Good afternoon, and thank you for participating in Porch Group's third quarter 2026 conference call. Earlier today, we issued our earnings release and filed our related Form 8-K with the SEC. The earnings release and today's presentation are available on our investor relations website at ir.porchgroup.com. Before we begin, I'd like to review the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995, which provides important cautions regarding forward-looking statements. Today's discussions, including responses to your questions, reflect management's views as of today, October 28, 2026. We undertake no obligation to update or revise these remarks. We will make forward-looking statements that involve risk and uncertainties, and actual results may differ materially. Please refer to the information on this slide and our SEC filings for additional detail. We will also reference certain non-GAAP financial measures.
Reconciliations to the most directly comparable GAAP measures are included in today's earnings release, available at ir.porchgroup.com. A replay of this webcast will also be available after this call on our investor relations site. Joining me here today are Matt Ehrlichman, Porch's CEO, Chairman, and Founder; Shawn Tabak, Porch's CFO; and Matthew Neagle, Porch's COO. With that, I'll turn the call over to Matt for his key updates.
Thanks, John. Good afternoon, everyone. Q3 was another strong quarter for Porch, and we are proud of the team's execution. Reciprocal policies written grew 42% year-over-year. Adjusted EBITDA, excluding the Reciprocal, more than doubled. Insurance Services delivered its sixth consecutive Rule of 80 quarter, combining 39% revenue growth and 49% Adjusted EBITDA margin. These results drove another healthy raise to our full-year outlook. In my view, the key takeaway is that our organic growth system is working well. We have significant capacity at the Reciprocal, an expanding distribution funnel, rapid new customer growth, and disciplined underwriting. As that volume moves through our largely fixed Porch cost structure, it generates higher earnings, strong cash flow, and an improving financial profile. Our performance allows us to complement organic growth selectively through M&A.
We recently announced the pending acquisition of Allied Trust, a high-quality regional insurance company, which is expected to add scale, products, geographies, talent, and more than a decade of claims data. I'll turn to Allied shortly, but first, let's review our strong third quarter results. A few highlights. Reciprocal written premium, or RWP, was $161 million, up 17% year-over-year. Reciprocal policies written of 68,000 grew 42% year-over-year, which accelerated from Q2's 38% growth rate. As a reminder, we generate some of our Insurance Services revenue based on premium and some based on the number of policies. RWP flowed through to Insurance Services Adjusted EBITDA at a 31% conversion rate, reflecting continued operating leverage in Insurance Services. At the company-wide level, Adjusted EBITDA, excluding the Reciprocal, was 28% of RWP.
The strengthening earnings power is clear to see in the year-over-year comparison with Adjusted EBITDA, excluding the Reciprocal, of $44 million, more than doubling from the prior year period. Taken together, the quarter provides another clear proof point that the model is working. The framework for scaling Insurance Services remains straightforward. The Reciprocal statutory surplus provides capacity. Agencies and quote volume creates opportunities. Conversion turns those opportunities into policies and premium. Our proprietary data and underwriting discipline help determine which risks we want to win and at what price, producing leading loss ratios and more margin in the system. Let's look at total policy growth and then each component that builds to that result. You can see here in Q3, total Reciprocal policies written across new and renewal grew 42% year over year to 68,000.
The rate of growth accelerated from Q2, and we expect policy growth to remain strong in Q4. The expansion of the customer base is the purest indicator of our growth and momentum. Supporting continued growth begins with maintaining a strong capital position at the Reciprocal, which we measure primarily through statutory surplus as well as non-admitted assets. Since the launch of the Reciprocal, statutory surplus has increased by almost $75 million and in Q3 at $174 million. This is up $22 million from the prior year period and higher sequentially for the sixth consecutive quarter. The expanding surplus demonstrates the strength of the underlying underwriting results and provides substantial capacity to support disciplined premium growth. Exiting this quarter, the Reciprocal statutory surplus supports what is approaching $1 billion of premium.
The Reciprocal also holds non-admitted assets, primarily Porch shares, which we can turn into statutory surplus at our discretion or use in M&A to create substantial value. Including non-admitted assets, the Reciprocal has the ability to support over $2 billion of premium. With that capacity in place, the next component of the growth engine is expanding the distribution funnel. Our land and expand strategy continues to add new producing agencies and deepen production within existing relationships. In Q3, producing agency branch locations increased 114% year over year, while quote volume grew 79% and increased sequentially for the eighth consecutive quarter. We see a considerable runway to add producing agencies, increase production within existing relationships, and expand into additional geographies. Next, conversion rate, which was approximately flat versus Q2 and up 53% year over year.
