Neptune Insurance Holdings Inc. Class A

Thank you for standing by. My name is Demi and I will be your conference operator today. At this time, I would like to welcome everyone to the Neptune Insurance Holdings third 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 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to John 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 8K that was publicly filed with the SEC on November 12, 2025. And now I'd like to turn the call over to Trevor.

Good evening, and thank you for joining us for Neptune's first earnings call as a publicly listed company, an exciting milestone for all of us. We're deeply grateful for the support from our investors, our agents, our capacity providers, and our policyholders as we begin this next chapter in Neptune's journey. Due to the timing of the IPO, this earnings release focuses on our last months as a private company, and the results show the ability of our team to execute under the pressure of both the public offering process and hurricane season, typically our busiest period of the year. Our success is apparent in our first quarterly earnings that highlights the continued growth and success of our business, including record revenue of $44.4 million, a 31% increase year-over-year, net income of $11.5 million, record adjusted EBITDA of $26.7 million at a 60% margin, record written premium of $102 million, driving a 33% year-over-year premium in forced growth, and record new business sales posted during the quarter. We believe our business model is unique to the public markets. We operate as a managing general agent or MGA that takes no balance sheet insurance risk. This allows us to be efficient, asset light, and profitable. Moreover, our AI-first approach allows our team members to do more, resulting in LTM revenue per employee of 2.5 million and adjusted EBITDA per employee of 1.5 million, both records. We are most proud of the exceptional customer experience we provide to agents and consumers nationwide, and the consistent profitability we have historically provided to our capacity providers. This is only possible through our organization as a technology company operating in the insurance space, not as an insurance company attempting to utilize technology. Our mission is simple, to make insurance easy to buy, simple to understand, and efficient to manage, powered by world-class technology and data science. The results we delivered in the third quarter of 2025 reflect the strength of that model. I'll now turn things over to Matt Duffy, our President and Chief Risk Officer, to discuss updates from the three core pillars of our business, technology, risk relationships, and distribution.

Good evening. During Q3, our data science and engineering teams made significant progress delivering new technology. We completed a full rewrite of the Triton underwriting engine, a year-long project focused on improving speed, accuracy, and flexibility. It enhances the user experience for customers and agents, increases certainty for our capacity providers, and provides management with both enhanced functionality and insight into model performance. We also released a new machine learning model designed to optimize conversion of new business quotes. Early results are encouraging, and we expect it to drive continued growth across our product suite in the coming quarters. In addition, we expanded our flood offering with higher coverage limits. We began writing policies in Alaska, which took our offering nationwide, added a new capacity program and launch the redesigned agent profile. As we head into Q4, we have many impactful technology projects underway that will continue to reshape how we think about portfolio development, customer experience, and the future of our business. Our long-term technology focus remains on providing a best-in-class experience across the value chain, from insureds through agents and to our capacity providers. Those capacity providers continue to be key to the business. On October 1st, we launched our seventh carrier program through our partnership with Palomar, adding six new capacity providers and bringing our total panel to 39 risk-taking partners. We also completed the annual renewal of another capacity program, a program on which we expect continued growth through the upcoming treaty period. Our expanding panel and deep partnerships remain a core strength, allowing Neptune to scale efficiently and serve more customers with confidence. And that momentum continues into the distribution side of the business. Flooding in July again underscored the protection gap in the US flood market, where we believe just 2% of properties nationwide are covered with flood insurance. These events helped raise awareness that our growth continues to come primarily from strategic expansion, putting Neptune software in the hands of more agents and educating property owners across the country. Over 80% of new business came from non-mandatory purchase situations in Q3, highlighting the strength of our distribution model even in a quiet storm season with no landfalling hurricanes. This performance demonstrates the resilience and reach of our platform. The NFIP's transition to risk rating 2.0 remains a long-term structural tailwind. As NFIP rates rise towards full actuarial adequacy, Neptune's competitiveness continues to improve, creating a steady flow of customers moving to private alternatives. Our distribution team continues its excellent work in expanding both the breadth and depth of our relationships. This is highlighted in the achievement of both record new business sales and a record number of unique agency codes binding new policies during the third quarter. As we look ahead to Q4, currently the US federal government remains shut down. And as a result, the NFIP is not authorized to issue or renew policies until reauthorization by Congress. At the same time, Federal financial institution regulators have reminded lenders that they may continue making loans without requiring flood insurance during this period. We believe these opposing dynamics partially offset one another. The absence of NFIP authorization creates opportunity for Neptune, while the pause in mandatory purchase requirements limits that overall benefit. Next, I will turn it over to Jim Steiner, our Chief Financial Officer, to discuss financial results for the quarter.

