quarter by year-end. We are well ahead of our start-of-year policy count expectations with pricing slightly below due to a softer insurance market with competitors lowering prices.

While price can move up or down based on market cycles, policy growth is the key as it's the leading indicator of future growth and as premium for renewing customer naturally increases. There's substantial excess capital to support this level of growth. The reciprocal ended Q2 with statutory surplus of $170 million, up meaningfully versus the prior year period. That's a strong outcome, particularly given Q2 is typically a seasonal period in Texas when weather activity most impacts surplus, and we did see some of that this quarter. The $43 million gained over the last year translates to more than $200 million of additional RWP capacity.

Overall, the reciprocal's Q2 statutory surplus supports over $800 million of premium including non-admitted assets, primarily the Porch shares owned by the reciprocal. It has the ability to support what's approaching $2 billion of premium. Looking ahead, the reciprocal surplus position gives us plenty of room to support our organic and inorganic growth goals. So with capacity in place, the next driver is top of funnel through independent insurance agencies. We continue to increase the top of funnel with a land-and-expand strategy. This is a key strategic proof point in the quarter. Producing agency branch locations grew 148% year-over-year, and quote volumes grew 87% year-over-year and increased sequentially for the seventh straight quarter.

That means we are significantly expanding the number of opportunities for us to win attractive low-risk business. The distribution engine is expanding and quote volumes continue to build, which sets a strong foundation for sustained premium growth. Looking ahead, we have a fraction of the total agencies even in our largest markets, so we certainly are in the early innings here. Moving down the funnel. Conversion is the lever that turns quote volume into new customers and premium. As shown here, conversion remained meaningfully above prior year levels, but we thought it would be helpful to see the impact when we refer to a softer market and how we can respond given our margin advantages.

As you can see here, conversions stepped down a tick in May without actions on our side simply due to competitors being more aggressive in their pricing, likely due to lower reinsurance costs. We responded with targeted pricing adjustments in specific areas, which resulted in improvements and reacceleration of conversion rates in June. In Texas, our largest state, conversion reached high watermarks in the final week of June, with broad-based improvement across the areas where we focus our actions. So the risk for us is less about managing to our medium and even short-term growth goals. In fact, we have a big advantage in our ability to perform across market cycles.

The risk is simply, in a given month, the execution and filing time required. The fact that we delivered these results in this market, with premium per new customer only down 4% year-over-year in Q2 means that we are sustaining the well above-market margins that we've demonstrated. So put all that together, we continue to see strong growth in RWP from new customers, which more than tripled year-over-year. We're adding new customers at a rapid rate, building a larger renewal base and keeping premium for new customer relatively stable. With that, I'll turn it over to Shawn to cover the financials and guidance.

Shawn Tabak: Thank you, Matt. Good afternoon, everyone. One quick housekeeping item before I dive into the results. Following feedback, we've updated our reporting format to provide more detail on our consolidated GAAP results, which include the reciprocal. We've also renamed Porch shareholder interest to Porch-owned segments for revenue, gross profit and adjusted EBITDA, excluding the reciprocal. We've done that to ensure clarity, and this is a naming change only. Now let's dive into the results. I'll start off with a high-level summary of our financials. In Q2, we saw strong results from the Insurance Services segment, which drove significant growth in adjusted EBITDA. Policies written of 59,000 were up 38% year-over-year, driven by new customer additions.

RWP of $140 million drove adjusted EBITDA, excluding the reciprocal, of $39 million. That's growth of 150% year-over-year. Net income attributable to Porch shareholders was $6 million, an important milestone for the business. Overall, these results highlight the strong growth in our Insurance Services business and its operating leverage as RWP and policies scale. As our Insurance Services business has grown, it's become the clear engine of our earnings growth and as such, we'll highlight its performance in today's discussion. Now let's walk through revenue before we move into the segment results. Total consolidated GAAP revenue was $141 million, up 12% year-over-year. Revenue for the Porch-owned segments, excluding the reciprocal, was $132 million, up 23% year-over-year.

And within that, Insurance Services delivered $93 million in revenue, up 38% year-over-year. And now let's dive into the segment results. Insurance Services is the segment driving the majority of our adjusted EBITDA and adjusted EBITDA growth. Revenue grew 38% year-over-year to $93 million, driven by higher fee-based revenue with higher policies written, RWP volume and new customer additions. In the quarter, we saw 38% growth in policies written year-over-year, which was a 500 basis point acceleration from the Q1 growth rate. Gross profit was $81 million, up 40% year-over-year. Gross margins in this segment are strong and predictable at 87% for Q2. Insurance Services adjusted EBITDA was $44 million, up 126% year-over-year.

