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Hello, everyone. Thank you for joining us, and welcome to Neptune Insurance Holdings Third Quarter Earnings Call. [Operator Instructions] I will now hand the call over to Jon Carlon, Director of Corporate Development. Please go ahead.

Thank you, and good afternoon. With me here today is Trevor Burgess, Chairman and CEO; Matt Duffy, President and Chief Risk Officer; and Jim Steiner, CFO and COO. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements, including, among others, statements about our expectations for our future financial performance, growth opportunities, business strategy, market trends and capital allocation plans.

These statements are based on our current views and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. We direct you to our recent SEC filings for a full description of these risks. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

We will also reference certain non-GAAP financial measures. These measures should be considered only as supplements to their comparable GAAP measures. Additional information, including reconciliations of the non-GAAP measures to their most comparable GAAP measures can be found in our earnings release at investors.neptuneflood.com and in our current report on Form 8-K that was publicly filed with the SEC on October 20, 2026.

Now I'd like to turn the call over to Matt.

Thanks, Jon. It's been a remarkable year for Neptune. And as we mark the first anniversary of our IPO, I want to spend some time today discussing not just the results we're delivering, but what's driving them and what they tell us about the future of the business. One of the things I've come to appreciate about Neptune is that the real strength of our business isn't in any one product, technology or distribution relationship.

It's how those elements work together. Our technology allows us to make better underwriting decisions and create better experiences for our distribution partners. That attracts more agents, more business, more capacity and helps us close the protection gap. And as the business grows, we gain greater insight, improve our technology and become more efficient. Each of those advantages reinforces the others.

What's particularly exciting today is that we're seeing the benefits of that model become increasingly apparent in our financial and operating results. We're growing revenue substantially faster than our team size. We're making our distribution partners more productive. We're attracting greater demand from risk-taking partners, and we're doing all of that at a time when the broader environment hasn't been helpful. That's important because we're not building a business that depends on favorable market conditions to succeed. The fact that it's a soft insurance market and a slow housing market hasn't impeded our ability to execute or grow. We're building a business with the capabilities to consistently take share, expand the market and compound our advantages over time.

I want to walk through the evidence of that today, including what we're seeing from our investments in AI, the evolution of our distribution network, the strength of our capacity relationships and the opportunities we see ahead. But first, let me turn to our third quarter results.

The third quarter was another record for Neptune. Revenue grew 34% year-over-year to $59.6 million. Adjusted EBITDA grew 38% to $36.8 million at a 62% margin, an improvement of 147 basis points from a year ago.

Premium in force reached $450 million, up 32%, and we now have more than 336,000 policies in force, up 29%. October 1 marked the anniversary of our first day of trading on the New York Stock Exchange, and it's worth reflecting on how far we've come in that short period. Our trailing 12-month revenue is now 44% higher than at June 30, 2025, the figure reported in our S-1.

We've achieved that growth while maintaining exceptional profitability with a Rule of 40 of 94. And the growth is broad-based. It's coming from the expansion of our distribution network, increasing productivity among our existing agents and the continued development of our products and technology.

As we get into operations, let me start with distribution because I know the impact of AI on insurance purchasing is top of mind for many investors. Our view is straightforward. Greater price transparency and easier access to insurance are opportunities for Neptune, not threats. There are more than 100 million buildings in the United States and approximately 25 million face meaningful flood risk, yet there are only around 4 million flood insurance policies.

The biggest obstacle to selling flood insurance isn't price discovery. It's that millions of property owners don't know they need it or mistakenly believe they're already covered. AI has the potential to change that by helping consumers understand their exposure and identify coverage gaps, and Neptune is exceptionally well positioned to serve that demand. Whether a consumer purchases through an insurance agent, directly through Neptuneflood.com or eventually through a personal AI assistant, our technology can support the transaction.

In the near term, we expect AI to make our existing distribution partners substantially more productive. Over time, as more consumers transact directly, there's also an opportunity to lower our distribution costs, which today represent our largest expense. We're already seeing tangible evidence of the opportunity through Atlas+. During the third quarter, 7,000 agents used Atlas+, exchanging more than 75,000 messages with the platform. And perhaps most importantly, quotes involving Atlas+ are binding at 3.5x the rate of quotes without an Atlas+ interaction. That is a powerful indication of the value we're delivering.

Let me give you an example of what that looks like in practice. We recently held a call with a large group of insurance agents. And during the discussion, one agent told us they just sold their first-ever flood insurance policy. They'd come to Neptune, run a quote and started a conversation with Atlas+. The tool gave them a sales script, helped them understand the property's flood exposure and provided the backgrounds they needed to explain the coverage to the customer.

They told us that conversation gave them the confidence to present the policy and ultimately close the sale. I love that story because it gets to the heart of what we're trying to accomplish. There are tens of thousands of insurance agents across the country who have customers exposed to flood risk, but who don't routinely sell flood insurance. Often it's because they don't have the expertise or confidence to have that conversation and Atlas+ changes that. It puts flood insurance expertise in the hands of every agent regardless of their experience.

And we recently heard from Garrett Mitchell with Rocket Flood, a HUB International company who said, and I quote, Atlas+ is making a real difference in our business. The chatbot on Neptune's quote page is like having an underwriter alongside us through the entire sales process. And with the new Atlas+ cards in just 3 weeks, we found dozens of endorsements and renewals, generating tens of thousands of dollars of premium.

Garrett's comments show that we're not simply making our partners more efficient. We're also helping drive demand for those partners so they can grow their business. More than 65,000 insurance professionals have now created verified Neptune accounts and over 43,000 of them were active during the quarter compared to 39,000 in Q2. We're not just adding distribution partners. We're making each relationship more productive and giving agents more reasons to do business with Neptune.

The same productivity gains are happening inside our organization. During Q3, our engineering team delivered 2.5x the amount of work it delivered in the same quarter last year with broadly the same number of people. And our service organization operated at an average of one human representative for every 30,000 policies in force, a 50% productivity improvement year-over-year while improving response times and customer satisfaction. These are meaningful improvements, and they demonstrate how we're growing the capabilities of the business considerably faster than its headcount, all while continuing to invest in new products, technology and underlying infrastructure.

I've spent a considerable amount of time with capacity partners over the last several months, and the quality of those conversations reflects how far the business has come. These are sophisticated counterparties with their own models, their own views of risk and many choices about where to deploy capital. They understand our portfolio, they monitor its performance and increasingly, they want to participate in its growth.

During the quarter, we renewed another capacity program on improved terms. And with that renewal, effective December 1, none of our active capacity programs will include contingent commissions. When existing partners want to grow alongside Neptune and new partners want to access the business, that's meaningful external validation of what we've built.

Let me turn to the external environment and the broader opportunity ahead. The housing market remains weak, and we've now gone through 2 consecutive years without a major hurricane, creating a substantial demand event for flood insurance. Both of those factors have historically supported new business demand and their absence has created a headwind. Despite that, our premium in force has grown at 32% year-over-year, and our new business premium during Q3 was up 51% year-over-year. That's an important indicator of the underlying strength of the business.

We're growing our distribution, taking market share and expanding the insured base without relying on an improvement in those external conditions. A recovery in the housing activity would certainly be beneficial, but it isn't required to deliver on our growth expectations. We're also monitoring the potential impact of a strong El Nino this winter. We don't expect it to have a material impact on either overall demand or the underwriting performance of our portfolio, but increased awareness of flood risk is good for the industry.

Significant weather events create opportunities to remind property owners of their exposure and of the importance of having flood insurance. We'll continue working closely with our fantastic distribution partners, particularly on the West Coast and in Hawaii, to translate that awareness into greater insurance adoption and helping to close the protection gap.

We are often asked about potential changes at FEMA around the NFIP. While we have no additional information and don't expect significant changes in the immediate term, our latest research highlights the opportunity for growth, showing that nearly half of NFIP policies are still priced below their full risk level, representing approximately $2.6 billion in annual subsidies that will continue to burn off in the coming years.

Meaningful reform would accelerate that opportunity, but it isn't a prerequisite for our success. We're also continuing to expand our addressable market through new products.

Our Indemnity Earthquake product is progressing through beta testing, and we anticipate a formal launch in Q4.

Let me finish with our outlook. Shortly after our IPO last year, we introduced initial 2026 revenue guidance of $186 million to $189 million. Today, we're raising that guidance for the fourth time to $204 million, which, if achieved, will result in approximately 28% year-over-year growth with an adjusted EBITDA margin above 61%.

We're also announcing initial guidance for the full year 2027. We expect approximately $238 million in revenue at an adjusted EBITDA margin of approximately 61%. That outlook assumes neither a recovery in the housing market nor an above-average hurricane season. It also excludes any inorganic growth and any substantial contribution from new product lines.

In other words, we expect to continue delivering strong, highly profitable growth without needing the external environment to improve. And that brings me back to where I started. The strength of Neptune isn't any single product, technology or distribution relationship. It's how those advantages work together and become more powerful as the business grows. One year after our IPO, Neptune is materially larger, more productive and more capable. Our distribution network is expanding. Our technology is improving productivity across the business. Our capacity relationships are stronger than ever. We're serving 336,000 customers nationwide, and we've demonstrated that those advantages translate into sustained growth and exceptional profitability. That's what gives us confidence in our outlook and in the significant opportunity still ahead of us.

With that, I'll hand it over to Jim.

Thanks, Matt. I'll spend a few minutes on the financial results, the underlying economics of the business and our balance sheet and capital allocation. Starting with the quarter. Revenue was $59.6 million, up about 34% year-over-year. Adjusted EBITDA was a record $36.8 million, up about 38% for an adjusted EBITDA margin of about 62%.

So once again, adjusted EBITDA grew faster than revenue and our margin expanded while we kept investing across the business. A few things are driving that. First, the in-force book keeps growing. We ended the quarter with about $450 million of premium in force, and each year, the renewal book contributes more of our revenue.

Our revenue retention rate over the last 12 months is about 89%. Retention matters a great deal to our financial model. Each year, we start with a larger base of policies already in force. With strong retention, much of that book keeps earning revenue before we write a single dollar of new business.

Second, the operating leverage in the business continues to show through. We don't retain underwriting risk as premium grows, we don't need to provide additional insurance capital. And much of our infrastructure doesn't need to grow in step with premium. That includes our underwriting platform, our policy administration technology, our data science capabilities and our corporate functions.

Our largest variable expense is distribution commission. Beyond that, as premium revenue grow, a meaningful share of additional revenue can convert to adjusted EBITDA while we keep investing in the platform. That's why we believe margins above 60% and continued investment in growth are entirely compatible. You can see the same dynamic in our productivity numbers.

Over the last 12 months, revenue per employee was about $3.2 million and adjusted EBITDA per employee was about $2 million. Those figures keep rising because revenue is growing much faster than the organization.

Turning to cash flow. During the quarter, we generated $25.9 million of operating cash flow. For the first 9 months of the year, operating cash flow was $69.3 million. That cash gives us a lot of flexibility in how we allocate capital. At quarter end, we had $215 million outstanding on the revolver.

Our total net leverage ratio, as defined in our credit facility, was about 1.7x compared with about 2.9x a year ago. Over the last 12 months, we've reduced leverage while also returning capital to shareholders. Our approach to capital allocation remains straightforward. The first call on capital is attractive opportunities to grow Neptune. Beyond that, we intend to continue our share repurchase program opportunistically and to reduce debt over time. We don't view those as fixed buckets. Our cash generation and capital-light structure give us the flexibility to put capital wherever we see the best expected return.

One more item. When RSUs vested on September 30, we withheld some of the shares to cover employee taxes. That avoided additional dilution. After quarter end, we paid about $14.2 million in related taxes. Because that cash went out after the quarter closed, it will show up in our fourth quarter cash flow.

With that, I'll turn it over to Trevor for closing remarks.

We recently celebrated the 1-year anniversary of our IPO. Over this past year, I'm incredibly proud that we have grown our revenue by 34%, our adjusted EBITDA by 38%, our premium in force by 32%, our policies in force by 29%, all while our number of employees has actually fallen from 60 to 59.

In the last year, we have generated $82 million in operating cash flow and have used $49 million to delever and nearly $32 million to buy back stock. Our leverage ratio has fallen from 2.9x to 1.7x in the last year, giving us incredible flexibility to look at a wide range of strategic opportunities. I will reiterate that absent investment opportunities that will grow our business even more quickly, our bias will be to opportunistically buy back stock.

There is a paradox at the center of insurance distribution right now. The better AI gets at doing an agent's job, the more valuable the human agent becomes. The tools to disrupt how insurance is sold are here, but the typical American homeowner is now about 57.5, up more than 3 years since 2010, and homeowners are aging faster than the country as a whole. That's according to the National Association of Realtors.

Even the people buying homes today are older than ever with a median age of 59. Those homeowners aren't going to walk away from an agent they've trusted for 20 years just because an AI could do the same job. My own mother isn't going to. When advice is cheap and everywhere, trust is the scarce thing. So we don't see AI replacing the agent in the short term. We see AI working through the agent. That's why we built Atlas+. It puts the speed of AI behind the agent, so the relationship stays with the agent and the work gets faster, smarter and more accurate.

Now none of this is permanent. The futurist Roy Amara said, "we overestimate the effect of technology in the short run and underestimate it in the long run". That still holds. The gap between what AI can do and what customers are ready for will close. Today, Neptune wins by powering the agent. As buyers get more comfortable with AI, Neptune wins by serving them directly, too. Either way, we benefit as this change takes place, however quickly it comes.

I'd like to close by talking about some exciting changes to our Board and our management team. David Noble has joined our Board of Directors as a new Independent Director. I've known David for over 25 years since we worked together at Morgan Stanley. He has become one of the most celebrated executive coaches of our generation, having repeatedly been a top 50 coach and the author of the Harvard Business Review published Real-Time Leadership.

As we grow as a company, having his voice at the table is a privilege and an honor. I am also excited to announce today that our Audit Committee Chair, Cristian Melej, will join the company in January and become our CFO after the filing of the 10-K. Cristian, Matt, Jim, Jon and I first worked together in the early days of my leading C1 Bank, where Cristian would eventually become our CFO. He's an incredible accountant and thinker, and we are lucky to have him join the team.

Jim Steiner, our long-term CFO, will stay on as a Board member and as our COO. Jim has been an incredible business partner, friend and leader at Neptune, and we appreciate his tireless efforts to build the business we have today, and we look forward to continuing to work together. Thank you to our agents, to our capacity providers, our policyholders and to our employees for making this quarter possible. Thank you all for joining us, and we'll now open the call to questions.

[Operator Instructions] Your first question is from the line of Elyse Greenspan with Wells Fargo.

My first question, when you guys were talking about AI, right, you were talking about over time, just becoming more efficient. And I think you said like with lower distribution costs. Can you just give us a sense as you guys are thinking out just how beneficial AI could potentially be on your expense levels and how we could think about that benefiting your margins over time?

Sure. Thank you for that question. First of all, I would say I think it's going to take a long time to get there. But we have some good examples in other countries where this transformation has taken place. And the United Kingdom is probably a really good example because there, 60% or 70% of homeowners buy their homeowners policies through a comparative rater. Which you can think about as being an unsophisticated form of artificial intelligence.

And there, the carriers who win the policies pay the online raters a onetime fee of GBP 50. As opposed to an average of 13% every year that we're paying an agent today. So our largest expense category would dramatically fall if consumers decided that they wanted to use AI agents such as Muse or chatbots such as ChatGPT in order to buy their flood insurance. I think it will be a very slow transition, but it would be a transition that would be very profitable for Neptune as that is our largest cost.

Okay. And then my second question, when you were talking about guidance, you mentioned that you guys -- it didn't include organic growth or contributions from new product lines. I guess in relation to both, I mean, can you just give us a sense of what product lines like could potentially be launched, right, over the coming year or if inorganic growth could be part of the equation and kind of supplemental to the '27 guidance you guys laid out today?

Sure. Thank you. We're in a very, very envious position of having a very attractive leverage ratio, access to capital and tremendous free cash flow. And that allows us to think about investing in new perils such as the earthquake peril, which we will have decided we will turn from a beta product to a fully fledged product by the end of the year. That's starting to gain some steam, still early days, but starting to gain some steam.

We will look at other perils that are climate-related that are carefully aligned with the data and the tool set that we have developed at Neptune and that can be broadly applicable. The demand is really coming from 2 areas. One is our risk-taking partners who would like to do more and more with Neptune because of our success in underwriting flood and quite frankly, how we operate as an AI-native MGA, where data is incredibly transparent to them in ways that just is not how the industry currently operates.

And then second, from our distribution partners who are incredibly interested in finding more ways to do business with Neptune because of how simple our system is to access and buy product. So we are continuously looking earthquake will be the next official product, and we will look at others.

Inorganically, we have looked at a large number of opportunities as they have been presented to us or as we have seen them. And there have not been many that have met our screening criteria just given our organic growth that we are able to achieve. But if there is one that meets our criteria, we're happy that we have the capital structure to be able to execute upon that. And quite frankly, the experience as a management team to be able to execute upon them.

Your next question is from the line of Mike Zaremski with BMO.

Maybe just poking around in a positive way about the last 12-month revenue retention figure in the very high 80s, 89, I believe. I believe it was low 90s a year ago. Obviously, your results are excellent. But just kind of curious if, given how important that KPI is, if you can kind of talk through what's going on there in terms of the moving parts?

Yes. A lot of what we're focused on is really about the lifetime value of a customer relative to their risk. And we're finding that because of the extraordinary underwriting results that we've been able to deliver, we haven't necessarily needed to push price as much. And we think that, that has greatly contributed to the new business growth side of the house. So it's always a trade-off, right, between how much price you push versus volume in the door and understanding that elasticity.

Again, we're fundamentally pricing based upon risk, but we're able to use price as, listen, if we can lower prices for consumers and get more new people in the door, then that's something that we're going to try to do. That then obviously then translates when it comes time to renew policies, you're going to see some small variations there as maybe we don't push price quite as much.

Understood. Okay. Got it. So you're kind of tinkering as you said you would do during the IPO with that. Okay. And maybe just a high-level question. As we've tested ChatGPT and some of the LLMs in recent months. They've gotten a lot better on the consumer side of talking to it and asking to any flood insurance, et cetera, and being able to bind a policy and it almost always gives us a Neptune quote very fast, much better process than just a couple of months ago. Obviously, direct-to-consumer is still not a big driver of distribution.

But curious, since I think we haven't used Atlas+, would you -- are there any kind of analogies or would you say that Atlas+ experience would be something like the experience we're seeing improvement on the consumer side and that agents just really get answers very fast and bind a quote much faster because of the AI underneath it?

Yes. Atlas+ is really our product to help turn agents into super agents. And we have 2 portions of Atlas+ live right now. One is on the quote screen. And as Matt mentioned, agents who interact with Atlas+ when they're running a quote, bind at 3.5x the rate of people who don't interact. So we know that it is having a really positive effect, causation correlation, right? We get it. But still, that's a big difference, and we're excited. And when we read the questions that they're asking, a lot of it is just helping them get more comfortable selling flood. There are some agents who sell flood every single day, and they already know Neptune, and they know how to breeze through our system, and they don't need Atlas+ because they already know it.

But the vast majority of agents aren't selling flood every single day or maybe they're selling it once a week. And having the world's smartest underwriter sitting right there helping to answer the questions is a very, very valuable tool, and we see that in the data.

The second part of Atlas+ is it's only been out in the wild for about a month now and probably about 30% or 40% of our agents currently have access to it as we roll it out. And we're seeing some really exciting early-stage results. What Atlas+ actions or cards does, it tells the agent what is the next best thing that they can do, and that may be running a new quote or looking at an expired quote from last year or sending an e-mail to a customer who's past due on paying for their renewal or it may be sending them an e-mail saying, "Hey, you've got an endorsement available for pool coverage and that customer, we know has a pool, but you didn't sell in the pool coverage and click this one button to have the AI, send an e-mail out to the customer and they can pay with Apple Pay, the $30 to add the pool coverage.

We've now had over 130 positive tasks completed by consumers. That's renewals, endorsements paid as a result of this Atlas+ card. So we look forward to by the end of the year, having enough data to better understand what its impact is going to be. But beyond the direct impact of getting more consumers to pay the renewals and be properly insured with the right endorsements, it's also acting as a great training tool to agents about what is possible and reminding them of the great things that they can do within the Neptune system.

So -- we are very bullish on these investments on the agent side, just as we're investing on the direct-to-consumer side. As you mentioned, and we put out a press release about it, we are fully enabled on ChatGPT. We're fully enabled for AI agents such as Muse. If someone wants to use Muse to run an Neptune quote, they're going to be able to do that.

Your next question is from the line of Andrew Kligerman with TD Cowen.

First question is around carriers. And we're seeing more carriers show up in the flood market. Their volumes seem to be immaterial. But as more carriers leverage AI and digital distribution, what competitive advantages of Neptune are hardest for competitors to replicate?

So I think there are a couple of things. First of all, we haven't seen any carriers gain any material traction that we're aware of. I know there are always Lloyd's syndicates that make an API available to the marketplace. Those APIs are really just connected to an Excel spreadsheet. It's not a sophisticated pricing tool that's looking at the nearly 40 million quotes that we've run in our history and the thousands of claims data and really understanding the fundamental risk behind this.

