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Good afternoon, welcome to Exzeo Group's first quarter 2026 earnings call. My name is Angela, and I will be your conference operator. At this time, all participants will be in a listen-only mode. Before we begin today's call, I would like to remind everyone that this conference is also being broadcast live via webcast and is available for webcast replay approximately 4 hours after the call through May 6, 2027 on the investor relations section of Exzeo Group's website at www.exzeo.com. I would now like to turn the call over to Bill Broomall, Vice President of Investor Relations. Bill, please go ahead.

Thank you, and good afternoon. Welcome to Exzeo Group's first quarter 2026 earnings call. To access today's webcast, please visit the investor information section of our corporate website at www.exzeo.com. Before we begin, I would like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as anticipate, estimate, expect, intend, plan, and project and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission.

Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company's business, financial condition, and results of operation. Exzeo Group disclaims all the obligations to update any forward-looking statements. With that, I'd like to turn the call over to Suela Bulku, Exzeo's Chief Financial Officer.

Thank you, Bill. Good evening, everyone, and thank you for joining us for Exzeo's first quarter earnings call. Exzeo continues to deliver on its core objectives. Managed premium on the platform experienced another quarter of growth to $1.43 billion and exceeded our expectations. We delivered continued bottom line growth, including strong cash flows and a 49% adjusted EBITDA margin in the quarter. Pre-tax income in the quarter was over $27 million, an increase from $24 million in the prior year quarter and above our previous guidance range. Diluted earnings were $0.22 per share. For the first quarter, revenue increased to $56 million from $52 million in the prior year quarter, driven by the increase of managed premium on the platform.

The growth in managed premium reflects continued diversification across the business with managed premium from non-HCI clients reaching approximately $105 million, a positive step forward. Our adjusted EBITDA margin was over 49% in the quarter, we believe our margins are repeatable in the future. This quarter reflected continued investment in growth initiatives and personnel. As our model continues to expand, we expect to make additional investments going forward. Kevin will go into more detail in his remarks. A few additional highlights for the quarter. Our annual recurring revenue was $216 million in the first quarter, an increase from about $199 million in the prior year quarter. Free cash flow generation remains strong. For the first quarter, we generated free cash flow of about $25 million with net income of about $20 million.

That represents a free cash flow conversion rate of 123%. Turning to the balance sheet. We ended the year with $330 million of invested assets, which includes cash equivalents, and fixed income securities, and we remain debt-free. Shareholders' equity increased to $275 million, an increase from $254 million at the end of the year. Our shareholder equity is now eight times higher than it was a year ago. Excluding the IPO impact, it has more than tripled over the same period, reflecting strong underlying growth in the business. Before turning the call over to Kevin, I want to quickly touch on our guidance expectations. For the second quarter, we expect pre-tax income to be between $27 million and $30 million.

For the full year 2026, we are leaving our guidance unchanged at between $115 million and $125 million. With respect to managed premium, we expect managed premium to remain stable in the second quarter at approximately $1.4 billion, consistent with the anticipated timing of growth across our existing client base. We continue to expect managed premium of $1.55 billion at year-end 2026. In closing, we are very pleased with our strong start to 2026 as Exzeo delivered another quarter marked by continued execution across premium expansion Revenue growth, solid profitability, and solid balance sheet. With that, I will hand it over to Kevin, President of Exzeo.

Thank you, Suela. Exzeo has made meaningful progress towards its strategy in early 2026. To remind those new to the Exzeo story, the composition of managed premium continues to evolve as Exzeo expands beyond its historical client base. At the end of the third quarter of 2025, all $1.2 billion of managed premium on the Exzeo platform was generated from HCI-sponsored carriers. That has grown to approximately $1.3 billion as of the first quarter 2026. Additionally, over the past six months, we've added three new carriers to the platform, and these carriers added $105 million of managed premium as of the first quarter. These new carriers account for over 7% of managed premium, marking an important milestone in diversifying revenue sources and validating the platform's ability to attract and support external partners.