Adjusted EBITDA margin was 48% compared to 29% in the prior year period, driven by operating leverage as RWP and policies written scale. Two notes here first, as a reminder, the majority of the high-margin management fee we charge is recognized upfront, but a portion is deferred over 18 months. Thus, while last year was year 1 of operating the reciprocal, 2026 is the first year where we benefit from that deferred revenue and corresponding margin. Second, the margin improvement also reflects a roughly $3 million benefit from an expense true-up in the quarter, which we don't expect to recur.

Overall, Insurance Services continues to demonstrate a very high margin profile with even higher incremental margins given the largely fixed cost base. Shifting now to Software & Data and Consumer Services segments, which overall were relatively flat year-over-year against the backdrop of a stagnant U.S. housing market. Starting with Software & Data. Revenue was $23 million. As a reminder, we sunset certain legacy home contractor SMB-focused products, which drove the year-over-year decline. Our inspection and title insurance software businesses remained solid despite the stagnant market. Gross profit was $17 million with gross margin of 75%. Adjusted EBITDA was $5 million. Moving to Consumer Services. Revenue was $18 million.

Gross profit was $15 million with gross margin of 84%, and adjusted EBITDA was $3 million. Turning to the reciprocal now. Statutory surplus was better than our expectations, ending the period at $170 million, up 33% year-over-year and up 3% quarter-over-quarter. This is a strong result as the reciprocal typically incurs the most weather claims in Q2, including a $14 million storm in the quarter. Loss ratios remained strong. Gross loss ratio was 38% and attritional loss ratio was 18% in Q2, reflecting continued pricing and underwriting discipline and a meaningful margin advantage.

And finally, after selling 2.1 million Porch shares to Porch Group in Q2, the reciprocal now owns 16.2 million Porch shares, of which the majority of the value is considered non-admitted assets and incremental to statutory surplus. Okay. Moving on to the balance sheet. Porch ended Q2 with $127 million in cash and investments, down slightly versus Q1. The decrease reflects the purchase of the 2.1 million Porch shares during the period, along with $17 million in interest expense and timing of working capital and all of that partially offset by adjusted EBITDA generated in the period.

As a reminder here, over time, we expect cash generated for Porch to track with adjusted EBITDA, excluding the reciprocal, minus the cash interest on our notes. Q2 was consistent with that framework. Adjusted EBITDA generation largely offset the biannual interest payment and the 2.1 million share purchase from the reciprocal. On the reciprocal side, it held cash and investments of $331 million at the end of Q2. Okay. Shifting now to guidance. We're raising our guidance across the board given the strong 2Q performance and outlook for the remainder of the year, driven by Insurance Services. We're increasing guidance for revenue, excluding the reciprocal, to a range of $506 million to $517 million.

The midpoint of $512 million represents a 22% year-over-year growth rate, up from the 22% growth rate that was implied in the prior guidance midpoint. We're increasing guidance for gross profit, excluding the reciprocal, to a range of $419 million to $429 million, now representing 23% growth at the midpoint, up from 18% growth at the prior midpoint. We're increasing our guidance for adjusted EBITDA, which excludes the reciprocal to a range of $119 million to $125 million. The midpoint of $122 million represents a 59% year-over-year growth rate, up from 38% growth at the prior midpoint. Taking a step back. We started the year with adjusted EBITDA guidance of roughly $100 million at the midpoint.

Halfway through the year, we've delivered $59 million of adjusted EBITDA, excluding the reciprocal, and in 6 months, we've increased our guidance by more than $20 million at the midpoint. As Matt highlighted, we expect net income attributable to Porch shareholders to be positive for the full year and on a go-forward annual basis. The trend here is clear. Adjusted EBITDA is scaling. Insurance services is driving operating leverage, and the business is moving into a profitable position. Quarter-to-quarter, GAAP net income can still move with mark-to-market adjustments and other noncash items, but that doesn't change the underlying trajectory. This positive net income milestone and overall earnings growth trajectory also translates to a strengthening and more durable financial profile.

With our updated guidance, we expect our leverage ratio to be better than 3x this year, consistent with the 2 to 3x target range we discussed in our 2024 Investor Day. Now I'll hand it over to Matthew to provide a strategic update.

