8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 14, 2023

PORCH GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-39142	83-2587663
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

411 1st Avenue S., Suite 501
Seattle, Washington	98104
(Address of principal executive offices)	(Zip Code)

(855) 767-2400

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001	PRCH	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

On March 14, 2023, Porch Group, Inc. (the “Company”) management and the Audit Committee of the Board of Directors of the Company (the “Audit Committee”) concluded that the previously issued unaudited condensed consolidated financial statements as of and for the quarters ended March 31, 2022, June 30, 2022 and September 30, 2022 (the “2022 quarterly financial statements”) of the Company included in the Company’s Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (“SEC”) on May 10, 2022, August 9, 2022, and November 9, 2022, respectively, require restatement and should no longer be relied upon. In addition, any previously issued or filed earnings releases, investor presentations or other communications describing the Company’s quarterly financial statements and other related financial information covering the quarters ended March 31, 2022, June 30, 2022 and September 30, 2022 should no longer be relied upon.

Under the Company’s third-party quota share reinsurance program, the Company’s insurance subsidiary has ceded some, but not all, the liabilities related to losses and loss adjustment expenses (LAE) to third-party reinsurers. The losses ceded to third-party reinsurance companies are subject to certain terms, which vary by participating reinsurer, which impact the amount of losses that the Company can cede under those respective terms. The Company identified an error in the accounting for these arrangements, in that the terms were not fully considered in the calculation of losses ceded to third party reinsurance companies. As a result of this error, the Company determined that the cost of revenue was misstated during the interim periods as follows: $4.0 million understated for the three months ended March 31, 2022; $0.7 million understated for the three months ended June 30, 2022 (for a total of $4.7 million understated for the six months ended June 30, 2022); and $0.3 million overstated for the three months ended September 30, 2022 (for a net total understatement of $4.4 million for the nine months ended September 30, 2022).

In connection with this restatement, the Company is also correcting for other immaterial errors related to revenue, selling and marketing expenses, interest expense, prepaid expenses and other current assets, goodwill, deferred revenue, refundable customer deposits, and current debt. The restatement of the 2022 quarterly financial statements does not impact the Company’s reported cash position.

The Company does not intend to file amended Quarterly Reports on Form 10-Q for the 2022 quarterly financial statements. However, the restated financial information related to such periods is attached as Exhibit 99.2 to this Current Report on Form 8-K and will be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”), which the Company expects to file on March 16, 2023. The Company will also effect the restatement of its 2022 quarterly financial statements in connection with the future filings of its Quarterly Reports on Form 10-Q in 2023.

The Company’s management had previously concluded and disclosed that the Company’s disclosure controls and procedures were not effective at December 31, 2021 due to the existence of material weaknesses in internal control over financial reporting. The Company’s management will also report ineffective internal control over financial reporting in the 2022 Form 10-K and will give consideration to the effect of the restatements described above.

The Company’s management and the Audit Committee have discussed the matters disclosed in this Current Report on Form 8-K pursuant to this Item 4.02 with Ernst & Young LLP, the Company’s independent registered public accounting firm.

Item 7.01. Regulation FD Disclosure.

The information in this Current Report on Form 8-K (and other than the information disclosed under Item 4.02 and Exhibit 99.1 attached hereto), shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Unaudited Selected Quarterly Financial Information
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PORCH GROUP, INC.
By:	/s/ Shawn Tabak
	Name:	Shawn Tabak
	Title:	Chief Financial Officer

Date: March 14, 2023

EX-99.1

Exhibit 99.1

PORCH GROUP, INC.

Unaudited Selected Quarterly Financial Information

In the following tables, we have presented a reconciliation of our unaudited condensed consolidated financial information as originally reported, to the as restated amounts as of and for the three months ended March 31, 2022, the three and six months ended June 30, 2022, and the three and nine months ended September 30, 2022. The restatements will be effected in future filings of our 2023 unaudited condensed consolidated financial statements within our Quarterly Reports on Form 10-Q.

The table below sets forth the unaudited condensed consolidated balance sheet information, including the balances as reported, adjustments and the balances as restated (in thousands, except per share amounts).