Conversion rate is one of the levers we use to manage the policy and premium growth needed to achieve our internal revenue and profit objectives. In certain hard market cycles, there will be more premium and less policies, and in soft markets, the inverse. Given the strength of our top of funnel, we are in a fantastic position. We can manage conversion, maintain exceptional loss ratios to maximize overall margin in the system, and achieve our goals. Conversion rates strengthened throughout October, supporting accelerating premium policy growth in Q4 while maintaining the underwriting discipline and attractive earnings flow-through that are producing this year's substantial outperformance. Together, quotes and conversion produce RWP from new customers, which almost tripled year over year, increasing 178%. We are doing this while producing exceptional underwriting results.
For the quarter, the Reciprocal's overall gross loss ratio was 24%, and attritional losses, which exclude catastrophic weather events, was 18%. This excess margin in the system generates substantial cash flow, which can be used to supplement our organic growth with M&A. Speaking of which, a few weeks ago, we announced the proposed acquisition of Allied Trust, an established regional insurance company with meaningful operations in Texas and Louisiana and additional presence in the Carolinas. It is a strong strategic fit. Following closing, we expect to leverage Porch's proprietary property data to identify and reduce exposures that do not meet our internal targeted returns, improve pricing across the retained book, and focus future growth on the most attractive risks. We have constructed this deal to be efficient and accretive for Porch shareholders.
The approximately $200 million of aggregate consideration or $140 million net of Allied statutory surplus is separated between the Reciprocal and Porch Group. The Reciprocal is spending $105 million to acquire the insurance carrier, which is expected to have approximately $60 million of statutory surplus at closing, which immediately comes back. Net of that acquired surplus, the Reciprocal's effective purchase consideration is expected to be approximately $45 million, funded with a small amount of its non-admitted Porch shares. Overall, the deal is expected to be approximately statutory surplus neutral for the Reciprocal. Porch expects to spend $95 million to acquire Allied's managing general agency and captive reinsurance entities, $75 million in cash and $20 million in stock. For Porch, this represents an acquisition multiple of less than four times EBITDA, given the approximately $25 million of adjusted EBITDA expected to accrue to Porch in the first full year following closing.
Allied, similar to other homeowners' insurance companies, generates lower premium-to-earnings conversion than what Porch sees today. Following closing, we expect to improve those economics by applying our data and unique capabilities as we did with HOA previously. We expect those benefits to develop progressively over the 12 to 24 months following closing. With this, we expect the cash earnings generated by Allied to repay Porch's investment within three years. While we are not providing 2027 guidance until next quarter per our standard rhythm, we wanted to provide some initial visibility into what the baseline looks like next year, assuming a full year of Allied contributions. Our internal combined company 2027 target includes more than $900 million of RWP, more than 360,000 Reciprocal policies written, and more than $180 million of adjusted EBITDA, excluding Reciprocal.
Overall, we are making substantial progress toward the medium-term financial targets we established at our 2024 Investor Day of $3 billion of premium and $660 million of adjusted EBITDA. With that, I will turn the call over to Shawn to review our financial results and updated 2026 outlook.
Thank you, Matt. It is an exciting time at Porch. Strong results, confidence in our growth outlook, and M&A execution underway. The Allied transaction also expands our premium and EBITDA scale, improves our 2027 cash flow profile, and creates more attractive refinancing options, generating additional shareholder value. Okay, let us dig into Q3 financials, starting with a high-level summary. Our Insurance Services segment is the growth and cash flow engine for Porch and was the principal driver of our financial performance again in Q3. As Matt discussed, Reciprocal policies written grew 42%, expanding the current customer base and the future renewal opportunity. RWP of $161 million and policies written of 68,000 drove adjusted EBITDA, excluding the Reciprocal of $44 million, growth of 116% year-over-year. As it does, cash and investments for Porch shareholders increased in line with adjusted EBITDA. We also delivered a significant improvement in GAAP profitability.
Net income attributable to Porch was $12 million, up $23 million over the prior year. These results demonstrate the operating leverage in the model. As policies and RWP scale, a meaningful portion of incremental Insurance Services revenue can flow through to adjusted EBITDA and cash for Porch shareholders. Okay, let us walk through the revenue and segment results supporting that profitability. First, with revenue, total consolidated GAAP revenue was $144 million, up 13% year-over-year. Revenue for the Porch-owned segments, excluding the Reciprocal, was $141 million, up 22% year-over-year. Insurance Services was again the primary growth driver, with segment revenue up 39% year-over-year to $103 million. The Insurance Services growth and cash flow engine are the key drivers of our performance. So let us take a closer look at that segment.