So I think there is a very material difference in the underwriting that's taking place, number one. And then number two is really about distribution. And it's easy to make those available on some comparator platforms. But moving into large sophisticated distributors who want to make sure that you have a history and a track record and are going to be there for a long time and have the API, the ability to do APIs directly into their quoting platforms and run thousands and thousands of quotes a day and write $15 million policies and be in all 50 states plus Washington, D.C.

We have, in fact, seen a bit of the opposite where some of our largest distributors in recent recontracting that we've done with them have actually shrunk the number of private flood offerings they have favoring Neptune.

Andrew, I would just add on top of that as well. We quoted the new business premium growth number year-over-year. So we're up over 50% year-over-year in terms of new business premium sales. That is fantastic from a sales standpoint. It's also important to keep in mind that there's 100 million buildings out there that our goal is to get insured, right? 25 million that are at moderate to severe risk of flooding.

And so the market is huge. There's a tiny, tiny percent of take-up today, and this is Neptune expanding the market. This is just continuing to sell into those homes that have never had flood insurance before. And that is where that growth in new business is coming from, and that's what we continue to focus on.

And my follow-up question, and you've given a lot of good color around EBITDA growth. You've taken the guidance EBITDA margin up to above 61% from 60% to 61%. You've talked about generating more and more revenue per employee. Is it possible that in the not-too-distant future, you could be talking about EBITDA margins above 62%?

So if you look at group Q3, we were 61.7%. So we're getting damn close. And it definitely has some seasonality to it, because as everyone remembers, we've got the same cost in Q1 as we do in Q3. But in Q1, people aren't thinking about flood insurance. So we sell a lot less in the winter time. So -- but we certainly hope that we can continue to grow margins over time. And we're seeing some amazing things through the use of AI, some of which we build and some of which we buy, right?

We're buying AI when it's something where there's sophisticated systems that can really do things like customer service where it's just a cost to us. If the most we can save is a couple of hundred thousand dollars, and that's not something I want my team focused on. We want to be focused on things that are centered around our intellectual property and centered around revenue growth.

So if I can pay a couple of hundred thousand dollars for an AI system that then can be put in front of our incoming customer service e-mails and successfully service 60%, 70%, 80% of those, we're going to be able to get a lot more efficient over time. And so I'm excited by what we're seeing with technology, our use of technology, and it's not out of the realm of the possible, but we'll work there over time.

Your next question is from the line of Gregory Peters with Raymond James.

I'm going to -- I was looking at your slide on distribution, I think it's Slide 13. And at the bottom and in one of the charts, you talk about these cumulative Triton quotes reaching 38.7 million. And as I look at that number, it's substantially larger than actually the policies in force. So trying to understand what's going on with the 38.7 million because it should be nice if you could convert those all to policies in force. Maybe you have some interpretation. Is it people just getting the same quote over and over again? Or maybe you have some color on what do you think is going on there?

Sure. I think the first thing to remember is that part of what makes Neptune very special is the technology we have to integrate with very large distribution partners directly into their quoting platforms. And when we do that via an API that enables them to do things like run a flood quote every time they're running a homeowners' quote. But that doesn't necessarily mean that all of those large distribution partners have mandated that their agents then verbalize that quote every single time that it is run, right?

And that's what we're working on, how do we change agent behavior over time? That's why we're investing in Atlas+. How do we turn agents into super agents? How do we give them tools to do more of the things we'd like them to do? And what we actually see is with our very best agents where they do offer it every single time, their quote-to-buying ratios can be 5x, 6x, 7x, 8x, an agency who doesn't have the same mandate. And so what we're working to do is change the agent behavior over time. And if we can do that, that quote-to-buying ratio will just continue to rise.

Okay. I guess, the other question, just more big picture, there's been some small hurricane activity, there's flooding in Texas and New Mexico, and there's some stuff up in the Panhandle Florida. And I'm going to go on the presumption and probably little if no impact on your company, but maybe there has been some impact, maybe it affects market perception of the demand for flood? Or maybe you could just talk about some fallout that you're seeing as a result of those events as it relates to your business?

There certainly have not been any major hurricanes this year that would be the hallmarks of large surges in demand. So the incredible results in the third quarter and the results we've had this year have really been because of our operating on all cylinders, growing distribution, working with our distribution partners, selling more, being focused on delivering great value to consumers, how do we roll out Atlas+ to make agents smarter and smarter and how they could sell. And the weather has not done us any favors this year.

[ Summer ] did us a favor by not causing a huge amount of damage, but definitely has not created that fear-based buying cycle that we see with very large hurricanes. The only slight exception would be just El Nino in general is raising awareness around weather patterns, sometimes in unique areas, right? Hawaii has had, not a big state, right, not going to make a material difference to our business, but they've had a record number of hurricanes that have gone through Hawaii, right? And California you saw Governor Newsom declared a state of emergency because of El Nino for this winter. So we're certainly watching those things, and we'll see if any of that results in some uptick in demand. So I would say we've done really well despite there not being any hurricanes and despite there not being a healthy housing market.

Your next question is from the line of Tommy McJoynt with KBW.

A question on the metric when I look at commission income as a percentage of written premium. I understand there's been some moving pieces with your renewals of terms with different capacity programs. And you also mentioned the change in having no contingents in all terms effective on December 1. When you take those different moving pieces, we saw the third quarter a nice step-up in that metric, that commission income metric. Is that a good number to use going forward do you think? Or do you think there's still upside from some of the renewed terms playing out?

Yes. Tommy, thanks for the question. The renewal of our -- each of our programs, each of our capacity relationships happen throughout the year. So it's not like these all come into effect at the start of Q3 or anything that would cause a particularly large jump at that point. But we continue to negotiate changes to those contracts as they come up year-over-year. One renews in Q4 that we talked about on the call. And with that renewal, we removed those contingent commissions and got some favorable increases in the ceding commission there.

So I think where we're at today is a good run rate for the near term, but we continue to produce fantastic underwriting results for our capacity partners, and we continue to provide fantastic growth from a premium standpoint -- from a written premium standpoint into those programs. And so as we continue to do so and continue to prove out the model, then as we always say, we continue to have those negotiations.

Got it. That makes sense. And then you also mentioned your points around the guidance increase throughout the year. And so when you take the latest 2026 revenue guide versus the initial metric about a year ago, it has increased about 9%. So when you step back, what are the 2 or 3 largest drivers that you'd attribute that outperformance to and especially in the face of what's been a fairly weak housing and a relatively benign weather year?

I'll give you 2 things, and I'll ask Matt to play cleanup there. One is Jean-Luc Eckstein, who's our Chief Customer Officer, and his team have done an absolutely fantastic job making sure that agents across this country understand Neptune, its capabilities and how we can help them grow their books in the face of a challenging and soft market for most brokers, right?

So flood can be an area of great growth and great value to their customer. So a big shout out to our distribution team for a lot of hard work this year on making sure that agents understand Neptune's value proposition. That's adding new agencies and really importantly, working with existing agencies to do more and deepen those relationships.

The second thing is around technology and Atlas+ helping -- providing that agent with an amazing tool sitting right next to them when they're running a quote, helping them to be a super agent and get their questions answered and give them the confidence necessary to sell that policy. It is an incredible tool, and we've had thousands and thousands of agents interact with that and benefit from that tool. Matt, what else would you add?

Yes. I just add 2 things. One is from a product standpoint. So we continue to modify the product and improve the product. And so some of the changes we've made this year with increasing the limits that are available, adding those optional coverages, we sell -- every day, we continue to sell more and more higher limit policies, high premium policies and just have a better products market fit than we ever have before.

And I think that continues to be the case in the flood peril. And as Trevor mentioned earlier, we're getting more and more confident that that's the case in the earthquake peril as well. And then I'd also just mention the sort of turmoil that we've seen with the NFIP with the shutdown at the end of last year. And then with the issues again during Q1 at the start of this year, I think more and more agents through that process found the ease of use through Neptune, found our system and continue to like that process and do more and more business with us. So I think it's all of these points compounded and combining, which is what allows us to raise the guidance and also set the guidance that we've set for 2027.

Your next question is from the line of Josh Shanker with Bank of America.

So look, the weather is not really working for you. And obviously, the housing formation is not, but you're doing great anyways. Is there any stats you have around the percentage of homes that are being bound with a new coverage, including flood compared to past years and the percentage of those homes, I guess, that are getting Neptune policy, which is probably a very high percentage. Is there a way to think about the take-up rate, how it's changed over time?

There's not a great way to do that, Josh. There's not a great public data set around it. There's some back of the envelope math if we look at the size of the NFIP and we look at the rate at which they are shrinking over time and they continue to do so. As we sit here today, Neptune is just shy of 10% of the size of the NFIP from a policy standpoint. And also 5 years ago, we were 1%, and we're pushing 10% as we sit here today.

So we obviously continue to grow from a market share standpoint pretty rapidly as we have rapid growth and the NFIP declines. I think if we look at the sort of a market rate of turnover with the NFIP, we come back into Neptune winning 20% to 30% of all new policies that are issued from a stand-alone flood standpoint here, which continues to increase year-over-year from that same -- if we do that same equation.

And do you have any thoughts around the percentage of policies that you're writing that are for a new home purchase versus somebody who's being shunted out of the NFIP or just changing from another carrier? Is there any way to think about that?

A little bit. We can look at some data around who's buying us on a mandatory basis, right? And we do have some data around the timing of their mortgage and if it's a new purchase. And the estimate that we have is that only about 20% of our policies actually came from the NFIP, actually switched from the NFIP. And everybody else is net new. And that could be net new existing homeowner or net new because they're buying a home and never even went into the NFIP, right? And the breakdown between that, again, the data is not really available and it's not great, but that's about the best direction I can give you right now. We are working on some data that may help us to be able to better answer that question in the coming years.

I may ask some more questions offline about this.

Your next question is from the line of Paul Newsome with Piper Sandler.

I was hoping you could give us maybe a little bit of your most recent thoughts on the rollout mechanically of the earthquake business and in terms of how it will proceed from a state perspective and agent licensing perspective, et cetera, just to give us a sense of the pace of what might or might happen with the new product.

Yes. So thanks for the question about the earthquake product. A couple of things. So when we launched in beta available just in one state, California, and only available via our agent portal. So an agent had to sign in and directly run a unique earthquake quote. What's next in the progression is in the past week, we've begun to be testing cross-sell, which means when someone in California, an agent in California runs a flood quote, they have the opportunity to immediately see what the earthquake quote would be, right, and without having to do any additional work.

So we actually sold our first cross-sell policy today. So that was an exciting milestone there. Next on the journey will be API availability, where we will make the earthquake product available via API to our large quoting partners. And then next will be the direct-to-consumer portal for earthquake, which allows us then to do things like include a new kind of Atlas+ action card, which would be a cross-sell from an existing flood policy to then have an agent be able to click one button and send their consumer a new earthquake quote and have that consumer fulfill entirely online if that's what they'd like to do.

So when we talk about fully launching a product, it means taking full advantage of Neptune's entire suite of technology and all that comes with it. And we're now 2 out of 3 or 4 or 5 of the steps along the way. So we hope by the end of the year, all of those steps are completed, and we'll call it a fully launched product at that point. Importantly, this is an E&S product. It is a technically deductible buydown product that fits under the export list. And so it does not require any unique licensing from the agents, but there are steps that agents have to go through to sell a surplus lines product in California, and our system is sophisticated and builds those systems and processes.

That's great. Separate question. Is there -- now as we past the IPO, an optimal amount of financial leverage for Neptune in your opinion that over time, you want to be at? Or is it just sort of a -- we'll see as we go, kind of, process from a financial leverage perspective?

We're at a pretty low level of leverage right now at 1.7x. And obviously, this is somewhat dependent upon the interest rates at the moment and other opportunities. I would say other than month-to-month opportunities to buy back stock, where I'm not a big fan of adding a ton of leverage to buy back your own stock, right? So we buy back stock with free cash flow, maybe smooth out using the revolver, but certainly not going to, at this point, lever up to buy back a lot of stock.

And so really, what having a low amount of leverage enables us to do is be very opportunistic if there are inorganic growth opportunities in front of us, right? And if there are ways that we can find companies that can really benefit from Neptune's technology, then we'll want to take advantage of that. So no set target for leverage, but I'm very happy to be in the position we're in as a company.

Your next question is from the line of David Motemaden with Evercore ISI.

Just a question on the 17% revenue growth for next year that you guys are projecting. It sounds like the commission rate is stable here and could be up. I guess that would be up for the full year in '27. But maybe you could talk a little bit about what you guys are contemplating both on like the PIF growth side, but also how you're thinking about premium growth and pricing. If some of the good lifetime loss ratio results, you guys are thinking of passing that through in lower pricing to drive volume?

David, yes, thanks for the question. So I think we continue to be more and more bullish around our ability to grow PIF to grow distribution and to drive those new business sales. I think from a pricing standpoint, we have a goal to get as many people covered as possible, right? This is an issue that America has faced for a long time is the low coverage rates that we have in the country. And so we want to get more and more people insured here.

The portfolios need to continue to make sense from a capacity standpoint for our capital -- for our capacity providers. And so that's always sort of the tension that we play within Neptune. But we expect to continue to have very good premium and revenue retention figures as we look into next year as well as strong new business growth quarter-over-quarter as we get through next year. What we're not planning on there is a particularly strong hurricane season, any uptick in the housing market, anything happening with NFIP, right, any organic -- sorry, inorganic growth opportunities or any particular growth in new products that we might put out there and really including the earthquake product that we have today.

And so I think we continue to become more and more bullish quarter-over-quarter, and I think that's reflected in the revenue growth that we've put out there. It's obviously -- as we get bigger and bigger and that revenue number gets bigger, it's harder to put up larger growth percentages, but that's what we continue to work on.

Great. And then maybe just a quick follow-up. The Palomar agreement seems to have been a pretty big success. Is there any sense you could give us now that, that's sunset, how much that has contributed to the growth here? If I just sort of look at, I think you guys have added on a quarterly basis, about 20,000 units. Is there any way you could size how much Palomar is within that, on that, I guess, is now being lapped?

Yes. So if we look at Q3 revenue growth of 34% outside of the Palomar deal, that growth would have been 30%. So we continue outside of the Palomar deal to grow very rapidly. But we have a fantastic relationship with Palomar. They're a great team over there. We're very thankful for the relationship. And I think this has been a really, really good scenario, a really good use case from both sides where Palomar and their portfolio has been able to benefit greatly over the last 12 months, and we've also been able to add nicely to Neptune's growth at the same time.

Your next question is from the line of Rob Cox with Goldman Sachs.

Yes, just a question going back to the AI agent discussion and noting the press release you put out on news, I'm just curious if you have good data on how AI agents are interacting with your platform today? And if so, what you think that tells you about how this might develop over time?

I would say it's entirely immaterial at this point and it's a good hobbyist exercise for people at this time. But if you look at the average age of a homeowner in America, this is not yet a mass market product for buying insurance. I hope someday it becomes that, but it's not impactful today at all.

Yes. If I could follow up on maybe just the premium per policy trend. So up 2% year-over-year. I know you guys have increased limits on some products and you're still getting price increases. So I'm just curious what is sort of dragging down the premium per policy year-over-year as opposed to what it would be otherwise.

You have to look at mix as well, right? So during a government shutdown year such as last year, you're going to sell a lot of A zone mandatory policies. And as that went off, you may sell a higher percentage of X zone policies, which are on average lower price. So you really have to look at mix as well before just looking at overall premium average.

Your next question is from the line of Cave Montazeri with Deutsche Bank.

My first question is on the CFO transition. Things are doing pretty well with Jim. So I'm just curious to know if you can give us any color on why the transition and why now?

I'll give you my view. And then if Jim wants to add anything, I'm happy to have him jump in. We've been at this for 10 years now, and it's been an incredible experience. And what we're finding is that we need -- at least for some period of time, we need more help at the senior levels. And Jim has done an incredible job as CFO, but by becoming our full-time COO is going to be able to help us to automate and transition as many of those things to technology as possible over time.

Cristian is someone that we've worked with before. He was the CFO of the bank that we all worked at and ran for years. And so he's a known quantity. He's our -- until yesterday was our Chair of our Audit Committee at Neptune. So he has a deep understanding of Neptune and its financials. And so this is a great opportunity to share the workload and broaden the base. Jim, anything you would add?

I'd just add, given the history that I've had with Cristian, there's really no one else in the world I would feel more comfortable handing the reins over to as my successor in this role. I also would just remind everyone that I'm staying on as the COO. There are plenty of operational things to get done around here for now in the foreseeable future, and we'll bring on the Board an oversight function and my eyes will be on the financials as yours are.

Great. And my follow-up is on just price transparency in flood insurance. And here you're loud and clear that older people are less likely to use, like, a personal agent to buy insurance and to buy [indiscernible]. They could be using it to just shop around, educate themselves and maybe eventually let that trigger a discussion with our broker. So my question is, if that happens, how well positioned is Neptune to compete in a world where there is more price transparency?

Boy, that would be a tremendous opportunity for Neptune and probably the biggest opportunity for us because 2 things would happen if everybody used an AI agent to get educated. The first is that 21 million Americans would find out that their house is at high risk of flooding and that they need to buy flood insurance and they don't have a policy today. So that AI is going to tell them the truth about the science, and that would be fantastic.

So job #1, please everyone use an AI agent and get educated about your risk because it will expand the market from 4 million policies today to 25 million. So that would be number one. And then number two is you have to remember that there are currently 1.7 million people who have NFIP policies who could save money by switching to Neptune today. So if they've got the AI agent out there shopping for them, Neptune is the primary beneficiary of that, right?

We have the capacity relationships to be able to grow and serve those all 1.7 million of them found out tomorrow because of an AI agent that they could save money by switching to Neptune. We're the only one with the capacity to be able to actually effectuate that change. So both of those things would be tremendous outcomes for Neptune. We have the best data. So like a Progressive, if you have the best data, you're going to win in a sophisticated open and transparent marketplace.

There are no further questions at this time. I will now turn the call back to Trevor Burgess for closing remarks.

I want to thank everyone for joining the call today. We are thrilled by third quarter's results and the momentum that we have in this business. I think I said this last quarter, but I'm going to repeat it. I have never been more excited about Neptune, the prospects and where we can go with this company. How we are using technology is incredibly innovative. We have a lot of exposure to a lot of different insurance companies. And what we are doing is bleeding edge and is leading the industry, and I think will serve us very well as this AI transition continues to take place. So thank you all for your help. Thank you for the questions. And look forward to the quarter ahead.

This concludes today's call. Thank you for attending. You may now disconnect.

Thank you. Good morning and thank you for standing by. My name is Jeanne and I will be your conference operator today. At this time, I would like to welcome everyone to the Neptune Insurance Holdings Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.

Thank you. I would now like to turn the conference over to John Carlin, Director of Corporate Development. You may begin.

Thank you and good morning. With me here today is Trevor Burgess, Chairman and CEO, Matt Duffy, President and Chief Risk Officer, and Jim Steiner, CFO and COO. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements including, among others, statements about our expectations for our future financial performance, growth opportunities, business strategy, market trends, and capital allocation plans. These statements are based on our current views and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. We direct you to our recent SEC filings for a full description of these risks. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. We will also reference certain non-GAAP financial measures. These measures should be considered only as supplements to their comparable GAAP measures.

Additional information, including reconciliations of the non-GAAP measures to their most comparable GAAP measures can be found in our earnings release at investors.neptuneflood.com. And in our current report, on Form 8K that was publicly filed with the SEC on July 21, 2026. Now I'd like to turn the call over to Trevor.

Good morning and thank you for joining us for Neptune's second quarter earnings call. Let's start with the headline. This was the best quarter in Neptune's history and it wasn't close. Revenue came in at 55.9 million, up 33% year over year. Adjusted EBITDA hit 34.5 million, up 36% at a 62% margin. That's up 165 basis points from a year ago. Premium in force reached 419 million, up 32%, and we now have over 316,000 policies in force, up 29%. And we have a very strong And so summing it all up on a trailing 12 month basis, revenue per employee and adjusted EBITDA per employee both reached record new highs, 3 million and 1.8 million respectively.

However you want to slice it, we grew across nearly every measure of this business. So what's driving it? I'd point to three things. First, we are seeing real momentum across our distribution network, both with agents who've been with us for years and with new partners we're bringing on. Second, the FEMA review council process has put a spotlight on the long-term status of the NFIP, and we think that's pushing more agents and their customers to take a serious look at private flood as the more durable option. I'd like to spend a moment on the FEMA review council's report because one of his recommendations is particularly exciting to us. and it's one FEMA can act on without any congressional action. We believe this single action could have the largest impact of any recommendation on our business. I recently wrote an editorial in The Hill that focused on telling the truth to Americans about their flood risk.

Research confirms FEMA's current flood maps understate high risk properties by more than two thirds. If FEMA acts on the council's recommendations to modernize the maps with data it already has, millions of properties now classified as low risk would move into mandatory purchase zones, giving homeowners accurate information and meaningfully expanding the mandatory purchase requirement for flood insurance. As Matt will mention, more than half of our sales are outside of these mandatory zones, but we'll still be thrilled to have more Americans know the truth about their flood risk. And third, our team has been executing at a pace I haven't seen before, across nearly every part of this business, all at once. We're adding to the core product, building entirely new products, completely redesigning the user interface, building Atlas Plus, growing our agent outreach, growing how we communicate with the market, and refining how we market ourselves. None of that shows up in a single line item on the income statement, but it's exactly the kind of work that sets us up for the next 24 months. And I think you're already seeing the early returns of it in this quarter's numbers.

