PORCH GROUP, INC. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations

This report and the documents incorporated herein by reference contain forward-
looking statements as defined by the Private Securities Litigation Reform Act of
1995. These statements are based on the beliefs and assumptions of management.
Although the Company believes that its plans, intentions and expectations
reflected in or suggested by these forward-looking statements are reasonable,
the Company cannot assure you that it will achieve or realize these plans,
intentions or expectations. Forward-looking statements are inherently subject to
risks, uncertainties and assumptions. Generally, statements that are not
historical facts, including statements concerning the Company's possible or
assumed future actions, business strategies, events or results of operations,
are forward-looking statements. These statements may be preceded by, followed by
or include the words "believes," "estimates," "expects," "projects,"
"forecasts," "may," "will," "should," "seeks," "plans," "scheduled,"
"anticipates" or "intends" or similar expressions.

Forward-looking statements are not guarantees of performance. You should not put
undue reliance on these statements which speak only as of the date hereof.
Unless specifically indicated otherwise, the forward-looking statements in this
report do not reflect the potential impact of any divestitures, mergers,
acquisitions, or other business combinations that have not been completed as of
the date of this filing. You should understand that the following important
factors, among others, could affect the Company's future results and could cause
those results or other outcomes to differ materially from those expressed or
implied in the Company's forward-looking statements:

the ability to recognize the anticipated benefits of the Company's business

combination consummated on December 23, 2020 (the "Merger") pursuant to that

certain Agreement and Plan of Merger, dated July 30, 2020 (as amended by the

First Amendment to the Agreement and Plan of Merger, dated as of October 12,

2020, the "Merger Agreement"), by and among PropTech Acquisition Corporation

? ("PTAC"), PTAC Merger Sub Corporation, a Delaware corporation and wholly-owned

subsidiary of PTAC ("Merger Sub"), Porch.com, Inc. a Delaware corporation, and

Joe Hanauer, in his capacity as the stockholder representative, which may be

affected by, among other things, competition and the ability of the combined

business to grow and manage growth profitably, maintain key commercial

relationships and retain its management and key people;

? expansion plans and opportunities, including recently completed acquisitions as

well as future acquisitions or additional business combinations;

?costs related to the Merger and being a public company;

?litigation, complaints, and/or adverse publicity;

the impact of changes in consumer spending patterns, consumer preferences,

? local, regional and national economic conditions, crime, weather, demographic

trends and employee availability;

?privacy and data protection laws, privacy or data breaches, or the loss of
data; and

?the impact of the COVID-19 pandemic and its effect on the business and
financial conditions of the Company.

These and other factors that could cause actual results to differ from those
implied by the forward-looking statements in this report are more fully
described in Part II, Item 1A of this report, Item 1A of the Company's Annual
Report on Form 10-K/A for the year ended December 31, 2020 filed with the SEC on
May 19,2021 and in any of the Company's subsequent SEC filings. The risks
described in these filings are not exhaustive. New risk factors emerge from time
to time and it is not possible for us to predict all such risk factors, nor can
the Company assess the impact of all such risk factors on its business or the
extent to which any factor or combination of factors may cause actual results to
differ materially from those contained in any forward-looking statements. All
forward- looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the foregoing cautionary

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statements. The Company undertakes no obligations to update or revise publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law.

Business Overview

Porch is a vertical software platform for the home, providing software and
services to approximately 20,000 home services companies, such as home
inspectors, moving companies, utility companies, warranty companies, and others.
Porch helps these service providers grow their business and improve their
customer experience.

As of September 30, 2021, Porch has two reportable segments: the Vertical
Software segment and the Insurance segment.

Porch's Vertical Software segment provides software and services to home
services companies and, through these relationships, gains unique and early
access to homebuyers and homeowners, assists homebuyers and homeowners with
critical services such as moving, and, in turn, Porch's platform drives demand
for other services from such companies as part of our value proposition.
Vertical Software segment has three types of customers: (1) home services
companies, such as home inspectors, for whom Porch provides software and
services and who provide introductions to homebuyers and homeowners;
(2) consumers, such as homebuyers and homeowners, whom Porch assists with the
comparison and provision of various critical home services, such as moving,
security, TV/internet, and home repair and improvement; and (3) service
providers, such as moving companies, title companies, security companies and
TV/internet providers, who pay Porch for new customer sign-ups.

Our Insurance segment offers various property-related insurance policies through
its own managing general agency, carrier and agency. The Insurance segment also
includes home warranty revenue.

Throughout the last eight years, Porch has established and expanded operations
across a number of home-related industries. Porch has also selectively acquired
companies which can be efficiently integrated into Porch's platform. In 2017, we
significantly expanded our position in the home inspection industry by acquiring
ISN™, a developer of ERP and CRM software for home inspectors. In November 2018,
we acquired HireAHelper™, a provider of software and demand for moving
companies. In 2019, we acquired a business that connects new homebuyers to
utility companies. In 2020, we acquired a moving services technology company,
iRoofing, LLC a roofing software company, and two individually immaterial
acquisitions. In the first half of 2021, we acquired a home inspection
integrated customer service and call handling solution company, V12 Data, an
omnichannel marketing platform, HOA, an insurance managing general agency, as
well as Rynoh, a financial management and fraud prevention software service for
the title and real estate industries. In September 2021, we acquired American
Home Protect ("AHP"), a provider of whole home warranty policies across the
United States. We will continue to make additional acquisitions that are
consistent with our focus on insurance and home services related verticals.

We sell our software and services to companies using a variety of sales and
marketing tactics. We have teams of inside sales representatives organized by
vertical market who engage directly with companies. We have enterprise sales
teams which target the large named accounts in each of our vertical markets.
These teams are supported by a variety of typical software marketing tactics,
including digital, in-person (such as trade shows and other events) and content
marketing.

