Fair Value

3 Months Ended

Mar. 31, 2025

Fair Value Disclosures [Abstract]

Fair Value

Note 6. Fair Value

The following tables summarize the fair value measurements of assets and liabilities that are measured at fair value on a recurring basis.

		Fair Value Measurement as of March 31, 2025
		Level 1		Level 2		Level 3		Total Fair Value
Assets
Money market mutual funds		$	9,324	$	—	$	—	$	9,324
Debt securities:
U.S. Treasuries		16,589		—		—		16,589
Obligations of states, municipalities and political subdivisions		—		2,097		—		2,097
Corporate bonds		—		8,639		—		8,639
Residential and commercial mortgage-backed securities		—		3,400		—		3,400
Other loan-backed and structured securities		—		—		—		—
Asset of Reciprocal (a consolidated variable interest entity):
Money market mutual funds		1,760		—		—		1,760
Debt securities:
U.S. Treasuries		9,669		—		—		9,669
Obligations of states, municipalities and political subdivisions		—		9,525		—		9,525
Corporate bonds		—		78,034		—		78,034
Residential and commercial mortgage-backed securities		—		61,301		—		61,301
Other loan-backed and structured securities		—		12,395		—		12,395
		$	37,342	$	175,391	$	—	$	212,733
Liabilities
Contingent consideration - business combinations	(1)	$	—	$	—	$	55	$	55
Private warrant liability	(2)	—		—		1,192		1,192
Embedded derivatives	(3)	—		—		15,589		15,589
		$	—	$	—	$	16,836	$	16,836

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(1)The liability for contingent considerations related to business combinations is included in other liabilities in the unaudited Condensed Consolidated Balance Sheets as of March 31, 2025.

(2)The private warranty liability is included in accrued expenses and other current liabilities in the unaudited Condensed Consolidated Balance Sheets as of March 31, 2025.

(3)The embedded derivatives liability is included in other liabilities in the unaudited Condensed Consolidated Balance Sheets as of March 31, 2025.

		Fair Value Measurement as of December 31, 2024
		Level 1		Level 2		Level 3		Total Fair Value
Assets
Money market mutual funds		$	111,950	$	—	$	—	$	111,950
Debt securities:
U.S. Treasuries		27,102		—		—		27,102
Obligations of states, municipalities and political subdivisions		—		11,872		—		11,872
Corporate bonds		—		70,896		—		70,896
Residential and commercial mortgage-backed securities		—		60,774		—		60,774
Other loan-backed and structured securities		—		12,107		—		12,107
		$	139,052	$	155,649	$	—	$	294,701
Liabilities
Contingent consideration - business combinations	(1)	$	—	$	—	$	83	$	83
Private warrant liability	(2)	—		—		460		460
Embedded derivatives	(3)	—		—		22,262		22,262
		$	—	$	—	$	22,805	$	22,805

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(1)The unaudited Condensed Consolidated Balance Sheets included less than $0.1 million in accrued expenses and other current liabilities and less than $0.1 million in other liabilities as of December 31, 2024, for contingent consideration related to business combinations.

(2)The private warranty liability is included in accrued expenses and other current liabilities in the unaudited Condensed Consolidated Balance Sheets as of December 31, 2024.

(3)The embedded derivatives liability is included in other liabilities in the unaudited Condensed Consolidated Balance Sheets as of December 31, 2024.

Financial Assets

Money market mutual funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. As the funds are generally maintained at a net asset value which does not fluctuate, cost approximates fair value. These are included as a Level 1 measurement in the table above. The fair values for available-for-sale fixed-maturity securities are based upon prices provided by an independent pricing service. We have reviewed these prices for reasonableness and have not adjusted any prices received from the independent provider. Level 2 securities represent assets whose fair value is determined using observable market information such as previous day trade prices, quotes from less active markets or quoted prices of securities with similar characteristics. There were no transfers between Level 1 and Level 2.

Contingent Consideration – Business Combinations

As part of the acquisition of Floify, LLC (“Floify”) in October 2021, we issued shares as partial closing consideration to the sellers of Floify and guaranteed that the value of those shares would equal or exceed 200% of such price on or prior to December 31, 2024 (the “True-Up Obligation”). The True-Up Obligation could be settled at our option in cash, Porch common stock, or a combination thereof. On March 27, 2024, we entered into a settlement agreement and mutual release of claims with the sellers of Floify to settle a post-closing dispute. As part of the of this agreement, the sellers of Floify agreed to terminate the True-Up Obligation in full and released from restriction approximately $0.9 million of escrowed cash to us. We estimated the fair value of the True-Up Obligation as of the settlement date using the Monte Carlo simulation method. The fair value is based on the simulated market price of our common stock over the maturity date of the True-Up Obligation. As of March 27, 2024, the key inputs used to determine the fair value of $14.9 million included the stock price of $4.13, strike price of $36.00, discount rate of 23.6% and volatility of 95%. Subsequent to the valuation, we recognized a gain on settlement in other income, net, in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss equal to the fair value of $14.9 million.