I want to spend a minute on something that's been on investors' minds this year, because I think the market had it backwards. The fear that AI would replace insurance agents outright, and that this would somehow be bad for Neptune. Here's what I'd say to that. First, even if that fear played out exactly as people worried, it still wouldn't be bad for us. Paying our agents is the single largest expense we have, and a world with less need for agent labor is a world with a better cost structure for Neptune, not a worse one. Second, and more importantly, that's not actually the bet we are making. We don't think agents are going away.

And we're not trying to build the AI that replaces them. We're building the AI that arms them. Last quarter, I talked about turning agents into what we call super agents. This quarter is what that looks like when it starts to work. The first piece of Atlas+, the expert sitting right there on the quote screen, answering an agent's questions in real time, drafting the follow-up email, explaining why a customer needs excess flood coverage, is live today and agents are using it. By the end of the quarter, nearly 3,700 agents had exchanged 33,000 messages with Atlas+. We have placed the best flood underwriter sitting side by side with our agents.

The second piece goes live in the next few weeks. Instead of an agent staring at a blank screen wondering what to do next, Atlas Plus will hand them a ranked list of tasks with the single most valuable thing they could be doing right now as ranked by our data science team sitting at the top. Then Atlas Plus does a lot of the work of getting that task done. We are not asking the more than 55,000 agents who have signed up for individual user accounts on our platform to go and build their own AI. We are building it for them. We're handing it to them. We are using AI to help our agents become super agents and to help the U.S. close the massive flood insurance gap. Remember, there are over 100 million buildings in the U.S. and only about 4 million flood policies.

With that, I'll turn things over to Matt to walk us through the business in more detail.

detail. Thank you, Trevor. The second quarter was another record quarter for Neptune, but what stood out to me wasn't any single result. It was the pace of execution across the business. We shipped more technology than we ever have, we expanded our product offering, renewed our two largest programs on improved terms, kept growing our distribution network, and started to see the investments we've made in AI change the way the business operates every day. Before I get into the detail, one point. People often ask whether AI is mainly about reducing costs. That's not how we think about it. Neptune already operates with exceptionally high efficiency, and our objective isn't to grow by adding large numbers of people.

It's to keep growing revenue while increasing headcount far more slowly. You can see that in a single metric. On a trailing 12-month basis, revenue per employee reached a record $3 million this quarter. That number captures how the business is evolving, and it's one of the results I'm most excited about. Let me give you the detail behind what Trevor described, starting with technology. If you look at everything the engineering team delivered over the last three months, it's a remarkable amount of work. We launched commercial and condominium earthquake products.

We completed a full redesign of the agent portal and quoting experience. We extended the first phase of Atlas Plus to all of our distribution partners. introduced new portfolio insight capabilities for agents. We deployed a new machine learning model in the underwriting process. We expanded our flood products with new coverages, completed major underwriting infrastructure projects, delivered dozens of additional improvements across the platform. That's comfortably the most we've ever delivered in a single quarter. 12 months ago, I'd have looked at that roadmap and assumed we'd need a much larger engineering organization to deliver it. Instead, we changed the way our engineers work. AI now supports our developers throughout the software development process, helping write code, review code, test software, and investigate problems.

Our engineers still make every important decision. They're simply spending far more of their time designing and building products, and far less on repetitive development tasks. The result is that our engineering team delivered more than twice the work it did in the fourth quarter of 2025 and over 50% more than the first quarter of 2026, with a team that's remained broadly the same size. Ultimately, this isn't about writing code faster. It's about giving the business the right tools to do the right thing. the ability to launch more products, respond to opportunities more quickly, and keep growing without expanding the organization at the same rate. We're seeing the same thing outside engineering, and our customer success team is a good example. Compared to the second quarter of last year, each customer success representative now manages roughly 25% more policies, while we've reduced customer wait times and improved the quality of the responses customers receive. goal was never to shrink the team.

It was to let the same highly skilled professionals support a much larger business and deliver an even better experience. Let me turn to underwriting performance, which we report once a year on our second quarter call. Our lifetime written loss ratio is now just 19.5%, down over 500 basis points from a year ago. For this peril, that's an exceptional number, and it's the clearest proof of what our pricing and underwriting platform, Triton, has delivered across eight storm seasons and now into a ninth. And through through 21 landfall hurricanes during that time. It's also one of the reasons our capacity providers continue to grow alongside us, which brings me to capacity. During the quarter, we renewed our two largest programmes.

Both renewed on improved economic terms, reflecting the confidence our partners have in Neptune's underwriting platform and the results we've delivered together. We also welcomed additional capacity providers, bringing our panel to 45. Alongside those renewals, we increased building coverage limits to $15 million across every property type and expanded coverage across all of our flood programs. Those enhancements further differentiate the products for our distribution partners and improve the value proposition for policyholders. And late in the quarter, we extended our earthquake platform with the commercial and condominium products I mentioned. It's early, but the response from agents and customers has been encouraging, and we'll keep testing that business thoughtfully. Turn into distribution. Since launching individual user accounts in December, more than 55,000 insurance professionals have created verified Neptune accounts, each secured with multi-factor authentication.

Every interaction helps us understand how agents work, which lets us keep improving Atlas+, refining the experience and building better tools. That momentum continues to translate into growth. One statistic stood out this quarter. More than 55% of our new business came from properties outside FEMA's special flood hazard areas. And over 75% came from voluntary, not bank mandated purchases. We think that's an important signal of where the private flood market is heading. For years, we've said the opportunity isn't simply moving policies off the National Flood Insurance Programme.

The far larger opportunity is expanding the market, protecting properties that historically haven't carried flood insurance at all. We continue to show great success in that area. The FEMA review council report generated a lot of discussion during the quarter, and we've had a number of questions about what that means for Neptune. I think it's an encouraging report. It recognizes the role the private market can play in closing America's flood insurance gap. spotlight that it's put on the long-term future of the NFIP is prompting more agents and customers to take a serious look at Private Flood. That's helping demand today. What I'd be clear about is this. Whether the longer term recommendations are implemented and over what timeframe remains uncertain. and none of that is built into our projections.

The record quarter we're discussing wasn't driven by changes in government policy. It came from executing the same strategy we've followed for years. better products, better technology, empowering agents, and expanding distribution. If additional opportunities emerge over time, we are best positioned to pursue them. Before I hand it over to Jim, let me touch on our outlook. We've had a very strong first half. The business continues to perform, distribution continues to grow, and we're seeing the benefits of the investments we've made across the platform. Based on that performance, we are raising our full year expectations.

We now expect 2026 revenue of $199 million, which would represent top line growth of 25%, and an adjusted EBITDA margin of 60 to 61%. That outlook reflects the momentum in the business today. It does not assume any acceleration from future FEMA initiatives or broader changes to the National Flood Insurance Program. and it also accounts for the below average Atlantic hurricane season projections released by the National Oceanic and Atmospheric Administration. When I look across Neptune, what gives me confidence isn't any single launch or metric. It's that every part of the business is moving in the same direction. technology, more products, teams supporting a larger business without growing at the same pace, better tools for our agents and capacity partners expanding alongside us. All of it's translating into stronger financial performance. That's exactly the business we've been building for years.

And I think this quarter shows what's possible as those investments begin to compound.

With that, I'll hand things over to Jim. Thanks, Matt. Today I'll cover three things. How the quarter looked financially, why the model produces these results, and how we're deploying capital. Starting with the quarter, we had strong growth, revenue of 55.9 million, up 32.8% year-over-year, with both record new business and a larger base of in-force premium contributing. Adjusted EBITDA was 34.5 million and margin expanded to 61.7% of roughly 165 basis points from a year ago. We grew and became more profitable in the same quarter, which is the balance we're always trying to strike. Policy retention rate renewal also improved year over year to 86%.

That continues to be a driver of the top line as we compound a larger and larger renewal book, which contributes more revenue each passing year. A question we hear often is how margins hold as we grow. The answer is in the structure of the business. We carry no underwriting risk, our capacity partners do. So growth does not consume capital. and the decisions about which risks to bind, for whom, and at what price are made in software. So growth does not require us to add people in proportion. We expand by writing policies and writing code, not by expanding the balance sheet or payroll, which is why a quarter like this one lifts margin rather than compressing it.

The per employee numbers tell the same story. On a trailing 12 month basis, per employee and adjusted EBITDA per employee both set records at 3 million and 1.8 million, respectively. as you'd expect from a software company rather than an insurer. To us, that's the clearest evidence of what we have built, and we believe that we are the only public company of our kind. On the balance sheet, this was another quarter of deleveraging. We finished at $240 million drawn on our $260 million revolver, roughly 2.1 times trailing adjusted EBITDA. reflects a net increase of $13 million in debt since the end of the first quarter, which was utilized to repurchase shares during the secondary offering, as I'll discuss in a moment. After the end of the quarter, we paid down $7 million, bringing our current balance to $233 million. We are also active in returning capital to shareholders in two ways this quarter.

First, we repurchased $26 billion in stock when our private equity shareholders completed its secondary offering in May. a healthy step that expanded our public float, improved trading liquidity, and broadened the shareholder base. Second, we repurchase a further $6 million in the open market. Our priorities from here are straightforward. Reinvestment in the platform comes first because that's where $1 compound is the best for us. Beyond that, we return capital to shareholders. There's 100 million repurchase authorization the board put in place in April, of which there is 94 million remaining and through the upcoming net settlement of our RSUs as they vest in September. Taken together, this is a business that grows quickly, turns that growth into cash, and becomes more efficient as it scales.

That profile is rare in any industry, and we believe it is singular in ours.

With that, I'll turn it back to Trevor. I'll close with this. This was the strongest quarter in Neptune's history, and I don't say that lightly. As Matt walked through, our lifetime loss ratio has now fallen below 20% for the first time. Extraordinary for this industry. And proof of what Triton has delivered through eight storm seasons and now into a ninth. But what has me most excited isn't a number from this quarter. It's what this team is building towards over the next few years. We're adding to the product, building entirely new products, completely redesigning the interface, expanding agent outreach, sharpening how we communicate, and refining how we market, and we're doing this all at once.

And in the third quarter, agents get the next piece of AI in Atlas Plus, a rank list of exactly what to do next, most valuable task first, with Atlas Plus doing the heavy lifting to get it done. We've spent years trying to change agent behavior one conversation at a time. This is how we turn every one of them into a super agent at scale. All of this for the people who sell 98% of our policies. And we're just getting started. Thank you to our agents, to our capacity providers, our policy holders, and to our employees for making this quarter possible. Thank you for joining us, and I'll now open the call to questions.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. And your first question comes from the line of Charlie Litterer with BMO Capital Markets. Please go ahead.

Hey, good morning. Thanks. On your comments on agents being more interested in Neptune or private flood insurance because of the FEMA review council's report, can you unpack what you're seeing that's leading you to believe that's driving agent interest and how we should think about that as a near-term catalyst for the back half of the year? Thanks.

I think some of this goes back to what we saw coming out of the government shutdown. So we had the longest government shutdown in history. There was no access to the NFIP. And many agents who had used the NFIP for decades now needed some alternative, and they obviously found Neptune, used us, liked us, saw how easy it was, how the product is better and have stuck with us. The FEMA Advisory Council talking about sort of the long term government goal of growing the participation of the private marketplace. is just another set of data that those analysts need to incorporate into their thinking about how they spend their time. We're having a number of very senior discussions with large organizations that are thinking about what what is their five-year plan when it comes to the NFIP versus private flood? And we're excited to be in the room and to be having those discussions. For now, what I would say is what we're seeing on the ground is active engagement, better engagement than we have ever seen before. more agents purchasing policies for their customers.

We've had a very slow start to the storm season. We had these tiny A and B storms that have happened. So all of the performance in the second quarter really really came from agents engaging with Neptune in higher and special ways. The backdrop is we still have a terrible housing market also. So someday when we have a good housing market and we have all of these agents who are who love Neptune, then we'll really see what we can produce.

Got it, thanks. You also called out the improved economic terms on your two largest programs.

Can you help us think through the magnitude and whether that had an impact in 2Q or if that's more of a, you know,.

you know, back half and beyond impact. Thanks. That's more of a back half impact. Those programs were June one renewal. So we had a one third of the quarter impact from having them and you're talking, you know, half a point or something like that on the program's improvement in the economics. Again, we view these relationships as long-term, critical relationships where we want over good years, bad years, 10 years, it to be a great economic outcome for both Neptune and for our risk taking partners. We're not interested in running a reverse Dutch auction at the end of every quarter to see how we can make the very, at the end of every program to see how we can make the very highest seating commission possible. We want to make sure that there's a fair split that takes place over time of those premium dollars.

And we've continued to be able to find tremendous partnerships and that fair split continuing.

Thank you. Your next question comes from the line of Pablo Sings on with JP Morgan. Please go ahead.

Hi, good morning. To start off, I was curious if you could break out how much the Palomar book contributed to the 40% e-biz growth this quarter?.

Yes, we're not breaking out individually, but it's something like, something like about half of it. So we still would have seen, you know, very, very strong, you know, organic growth without, without the Palomar book.

Yes. Thanks, Trevor. And then secondly, I think you made several interesting comments about efficiency and productivity gains from AI in your technologies and having strong sales associated with this quarter does help margins, clearly. But I was wondering how you think about these new tools going forward, right? Because to your point, Neptune is highly profitable, right? But it seems like just given technology today, there might be some optionality to bring that even higher. So just curious about how you're thinking about the potential there.

We reached a peak of, I think, 62 employees. I think we're at 59 today. you know, just as there's some, you know, general churn. So it wasn't a design, but it's also somewhat that with the AI tools that we're using and implementing, there's not a rush to need to get, you know, back to 62. So this is a business that, you know, can become more efficient, but as Matt talked about, we're, really trying not to spend a lot of time on cost reductions with AI. That That doesn't make much sense when you only have 59 people. all of our effort utilizing AI is how we grow the top line. How do we find ways to help our agents become super agents, to sell more, to close that protection gap. And we're excited to see how Atlas Plus and other initiatives can drive that going forward. forward.

Uh, but certainly, you know, if we're holding expenses largely, you know, steady, uh, all new business that's coming in that comes through agents comes in at about a 70% EBITDA margin. So it averages in well and drives that number up.

Thanks, Trevor. Your next question comes from the line of Josh Shanker with Bank of America.

Yes, thank you for taking my question, everybody. Trevor, you made your comments on A and B storms, B being Bursa. As it was happening, it looked like it's still underway, but it's a low-grade storm producing a lot of water along those low-lying areas. Is this going to be a FEMA loss in depth? Does Neptune have exposure to that area generally? Could it stimulate demand?.

These kinds of storms are not material losses for Neptune or won't generate material losses for Neptune, nor will they generate material losses for the NFIP. What these kinds of storms do is really raise awareness, which raises demand, which which leads to fairly short periods of increased sales activity. And we're happy for that awareness, even though unfortunately it does lead to flooding in low-lying areas and certainly is impactful, meaningfully impactful to the families and businesses in this path. But this is not, these kinds of storms that we had with A and B are nothing that really changes the overall impact. You need a storm more akin to Helene of two years ago that has sort of massive impact. impact to have something where, or Hurricane Harvey or Sandy, those fundamentally changed the demand curve in the areas that were impacted. We still sell way more policies in New Jersey because of Sandy than we otherwise would have. But you need a really big storm to really fundamentally change the elasticity curve.

And then changing gears a little bit, what's your expectation on take up of the higher value offerings that you're given that current customers will buy up more coverage?.

Yes, we really have two opportunities there. One is the one you mentioned where we can go back to all of the existing customers who bought products. 7 million of building cover on their home, and now we offer 15, we can go back to them and say, hey, would you like to increase at renewal or even mid-year? Would you like to increase to the new higher limits? And obviously, there are fewer $15 million homes than $7 million homes, but we do think that that is an interesting driver of growth. And then what we're seeing on the new business side is very good take up, you know, just even in the past couple of weeks that it has, since it's been available, we're seeing healthy impact and nearly every day we're selling a new 15 million dollar policy so that obviously will have some uh.

do some help in driving up the average premium. And if I can just sneak another one in, the multi-family product offering, what that means for that offering. I'm sorry, can you say that again? And for the potential for growth in multifamily, what's the opportunity there with the higher limits?.

Yes, so multifamily, and that includes both condominiums and apartment buildings. This is one of the major reasons why we push for these higher limits is to be able to serve that marketplace in a meaningful way. If you think about it, if you've got an apartment building and you have an NFIP policy, you have a $500,000 limit and no loss of rents coverage. With Neptune, you can now get $15 million of coverage on that building and a million dollars of loss of rents coverage. So the product differential is now so large versus the NFIP, really calls into question why anyone would buy the NFIP policy. Thank you for all the details. Great quarter. Thank you.

Your next question comes from the line of Rob Cox with Goldman Sachs. Please go ahead.

Hey, thanks. Good morning. Yes, just wanted to go back to the flood map discussion. I'm just curious if you have a sense of how much of an addressable market expansion increasing or modernizing the flood maps would be for Neptune just in the flood zone area?.

you. So the math looks something like this right now they're about you know know, three and a half, let's call it 3 million, uh, . out of 9 million mandatory zone buildings. And that's a lot of money. Some of that gap is because of noncompliance with the law, and some of that gap is because people don't have a federally backed mortgage. So they paid cash for their house or whatever it may be. So about three of nine. if that same ratio holds and you go to 24, then you're talking about 8% million from three, so an additional five million, you know, mandatory policies. plus added awareness for everybody else, we think it could have, that's why we talk about it potentially having the largest impact, maybe even larger than sort of a takeout or any of those kinds of things that would require congressional action. Yes, it seems meaningful. And then I just wanted to- And I would just, maybe I should just add that some of this is happening. This will happen over time anyway.

So last year, Broward County changed their maps. It added 80,000 people. in that Florida County to the 80,000 buildings to the high risk flood zones. Harris County, Texas is right now going through new maps. When those new maps finally get published in the next year or so, that will add 170,000 buildings to the high risk flood zones. So, What we're trying to encourage is FEMA to do this sort of all at once, do a modernization exercise and do it all at once. If they don't do that, it's still going to happen over the next five to 10 years. We're still going to get to the same place.

It's just going to take longer.

Yep, that's super helpful. And just on guidance, I just want to make sure I understand. So it seems like there's plentiful positive factors, you know, increasing building coverage limits, expanded product offering, improved economic terms. You've got Atlas Plus coming in a more expanded way in the third quarter. Is there any offsets that would be causing you to otherwise increase guidance less on the back of those tailwinds?.

I think the thing that you have to remember is that the second half of the year is normally dominated by storm driven events. And given the forecast, as Matt mentioned in his remarks, we're just taking down those expectations of any storm, you know, related impacts. Now in El Nino years, there have been massive storms, including Hurricane Andrew. So it is possible that there could be something really, really big that happens this year. And we're just not taking that into account in our forecast. So our forecasts include a very benign.

storm here. Okay, got it. Just more conservative on the weather. Perfect. Yes, that's one thing I can't control.

Your next question comes from the line of Tommy McJoyant with KBW. Please go ahead.

Hey, good morning. Looking at the fee income line in the revenue section, if I look at that as a percentage of written premiums, that saw a modest uplift of its own in the quarter. First off, can you remind me, those are fees paid by policyholders, right? And is the higher percentage just driven by a geographic mix, or was there an active change in the fee schedules that you set? And should we think about that 2Q level as fair to run rate, think of it as sustainable?.

Yes, so those are fees that are paid by the policy holder at new business and every renewal thereafter. And it's, it's a, MOSTLY TWO THINGS. SOME IS GEOGRAPHIC. WE HAVE SOME STATES HAVE LIMITATIONS ON WHAT THOSE FEES ARE AND WE HAVE MORE GROWTH IN UNLIMITED STATES. AND WE HAVE We also saw some uptick in the commercial business, which has higher fees. in part due to the higher limits that we have in place. But we did not make any changes during the quarter to the fee schedule itself, although that is something that we continuously look at and want to have the right balance over time. Got it, thanks. And then switching over,.

In the past couple quarters, you've talked about starting to experiment a little bit with looking at price elasticity for the cost of your policies and thinking about a potential higher uptake of customers adopting flood policies. Are there any questions? any updates on that experimentation, certainly in the context of thinking about the sub-20% lifetime to date loss ratio for your capacity providers? It seems like there would be some price elasticity there. So any updates around that program? Thanks.

Yes, what we call the Quotabine model continues to, it is now fully deployed and is live at reducing prices for customers for new business. in areas where and for property types where we think it can make a change in the likelihood of someone purchasing and that is definitely having a positive impact on you know the new business sales so i would say that the data science models that we have built are performing as we expected and are having an impact. And what I'm excited about is this is lowering prices to get more people covered, which is part of our fundamental mission to help close this protection gap that exists.

Great. Thanks, Trevor. Your next question comes from the line of Ristian Getzoff with Wells Fargo. Please go.