For consumers, Porch largely relies on our unique and proprietary relationships
with the approximately 20,000 companies using Porch's software to provide the
company with end customer access and introductions. Porch then utilizes
technology, lifecycle marketing and teams in lower cost locations to operate as
a Moving Concierge to assist these consumers with services. Porch has invested
in limited direct-to-consumer ("D2C") marketing capabilities, but expects to
become more advanced over time with capabilities such as digital and social
retargeting.

Key Performance Measures and Operating Metrics

In the management of our businesses, we identify, measure and evaluate a variety
of operating metrics. The key performance measures and operating metrics we use
in managing our businesses are set forth below. These key

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performance measures and operating metrics are not prepared in accordance with
GAAP, and may not be comparable to or calculated in the same way as other
similarly titled measures and metrics used by other companies. The key
performance measures presented have been adjusted for divested Porch businesses
in 2018 through 2020.

Average Number of Companies in Quarter - Porch provides software and services

to home services companies and, through these relationships, gains unique and

early access to homebuyers and homeowners, assists homebuyers and homeowners

with critical services such as insurance, warranty and moving. Porch's

customers include home services companies, such as home inspectors, for whom

Porch provides software and services and who provide introductions to

homebuyers and homeowners. Porch tracks the average number of home services

? companies from which it generates revenue each quarter in order to measure our

ability to attract, retain and grow our relationships with home services

companies. Porch management defines the average number of companies in a

quarter as the straight-line average of the number of companies as of the end

of period compared with the beginning of period number of companies, inclusive

of all companies across Porch's home services verticals that (i) generate

recurring revenue and (ii) generated revenue in the quarter. For new

acquisitions, we determine the number of customers in their initial quarter

based on the percentage of the quarter they were part of Porch.

Average Revenue per Account per Month - Management views Porch's ability to

increase revenue generated from existing customers as a key component of

? Porch's growth strategy. Average revenue per account per month in quarter is

defined as the total revenue from the quarter divided by the average number of

companies in the period divided by 3 (to provide monthly revenue).

The following table summarizes our average companies in quarter and average
revenue per account per month for each of the quarterly periods indicated:

                         2018       2019        2019        2019        2019        2020        2020        2020         2020        2021        2021        2021
                          Q4          Q1          Q2          Q3          Q4          Q1          Q2          Q3          Q4          Q1          Q2          Q3
Average Companies in
Quarter                   9,627      10,199      10,470      10,699      10,972      10,903      10,523      10,792      11,157      13,995      17,120      20,472
Average Revenue per
Account per Month in
Quarter                 $   325    $    305    $    468    $    552    $   

450    $    484    $    556    $    664    $    556    $    637    $  1,000    $  1,022




Due to COVID-19, some small companies put their business with the Company on
hold which is reflected in lower number of total companies in 2020 and higher
average revenue per account.

Number of Monetized Services in Quarter - Porch connects consumers with home

services companies nationwide and offers a full range of products and services

where homeowners can, among other things: (i) compare and buy home insurance

policies (along with auto, flood and umbrella policies) and warranties with

competitive rates and coverage; (ii) arrange for a variety of services in

connection with their move, from labor to load or unload a truck to

full-service, long-distance moving services; (iii) discover and install home

automation and security systems; (iv) compare internet and television options

for their new home; (v) book small handyman jobs at fixed, upfront prices with

? guaranteed quality; and (vi) compare bids from home improvement professionals

who can complete bigger jobs. Porch tracks the number of monetized services

performed through its platform each quarter and the revenue generated per

service performed in order to measure to measure market penetration with

homebuyers and homeowners and Porch's ability to deliver high-revenue services

within those groups. Monetized services per quarter is defined as the total

number of unique services from which we generated revenue, including, but not

limited to, new and renewing insurance and warranty customers, completed moving

jobs, security installations, TV/internet installations or other home projects,

measured over a quarterly period.

Average Revenue per Monetized Service - Management believes that shifting the

mix of services delivered to homebuyers and homeowners toward higher revenue

services is a key component of Porch's growth strategy. Average revenue per

? monetized services in quarter is the average revenue generated per monetized

service performed in a quarterly period. When calculating Average Revenue per

Monetized Service in quarter, average revenue is defined as total quarterly

   service transaction revenues generated from monetized services.


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The following table summarizes our monetized services and average revenue per
monetized service for each of the quarterly periods indicated:

                2018         2019         2019         2019         2019         2020         2020         2020         2020         2021         2021         2021
                 Q4           Q1           Q2           Q3           Q4           Q1           Q2           Q3           Q4           Q1           Q2           Q3
Monetized
Services
in Quarter      184,645      185,378      205,887      211,190      172,862      152,165      181,520      198,165      169,949      182,779      302,462      329,359
Revenue
per
Monetized
Service in
Quarter       $      44    $      43    $      63    $      76    $      78    $      93    $      86    $      97    $      98    $      92    $     129    $     144

In 2020, the Company shifted insurance monetization from getting paid per quote
to earning multiyear insurance commissions, resulting in fewer monetized
transactions with higher average revenue.

In March 2020, COVID-19 impacted the service volumes during the period from
March until June. The impact on service volumes, largely recovered by June 30,
2020 and after adjusting for insurance monetization remains above prior year
volumes.

Recent Developments

COVID-19 Impact

In March 2020, the World Health Organization declared a pandemic related to the
global novel coronavirus disease 2019 ("COVID-19") outbreak. The COVID-19
pandemic and the measures adopted by government entities in response to it have
adversely affected Porch's business operations, which impacted revenue primarily
in the first half of 2020. The impact of the COVID-19 pandemic and related
mitigation measures, Porch's ability to conduct ordinary course business
activities has been and may continue to be impaired for an indefinite period.
The extent of the continuing impact of the COVID-19 pandemic on Porch's
operational and financial performance will depend on various future
developments, including the duration and spread of the outbreak and impact on
the Company's customers, suppliers, and employees, all of which is uncertain at
this time. Porch expects the COVID-19 pandemic to continue to have an uncertain
impact on future revenue and results of operations, but Porch is unable to
predict at this time the size and duration of such impact.

Comparability of Financial Information

Porch's future results of operations and financial position may not be
comparable to historical results as a result of the Merger.