Insurance Services revenue of $103 million grew 39% year-over-year, driven by higher fee-based revenue with higher policies written, RWP volume, and new customer additions. In the quarter, we saw a 42% growth in policies written year-over-year, which was a 400 basis point acceleration from the Q2 growth rate. Gross profit increased 46% year-over-year to $91 million. Gross margins in this segment are strong and predictable at 89% for Q3. Insurance Services adjusted EBITDA was $50 million, up 98% year-over-year. Adjusted EBITDA margin was 49%, driven primarily by strong fee-based revenue growth and operating leverage. As a reminder, the majority of the management fee is recognized upfront, with a portion deferred over 18 months. As 2025 was the Reciprocal's first year, 2026 is when we first benefit from that deferred revenue and margin.
Overall, the Insurance Services segment was better than Rule of 80 when adding the 39% revenue growth with the 49% adjusted EBITDA margin. Let us now turn to our other businesses, which provide strategic advantages for insurance. Software & Data revenue was $22 million. The year-over-year decline primarily reflects the previously announced exit from a lower valued product serving small home service contractors. Adjusted EBITDA was $4 million. Consumer Services revenue was $18 million, with adjusted EBITDA of $3 million, benefiting modestly from the timing of certain operating expenses. As insurances scale, we are prioritizing these teams for their strategic impact: data, distribution, and customer access over pure P&L performance. Overall, an easy way to think about our business, Insurance Services is the primary earnings engine.
As the housing market recovers over time, Software & Data and Consumer Services earnings should largely offset corporate expenses, making Insurance Services Adjusted EBITDA a close proxy for total company Adjusted EBITDA excluding the Reciprocal. Okay. Shifting now to the Reciprocal. Statutory surplus remains very strong, $174 million at the end of Q3, up $22 million year-over-year. Our objective is profitable growth with strong underlying loss ratios at the Reciprocal, supported by our data advantage. We are pleased with the underwriting performance in Q3. Gross loss ratio was 24%, while the attritional loss ratio was 18%, remaining in the teens for the eighth consecutive quarter. As we shared when we announced the Allied acquisition, we also expect to establish an at-the-market or ATM program. This would allow the Reciprocal to sell a portion of its existing Porch shares over time.
Because these shares are largely non-admitted assets, selling them converts that value into statutory surplus, which then supports further premium growth capacity. Shifting to the balance sheet, we present Porch and Reciprocal liquidity separately so investors can clearly understand the capital available to each entity. Porch ended Q3 with $165 million in cash and investments, up $38 million versus Q2. The increase was driven by the Adjusted EBITDA in the quarter of $44 million, partially offset by the final payoff of our 2026 notes of $8 million. Adjusted EBITDA to cash flow conversion continues to be very strong. I am also pleased to share that our net leverage is now 2.4 times our trailing 12-month Adjusted EBITDA, within our target range of 2-3 times. This was a key goal we first outlined at our 2024 Investor Day that we have now delivered.
Shifting to the Reciprocal, cash and investments was $333 million at the end of Q3. The combination of higher earnings, stronger cash generation, and growing liquidity provides Porch with increasing financial flexibility as we look ahead. Shifting to guidance, we are pleased to provide another annual guidance raise. Given our Q3 outperformance and expectations for the remainder of the year, we are raising the midpoint across each guidance measure driven by Insurance Services. We are increasing guidance for Porch-owned segments revenue, which excludes the Reciprocal, to a range of $518 million-$523 million. The midpoint of $521 million represents a 24% year-over-year growth rate, up from the 22% growth implied in the prior guidance midpoint. We are increasing guidance for gross profit excluding the Reciprocal to a range of $438 million-$443 million, now representing 28% growth at the midpoint, up from 23% growth at the prior midpoint.
This now represents an 85% gross margin at the midpoint. We are increasing our guidance for Adjusted EBITDA excluding the Reciprocal to a range of $135 million-$140 million. The midpoint of $138 million represents 79% year-over-year growth, up from 59% growth at the prior midpoint. The increase in the guidance here is driven by Insurance Services based on Q3 performance and our expectations for a strong close to the year. For the full year, we continue to expect positive net income attributable to Porch. Now I will turn the call over to Matthew for an update on our strategic and operating priorities.
Thank you, Shawn. I will start with a few overarching business updates and then walk through the key KPIs across our segments. Starting with Insurance Services, we continue to broaden distribution and provide a strong agent experience, with agent NPS now at 48. We are also modernizing certain core insurance infrastructure. Investments in policy administration, data science platform, and claim systems are designed to improve speed and results. AI is enabling us to take on more ambitious projects faster. Our Software & Data and Consumer Services businesses provide important strategic advantages that strengthen the insurance strategy. For example, we have now productized more than 100 Home Factors for use within our insurance operations. Together with our moving and warranty capabilities, these businesses provide valuable data, customer access, and unique capabilities that strengthen Insurance Services and the Reciprocal. I will now turn to our segment KPIs.