Hi, good morning. My first question is on PIF growth. So PIF growth was up about 29% year over year, which the first half tends to be seasonally weaker. I guess, how should we think about the year over year growth trends in the back half in terms of versus the first half? Like, could we still see an acceleration even if we have a benign hurricanes? season or are the year over year comps also a little bit impacted since last year you also benefited from the government shutdown? Thank you.

Yes, you've hit the nail on the head. I can't control the weather and I also can't control whether or not there's going to be a government shutdown. So last year the weather didn't help us, but we had the government, we had the government shutdown. The government shutdown last year really impacted, you know, Q4. Q3 is really more the weather, you know, one. And, you know, If we have a benign Q3 last year and we have a benign Q3 this year, we don't think that that's where the change will take place. The harder comp comes in Q4 if we have benign weather and no government shutdown.

Got it. And then for my second question, you've talked about before about 400 to 500k of new business at-bats per year. Are you seeing an increase in those at-bats as you kind of get more agents in your distribution and as more of the business goes to the private side? And I guess, how should we kind of think about that year-over-year growth in at-bats on like a normalized.

basis as you kind of look out like a few years from now? Yes, we're, we're seeing, you know, steady growth. It's really tied to, you know, the number of agents that are, you know, interacting with our system, um, We are working on some larger new API partners that could drive that higher. And we're excited to obviously help current distribution partners transition from manual use of our system to a more automated use. It's not because we don't have the technology that's available to do that. It's very often these large partners getting on their development schedules and prioritization schedules just can take years and but we're now actively working on some big ones and I'm excited to see what that can bring in the second half.

Got you. And if I could just squeeze one more. For the flood map modernization, I guess, what does that timeline look like, just given we're kind of near the midterms? Do you think the midterms could impact or delay that decision? And also, if it does get enacted, it sounds like it could happen all at once. So, would new business take over? up like over like the next couple of quarters by like the 5 million households.

So a couple of things. First, one of the reasons we really like this recommendation is it doesn't require an act of Congress. The existing law in fact says that every flood map should be updated every five years. And the vast majority of flood maps have not been updated in the last five years. So some of this is just follow the existing law and update them every five years. On the other side, so that's the good news is you don't need Congress. Midterms have nothing to do with it. What you need though are people at FEMA who are making that decision that, okay, let's go ahead and do this and let's put more initiative energy people towards that. but the number of people working at FEMA has reduced dramatically.

And so whether or not the government can make that a priority, given the current levels of staffing is an interesting question. So we do not know the answer about timing. We do not have a good sense of if it will happen, but we're encouraging it to happen because it's the right thing for Americans to know about their risk and it is something that does not require an act of Congress. So if writing an editorial in the Hill is lobbying, then that's the lobbying we're doing and trying to put our energy towards. Got it. Thank you. Congrats on the quarter. Thank you.

Your next question comes from the line of Peter Knudson with Evercore ISI. Please go ahead.

Hey, good morning. Thanks for taking my questions. My first one is on the FEMA review council recommendations that you think would need congressional action. I guess could you just me think about you know the the depopulation and that changes to the write your own compensation scheme To what degree, you know, those do need congressional action and essentially is there sort of like a shaved down workaround version of either of those such that you think, you know, there's some changes are made without needing congressional approval?.

Matt, do you want to take that? MATT BONGIOVI yes, hey, Peter. Good morning.

The short answer is that we don't know the answer to that question. There's a spectrum of possibilities here for each of the suggestions that were made in the FEMA review council report and the extent to which those implementations or those suggestions are implemented and the timeline on which, the two axes that we're looking at here. We believe that both of the two that you mentioned, at least, would require some changes to the legislation or some congressional action. We do not know the extent to which there's appetite within the administration today to make administrative changes outside of the congressional process there. And so I think that's the question that remains up in the air.

Yes, okay, thank you. It's helpful. And then just going back on the improved economic terms, those are the two largest providers, I guess. Are you guys expecting further improvements on the rest of the capacity providers? And could you just remind me, I guess maybe it's on a rolling basis, but when those were new and if so, I guess, you know, it sounds like that wasn't even really an impact on the increased commission rate in the quarter. So is it fair to assume, you know, commission rates can tick up even further in the near term? Yes.

Well, we had, again, a one-third impact in the quarter because they were 6-1 programs. And June was certainly a stronger month than April. So there was some impact in the second quarter, but there will be a slightly larger impact in the third quarter and beyond. Every time one of our programs comes up for renewal, we have this discussion. And our two largest programs are 6-1, but we have a small program on December 1st. We have a program October. So as the October and December ones come up, we will have those discussions with those partners. and try to reach a mutually beneficial outcome on both. One of the programs that we renewed earlier this year, we ended up doing a two-year agreement where it was 1.25% spread over two years.

And so half and half. So sometimes we're able to negotiate sort of a multi-year, you know, easing in of increases. So again, these are not, we're not going to get five more percentage points, but you know, are we, looking to get 25 to 50 basis points on each program each year if we can, yes. Does that go on forever? No, it does not. Because at some point, Right, the economics, you know, that they'd be better off doing a different form of insurance than flood. But I think we have a little ways to go and the more history we have, and quite frankly, the more history we have with landfills fall hurricanes, right, we've had 21 in our history, if we can get up that we've had 30 or 40 in our history and are still delivering, you know, incredibly, you know, outsized returns, then, you know, we will be able to get even healthier economics than we get today.

Thanks. Your next question comes from the line of Mitch Rubin with Raymond James. Please go ahead.

Hey, good morning. This is Mitch on for Greg. I've talked about how every quote gets priced without a human in the loop. In June, the Texas DOI issued a bulletin stating that when AI drives a consequential consumer decision, they expect a person to review and approve before it's acted on, and they plan to examine governance and internal controls around AI use.

Is there a point where Neptune has to add oversight or compliance rules? First of all, this is not covered by the Texas matter because we're not using AI to set pricing in the way that you think about AI in that context. directive, they're talking about generative AI like chat GPT or anthropic and that's not what we're doing. All of the AI that we're using is algorithmic, it can be turned into just straight math.

So it's just not applicable for what we're doing. Got it. I appreciate the color. And for my next question, so clearly the focus today is on under-insurance in the U.S., but in the S-1, international expansion was framed as a longer term opportunity. With the severe flooding across Asia this year and Europe in 2025, can you refresh us on where you stand with that? And if you've seen any incremental appetite from capacity providers to expand outside the U.S.? Thanks.

Yes, we certainly have tremendous appetite from our risk-taking partners to have us go elsewhere in the world with our technology. And that's not just on, you know, flood, but on other perils as well. And we're continuously considering. those options and weighing them versus the opportunity that is available at home. And what I can tell you so far is nothing has crossed the bar as a better use of our time than focusing on the United States, where you've got 25 million buildings at high risk of flooding and only 4 million policies. There's not another opportunity worldwide that we're aware of. where you've got 21 million buildings that absolutely need to have it, where we're alive and can actively work on attacking those.

Thank you. That concludes our question and answer session. I will now turn the conference back over to Trevor Burgess for closing remarks.

Listen, thank you to everyone for joining and thank you for the questions. We're very excited about the trajectory of this business. The team is working so hard with incredible tools at its disposal to you know, drive business. Matt talked about it, but the fact that we deployed twice as many tickets as we did in the fourth quarter. with a slightly smaller team is just incredible. And being able to do live iterations respond to customer needs, respond to agent needs. I have never been more excited about this business than I am today. And so thank you all for your interest and for the questions and,.

We'll get back to work on Q3 and beyond. This concludes today's conference call. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Thank you for standing by. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the Neptune Insurance Holdings First Quarter Earnings Call. [Operator Instructions]

I would now like to turn the call over to Mr. Jon Carlon, Director of Corporate Development. You may begin.

Thank you, and good afternoon. With me here today is Trevor Burgess, Chairman and CEO; Matt Duffy, President and Chief Risk Officer; and Jim Steiner, CFO and COO.

Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements, including, among others, statements about our expectations for our future financial performance, growth opportunities, business strategy, market trends and capital allocation plans. These statements are based on our current views and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. We direct you to our recent SEC filings for a full description of these risks.

We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. We will also reference certain non-GAAP financial measures. These measures should be considered only as supplements to their comparable GAAP measures. Additional information, including reconciliations of the non-GAAP measures to their most comparable GAAP measures can be found in our earnings release at investors.neptuneflood.com and in our current report on Form 8-K that was publicly filed with the SEC on April 22, 2026.

And now I'd like to turn the call over to Trevor.

Good evening, and thank you for joining us for Neptune's First Quarter Earnings Call. Before we review the quarter, I wanted to talk about how excited I am by this moment in the history of technology. I was an investment banker during the first dotcom boom. I built one of the first technology-first banks and now I'm leading when first AI-native public companies. What AI has enabled in the last few months has far surpassed anything I've seen before. This is the power of the exponential. The Neptune team has the horse by the reins and is building something very special.

People often ask how we think about AI at Neptune. The answer goes back to the very beginning. In 2018, when we hired our first engineers, I put a sign on the wall that said, No Humans, not because we don't value people, but because we wanted to build a system where technology could do what humans cannot, faster, more consistently and at scale. What is now being described as AI native, we simply view it as the right way to build from day 1. That mindset continues to guide us today. We don't start with today's constraints and optimize around them. We start with where the world is going and build towards that future. And as the technology continues to evolve, the gap between Neptune and traditional insurance platforms is not narrowing it is widening.

AI also creates a significant opportunity to expand the market. Tens of millions of properties in the United States remain uninsured for flood risk. By using AI to improve risk awareness, simplify the buying process and support agents with better tools, we believe we can meaningfully grow the insured base over time.

That brings me to what we are seeing in the business today. Last quarter, I spoke about turning agents into what we call super agents. We are now seeing that come to life. Following quarter end, we launched in a beta release, Atlas+, are a genetic assistant for insurance agents. Atlas+ can answer questions, generate sales materials and interact directly with quotes in real time. Early feedback has been extremely strong, including examples of policies being sold directly as a result of these interactions. Over time, we expect Atlas+ to become a core part of the sales workflow.

Importantly, these capabilities are built on top of what we believe is one of our most important advantages, our proprietary data. Our platform has processed tens of millions of quotes and over 1 million policies, generating real-world underwriting, pricing and behavioral data that continuously improves our models. We believe that data advantage will continue to compound over time and create a structural barrier to entry in an AI-driven market.

From a financial perspective, the implications are equally important. In 2025, we operated at a 60% adjusted EBITDA margin. As AI continues to reduce friction in distribution and automate workflows, we believe our current level is a floor and not a ceiling.

Turning to the quarter. The first quarter of 2026 was a record first quarter for Neptune and reflected continued strength across the business. Highlights from Q1 include: revenue of $37.8 million, a 29% increase year-over-year; net income of $7.3 million with adjusted net income of $13.4 million; adjusted EBITDA was $21.6 million, that's growth of 26%; written premium was $86.7 million, driving 32% year-over-year premium in force growth, and we had record first quarter new business sales.

As a reminder, the first quarter is typically our lowest margin quarter due to seasonality. And this year, that effect is more pronounced as public company audit and compliance costs are front-end loaded in Q1. As a result, adjusted EBITDA margin in the quarter was approximately 57.1%. Importantly, this is a timing dynamic, not a structural change in the business, and we continue to expect full year margins in the 60% to 61% range.

Premium in force reached approximately $389 million at quarter end, and we look forward to celebrating our $400 million threshold shortly. As a reminder, Neptune operates as an asset-light MGA and takes no balance sheet risk. This allows us to scale efficiently while maintaining strong profitability.

On a trailing 12-month basis, revenue per employee reached $2.8 million and adjusted EBITDA per employee reached $1.7 million, both record levels. To put our revenue per employee in context, do this calculation for other companies. This is how you can tell if a company is really AI native. In addition to our earnings results, today, we announced that our Board has approved a $100 million stock repurchase program. We expect to fund this program through free cash flow over the next 2 years. This is incremental to our previously announced plan to retire shares associated with RSU tax settlements. We view share repurchases as a high return use of capital given the strength of our cash generation and scalability of our model.

Stepping back, we believe our competitive position is defined by 3 core advantages: proprietary data and AI-driven underwriting; deep and expanding capacity relationships; and flexible technology-enabled distribution. Together, these create a durable and widening moat.

I'll now turn things over to Matt to walk through the business in more detail.

Thank you, Trevor. Q1 was a very strong quarter for our system and our team of 62 exceptional employees. Across our 3 core pillars, we continue to adapt, innovate and perform with the results able to speak for themselves.

Starting with technology. Trevor touched on the pace of change we're seeing in technology. Inside Neptune, that's showing up in a very tangible way. And I'll be honest, it's hard to capture in an earnings call, just how fast things are moving internally. Our team is building with tools that didn't exist a matter of months ago and they're using them to rethink how we build, how we operate and how we serve our agents and customers.

You can see that directly in the pace of product development coming out of the company, during and immediately following the first quarter, we rolled out 3 major technology advancements, all of which lay the groundwork for a continued redefinition of how our system is utilized, accessed and built. The first is Atlas+, which is the AI layer we're building across the Neptune platform and which we introduced in April through an initial beta experience for a small group of agents. This beta is a conversational interface embedded directly into the quoting workflow.

Agents can ask questions, adjust coverage and move through the quote to bind process using natural language. In the first couple of weeks, we've seen thousands of agent interactions, which tells us this fits naturally into how agents already work. And this is just the starting point. Over the coming quarters, we expect Atlas+ to expand beyond this initial interface and become a core part of how users interact with Neptune across our platform.

The second is our Neptune application inside ChatGPT, which gives property owners a new way to interact with our platform. Instead of navigating a traditional quoting flow, users can ask questions about flood risk in plain language and receive a real-time Neptune quote directly within the interface. What's important here is less the interface itself and more what it represents, as conversational AI continues to evolve, we expect experiences like this to play an increasing role in how people access information and make decisions.

And the third is Proteus, an internally developed AI software developer. The way we think about this is pretty simple. Our engineers are exceptionally talented and their highest value comes from problem solving, system design and building new capabilities, not from spending time on execution that can be automated. So we've built Proteus as a set of agentic tools and skills that can take on the execution work. Proteus writes code, reviews it, completes development tasks and monitors the system in real time. It allows our engineers to stay focused on the critical thinking and design work that actually moves the platform forward.

In March alone, Proteus was responsible for over 30% of the engineering tickets completed. Put differently, that's nearly a 50% increase in the amount of work the team is shipping, and you can feel that inside the company, things that used to take weeks are getting done in hours and ideas we've had for years are now becoming feasible projects.

Each of these changes I've discussed is powered by the data running through our system, tens of millions of quotes, over 1 million bound policies and constant interaction from tens of thousands of agents. And as they evolve, these changes will continue to represent a fundamental shift in how Neptune's platform is accessed, how it's used and how it's built.

Turning to capacity. During the quarter, we renewed one of our 8 programs, increasing the size of that program for the '26, '27 treaty period and adding 2 new reinsurers, bringing our total panel to 42 capacity providers. Program renewals are important milestones for the business. They reflect long-term relationships and a track record of consistent underwriting performance. In this case, we saw the program grow and terms update in a way that reflect the results we've delivered. That's been a consistent pattern for us as the platform scales and the data continues to improve, our capacity partners are growing alongside us.

And finally, distribution. Our growth continues to be supported by the strength of our agent network, which remains an important part of how we reach and serve property owners across the country. During the first quarter, we delivered record first quarter new business production, driven by strong agent engagement and continued deepening of distribution relationships. One of the clearest indicators of that momentum is user-based activity. Since launching our new user-based log-in system in December, more than 45,000 individual agents have signed up for direct access to Neptune, and that number continues to grow daily.

To be clear, this is not the total number of agents we work with, but rather the number of individual users who create direct accounts using their e-mail and phone number and verified that access by a multifactor authentication on the platform between December and March. And nearly 11,000 of those users have already bound new business policies in that same time frame.

Those stats show the real scale of how the platform is being used and the associated data allows us to build better tools and experiences around how agents actually work. We continue to invest heavily in our agents through building tools and products that are driving adoption and helping us to help insurance agents become increasingly effective.

I'll summarize with this. What you're seeing here is a system, an ecosystem that gets better in real time. faster to build, easier to use and more valuable to the agents, customers and capacity providers that are a part of it. And that's really how this business can continue to compound over time. As we head into hurricane season, which is typically our busiest period, that level of performance really matters.

With that, I'll turn it over to Jim.

Thanks, Matt. The first quarter reflects another strong period of execution with a continued growth in revenue, strong retention across the portfolio and sustained profitability. Revenue for the quarter increased 28.8% year-over-year to $37.8 million, driven by record first quarter new business production and the continued expansion of our premium in force. Adjusted EBITDA increased 26% to $21.6 million, which demonstrates that revenue growth didn't come at the expense of operating discipline.

We continue to see strong performance on renewals. Premium retention remains high, reflecting both the value of our product and the consistency of our pricing approach. The Q1 adjusted EBITDA margin was 57.1%, even though substantially, all of our public company accounting costs hit the P&L during the first quarter. Again, this is a timing dynamic, not a structural change in the business and we continue to expect full year adjusted EBITDA margins in the 60% to 61% range.

Stepping back, the underlying economics of the model remain very strong. A reminder on the model, we don't carry any of the underwriting risk, the carriers do. What we carry is the technology that decides which risk to bind, who to bind them with and at what price. That means we grow by adding policies, not by adding capital. and we scale by writing more code, not by hiring underwriters.

We track our employee metrics as key indicators of our performance. Revenue per employee was $2.8 million on a trailing 12-month basis. Adjusted EBITDA per employee was $1.7 million. Both metrics are up double digits year-over-year. These head count ratios hold the roof up on the whole margin story. If we had to add one employee for every few hundred thousand of revenue, we look like every other insurance company. These metrics highlight the efficiency and scalability of the platform as we grow.

Turning to the balance sheet. During the quarter, we continued to strengthen our capital structure. Last year, we refinanced our existing term debt into a $260 million revolving credit facility, which lowered our cost of capital, removed to acquired amortization and has provided greater flexibility as we manage the business. We ended the quarter at $227 million of total debt outstanding on the revolver, which is 2.2x trailing adjusted EBITDA. Yesterday, we paid another $5 million down, bringing our current balance to $222 million. Neptune's earnings mean that leverage comes down on its own. And to date, we've repaid debt with excess cash.

From a capital allocation perspective, our framework is pretty simple going forward. The first dollar goes into the platform because that's where the compounding happens. The second dollar shows up in the share buyback program Trevor just announced and the RSU net settlement program we announced last year. Both of these tools return capital to shareholders. Overall, the financial results of the quarter reinforced the strength of the model. We continue to deliver strong growth, high margins and increasing operating efficiency, while maintaining a disciplined approach to capital management.

With that, I'll turn it back to Trevor.

Neptune remains focused on long-term shareholder value creation. Despite the inherent variability of government policy and weather-related activity, the strength of our performance in the first quarter has increased our confidence in the outlook for 2026.

Based on that performance, we are increasing our full year expectations. For the full year 2026, we now expect revenue of $195 million and an adjusted EBITDA margin between 60% and 61%. These targets reflect our continued commitment to profitable growth, operational efficiency and disciplined capital allocation. Where appropriate, we intend to deploy capital to grow the business, while returning excess capital to shareholders. To date, that has included a strong emphasis on debt reduction as a straightforward and efficient way to enhance equity value.

As part of this approach, our newly authorized stock repurchase program, together with our ongoing RSU related stock retirement gives us multiple levers to return capital in a disciplined and opportunistic way. We view these actions as a natural extension of a strong cash generation and high margin profile of this business.

As we move towards the 2026 hurricane season, there are always unknowns around storm activity and weather patterns. What our customers and agents can count on is that our team shows up when it matters most. We are constantly improving the systems that help people protect their homes and businesses, and we take that responsibility seriously.

And for our investors, our focus remains the same. We'll continue to push the boundaries of what an AI-native insurance platform can do. Every quarter, we are doubling down on our technological lead, strengthening our distribution network and deepening our capacity relationships. We believe the combination of those 3 things will continue to have a power law effect around this business.

We'll now turn things over for questions.

[Operator Instructions]

And your first question comes from the line of Rob Cox with Goldman Sachs.

Yes, just the Atlas. Atlas sounds very interesting. I was just hoping you could give us some more color around what exactly Atlas is doing, how near-term impactful this is? Of the 3 items you mentioned, where you've been leveraging AI, do you expect to see this today and in 2026 or how near term is this?

Yes. Thanks, Rob. We are very excited about Atlas+. The original Atlas was launched about 1.5 years ago as we've looked for ways to use AI available at that time to help educate our independent insurance agents about things like incoming storm activity or how many claims have there been in a particular neighborhood to give them facts and figures to help them become better at selling flood insurance.

What agentic AI has allowed us to do now is to turn every agent into a super agent, and that's what we've really been focused on building with Atlas+. What's currently available is a chat interface that allows an agent to ask things, such as generate an e-mail script for me that I can send out to a consumer or help me explain why temporary living expense cover is a really important add-on, or tell me the 3 main reasons why this customer should buy flood insurance, or go ahead and show me the price at all the different deductibles that are available.

