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Good morning, and thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Neptune Insurance Holdings Q2 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 *1 on your telephone keypad. If you would like to withdraw your question, press *1 again. Thank you. I would now like to turn the conference over to Jon 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 8-K that was publicly filed with the SEC on July 21st, 2026. Now, I'd like to turn the call over to Trevor.

Good morning and thank you for joining us for Neptune's Q2 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%. 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. 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 its 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. 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+, 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+ 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. Atlas+ 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.

Thank you, Trevor. The Q2 was another record quarter for Neptune. What stood out to me was not 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+ to all of our distribution partners. We 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, and delivered dozens of additional improvements across the platform. That's comfortably the most we've ever delivered in a single quarter. Twelve 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 issues.

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 Q4 of 2025 and over 50% more than the Q1 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 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. Our customer success team is a good example. Compared to the Q2 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. The 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 Q2 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. It's the clearest proof of what our pricing and underwriting platform, Triton, has delivered across eight storm seasons and now into a ninth, 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 programs, 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.

Later 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. Turning to 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, 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 Program. 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. The 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're 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%-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.

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. More 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%, up 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 at 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. Growth does not consume capital. The decisions about which risk to bind, for whom, and at what price are made in software. 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, revenue per employee and adjusted EBITDA per employee both set records at $3 million and $1.8 million respectively. Figures you would 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 de-leveraging. We finished at $240 million, drawn on our $260 million revolver, roughly 2.1x trailing adjusted EBITDA. This 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 million in stock when our private equity shareholders completed a secondary offering in May. A healthy step that expanded our public float, improved trading liquidity, and broadened the shareholder base. Second, we repurchased a further $6 million in the open market. Our priorities from here are straightforward.

Reinvestment in the platform comes first because that's where a dollar compounds the best for us. Beyond that, we return capital to shareholders through the $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. 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. Proof of what Triton has delivered through eight storm seasons and now into a ninth. 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. In the third quarter, agents get the next piece of AI in Atlas+, a rank list of exactly what to do next. Most valuable task first, with Atlas+ 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. 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. 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 1 on your telephone keypad. Your first question comes from the line of Charlie Lederer 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. We had the longest government shutdown in history. There was no access to the NFIP. 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. Have stuck with us. The FEMA Advisory Council talking about 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 is their five-year plan when it comes to the NFIP versus private flood.

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. All of the performance in the second quarter really came from agents engaging with Neptune in higher and special ways. The backdrop is we still have a terrible housing market also. Someday when we have a good housing market and we have all of these agents 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 back half and beyond impact? Thanks.

It's more a back half impact. Those programs were June 1 renewals, so we had a one-third of the quarter impact from having them, and you're talking half a point or something like that on the programs 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 program to see how we can make the very highest ceding commission possible. We want to make sure that there's a fair split that takes place over time of those premium dollars. 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 Singzon with JPMorgan. Go ahead.

Hi, good morning. To start off, I was curious if you'd break out how much the Palomar book contributed to the 40% EBITDA growth this quarter.

Yeah. We're not breaking out individually, but it's something like about half of it. We still would've seen very strong organic growth without the Palomar book.

Yep. Thanks, Trevor. Secondly, I think you made several interesting comments about efficiency and productivity gains from AI in your technologies and having strong sales associated this quarter does help margins clearly. I was wondering how you think about these new tools going forward. To your point, Neptune is highly profitable. It seems like just given technology today, there might be some optionality to bring that even higher. 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, just as there's some general churn. 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 back to 62. This is a business that can become more efficient. As Matt talked about, we're really trying not to spend a lot of time on cost reductions with AI. 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+ and other initiatives can drive that going forward.

Certainly, if we're holding expenses largely steady, all new business that's coming in that comes through agents comes in at about a 70% EBITDA margin. 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. Please go ahead.

Yeah. Thank you for taking my question, everybody. Trevor, you made your comments about A and B storms, B being Bertha. As it was happening, it looked like, I mean, 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? Does Neptune have exposures 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 leads to fairly short periods of increased sales activity. We're happy for that awareness, even though unfortunately it does lead to flooding in low-lying areas and certainly is meaningfully impactful to the families and businesses in its path. 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 massive impact to have something where or Hurricane Harvey or Sandy, those fundamentally changed the demand curve in the areas that were impacted, right?