Key Factors Affecting Operating Results

The Company has been implementing its strategy as a vertical software platform
for the home, providing software and services to approximately 20,000 home
services companies, such as home inspectors, moving companies, utility
companies, warranty companies and others. The following are key factors
affecting our operating results in 2020 and the nine months ended
September 30, 2021:

Continued investment in growing and expanding our position in the home

? inspection industry as a result of the 2017 acquisition of ISN™, a developer of

ERP and CRM software for home inspectors.

Continued investment in growing and expanding our position in providing moving

? services to consumers as a result of the 2018 acquisition of HireAHelper™, a

   provider of software and demand for moving companies.


   Intentionally building operating leverage in the business by focusing on

growing operating expenses at a slower rate than the growth in revenue. We are

? specifically increasing economies of scale related to our variable selling

   costs, Moving Concierge call center operations and product and technology
   costs.


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In the first nine months of 2021 the Company invested $178.7 million in cash,

? net of acquired, and $24.8 million in common stock to acquire companies to

expand the scope and nature of the Company's service offerings, add additional

team members with important skillsets, and realize synergies.

In January 2021, Porch acquired V12 Data, an omnichannel marketing platform.

? The purpose of the acquisition is to expand the scope and nature of Porch's

service offerings, add additional team members with important skillsets, and

realize synergies.

In April 2021, Porch acquired HOA, an insurance managing general agency. The

purpose of the acquisition is to expand the scope and nature of Porch's product

? offerings, add additional team members with important skillsets, and gain

licenses to operate as an insurance carrier and managing general agent in 31

states.

In May, 2021, Porch acquired Rynoh, a software and data analytics company that

? supports financial management and fraud prevention primarily for the title and

real estate industries.

In September 2021, Porch acquired AHP, a company providing home warranty

? policies. The purpose of the acquisition is to expand the scope and nature of

   Porch's product offerings, add additional team members with important
   skillsets, and realize synergies.

In March and April of 2021, a number of holders of public warrants exercised

? their warrants to acquire approximately 10.9 million shares of common stock,

resulting in cash proceeds of $126.8 million.

In September 2021, the Company raised $413.5 million in net proceeds from a

private offering of its 0.75% Convertible Senior Notes due 2026 (the "2026

Notes"). See Note 7. The proceeds from this offering, after paying down the

? Senior Secured Term Loan and purchasing the capped call transactions, increased

the Company's unrestricted cash balance to $410.2 million. This level of cash

is expected to provide sufficient financial resources for the Company's ongoing

plans for future acquisitions and other investments, such as operating leverage

and organic growth.

? Ongoing expansion in other software verticals related to the home and related

services such as title, warranty and mortgage software.

Basis of Presentation

The unaudited condensed consolidated financial statements and accompanying notes
of Porch include the accounts of the Company and its consolidated subsidiaries
and were prepared in accordance with accounting principles generally accepted in
the United States ("GAAP"). All significant intercompany accounts and
transactions are eliminated in consolidation.

The Company operates in two operating segments: Vertical Software and Insurance.
Operating segments are identified as components of an enterprise about which
separate discrete financial information is available for evaluation by the CODM
in making decisions regarding resource allocation and assessing performance. The
Company has determined that its Chief Executive Officer is the CODM.

Components of Results of Operations

Total Revenue

The Company generates its Core Services Revenue from (1) fees received for
connecting homeowners to individual contractors, small business service
providers and large enterprise service providers, (2) commissions from
third-party insurance and warranty carriers, and (3) insurance and warranty
premiums, policy fees and other insurance-related fees generated through its own
insurance carrier. The Company's Managed Services Revenue is generated from fees
received for providing select and limited services directly to homeowners. The
Company's Software and Service Subscription

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Revenue is generated from fees received for providing subscription access to the
Company's software platforms and subscription services across various
industries.

In the Core Services Revenue stream, the Company connects Service Providers with
homeowners that meet pre-defined criteria and may be looking for relevant
services. Service Providers include a variety of service providers throughout a
homeowner's lifecycle, including movers, TV/Internet, warranty, and security
monitoring providers, plumbers, electricians, roofers, title companies, et al.
The Company also sells home insurance and home warranty policies through the
Company's own insurance carrier, as well as for third-party insurance carriers.

Managed Services Revenue includes fees earned from homeowners for providing
select services directly to the homeowner, including handyman and moving
services. The Company generally invoices for managed services projects on a
fixed fee or time and materials basis. The transaction price represents the
contractually agreed upon price with the end customer for providing the
respective service. Revenue is recognized as services are performed based on an
output measure or progress, which is generally over a short duration (e.g., same
day). Fees earned for providing managed services projects are non-refundable and
there is generally no right of return.

Software and Service Subscription Revenue primarily relates to subscriptions to
the Company's home inspector software, marketing software and services, and
other vertical software. The Company's subscription arrangements for this
revenue stream do not provide the customer with the right to take possession of
the software supporting the cloud-based application services. The Company's
standard subscription contracts are monthly contracts in which pricing is based
on a specified price per inspection completed through the software. Marketing
software and services are primarily contractual monthly recurring billings. Fees
earned for providing access to the subscription software are non-refundable and
there is no right of return. Revenue is recognized based on the amount which the
Company is entitled to for providing access to the subscription software during
the monthly contract term.

Total Costs and Expenses

Operating expenses

Operating expenses are categorized into four categories:

 ? Cost of revenue;


 ? Selling and marketing;

? Product and technology; and

? General and administrative.

The categories of operating expenses include both, cash expenses and non-cash
charges, such as stock-based compensation, depreciation and amortization.
Depreciation and amortization are recorded in all operating expense categories,
and consist of depreciation from property, equipment and software and intangible
assets.

Cost of revenue primarily consist of professional fees and materials under the
Managed Services model, losses and loss adjustment expenses, and credit card
processing and merchant fees.