And Atlas+ can interact with the quote. We really view this as the very beginning of a long line of upgrades that we will make to the agent's experience. We've mentioned for the past 8 or 9 years as we built this business that our biggest barrier to growth is how do we change agents behavior, how do we get agents to offer flood insurance every time they're selling a home or a business owner's policy, how do we get them educated to be amazingly knowledgeable about flood insurance, its risks and why people need to be protected. Agentic AI is allowing us to do that, and we're excited to roll this out. We are already seeing the impact of what is live today, and we're very excited by the things that we'll be shipping in the coming months.

I would have said a year or 2 ago that everything that we're trying to build, would take us years to build, but it's now down to weeks or months. And so the other things, the other uses of AI, creating a Proteus system that allows our internal software developers, engineers and data scientists to move at least twice as fast if you're 3x as fast, really means that Atlas+ can be -- we're trying to follow in Anthropic's footprints is constantly putting out amazing, new functionality and product very, very quickly.

That's very helpful and exciting. If I could just follow up on the guidance. So revenue guidance is increasing. Just curious if that was due to this quarter or if you're feeling better about later on in the year? And on the margin guidance it maintained -- I realize the first quarter here, we have some timing-related items, but should we be thinking about this as Neptune is trending towards the lower end of the margin range for the year? Or is that premature?

Well, first, let's talk about the revenue side. What we saw in the first quarter was just continued really good trends. We obviously have great revenue in the first quarter, record sales in the first quarter. And we got a really good sense because remember, our policies go into effect as a 10-day waiting period. So by the 22nd of the month like we are today, we've got a really good sense of what April looks like and the general momentum that we have so far this year. So we're quite bullish on the topline revenue trends, which is why we increased the guidance. This is not some hope and prayer that things get better later on. This is looking at the trajectory that's here and now.

On the margin side, no, we certainly hope to do as well as possible on the margin for the full year. You can look at our first quarter margin every single year, it's the lowest, and that's because we have all 62 employees the whole year long, but it only makes up about 18% of our revenue, right, because of the seasonality in the business. So it's just inherently a lower margin quarter and then you build in 100% of the 2025 audit expense with PwC in the first quarter, well, that's going to impact that. But no, we're feeling quite good about the margin profile of the business and are excited about really 60% being a floor rather than a ceiling to what this business can become.

Your next question comes from the line of Josh Shanker with Bank of America.

Great quarter. We talked about fourth quarter and into first quarter about the Milton, Helene opportunity back over a year ago and why that was a headwind on comparisons this year. As we enter 2Q, is that done? Or are there people who 6 months after Milton and Helene were still nervous and brought in 2Q 25 were the comparisons there, not in the number going forward?

Yes, Josh, I don't think that's an impact going forward. That's really a do people renew the next year. And the most extreme example of that is Utah had this amazing snow season a couple of years ago. And the next year, it didn't snow and so people didn't renew their policies. That's the really extreme side of it. But in hurricane-prone zones such as Florida, we will see a little bit of lower renewal when people are buying after a really scary storm. But that's now passed us, that wouldn't impact the first or second quarter.

And then switching gears to opportunity. Obviously, your data flow continues to increase and get smarter. I don't know if you're any smarter about earthquakes to or other events happening in California per se, what is your data learning right now about how Neptune can possibly be a meaningful player in market other than flood?

Well, it's certainly -- I will tell you that flood remains our core focus. It is an amazing business with a tremendous opportunity. We have 20 million buildings in America that need flood insurance that don't have it today. We have the NFIP shrinking and 60% of the people within the NFIP who could save money by switching to Neptune. That's about 1.7 million policies. So give us a good housing market, let's turn those into Neptune policyholders.

But at the same time, as we announced last quarter, we are running a beta test of earthquake. Earthquake data doesn't come because we haven't had a major earthquake in decades. And so we're obviously not gathering an earthquake experience data at this time. What we're doing with earthquake is working with our agents and making sure that we have good product market fit before we actually launch a product into the marketplace. I would expect that, that beta test would continue for the next 3 or 4 months, and we would then make a decision around what we're going to launch in California.

Your next question comes from the line of Gregory Peters with Raymond James.

So one of the things that we've been watching is that we've noticed that other companies have announced flood start-up initiatives or expanded their existing flood capabilities. I'm thinking about like another local company Exzeo, I'm thinking about like Nationwide, I think they announced something called Titan Flood. So maybe you could just for a moment, talk about how resilient your competitive position is and talk about what you're seeing from other flood alternatives for insurance alternatives that is in the marketplace and if you're seeing anything that's of a concern?

Yes. Thank you. I really think that this is a power law business where the more data and the more size you have, the better that business is going to do. If you think about investing in social media companies. There were lots of competitors to Facebook, but you didn't invest and Facebook you didn't make any money.

To get very specific about flood insurance competitors, we had a record first quarter sales. It was the best first quarter sales we've ever had. We are not seeing any meaningful impact from any competitor except for the NFIP who remains the dominant force in flood insurance with approximately 85% of the business that's out there. We, of course, pay attention to all potential competitors, and we have seen many, many competitors come and go over the years. It is a very difficult peril to underwrite.

We had no landfall hurricanes last year that has given people a lot of confidence that they can typically underwrite flood insurance. Neptune, you'll remember, has been through 21 landfall hurricanes some of these new startups when faced with a meaningful hurricane in the major metropolitan area where they've sold a lot of policies, at least historically, have not fared very well and has led to many of them going out of business as quickly as they gone in the business.

But it is important for us always to pay attention to potential competitors and to look at the marketplace. If we are Uber, we want to be paying attention to who could potentially be the Lyft. I just don't see that yet, but we continue to look very carefully. So I would say as of today, we don't believe it's impacting our business.

Fair enough. In your investor presentation, when in the revenue section, you highlight a couple of also the larger renewal portfolio, increased commission. And then in the negatives or the headwinds section you cited the residual slowdown in sales due to the active storm season, which you just addressed in the previous question. But you also talked about the ongoing slow real estate market, and so I'm just interested in your perspective on how -- if there is a change in the real estate market outlook sometime down the road that, that might become a tailwind? Or how do you size up that headwind versus a tailwind?

Greg, thanks for the question. We've talked about this for a number of years now where we've been experiencing the slow housing market. And the most important number to remember there is the one that Trevor just mentioned. The market as it exists today, has something like 4 million policies for the insurance market and about $3.5 million of those exist would be NFIP.

Today, about 1.7 million, 1.8 million of those policyholders with the NFIP would save money by switching to Neptune. They have not done so because there's been no turnover in the housing market. And so there's not been the ability to shock that policy into the private market to see what that pricing looks like. And so we believe a change in the housing market and uptick in sales there, whether it's housing sales or whether it's refinancing activity, would be a huge, huge tailwind to the business.

We saw this a little bit at the start of COVID when the housing market picks up that. And while there was a very small incremental impact to midterm cancels in our portfolio, there was a much, much larger impact on new business sales, which far outweighs our installations on the portfolio. So give us a better housing market and we're very, very bullish on what that means for sales and for portfolio growth in general.

Your next question comes from the line of David Motemaden with Evercore ISI.

I had a question just on policy retention. If you could talk a little bit about how that trended in the quarter. I see on Slide 9 that revenue retention ticked down a little bit. Still at a strong level, it's at 90% over the last 12 months, but it did tick down from 92% in 2025. So just hoping you can unpack some of the trends there, please.

So I think the first thing to mention, then I'll turn it over to Matt for some more details. But the first thing to mention is we're one of the only companies in the P&C space to still be taking positive rate. Last year, our average price increase on renewals was about 13%. And so far this year, it is still positive. It's just happens to be positive mid- to high single digits. And so that explains most of the difference in the revenue retention is just the change in the increase of pricing. I'm really happy that we have our business as opposed to ones that are down 30%, right, and still be up, 7% is amazing. So we're very happy that we have picked the market that we're in.

You just have to remember that the NFIP prices on a statutory basis, not based upon whether or not it's a hard or soft reinsurance market. Matt, what would you add to that?

Yes, I think that's all right. The only thing I would add is the machine learning models that are operating on the renewal book that are optimizing for lifetime value of the customer as opposed to any single year retention rate. So the more units that we're able to keep around the higher the lifetime value is not entering, I guess, the portfolio in general. And so we're able to take a long-term view because we have a very, very long-term view of this business. As owner operators. And we will always prioritize ensuring that we keep customers around for the long term and that we have a great product and a great pricing strategy that provides value to those customers over the long term as well.

Got it. Sounds like the policy retention is pretty stable there. I think it was 86%. So that's helpful there. My follow-up is just on how you guys are thinking about the FEMA Advisory Council process. Any sort of updates you have in terms of the possibility of a citizen style depopulation and how you guys might react to something like that?

So the first thing I would say is that we have no added information. We have heard nothing. We've got no communication. And so other than what we've all read in the press about the time frame being extended, we are not aware of any additional details. What I can tell you though is from a capacity standpoint, we have taken very specific actions to make sure that we're ready in case something does happen.

And so we are entirely prepared to flex and bring on as many customers as we need to, to help make sure that Americans are protected for this peril in case the U.S. government decides to reduce their exposure or get out of the business. Our job, we feel, is to increase the role of private flood insurance and make sure that we're a viable alternative. And we absolutely are prepared to do that and have the capacity back in to do that.

Your next question comes from the line of Tommy McJoynt with KBW.

I don't think you gave the updated lifetime to date loss ratio for your capacity providers, but I suspect it is in the teens at this point. While some of that may be fortunate weather and some is surely your risk modeling expertise, at some point, does that translate into pressure to actually reduce pricing on an absolute basis?

So the first thing is, we'll let you know. We plan on announcing that once a year, so we will announce that at the end of the second quarter. The last time we announced that was the end of the second quarter of last year. And so we will update that annually so that just people have a very clear non-seasonally affected view of that. So expect that at a data point at the end of the second quarter.

The second thing I would say is that it really just creates an opportunity for us and this is a discussion that we've had with all of our capacity providers. Would they be interested in higher volume in exchange for a slightly higher modeled loss ratio. And given our track record and given the exacting specificity our underwriting platform we are able to make changes like that, driven by our data science team, and we have those models live in the system at this point. And we're excited by the revenue growth and the policy growth that we're seeing as a result of those models being deployed.

So I think it does create a -- the success creates an opportunity to lower prices and get more people insured is really the summary. But please know that this is being done with an incredible system led by an incredible team of engineers and data scientists who are focused on just that optimization of this flood insurance conundrum that United States faces.

And then switching over to the ChatGPT product that you've rolled out, is there any compensation owed to a counterparty when flood policies and Neptune are placed through that app? And if not, does that just imply the incremental margins on any of those policies are very strong, similar to your direct-to-consumer channel?

At this point, there are -- no money is owed to any counterparty. ChatGPT is not charging for that. To be clear, they don't allow buy ins to take place on their platform. So it's very similar to the way you think about Google, right? If you Google Neptune, you can find it. And even if we didn't pay for Google Search, right, we were the top ranked, we would show up as we do, someone could come to us and we wouldn't owe anybody. Now we do some Google ad words just to make sure we're always at the top of the paid search also. But it's very similar to just a Google search engine at this point.

Now that may change in the future. We're excited to have launched that product because it's a great showcase for the technology prowess that Neptune and its engineers have, but it is something that we think will have limited utility until consumers make the decision that they want to buy via chatbots, which is not something that has happened yet. Consumers really like the advice of their insurance agent in America. And that's why we are really focused on building Atlas+ to help turn our agents into super agents.

Your next question comes from the line of Andrew Kligerman with TD Cowen.

Just to quickly follow up on the FEMA question. If I understand it right, a congressional vote would come in either September or sooner, but nothing is clear at this stage. Is that the right read?

I'm not sure about that. The leaked FEMA memo that was published by Bloomberg seem to suggest that the administration was looking at things that they could do without Congress' involvement. The Biden administration put forward 14 proposals during their administration, proposes to Congress. Congress did not act on any of those proposals. Those proposals all would have been pro private flood insurance. So this is really a bipartisan issue, how do we get more Americans insured.

But I have not heard anything about proposed legislation being given to Congress for them to consider in September or October time frame. There's been a variety of congressional-led proposals that some of which are quite positive. Senator Scott has one to allow people to deduct the cost from their taxes, their flood insurance costs in the taxes. So there are a number of very positive suggestions coming out of Congress, but I haven't heard of any specific legislation.

Got it. That was very helpful. Yesterday, we saw the approval grant for Boleron, a Bulgaria based broker to distribute policies directly inside of ChatGPT, Trevor. Could we see this happening in the U.S. as well? Or do you see AI as more of a funnel into traditional direct channels on Neptune's website?

Currently, ChatGPT does not allow direct binding within the app itself. If they change that, we will be able to meet that immediately. But I think this is more about consumer behavior than necessarily the technological availability of something. We've had direct-to-consumer available since the very beginning of Neptune, and it's always made up 2% of our business. And it was 2% of a very small amount 9 years ago, and it's 2% of a much larger amount now, but it's still 2%. So this is really about our consumers now going to utilize chatbots to buy home-related insurance. And I think that's a much larger question then is it possible.

Your next question comes from the line of Pablo Singzon with JPMorgan.

First question is on new business. I think this might be the first quarter that you've disclosed the growth rate, which I think came in at 44%. I was wondering if you could give a perspective on how the growth rate had trended, I guess, in '25, right, whether over the full year or maybe the past couple of quarters?

We felt very good about the growth rate in the first quarter. The number of agents that we're binding was up. We obviously have switched to the single sign-on, which is extremely helpful and that we now have 45,000 agents who have established single sign-on credentials with us. But we'll get back to you on comparable information for the last -- for the prior year.

All right. And then a follow-up, just -- so as more purchase line insurers and agents pivot to growth, right, whether it's selling auto or homeowners, do you think that helps or attracts or maybe even neutral to your efforts to sell flood, right? So how do you start thinking about that your position against that trend because it is clear at this point that everyone is trying to sell more? Does it help or maybe it doesn't really affect you guys?

It's extremely positive for us when agents want to add on ancillary products, right? And flood is the most obvious ancillary product to the home or to the business policy since it's excluded by carriers. And so we view that trend as a very positive trend for Neptune. There are amazing agents, such as Goosehead and others who have done a great job at really thinking about policies per relationship and how do they always offer flood insurance every time they're selling a homeowners policy that increases stickiness and increases the quality of the advice being given to the consumer.

Because, as we've talked about many times, the main problem that we have in the U.S. with flood insurance is that people don't have it. There's 20 million people who are at risk of flooding who don't have the coverage. And so it's an amazing advice to come from a insurance agent to their consumer. So it's a great trend.

Your next question comes from the line of Yaron Kinar with Mizuho.

My first question relates to the $195 million revenue target for the year. I'm starting to see some early indications of the North Atlantic hurricane season potentially being a bit lower just because of El Nino. Is that contemplated in that number? Or are you still assuming a normal season and whatever that may mean?

Yes. Thank you. We're very aware and we track very closely the predictions around the storm season. There are a couple of dynamics happening. One is phenomenon that you've mentioned and the other equally impactful phenomenon as the sea temperature in the Gulf. And the Gulf temperature is extremely, extremely high, which means that the Gulf systems being able to spin up very quickly and gain steam very quickly like Hurricane Michael did that hit Florida with amazing power remain quite possible during the season. I would say the $195 million assumes that there is some storm activity but does not assume a very active storm season.

And can you maybe give us a little bit of color as to how you're thinking about that? When you talk about a some storm activity, are we talking about 2, 3 main storms, making land falls in population centers?

Yes. We think about that as 1.8 landfall hurricanes, which happens being a long term average.

Right, right. Okay. And then switching to capital deployment. So you have $100 million new share authorization that, if I understood correctly, you expect to utilize over the next couple of years, by the end of '27. And then if I just look at the EBITDA margins and the tax rate, I think you get to roughly $150 million of cash flows plus minus for the next 2 years. Are you intending to deploy the remaining cash flows towards filing debt? Or are you going to keep a portion of that as a dry powder for other opportunities?

Yes. Remember that we had also announced the RSU net tax settlement, which at today's stock price would use something like $12 million of cash or something. So the employees will surrender the shares, we'll rip those up and then we'll pay the taxes to the IRS with company cash. So if you think about that this September and next September has 2 chunks, plus the $100 million starts to give you a sense of where we would use the cash. And we can work with you on some of the -- as you model out the free cash flow, we have a little higher expectations than you've noted.

Your next question comes from the line of Cave Montazeri with Deutsche Bank.

So you keep paying down debt. At the same time, your EBITDA is growing growing. Looks like it could be at 2x debt to EBITDA by the end of next quarter. I'm just trying to understand what's your pure metal framework when it comes to debt you want to keep. Do you have a target debt-to-EBITDA ratio in mind for the medium to long term?

Yes. We generally would like to stay below 2.5x. So there may be opportunistic times to utilize the stock repurchase as we saw in the last quarter, if there was an event like that again, we would obviously take advantage of that to buy back shares opportunistically and utilize the revolver availability to do so. But absent that, we have, to date, at least continue to pay down debt. As long as we're below 2.5 to 3x levered, we feel very comfortable that we can, given the certainty of how this business operates, that we can begin returning cash to shareholders, and we think stock buybacks are the best way to do that.

Okay. And in terms of your -- the technology that you -- like how much of it is built in-house versus purchased from third-party vendors? And I guess, of the technology that you're using from third-party vendors, do you now have the ability to maybe build it in-house and make it more bespoke versus some of the more standardized software that you could buy externally?

This is a really interesting debate that we often have. And now you have to think about Neptune is a rather unique company because we have 62 employees and our entire expense base is less than 10% of our revenue. So we're already about as lean a company as it can exist, right? And so if I think about how do I deploy our engineers and data scientists, I wanted to deploy them on things that can generate more revenue. Saving, no longer using a third-party piece of software like Microsoft Word, could we rebuild Microsoft Word now? Yes. Does it make sense to do that? And maintain the system, et cetera. No, it makes much more sense just to pay Microsoft, whatever it costs $5,000 a year to have it.

And so we are very focused on how do we deploy our engineers to increase revenue growth rather than save the couple of hundred thousand dollars that shows up in our externally purchased software and most of the software that we're purchasing at this point is really commodity type of software. Matt, what would you add?

Yes, Cave, I'd just add that all of the core functionality that exists in our systems today and Titan and Poseidon and Atlas and Proteus and all of the systems that we've mentioned is built entirely in-house. Trevor's comments are 100% true for ancillary software that may be helpful from a customer service standpoint, Zoom, that type of functionality, but all of the core software is built entirely in-house.

That concludes our question-and-answer session. I will now turn the conference back over to Mr. Trevor Burgess for closing remarks.

I'll end the way I started by just talking about this moment in history, I've never been more excited about being an entrepreneur than I am right now. Our entire team is giddy to be working at Neptune on this challenge, on this problem using the tools that are now available to us. We are live watching the updates from Anthropic, from ChatGPT, from Google, from X about what tools are available to us and how can that allow us to move more quickly to help get these 20 million Americans insured for this payroll that they're not protected for right now.

So it's a great time to be an entrepreneur. It's a great time to be at Neptune. And thank you for joining us today.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Good afternoon, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Neptune Insurance Holdings Fourth Quarter Earnings Call. [Operator Instructions] I would now like to turn the call over to Jon Carlon, Director of Corporate Development. Please go ahead.

Thank you, and good afternoon. With me here today is Trevor Burgess, Chairman and CEO; Matt Duffy, President and Chief Risk Officer; and Jim Steiner, CFO and COO. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements, including, among others, statements about our expectations for our future financial performance, growth opportunities, business strategy, market trends and capital allocation plans. These statements are based on our current views and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. We direct you to our recent SEC filings for a full description of these risks.

We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. We will also reference certain non-GAAP financial measures. These measures should be considered only as supplements to their comparable GAAP measures. Additional information, including reconciliations of the non-GAAP measures to their most comparable GAAP measures can be found in our earnings release at investors.neptuneflood.com and in our current report on Form 8-K that was publicly filed with the SEC on February 18, 2026. And now I'd like to turn the call over to Trevor.

Good evening, and thank you for joining us. Let me start with what's on everyone's mind. Last week, our stock sold off seemingly because investors decided AI is coming for insurance. They're right. They just have the direction of the trade completely wrong. Neptune isn't threatened by AI disruption. We are AI disruption. We have been since the day we wrote our first policy. We have no legacy system to rip out. We have no army of manual underwriters to replace. We built this company as an AI-powered API-first platform from scratch, proprietary machine learning models running pricing, underwriting, portfolio management and distribution across the largest private flood data set in the United States.

Let me be specific about what that means, the data moat. Over years of underwriting and servicing hundreds of thousands of policies, we have assembled proprietary flood risk data, behavioral retention data, claims performance insights and real-time transaction signals that no competitor can replicate by simply plugging in a large language model. In an AI-driven world, the model is a commodity. The data is the moat. We have the data. The results. Our underwriting performance hasn't just been good. It has been so good that capacity providers are fighting to get on our platform. We grew from 23 to 40 capacity partners this year, a 74% increase, now supporting 8 programs. And because those partners have seen hundreds of millions of dollars in underwriting profit flow through Neptune, our average commission rate increased 35 basis points year-over-year.