We still sell way more policies in New Jersey because of Sandy than we otherwise would have. You need a really big storm to really fundamentally change the elasticity curve.

Changing gears a little bit, what's your expectation on take-up of the higher value offerings that you're giving that current customers will buy up more coverage?

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 $7 million of building cover on their home, and now we offer $15 million. 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?" Obviously, there are fewer $15 million homes than $7 million homes, but we do think that that is an interesting driver of growth. Then what we're seeing on the new business side is very good take-up, just even in the past couple of weeks since it's been available. We're seeing healthy impact and nearly every day we're selling a new $15 million policy. That obviously will do some help in driving up the average premium.

If I can just sneak another one in, the multifamily product offering, what that means for that offering?

I'm sorry, can you say that again?

For the potential for growth in multifamily, what's the opportunity there with the higher limits?

Yeah. 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 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 $1 million of loss of rents coverage. 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.

Thanks. Good morning. 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.

The math looks something like this. Right now, there are about, let's call it 3 million mandatory policies out of 9 million mandatory zone buildings. Some of that gap is because of non-compliance 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. About 3 of 9. If that same ratio holds and you go to 2024, then you're talking about 8 million from 3, so an additional 5 million 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 a takeout or any of those kinds of things that would require congressional action.

That seems meaningful.

Maybe I should just add that some of this is happening, this will happen over time anyway. 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. What we're trying to encourage is FEMA to do this 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 5-10 years. We're still going to get to the same place. It just is going to take longer.

Yep. That's super helpful. Just on guidance, I just want to make sure I understand. It seems like there's plentiful positive factors, increasing building coverage limits, expanded product offering, improved economic terms. You've got Atlas+ 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 sales. Given the forecast, as Matt mentioned in his remarks, we're just taking down those expectations of any storm-related impacts. Now, in El Niño years, there have been massive storms, including Hurricane Andrew. 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. Our forecasts include a very benign storm year.

Okay. Got it. Just more conservative on the weather. Perfect.

Yeah. That's the one thing I can't control.

Your next question comes from the line of Tommy McJoynt 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? Is the higher percentage just driven by a geographic mix, or was there an active change in the fee schedules that you set? Should we think about that 2Q level as fair to run rate, think of it as sustainable? Thanks.

Yeah. Those are fees that are paid by the policyholder at new business and every renewal thereafter. It's mostly two things. Some is geographic. Some states have limitations on what those fees are, and we had more growth in unlimited states. 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. 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. Switching over, in the past couple of 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 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. Any updates around that program? Thanks.

Yes. What we call the quote to bind model. 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 the new business sales. I would say that the data science models that we have built are performing as we expected and are having an impact. What I am 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 Riskin Getsoff with Wells Fargo. Please go ahead.

Hi. Good morning. My first question is on PIF growth. 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? Could we still see an acceleration even if we have a benign hurricane season? Are the year-over-year comps also a little bit impacted since last year you also benefited from the government shutdown? Thank you.

Yeah, 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. Last year, the weather didn't help us, but we had the government shutdown. The government shutdown last year really impacted Q4. Q3 is really more the weather one. 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. For my second question, you've talked about before about 400K-500K of new business at-bats per year. Are you seeing an increase in those at-bats as you get more agents in your distribution and as more of the business goes to the private side? I guess, how should we think about that year-over-year growth in at-bats on a normalized basis as you look out a few years from now?

Yeah, we're seeing steady growth that's really tied to the number of agents that are interacting with our system. We are working on some larger new API partners that could drive that higher, 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. We're now actively working on some big ones, I'm excited to see what that can bring in the second half.

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

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. Some of this is just follow the existing law and update them every five years. On the other side, 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." The number of people working at FEMA has reduced dramatically, and whether or not the government can make that a priority, given the current levels of staffing, is an interesting question. 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. If writing an editorial in The Hill is lobbying, then that's the lobbying that 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 Knudsen 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 help me think about the depopulation and the changes to the Write Your Own compensation scheme? To what degree those do need congressional action, and essentially, is there a shaved down workaround version of either of those, such that you think there's the potential that some changes are made without needing congressional approval?