Starting with insurance KPIs, the key operating story remains volume growth. For Q3, Reciprocal policies written of approximately 68,000. Reciprocal written premium was $161 million, and RWP per policy written was $2,384. RWP per policy remains lower year-over-year, primarily due to customer mix. New customers represented a significantly larger share of policies written and generally began at lower premium levels than renewing customers. Importantly, premium per new customer declined just 2% year-over-year. As these newer customer cohorts mature and move into renewal periods, we expect the mix comparison to become more balanced over time. Moving to Software & Data in Consumer Services, the KPI trends are comparable to what we have seen in recent quarters.
For Software & Data, the average number of companies served of approximately 18,000 was lower than the prior year period, driven largely by the previously mentioned planned sunset of a legacy product for small home service contractors, which resulted in the removal of roughly 4,000 companies. The positive offset from the focus on higher value customers is evident in the annualized average revenue per company KPI, which grew 17% year-over-year to $4,840. In Consumer Services, the number of monetized services declined 11% year-over-year, largely due to continued housing and moving softness. Average revenue per monetized service grew 6% year-over-year. The revenue per service improvement reflects continued upsell and cross-sell execution. I will now pass it back to Matt to wrap us up.
Thank you, Matthew. I want to wrap up briefly by reinforcing the most important messages from today. First, the organic growth system is working. The customer base continues to expand rapidly, with Reciprocal policies written up 42% year-over-year. Insurance Services delivered its sixth consecutive Rule of 80 quarter. Adjusted EBITDA more than doubled, and we generated strong cash flow. Second, both Porch and the Reciprocal are operating from positions of strength. At Porch, rising earnings and strong cash conversion increased liquidity and reduced net leverage to 2.4 times on the lower end of the target range established at our last Investor Day.
Separately, the Reciprocal has far more capital than it needs and an exceptional 18% attritional loss ratio in the quarter. Third, the proposed acquisition of Allied Trust represents an exciting step forward. It creates additional opportunities to apply Porch's strategic advantages to create more margin and growth as we look to the future. As I said, assuming a full year of Allied contributions, our initial 2027 combined company target includes more than $900 million of RWP, more than 360,000 policies written, and more than $180 million of Adjusted EBITDA, excluding the Reciprocal. It is kind of fun. Just looking back, it was just 2024 when we did $7 million of Adjusted EBITDA, 2025 when we did $77 million, and now we have raised guidance for 2026 from $102 million at the start of the year to now $138 million.
This 2027 baseline will represent significant progress toward our medium-term target of $660 million of Adjusted EBITDA, with substantial opportunities still ahead thereafter. We are proud of the team's execution and the company we are building and remain focused on creating long-term shareholder value. With that, John, please open the call for questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Our first question comes from the line of Daniel Kurnos with StoneX Financial Inc. Please go ahead.
Awesome. Thanks. Good afternoon, guys. Another phenomenal quarter. I guess, Matt, I am sure you are going to get a bunch of questions on Allied, so I will ask kind of the two sort of primary ones, which are, one, just as you look at their book, obviously having an A rating Demotech is excellent. Just as you think about having to reevaluate their book, I assume you are not anticipating a ton of churn on policies. Two, you kind of outlined this in your prepared remarks, but their conversion ratios are lower than yours. I think I can still do math this early in earnings season, but three years on 25 million implies higher EBITDA for them over time. Just how much room is there and sort of how should we think about them getting to your ratios over time?
Yeah. Thanks, Dan. Good to get those questions. Maybe I will take the second one first. I think everyone in the industry has lower premium to EBITDA conversion ratios than us. Just as, I suppose, set expectations, I think any company in the category that we would acquire, I would expect to have lower conversion ratios. That is part of what we built, the uniqueness of what we have built. We are excited about being able to apply our data. As I mentioned, I would expect 12 to 24 months to be able to apply the data, prune the policies that aren't the right fits, be able to make the right adjustments with pricing. But we would expect it to be able to move toward what we have shown we can do at HOA in terms of the conversion rate of premium to revenue and premium to EBITDA.
That would be our initial expectations. In terms of the first question, I made comments previously that as we look at different M&A opportunities, the bar would be very high, and we would be looking at things that truly would be exceptional fits. We think this certainly falls into that category. To your point, Allied is A-rated exceptional. It is a strong company, a well-run company. We think the people there are going to be great fits into our team. We are going to simply be able to help it with the unique data and capabilities that Porch has to just help it grow faster and more profitably as we look ahead. But it is a strong company. In terms of how much of the policies we would non-renew or prune, that is TBD.
