In 2020, the Board of Directors and stockholders approved the Porch Group, Inc. 2020 Stock Incentive Plan (the “2020 Plan”). As of December 31, 2023, the aggregate number of shares of common stock reserved for future issuance under the 2020 Plan is 8.0 million. The number of shares of common stock available under the 2020 Plan increases annually on the first day of each calendar year until (and including) the calendar year ending December 31, 2030, with such annual increase equal to the lesser of (i) 5% of the number of shares of common stock issued and outstanding on December 31st of the immediately preceding fiscal year and (ii) an amount determined by the Board of Directors.

The 2020 Plan provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance awards (“PRSUs”) and other stock awards to our employees, officers, non-employee directors and independent service providers, collectively referred to as “Equity Awards.”

Prior to the Merger, our 2012 Equity Incentive Plan (the “2012 Plan”) provided for the grant of equity awards to employees, directors and consultants. Each option from the 2012 Plan that was outstanding immediately prior to the Merger and held by current employees or service providers, whether vested or unvested, was converted into an option to purchase a number of shares of common stock and otherwise continued to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former option immediately prior to the consummation of the Merger.

The following table summarizes the classification of stock-based compensation expense in the Consolidated Statements of Operations and Comprehensive Loss:


	Year Ended December 31,
	2023		2022		2021
Cost of revenue	$	—	$	—	$	1
Selling and marketing	3,351		4,855		5,584
Product and technology	4,804		5,435		7,223
General and administrative	12,554		16,751		25,784
Total stock-based compensation expense	$	20,709	$	27,041	$	38,592

Stock-based compensation consists of expense related to Equity Awards, earnout restricted stock, and a secondary market transaction as described below:


	Year Ended December 31,
	2023		2022		2021
Secondary market transaction(1)	$	—	$	—	$	1,933
Employee earnout restricted stock	—		—		22,961
Employee awards	20,709		27,041		13,698
Total operating expenses	$	20,709	$	27,041	$	38,592

(1)In 2019 and 2020, certain executive officers entered into a series of secondary market transactions related to Porch.com redeemable convertible preferred stock.

Options granted under the 2020 Plan and 2012 Plan to employees typically vest 25% of the shares one year after the options’ vesting commencement date and the remainder ratably on a monthly basis over the following three years. Other vesting terms are permitted and are determined by the Board of Directors or the Compensation Committee of the Board of Directors. Options have a term of no more than ten years from the date of grant, and vested options are generally cancelled three months after termination of employment.


	Number of Options Outstanding (in thousands)	Weighted- Average Exercise Price (per share)		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Balances as of December 31, 2022	3,863	$	3.58

Options exercised	(20)	1.28			$	9
Options forfeited	(34)	7.98
Options expired	(167)	5.32
Balances as of December 31, 2023	3,642	$	3.47	4.6	$	1,827
Exercisable at December 31, 2023	3,544	$	3.30	4.5	$	1,827

The fair value of each employee stock option granted during the years ended December 31, 2022 and 2021, were estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:


	Year Ended December 31,
	2022	2021
Risk-free interest rate	3.2%	0.9 – 1.3 %
Expected term (years)	6	5 – 6
Dividend yield	—	—
Volatility	60%	60 – 61 %
Weighted-average grant-date fair value per share	$1.85	$8.23

The risk-free interest rate used in the Black-Scholes option-pricing model is based on the implied yield currently available in the U.S. Treasury securities at maturity with an equivalent term. The expected term for options granted to employees is estimated using the simplified method. We have not declared or paid any dividends through December 31, 2023, and do not currently expect to do so in the future. We base our estimate of expected volatility on the historical volatility of comparable companies from a representative peer group selected based on industry, financial, and market capitalization data. We use the average expected volatility rates reported by the comparable group for an expected term that approximates our estimated expected term.

The total amount of unrecognized stock-based compensation expense for options granted to employees and non-employees as of December 31, 2023, is approximately $0.5 million and is expected to be recognized over a weighted-average period of 0.9 years.

During 2023, we granted RSUs under various equity award programs. RSUs granted to employees typically vest 25% of the shares one year after the vesting commencement date and the remainder ratably on a quarterly or semi-annual basis over the following three years. Certain RSUs vest quarterly over three years from the vesting commencement date. The fair value of RSUs is determined using the closing price of our common stock on the grant date.