Selling and marketing expenses primarily consist of third-party data leads,
affiliate and partner leads, paid search and search engine optimization ("SEO")
costs, policy acquisition and other underwriting expenses, payroll, employee
benefits and stock-based compensation expense and other headcount related costs
associated with sales efforts directed toward companies and consumers.

Product and technology development costs primarily consist of payroll, employee
benefits, stock-based compensation expense, other headcount related costs
associated with product development, net of costs capitalized as

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internally developed software, cloud computing, hosting and other technology
costs, software subscriptions, professional services and amortization of
internally-development software.

General and administrative expenses primarily consist of expenses associated
with functional departments for finance, legal, human resources and executive
management expenses. The primary categories of expenses include payroll,
employee benefits, stock-based compensation expense and other headcount related
costs, rent for office space, legal and professional fees, taxes, licenses and
regulatory fees, and other administrative costs.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires
management to make estimates, judgments, and assumptions that affect the amounts
reported and disclosed in the condensed consolidated financial statements and
accompanying notes. On an ongoing basis these estimates, which include, but are
not limited to, estimated variable consideration for services performed, the
allowance for doubtful accounts, depreciable lives for property and equipment,
acquired intangible assets, goodwill, the valuation allowance on deferred tax
assets, assumptions used in stock-based compensation, unpaid losses and loss
adjustment expenses, contingent consideration, earnout liabilities and private
warrant liabilities, are evaluated by management. Actual results could differ
materially from those estimates, judgments, and assumptions.

At least quarterly, we evaluate our estimates and assumptions and make changes
accordingly. For information on our significant accounting policies, see Note 1
to the accompanying Porch unaudited condensed consolidated financial statements.

During the three months ended September 30, 2021, there were no changes to the
critical accounting policies discussed in our Annual Report on Form 10-K/A for
the fiscal year ended December 31, 2020, as filed on May 19, 2021. For a
complete discussion of our critical accounting policies, refer to Item 8 in the
2020 Annual Report on Form 10-K/A.

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Results of Operations

The following table sets forth our historical operating results for the periods
indicated:


                                    Three Months Ended September 30,                       Nine Months Ended September 30,
                                       2021                   2020         % Change           2021                  2020          % Change
                                                                        (dollar amounts in thousands)
Revenue                          $          62,769      $         21,507        192 %   $        140,852      $         53,703         162 %
Operating expenses:
Cost of revenue                             19,158                 5,361        257 %             44,587                13,252         236 %

Selling and marketing                       22,874                 8,803        160 %             60,636                30,443          99 %
Product and technology                      11,317                 5,701         99 %             34,158                18,124          88 %
General and administrative                  22,034                 5,490        301 %             66,463                15,539         328 %
Gain on divestiture of
business                                         -                     -         NM                    -               (1,442)       (100) %
Total operating expenses                    75,383                25,355        197 %            205,844                75,916         171 %
Operating loss                            (12,614)               (3,848)        228 %           (64,992)              (22,213)         193 %
Other income (expense):
Interest expense                           (1,857)               (3,952)       (53) %            (4,296)              (10,329)        (58) %
Change in fair value of
earnout liability                            7,413                     -         NM             (15,388)                     -          NM
Change in fair value of
private warrant liability                    2,692                     -         NM             (17,521)                     -          NM
Gain (loss) on extinguishment
of debt                                    (3,133)               (2,532)         24 %              5,110                 1,077         374 %
Investment income and realized
gains, net of investment
expenses                                       248                     -         NM                  448                     -          NM
Other income (expense), net                    316                 1,418       (78) %                225               (2,050)       (111) %
Total other income (expense)                 5,679               (5,066)         NM             (31,422)              (11,302)         178 %
Loss before income taxes                   (6,935)               (8,914)       (22) %           (96,414)              (33,515)         188 %
Income tax benefit (expense)                 1,836                   (9)   

     NM                9,917                  (33)          NM
Net loss                         $         (5,099)      $        (8,923)       (43) %   $       (86,497)      $       (33,548)         158 %




NM = Not Meaningful

Comparison of Three and Nine Months Ended September 30, 2021 and 2020

Revenue

Three months ended September 30, 2021 compared to three months ended September
30, 2020:

Total revenue increased by $41.3 million, or 192% from $21.5 million in the
three months ended September 30, 2020 to $62.8 million in the three months ended
September 30, 2021. The increase in revenue in 2021 is driven by acquisitions
and organic growth in our moving services, inspection and insurance businesses.
As Porch has grown the number of companies that use our software and services,
we have been able to grow our B2B2C ("Business to Business to Consumer") and
move related services revenues.

Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

Total revenue increased by $87.1 million, or 162% from $53.7 million in the nine
months ended September 30, 2020 to $140.9 million in the nine months ended
September 30, 2021. The increase in revenue in 2021 is driven by

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acquisitions and organic growth in our moving services, inspection and insurance
businesses, which contributed an aggregate of $75.7 million of the revenue,
offset by the revenue related to divestitures of $4.3 million.

Cost of Revenue

Three months ended September 30, 2021 compared to three months ended September
30, 2020:

Cost of revenue increased by $13.8 million, or 257% from $5.4 million in the
three months ended September 30, 2020 to $19.2 million in the three months ended
September 30, 2021. The increase in the cost of revenue was mostly attributable
to the growth in the moving business and cost of revenue for our acquired
businesses. As a percentage of revenue, cost of revenue represented 31% of
revenue in the three months ended September 30, 2021 compared with 25% in the
same period in 2020.

Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

Cost of revenue increased by $31.3 million, or 236% from $13.3 million in the
nine months ended September 30, 2020 to $44.6 million in the nine months ended
September 30, 2021. The increase in the cost of revenue was mostly attributable
to the growth in the moving business and cost of revenue for our acquired
businesses. The increase is also due to the loss and loss adjustment expense
related to our insurance carrier business. As a percentage of revenue, cost of
revenue represented 32% of revenue in the nine months ended September 30, 2021
compared with 25% in the same period in 2020.