We obviously have to go and get the deal closed, and then we can start to do that evaluation. TBD, but it is a strong company to your point.
Then maybe just, I guess, more theoretically, Matt, as you look forward here, you have done the deal, you have got to digest it. The market, I think Matthew said you are down 2% on a like-for-like basis. It is really just been mixed to new customers that has been driving price down. You have talked about getting a little more aggressive to get the policies that you want. Just how do you think about remaining aggressive, knowing that you have this acquisition coming in and knowing that you can now fund the surplus more with the ATM?
Yeah, having this acquisition come in doesn't really impact what we're doing or what we're managing to this year or even ahead from an organic perspective. We expect to continue to grow our business very effectively, both in terms of premium and in terms of policies. I mentioned we expect premium and policies both to accelerate nicely here in the fourth quarter, and we think it's set up for a continued strong performance in 2027. I'm not sure if it really impacts us in terms of what we would have done anyway. One of the points that I made is that we have lots of capacity at the Reciprocal. There's plenty of capital for us to be able to grow at a really nice clip like we've talked about in the past. This really is just additive to what we would've done anyway.
Got it. Well, thanks for all the color and congratulations.
Appreciate it. Thanks.
Our next question comes from the line of Jason Helfstein with Oppenheimer & Co. Please go ahead.
Thanks. I guess maybe first high level about the industry. To the extent that if the pricing dynamic in the industry stays where it is into next year, I guess you've kind of given us the gross premium outlook for next year, but just how could that change if the pricing dynamic kind of doesn't change, I guess? Just maybe opine there. Then on take rate, Shawn, you've obviously come in meaningfully better, I think, each last few quarters than the implied guide. We can obviously see where the implied guide for the fourth quarter is. But I guess, how should we think about take rate for next year, prior to the acquisition impact? Kind of just give us some help there, because I think most people are modeling it a little bit weaker next year, but you're just coming in better. Thank you.
Why don't you take that one, Shawn, then I can loop in behind with the first question.
Yeah. Overall with guidance, I would just say it starts focusing and closing out this year. We're really pleased with what we're seeing. Matt mentioned we started the year with $102 million of Adjusted EBITDA at the midpoint. We've raised guidance every quarter this year. We're seeing great momentum here, also accelerating growth as we're closing out the year. We were pleased today to update our guidance again to $138 million of Adjusted EBITDA at the midpoint. With respect to the take rate, we don't guide at the segment level. But if I do look back over the last four quarters, that take rate has ranged from 60%-66%. This quarter it came in at 64%, so kind of toward the middle of that range.
Then with respect to next year and going forward, we'll provide an update with our normal cadence in February for guidance for next year. But for now, I'd just point folks to kind of the trailing four quarter trend.
In terms of the first question, one great thing that we have certainly that provides tailwinds is very significant agency and quote growth. We can continue to grow a premium just because there's more opportunities without having to make meaningful changes in terms of pricing and conversion rates. Matthew noted, price per new customer was down only 2% year-over-year this quarter. We think that is a great data point in terms of how comparable that really is. Now, obviously, the market did soften this last year. We managed to where the market is. I would just make the point that we're able to manage to our growth goals and our financial results while being very disciplined in terms of our underwriting. You can see that in the attritional loss ratios, in particular, that still are just exceptional.
We would expect to continue that going forward.
Our next question comes from the line of Jason Kreyer with Craig-Hallum. Please go ahead.
Thank you. Great results, guys. Wanted to focus on the 100%-plus growth in agency locations and 80% growth in quote requests. Just what is it that drives that? What is it that makes more carriers and more agencies want to sign on and work with Porch? Then maybe how do you think about that after the acquisition? Do you think that opens up even greater opportunities in terms of branch locations and in quotes?
I can take that. It is a lot of blocking and tackling. There is not a magic solution to it. We just go talk to agencies. I think we have shared this previously, but there is still a lot of room for us to grow agencies. We still only have a subset of the total agency population. What I will say is we have gotten very good at talking about why we are special and why we are differentiated, and agents want to work with carriers who are differentiated, and we treat them well, and we have great tools. Those are the things that they care about, a good product, good tools, and to be treated well. In terms of Allied, there are certainly some synergies there. They open up distribution for us in Louisiana, so it is a whole new state where we can go and build our growth engine.
We have not done a full analysis yet, but we believe there are going to be agencies where we can coordinate and cross-sell. So agencies that they have that we do not have, agencies that we have that they do not have. That is going to help both of the companies to grow more quickly.