	Number of RSUs (in thousands)	Weighted Average Fair Value (per share)
Balances as of December 31, 2022	5,309	$	8.21
Granted	6,415	1.39
Vested	(2,303)	8.14
Forfeited	(1,111)	4.40
Balances as of December 31, 2023	8,310	$	3.34

The total amount of unrecognized stock-based compensation expense for RSUs granted to employees and non-employees as of December 31, 2023 is approximately $21.6 million and is expected to be recognized over a weighted-average period of 2.3 years.

During 2023, we granted 0.8 million RSAs under various equity award programs with a weighted average grant date fair value of $1.46. RSAs granted to employees vest immediately upon the employee accepting the award. The fair value of RSAs is determined using the closing price of our common stock on the grant date.

During 2023, we granted PRSUs. We have two types of PRSUs outstanding - awards for which the vesting is subject to both a time-based vesting schedule and either (a) achievement of a market condition only (the “Market Only Awards”) or (b) the achievement of both performance conditions and market conditions (the “Performance and Market Awards”).

The Market Only Awards will be earned if, within 36 months following the grant date, the closing price of a share of our common stock is greater than or equal to various target prices over any 20 trading days within any 30-consecutive trading day period (each a “Stock Price Hurdle”) as defined in the award terms. The requirement to achieve the Stock Price Hurdles meets the definition of a market condition. To the extent a Stock Price Hurdle is achieved, the Market Only Awards vest in accordance with the defined time-based graded vesting schedule, subject to the individual’s employment or service through the applicable vesting date.

The Performance and Market Awards are subject to three performance goals each year over a three-year performance period (each year, an “Achievement Period”):

•the price of a share of our common stock must achieve specified compound growth rates over any 20 trading days within any 30-consecutive trading day period during the applicable Achievement Period (the “Absolute Share Price Requirement”), and

•we must achieve a revenue target in comparison to the Board-approved budget during the applicable Achievement Period (the “Revenue Condition”). If the Revenue Condition was not achieved in the prior Achievement Period, the target revenue amount for the following Achievement Period is increased from the next year’s budget based on the prior year shortfall.

For certain awards, the Achievement Periods in each of 2022, 2023, and 2024, the percentage of the target shares earned varies based on the achieved growth rate during the period, provided that the Revenue Condition is also met for the applicable Achievement Period. The maximum payout of the award is 200% of the target PRSUs for all Achievement Periods.

Any earned PRSUs will time vest as of the Compensation Committee’s determination of achievement following the Achievement Period in 2025, subject to the individual’s employment or service through the end of the Achievement Period in 2025.

For the Performance and Market Awards, each of the Achievement Periods effectively represents a separate award. The grant date of each annual award is not established until the associated Revenue and EBITDA Conditions have been established via the Board-approved budget for the applicable fiscal year. The requisite employment or service period for each tranche is from the applicable grant date through the end of each Achievement Period in 2024 and 2025. The Absolute Share Price Requirement represents a market condition, and the Revenue and EBITDA Conditions represent performance conditions.


	Number of PRSUs (in thousands)	Weighted Average Fair Value (per share)
Balances as of December 31, 2022	921	$	4.94
Granted	2,833	0.93


Balances as of December 31, 2023	3,754	$	1.91

The grant-date fair value of PRSUs is determined using a Monte Carlo simulation model that utilizes significant assumptions, including volatility, that determine the probability of satisfying the market condition stipulated in the award to

calculate the fair value of the award. The total amount of unrecognized stock-based compensation expense for the remaining PRSUs as of December 31, 2023, is approximately $2.1 million and is expected to be recognized over a weighted-average period of 1.9 years.

Upon the Merger in 2020, 976 thousand restricted common shares, subject to vesting and forfeiture conditions, were issued to employees and service providers pursuant to their holdings of pre-Merger options, RSUs or restricted shares (the “employee earnout shares”). During 2021, 642 thousand employee earnout shares became fully vested, as the first and second market conditions for vesting were fully satisfied as a result of our stock price and trading activity. The earnout period ended on December 24, 2023. The remaining unvested shares were forfeited and subsequently canceled.

Prior to the closing of the Merger in 2020, our CEO was granted a restricted stock award under the 2012 Plan which was converted into an award of 1.0 million restricted shares of common stock upon the closing of the Merger. During 2021, 667 thousand CEO restricted earnout shares became fully vested, as the first and second market conditions for vesting were fully satisfied as a result of our stock price and trading activity. The earnout period ended on December 24, 2023. The remaining unvested shares were forfeited and subsequently canceled.