Matthew Neagle: Thank you, Shawn. I'll provide a brief operating update and walk you through the key KPIs across our segments. Last quarter, we discussed AI, how we're using it at Porch today, how we plan to use it over time and why we believe AI strengthens rather than threatens our position. Today, I want to give a few concrete examples of how that is starting to show up operationally. We believe our proprietary data assets become more valuable as AI capabilities mature. Our data platform gives us unique insights on approximately 90,000 -- sorry, 90% of U.S. residential properties and early signals into 90% of U.S. homebuyers each month.

Not only does AI allow us to accelerate the breadth and depth of our data platform, we are able to leverage it to better price and predict risk. In engineering, we are seeing broad adoption of AI tooling and productivity improvements, including a 2.4x increase in lines of code changed and a 73% increase in merge requests created. Nearly all of our engineers leverage available tools to meaningfully accelerate their work. AI is helping identify and reduce underutilized compute resources across targeted cloud compute infrastructure, with net savings approaching 10%. Across the org, AI is improving product and support capabilities.

And just one example, in our moving group, we've shifted to AI-assisted call reviews, which is already having a major impact on conversion, and support is becoming faster, cheaper and higher quality. These are just a few of many examples. Our company already looked at Velocity as a competitive advantage versus our competitors, and the tools available will help us accelerate. Shifting gears to the Q2 insurance KPIs. The key operating story is volume growth. We continue to expand the customer base at a strong growth rate with reciprocal policies written of approximately 59,000, growing 38% year-over-year. Reciprocal written premium was $140 million, and RWP per policy written was $2,383.

Similar to recent quarters, RWP per policy written was down year-over-year given the mix shift toward a higher percentage of new customers versus higher-priced renewing customers. As Matt mentioned, the premium per new customer in Q2 declined only 4% year-over-year, which is the appropriate apples-to-apples comparison. The progress we've made in our Insurance Services business is clear to see in the financials and KPIs, but there's more to the story. The most important point is that Insurance Services is not just getting bigger. It's becoming more scalable and more efficient. We continue to make progress across the various operations that support the insurance business.

On pricing and underwriting, we are continuing to improve the precision of how we select price and manage risk. This matters because it supports disciplined growth, helping us compete for the right policies and maintaining attractive unit economics by avoiding bad risks. Our agency experience continues to improve. Here, we've seen a 30-point improvement in NPS driven by our product investment, better support and responsiveness, and execution by our teams. We're continuing to invest in the technology behind our insurance workflows using automation and AI to improve velocity and increase efficiency across the organization.

So when you look at the quarter, the takeaway is more than the strong financial execution, but the deep investments we're making at the same time to set the business up for years of strong performance ahead. Moving to Software & Data and Consumer Services. Both businesses remain tied to the U.S. housing market, which continues to present a challenging backdrop. Our focus is straightforward, manage these businesses with discipline today while continuing to strengthen the product and partnerships for our future market recovery. Starting with the Software & Data KPIs. The total number of companies served was approximately 19,000.

The majority of the decline was driven by the previously discussed planned sunset of a legacy product that served roughly 4,000 small home service contractors. Annualized revenue per company increased 24% year-over-year to $4,926, reflecting the higher mix of larger, higher value customers. In Consumer Services, the team continued building partnership momentum in advancing properties such as movingplace.com. For the quarter, Consumer Services had 84,000 monetized services with annualized revenue per monetized service of $216, growing 7% year-over-year driven by upsell and cross-sell efforts. Beyond the KPIs, we continue to make progress on the product and customer experience side of the business.

In Software & Data, the Home Factors pipeline is progressing nicely with carriers of all sizes testing the product with successful results. In the quarter, ISN launched a redesigned order form in auto provisioning for new inspectors. And last year, ISN rolled out AI defect detection and usage has doubled across our core inspection software products. Importantly, customer satisfaction for our software products remains strong and improving. The latest NPS was 51 for inspection software, up 14% year-over-year; 61 for our Floify mortgage software, up 23%; and 71 for Rynoh, up 14%. That is encouraging in any environment but especially against a housing market that remains near cyclical trough levels.

We see additional opportunity to improve product value and customer experience, which we believe can further strengthen our already strong market positions, including inspection where we serve roughly half of the market, in title where we have roughly 40% share. I'll now pass it back to Matt to wrap this up.