Because of the validation we are seeing in the market, we are investing in our business and infrastructure to ensure we have everything in place to pursue our future growth ambitions. This includes investing in talent and platform capabilities. Through April of this year, the company added about 20 new full-time employees. These new team members will focus on supporting scaling of operations, onboarding new clients, and expanding product capabilities. This build-out reflects both the increasing demand for the Exzeo platform and management's confidence in the company's growth trajectory. In closing, we continue to build momentum. The existing carriers on our platform are growing. The new carriers added to the platform are having success scaling and now contribute to the total managed premium on our platform. We are investing in infrastructure to put us in a position to take advantage of the next phase of growth.

Now I'll turn the call over to Paresh, Exzeo's Chief Executive Officer.

Thanks, Kevin. As Suela highlighted in her remarks, we are successfully scaling our platform with tremendous efficiency. Out of every $1 we are adding to the platform, $0.50 is dropping to pre-tax income. Because of these attractive economics, Kevin is working to add more managed premium to the platform, and I think we have a fabulous team to execute that strategy. In addition to that, we have an additional strategy that is now developing. It requires a deep understanding of the broader industry and market trends. Let me elaborate. First, we know that the insurance industry, our potential clients, generally are behind in adapting the latest technology. Most of them have IT teams who can implement and maintain software tools and systems, but what they cannot do is develop new tools. Second, the Exzeo platform was developed entirely in-house from the ground up.

We have developers and insurance experts under the same roof, and it shows that we know how to develop, deploy, maintain systems at scale. This is a key differentiator. Third item is insurers are facing shortage of skilled talent, that talent gap continues to widen across the industry. Finally, there is AI. The industry recognizes that AI has the potential to significantly improve operational efficiency. While there has been considerable discussion about how carriers can leverage AI, most companies are just adding AI to their tool set as an additional expense. Exzeo is doing something different. Exzeo is using AI to build solutions. Let me give you a concrete example. Starting April 1, insurance regulators in Florida implemented new wind mitigation requirements. These updated regulations, which include additional documentation requirements, creates a meaningful operational burden for all carriers.

Insurers must also find the talent and expertise needed to manage these new requirements. These challenges not only place additional strains on operations, but also introduces incremental costs. While many in the industry viewed these changes as a challenge, Exzeo saw them as an opportunity. The Exzeo team was able to combine its deep expertise in building solutions with internally developed AI tools to design and deploy a solution in less than a month. It is called WindForm Pro. By eliminating manual workflows, WindForm Pro streamlines the process and significantly reduces the operational and frictional burden on carriers. In fact, multiple carriers outside the Exzeo platform are already testing WindForm Pro, and one carrier has already signed up to use it.

What this demonstrates is that by combining AI capabilities with our in-house talent, we can quickly identify challenges and design and deploy solutions in a highly cost-effective manner. We believe we are only beginning to tap into the broader opportunities that this approach can create. In summary, we already have a profitable platform that is a strong generative cash flow and continues to scale. At the same time, we are identifying and solving new industry challenges that can lead to additional revenue streams in the future. With that, I'll turn it over for questions.

Thank you. We will now begin the question and answer session. Your first question comes from the line of Matthew Carletti with Citizens Capital Markets. Your line is now open.

Hey, thank you. Maybe I'd start with kind of a two-part question, but kind of first part being, can you update us on kind of the newer clients you've announced the past few quarters, kind of how the onboarding and integration and getting up to speed is going? Then kind of alongside that, kind of how the pipeline's looking, conversations so forth for, you know, customers 8, 9 and beyond?

Sure, Matt. This is Kevin. From a new client standpoint or ones that we've recently onboarded, it's going as planned. You know, as I think Suela and I both mentioned, you know, from a standing start in December to over around $105 million of premium on the platform, I think that's, you know, a strong uptake when you consider that those 2 clients, 1 was signed in September of last year and the other 1 was October. All is on solid footing there. As far as new clients and pipeline continues to build, you know, as we mentioned last quarter, you know, we have team members that are focused at and each day, each week building on that pipeline.

