Debt

3 Months Ended

Mar. 31, 2023

Debt

Debt

7. Debt

At March 31, 2023, debt comprised of the following:

					Debt
			Unaccreted		Issuance		Carrying
	Principal		Discount		Costs		Value
Convertible senior notes, due 2026	$	425,000	$	—	$	(7,947)	$	417,053
Advance funding arrangement		9,255		(408)		—		8,847
Term loan facility, due 2029		9,651		—		—		9,651
Other notes		300		(76)		—		224
	$	444,206	$	(484)	$	(7,947)	$	435,775

Convertible Senior Notes

Interest expense recognized related to the 0.75% Convertible Senior Notes due 2026 (the “2026 Notes”) was approximately $1.4 million for each of the three months ended March 31, 2023 and 2022, and comprised of contractual interest expense and amortization of debt issuance costs.

In April 2023, the Company issued $333 million aggregate principal amount of 6.75% Senior Secured Convertible Notes due in 2028 (the “2028 Notes”) in a private placement transaction. Porch used a portion of the net proceeds from the 2028 Notes offering to repurchase $200 million of the 2026 Notes and to fund the repayment of $9.7 million outstanding under HOA’s term loan facility, in each case plus accrued and unpaid interest thereon and related fees and expenses. See Note 16 for additional information.

Advance Funding Arrangement

For certain home warranty contracts, the Company participates in a financing arrangement with third-party financers that provide the Company with contract premium upfront, less a financing fee. Third-party financers collect installment payments from the warranty contract customer which satisfy the Company’s repayment obligation over a portion of the contract term. We remain obligated to repay the third-party financer if a customer cancels its warranty contract prior to full repayment of the advance funding amount received by the Company. As part of the arrangement, the Company pays financing fees, which are collected by the third-party financers upfront, and are initially recognized as a debt discount. Financing fees are amortized as interest expense under the effective interest method. The implied interest rate varies per contract and is generally approximately 14% of total funding received. Interest expense recognized related to advance funding arrangement was $0.5 million and $1.0 million for the three months ended March 31, 2023 and 2022, respectively.

Term Loan Facility

As of March 31, 2023, the Company has borrowed $9.7 million on the HOA term loan facility. In April 2023, the term loan facility was repaid in full by using a portion of the 2028 Notes offering proceeds. See Note 16 for additional information.