Matt, do you want to take that?

Yeah. 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 are 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. I think that's the question that remains up in the air.

Yeah. Okay. Thank you. It's helpful. Just going back on the improved economic terms, those were with the two largest providers, I guess. Are you guys expecting further improvements on the rest of the capacity providers? Could you just remind me, I guess maybe it's on a rolling basis, but when those were new, and if so, I guess it sounds like that wasn't even really an impact on the increased commission rate in the quarter. Is it fair to assume commission rates can tick up even further in the near term?

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. 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

October. 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 end up doing a two-year agreement where it was 1.25% spread over two years, and so half and half. Sometimes we're able to negotiate sort of a multi-year easing in of increases. Again, we're not going to get five more percentage points, but 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, the economics, they'd be better off doing a different form of insurance than flood.

I think we have a little ways to go, and the more history we have, and quite frankly the more history we have with landfall hurricanes, 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 incredibly outsized returns, then 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.

Hey.

You 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 roles?

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 directive. They're talking about generative AI like ChatGPT 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. It's just not applicable for what we're doing.

Got it. I appreciate the color. For my next question, 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.

We certainly have tremendous appetite from our risk-taking partners to have us go elsewhere in the world with our technology. That's not just on flood, but on other perils as well. We're continuously considering those options and weighing them versus the opportunity that is available at home. 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 live 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.

Thank you to everyone for joining. 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 drive business. Matt talked about it. The fact that we deployed twice as many tickets as we did in the fourth quarter with a slightly smaller team is just incredible. 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. Thank you all for your interest and for the questions. We'll get back to work on Q3 and beyond.

This concludes today's conference call. You may now disconnect.

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. 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 in your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. 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 22nd, 2026. 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 dot-com boom. I built one of the first technology-first banks, and now am leading one of the 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 viewed as the right way to build from day one. 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. 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 Plus, our agentic assistant for insurance agents. Atlas Plus 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 Plus 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 and force growth. 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%-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 two 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 the scalability of our model.

Stepping back, we believe our competitive position is defined by three 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 three core pillars, we continued 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. 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 three major technology advancements, all of which lay the groundwork for a continued redefinition of how our system is utilized, accessed, and built. The 1st is Atlas Plus, 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. This is just the starting point.

Over the coming quarters, we expect Atlas Plus to expand beyond this initial interface and become a core part of how users interact with Neptune across our platform. The 2nd 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. The 3rd 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. We've built Proteus as a set of agentic tools and skills that can take on that 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. 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 eight programs, increasing the size of that program for the 2026, 2027 treaty period, and adding two 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. 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 login 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 created direct accounts using their email and phone number and verified that access via multi-factor authentication on the platform between December and March. Nearly 11,000 of those users have already bound new business policies in that same timeframe. 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. 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%-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. 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 headcount 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'd 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 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 reinforce 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%-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 the 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. 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 three things will continue to have a power law effect around this business. We'll now turn things over for questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Thank you. Your 1st question comes from the line of Rob Cox with Goldman Sachs. Your line is now open.

Hey, thanks. Good evening. Yeah, just the 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 three 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?

Yeah. Thanks, Rob. We are very excited about Atlas Plus. The original Atlas was launched about a year and a half ago as we 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 Plus.

What's currently available is a chat interface that allows an agent to ask things such as, Generate an email 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 three 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. Atlas Plus can interact with a quote. We really view this as the very beginning of a long line of upgrades that we will make to the agent experience. We've mentioned for the past eight or nine 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've said a year or two ago that everything that we're trying to build would take us years to build, but it's now down to weeks or months.

The other things, the other uses of AI, creating this Proteus system that allows our internal software developers, engineers, and data scientists to move at least twice as fast, if not three times as fast, really means that Atlas Plus can. We're trying to follow in Anthropic's footprints of constantly putting out amazing new functionality and product very, very quickly.

Thanks for that answer. That's very helpful and exciting. Yeah, 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. On the margin guidance maintained, I realize this 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, 1st let's talk about the revenue side. What we saw in the first quarter was just continued really good trends. We obviously had great revenue in the first quarter, record sales in the first quarter. We get a really good sense because remember, our policies go into effect 10 days. There's a 10-day waiting period. 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. We're quite bullish on the top line 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. 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. 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. Your line is now open.