We feel confident that we'll continue to execute and bring on new clients in standard fashion.

Great. Then if I could just maybe follow up with Paresh. You talked a bit about this WindForm Pro. Can you just help us maybe give us a better understanding of, you know, one, just kind of order of magnitude, what that could mean to, you know, if it does get some traction kind of revenue or how it's priced based on premiums, things like that. Secondly, if you're really viewing this as kind of just a one-off product or if more from an angle of kind of a, maybe a hook or an opportunity to bring potential new customers into the broader ecosystem that is Exzeo?

Yeah, Matt. Answering the questions in different ways. The product, because of the need that industry had with you know, was built in very quick fashion, and obviously it solves a problem, a current problem that everybody's facing. As such, and the way we've deployed it's very cheap. It's like about 10% of what it would cost you to do manually. What it's doing is it's opening doors for new carriers to appreciate what Exzeo is capable of. From that sense, it's a, you know, it's a very good deal to further spread the Exzeo brand. In terms of revenue, I don't think this in of itself, especially because of the prices we're charging, right? That it's gonna be meaningful in terms of revenue.

I don't think Suela's adjusting her financial models because of it. That's that part. The really, the big thing is how this was developed, the speed at which it was developed, how it's being deployed, right? This is basically monetizing AI capabilities in a manner that is both, well, reduces our expenses to develop by orders of magnitude and enhances value to potential clients, right? It's a real thing that we weren't even thinking of when we had the last earnings call two months ago, right? I mean, to be fair, our developers have been monitoring developments in the AI space, shoot, for almost three years at this point. Pretty much since the week ChatGPT came out.

It's waiting for it to be when the moment is right, when it's ready for prime time. In WindForm Pro, we are demonstrating how AI can be used and utilized and turned into a product and turned into revenue all in, you know, two months.

That's great color. Thank you very much.

Your next question comes from the line of Terry Tillman with Truist Securities. Your line is now open.

Yeah. Hey, good afternoon, Paresh, Kevin, Suela and Bill. My first question, I kind of wanted to build on the last set of good questions. really about AI. I mean, it seems like it's almost like daily something dramatic is happening in some of these industries, and we're hearing CEOs saying spending billions of dollars on this stuff. Beyond just kind of like this potential new factory where you can light up new solutions really quick, like Wind, WindForm, I'm curious if AI is just this call to arms for even traditional insurers or upstart is actually starting to drive some incremental sales funnel activity just because we really have to transform the whole business across everything, underwriting policy management, et cetera.

Are you seeing any kind of incremental tailwinds from just, hey, this AI thing is the real deal? We need to get going yesterday, and then I had a couple follow-ups.

Yeah. Terry, what I would tell you about that is, yes, all of those possibilities of in underwriting, quoting, claims management, et cetera, there's always been that conversation of AI could do things, right? The issue has always been how do you do it? A lot of insurance carriers probably want a package solution as opposed to here's your cloud code, develop your own solution. That was my point about this, right? One of my in my prepared remarks. It's just because it's available doesn't mean everybody can actually assemble it and turn it into a solution that they can use over and over again. It turns out that the Exzeo technology team can, right? They do it in a controlled manner.

Back to that whole thing, being able to design, deploy, and maintain things at scale is quite a need that still is there. We are starting to sort of see a unique niche that we can fill. In theory, anybody can fill that niche, is what people will tell you. In theory, anybody could have built a copy of Google Search. Heck, Microsoft even tried with all of their resources, but Bing doesn't quite cut it, right? You get the idea. We are seeing that having the idea and being able to actually put it into production are two separate different things. Yeah?

Yep. Got it. Maybe just, maybe one and a half more questions. I know, Kevin, you were talking about investing in I think 20 FTEs. I know you all hired a key kind of long-term veteran in the industry. Is that team built out now, or is it got enough substance and size and how they're doing? I know it's early days, but just any progress there and then a model question for Suela.

