Porch Group (PRCH, Financial) announced impressive financial results for the first quarter, reporting revenue of $84.5 million, surpassing the anticipated $79.4 million. This marks the company's inaugural quarter under its revamped business model following the sale of its insurance carrier to a third-party managed Reciprocal at the start of 2025. The new approach, which is commission and fee-based with higher margins, has yielded a significant 82% gross margin. Gross profit saw an 86% year-over-year increase, while Adjusted EBITDA surged by $34 million from the previous year, reaching $17 million, alongside enhanced cash flow from operations.
Despite facing overall economic challenges and tariffs, the company's outlook remains strong. Porch Group has revised its 2025 projections, forecasting $410 million in revenue, $327.5 million in gross profit, and $65 million in Adjusted EBITDA at the midpoint. Moreover, the Reciprocal has successfully secured a new reinsurance program at reduced costs, mitigating risks and enabling Porch shareholders to benefit from the growth opportunities within the homeowners insurance domain without direct exposure to catastrophic weather claims.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 6 analysts, the average target price for Porch Group Inc (PRCH, Financial) is $8.00 with a high estimate of $10.00 and a low estimate of $6.00. The average target implies an upside of 26.16% from the current price of $6.34. More detailed estimate data can be found on the Porch Group Inc (PRCH) Forecast page.
Based on the consensus recommendation from 6 brokerage firms, Porch Group Inc's (PRCH, Financial) average brokerage recommendation is currently 1.8, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Porch Group Inc (PRCH, Financial) in one year is $3.64, suggesting a downside of 42.6% from the current price of $6.341. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Porch Group Inc (PRCH) Summary page.
PRCH Key Business Developments
Release Date: February 25, 2025
- Adjusted EBITDA (Q4 2024): $42 million, a record for the company.
- Net Income (Q4 2024): $30 million.
- Revenue (Q4 2024): $100.4 million, a 12% decrease from the prior year.
- Revenue Guidance (2025): $400 million at the midpoint.
- Gross Margin (2025 Guidance): Approximately 80% expected.
- Adjusted EBITDA Guidance (2025): $60 million at the midpoint, with a 15% margin.
- Gross Written Premium (Q4 2024): $112 million, broadly flat compared to the prior year.
- Insurance Revenue (Q4 2024): $72 million, with 29% organic growth trends.
- Vertical Software Revenue (Q4 2024): $29.3 million, a 6% increase from the prior year.
- Corporate Expenses (Q4 2024): $12 million, $8 million lower than the prior year.
- Cash and Investments (End of 2024): $70 million, excluding HOA.
- Surplus Note Balance (January 2025): Increased to $106 million.
- Gross Loss Ratio (Q4 2024): 21%, down from 36% last year.
- Gross Combined Ratio (2024): 79%, an improvement from 88% in the prior year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Porch Group Inc (PRCH, Financial) achieved its goal of adjusted EBITDA profitability for the full year 2024, delivering $7 million, which was better than guidance.
- The company reported a record adjusted EBITDA of $42 million in Q4 2024, with net income reaching $30 million.
- Porch Group Inc (PRCH) provided an optimistic outlook for 2025, with adjusted EBITDA guidance of $60 million at the midpoint, representing a significant increase over 2024.
- The transition to a commission and fee-based model is expected to result in approximately 80% gross margins in 2025, indicating a more profitable and predictable business model.
- The formation of the Porch Insurance Reciprocal Exchange (PIRE) and the sale of the Homeowners of America Insurance Carrier into PIRE are expected to transform financial results, making them more predictable and higher margin.
Negative Points
- Total revenue in Q4 2024 decreased by 12% from the prior year, impacted by nonrecurring items and the sale of EIG, the legacy in-house agency.
- There was a $5 million nonrecurring year-end adjustment in Q4 2024, which reduced revenue and adjusted EBITDA.
- Gross written premium was flat compared to the prior year, affected by the divestiture of the legacy insurance agency, EIG.
- The Reciprocal approval and formation took longer than anticipated, delaying growth initiatives.
- The company is facing ongoing litigation related to the Vesttoo matter, which could impact future financial outcomes.