Yeah, thank you everyone. 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 six months after Milton and Helene were still nervous and bought in 2Q 2025? Or are the comparisons there not in the numbers going forward?

Yeah, Josh, I don't think that's an impact going forward. That's really whether 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. 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 past us. That wouldn't impact the first or second quarter.

Switching gears opportunity, obviously, your data flow continues to increase and get smarter. I don't know if you're any smarter about earthquakes, though, 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. Give us a good housing market, and let's churn those into Neptune policyholders. 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 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 you know, beta test would continue for the next three or four months, and we would then make a decision around what we're going to launch in California.

Thank you for all the answers. Appreciate it.

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

Hey, good afternoon everyone. One of the things that we've been watching is that we've noticed that other companies have announced flood startup initiatives or expanded their existing flood capabilities. I'm thinking about another local company, XCO. I'm thinking about Nationwide. I think they announced something called Titan Flood. 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 insurance alternatives that is in the marketplace, and if you're seeing anything that's of a concern.

Yeah, 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 if you didn't invest in 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 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 successfully 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 a major metropolitan area where they've sold a lot of policies, at least historically, have not fared very well, and this led to many of them going out of business as quickly as they've gone into business. 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. We continue to look very carefully. 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 positives, the larger renewal portfolio, increased commission. In the negatives or the headwind section, you cited the residual slowdown in sales due to less active storm season, which you just addressed in the previous question. You also talk about the ongoing slow real estate market. I'm just interested in your perspective on if there's a change in the real estate market outlook sometime down the road that might become a tailwind, or how do you size up that headwind versus a tailwind?

Hey, Greg. Yeah, thanks for the question. We've talked about this for a number of years now while we've been experiencing this 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, the flood insurance market, and about 3.5 million of those exist with the NFIP. Today, about 1.7 million or 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 shop that policy into the private market to see what that pricing looks like.

We believe a change in the housing market and an uptick in sales there, whether it's housing sales or whether it's refinancing activity, would be a huge tailwind to the business. We saw this a little bit at the start of COVID when the housing market picked up there. 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 any cancellations on the portfolio. Give us a better housing market and we're very bullish on what that means for sales and for portfolio growth in general.

Thanks for the answers.

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

Hey, thanks. Good evening. 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 nine 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. Just hoping you can unpack some of the trends there, please.

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 just happens to be positive mid to high single digits. 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? To still be up 7% is amazing. We're very happy that we've picked the market that we're in.

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?

Yeah, I think that's all right. The only thing I would add is the machine learning models that are operating on the renewal book are optimizing for lifetime value of the customer as opposed to any single year retention rate. The more units that we're able to keep around, the higher the lifetime value of that unit and of the portfolio in general. We're able to take a long-term view because we have a very, very long-term view of this business as owner-operators. 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. Thanks. It sounds like the policy retention is pretty stable there. I think it was 86%. 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 Citizens-style depopulation, and how you guys might react to something like that?

The first thing I would say is that we have no added information. We've heard nothing. We've had no communication. Other than what we've all read in the press about the timeframe 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. We are entirely prepared to flex, and bring on as many customers as we need 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. We absolutely are prepared to do that and have the capacity backing to do that.

Great. Thank you.

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

Hi, good evening. 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?

The 1st thing is, I will let you know that we plan on announcing that once a year. We will announce that at the end of the second quarter. The last time that 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. Expect that at a data point at the end of the second quarter. The 2nd 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 model loss ratio?

Given our track record and given the exacting specificity of our underwriting platform, we are able to make changes like that driven by our data science team. 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. I think success creates an opportunity to lower prices and get more people insured, is really the summary. 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 the United States faces.

Thanks for that. Switching over to the ChatGPT product that you've rolled out, is there any compensation owed to a counterparty when flood policies in Neptune are placed through that app? 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 monies owed to any counterparty. ChatGPT is not charging for that. To be clear, they don't allow binds 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, if we were the top ranked, we would show up, as we do, and someone could come to us, and we wouldn't owe anybody. Now, we do do some Google Ads, 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.

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 Plus to help turn our agents into super agents.

Thank you.