Matt Ehrlichman: Thank you, Matthew. Okay. I want to wrap up by briefly reinforcing the most important messages from today. First, we're executing well. We exceeded expectations across the board and raised our outlook. Adjusted EBITDA, excluding the reciprocal is now $122 million at the midpoint and $125 million at top end of guidance, driven by the very high incremental margins of our Insurance Services business. We are ahead of schedule and tracking to our medium-term target of $3 billion in premium, $2.3 billion in revenue and $660 million in adjusted EBITDA, excluding the reciprocal. Second, we are pleased with the progress on growth. As we mentioned, total policies written grew 38% year-over-year. Insurance Services similarly had 38% year-over-year revenue growth.

The number of producing agency branches more than doubled, and statutory surplus at the reciprocal is in a very strong position. And third, our financial profile has strengthened. We're now a Rule of 50 company. Our leverage ratio is better than 3x this year, and we delivered positive net income attributable to Porch in Q2 while expecting to remain positive for the full year. With that, John, let's please open the call for questions.

Operator: Your first question comes from the line of Dan Kurnos with StoneX.

Daniel Kurnos: Thanks for all the additional color tonight, especially Matt refocusing on policy count. Can you just broaden your thoughts a little bit? I mean I really appreciate the slide in terms of sort of the targeted actions you guys took. So just help us think through what you saw, how you guys reacted and to what extent the market is dictating those choices and when you might choose to get more aggressive or not because you guys are in a rather enviable position from a margin perspective and you have a lot of leeway.

Matt Ehrlichman: Yes. Thanks. Appreciate it. Yes. The first point that you make is just the point we wanted to lay on, which is I'm not sure if folks have really understood and appreciated. We talked about how we generate revenue in a few different ways, management fees and policy fees as examples. But the policy fees and really the count of policies is really impactful to our financial model. And so we just wanted to make sure that was clear to folks. In terms of conversion rate, I mean, you saw it on the graph, but it is interesting to see, across different market cycles, conversion rates will naturally move up and down slightly.

And the advantage that we have is just because we have such better loss ratios than the market, we are able to manage against that. And so I certainly was proud of the team's ability to kind of recognize changes in the elasticity curve of the conversion rates, be able to put new actions in. And again, like I mentioned, really a fairly minor change is that 4% year-over-year change in the premium per new customer but to be able to respond quickly and ensure that we're managing to the outcomes that we want to manage to for this year. I think you're right, Dan. There's a lot of runway ahead.

And as I've talked about, we want to just stack year after year after year after year really strong, consistent growth while we're maximizing margin dollars within our growth goals, and that's the playbook that we're executing against.

Daniel Kurnos: And then if I could just follow up just 2 secondary pieces, first, just any update on how Michigan is going, learnings there? Obviously, it's going to take a while to sort of prove out the data case, but just love an update. And you mentioned it yourself. You just added a little bit more to the surplus, especially in the statutory side. You had a phenomenal 2Q, especially given timing and seasonality. Book rolls, M&A, any reason to get more aggressive? Or are you -- I know you just finished telling me that you're trying to maximize margin dollars, but those all accrue, Matt, to shareholder interest. So just any thoughts there would be great.

Matt Ehrlichman: Well, why don't I take the second one? And Matthew, maybe you can give an update on Michigan. It is your home state after all, so I give you the glory there. The -- I'm not going to answer much of your question on M&A, of course, Dan. But I will say that there are lots of interesting opportunities. Our corporate development team has never been busier. It's part of our playbook. And so like what -- just to be super clear, what we're managing to and what we've talked about in terms of our goals this year, those are our pure organic goals.

So if we were to do anything else, that would sit on top, certainly, in terms of what we look to do and more to come as in the right time, certainly, if there's something to share. Matthew, do you want to hit on Michigan?

Matthew Neagle: Yes, yes. I think we're excited about Michigan. We're excited about any new state expansion. You're right, it does take time, but our team is focused on growing distribution there. So there's lots of opportunity for us around agencies, and we're getting them appointed. We're starting to see quote flow. The other thing I would say about the data that's interesting is we're now smart enough with our data that even if we don't have data on a home, we have enough data on related homes that we can start to infer things about homes.

The reason why that gets important is when you're heading into a new state, there's always an amount of time where you're learning about how risk behaves in those homes, and you accumulate that over time by getting more claims data and working with more customers. We think we'll have sort of an advanced start because of our data based on kind of what we've been seeing in our modeling.