That's not us negotiating harder. That's the market telling us our AI works. Where we sit? Before I explain why AI is a tailwind for us, it's worth clarifying how Neptune actually reaches the end customer because I think some of the confusion starts here. We are a managing general agent. We sit between the capacity providers who take the risk and the distribution channel that reach the policyholder. We do not own large captive agency forces. We reach customers 2 ways, through a network of independent agents and wholesale partners and through direct-to-consumer digital channels. Both flow through the same platform. That distinction matters because when AI reduces the cost of distribution, that savings flows directly to Neptune's bottom line.

We are not disrupting ourselves. The distribution upside. Here's the part that I think is most misunderstood. Agent commissions are our single largest expense line. If AI-driven workflows reduce friction in how consumers buy flood insurance and they will, that is not a threat to Neptune. That is margin expansion for Neptune. We already support both agent-led and fully digital flows on the same platform. If every customer in America decides tomorrow that they want to buy flood insurance through an AI agent instead of a human one, we are ready. And our adjusted EBITDA margin goes from an already exceptional 60% to something significantly higher.

The team. I'd like everyone to look at who actually works here because it tells you what kind of company this is. Over 40% of Neptune's employees are engineers or data scientists. This is not an insurance company experimenting with AI. This is an AI company that happens to be in insurance. And that composition shows up in the numbers. In 2025, trailing 12-month revenue per employee increased 15% to $2.7 million and adjusted EBITDA per employee increased 14% to $1.6 million. For context, our revenue per employee puts us between Apple and NVIDIA. These are not insurance company metrics. Those are elite technology platform metrics made possible because of AI.

I want to be honest about something. Nobody knows exactly how AI will reshape this industry. We could be wrong about the pace, the path or the specifics. But if the question is who is best positioned to adapt, we like our answer. We are already building with the latest tools. We are already operating at the cutting edge and our entire infrastructure was designed to evolve. If the future belongs to AI, and we believe it does, we would rather be the company that was built for it than the one trying to catch up. Technology, capacity, distribution. Those are the 3 moats around this company, and we expect every one of them to get deeper as AI adoption accelerates.

Now let me talk you through the quarter. The fourth quarter was an outstanding finish to a record year for Neptune. It showcased the stability of our platform, the strength of our execution and the durability of our business model. During the quarter, we successfully launched new capacity programs, delivered record new business sales and scaled our technology seamlessly to meet elevated demand, all while maintaining strong margins and operational discipline. Our first full quarter as a public company built directly on the momentum that brought us here and capped an exceptional year.

A few highlights from the quarter include revenue of $43.8 million, a 39% increase year-over-year, net income of $4.3 million at a 10% margin, down 63% from the fourth quarter of 2024, with adjusted net income of $15.3 million, up 25% from the fourth quarter of 2024. Adjusted EBITDA of $25.9 million, up 34% year-over-year at a 59% margin, written premium of $100.3 million, driving 33% year-over-year premium in force growth and record new business sales posted during the quarter.

The strength of the fourth quarter capped an exciting and record-setting year. For the full year 2025, Neptune delivered revenue of $159.6 million, up 34% from 2024. Net income of $37.4 million at a 23% margin, up 8% from 2024 and adjusted net income of $56.9 million, up 38%. Full year adjusted EBITDA of $95 million, up 32% year-over-year at a 60% margin, giving us a Rule of 40 of 93. Year-end premium in force was approximately $370 million, reflecting over $90 million of net growth during the year. And as a reminder, because this is central to understanding the business, Neptune takes no balance sheet insurance risk, 0. We are an asset-light platform that earns commissions and fees on every policy written and renewed.

That model is what allows us to scale at 60% EBITDA margins without taking catastrophe exposure onto our books. Now profitability and technology get a lot of the attention, and they should. But I wanted to spend a moment on something that doesn't always show up in the model, how we performed when it mattered most. During the fourth quarter, the federal government shut down and the National Flood Insurance Program or NFIP went dark. That is the primary source of flood insurance for most Americans, and it was unavailable. While the NFIP was shut down, our platform kept quoting, kept binding and kept onboarding new agents who needed somewhere to send their customers. We made targeted disciplined decisions to support our agent partners during the disruption, including incentives that contributed to record new business sales with minimal impact to margins.

That is the kind of moment that cements relationships. Agents remember who showed up. I also want to highlight a structural advantage of our market that I think is underappreciated. Flood insurance pricing is not subject to the reinsurance cycle volatility that whipsaws other property and casualty lines. The NFIP sets its rate statutorily. And as the dominant market alternative, that creates a stable pricing environment around which we can underwrite with confidence. In 2025, we retained 98% of premium. That retention rate tells you 2 things. Our pricing is competitive and our policyholders are staying. The results we delivered this year reflect a model that is working, technology, data, capacity, distribution and execution all compounding together.

We enter 2026 with real momentum and confidence in our ability to continue building value long term. I'll now turn things over to Matt Duffy, our President and Chief Risk Officer, to discuss business updates.

Let me walk through how we scaled our 3 core pillars during the fourth quarter. Our technology platform handled elevated volume without strain during the federal government shutdown. Increased activity drove strong growth in sign-ups, quotes and bound policies. Performance, reliability and service levels remain constant throughout, highlighting the best-in-class fully digital nature of our platform. We also launched the beta version of our Indemnity Earthquake product. Because our underwriting and distribution infrastructure is entirely digital and API-driven, adding adjacent perils requires minimal incremental cost. We can expand into new lines without adding complexity or sacrificing margin. The company was built this way by design.

At the same time, ongoing enhancements to our machine learning models continue to improve performance across both new business and renewals, demonstrating the compounding nature of our data advantage. We are seeing real productivity gains across our engineering organization from AI-assisted development tools. Engineers are shipping code faster, iterating models more quickly and accelerating testing and documentation cycles while maintaining strict quality and security standards. Nearly half of our workforce is our engineering and data science team. When development velocity increases, innovation accelerates and importantly, operating leverage improves. That advantage compounds over time. Our platform was built from inception for real-time digital insurance transactions. If conversational or AI-driven interfaces increasingly become the entry point for insurance purchases, we are ready and integrated.

We do not need to retrofit legacy systems or rebuild workflows. If more volume ultimately shifts towards direct-to-consumer channels, our economics benefit. At the same time, we continue investing in tools that make agents more productive. We are channel flexible by design.

On to capacity. Our capacity relationships are a direct validation of 8 years of underwriting performance. It's important to clarify something that is often misunderstood. Neptune does not file rates like admitted insurers. Our pricing algorithms and risk selection models are proprietary. We also do not retain insurance risk on our balance sheet. That means we scale without catastrophe loss volatility or capital strength. Our revenue is driven by recurring premium retention and operating leverage, not by loss ratio swings. That structure allows us to grow capacity efficiently, as shown during the fourth quarter when we launched our seventh capacity program with Palomar, which contributed immediately to financial results.

We also executed our eighth program with Somers Re, which went live on January 1. That program was designed to deploy additional capacity quickly as opportunities arise. Q4 also saw us expand an existing capacity relationship to support the beta launch of our indemnity earthquake product. We now partner with 40 risk-taking providers, up 74% year-over-year. Capacity expansion is earned. It reflects underwriting performance, disciplined portfolio management and transparent reporting. Our partners continue to expand alongside us because the results support it. Subsequent to quarter end, we completed the renewal of another significant capacity agreement. The continued renewal and expansion of these capacity relationships reinforce our ability to scale efficiently across varying market conditions while maintaining underwriting discipline.

And distribution. The strength of our distribution platform was particularly evident in the fourth quarter. We delivered record-breaking new business sales despite the absence of storm-driven demand, underscoring the point that our growth is driven by execution and market expansion rather than event-driven activity. Production associated with the Palomar relationship contributed incremental volume on top of an already record-setting quarter. We launched a new user-based log-in process during the quarter and more than 30,000 insurance agents registered within the first 30 days.

This significantly improves how agents interact with our platform and is already deepening the behavioral data set that delivers better tools, insights and feedback through our data science and AI models. For the full year, premium retention reached 98%, up 90 basis points year-over-year, supporting record written premium of $367 million. Those figures reflect the durability of our agent relationships and the consistency of our value proposition. Across technology, capacity and distribution, the progress achieved in the fourth quarter strengthens our operating leverage, reinforces our competitive moat and compounds our data advantage. We enter 2026 with significant momentum. With that, I'll pass it on to Jim.

For the fourth quarter of 2025, Neptune delivered another strong financial performance, capping off a very successful year. Quarterly revenue increased 39% year-over-year to $43.8 million, driven by record new business sales and strong retention across the portfolio. For the full year, revenue increased 34% to $159.6 million, reflecting continued growth in premium in force and consistent execution across the business. We've continued to focus on renewal acceptance as a key driver of revenue retention. For the full year ended December 31, 2025, we retained 98% of premium and 86% of eligible policies, up 0.9 and 1.8 percentage points, respectively, compared to 2024. Our asset-light technology-first model continues to deliver operating efficiency and strong margins even as we incur incremental costs associated with being a public company.

For the 3 months ended December 31, 2025, net income was $4.3 million, down 63% over the prior year quarter, while adjusted EBITDA rose 34% to $25.9 million. Net income included $4.6 million of IPO-related expenses incurred during the quarter. This resulted in a 9.9% net income margin and a 59% adjusted EBITDA margin for the quarter. For the full year of 2025, net income increased 8.2% year-over-year to $37.4 million, representing a 23% net income margin, while adjusted EBITDA increased 32% to $95 million, representing a 60% adjusted EBITDA margin.

2025 adjusted EBITDA primarily excludes IPO expenses and share-based compensation. On a per employee basis, we generated $2.7 million of revenue per employee and $1.6 million of adjusted EBITDA per employee for the full year, increases of 15% and 14%, respectively, compared to the prior year. The continued improvement in these metrics underscores the scalability of our model as we grow. Turning to the balance sheet. Our growth and strong operating cash flow allowed us to further strengthen our capital structure. During the quarter, we refinanced our existing term debt into a $260 million revolving credit facility, which lowered our interest rate, eliminated required amortization and provides greater flexibility to manage capital efficiently.

We ended the quarter with $240 million of total debt outstanding or approximately 2.5x net leverage on a trailing 12-month adjusted EBITDA basis. Subsequent to quarter end, we paid down an additional $9 million of debt during January and February, bringing our current outstanding balance to $231 million. Our priority remains continued debt reduction while maintaining flexibility to invest in growth. IPO-related expenses totaled approximately $8.9 million for the full year, including $0.5 million incurred during the fourth quarter. These costs were reimbursed following the completion of the IPO on October 2, and that reimbursement was reflected as an equity contribution in our Q4 financials. The proceeds from reimbursement were used to further reduce outstanding debt.

Share-based compensation totaled $11.4 million for the year with $11.1 million recognized during the fourth quarter. This increase was driven by 2 IPO-related items. First, upon completion of the IPO, outstanding unvested employee stock options became subject to accelerated vesting, resulting in a onetime noncash compensation expense of $4.1 million. Second, as part of the IPO, Neptune issued restricted stock units to all employees. These RSUs vest annually in equal installments over 3 years. On a go-forward basis, we expect approximately $6.9 million of RSU-related expense quarterly.

Based on Neptune's year-end stock price and calculated using the treasury stock method, we had 149,401,852 diluted shares outstanding. The net share settlement to satisfy tax withholding obligations will reduce that total share count by approximately 500,000 shares or 35 basis points. Upon vesting, the net sale of RSUs will have a 64 basis point dilutive effect on the account of basic shares outstanding. With that, I'll turn things back to Trevor for closing remarks.

Neptune remains focused on long-term shareholder value creation. The inherent variability of government policy and weather-related activity make short-term forecasting challenging. And as a result, we generally do not update guidance unless there has been a meaningful change in the underlying trajectory of the business. The strength of our performance in the fourth quarter and across full year 2025 has increased our confidence in the outlook for 2026. Based on that performance, we are increasing our full year expectations. For full year 2026, we now expect revenue of approximately $193 million and adjusted EBITDA margin between 60% and 61%. These targets reflect our continued commitment to profitable growth, operational efficiency and disciplined capital allocation.

Where appropriate, we intend to deploy capital to grow the business while returning excess capital to shareholders. To date, that has included a strong emphasis on debt reduction as a straightforward and efficient way to enhance equity value. Before we open the line for questions, I want to bring it back to what matters. This quarter capped a record year. Revenue grew 39%, adjusted EBITDA grew 34%, and we did it at a 59% adjusted EBITDA margin while investing for growth. Those are the numbers of a company that is AI. I want to be direct about what we're building because I think the market narrative has drifted from the reality.

Neptune is not just a successful flood MGA. We are building the technology and data infrastructure for flood insurance in an AI-driven world. That is a much larger opportunity, and we have a meaningful head start. Our data sets get stronger every day. Every policy quoted, every renewal decision, every claim resolved feeds back into our models. That flywheel has been compounding for years. You cannot shortcut it with a foundation model into press release. Data at our scale in our domain is a structural barrier to entry, and we believe it widens with time. Our underwriting results have made that case to the people who matter most, the capacity providers, putting real capital behind our models. We went from 23 to 40 partners this year.

Commission economics improved. That is not momentum you can hand wave away. That is sophisticated risk capital voting with its balance sheet that Neptune works. And our distribution infrastructure is built for wherever the market goes next, agents, embedded digital, AI-native workflows. We don't need to guess which channel wins. We capture all of them on the same platform. But I want to be clear about something. We are not rooting against human agents. There are roughly 25 million buildings in the United States at meaningful risk of flooding and only about 4 million flood insurance policies in force. That is a massive protection gap. AI doesn't close the gap alone. Agents do, armed with better tools, better data and a faster quoting experience.

Our job is to make agents more productive, not to replace them. When we do that well, the addressable market gets dramatically larger for everyone. And if parts of the market do shift towards fully automated buying, our margins expand because our largest cost line compresses. Either way, Neptune wins. So here's how I frame it simply. We have the technology, we have the data, we have the capacity relationships. We have the distribution flexibility, and we just posted a record year, proving all 4 work together. The question is not whether AI disrupts insurance. The question is, who is best positioned when it does. We believe, and our results demonstrate that answer is Neptune. Thank you to our employees, our over 30,000 totally awesome human insurance agents, our capacity partners and our shareholders. We'll now open the line for questions.

[Operator Instructions] Your first question comes from the line of John Barnidge of Piper Sandler.

Congrats on the results and appreciate the opportunity. I believe you had talked about earthquake launching. How large of a market do you think this is for the company in '26?

Thank you for asking that question. We are in beta testing right now. And what that means for us is getting the technology right, making sure that we have the right product that meets the marketplace needs. And we know that in California, which will be our first state, 90% of homes are not protected by earthquake coverage. So we think much like flood, it's a hugely underpenetrated market. Too early to say how big that will be for us in 2026.

My other question, if I may. It looks like there was a letter Elizabeth Warren put out shortly before the close today, attempting to connect flood insured with Project 2025. Can you maybe talk about your response to that and maybe build, Trevor, on how you are the AI disruption as opposed to being disrupted?

If this were polymarket and you had given -- I was giving out odds of the likelihood that the Trump administration would invite me to the White House, and I would get a letter from Elizabeth Warren, I'd say it's something like 10,000:1. But I think that it's a tremendous opportunity for us to continue to talk with important stakeholders about the role of private flood insurance. We're entering our 10th year here in business. We are the largest private flood insurer in the United States. And we want to make sure that all stakeholders understand the role that private flood insurance can play to close the huge flood insurance gap that exists in the country.

We have talked with everyone who is interested in talking with us from Senator staffs to the White House, to the FEMA Advisory Council to our local Congress person. This is a bipartisan concern to make sure that people can be properly protected. And we look forward to talking to Senator Warren staff to make sure she understands the role that private flood insurance can play. Listen, when it comes to -- I'm sorry.

Sorry, I didn't realize you're continuing.

Yes. No, I was just going to answer your second question about sort of where we fit in the AI ecosystem. Really, I think the most important thing to understand is that Neptune's platform was built from the beginning using old-fashioned AI. So non-large language model developed AI, really the automation of human tasks. So we've been built from the beginning able to work in digital workflows. We've been able to work in agent-led workflows, direct-to-consumer. If all Americans decide tomorrow, they're going to use ChatGPT to buy flood insurance, we're ready for that, and that would be good for us because it would expand our margins.

But I don't think that's actually going to happen. Agents play an incredibly important role here at expanding the marketplace. So there are about 25 million buildings in America that are at moderate to severe risk of flooding, and there are only about 4 million flood insurance policies that exist today. We need agents to be beating the drums, educating their customers that they need to add flood insurance to their coverage universe.

Your next question comes from the line of Andrew Kligerman of TD Cowen.

I was curious a little bit about the comment that your priority or emphasis would be on debt reduction, especially -- and maybe I would get a better -- you could give me a better sense of why that would be the priority given in the last 2 weeks, what I think was just -- and certainly, what you explained, Trevor, was a real overreaction to AI on your stock. I mean, I think it went down way too much. So my question is, given where the stock is, is there any thinking about share repurchase? And I think it was something you were touching on or exploring during the IPO period. So maybe bottom line, long story short, priorities on capital management and why?

Yes. Thank you for that question. We're -- we've been paying down debt because it's the easiest thing to do. And obviously, as a revolver, that just gives us availability under that revolver to utilize that in the future if need be. We find great ways to grow the business or invest or ultimately, if the Board decides that stock repurchases are the right thing to do, we're going to have the dry powder to be able to do that. And obviously, we produce significant free cash flow, which will just grow that amount over time.

As I mentioned on our last call, we now have 3 things available to us. We can pay down debt, we can buy back shares, and we can potentially someday pay dividends. I think our Board is going to be interested in the first 2 for this year because it gives us the most flexibility. And we will have to see what the ultimate reaction is to our earnings and helping educate the market about our stock. But we too were surprised that year-to-date, we're down more than the traditional brokers, which is confusing to us.

It seemed like a real overreaction. Kind of following up on John's question about Senator Warren's letter. Related to that, she seemed to favor NFIP over the private market. And I appreciate that you want to educate the Senator staff. But I was kind of hopeful just given that it just seems like the private markets are so much more efficient. I've been kind of hopeful that the NFIP could be resolved in the form in which it currently exists. Do you, Trevor, think that there's a good probability of that at this point, given the support that we're seeing in the Senate?

I think there's a lot of education that still needs to happen in Congress. And in particular, helping everyone understand that private flood insurance can save the majority of Americans' money on their flood insurance, right? That's a really important point if we're trying to get more people insured, if we're trying to close this massive flood insurance gap, which I've talked about a couple of times on this call. We've got some education work to do. Now the decision around what's going to happen with FEMA and the NFIP seems to lie with the administration. And I don't have any insight into what the decision-making process is there. And we, like everyone, look forward to hopeful report from the FEMA Advisory Council, which was extended and may still produce a report, we'll see. But our job is just to do the blocking and tackling every day to try to sell more policies. The NFIP has been in long-term decline, and Neptune is growing rapidly. And our job is to keep Neptune growing, and there's not much I can do to control what happens at the federal government level.

Your next question comes from the line of Bob Wong of Morgan Stanley.

So my first question is really about how to think about the future evolution of AI, right? So I think you gave some tremendous comments on why AI is an advantage that is built for Neptune and Neptune is built for AI. But as we go forward as technology evolves, as you gather more data, things of that nature, can you maybe help us think about, is there a scenario where potentially other competitors that can perhaps replicate your capabilities or perhaps comes in from a different angle that can, for lack of a better word, give you a run for your money. But just really curious as to how you think about the evolution of the technology going forward.

Yes. I think there are a couple of things here. One is there's a massive TAM here, right? There are 100 million buildings in America. 80% of the sales that Neptune has ever done are non-mandatory, right? So there's a very big market here. Number two, we have a big data moat, right? The data that we have collected and we continue to collect and analyze gives us tremendous advantage. I don't think without that data, it's going to be easy even with a future where large language models know everything about humans. They know everything that they have read on the Internet, and that data doesn't exist on the Internet, right?

So -- but I'm open to the possibility that advancements could be made there. But there are 2 other important moats. And one is the capacity relationship. Someone needs to take that risk -- and we've made hundreds of millions of dollars for our risk-taking partners over the last 8 or 9 years. This is a relationship business. We worked very hard to cultivate those relationships, and we continue to grow those relationships quite profitably for them. We work with 11 of the 12 largest reinsurers in the world. They would have to be making a decision to leave us and the money that we have made them over time to go for a new startup. I'm not saying that's impossible. I'm just saying it seems unlikely. And then the last area is distribution. We've worked for years to build the distribution network that we have with amazing agents across this country. And it took years and years to build all of the API connections in, et cetera. So I just think there are -- there's not one, there's not 2. There are 3 meaningful moats here that are just going to be hard to replicate.

Okay. Really helpful. Maybe on the second point is the path of growth. You've addressed some of this on the prepared remarks. But if we think about the current quarter, right, the revenue was stellar. One thing I would like to maybe get a little bit more detail on is how you think about the path for that growth going forward. Is there any reason to think that you cannot repeat the same level of growth you just had in the last, call it, 2 quarters or 3 quarters going forward? It feels like the momentum is on your side, so to speak.