Selling and marketing

Three months ended September 30, 2021 compared to three months ended September
30, 2020:

Selling and marketing expenses increased by $14.1 million, or 160% from $8.8
million in the three months ended September 30, 2020 to $22.9 million in the
three months ended September 30, 2021. The increase is due to $12.8 million
related to higher selling and marketing costs associated with the growth in our
moving, inspection and insurance businesses, as well as the selling and
marketing costs of our acquired businesses. Additionally, there was an increase
of $1.3 million in stock-based compensation expenses. As a percentage of
revenue, selling and marketing expenses represented 36% of revenue in the three
months ended September 30, 2021 compared with 41% in the same period in 2020.

Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

Selling and marketing expenses increased by $30.2 million, or 99% from $30.4
million in the nine months ended September 30, 2020 to $60.6 million in the nine
months ended September 30, 2021. The increase is due to $27.3 million related to
higher selling and marketing costs associated with the growth in our moving,
inspection and insurance businesses, as well as the selling and marketing costs
of our acquired businesses. Additionally, there was an increase of $4.7 million
in stock-based compensation expenses. This is offset by our divested businesses'
selling and marketing costs of $1.8 million. As a percentage of revenue, selling
and marketing expenses represented 43% of revenue in the nine months ended
September 30, 2021 compared with 57% in the same period in 2020.

Product and technology

Three months ended September 30, 2021 compared to three months ended September
30, 2020:

Product and technology expenses increased by $5.6 million, or 99% from $5.7
million in the three months ended September 30, 2020 to $11.3 million in the
three months ended September 30, 2021. The increase is due to investments in our
moving, insurance and inspection groups, due to the growth in these businesses,
product and technology costs from our acquired businesses, and $1.3 million
higher stock-based compensation expense. As a percentage of revenue, product and
technology expenses represented 18% of revenue in the three months ended
September 30, 2021 compared with 27% in the same period in 2020.

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Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

Product and technology expenses increased by $16.0 million, or 88% from $18.1
million in the nine months ended September 30, 2020 to $34.2 million in the nine
months ended September 30, 2021. The increase is due to investments in moving,
insurance, and inspection groups due to the growth in these businesses, product
and technology costs from our acquired businesses and $4.9 million higher
stock-based compensation expense. As a percentage of revenue, product and
technology expenses represented 24% of revenue in the nine months ended
September 30, 2021 compared with 34% in the same period in 2020.

General and administrative

Three months ended September 30, 2021 compared to three months ended September
30, 2020:

General and administrative expenses increased by $16.5 million, or 301% from
$5.5 million in the three months ended September 30, 2020 to $22.0 million in
the three months ended September 30, 2021, primarily due to costs related to
operating as a public company and increased hiring of corporate resources.
Additionally, from March 2020 through August 2020, the Company reduced pay for
certain employees and partially or fully furloughed certain employees therefore
reducing compensation expense during the period. Also, stock-based compensation
expense for three months ended September 30, 2021 was $2.8 million higher than
in the same period in 2020.

Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

General and administrative expenses increased by $50.9 million, or 328% from
$15.5 million in the nine months ended September 30, 2020 to $66.5 million in
the nine months ended September 30, 2021.The increase is primarily due to
increase in stock-based compensation of $18.2 million and costs operating as a
public company and increased hiring of corporate resources. Additionally, from
March 2020 through August 2020, the Company reduced pay for certain employees
and partially or fully furloughed certain employees therefore reducing
compensation expense in the nine months ended September 30, 2020.

Stock-based compensation consists of expense related to (1) equity awards
granted as compensation in the normal course of business operations, (2)
employee earnout restricted stock (see Note 9) and (3) a secondary market
transaction (dollar amounts in thousands).

                                             Three Months Ended        Nine Months Ended
                                               September 30,            September 30,
                                               2021         2020        2021        2020
Secondary market transaction               $          -    $    -    $     1,933   $     -
Employee earnout restricted stock                 4,243         -         20,792         -
Employee awards                                   1,641       507         

6,636 1,541
Total stock-based compensation expenses $ 5,884 $ 507 $ 29,361 $ 1,541

Interest expense, net

Three months ended September 30, 2021 compared to three months ended September
30, 2020:

Interest expense decreased by $2.1 million, or 53% from $4.0 million in the
three months ended September 30, 2020 to $1.9 million in the three months ended
September 30, 2021. The decrease was primarily due to decreased interest rates
paid during the three months ended September 30, 2021 compared with the three
months ended September 30, 2020, as a result of the January 2021 amendment to
the Company's senior secured term loans, which reduced the interest payable from
11.05% to 8.55% and subsequent repayment of these loans in September 2021 (see
Note 7). The effective interest rate for the new 2026 Notes issued in September
2021 was 1.3%, which further reduced the Company's interest expense.

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Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

Interest expense decreased by $6.0 million, or 58% from $10.3 million in the
nine months ended September 30, 2020 to $4.3 million in the nine months ended
September 30, 2021. The decrease was primarily due to a decreased interest rates
paid during the nine months ended September 30, 2021 compared with the nine
months ended September 30, 2020, as a result of the January 2021 amendment to
the Company's senior secured term loans, their subsequent repayment and the fact
that the new 2026 Notes issued in September 2021 have substantially lower
interest rate.

Change in fair value of earnout liability

Changes in fair value of earnout liability were $7.4 million gain and $15.4
million (loss) in the three and nine months ended September 30, 2021,
respectively. During the nine months ended September 30, 2021, $25.8 million of
the earnout liability was reclassified to additional paid in capital as a result
of a vesting event in March 2021.

Change in fair value of private warrant liability

Changes in fair value of private warrant liability were $2.7 million gain and
$17.5 million (loss) in the three and nine months ended September 30, 2021,
respectively. During the three months and nine months ended September 30, 2021,
$14.5 million and $31.3 million, respectively, was reclassified to additional
paid in capital as a result of warrant exercises.

