Porch Group, Inc.PRCH
Porch Group, Inc. Fair Value Disclosure
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 December 31, 2025 | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total Fair Value | |||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Money market mutual funds | $ | 7 | $ | — | $ | — | $ | 7 | ||||||||||||||||||
| Debt securities: | ||||||||||||||||||||||||||
| U.S. Treasuries | 13,370 | — | — | 13,370 | ||||||||||||||||||||||
| Obligations of states, municipalities and political subdivisions | — | 2,070 | — | 2,070 | ||||||||||||||||||||||
| Corporate bonds | — | 31,279 | — | 31,279 | ||||||||||||||||||||||
| Residential and commercial mortgage-backed securities | — | 21,309 | — | 21,309 | ||||||||||||||||||||||
| Other loan-backed and structured securities | — | — | — | — | ||||||||||||||||||||||
| Asset of Reciprocal (a consolidated variable interest entity): | ||||||||||||||||||||||||||
| Money market mutual funds | 25,047 | — | — | 25,047 | ||||||||||||||||||||||
| Debt securities: | ||||||||||||||||||||||||||
| U.S. Treasuries | 9,633 | — | — | 9,633 | ||||||||||||||||||||||
| Obligations of states, municipalities and political subdivisions | — | 12,394 | — | 12,394 | ||||||||||||||||||||||
| Corporate bonds | — | 63,109 | — | 63,109 | ||||||||||||||||||||||
| Residential and commercial mortgage-backed securities | — | 77,968 | — | 77,968 | ||||||||||||||||||||||
| Other loan-backed and structured securities | — | 17,538 | — | 17,538 | ||||||||||||||||||||||
| $ | 48,057 | $ | 225,667 | $ | — | $ | 273,724 | |||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Contingent consideration - business combinations | (1) | $ | — | $ | — | $ | 39 | $ | 39 | |||||||||||||||||
| Embedded derivatives | (2) | — | — | 2,627 | 2,627 | |||||||||||||||||||||
| $ | — | $ | — | $ | 2,666 | $ | 2,666 | |||||||||||||||||||
______________________________________
(1)The liability for contingent considerations related to business combinations is included in accrued expenses and other current liabilities in the Consolidated Balance Sheets as of December 31, 2025.
(2)The embedded derivatives liability is included in other liabilities in the Consolidated Balance Sheets as of December 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 | |||||||||||||||||||
______________________________________
(1)The 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 Consolidated Balance Sheets as of December 31, 2024. The private warrants expired on December 23, 2025.
(3)The embedded derivatives liability is included in other liabilities in the 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 with U.S. Treasuries as Level 1 measurements in the table above. The fair values for available-for-sale fixed-maturity securities are based upon prices provided by an independent pricing service and included as Level 2 measurements in the table above. 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 Consolidated Statements of Operations and Comprehensive Loss equal to the fair value of $14.9 million.
We estimated the fair value of other 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 over the maturity date of the contingent consideration. As of December 31, 2025, the key input used to determine the fair value of less than $0.1 million were management’s cash flow estimate through the remaining term of less than one year. 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 using the Black-Scholes-Merton option pricing model. The private warrants expired on December 23, 2025. At the time of expiration there were 25 thousand warrants outstanding and we wrote off the remaining liability of $131 thousand. As of December 31, 2024, the key inputs used to determine the fair value included exercise price of $11.50 per share, expected volatility of 67%, remaining contractual term of 0.98 years, and stock price of $4.92 per share.
See Note 10, Stockholders' Equity and Warrants, for detailed information on warrant exercises.
Embedded Derivatives
In connection with the issuance of senior secured convertible notes in April 2023 (the “2028 Notes”) and in accordance with ASC Subtopic 815-15, Derivatives and Hedging – Embedded Derivatives, (“ASC 815-15”) certain features of the 2028 Notes were bifurcated and accounted for separately from the notes. The following features are recorded as derivatives.