Yeah. Terry, this is Kevin. Yeah. We continue to build the team. Hence the 20 folks since January 1st. We continue to build the team around them to drive growth and drive, you know, ever-increasing pipeline activity.

Terry, if I could put a different context into all of this stuff. I'm sure you've been on lots of earnings calls, and the recurring theme has always been we are adding AI, as in licensing stuff and running up, you know, making it a new tool and running up an expense. 2, we are cutting headcount, right? That seems to be the recurring theme. We're doing the opposite. We're using AI as a revenue generator and a lead generator in lots of ways, we're actually already monetizing it. Secondly, Kevin is adding people. To be fair, it's not a fair comparison because we started from such a lean, efficient operation that the people Kevin's adding should have a material impact on our rate of accelerating our growth going forward, right?

That's why I'm kind of excited that he's adding people. Yeah?

For sure. I'll turn it over to somebody else after just this question, but I really wanted to get it in. Managed premium and ARR were strong in the quarter. They were well ahead of at least our expectations. You know, I know it takes time for that to move to revenue from operations and revenue. Can you share anything about how that played out in one Q versus what you thought or just any commentary around timing from that large add of premium in one Q as we move into two Q and beyond? Thanks again.

Yeah, thank you for the question, Terry. As I mentioned before, the timing when the managed premium gets added to our platform obviously matters. What we saw in Q1 is that the new additional premium, especially from the new clients, joined the platform mid to late quarter. Also keep in mind that we recognize upfront about 25%-30% of the revenue and is recognized over time. That said, new premium is still not large enough, you know, large enough share of our total managed premium that currently have in our platform to materially distort quarterly revenue on its own. On a normalized basis, you can think of the ARR conversion into revenue to being generally flat, fairly flat, consistent over the quarters.

Just a reminder though that we do have some seasonality on the margin, based on the renewal cycle of the policy and the product mix, and then how we recognize revenue along with expenses. Historically, you'll see higher margin in your center B in the middle of the year, which drive the Q2 peak that we have seen historically.

Okay, thanks.

Thank you.

Your next question comes from the line of Dylan Becker with William Blair. Your line is now open.

Hey, everybody. Appreciate it. Maybe Paresh, double-clicking on kind of the prior points and, or maybe for Kevin as well too, but on the opportunity to kind of dedicate more resources, given kind of the opportunity at hand and the ability for AI to kind of superpower that in some context. I know the cadence of getting WindForm Pro into market, is notable, but maybe how you think about that balance, right? Of compounding the existing kind of platform value proposition, how that can compel more customers to come online, but also kind of scaling that outside of Florida and into new territories and regions, kind of maybe a breadth and depth kind of type of question, if that makes sense from a platform functionality perspective.

Yeah, great question, right? I think that's why we sort of in our prepared remarks try to talk about, you know, plans and growth for the existing platform and adding managed premium in that fashion, while at the same time exploring these new capabilities and basically door-opening projects that we're doing that also have, They won't have impact immediately, but they will create long-term opportunity and, you know, create a differentiation for Exzeo over other solutions in the marketplace. We kind of have short-term things we're trying to do, medium-term things we're trying to do, and long-term things we're trying to do. You know, personally, from my perspective, it's the long-term things that we're doing that I think are the most exciting as to what it could mean down the road, right?

Because we, WindForm Pro, if you think of it as just a universal way of filling out this OIR requirement, right? The same architecture and method that we developed that, we could use it to create a digital agent for, you know, reviewing claims or a digital agent for compliance, which is a big thing with insurance carriers, or a digital agent for generating a rate filing, those kinds of things. We can see that at this point, and we know how to use AI to develop those tools and capabilities. That's the beauty of AI. It doesn't mean that it will only do it on the Exzeo platform. One of the agents could also work on any other software platform that a carrier might have implemented. Think about what that opens up as a door, right?