Yes. We're certainly excited about the momentum in the business, and we have -- that's why we've increased our revenue guidance for 2026. we have a couple of things going on at the same time here. One is increased momentum. Two is the Palomar rollover, which will run through October 1 of this year. So that -- we will not have that effect in the fourth quarter of 2026. And we're larger, which means that even if you have 86%, 87% of people renewing their policies with you, you're still losing 13%, and you need to make those up to just stay the same. So it gets harder and harder the larger and larger you get. So you put all of that together, and we are confident that things look better than they did 3 months ago, and that's why we increased our guidance.

Your next question comes from the line of Mike Zaremski of BMO.

Just a question around any updates on the task force that was created by the President. And if you all have seen any plans, time line kind of et cetera, around that initiative.

Thanks, Mike. The only thing that we heard is the same thing that everyone in America heard, which was that it was extended by 60 days, and that puts it to sometime end of March, and we'll stand by and see what happens. But we have no other information than that the extension took place.

Got it. So there's nothing you've seen that you're kind of changing the way you operate to be able to react to the extent something meaningful comes to be in -- when that date arrives.

Well, we're ready in case something does happen, but I just don't know what, if anything will happen. So you saw that we added our eighth program on January 1 with Somers Re. Somers is backed by a very, very large global reinsurer. And we are -- we put that kind of program in place in order to be able to react incredibly quickly if we need to. There could also be another government shutdown, right? The NFIP has now been extended through September. There were multiple shutdowns in the first Trump administration. We've already had 2 so far in this one that affected the NFIP. And we need to be ready to serve America if that comes to pass again this fall.

Great. That's helpful. My final follow-up is on the stronger-than-expected revenues, you gave us some good color on the puts and takes. Did you all tease out kind of how much of a bump you got from the shutdown? And separately, are the promotions you called out, are those kind of normal course of business or those were more onetime due to the shutdown?

I think the promotions were more onetime. Our December expense for agents returned to normal levels as they have in January and so far in February, but we do, do promotions from time to time. And we thought the shutdown was a good opportunity to lean in and take a very minor impact on margin to introduce a lot of new agents to Neptune, who had heretofore largely only used the NFIP. So we were excited about onboarding them. When we last spoke in the middle of December -- in November, which I think was on the day that the major shutdown ended, I likened the impact to a medium-sized storm. Maybe with the after effects of agents discovering Neptune for the first time and sticking with us because they liked it, maybe it was a medium to large-sized storm.

But still, not as large as we would see from a major category 4, 5 hurricane impacting a major metropolitan area. But the shutdown did have the very positive effect of introducing a large number of agents to us for the first time. And that's part of why the added enthusiasm and trend led us to increase our guidance.

The next question comes from the line of Tommy McJoynt of KBW.

If we looked at the last few years and also just thinking about the next few years ahead, is most of Neptune's growth taking share from the NFIP? Or is it writing new policies that previously had no flood insurance?

It's something like 75% or 80% net new. very few people are actually switching from the NFIP to Neptune. And that's because there's still about half of all policies are receiving subsidies and their risk rating 2.0 price has not yet been achieved. As you remember, the NFIP is increasing prices on consumers' homes by 18% a year until they reach their actuarially accurate rate at the NFIP. So with the ongoing subsidization, there really hasn't even been the opportunity for people to think about a private alternative. So that, I think, will change over time as those subsidizations burn off in the coming 3, 4, 5 years. But for now, the vast majority has been net new, new home purchases, people discovering from their agents that their homeowners policy doesn't cover the risk of flooding and the need to protect themselves from this most dangerous peril.

The housing market has not done us any favors, right? The housing market continues to be quite slow. When people buy houses is when they normally shop for insurance. So a return to a healthy housing market would definitely help our business as well because a lot of those people may have NFIP policies, they sell their home. Now that's a new opportunity for someone to shop.

And actually along the same line there, sort of mechanically, when a home does sell that's currently under, we'll call it, risk rating 1.0 pricing with the NFIP, does the new buyer of that home get the full risk-adjusted risk rating 2.0 price even if it's significantly higher? Or are they also grandfathered into the 18% increased cap?

They are able to be grandfathered into the glide path through a manual process of taking over the old policy. Not everyone does that because it is a bureaucratic process, but it is possible to do. Otherwise, they do have to pay the new Risk Rating 2.0 price. But a lot of home sales also are taking place with people who have paid off their mortgage and so are no longer required to have flood insurance. And then when they sell, they sell to someone who does have a mortgage and then that's going to trigger the requirement for a new policy to be bought. And that's a great opportunity for Neptune. So that's part of the reason why we're at near record levels in the United States of cash ownership of homes. And so that churn creates new mortgages, creates new mandatory buying.

Your next question comes from the line of Gregory Peters of Raymond James.

I was going to ask you, I was looking at Page 13 of your investor deck. And one of the comments you made was actually the last bullet point. And I think, Matt, you talked a little bit about it during your comments where you said you launched a new user-based agent log-in system. And you said within 30 days of the launch, more than 30,000 agents created individual accounts. And my human brain is having some problems processing how you had such a broad acceptance of this. Was that bots registering individual accounts? Talk to me about what actually happened that triggered such a strong response rate.

No, it wasn't bots. This is -- Sorry, Greg. Thank you for that question. The answer is no, it wasn't bots. This is all human-based and this is multifactor authentication. So the requirement to properly authenticate into the system. And this is just a reflection of how many users we have actually using Triton, the quoting platform and Poseidon, the policy management platform on a monthly basis. And so this is agents who are coming into quote policies, to buying policies and then also agents who are coming in to service existing policies as well.

So we had a great uptick, but this is a big benefit and a big new data set that we have going into 2026 that provides us much more granular behavioral data at the agent level that will allow us to really help the agents as they go through this process, help them with ways that they can sell policies, how can they improve the sort of penetration within their book of flood insurance purchases and also be able to reward agents for the behavior and for the quote and binding that they're doing through the Neptune system.

Okay. I guess a follow-up question just relates back to comments you were talking about where you said you now have 8 programs and 40 capacity providers and can you just remind me what the difference is between program #1 versus program #8 or program #4 versus program #7? Just give me -- just trying to visualize what the difference is in the programs.

The programs are all actually the same. They've all signed up to Neptune and to Triton to allocate individual policies to them. And we were actually awarded a patent last year on our disaggregation system that does that allocation, and it's assigning individual policies to the carrier where it's going to have the least impact on their probable maximum loss. So it's a very sophisticated program. You can think about it pretty simply as saying, we don't want one carrier to have all the policies in Miami, right? We want to spread that out amongst the 8 different programs. And we want to make sure that if a big storm happens, no one carrier is disproportionately damaged because of that storm.

And doing that on a -- in a highly sophisticated way to manage their risk capital is a big part of the value add of Neptune to these carrier partners. But they're all exactly the same rule set. They are not setting any pricing. There's no different guidelines. They're signing up to Neptune, and they're basically giving us a premium that they're looking for during the year. Maybe said a different way, they put in a premium request and then we're letting them know what we think we're going to be able to allocate them in terms of premium during the year. But the -- to be super clear, we call a capacity provider, either an insurer or a reinsurer. The 8 programs are our 8 insurers on whose paper we place the individual policies. And then we have 32 reinsurers who sit behind those 8 insurance companies for a total of 40 total capacity providers.

Your next question comes from the line of David Motemaden, Evercore.

I had just a question on the agent sales promotions that you guys were running and it feels like they had a pretty big impact and minimal margin impact on the growth, but minimum margin impact. It didn't sound like you guys were going to continue those in a bigger way. I guess margins are really good, but when you're producing the volume growth that you did this quarter, that's at least, I think, a pretty good trade-off. So I guess, why not do more of these promotions to really drive the volume and the top line growth here?

We certainly have tried promotions in a variety of different settings and continue to do so. So new agents, storm season, post-storm recoveries, government shutdowns. And the one we ran for the government shutdown was pretty specific around getting new agents to do business with us. And so it's sort of an introductory to Neptune kind of promotion. But we're not afraid to do promotions. We're very excited about this new data set that Matt was talking about of having the individual traceable information around actual humans, 30,000 human agents now and being able to more precisely tailor incentives to those agents. And so as we collect data from this new individual log-in system, which started on December 1, over this year, we think we will be able to more precisely be able to deploy those kinds of incentives. It is something we are absolutely focused on. It's not that we're taking them away, but it's around using the dollars in the most effective times and places possible.

Got it. And maybe just following up just there on that last point on the user base -- individual user base log in. I guess any early signs on that? Any encouraging signs, any testing that you've done? Or are we still in the discovery phase?

We're still early. And remember that we have a very seasonal business. So January is normally the slowest month of the year, followed by February, right? So this is the slow time. As we approach hurricane season, things tend to heat up and then volume is very dependent on storm activity and last year government shutdowns. So this is really a data gathering time of year for us, and we would look to deploy and take action upon that when it is actually raining.

Our next question comes from the line of Josh Shanker of Bank of America.

Congratulations on the quarter and the year. Trevor, in your opening remarks, you mentioned that you felt that AI would reduce friction, and it seems to be that commission costs would come down for the industry as one of those frictional costs. In this whole week, regardless of what happened to Neptune, and I just want to think broader, do you believe that the AI sort of concern is real for the industry and that commissions will be under pressure for the insurance industry? I say that knowing that you're paying people about 13%, 14% for about 1 minute of work. And I'd love to hear how you think about the industry's impact.

So Neptune has had a direct-to-consumer channel from the very beginning. And it's always been about 2% of our business every year. Even as we grow, it remains about 2% of our business. Consumers like talking with humans, agents around the risk that they're taking on in their life and getting good advice. Can I foresee a dystopian future where AI agents are better than humans at convincing us as to our risk and better at selling to us? Maybe. I'm not sure that's a great world, but I can futurize and think of that kind of outcome. And that's really what I think the market was jumping to was that kind of outcome where AI agents are just better at humans at doing the job of convincing humans what to do and providing them advice.

Our point is, if that happens, Neptune's margins improve because when we sell direct-to-consumer, we don't have to pay an agent, right? That is -- it's just our technology directly linked in. We may have had to pay Google AdWords. We may have to pay OpenAI. We may have to pay Anthropic. We may have to pay our new AI overlords, unclear. But those costs generally would need to be lower than we would have to pay an agent for it to make sense for us to dedicate that money.

So I think it is possible to envision that kind of dystopian future, but I don't think that it is a near-term concern. I spent last weekend upgrading my parents' phones, and I installed ChatGPT for them, and they were playing around with it. And I asked my mother this week, have they been using it much? And they said, no, it scared them too much. I'm 53, and I can use it and it makes sense. But I think this is going to be a long road to convince large swaths of Americans to stop taking advice from their friend at the Qantas Club and to start listening to an AI.

There are no further questions at this time. And with that, I will now turn the call over to Trevor Burgess, Chairman and CEO, for closing remarks. Please go ahead.

So thanks, everyone, for joining us this hour to listen to our full year and fourth quarter update. I'm incredibly proud of the work that the team is doing here. We look forward to sharing with you updates throughout this year on the progress that we're making. And I want to give a special shout out to the 30,000 human agents who are working with Neptune every single day to help close the flood insurance gap that exists in America. Thank you all so much.

Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.

Thank you for standing by. My name is Danny, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Neptune Insurance Holdings Third Quarter Earnings Call. [Operator Instructions]

I would now like to turn the conference over to Jon Carlon, Director of Corporate Development. You may begin.

Thank you, and good afternoon. With me here today is Trevor Burgess, Chairman and CEO; Matt Duffy, President and Chief Risk Officer; and Jim Steiner, CFO and COO.

Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements, including, among others, statements about our expectations for our future financial performance, growth opportunities, business strategy, market trends and capital allocation plans. These statements are based on our current views and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. We direct you to our recent SEC filings for a full description of these risks. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

We will also reference certain non-GAAP financial measures. These measures should be considered only as supplements to their comparable GAAP measures. Additional information, including reconciliations of the non-GAAP measures to their most comparable GAAP measures can be found in our earnings release at investors.neptuneflood.com and in our current report on Form 8-K that was publicly filed with the SEC on November 12, 2025. And now I'd like to turn the call over to Trevor.

Good evening, and thank you for joining us for Neptune's first earnings call as a publicly listed company, an exciting milestone for all of us. We're deeply grateful for the support from our investors, our agents, our capacity providers and our policyholders as we begin this next chapter in Neptune's journey. Due to the timing of the IPO, this earnings release focuses on our last month as a private company and the results show the ability of our team to execute under the pressure of both the public offering process and hurricane season, typically our busiest period of the year.

Our success is apparent in our first quarterly earnings that highlights the continued growth and success of our business, including record revenue of $44.4 million, a 31% increase year-over-year, net income of $11.5 million, record adjusted EBITDA of $26.7 million at a 60% margin, record written premium of $102 million, driving a 33% year-over-year premium in force growth and record new business sales posted during the quarter.

We believe our business model is unique to the public markets. We operate as a managing general agent, or MGA that takes no balance sheet insurance risk. This allows us to be efficient, asset-light and profitable. Moreover, our AI-first approach allows our team members to do more, resulting in LTM revenue per employee of $2.5 million and adjusted EBITDA per employee of $1.5 million, both records.

We are most proud of the exceptional customer experience we provide to agents and consumers nationwide and the consistent profitability we have historically provided to our capacity providers. This is only possible through our organization as a technology company operating in the insurance space, not as an insurance company attempting to utilize technology.

Our mission is simple: to make insurance easy to buy, simple to understand and efficient to manage, powered by world-class technology and data science. The results we delivered in the third quarter of 2025 reflect the strength of that model.

I'll now turn things over to Matt Duffy, our President and Chief Risk Officer, to discuss updates from the three core pillars of our business: technology, risk relationships and distribution.

Good evening. During Q3, our data science and engineering teams made significant progress delivering new technology. We completed a full rewrite of the Triton underwriting engine, a year-long project focused on improving speed, accuracy and flexibility. It enhances the user experience for customers and agents, increases certainty for our capacity providers and provides management with both enhanced functionality and insight into model performance.

We also released a new machine learning model designed to optimize conversion of new business quotes. Early results are encouraging, and we expect it to drive continued growth across our product suite in the coming quarters.

In addition, we expanded our flood offering with higher coverage limits. We began writing policies in Alaska, which took our offering nationwide, added a new capacity program and launched a redesigned agent profile.

As we head into Q4, we have many impactful technology projects underway that will continue to reshape how we think about portfolio development, customer experience and the future of our business. Our long-term technology focus remains on providing a best-in-class experience across the value chain from insureds through agents and to our capacity providers. Those capacity providers continue to be key to the business.

On October 1, we launched our seventh carrier program through our partnership with Palomar, adding six new capacity providers and bringing our total panel to 39 risk-taking partners. We also completed the annual renewal of another capacity program, a program on which we expect continued growth through the upcoming treaty period. Our expanding panel and deep partnerships remain a core strength, allowing Neptune to scale efficiently and serve more customers with confidence. And that momentum continues into the distribution side of the business.

Flooding in July again underscored the protection gap in the U.S. flood market, where we believe just 2% of properties nationwide are covered with flood insurance. These events helped raise awareness that our growth continues to come primarily from strategic expansion, putting Neptune software in the hands of more agents and educating property owners across the country.

Over 80% of new business came from non-mandatory purchase situations in Q3, highlighting the strength of our distribution model even in a quiet storm season with no landfalling hurricanes. This performance demonstrates the resilience and reach of our platform. The NFIP's transition to risk Rating 2.0 remains a long-term structural tailwind. As NFIP rates rise towards full actuarial adequacy, Neptune's competitiveness continues to improve, creating a steady flow of customers moving to private alternatives. Our distribution team continues its excellent work in expanding both the breadth and depth of our relationships. This is highlighted in the achievement of both record new business sales and a record number of unique agency codes binding new policies during the third quarter.

As we look ahead to Q4, currently, the U.S. federal government remains shut down. And as a result, the NFIP is not authorized to issue or renew policies until reauthorization by Congress. At the same time, federal financial institution regulators have reminded lenders that they may continue making loans without requiring flood insurance during this period. We believe these opposing dynamics partially offset one another. The absence of NFIP authorization creates opportunity for Neptune, while the pause in mandatory purchase requirements limits that overall benefit.

Next, I will turn it over to Jim Steiner, our Chief Financial Officer, to discuss financial results for the quarter.

Thanks, Matt. For the third quarter of 2025, Neptune delivered strong financial performance. Revenue increased 31% year-over-year to $44.4 million, driven by record new business sales and continued improvement in renewal retention. Year-to-date, we've retained 99% of premiums and 86.2% of policies, up 1.9 and 2.8 percentage points, respectively, from the same period in 2024. Our asset-light technology-first model continues to deliver efficiency and strong margins.

For the three months ended September 30, 2025, adjusted EBITDA rose 29% to $26.7 million, resulting in a 60% adjusted EBITDA margin for the quarter. On a trailing 12-month basis, we generated $2.5 million of revenue per employee and $1.5 million of adjusted EBITDA per employee, increases of 29% and 30%, respectively, from the prior year. These results underscore the scalability of our model as we grow.

Turning to the balance sheet. Our growth and strong operating cash flow continued to support deleveraging. We ended the quarter with $264 million of total debt or about 3x net leverage on a trailing 12-month adjusted EBITDA basis. Following quarter end, we repaid $13 million of debt and on November 10, refinanced into a $260 million revolving credit facility with $251 million outstanding. The new facility lowers our interest rate, eliminates required amortization and provides greater flexibility to manage capital efficiently.

The largest adjustment to EBITDA this quarter was related to IPO expenses of roughly $5 million. A total of $8.5 million of IPO-related expenses incurred year-to-date were reimbursed after the IPO closed on October 2, and that reimbursement will be reflected as an equity contribution in our Q4 financials. Reimbursement proceeds funded a significant portion of the $13 million debt paydown I just mentioned.

Now I'll turn things back over to Trevor for introductory 2026 guidance and closing remarks.

I'm generally not a fan of providing detailed guidance as it can shift focus towards quarterly performance rather than long-term value creation. That said, for our first full year as a public company, we're offering initial benchmarks to help investors frame Neptune's trajectory. You will notice that the ranges are narrower than those we typically see for other public companies, and that's because of the certainty historically provided by our substantial renewal base and our highly efficient technology-first platform.

For full year 2026, we expect revenue between $186 million and $189 million and adjusted EBITDA margin between 60% and 61%. These targets reflect our continued commitment to profitable growth, operational efficiency and disciplined capital allocation. Where possible, we plan to deploy capital to grow the business and return any excess to our shareholders. In line with this strategy, in September 2026, our first tranche of restricted stock units is expected to vest, and we intend to satisfy the associated tax withheld via net share settlement, which is expected to withhold and retire approximately 500,000 shares.

Before we open the line for questions, I want to take a moment to thank our team at Neptune. Their hard work and dedication made this transition to public company life not only possible but successful. I also want to thank our investors and partners for their confidence in Neptune's vision and strategy. We're still in the early chapters of a very large story, one where technology, data and customer experience come together to redefine what insurance can be. We look forward to sharing our continued progress in the quarters ahead.

We'll now open the call for questions.

[Operator Instructions] Your first question comes from the line of Andrew Kligerman with TD Cowen.

So, my first question is around the agency codes. I think it was interesting that you called out that you had a record number of new agency codes. And it had been my understanding that you had 100,000 unique agency codes. So I'm hoping you could kind of put in context what that record number was and how that relates to the 100,000 that I thought you had.

And then with that, it was also my understanding that you have a couple of agencies, big ones that have this opt-out provision where the client might buy a homeowners' policy, but they have to opt out of flood if they don't want it. And so I'm curious as to how many within that group of unique agency codes have that type of a provision in place right now?

Thanks for the question. In the S-1, we disclosed that there was over 20,000 agency codes that have found the policies from Neptune historically and over 80,000 that quote through the Neptune system. So, yes, we see great retention rates in those agency codes that continue to come back and find policies with Neptune month-over-month. And for the third quarter, we saw a record number of those unique agency codes that found the policies.

So our growth during the third quarter with this being a slow hurricane season was really due to that growth in distribution, and that continues to be the case and really has been the case historically on the portfolio. So the distribution team does a great job in sort of facilitating those technology integrations that you mentioned that sort of help with that, as you framed in opt-out provision. But we really don't have a strong feel on the number of bind or unit agency codes that bound with us using that sort of opt-out provision.

Andrew, this is Trevor. The only thing I would add is that we are in the process of moving to a single sign-on system. Most of that rollout will be done by the end of this year. which will then be able to give us more granularity and the ability to more precisely market to individual agents and incentivize individual agents and have our data science team really dig into the behavior of individual humans starting in 2026.

Got it. And my follow-up question is around the adjusted EBITDA margin. I think you've guided to 60% to 61%. You came in at 60.2%. So I guess that is somewhat of a type end, but I'm wondering where you think -- will it be on the higher end, the lower end? And what might be some of your expected influences toward the higher or lower end going forward?

I think that the hardest thing to always predict in our business is what's going to happen with hurricane season. And we saw in 2025, a very light hurricane season and some added expenses of being a public company, such as we have a new General Counsel, right? We have new insurance costs, obviously, as part of being a public company that are not adjusted out of EBITDA. They're just our new real run rate.