Operator: Our next question comes from the line of Jason Helfstein with Oppenheimer.

Jason Helfstein: So this is now 2 solid quarters of very nice take rate. Can you just talk about is this the new normal and how mix kind of plays into the take rate? And then secondly, I think that the rest of the industry -- or I guess, in general, right, the industry is losing the pricing tailwind but yet it doesn't seem to kind of impact your efficiency on marketing for a lot of the reasons that you've talked about and we all know. Just maybe talk about how you think like that dynamic, that kind of change in the industry kind of impacts your ability to be efficient adding policies.

Matt Ehrlichman: Shawn, why don't you take the first and I can layer in the second?

Shawn Tabak: Yes, sure. For the take rate context there for folks, sometimes folks think of the insurance services revenue as a percentage of RWP as effectively the take rate. So I think that was the question there from Jason, that, that percentage was 66% in Q2. It was 65% in Q1. So Jason, I think your commentary there, we have seen it now for a couple of quarters sustain that higher mark. We're pleased with that conversion, both in the Insurance Services revenue and ultimately into adjusted EBITDA given the relatively fixed cost base that's creating a lot of earnings.

And so something in that 60% to 65% range is kind of the area we've seen it over the last couple of quarters. And the last thing, I guess, I would just say there, mechanically, just so -- also last year was our -- I mentioned this in the prepared remarks, but we are seeing some deferred revenue flowing through into that, and we expect that to continue ongoing. I mentioned last year it was the first year under the reciprocal structure. And so some of the fees get deferred, and so that's coming in this year. And that will continue. We expect that to continue, obviously, in future years as well.

Matt Ehrlichman: And then on the second one, maybe just high level quickly, Jason, fundamentally, what I think this game is around is if one can be able to better assess, predict and price risk, fundamentally, you'll win. And I think we've clearly demonstrated over an extended period of time now that we have abilities to be able to produce lower loss ratios than others do. And with lower loss ratios and low attritional loss ratios, it just means that there's more margin in the system overall. And then you can choose how you want to deploy the margin. You can be able to -- obviously, we have a very healthy flow through in terms of Porch Group EBITDA.

We obviously are growing the capital base at the reciprocal really effectively. You're able to allocate to a really healthy reinsurance program to make sure the reciprocal is protected, but you can also use it for growth. And we've effectively put a little bit of the margin back to customers via that 4% decline in premium per new customer, and through that, you're able to control and impact those conversion rates, which, in turn, help us to be able to grow faster, our policy count faster.

And so that is a great position to be in, where we can manage this margin advantage that we have to be able to produce the outcomes that are going to create shareholder value over time.

Operator: Our next question comes from the line of Matthew VanVliet with Cantor Fitzgerald.

Mason Marion: This is Mason Marion on for Matt. So your proprietary data is one of your real competitive advantages. You kind of talked to it on the call, but how is AI helping you further expand this advantage? Are you leveraging your home inspection data in any new or interesting ways today compared to, say, maybe the beginning of the year?

Matthew Neagle: Yes. So what...

Matt Ehrlichman: Go ahead. I'll layer on. Go ahead. You get it.

Matthew Neagle: So we do have a large set of proprietary data, and we continue to look for different attributes or conditions of homes that we think could be predicted of risk, and we call those Home Factors. And so we're now up to 100 Home Factors. So we continue to build out insights from the data that we have. In terms of AI, I would highlight a couple of things. Our ability to go model and identify those Home Factors is getting faster. And so we are able to get through building out all of the different insights we think are within our data more quickly.

I think the other things, there are certain types of data, particularly around digital information, which before felt very hard to go and extract insights from, are now becoming much more reachable with AI. And so that just allows us to go deeper into the data to build out these Home Factors that help our business and we think will help other insurance businesses.

Mason Marion: Then maybe a modeling one here to follow up. So your EBITDA guide, if I'm doing my math right here, you raised it by about $16 million, while revenue was raised by about $11 million. I mean you have really strong incremental margins. Can you kind of talk to where you're seeing really strong leverage and how that factored into the guidance?