Again, very early days, but we didn't want to talk You know, if you notice, in all, through all of this stuff, we've never really mentioned AI in any material way. We didn't because it wasn't that we weren't aware of it or weren't doing anything. We wanted to do it when we actually had something. WindForm Pro actually shows you when we have something. It was only, it's, it was the sample of what is more to come, yeah?

Very helpful. Excited to kind of keep an ear out for what's to come in the future there. Thank you, Paresh. Maybe for Suela too, on the premium growth dynamic, obviously still very impressive. I know you kind of said, hey, we expect it to be flat next quarter, reiterate the full year outlook. Could you just kind of remind us some of those seasonal components, and maybe again, a broader update given the Florida exposure to how underwriting cycles are maybe impacted or how carriers kind of think through those as we enter into hurricane season, if there's anything to kind of be aware of there from a seasonal perspective. Thank you.

Yeah, that's a very good question. Yeah, as I mentioned, we expect our managed premium to remain stable, which is consistent with the growth pattern of our client base. Our clients are primarily based in Florida, which usually the growth is more back-ended, so you see the growth in the managed premium more in the fourth quarter.

Yeah, I mean, yeah, you get it, right? In the sense of it's not set by us, it's set by clients. We're just trying to explain what clients typically do and, you know, what their cadence normally is.

Very helpful. Thank you.

At this time, this concludes our question and answer session. I would now like to turn the call back over to Paresh Patel, who has a few closing remarks.

Thank you. I want to thank everyone who joined the call today. I also want to thank the Exzeo team for their continued hard work. Before we wrap up, I should just provide a quick update on the Rule 10b5-1 purchase plan that is underway for me to buy shares. As of today, I think I've bought about 72,000 shares since the plan went into effect a couple of months ago, and it still continues on, and I look forward to it being filled out hopefully sometime in the current quarter. With that, we'll end the call. Thank you.

At this time, this concludes today's call. Thank you all for joining. You may now disconnect.

Good afternoon, and welcome to Exzeo Group's Fourth Quarter 2025 Earnings Call. My name is Mark, and I will be your conference operator. [Operator Instructions] Before we begin today's call, I would like to remind everyone that this conference call is being broadcast live via webcast and is available for webcast replay approximately 4 hours after the call through February 25, 2027, on the Investor Relations section of Exzeo Group's website at www.exzeo.com. I would now like to turn the call over to Bill Broomall, Vice President of Investor Relations. Bill, please proceed.

Thank you, and good afternoon. Welcome to Exzeo Group's Fourth Quarter 2025 Earnings Call. To access today's webcast, please visit the investor information section of our corporate website at www.exzeo.com. Before we begin, I would like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as anticipate, estimate, expect, intend, plan and project, and other similar words and expressions, are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company's business, financial condition and results of operation. Exzeo Group disclaims all the obligations to update any forward-looking statements. Now with that, I would like to turn the call over to Suela Bulku, Exzeo's Chief Financial Officer.

Thank you, Bill. Good evening, everyone, and thank you for joining us for Exzeo's fourth quarter earnings call. Exzeo delivered another strong financial performance for the fourth quarter. Pretax income in the quarter was approximately $29 million and diluted earnings per share were $0.25. For the full year, pretax income was over $110 million and diluted earnings per share were $0.99. For the fourth quarter, revenue increased to $53 million; and for the full year, increased to $217 million. We booked the first non-HCI revenue during the quarter. And while the contribution from our 2 new clients was modest, they are growing and are expected to have managed premium on our platform of approximately $100 million by the end of the first quarter. Our adjusted EBITDA margin increased to over 54% in the fourth quarter and for the full year. There continues to be significant leverage in our operating model because we can add managed premium with very little incremental expense. I want to highlight a few other KPI metrics. Managed premium at the end of the fourth quarter were approximately $1.39 billion, ahead of our expectations and up significantly from about $580 million last year. The other KPI metric that I wanted to highlight was our annual recurring revenue, which was $215 million in the fourth quarter, an increase from about $139 million in the prior year quarter. For the full year 2025, we generated strong free cash flow of about $97 million. With net income of about $83 million, that represents a free cash flow conversion rate of 117%. Moving to the balance sheet. We ended the year with $305 million cash and cash equivalents, and we continue to have no debt. Stockholders' equity increased 16-fold to $254 million. Before turning the call over to Kevin, we would like to provide a quick update on guidance and what we're currently expecting for the first quarter and the full year 2026, starting with pretax income. We expect pretax income to be between $23 million and $26 million for the first quarter. For the full year 2026, we continue to expect pretax income to be between $115 million and $125 million. Next, managed premium. We expect managed premium to be over $1.4 billion by the end of the first quarter. Based on current momentum, we are raising our outlook for 2026 and we now expect managed premium to reach $1.55 billion by year-end. In closing, Exzeo delivered another strong quarter highlighted by continued growth in managed premium, expanding margins and a solid, debt-free balance sheet supported by a strong cash position. And with that, I will hand it over to Kevin, President of Exzeo.