We estimated the fair value of the business combination contingent consideration based on specific metrics related to the acquisition of Residential Warranty Services (“RWS”) in April 2022, using the discounted cash flow method. The fair value is based on a percentage of revenue of the contingent consideration through the maturity date of August 2026. As of March 31, 2025, the key inputs used to determine the fair value of $0.1 million were management’s cash flow estimates

and the discount rate of 14%. As of December 31, 2024, the key inputs used to determine the fair value of $0.1 million were management’s cash flow estimates and the discount rate of 14%.

Private Warrants

We estimated the fair value of the private warrants that expire on December 23, 2025, using the Black-Scholes-Merton option pricing model. As of March 31, 2025, the key inputs used to determine the fair value included exercise price of $11.50, expected volatility of 67%, remaining contractual term of 0.73 years, and stock price of $7.29. As of December 31, 2024, the key inputs used to determine the fair value included exercise price of $11.50, expected volatility of 67%, remaining contractual term of 0.98 years, and stock price of $4.92.

Embedded Derivatives

In connection with the issuance of senior secured convertible notes in April 2023 and in accordance with Accounting Standards Codification 815-15, Derivatives and Hedging – Embedded Derivatives, certain features of the senior secured convertible notes were bifurcated and accounted for separately from the notes. The following features are recorded as derivatives.

•Repurchase option. If more than $30 million aggregate principal amount of the 2026 Notes remains outstanding on June 14, 2026, the 2028 Note holders have the right to require us to repurchase for cash on June 15, 2026, all or any portion of their 2028 Notes, in principal amounts of one thousand dollars or an integral number thereof, at a repurchase price equal to 106.5% of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

•Fundamental change option. If we undergo a fundamental change, as defined in the indenture governing the 2028 Notes and subject to certain conditions, holders of the 2028 Notes have the right to require us to repurchase for cash all or any portion of their 2028 Notes, in principal amounts of one thousand dollars or an integral multiple thereof, at a repurchase price equal to 105.25% of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date. A fundamental change includes events such as a change in control, recapitalization, liquidation, dissolution, or delisting.

•Asset sale repurchase option. If we sell assets and receive net cash proceeds of $2.5 million in excess of the Asset Sale Threshold (as defined below) (such excess net cash proceeds, the “Excess Proceeds”), we must offer to all holders of 2028 Notes to repurchase their 2028 Notes for an aggregate amount of cash equal to 50% of such Excess Proceeds at a repurchase price per 2028 Note equal to 100% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the relevant purchase date, if any. “Asset Sale Threshold” means $20.0 million in the aggregate, provided that on and after the date on which the cumulative net cash proceeds received by the Company and its restricted subsidiaries from the sale of assets after April 20, 2023, exceeds $20.0 million in the aggregate, the “Asset Sale Threshold” means $0. As of March 31, 2025, our remaining Asset Sale Threshold was $9.1 million (See Note 17).

The inputs for determining fair value of the embedded derivatives are classified as Level 3 inputs. Level 3 fair value is based on unobservable inputs based on the best information available. These inputs include the probabilities of a repurchase, a fundamental change, and qualifying asset sales, ranging from 2% to 57%.

Level 3 Rollforward

Fair value measurements categorized within Level 3 are sensitive to changes in the assumptions or methodology used to determine fair value, and such changes could result in a significant increase or decrease in the fair value.

The changes for Level 3 items measured at fair value on a recurring basis using significant unobservable inputs are as follows:

		Contingent Consideration - Business Combinations		Embedded Derivatives		Private Warrant Liability
Fair value as of December 31, 2024		$	83	$	22,262	$	460
Change in fair value, loss (gain) included in net loss	(1)	(28)		(6,673)		732
Fair value as of March 31, 2025		$	55	$	15,589	$	1,192

		Contingent Consideration - Business Combinations		Embedded Derivatives		Private Warrant Liability
Fair value as of December 31, 2023		$	18,455	$	28,131	$	1,151
Settlements		(14,930)		—		—
Change in fair value, loss (gain) included in net loss	(1)	1,051		(1,483)		425
Fair value as of March 31, 2024		$	4,576	$	26,648	$	1,576

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(1)Changes in fair value of contingent consideration related to business combinations are included in general and administrative expenses in the unaudited condensed consolidated statements of operations. Changes in fair value of the private warrant liability and embedded derivatives are disclosed separately in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Fair Value of Fixed Rate Debt

As of March 31, 2025, and December 31, 2024, the fair value of the 2026 Notes (see Note 9) was $152.5 million and $137.7 million, respectively. As of March 31, 2025, and December 31, 2024, the fair value of the 2028 Notes (see Note 9) was $295.4 million and $278.3 million, respectively. The fair value of the other notes approximate the unpaid principal balance. All debt, other than the convertible notes which are Level 2, is considered a Level 3 measurement.