Shawn Tabak: Yes, sure. Maybe I'll start with the results in the second quarter here. You could see it really clearly in Insurance Services adjusted EBITDA. If you look at the segment, the costs are relatively fixed. I think this has been part of the story that we've been telling for many quarters now. And I think this quarter was just a great example of where the numbers are clearly showing that also. And we see that in prior quarters as well, but it's 38% growth in policies written and relatively fixed cost. I did mention there's a $3 million nonrecurring benefit in this period, so make sure we account for that. But the margins are phenomenal.

And so obviously, we're pleased today to continue to increase our guidance. In the last 6 months, we've increased our adjusted EBITDA guidance by over $20 million and are now guiding to $122 million at the midpoint. We're very pleased with how the year is progressing, and we're excited.

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

Ryan Tomasello: On the revised guidance, can you say what that is now baking in for reciprocal written premium for the full year and in the second half whether or not we're now talking about something north of $600 million, which is what I believe you initially set out to achieve to start the year?

Shawn Tabak: Yes. The target on RWP is $600 million. Let me maybe provide some context and break that down for folks. We're halfway through the year. We've done $255 million of RWP. That means in the second half of the year, we're expecting a $345 million of RWP. We talked about on the call today, policy growth has been fantastic, and we're seeing a lot of volume, and we expect volume to continue to ramp sequentially ending the year with more than 70,000 policies per quarter -- written per quarter. So those are some of the components to it.

If you put that in context, in Q2, we wrote just under 60,000 policies, and we'll continue to increase the policies written with the things that are -- have been working very well for us, top-of-funnel distribution, continuing to add agents using our land-and-expand approach, conversion with targeted actions, all the things -- some of the things that we saw today that have been working quite well.

Ryan Tomasello: I guess, given the momentum you've seen in the first half, is there potentially some offsets to that, that are reducing the upside to that $600 million for the full year or why the second half isn't baking in more upside? Just trying to understand the moving pieces here just given how strong the results have been thus far and the guide up despite the RWP guide seemingly unchanged.

Matt Ehrlichman: Well, again, it's one of the messages I was trying to land, Ryan, just to make sure it's clear. We're obviously managing to our financial results in terms of kind of where we want to -- what we want to deliver. And certainly, you see that just with how we're executing against that, obviously, with both the beat today and the substantial raise. The thing, again, I just don't think -- I think people have been very focused on just an RWP, but our economic model is driven through both RWP and policies written. And we just want to make sure that's clear. We charge policy fees to every new and renewing policyholder.

And so that is a way that we generate money. And so you really have to look at both of those 2 things. Policy growth is -- as we talked about today several times, it's growing very, very rapidly. And so we just -- we can balance those 2 things, how fast we want to grow the total premium and how fast we're going to grow the policies, at the end of the day, to be able to accomplish our organic growth goals for our business. And that's the way that we'll approach it.

Operator: Our next question comes from the line of Timothy D'Agostino with B. Riley Securities.

Timothy D'Agostino: Just quickly on my end. It'd be great to just get some color on the products, the legacy product and the Porch insurance product. RWP from new customers obviously tripled year-over-year. Are you seeing a lot of interest in demand for the new product? Or is it still towards that legacy product? And then as well for the branch growth, do you see new branches that come online? Are they interacting with that new product more? Any color around that would be great.

Matt Ehrlichman: Yes. I mean it's -- I mean, by definition, obviously, in the way that just insurance works, the vast majority of policies are going to be with our legacy Homeowners of America product because it has all of the renewing customers on it. And so we are excited about Porch insurance and the value prop. As a reminder, it's only launched in one state as well, and so even in that one state, you have to go and ramp up the number of agencies that are able to sell and distribute it. So when you launch a new product, it does take time to ramp both within that state across more states and then to start building a renewal base.

But we continue to be excited about fundamentally offering a different product to consumers, being able to bring a full home warranty, being able to bring 4 hours of moving service. And we do want to be known as providing the best product for a homebuyer, period, full stop. And we've got unique capabilities in our consumer services area to be able to do that. But it's early days just given kind of how the model works like I described.

Operator: Our next question comes from the line of Oscar. In the meantime, we'll move on to our next question. Our next question comes from the line of Jason Kreyer with Craig-Hallum.

Jason Kreyer: So in the quarter, you kind of had the first transaction to monetize some of the shares held inside of the reciprocal. Just curious, how should we think about the other 16 million shares and what your strategy is going to be there over the coming quarters or the coming years.