Gain (loss) on extinguishment of debt

Three months ended September 30, 2021 compared to three months ended September
30, 2020:

Loss on extinguishment of debt was $3.1 million and $2.5 million in the three
months ended September 30, 2021 and 2020, respectively. The $3.1 million loss in
the three months ended September 30, 2021 relates to the repayment of all
outstanding obligations under the Runway Loan Agreement. See Note 7. The $2.5
million loss in the three months ended September 30, 2020 relates to an
amendment of a legacy 2019 promissory note, which was subsequently repaid.

Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

Gain on extinguishment of debt was $5.1 million and $1.1 million in the nine
months ended September 30, 2021 and 2020, respectively. The $5.1 million gain in
the nine months ended September 30, 2021 consists of the $8.2 million gain on
extinguishment of the Porch PPP Loan, offset by the $3.1 million loss on
repayment of all outstanding obligations under the Runway Loan Agreement. The
$1.1 million gain in the nine months ended September 30, 2020 relates to the net
impact of extinguishments of several Company's legacy promissory notes.

Investment income and realized gains, net of investment expenses

Investment income and realized gains, net of investment expenses was $0.2
million and $0.4 million in the three and nine months ended September 30, 2021,
respectively.

Other income (expense)

Three months ended September 30, 2021 compared to three months ended September
30, 2020:

Other income, net was trivial and did not change significantly in both periods.

Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

Other expense, net was $0.2 million income in the nine months ended September
30, 2021 and $2.1 million expense in the nine months ended September 30, 2020.
The $2.3 million change was primarily due to $1.2 million loss on

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remeasurement of legacy preferred stock warrant liability and $0.9 million loss
on remeasurement of debt in the nine months ended September 30, 2020.

Income tax expense (benefit)

Three months ended September 30, 2021 compared to three months ended September
30, 2020:

Income tax benefit of $1.8 million was recognized for the three months ended
September 30, 2021 primarily due to the impact of acquisitions on the Company's
valuation allowance. Income tax expense was not material for the three months
ended September 30, 2020. The Company's effective tax rate in both periods
differs substantially from the statutory tax rate primarily due to a full
valuation allowance related to the Company's net deferred tax assets.

Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

Income tax benefit of $9.9 million was recognized for the nine months ended
September 30, 2021 primarily due to the impact of acquisitions on the Company's
valuation allowance. Income tax expense was not material for the nine months
ended September 30, 2020. The Company's effective tax rate in both periods
differs substantially from the statutory tax rate primarily due to a full
valuation allowance related to the Company's net deferred tax assets.

Segment Results of Operations

We operate our business as two reportable segments that are also our operating
segments: Vertical Software and Insurance. For additional information about our
segments, see Note 12 in the notes to the condensed consolidated financial
statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Segment Revenue


                     Three Months Ended     Nine Months Ended
                                September 30, 2021
Revenue:
Vertical software   $             42,287   $           101,629
Insurance                         20,482                39,223
Total revenue       $             62,769   $           140,852

For the three months ended September 30, 2021, the Vertical Software segment
revenues were $42.3 million or 67% of total revenue. The Insurance segment
revenues were $20.5 million or 33% of total revenue during the same period.

For the nine months ended September 30, 2021 the Vertical Software segment
revenues were $101.6 million or 72% of total revenue. The Insurance segment
revenues were $39.2 million or 28% of total revenue during the same period.

The increase in the proportion of the Insurance segment revenue in the three
months ended September 30, 2021 is mainly due to the acquisitions of HOA and
AHP.

Segment Adjusted EBITDA (Loss)

Segment Adjusted EBITDA (loss) is defined as revenue less operating expenses
associated with our segments. Segment Adjusted EBITDA (loss) also excludes
non-cash items, certain transactions that are not indicative of ongoing segment
operating and financial performance and are not reflective of the Company's core
operations. See Note 12 in the notes to the condensed consolidated financial
statements included in Part I, Item 1 of this Quarterly Report for additional
information.

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                                          Three Months Ended     Nine Months Ended
                                                     September 30, 2021
Segment adjusted EBITDA (loss):
Vertical Software                         $             7,712   $            19,041
Insurance                                               5,473                 3,067
Corporate and Other(1)                               (12,312)              (40,754)

Total segment adjusted EBITDA (loss)(2)   $               873   $         

(18,646)

(1) Includes costs that are not directly attributable to our reportable
segments, as well as certain shared costs.

(2) See reconciliation of adjusted EBITDA (loss) to net loss below.

Non-GAAP Financial Measures

This report includes non-GAAP financial measures, such as Adjusted EBITDA
(loss), Adjusted EBITDA (loss) as a percent of revenue and average revenue per
monetized service.

Porch defines Adjusted EBITDA (loss) as net income (loss) adjusted for interest
expense, net, income taxes, other expenses, net, depreciation and amortization,
certain non-cash long-lived asset impairment charges, stock-based compensation
expense and acquisition-related impacts, including compensation to the sellers
that requires future service, amortization of intangible assets, gains (losses)
recognized on changes in the value of contingent consideration arrangements, if
any, gain or loss on divestures and certain transaction costs. Adjusted EBITDA
(loss) as a percent of revenue is defined as Adjusted EBITDA (loss) divided by
GAAP total revenue. Average revenue per monetized services in quarter is the
average revenue generated per monetized service performed in a quarterly period.
When calculating average revenue per monetized service in a quarter, average
revenue is defined as total quarterly service transaction revenues generated
from monetized services.

Porch's management and Board of Directors use these non-GAAP financial measures
as supplemental measures of Porch's operating and financial performance for
historical and forward-looking periods, for internal budgeting and forecasting
purposes, to evaluate financial and strategic planning matters, and for certain
measures, to establish performance goals for incentive programs.  Porch believes
that the use of these non-GAAP financial measures provides investors with useful
information to evaluate projected operating results and trends and in comparing
Porch's financial measures with competitors, other similar companies and
companies across different industries, many of which present similar non-GAAP
financial measures to investors. However, Porch's definitions and methodology in
calculating these non-GAAP measures may not be comparable to those used by other
companies.  In addition, Porch may modify the presentation of these non-GAAP
financial measures in the future, and any such modification may be material.