Thank you, Suela. As we previously communicated, we laid out goals for 2026. Let me give you a progress update. First, we wanted to add non-HCI clients to our platform and grow them to a meaningful size. As Suela highlighted, the 2 start-ups added to the platform in the fourth quarter should be approximately $100 million of premium by the end of the first quarter. Second, we issued a press release this evening announcing that Exzeo has added a new client and a new product to its platform. The new product is flood and the new client is Tokio Marine Highland, a wholly owned subsidiary of Tokio Marine Kiln and a member of Tokio Marine Group. They've selected the Exzeo platform to offer their flood insurance product, and we've already added our first policy. Third, we are taking an important step to widen our sales funnel with prospective clients. This includes the recent hiring of a seasoned industry executive with a tremendous amount of experience in software sales. Overall, Exzeo is heading in a positive direction. Next, I want to take a few minutes to give our view on the approaching inflection point of AI in the insurance industry and why we think it will be positive for Exzeo. Much of the insurance industry still relies on human underwriters to manually review and touch nearly every policy. In an AI-driven world, that is going to change. Friction will come out of the system. We saw years ago that the industry would eventually be moving towards a fully automated insurance platform, where policies are bound in minutes and administered with little to no human intervention, which is what Exzeo currently does today. What is clear is that the technology bar is being raised. We believe the rise of AI will drive a new upgrade super-cycle that will be difficult to avoid. The end-result will be a modernized platform that reduces human touch per policy, lowers operating costs and delivers better underwriting performance. The debates of how to navigate these upgrades will be a major topic. It will cause a rethink of how insurance is done and what tools or platforms to use. The Exzeo platform was built to deliver the solution. It is a modern, fully automated insurance platform that scales efficiently with our clients' growth. We offer our clients shorter implementation cycles, as demonstrated by the speed at which new clients are already operational on the platform; a consumption-based fee model, eliminating large upfront costs and directly aligning Exzeo's economics with our clients' growth; and reduced execution risk, providing a streamlined on-ramp to the future. In short, this industry inflection point has the potential to serve as a meaningful catalyst, accelerating our ability to achieve and potentially exceed the strategic objectives we outlined during our IPO process. Now I'll turn the call over to Paresh, Exzeo's Chief Executive Officer.

Thanks, Kevin. Now that we are a few months removed from our IPO, several things are evident. As Suela highlighted, Exzeo is delivering strong operating margins, growing earnings and generating meaningful positive cash flow. On the operational side, as Kevin discussed, we are growing managed premium, broadening our product offerings, signing new third-party clients and investing in the team needed to capture additional market share in the years ahead. With all that said, what excites me the most is, with AI, the future operating model of the insurance industry will be different, and Exzeo was designed specifically for that future. And our focus now is on execution, including adding more clients, products and premium to the platform. And with that, I'll turn it over -- turn the call over for questions.

Thank you. And our first question will come from Terry Tillman with Truist Securities.