So, as we grow into that in 2026, and we would anticipate a normal hurricane season, which would have 1.8 landfall hurricanes, we would hope that our performance would allow us to drive towards the higher end of that range. We keep a very run a very tight ship here in terms of our G&A expenses. We know what they need to be. And the biggest open question is, what's the hurricane season going to be like? And what is -- how is that going to influence new business sales.

Your next question comes from the line of Rob Cox with Goldman Sachs.

Just first question, I just wanted to ask about the FEMA Advisory Council. Just based on your understanding and your prior dialogues, are you expecting more of firm recommendations from this council sort of in the near term as I think a report is due there? Or are you expecting more of like broad-based views in that council's report and maybe a slower time line for adoption? Just trying to understand better what you all think may or may not be included in that report.

Bob, thank you for the question. Our understanding is that a report from the FEMA Advisory Council is due to President Trump 180 days after their first meeting, which would put us sometime around the end of November or early December. We have no insight into the contents of what that report may be or what the Trump administration plans to do once they receive that report.

What I can tell you is that today, we sent in a letter to the FEMA Advisory Council, updating them on what we saw during this shutdown that may be ending as early as this evening. And in broad strokes, what we saw during this shutdown was a fully functioning insurance market, even though the NFIP was closed and countering that, as Matt talked about in the prepared remarks, the federal banking regulators removed the requirement for flood insurance associated with home loans.

But the insurance market did well. The private market was able to perform. Home closings were able to continue as expected and a large number of new customers were able to discover that private flood exists and can be a fantastic alternative to the NFIP, because at Neptune, we offer higher limits than the NFIP and optional coverages such as temporary living expense cover that makes our form a more valuable form to the consumer.

So we were able to share those early observations from the government shutdown with the FEMA Advisory Council, and we hope that they would take that into account. But we've had a little test of what it would be like without the NFIP.

Appreciate that color. And I know you mentioned you don't like giving guidance and you gave us some help on 2026. But is there any way to help us better piece apart what you've seen thus far in the fourth quarter here as we're almost halfway through and breaking apart kind of the benefit that -- it sounds like a net benefit that you've seen from the government shutdown.

So we've certainly seen a net benefit there in sales since October 1, and it was nice to have the shutdown sort of aligned with the IPO, which also provided us with some additional publicity there.

As Trevor mentioned, the lack of requirement to purchase insurance that's existed so far this quarter, right, the effective removal of the mandatory purchase requirement has definitely dampened the impact there, but overall, a net benefit that we've seen so far.

The only sort of additional point that I'd add there is we continue to see this sort of long-term trend in the direction of private insurance. And that's really the benefit that we've seen from the shutdown is additional distribution partners as well as our current and additional capacity providers reaching out and saying, hey, we need to be a partner of Neptune now. We need to work with you to grow the private insurance market. So those trends remain very, very favorable for us.

And so in the long term, as we think about 2026 and beyond, that's really where sort of the shutdown is going to help the model and continue to drive our financial performance.

Next question comes from the line of David Motemaden with Evercore ISI.

I was hoping, Matt, maybe you could just talk about within the record new policy sales, how we should think about how much that grew by? Is there any way to sort of parse that out between -- it sounded like 80% of it was coming from non-required purchases. Maybe just parsing out the growth between required and sales within the SFHAs would be helpful.

Yes. Thanks for the question. You sort of hit the number there hit the nail on the head. So 80% of the sales -- over 80% of the sales during the period were in those non-mandatory circumstances. And when we talk about non-mandatory, that's sales within a special area and to a mortgage bank. That trend and that number is sort of on trend for the past 12 and 24 months. And as we think about the percentage of sales just outside of special test areas, that's also on trend with the numbers that we provided in the S-1 as well, so north of 60% they were over the past two years.

So we continue to see this great spread of the book, which is really driven by that ease of use and the technology system that we've been able to develop and that broad-based distribution network that we've been able to develop and continued API integrations, technology integrations with each of those distribution partners.

So, no significant change in the spread of the book that we sold during Q3. It was sort of more of the same, just more of the same.

Got it. And then just a follow-up on -- maybe if you could just talk a little bit about the Palomar relationship, how that's been going initially here? And then also just sort of on the agent count, I think they had also provided some other relationships through new agencies that maybe you guys could also leverage not only on the renewal side, but then for new business. So I was hoping maybe you could size that as well in terms of how many agents you guys could be distributing through as a part of that relationship.

Yes, absolutely. Palomar are a great partner and the new program is off to a really strong start here. We continue to expand the capacity provider panel, and it was great to get such a strong vote of confidence from a partner like Palomar and a sophisticated carrier like Palomar. I'd say there's really been two or three big benefits of the Palomar relationship in addition to the growth in policy count. From a capacity standpoint, it's allowed us to deepen some of the relationships that we already have from a reinsurance standpoint. And this allowed us to add six new names to that panel. So we now have those 39 capacity providers.

And then as you mentioned, from a distribution standpoint, so there's a number of agency relationships that Palomar had, especially over on the West Coast that we were -- we did not have or we were beginning to develop relationships with. And so I think if we put the Palomar relationship plus the publicity from the IPO plus the NFIP shutdown together, it drives some of that record number of agencies that we saw binding policies during Q3 and then also continued growth as we get into Q4.

In terms of putting a number on that, I don't have a great number for you today. But as we get into 2026, we'll be able to understand better how that growth in distribution is actually impacting the policy sales.

Next question comes from the line of Josh Shanker with Bank of America.

Just want to talk a little bit about the record policy growth. Is policy count a KPI that you're not really interested in us following? Does it matter for the quarter? Or how should we think about that?

Policy count is something that we obviously track. We ended the quarter with about 260,000 policies in force. And we are paid policy fees, obviously, based on the number of policies. So it is a component. The premium in force gives -- is a larger component of the revenue and is really the primary driver of the economics of our business and gives the best sense of the scale of the operation. And we're very, very happy with the growth that we saw in the third quarter, especially because there were no hurricanes, right? And that's really a testament to the team here led by Jean-Luc Eckstein on how do we grow our distribution relationships as much as possible.

And when we think about the NFIP being closed to new policies and whatnot, and you said it's half a dozen of another, I guess, in terms of the benefit and the pullback. I assume on the policies that would not have bought from the NFIP one way or the other, it didn't really make a difference? Or do you think that agents aware that there was no requirement or less aggressive in wanting to sell flood policies broadly?

Our sense is that it was a mixed bag and -- but still net positive. Because it really took either banks breaking with the federal guidance and requiring flood, even though technically not required or consumers acting like good boy or girl scouts and wanting to buy flood insurance because they know that they need it.

As the government reopens, though, it's going to be an interesting sort of test to see what happens because what has not been made clear yet is all those people who didn't buy flood insurance that we're supposed to, what's the rule going to be for banks? Are they going to have to go back and all buy flood insurance now? Will we see an uptick because of that? There hasn't been guidance published yet, and so we don't know what the follow-on effect is going to be in the coming weeks, assuming that the government reopens tomorrow.

And if you let me sneak one more quick in. Any better uptake given the closures on the direct-to-consumer product? Or is it still a product mostly sold and people aren't coming to the website so much?

We've been incredibly consistent at about 2% of our business being direct-to-consumer, and there were no material changes in that during this period.

Congratulations on the quarter.

Next question comes from the line of Tommy McJoynt with KBW.

Separate from weather, which has been talked about a lot, we suspect that home sales are also a significant input into the growth outlook. On that context, should we focus on existing home sales, new home sales or just total home sale units? And does your 2026 guidance contemplate a specific home sale market backdrop?

Our 2026 guidance anticipates a sort of the same housing backdrop. I would love for it to be a better backdrop, but we are assuming the same. And it's really total sales that is important. There is no different law between existing or new homes. And so it's really the total that we look at.

But we do -- we are also interested in things like the number of people paying off their mortgages because as people pay off their mortgages and now fully own their home for cash, that may be a reason why they are then allowed to drop having flood insurance. And so the percentage of Americans who own their home without a mortgage is also another metric to look at, and it has been very unfavorable for the past year or so, and we're assuming much the same in our 2026 guidance.

Okay. And then switching over, as we think about the fourth quarter and then the quarterly cadence in 2026, it seems like you might be running into some tough comps here for the next quarter or two, just going up against Hurricanes Milton and Helene in the third and fourth quarter of last year. Is it fair to think about tough comps for the next maybe a quarter or two and then maybe it gets easier to the extent that weather normalizes in the back half of '26? Or should we not think about it that way?

I think that's the right way to think about it if you're focused on what are new business sales. But obviously, the renewal book helps to buffer some of that impact because so much of the business is renewals. But from a new business perspective, you're exactly correct. Almost all of the impact of Helene and Milton was in Q4 last year because we have a 10-day waiting period. So the last 10 days of September sales all basically show up as new policies in October. So it was really -- those two storms were really a very large Q4 impact last year.

So tough comps from a new business perspective, yes, not necessarily from an overall business perspective because we hope to retain a large number of those people that we added.

Next question comes from the line of Yaron Kinar with Mizuho.

First question, I just want to confirm that when you are -- with the 2026 guidance, you are not including any impact from -- or lingering impact from the shutdown or in the potential changes in NFIP, similar to the conversations pre-IPO.

I'm sorry, could you repeat that question? There was some noise on the line.

Sure. I just want to confirm that the guidance that you offered for 2026, similar to the conversations we had pre-IPO does not contemplate any lingering impact from the shutdown and/or from changes to NFIP?

That's exactly correct. Our guidance assumes a status quo for the NFIP. It does not assume an additional shutdown in January. It's not a change in the operations of the NFIP.

Okay. And then my other question, just going back to the record number of new agency codes binding policies in the third quarter. Can you offer any additional color as to how many quotes or how many binds you're getting per new agency and how that compares to the agencies that you already have on kind of in your legacy book?

We don't have that breakdown available, but it's something that we can research. What I can tell you anecdotally is that a lot of agents were very happy to find that there was an option for their consumers during the shutdown. And certainly, during the third quarter, we also saw some of the hard work that was done by our distribution team to add new agencies, some of whom came from the new Palomar relationship, quite frankly, just discovering Neptune for the first time.

We normally see the impact of that from storms when people are then actively shopping for flood in rather than being sold flood insurance. The dynamic during the third quarter was much more around agents discovering Neptune, us signing new agents up either through Palomar or our organic efforts and them being new delighted customers that we hope will continue.

Yes. And I just add that Yaron, some of the growth that we saw during Q3 there was really due to this nurturing process that we go through with the distribution partners. So these aren't necessarily -- these aren't necessarily brand-new agents that signed up during Q3. These are agents that we onboarded previously and we go through this process of training, getting them to quote, technology integrations and then beginning to buy policies. And so this is really a long-term effort that we're talking about. It's not just the onetime events that we report.

Makes sense. And if I could sneak one more in, if I could. So, in response to Tommy's question, I think you said the absence of an active storm season would definitely impact new business, but not really the renewals. I'm curious, as you look at your track record, have you found any difference in the renewal rate, the first year renewal rate for policyholders that joined after a very active storm season versus policyholders that joined in a more benign season?

Yes, great question. Yes. So there's definitely sort of different cohorts and different breakdowns of the renewal book that we look at. And there is a lower likelihood of retention year one versus year two, three, four. One thing I'd say is, as we look at 2024, a very, very active storm season, we -- as Jim reported, we have 99% of premium that we've been able to retain so far this year to date. And that's working under sort of version one of the renewal machine learning model that we have. Version two of that is underway and is really focused on how do we retain those customers year one that the marginal sales above the baseline that we expected during the year.

And so if we think about 2025, sales have really come from the shutdown activity as opposed to any hurricane activity. And so that cohort is more mandatory sales and less non-mandatory sales. And so we generally have a higher propensity to pay the renewal. And so the fact that we've been able to retain 99% of premium and that continues to increase year-over-year is a really strong metric for us this year. And then as we look into 2026, we hope to be able to continue to grow that.

Makes sense.

Next question comes from the line of Gregory Peters with Raymond James.

Can you hear me okay?

Yes. Thank you.

Good. Just checking, I was having some connection problems earlier. I think for the first question, as I was going through your financial statements, I was interested in the operating cash flow. If you look at net cash provided by operating activities for the nine months, I think it's up some 10%, which compares with revenue for the first nine months being up some 30-plus percent and net income being up 44%.

So I thought I'd just inquire what are the moving parts inside the cash flow that are causing that deviation? I presume that, that's going to straighten out over time, but I just thought I'd give you an opportunity to talk about the operating cash flow results of the company through the first nine months of the year.

So, this is Trevor. I'll start out, and then I'm going to hand it to Jim to do cleanup. I mean one of the biggest impacts was we had $8.5 million of IPO expenses. Now our IPO was on September 30, but we were reimbursed by the selling stockholders in Q4 at closing on October 2. and we used that $8.5 million to then pay down debt in the fourth quarter. So we had this sort of strange thing where that hurt our operating cash flow in Q3, $5 million of the $8.5 million was in Q3. We were then reimbursed in Q4, but that flowed through equity, not through the income statement. And so we'll never get that back as operating cash, but we got the cash anyway.

So the short answer is, yes, it will normalize over time and especially now that we have refinanced the facility and have an even lower interest rate.

Jim, anything I missed?

I would just remind everyone that as our premium volume grows, our fixed costs do stay largely constant. Technology and capacity costs scale efficiently. So most of the incremental revenue drops right to the bottom line. We're able to leverage and optimize cloud costs, cost automation, distribution efficiency, et cetera.

As Trevor gave earlier in the guidance of 16% to 6% margin have proven to be sustainable in past and we go forward.

Okay. So my net takeaway is that when I look at the cash flow from operating activities next year in '26, when we clear the moving pieces from the third quarter and the fourth quarter of this year, we'll get something that looks more normalized. Is that an okay inference to make based on your comments?

Yes.

Okay. And then my follow-up question, I know maybe this has been asked before, but I'm going to come at it from a slightly different way. Your success and growth in the marketplace has been the talk of the town in the insurance marketplace. And there's a lot of people that touch the NFIP market.

And so I'm just curious, I know you're just out of the box here, but I'm just curious if you've seen any change in the competitive environment. And specifically, I'm just curious if there's been any new entrant or an existing player in the marketplace that's becoming more aggressive and becoming more competition for you than what you were seeing before?

Well, the biggest change on the competitive front has been that our main competitor has been closed for the past six weeks in the NFIP. But on the private side, the answer is no. We have not noticed any new entrants or existing players acting any differently.

And some of that is just because they're beholden to the capacity, right? They have to make sure that ultimately, they're delivering return to their capacity providers. And if you look carefully at the available data, which is limited, but if you look at the NAIC data and compare Neptune's results to that of other private providers in the residential primary space, you'll find that the volatility that Neptune has been able to deliver has been far below that of our competitors, which is a huge value to the capacity providers, which is why we're excited that we're now up to 39 risk-taking partners across seven different programs.

I'm actually glad you brought that up. I was looking at this report that said according to your analysis that your results might be 77% less volatile than the rest of the market if I look through like 2020 through 2024. I guess related to that comment, as you grow, are you going to be able to maintain that margin of outperformance? Or do you expect that margin of outperformance to moderate over time?

I'm unable to predict what my competitors will do. But what I can tell you is that we're focused on delivering great returns to our risk-taking partners so that insurance can be an investable asset at scale. And so one of the things that our risk-taking partners love about Neptune is not just the loss ratios that we're able to deliver, but that we're able to deliver material amounts of premium. And many of them would be very happy to trade off taking additional premium even if that meant that there was slightly higher loss ratios. We have done a good job at making money for our risk-taking partners. And now they're ready for us to shift into the next year.

Got it. Thanks for the additional details.

Next question comes from the line of Pablo Singzon with JPMorgan.

So, first question, Neptune's distribution footprint has historically been well represented in the Southeast, and that sort of makes sense and sort of aligns with the geographic bet of your premium. However, as you pointed out, a decent amount of your new business is coming outside of the traditional flood zones. Is it the same set of partners helping you with those sales? Or are there specific distributors that do better outside of the obvious flood zone.

I don't think that there is any unique set of agents that is doing better or worse in or out of the high-risk flood zones. I think what we really see is the behavior of our best agents is to offer people flood insurance regardless of their flood zone because they recognize that FEMA's maps are wrong.

And you all can look at the Wall Street Journal article over the past couple of days, which just re-highlights the work that the First Street Foundation has done showing that it's not 9 million people who are in high-risk flood zones, which is the FEMA number. It's really something closer to 25 million. And so the best agents are the ones that are just offering flood insurance every single time. And because Neptune delivers a price that says something about the risk, right? It's a very useful signal to the consumer.

And then second question, I'd just be curious to hear how you view write your own insurers, which, as you know, are an important element of the flood insurance ecosystem, right? Some of them have private flood offerings. Some of them offer NFIP as an accommodation to your clients. And it's not clear to me at least if they offer private flood just given the option. But I guess the question is, do you see them as competition or potential partners if the NFIP moves towards the private market, right, regardless of whether or not that trend is accelerated by any changes that the government is contemplating right now?

What I can tell you is that currently, many Write-Your-Owns are partners of Neptune and have asked their technology providers to display the Neptune price alongside the NFIP price. They do that because they want to be the best solution for their customers. They know that if the only option that they're presenting is the NFIP, that opens the door for that consumer to either go direct to Neptune or to talk to a different insurance agent to get that Neptune quote.

And so Neptune has now the largest and clear alternative to the NFIP is becoming a must-have option for Write-Your-Owns to make sure that they don't lose competitors to some other platform or some other agent system.

Next question comes from the line of Mike Zaremski with BMO Capital Markets.

First question is on the revenue run rate in the guide. Clearly, exceeded expectations in Q3, not much change to the revenue guide in '26. So I guess what am I missing? -- you all don't seem to be too clear on whether the government shutdown is providing a lift to 4Q? Or what are we missing about that discrepancy?

So I'm not sure there is a discrepancy. What I would say is that we haven't provided guidance for Q4 because we think that the -- first of all, we're a newly public company. And it's -- we want to make sure that we are providing some guidance, which is why we have provided 2026. 2026, we don't anticipate we will have a government shutdown, and we don't anticipate it will have a change to the NFIP's operating model. So we have to make assumptions around renewal rates for next year, premium growth. And we have become more optimistic than we were at the start of the third quarter by the end of the third quarter.

And so we are feeling more excited about 2026 than we were before. And I think that's reflected in the guidance that we gave to be able to retain a 60% to 61% EBITDA margin while incorporating all public company costs is a pretty amazing feat for year one out of the gate.

Okay. Great. That's helpful. Switching gears a bit. Florida Governor DeSantis is on record today saying he would like to see a more robust private flood market. Any insights you all might have behind why he would make those comments?

I have no insight into those comments and I was not aware of them. But what I can tell you is that we're all aware here in Florida that the NFIP has been shut down for the past six weeks and has not been a government -- there hasn't been a government option. And so he needs to have private options as an alternative. Thankfully, Neptune is headquartered in the state of Florida. Florida is our largest state, and we have been able to help a lot of Meridians in the past six weeks.

I think the other thing that he often talks to, and this may be related is just the affordability. And we know that for new policies, Neptune is less expensive than the NFIP, approximately 60% of the time. So 60% of consumers can save money by buying a Neptune policy that's obviously going to help affordability in the state and help control costs for homeowners.

Got it. That's helpful. And then just lastly, I'm curious if you can offer any perspective. We've heard some industry folks say that in recent years after hurricanes, there's been movements -- the private market took on a material amount of policies, but eventually, the private markets, those flowed back to the NFIP. Any -- as we think through kind of right, how the government is going to -- administration is going to think about how to actually augment the program going forward. Is there any truth to that historical context that you could offer about kind of what happened in recent years regarding movement of private NFIP back and forth?

I'm not aware of any data that would suggest policies moving from private back to the NFIP. The NFIP has been in long-term decline, peaking at about 5 million, and it's now down to 3.6 million contracts. So we've been in long-term structural decline. We're obviously during that time period, Neptune has grown from zero to 260,000. So we have not seen those trends at Neptune.

Now there have been a number, a large number of private flood insurers, competitors of ours who have tried to enter this business. It's a very complicated and dangerous peril, and their results have been unsatisfactory and they have exited the marketplace. And so for those particular insurers who have failed, their policies may then have somewhat flowed back to the NFIP, but not enough to make up for the overall structural decline in the NFIP.

Yes. Mike, I'd just add for some context. Trevor and I spent a week in Bermuda and New York at the end of October here meeting with over half of our capacity by the panel. And I would just say that the appetite from that panel to grow within the private insurance market has never been greater than it is today.

So if we think about the risk panel that sits behind Neptune, there's certainly no desire to shrink the size of their portfolio. they would look to have many more the exposure that they have today.

There are no further questions at this time. I would like to turn the call back over to Trevor Burgess for closing remarks.

Thank you. I just want to take a moment once again to thank the team at Neptune for their tremendous work. Nearly half of our team are engineers or data scientists who are focused on building the best AI models to deliver the results for consumers, agents and our capacity providers.

And I want to thank our frontline staff who are interacting with our agents every day and our consumers every day to help them protect themselves from this most dangerous peril. We are trying to do important work here of protecting many, many more Americans that are protected today from the risk of flooding. Thank you all for your time today.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.