You should not consider these non-GAAP financial measures in isolation, as a
substitute to or superior to financial performance measures determined in
accordance with GAAP.  The principal limitation of these non-GAAP financial
measures is that they exclude specified income and expenses, some of which may
be significant or material, that are required by GAAP to be recorded in Porch's
consolidated financial statements. Porch may also incur future income or
expenses similar to those excluded from these non-GAAP financial measures, and
Porch's presentation of these measures should not be construed as an inference
that future results will be unaffected by unusual or non-recurring items.  In
addition, these non-GAAP financial measures reflect the exercise of management
judgment about which income and expense are included or excluded in determining
these non-GAAP financial measures.

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See the reconciliation tables below for more details regarding these non-GAAP
financial measures, including the reconciliation of non-GAAP financial measures
to the most directly comparable GAAP financial measures.The following table
reconciles net loss to Adjusted EBITDA (loss) for the three and nine months
ended September 30, 2021 and the three and nine months ended September 30, 2020
(dollar amounts in thousands):


                                           Three Months Ended September 30,          Nine Months Ended September 30,
                                               2021                  2020               2021                  2020
Net loss                                 $        (5,099)      $        (8,923)   $       (86,497)      $       (33,548)
Interest expense                                    1,857                 3,952              4,296                10,329

Income tax (benefit) expense                      (1,836)                     9            (9,917)                    33
Depreciation and amortization                       4,431                 1,635             10,787                 5,021
Loss (gain) on extinguishment of debt               3,133                 2,532            (5,110)               (1,077)
Other expense (income), net(1)                      (316)               (1,418)              (225)                 2,050
Non-cash long-lived asset impairment
charge                                                 76                   239                216                   540
Non-cash stock-based compensation
expense                                             5,884                   507             29,249                 1,239
Non-cash bonus expense                                695                     -              1,378                     -
Revaluation of contingent
consideration                                         195                   100              (380)                 1,500

Revaluation of earnout liability                  (7,413)                     -             15,388                     -
Revaluation of private warrant
liability                                         (2,692)                     -             17,521                     -
Acquisition and related expense(2)                  1,958                 

(68)              4,648                 (386)
Adjusted EBITDA (loss)                   $            873      $        (1,435)   $       (18,646)      $       (14,299)
Adjusted EBITDA (loss) as a
percentage of revenue                                   1 %                 (7) %             (13) %                (27) %

(1) Other expense, net includes:

                                                Three Months Ended September 30,            Nine Months Ended September 30,
                                                 2021                    2020                  2021                   2020

Loss (gain) on remeasurement of debt                      -                     (488)                   -                    924
Loss (gain) on remeasurement of legacy
preferred stock warrant liability                         -                

    (785)                   -                  1,214
Other, net                                            (316)                     (145)               (225)                   (88)
                                            $         (316)       $           (1,418)    $          (225)       $          2,050

(2) Acquisition and related expense includes:

                                                      Three Months Ended September 30,           Nine Months Ended September 30,
                                                         2021                    2020              2021                 2020
Acquisition compensation - stock-based
compensation expense                               $               -        $             -    $         112      $             302
Gain on divestiture of businesses                                  -                      -                -                (1,442)
Professional fees                                              1,956                   (91)            4,526                    609
Transaction expenses and other                                     2       

             23               10                    145
                                                   $           1,958        $          (68)    $       4,648      $           (386)




Adjusted EBITDA for the three months ended September 30, 2021 was $0.9 million,
a $2.3 million improvement from Adjusted EBITDA (loss) of $1.4 million for the
same period in 2020. The improvement in the three months ended September 30,
2021 is primarily due to the increase in revenue driven by acquisitions and
organic growth in our moving services, inspection and insurance businesses.

Adjusted EBITDA (loss) for the nine months ended September 30, 2021 was $18.6
million, a $4.3 million decline from Adjusted EBITDA (loss) of $14.3 million for
the same period in 2020. The decline in Adjusted EBITDA (loss) is due to the
weather-related loss impact of the HOA insurance business, legal costs
attributable to general legal matters, increase in general and administrative
costs related to public companies and increased hiring for corporate resources.
Additionally during the nine months ended September 30, 2020 there was a
compensation reduction which did not recur

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during the comparable period in the current year. This was partially offset by
revenue growth in the moving, insurance and inspection groups, as well as no
negative impact of the divested businesses in 2020.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily from the sales of
redeemable convertible preferred stock and convertible promissory notes, and
proceeds from the senior secured term loans. On December 23, 2020, the Company
received approximately $269.5 million of aggregate cash proceeds from
recapitalization, net of transactions costs. As of September 30, 2021, the
Company had cash and cash equivalents of $410.2 million and $5.6 million of
restricted cash.

The Company has incurred net losses since its inception, and has an accumulated
deficit at September 30, 2021 and December 31, 2020 totaling $404.0 million and
$317.5 million, respectively.

As of September 30, 2021 and December 31, 2020, the Company had $429.6 million
and $50.8 million aggregate principal amount outstanding in convertible notes,
term loans and promissory notes, respectively. During 2020 and the first half of
2021, the Company refinanced the existing $40.0 million term loans and received
additional loan proceeds of $7.0 million from new senior secured term loans and
$10.3 million from the U.S. government pursuant to the Paycheck Protection
Program under the CARES Act.

In September 2021, the Company completed a private offering of $425 million
aggregate principal amounts of its 2026 Notes. The Company used a portion of the
net proceeds from the 2026 Notes offering to repay all outstanding obligations
under a Loan and Security Agreement, dated as of July 22, 2020 (as subsequently
amended, the "Runway Loan Agreement"), among the Company's wholly-owned
subsidiary Porch.com, Inc., as borrower representative, a syndicate of lenders
party thereto, the other borrowers party thereto, the guarantors party thereto
and Runway Growth Finance Corp (f/k/a Runway Growth Credit Fund Inc.), as
administrative agent and collateral agent (the "Agent"), pursuant to which there
was a $40.4 million senior secured term loan outstanding (the "Senior Secured
Term Loan"). The total repayment amount of $42.8 million consisted of
outstanding principal, accrued interest, prepayment fees and related expenses.
Concurrent with such repayment in full of all outstanding obligations under the
Senior Secured Term Loan on September 16, 2021, the Runway Loan Agreement (and
all commitments and liens thereunder) was terminated. A loss on extinguishment
of $3.1 million was recorded.