		For the reporting period						For the reporting period						For the reporting period
		March 31, 2022						June 30, 2022						September 30, 2022
		As Previously		Restatement				As Previously		Restatement				As Previously		Restatement
		Reported		Adjustments		As Restated		Reported		Adjustments		As Restated		Reported		Adjustments		As Restated
		in thousands						in thousands						in thousands
Current assets
Cash and cash equivalents	$	292,373	$	—	$	292,373	$	271,003	$	—	$	271,003	$	260,198	$	—	$	260,198
Accounts receivable, net		29,996		(2,608)		27,388		38,474		(2,424)		36,050		37,032		(1,668)		35,364
Short-term investments		8,462		—		8,462		8,165		—		8,165		7,212		—		7,212
Reinsurance balance due		239,739		(3,403)		236,336		273,971		(4,720)		269,251		303,987		(4,391)		299,596
Prepaid expenses and other current assets		21,087		(334)		20,753		22,621		(668)		21,953		21,160		(1,002)		20,158
Restricted cash		10,162		—		10,162		10,574		—		10,574		16,296		—		16,296
Total current assets		601,819		(6,345)		595,474		624,808		(7,812)		616,996		645,885		(7,061)		638,824
Property, equipment, and software, net		8,340		—		8,340		9,984		—		9,984		11,236		—		11,236
Goodwill		226,576		23,814		250,390		273,831		23,814		297,645		228,091		23,814		251,905
Long-term investments		56,865		—		56,865		56,228		—		56,228		55,357		—		55,357
Long-term insurance commission receivable		9,061		—		9,061		10,461		—		10,461		11,930		—		11,930
Intangible assets, net		124,306		—		124,306		136,575		—		136,575		111,728		—		111,728
Restricted cash, non-current		500		—		500		500		—		500		500		—		500
Right-of-use assets, net		3,922		—		3,922		6,052		—		6,052		4,697		—		4,697
Other assets		5,373		—		5,373		1,519		—		1,519		3,057		—		3,057
Total assets	$	1,036,762	$	17,469	$	1,054,231	$	1,119,958	$	16,002	$	1,135,960	$	1,072,481	$	16,753	$	1,089,234
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	8,016	$	—	$	8,016	$	7,739	$	—	$	7,739	$	6,717	$	—	$	6,717
Accrued expenses and other current liabilities		35,029		(889)		34,140		47,967		(1,353)		46,614		36,847		—		36,847
Deferred revenue		198,857		283		199,140		243,425		557		243,982		277,616		—		277,616
Refundable customer deposit		16,686		2,030		18,716		19,246		2,372		21,618		19,867		2,718		22,585
Current portion of long term debt		150		19,532		19,682		150		18,863		19,013		6,275		16,557		22,832
Losses and loss adjustment expense reserves		79,608		—		79,608		88,894		—		88,894		100,298		—		100,298
Other insurance liabilities, current		43,049		—		43,049		61,516		—		61,516		55,945		—		55,945
Total current liabilities		381,395		20,956		402,351		468,937		20,439		489,376		503,565		19,275		522,840
Long term debt		415,002		—		415,002		416,568		—		416,568		425,012		—		425,012
Refundable customer deposit - non-current		—		—		—		—		—		—		—		—		—
Earnout liability, at fair value		2,687		—		2,687		100		—		100		57		—		57
Private warrant liability, at fair value		5,004		—		5,004		926		—		926		802		—		802
Lease liability - non-current		2,267		—		2,267		3,622		—		3,622		2,968		—		2,968
Other liabilities (includes $12,822, $29,858 and $23,228 at fair value, respectively)		15,528		—		15,528		30,825		—		30,825		24,952		—		24,952
Total liabilities		821,883		20,956		842,839		920,978		20,439		941,417		957,356		19,275		976,631
Stockholders’ equity
Common stock, $0.0001 par value:
Authorized shares - 400,000,000, 400,000,000 and 400,000,000, respectively
Issued and outstanding shares - 98,297,186, 99,440,528 and 100,410,325, respectively		10		—		10		10		—		10		10		—		10
Additional paid-in capital		647,551		—		647,551		659,814		—		659,814		664,362		—		664,362
Accumulated other comprehensive income		(2,774)		—		(2,774)		(4,559)		—		(4,559)		(6,571)		—		(6,571)
Accumulated deficit		(429,908)		(3,487)		(433,395)		(456,285)		(4,437)		(460,722)		(542,676)		(2,522)		(545,198)
Total stockholders’ equity		214,879		(3,487)		211,392		198,980		(4,437)		194,543		115,125		(2,522)		112,603
Total liabilities and stockholders' equity	$	1,036,762	$	17,469	$	1,054,231	$	1,119,958	$	16,002	$	1,135,960	$	1,072,481	$	16,753	$	1,089,234

PORCH GROUP, INC.