•Repurchase option. This derivative had no value at December 31, 2025, because in May 2025 we reduced the outstanding principal of the 2026 Notes (see Note 9, Debt) to below the $30 million threshold described in this paragraph. If more than $30 million aggregate principal amount of the 2026 Notes were to remain outstanding on June 14, 2026, the 2028 Note holders would 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 December 31, 2025, our remaining Asset Sale Threshold was $9.1 million (See Note 14).
In connection with the issuance of senior unsecured convertible notes in May 2025 (the “2030 Notes,” see Note 9) and in accordance with ASC 815-15, certain features of the 2030 Notes were bifurcated and accounted for separately from the notes. The following features are recorded as derivatives.
•Additional interest. If at any time after November 27, 2025 we fail to file all reports required under the Securities Exchange Act of 1934, as amended, (after giving effect to applicable grace periods and other than Form 8-Ks) during the preceding 12-month period, or the 2030 Notes are not otherwise freely tradable under Rule 144 other than with respect to holders that are affiliates, we will be required to pay additional interest at a rate of 0.50% per annum on the outstanding principal amount to noteholders for each day we are out of
compliance with these requirements (the “Additional Interest”). The value of the Additional Interest derivative was $0 at the issuance date and $0 as of December 31, 2025.
•Participation feature. If the fair market value of a distribution (arising from a spin-off, distribution of capital stock, other asset or property distribution, or distribution of securities) made to stockholders is equal to or greater than the average of the last reported sale price of our common stock over the ten consecutive trading day period ending on, and including, the trading day immediately preceding the ex-dividend date for such distribution, then each holder of the 2030 Notes will directly receive, in respect of each $1,000 principal amount thereof, the same type and amount of property that they would have received if they had already converted their senior unsecured convertible notes into shares at the then-current conversion rate. This payment will be made at the same time and on the same terms as it is made to common stockholders. If the amount of any cash dividend per share is equal to or greater than the last reported sale price of our common stock immediately before the dividend, then the holders of the 2030 Notes are entitled to receive, for each $1,000 principal amount of notes, a cash payment (without needing to convert the notes) in the amount of cash they would have received as if they owned a number of shares of common stock equal to the number of 2030 Notes held multiplied by the conversion rate on the ex-dividend date for such cash dividend or distribution. The value of the participation feature derivative was $0 at the issuance date and $0 as of December 31, 2025.
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, qualifying asset sales, maintaining compliance with SEC regulations relative to the notes, and certain distributions to shareholders, ranging from 2% to 58%.
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 | ||||||||||||||
| Settlements | (1) | — | — | (4,473) | ||||||||||||||||
| Change in fair value, loss (gain) included in net loss | (2) | (44) | (19,635) | 4,013 | ||||||||||||||||
| Fair value as of December 31, 2025 | $ | 39 | $ | 2,627 | $ | — | ||||||||||||||
| 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 | (2) | (3,442) | (5,869) | (691) | ||||||||||||||||
| Fair value as of December 31, 2024 | $ | 83 | $ | 22,262 | $ | 460 | ||||||||||||||
(1)Settlements of the private warranty liability represent exercises during the period. See Note 10, Stockholders' Equity and Warrants, for a discussion of these exercises.
(2)Changes in fair value of contingent consideration related to business combinations are included in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss operations. Changes in fair value of the private warrant liability and embedded derivatives are disclosed separately in the Consolidated Statements of Operations and Comprehensive Loss.
Fair Value Disclosure
The following table summarizes the fair value of convertible senior notes (see Note 9, Debt, for more information):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Convertible senior unsecured notes, due 2026 | $ | 7.6 | $ | 137.7 | |||||||
| Convertible senior secured notes, due 2028 | $ | 332.7 | $ | 278.3 | |||||||
| Convertible senior unsecured notes, due 2030 | $ | 151.8 | $ | — | |||||||
The fair value of other notes approximated the unpaid principal balance. All debt, other than the convertible notes which are Level 2, was considered a Level 3 measurement.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 16, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 20, 2020 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.