Paresh, Kevin, Suela and Bill, congratulations on the results in the quarter. I had a couple of questions. First -- and hopefully, you can hear me okay. I wanted to ask about the entry into the flood market with Tokio Marine. That's a very large company. Anything you can share at all though about the level of aggression in terms of how quickly that business could build and how important that is to their future? Because I'm just trying to figure out how that might ramp. And is this a signal that you could be doing more in flood near term or do you want to just start here? And then I had a couple of follow-ups.

Terry, the biggest thing about this is that we have a previous relationship with them. And the speed to which -- how quickly this deal came together and we were written our first policy, having said that, we've got here so fast. We haven't really had a time to think about what the future may bring and how many places we can go with this thing. What we do know is Tokio Marine is licensed to sell the product in 42 states, right? So this instantly expands the scope and reach of what we can do with the Exzeo platform, right?

Terry, this is Kevin. What excites us with Tokio Marine is they have a long history in flood, very established, they know the business quite well. And being able to partner with someone that has that type of credibility, we think, is a true positive. And as Paresh mentioned, the speed at which our technology can partner with them is pretty impressive. They were excited how quickly we could get to market.

That's great to hear. I guess just 2 more quick questions. The next one is, that sounds strong in terms of just the 2 newer carriers to be $100 million of premium, if I got that right, in the first quarter. That's pretty sizable pretty quick. But I want to ask you a question beyond that, because it's like, well, what are the next kind of stacking-up of customers, because people always want to see more. I think, Paresh, you said on the last call that the pipeline had tripled in 5 weeks post the IPO. It sounds like you've got a new sales -- a seasoned sales leader. What could you share a little bit more about the go-to-market activity? You've been a public company for even longer. Just some commentary about how you see the funnel developing. And then I had one last one for Suela.

Yes. Absolutely. Look, Terry, the funnel is developing very well, and some relationships take a little bit longer to onboard and others happen very quickly. Tokio Marine, obviously, was a very quick one. But others may take a little bit longer because various other things get in the way. But we -- what we see is that opportunity is sort of growing. And why I say that is some of the prepared comments that we made about instead of having to try to win customers and convince them that Exzeo was the way to go, with generative AI, I think more people are looking to see what's the future and how quickly can we get there. And now think about what we just did in the last 4 months. We onboarded 3 new customers. They already have premium on the platform, right? Imagine how fast that world is moving compared to an industry where typical software implementations are 12 to 14 months, and that's for only part of the stuff, right? So what we sort of set out to do is now happening in real time. And ironically enough, more people are looking for it. So lots of conversations going on. We are also trying to be respectful of how we do this so that we don't really take credit for any conversations, so it actually turns into premium on the platform.

Yes. It makes sense. Understood. Last question for Suela is the free cash flow, the conversion is impressive being well over 100%. Could you share any perspective for -- I know we have the pretax income guidepost for '26 which you maintain. Any commentary around that outperformance in 4Q or the strength in 4Q and how you think about free cash flow conversion for all of '26?

Yes. We expect the free cash flow conversion to continue to be over 100%. And that's primarily driven by the growth that we expect. I know I've mentioned this before, but we have a positive working capital cycle where we actually get paid cash upfront from a customer, then it takes us over 12 months to recognize revenue. And since we're growing in 2026, we also -- we expect the free cash flow conversion to continue to be over 100%.

And our next question will come from Dylan Becker with William Blair.

Really nice job here. Maybe, it's kind of been hinted at, but for Kevin or Paresh, would love your guys' perspectives on kind of what the evolution of the insurance model looks like kind of facilitated by AI. If you could dive into the proprietary data set, how that positions you guys to be that differentiated provider here, and maybe the impetus having accelerated from an adoption perspective from an end consumer just due to the fact that the market is normalizing, rates are becoming a little bit more competitive and they need to get a little bit more granular in what they're underwriting? Thoughts there would be really appreciated.