Unaudited Selected Quarterly Financial Information (Continued)

The table below sets forth the unaudited condensed consolidated statements of operations and comprehensive loss, including the balances as reported, adjustments and the as restated balances (in thousands, except per share amounts):

		Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended						Three Months Ended
		March 31, 2022						June 30, 2022						June 30, 2022						September 30, 2022						September 30, 2022
		As Previously		Restatement				As Previously		Restatement				As Previously		Restatement				As Previously		Restatement				As Previously		Restatement
		Reported		Adjustments		As Restated		Reported		Adjustments		As Restated		Reported		Adjustments		As Restated		Reported		Adjustments		As Restated		Reported		Adjustments		As Restated
Revenue	$	62,561	$	1,006	$	63,567	$	133,330	$	1,152	$	134,482	$	70,769	$	146	$	70,915	$	208,696	$	3,139	$	211,835	$	75,366	$	1,987	$	77,353
Operating Costs and Expenses:
Cost of revenue		21,189		4,027		25,216		49,747		4,720		54,467		28,558		693		29,251		83,016		4,391		87,407		33,269		(329)		32,940
Selling and marketing		25,743		334		26,077		54,569		668		55,237		28,826		334		29,160		84,814		1,002		85,816		30,245		334		30,579
Product and technology		14,231		—		14,231		30,009		—		30,009		15,777		—		15,777		44,446		—		44,446		14,438		—		14,438
General and administrative		26,699		—		26,699		55,103		—		55,103		28,405		—		28,405		80,361		—		80,361		25,257		—		25,257
Loss on impairment of intangible assets and goodwill		—		—		—		—		—		—		—		—		—		57,057		—		57,057		57,057		—		57,057
Total operating expenses		87,862		4,361		92,223		189,428		5,388		194,816		101,566		1,027		102,593		349,694		5,393		355,087		160,266		5		160,271
Operating income (loss)		(25,301)		(3,355)		(28,656)		(56,098)		(4,236)		(60,334)		(30,797)		(881)		(31,678)		(140,998)		(2,254)		(143,252)		(84,900)		1,982		(82,918)
Other income (expense):
Interest Expense		(2,293)		(134)		(2,427)		(4,151)		(201)		(4,352)		(1,858)		(67)		(1,925)		(6,236)		(268)		(6,504)		(2,085)		(67)		(2,152)
Loss on remeasurement of earnout liability		11,179		—		11,179		13,766		—		13,766		2,587		—		2,587		13,809		—		13,809		43		—		43
Loss on remeasurement of private warrant liability		10,189		—		10,189		14,267		—		14,267		4,078		—		4,078		14,391		—		14,391		124		—		124
Investment income and realized gains		197		—		197		440		—		440		243		—		243		775		—		775		335		—		335
Other, net		56		—		56		(107)		—		(107)		(162)		—		(162)		(37)		—		(37)		69		—		69
Total other income (expense)		19,328		(134)		19,194		24,215		(201)		24,014		4,888		(67)		4,821		22,702		(268)		22,434		(1,514)		(67)		(1,581)
Income (loss) before income taxes		(5,973)		(3,489)		(9,462)		(31,883)		(4,437)		(36,320)		(25,909)		(948)		(26,857)		(118,296)		(2,522)		(120,818)		(86,414)		1,915		(84,499)
Income tax (benefit) expense		177		—		177		(290)		—		(290)		(468)		—		(468)		(268)		—		(268)		23		—		23
Net loss	$	(5,796)	$	(3,489)	$	(9,285)	$	(32,173)	$	(4,437)	$	(36,610)	$	(26,377)	$	(948)	$	(27,325)	$	(118,564)	$	(2,522)	$	(121,086)	$	(86,391)	$	1,915	$	(84,476)
Total other comprehensive loss		(2,515)		—		(2,515)		(4,300)		—		(4,300)		(1,785)		—		(1,785)		(6,312)		—		(6,312)		(2,012)		—		(2,012)
Total comprehensive loss	$	(8,311)	$	(3,489)	$	(11,800)	$	(36,473)	$	(4,437)	$	(40,910)	$	(28,162)	$	(948)	$	(29,110)	$	(124,876)	$	(2,522)	$	(127,398)	$	(88,403)	$	1,915	$	(86,488)
Loss per share - Basic and diluted		(0.06)				(0.10)		(0.33)				(0.38)		(0.27)				(0.28)		(1.22)				(1.25)		(0.88)				(0.86)
Shares used in computing basic and diluted loss per share		96,074,527				96,074,527		96,611,294.00				96,611,294		97,142,163				97,142,163		97,009,351				97,009,351		97,792,485				97,792,485