Thank you. Just a follow-up on the Allied Trust acquisition. You called this out as being surplus neutral. Surplus ended at $174 million in the quarter. If we take that 5x ratio to that gets you to kind of the $900 million that you called out for 2027. Just maybe help us understand your comfort with that capacity or what objectives you have in place over the next year to help create incremental capacity to maintain the current growth trajectory.
Yeah, we are set up really well from a capacity perspective. To your point, Jason, the statutory surplus at the end of Q3 here was $174 million. The year is not over yet, so we expect that to continue to go up, especially with Q4 here being especially the low seasonal claims period for the Reciprocal. One other note just for folks as a reminder, it is actually, and I think we said this is better than 5 to 1, and so we are set up really well from a capacity perspective.
Understood. Thanks, Shawn.
Our next question comes from the line of Randy Binner with Texas Capital Securities. Please go ahead.
Hey there. Thanks. This is really helpful to hear about Allied. I guess I am going to try and ask this question maybe a little more directly than the previous analysts, just on the pricing expectation with the guide of accretion from Allied. Because, and maybe it is more a question of how pricing is expected to be in Louisiana in their book. But it seems like if you add that number of policies, if you get to 360,000, that your rate would stabilize, if I am running the numbers correctly. So I guess, am I running that correctly? Are you expecting to see kind of better rate activity in the book? And just more broadly, as you diversify away from Texas, how is pricing in your kind of your core business and then what you expect to add with Allied?
I can take that. You guys can layer on. The first thing I would kind of refer back to is, it is a softening market, but when you look like for new customers, we are down just 2%. So we are being selective and strategic in how we respond to the softening market. Now, we do have a strong growth engine, and what is great about that is the premium will compound on itself. And so right now, the level of growth that we have is relatively larger compared to our renewal book, and so you are seeing the softening in the overall price. But as we build up that renewal book, there will be less of that, and we will see it balance out over time. The other dynamic is in the industry, the price per policy tends to be lower for newer customers.
Then as they stay with you, the discounts unwind, the age of the home increases, so you naturally see premium per policy increase over time with your book.
But Randy, to your question, you can do the math. We said better than $900 million of premium and better than 368,000 policies. So to your point, that's pretty straightforward math, in terms of what the average premium's going to be per customer. Let me just make one quick comment on this topic generally, which is what I'm excited about, and we'll just continue to prove it, certainly what we've proved with HOA, and we'll do it again here, is it's not that difficult to grow policies quickly but not be very profitable. Similarly, it's not that difficult to not grow policies, but to be profitable. What we've been able to do uniquely is to be able to grow very rapidly at very exceptional margins. Really, it's just a very small set of customers, generally speaking.
If you are perfect at predicting risk, a very small set are going to file a claim each year. So if you can have unique advantages to be able to identify who those people are and either make sure they're priced correctly, at a meaningfully higher price or just not carrying that risk, well, you can transform the margins of the business. You can actually have the price be a little bit lower for the really good risk customers, especially those new customers. You can then grow while maintaining or even improving margins. So for us, that's what the system does. So we're excited to be able to demonstrate that again here.
Okay. That's super helpful to kind of understand how the business is running versus maybe the way it's running through our spreadsheet. I also had a question on Allied, just in regard to the potential share issuance that would finance it. There's a deferred consideration piece for the Reciprocal acquisition, which is $50 million, which could include Porch shares owned by the Reciprocal. Then for the MGA piece, I believe it's plainly stated that it's $20 million in Porch shares. So those shares, I think, would all be unregistered. I think we'll probably assume the $20 million in our forward numbers, but maybe a little more color on the piece that's the deferred consideration and how we might think about how those shares would work their way into the share count. Thank you.
You want to take it, Shawn, or shall I?
Yeah. They-
I am happy to. Yeah, go ahead. No, you got it. We are going to see.
I was just going to say, yeah, they are being issued to the counterparty as part of the consideration. So ultimately, eventually will be included in the share count.
Yeah, just to make sure it is clear, Randy, $20 million
Okay
of Porch stock that is paid by Porch upfront. Those are shares that we would issue. The Reciprocal right now is 16 million shares. We will use a very small set of those shares for that deferred purchase price.
So the deferred consideration will be in Porch shares?
We have the option, but I think it is reasonable to assume that.
Got it. Okay. Very helpful. Appreciate it.
Our next question comes from the line of Ryan Tomasello with KBW. Please go ahead.
Thanks, everyone. The 42% growth in policies written, obviously really solid. Nice to see the sequential acceleration on that as well. The gap between growth in written premium dollars versus policies continues to widen over the last two quarters. How should we think about that gap persisting? With RWP dollar growth running into high teens, can you just help us understand if anything changed around how you're thinking about the organic RWP CAGR targets that you originally set out? I think you had talked about 20%+ Sounds like you're expecting an acceleration in the fourth quarter, but just how are we thinking about the gap between those two growth drivers here over the next year? Thanks.