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

Hey, thank you and good evening. 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 seemed to suggest that the administration was looking at things that they could do without Congress's involvement. The Biden administration put forward 14 proposals during their administration, proposals to Congress. Congress did not act on any of those proposals, but those proposals all would've been pro-private flood insurance. This is really a bipartisan issue. How do we get more Americans insured? I have not heard anything about proposed legislation being given to Congress for them to consider in a September or October timeframe. 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 costs from their taxes, their flood insurance costs from their taxes.

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, Glenn, 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. 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. It's always made up 2% of our business. It was 2% of a very small amount nine years ago, and it's 2% of a much larger amount now, but it's still 2%. This is really about are consumers now going to utilize chatbots to buy home-related insurance. I think that's a much larger question than is it possible?

Got it. Thanks very much.

Your next question comes from the line of Pablo Singzon with J.P. Morgan. Your line is now open.

Hi, good evening. First question is on new business. I think this might be the first quarter that you've disclosed a growth rate, which I think came in at 44%. I was wondering if you could give perspective on how the growth rate had trended, I guess in 2025, right? Whether over the full year or maybe the past couple of quarters. Thanks.

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

All right. Thanks, Trevor. Then a follow-up, just as more personal lines insurers and agents pivot to growth, right? Whether they're selling auto or homeowners, do you think that helps or detracts or maybe it's even neutral to your efforts to sell flood, right? How are you guys thinking about that, your positioning against that trend? Because it's clear at this point that everyone's trying to sell more. Does it help or maybe it doesn't really affect you guys? Thanks.

It's extremely positive for us when agents want to add on ancillary products, right? Flood is the most obvious ancillary product to the home or to the business policy since it's excluded by carriers. 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 homeowner's 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 US 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.

It's amazing advice to come from an insurance agent to their consumer. It's a great trend.

Thank you.

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

Thank you. Good afternoon or good evening. 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 Niño. Is that contemplated in that number or are you still assuming kind of a normal season and whatever that may mean?

Yeah. 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 the phenomenon that you've mentioned, and the other equally impactful phenomenon is the sea temperature in the Gulf. The Gulf temperature is 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 assumes that there is some storm activity but does not assume a very active storm season.

Can you maybe give us a little bit of color as to how you're thinking about that when you talk about some storm activity? Are we talking about two, three named storms making landfalls in population centers?

Yeah, we think about that as 1.8 landfall hurricanes.

Got it. Okay. Thank you.

Which happens to be the long-term average. Yeah.

Right. Okay. Switching to capital deployment. You have $100 million new share authorization, that if I understood correctly, you expect to utilize over the next couple of years, so by the end of 2027. If I just look at the EBITDA margins and the tax rate, I think it gets to roughly $150 million of cash flows plus or minus for the next two years. Are you intending to deploy the remaining cash flows towards lowering debt, or are you going to keep a portion of that as dry powder for other opportunities?

Yeah. 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. The employees will surrender the shares, we'll rip those up, and then we'll pay the taxes to the IRS with company cash. If you think about that this September and next September as two chunks plus the $100 million, it starts to give you a sense of where we would use the cash.

Got it. Thank you.

Yeah. We can work with you 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. Your line is now open.

Thank you. You keep paying down debt. At the same time, your EBITDA is growing. It 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 mental framework when it comes to how much debt you want to keep? Did you have a target debt to EBITDA ratio in mind for the medium to long term?

Yeah. We generally would like to stay below 2.5x. 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. Absent that, we have to date at least continued to pay down debt. As long as we're below 2.5x-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. In terms of the technology, how much of it is built in-house versus purchased from third-party vendors? 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. Now you have to think about Neptune as a rather unique company because we have 62 employees, and our entire expense base is less than 10% of our revenue. We're already about as lean a company as can exist, right? 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, right?

We are very focused on how do we deploy our engineers to increase revenue growth rather than save the $200,000 that shows up in our externally purchased software. Most of the software that we're purchasing at this point is really commodity type of software. Matt, what would you add?

Yeah. Cave, I'd just add that all of the core functionality that exists in our systems today in Triton and Poseidon and Atlas and Proteus, in 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. All of the core software is built entirely in-house.

Cool. That's helpful. Thank you.

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 peril that they're not protected for right now. It is 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.