Based on the Company's current operating and growth plan, management believes
cash and cash equivalents at September 30, 2021, are sufficient to finance the
Company's operations, planned capital expenditures, working capital requirements
and debt service obligations for at least the next 12 months. As the Company's
operations evolve and continues its growth strategy, including through
acquisitions, the Company may elect or need to obtain alternative sources of
capital, and it may finance additional liquidity needs in the future through one
or more equity or debt financings. The Company may not be able to obtain equity
or additional debt financing in the future when needed or, if available, the
terms may not be satisfactory to the Company or could be dilutive to its
stockholders.

Additionally, in the nine months ended September 30, 2021, the Company raised
approximately $130.3 million from the exercises of public warrants and stock
options.

The Company has used the proceeds from debt and equity principally to fund
general operations and acquisitions.

In the nine months ended September 30, 2021, the Company spent $178.7 million in
cash, net of cash acquired, plus stock of $24.8 million to acquire several
companies, in transactions accounted for as business combinations.

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The following table provides a summary of cash flow data for the three and nine
months ended September 30, 2021 and 2020:

                                            Nine Months Ended September 30,             $            %
                                               2021                   2020            Change       Change

                                                           (dollar amounts in thousands)
Net cash used in operating activities    $        (41,717)      $       (17,015)    $  (24,702)        145 %
Net cash used in investing activities            (184,657)               (3,852)      (180,805)         NM
Net cash provided by financing
activities                                         434,752                21,825        412,927         NM
Change in cash, cash equivalents and
restricted cash                          $         208,378      $            958    $   207,420         NM




Operating Cash Flows

Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

Net cash used in operating activities was $41.7 million for the nine months
ended September 30, 2021. Net cash used in operating activities consists of net
loss of $86.5 million, adjusted for non-cash items and the effect of changes in
working capital. Non-cash adjustments include stock-based compensation expense
of $29.4 million, depreciation and amortization of $10.8 million, gain on
extinguishment of debt of $5.1 million, and fair value adjustments to earnout
liability and private warrant liability of $15.4 million and $17.5 million,
respectively. Net changes in working capital were a use of cash of $22.7
million, primarily due to increases in current liabilities and reinsurance
balance due.

Net cash used in operating activities was $17.0 million for the nine months
ended September 30, 2020. Net cash used in operating activities consists of net
loss of $33.5 million, adjusted for non-cash items and the effect of changes in
working capital. Non-cash adjustments include stock-based compensation expense
of $1.5 million, depreciation and amortization of $5.0 million, non-cash accrued
and payment-in-kind interest of $4.9 million, gain on extinguishment of debt of
$1.1 million, fair value adjustments to debt, contingent consideration and
warrants with combined losses of $3.6 million, gain on divestiture of businesses
of $1.4 million, and loss on sale and impairment of long-lived assets of $0.8
million. Net changes in working capital provided cash of $3.0 million, primarily
due to increases in current liabilities.

Investing Cash Flows

Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

Net cash used in investing activities was $184.7 million for the nine months
ended September 30, 2021. Net cash used in investing activities is primarily
related to purchases of investments of $19.1 million, investments to develop
internal use software of $2.6 million, and acquisitions, net of cash acquired of
$178.7 million. This was offset by the cash inflows related to maturities and
sales of investments of $16.4 million.

Net cash used in investing activities was $3.9 million for the nine months ended
September 30, 2020. Net cash used in investing activities is primarily related
to investments to develop internal use software of $2.1 million and acquisitions
of $1.6 million.

Financing Cash Flows

Nine months ended September 30, 2021 compared to nine months ended September 30,
2020:

Net cash provided by financing activities was $434.8 million for the nine months
ended September 30, 2021. Net cash provided by financing activities is primarily
related to the issuance of the 2026 Notes of $413.5 million, financing of the
capped call transactions of $42.9 million, and exercises of warrants and stock
options of $130.3 million, partially offset by shares repurchased to pay income
tax withholdings upon vesting of RSUs of $23.8 million and debt repayments

of
$43.0 million.

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Net cash provided by financing activities was $21.8 million for the nine months
ended September 30, 2020. Net cash provided by financing activities is primarily
related to debt financing of $61.2 million, net of loan repayments of $42.9
million, and proceeds from issuance of redeemable convertible preferred stock of
$4.7 million, partially offset by deferred offering costs of $1.3 million.

Off-Balance Sheet Arrangements

Since the date of our incorporation, we have not engaged in any off-balance
sheet arrangements, as defined in the rules and regulations of the SEC.

Emerging Growth Company Status

The Company is an emerging growth company ("EGC"), as defined in the Jumpstart
Our Business Startups Act of 2012 (the "JOBS Act"). In accordance with the JOBS
Act, the Company previously elected to delay adopting new or revised accounting
standards issued subsequent to the enactment of the JOBS Act until such time as
those standards apply to private companies. As of June 30, 2021, the last
business day of the second fiscal quarter, the Company met certain thresholds
for qualification as a "large accelerated filer" as defined in Rule 12b-2 of the
Securities Exchange Act of 1934, as amended. Therefore, the Company expects to
lose EGC status as of December 31, 2021. The impact of this change in filing
status includes being subject to the requirements of large accelerated filers,
which includes shortened filing timelines, no delayed adoption of certain
accounting standards, presentation of two comparative periods, and attestation
of the Company's internal control over financial reporting by its independent
auditor.

Recent Accounting Pronouncements

See Note 1 to our unaudited condensed consolidated financial statements as of
and for the three and nine months ended September 30, 2021 for more information
about recent accounting pronouncements, the timing of their adoption, and our
assessment, to the extent we have made one, of their potential impact on our
financial condition and our results of operations.