Sure. Dylan, this is Kevin. On the first part, when you talk about data sets, I think you're well-versed in this. We've been on a journey here at Exzeo, that started back in 2012, and early days when we started building platform, there were data sets to purchase. So we built our own. And that gave us a distinct competitive advantage in the market. So we knew how to source it, curate it and make sure that it was accurate so we could make these key underwriting decisions for our clients. So I think that has been really key. When you look at some of our clients' performance over the last few years, or outperformance, we think a major element of that is the tech and the curated data sets that Exzeo is able to provide. And then on customers and where they live and what they expect, everyone is in a position these days where they're very used to kind of instant and making things simple and easy and reducing friction. I think one of the big things that Paresh has talked about in the past is we set up Exzeo so it's automated. All steps of the process, whether it's quote to bind, to the underwriting, to the customer service, even to the claims elements, it's critically important that you automate all those steps. There's not a kink in the hose, so to speak. And if you can do all those key pieces, you're going to drive incredible efficiency for your insurance carrier, your client. It's a better customer experience. The agents love you. And it really allows our clients to level up and compete in -- regardless of whatever market they might find themselves in.

Very helpful, Kevin. Maybe for Suela, could you kind of remind us as well too, and great to see kind of the uplift to the expected premium outlook for 2026 here, but how that kind of flows through the seasonality of premiums coming online, how that converts to kind of revenue and ARR, and maybe how that also gives conviction in the sustainability of the profitability profile as well too relative to kind of that margin expansion trajectory you've called out in the past as well?

Yes. Very good question. So Dylan, the timing of the ramp that we expect for 2026 would vary. But I would think of the ramp being a little bit more back-end loaded. So the timing will obviously matter. And as managed premium will be added to the platform, it will increase the annual recurring revenue based on the contractual fees or the take rate. And then from a revenue recognition standpoint, just a reminder that a portion of our revenue gets recognized upfront, is about 1/4 of our revenue is recognized upfront. And the remainder earned over the 12-month premium period. So I would just say that it all depends on the timing of the ramp and the timing when the managed premium joins our platform.

Yes. I think part of the whole thing about the prediction of this is that you could appreciate Suela is trying to assimilate the inputs from, at this point, 7 different carriers, and whatever their growth plans and expansion plans are, and trying to use that to predict where Exzeo will be, right? So that's why the answer is a little bit less defined than you would normally expect because -- and that's going to be more the case. Actually, we're in that weird situation where, if you have 7 people, it's difficult to predict things. If you had 1, it's easy. If you have 7, it's difficult. If you have 70, you can take an average, it will get there. We're in the in-between transition where the ramping and stuff is very difficult to tell because it's kind of lumpy. Yes?

[Operator Instructions] And then our next question will come from Matt Carletti with Citizens.

A couple of my questions were answered, I just have a couple of numbers ones, probably for Suela. Can you help me with the $1.39 billion managed premiums for the year, just kind of what -- I know it's a small number, but what's the starting point for third party? I heard your guidance on Q1, where you expect Q1 to end. But just I know there was some put on the platform in Q4. Can you help us with where that was at year-end?

I can just say that it was pretty modest. And as we -- both Kevin and I mentioned, we expect that to be material by the end of the first quarter. So percentage-wise, it will be increasing. You want to add anything?

Yes, Matt, I think the biggest thing we would like to hope everybody to note is third-party revenue on the platform was 0 at the end of Q3. It was nominal at the end of Q4. And it's going to be $100 million approximately into Q1. Just illustrates, because there were some concerns about adding third-party business, those are numbers.

Yes, perfect. That's helpful. And then just want to, Suela, I hate to ask you to repeat yourself, but I was in transit, get through security, I think, when you said it. The pretax net income guide, just for Q1, I got the year, was it $23 million to $25 million, or did I mishear you?

$23 million to $26 million.

$23 million to $26 million. Wonderful.

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Paresh Patel, who has a few closing remarks.

I want to thank everyone who joined the call today. And I want to thank the Exzeo team for all their hard work. And before we wrap up, I want to quickly mention that the Rule 10b5-1 prearranged purchase plan that I highlighted last quarter for myself will be effective next month. And I want to thank everyone for their time today. Thank you.

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