Sure. Yeah, generally in terms of what we had talked about in terms of premium for the year, we continue to be on track toward the objective. New business is performing well, like we mentioned. To your point, yeah, we are seeing a really nice acceleration in RWP and policy growth in October and expect as such for Q4. One reminder on that, Ryan. It was Q4 of 2025 when we really started increasing new business sales, and those policies are now renewing and lapping here. That does provide tailwinds, certainly, in terms of both policy and premium growth. Reminder, and this is probably good for everybody, but just how we run the business. We manage to our financial results, and our results are driven by both premium and policy count. We're just managing premium policies to hit our internal goals.
In certain markets, again, it might be, like I said, higher premium or less policies. If we were to have less premium, it would just mean because we would have more policies coming through, because again, we are just managing the balance of those two to get to our objectives. I do not know, Shawn, if there is anything else that you would want to layer on there.
No, I think that is it. Longer term, we have talked about organic growth of 20%-plus premium growth. I think you asked about that, and that is still the same. No changes there.
Great. I know you already mentioned a few things around the take rate dynamics, but just entertaining another question there. I would assume, given these policyholder fees, that that is accretive to the take rate when you are seeing accelerating growth and an accelerating contribution from new customers. Let me know if that logic is off, but as the book continues to roll here and more premium comes from renewals, how should we think about the impact of the take rate if that inevitably comes down as the premium in force continues to scale and renewals are driving a greater portion of growth?
Yeah. Look, I think as I was mentioning, we are really pleased with Insurance Services and the conversion that we are seeing to EBITDA there has been really strong from the RWP. With respect to the take rate itself, now mind you, we do not guide to segment level, but as I mentioned, over the last year or so, it has ranged from 60% to that mid-60s range. When we come back in February, when we do Q4 earnings, we will give our guidance for next year at that time. But for now, I guess I would just, look, again, point back to that 60% to mid-60s range.
Appreciate that. But just not looking for guidance here, but just in terms of the logic, all else equal, does what I laid out make sense in terms of
Yes
that relationship on the higher mix of new customers being a driver?
Yes.
Yeah.
Yeah.
Okay, great. Thank you, guys.
You bet.
Our next question comes from the line of Timothy D'Agostino with B. Riley Securities. Please go ahead.
Yeah, hi. Thanks for taking the question. Given the Allied acquisition and that Louisiana is a new state, because Allied has already underwritten in that state, can you be a little bit more aggressive in the policy growth in Louisiana? I guess trying to think about when you enter a state more organically, like Michigan, versus when you enter a state like Louisiana through an acquisition, does that allow you to be more aggressive in policy growth?
Yes.
You can take it. Go ahead.
Yeah. One of the benefits of entering states through acquisition is you acquire a lot of knowhow and data. A lot of what drives effective pricing is building models based off of historical claims and then combining it with the data that we have, which we are national in terms of our Home Factors data. You have built-in relationships with agencies. You have customer brand. We have certain
strategies that we have built for our growth engine that we can apply directly to the Allied distribution network. It is an accelerant, and a meaningful one, to enter a state via an acquisition with an established brand distribution network and set of claims data.
Okay, great. If I can ask a second question here, just on the 2026 updated guidance at the Adjusted EBITDA level. I think at the midpoint it implies around $34 million of Adjusted EBITDA in Q4. Is that step down quarter-over-quarter mostly seasonal? Are there any one-time items you might want to flag there? Then also just thinking into 2027 with the closing of the Allied acquisition, if that seasonality is being shown in this guidance for fourth quarter, would you expect to potentially outgrow that seasonality again in 2027 as Allied rolls into Porch?
Yeah. So, overall there are some additional factors to consider there. Again, we do not guide at the segment level, but I did mention today in the prepared remarks that Consumer Services benefited from some expense timing in Q3, so you have some of that going the other way in Q4. There is seasonality, especially in the non-insurance businesses. Most of the revenue there, and EBITDA therefore, is tied to home transactions, which are at a seasonal lower point in Q4 relative to Q3. So we would expect a typical decline there. Then also just we mentioned today on the call that some of our non-insurance businesses have seen declines in revenue, at least year-over-year, because we have shut down some of those businesses. Then I guess the last point that I would make, we are continuing to invest.
Matthew talked about some of the items on the call that we are continuing to invest in to accelerate growth. So I think all those are probably relevant.
Okay, great. Thank you so much for taking the question today.
Thank you.
Our next question comes from the line of Oscar Nieves with Stephens Inc. Please go ahead.