Matt Ehrlichman: Obviously, we're excited about where the value of a share is going to go over time. As we said before publicly, there is -- our view of intrinsic value is certainly different than where the shares are today. And we think as we just keep stacking quarters and just executing like we are that, that gap shrinks. And so there will be a time in the future where it's going to make sense to start selling some small portion of shares at the reciprocal to move some of the capital from non-admitted assets into statutory surplus. We talked about that being part of the playbook that we have, but we're in no hurry.

Obviously, we have so much capital at the reciprocal to be able to support far more premium growth than we're tracking for this year. We want to continue to maintain a nice healthy margin of excess capital. And so we'll just manage the business to make sure that we're accomplishing that.

Jason Kreyer: I don't disagree with your assessment on value of shares. Just as a follow-up, Matt. At the end of the quarter, I think the reciprocal secured $100 million cat bond. Can you just talk about what that means for the health of the reciprocal and if there's any anticipated cost savings on reinsurance coming out of that cat bond?

Shawn Tabak: Yes, I can cover that one. So -- and just for context for folks, a cat bond is a type of fully collateralized reinsurance. We placed it at the very top of the reinsurance tower, so it's covering very, very low likelihood events. But given the growth that we're seeing at the reciprocal, we thought it was prudent to ensure we were adding that. It was our inaugural cat bond offering for the reciprocal, and we're very pleased with the outcome. We partnered with a very strong slate of investors there. So I want to give a nod to those folks as well. But overall, we think it's an attractive instrument and an attractive way to procure reinsurance.

Operator: And our next question comes from the line of Oscar Nieves with Stephens Inc.

Oscar Nieves Santana: Sorry about earlier. I was having some technical difficulties.

Matt Ehrlichman: No problem.

Oscar Nieves Santana: My first question is you highlighted that new customer RWP grew 206% year-over-year, while total RWP grew 16%. So should investors expect that gap to persist? Or will renewal growth become a larger contributor over time?

Matt Ehrlichman: Well, we expect new customer growth will continue. Like obviously, we have a really healthy engine as we continue to add more agencies and then have agencies deliver more quotes and be able to have those quotes convert into policies. So like we talked about, we expect new -- the number of new policies to continue to grow here as we continue forward. It's a beautiful game, insurance is, which customers renew at a really, really high clip. And the vast, vast majority of customers pay with escrow, and it's just a very sticky product fundamentally.

And so we're not commenting on like the mix and how we expect the mix to transition over time, but certainly, I can give you that comment, which is we certainly expect new customers will continue to grow quickly. And those customers do become long-term customers generally, where the price per customer will tick up year after year after year as they renew. That's quite common.

Oscar Nieves Santana: All right. That's super helpful. And then my second one is on statutory surplus, which you mentioned increased to close to $170 million. So how should we think about the relationship between surplus growth and premium growth over the next, say, 12 to 24 months?

Shawn Tabak: Yes, I can take that one. So we're quite pleased with where the statutory surplus is, $170 million at the end of Q2. This year, year-to-date, it's up $15 million. And especially just having gone through the quarter with the highest weather claims typically, that's a great place to be and better than what I would have expected starting the year. And so we're certainly pleased with that outcome. The kind of required -- base requirement that we've historically talked about is a 5:1 RWP to surplus, and actually in some of the prior quarters, we've talked about it actually being a little bit better than that now.

But those are some of the guardrails that folks can think about there. But I would say very pleased with the statutory surplus and the loss ratios and just the underwriting discipline and how the reciprocal is performing.

Operator: And that concludes our Q&A session for today. I would now like to turn the call back over to Matt Ehrlichman for closing remarks.

Matt Ehrlichman: I appreciate everybody being on the call. Thanks for the questions. I think you can get a feel for the energy. We remain very confident in where we're at and how we are executing. I mean it is fun now to be a Rule of 50 company. Feel really good about our leverage being better than 3x this year. We're just making strong progress and certainly now being net income positive this year, all great markers for us.

We believe -- again, I feel very confident we've constructed a durable model with significant opportunity where we can scale a premium and convert that premium into high-margin earnings and continue to add products and capabilities that set us up to go after this $200 billion TAM with just fundamental advantages. Lastly, core thing we talked about is creating long-term shareholder value for shareholders as part of building a truly great and enduring company. And so certainly, just rest assured that's what we are focused on and I think, making great progress against each day. With that, we'll close the call. Have a great rest of the day. Take care, everybody.

Operator: Ladies and gentlemen, that concludes today's call. You may now disconnect.