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PORCH GROUP, INC.

Unaudited Selected Quarterly Financial Information (Continued)

The table below sets forth the unaudited condensed consolidated statements of cash flows, including balances as reported, adjustments and balances as restated amounts (in thousands). Note that only amounts that have changed have been disclosed.

		Three Months Ended						Six Months Ended						Nine Months Ended
		March 31, 2022						June 30, 2022						September 30, 2022
		As Previously		Restatement				As Previously		Restatement				As Previously		Restatement
		Reported		Adjustments		As Restated		Reported		Adjustments		As Restated		Reported		Adjustments		As Restated
Net loss	$	(5,796)	$	(3,488)	$	(9,284)	$	(32,173)	$	(4,437)	$	(36,610)	$	(118,564)	$	(2,522)	$	(121,086)
Change in operating assets and liabilities:
Accounts receivable		(1,296)		2,608		1,312		(9,907)		2,424		(7,483)		(8,639)		1,668		(6,971)
Reinsurance balance due		(11,323)		3,403		(7,920)		(45,555)		4,720		(40,835)		(75,571)		4,391		(71,180)
Prepaid expenses and other current assets		(6,749)		334		(6,415)		(7,758)		668		(7,090)		(6,297)		1,002		(5,295)
Refundable customer deposits		1,412		(4,361)		(2,949)		3,972		(4,429)		(457)		4,593		(2,083)		2,510
Deferred revenue		(2,228)		283		(1,945)		37,610		557		38,167		71,600		—		71,600
Accrued expenses and other current liabilities		(3,145)		(889)		(4,034)		2,358		(1,353)		1,005		(8,001)		—		(8,001)
Net cash used in operating activities	$	(13,291)	$	(2,110)	$	(15,401)	$	(2,306)	$	(1,850)	$	(4,156)	$	(12,808)	$	2,456	$	(10,352)
Net cash used in investing activities	$	(8,077)	$		$	(8,077)	$	(38,404)	$	—	$	(38,404)	$	(46,444)	$	—	$	(46,444)
Cash flows from financing activities:
Proceeds from debt issuance, net of fees		—		5,143		5,143		—		10,690		10,690		—		15,115		15,115
Repayments of advance funding		—		(3,033)		(3,033)		—		(8,840)		(8,840)		—		(17,571)		(17,571)
Net cash (used in) provided by financing activities	$	(389)	$	2,110	$	1,721	$	(2,005)	$	1,850	$	(155)	$	11,454	$	(2,456)	$	8,998

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XML

Document and Entity Information	Mar. 14, 2023
Document and Entity Information [Abstract]
Document Type	8-K
Document Period End Date	Mar. 14, 2023
Entity File Number	001-39142
Entity Registrant Name	PORCH GROUP, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	83-2587663
Entity Address, Address Line One	411 1st Avenue S.
Entity Address, Adress Line Two	Suite 501
Entity Address, City or Town	Seattle
Entity Address, State or Province	WA
Entity Address, Postal Zip Code	98104
City Area Code	855
Local Phone Number	767-2400
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common stock, par value $0.0001
Trading Symbol	PRCH
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Entity Central Index Key	0001784535
Amendment Flag	false