Hello, and thanks for taking my questions. My first one is, you've talked about a soft insurance market, so I just wanted to touch on that and what's behind it. Is it mostly competition, or is it reinsurance cost and capacity? And, related to that, how long do you think that lasts, and what does that mean for your growth margins and the Reciprocal's reinsurance and surplus?
Yeah. So it's tied to both the reinsurance market and competition. Reinsurance prices come down. Generally, there's just less cost that carriers have, and then therefore they're able to lower the price sequentially for new customers. So those, I would say, are linked and certainly a factor. We were able to experience a meaningful decline in our reinsurance cost because we were able to include our data. So our savings on reinsurance is actually more than what the market experienced. But still, that applies and that then creates a softening market, you would call it. This is where
Okay
it's a huge advantage to have just more margin in the system like we do, where you can really then just manage our results to the outcomes that we want. So you saw certainly throughout this year that we were able to still manage to our targets and our results despite changes in the market. So when there is time when there is bad weather or reinsurance prices go up, for us, we're going to be a real standout performer in those market cycles because we don't have that weather volatility on our P&L. So our results would be exactly the same regardless of what happened in terms of weather or reinsurance pricing. But again, that's part of the beauty of how the system was designed.
Thank you. My next one is on capital structure. Looking out the next year or two, how are you thinking about capital structure? I'm thinking about the 2028 converts, the surplus notes, and you talked about leverage earlier. Also, what other priorities you guys have for the cash that the business is generating and you guys expect to continue to generate?
Yeah, I can take that one. So, I think as we talked about today, we've done, I think, a pretty good job getting our leverage within the target range, and actually toward the lower end of our target range there. As we look ahead to next year, we'll look at refinancing the converts ahead of, obviously, when they're coming due. So we think we're set up really well. Obviously, today we updated our guidance again. So this year it's $138 million at the midpoint. On top of that, you also add in pro forma, the $25 million of additional contribution from Allied Trust, which will come next year. So we think we're set up really well there. The company's moving in a great spot. On the surplus notes, we have with the Reciprocal no changes expected there.
We really like the setup, the way things are working, and it's working really well.
You also had just asked about cash.
Yeah.
The business is, to your point, I suppose, generating a lot of cash, and we think there's going to be very attractive places for us to be able to deploy that excess cash. Obviously, we announced the Allied acquisition here just recently. M&A is one of those places that we do think we could deploy cash in a very attractive way for shareholders.
Thank you. The last one I have is related to Allied. You mentioned how that deal gets you closer to your medium-term targets. That's the $3 billion of premium and the $660 million of Adjusted EBITDA. What's the timeframe that you have in mind now, and what are the biggest swing factors in getting there versus before you had Allied in the picture?
Well, I am not going to tell you the specific timeline, but we certainly have a good sense for what that is going to be. I am sure that when we did the Investor Day back in 2024, in fact, I remember conversations with people about how we were going to be able to get there. I know that they are realizing now that it is going to be a lot faster than they had expected at that point in time. But clearly, we have made great progress, again, from $7 million in EBITDA to $180 million just in a few years. We are not commenting on specific timeframes. For us, it is just about continued execution. We do not certainly need other acquisitions to be able to go and get there. It is just when there is an opportunity like Allied Trust or anything else in the future, that certainly can just accelerate the pace.
All right. Very helpful. Thank you so much.
Thank you.
Our next question comes from the line of Matt VanVliet with Cantor Fitzgerald. Please go ahead.
Hi, this is Mason Marion on for Matt. Thanks for taking our question here. Did the Allied deal and other potential future deals change your thoughts around selling Home Factors data to other insurers?
It's a good question. No. Certainly, our insurance business is growing fast and, to your point, not only organically, but with M&A, it's going to grow very fast, and we expect that to continue here as we look ahead. We obviously want to be able to give our insurance business unique advantages, and so we certainly are limiting what type of data we would make available to anyone else in terms of geographies and ensuring that it's not competitive. That's certainly something that we're thinking about, we'll continue to be thinking about. But no changes here today.
Thank you.
That is all the time we have for Q&A. I would now like to turn the call back over to Matt Ehrlichman for closing remarks.
I will just say I really appreciate the time. Certainly appreciate the continued execution and support from our employees and partners and customers and shareholders. I mentioned in the prepared remarks just the journey over the last few years. We are excited about where we are. We are really excited about how we are entering this next phase of growth and margin and doing so from a true position of strength. Getting the business progressed to where it is from a balance sheet perspective, from a margin and earnings perspective, just gives us lots of tools now, lots of flexibility to make great choices so we can continue to deliver meaningful shareholder value. With that, appreciate it. Have a great rest of the day. See you soon.
Ladies and gentlemen, this concludes the meeting. You may now disconnect.