Thanks, Matt. For the third quarter of 2025, Neptune delivered strong financial performance. Revenue increased 31% year-over-year to $44.4 million, driven by record new business sales and continued improvement in renewal retention. Year-to-date, we've retained 99% of premium and 86.2% of policies, up 1.9 and 2.8 percentage points, respectively, from the same period in 2024. Our asset light technology first model continues to deliver efficiency and strong margins. For the three months ended September 30, 2025, adjusted EBITDA rose 29% to $26.7 million, resulting in a 60% adjusted EBITDA margin for the quarter. On a trailing 12-month basis, we generated $2.5 million of revenue per employee and $1.5 million of adjusted EBITDA per employee. increases of 29% and 30% respectively from the prior year. These results underscore the scalability of our model as we grow. Turning to the balance sheet, our growth and strong operating cash flow continue to support deleveraging. We ended the quarter with $264 million of total debt, or about three times net leverage on a trailing 12-month adjusted EBITDA basis. Following quarter end, we were paid $13 million of debt, and on November 10th, refinanced into a $260 million revolving credit facility with $251 million outstanding. The new facility lowers our interest rate, eliminates required amortization, and provides greater flexibility to manage capital efficiently. The largest adjustment to EBITDA this quarter was related to IPO expenses of roughly $5 million. A total of $8.5 million of IPO-related expenses incurred year-to-date were reimbursed after the IPO closed on October 2nd, and that reimbursement will be reflected as an equity contribution in our Q4 financials. Reimbursement proceeds funded a significant portion of the $13 million debt pay down I just mentioned. Now I'll turn things back over to Trevor for introductory 2026 guidance and closing remarks.

I'm generally not a fan of providing detailed guidance, as it can shift focus towards quarterly performance rather than long-term value creation. That said, for our first full year as a public company, We're offering initial benchmarks to help investors frame Neptune's trajectory. You will notice that the ranges are narrower than those we typically see for other public companies. And that's because of the certainty historically provided by our substantial renewal base and our highly efficient technology first platform. For full year 2026, we expect revenue between 186 million and 189 million, and adjusted EBITDA margin between 60 and 61%. These targets reflect our continued commitment to profitable growth, operational efficiency, and disciplined capital allocation. Where possible, we plan to deploy capital to grow the business and return any excess to our shareholders. In line with this strategy, in September 2026, Our first tranche of restricted stock units is expected to vest, and we intend to satisfy the associated tax withheld via net share settlement, which is expected to withhold and retire approximately 500,000 shares. Before we open the line for questions, I want to take a moment to thank our team at Neptune. Their hard work and dedication made this transition to public company life not only possible, but successful. I also want to thank our investors and partners for their confidence in Neptune's vision and strategy. We're still in the early chapters of a very large story, one where technology, data and customer experience come together to redefine what insurance can be. We look forward to sharing our continued progress in the quarters ahead. We'll now open the call for questions.

Thank you. As a reminder, to ask a question, you will need to press star then the number one on your telephone keypad. And if you would like to withdraw your question, press star one again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Andrew Kligerman with TD Cowen. Your line is open.

Hi, good evening. My first question is around the agency codes. I think it was interesting that you called out that you had a record number of new agency codes. And it had been my understanding that you had 100,000 unique agency codes. So I'm hoping you could kind of put in context what that record number was and Paul Cecala, WSBA Advancement Department Director, How that relates to the hundred thousand that I thought you had and then with that. Paul Cecala, WSBA Advancement Department Director, was also my understanding that you, you have a. Paul Cecala, WSBA Advancement Department Director, couple of agencies big ones that have this opt out provision, where the client might buy a homeowner's policy, but they have to opt out of flood if they don't want it and so i'm curious as to how many.

within that group of unique agency codes uh have that type of a provision in place right now hey yeah good evening and uh thanks for the question there yeah um you know it it in this one we uh disclosed that there was over 20 000 agency codes that had found a policy through neptune historically over 80,000 that have run a quote through the Neptune system. So, you know, we see great retention rates in those agency codes that continue to come back and bind policies with Neptune month over month. And, you know, for the third quarter, we saw a record number of those unique agency codes that bound the policies with Neptune. So, you know, our growth during the third quarter, with this being a, you know, slow hurricane season, was really great. due to that growth in distribution, and that continues to be the case and really has been the case historically on the portfolio. So, you know, the distribution team does a great job in sort of facilitating those technology integrations that you mentioned that sort of help with that, as you framed it, in opt-out provision. But we really don't have a, you know, strong feel on the number of binds or unit agency codes that bound with us using that sort of opt-out provision.

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

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

I think that the hardest thing to always predict in our business is what's going to happen with hurricane season. And we saw it in 2025, a very light hurricane season and some added expenses of being a public company, such as we have a new general counsel, right? We have new insurance costs, obviously as part of being a public company that are not adjusted out of, you know, either the other, just our new real run rate. So as we grow into that in 2026, and we would anticipate a normal hurricane season, which would have 1.8 landfall hurricanes, we would hope that our performance would allow us to drive towards the higher end of that range. We keep a very, you know, run a very tight ship here in terms of our, you know, GNA expenses. We know what they need to be. And the biggest open question is, what's the hurricane season going to be like, and how is that going to influence new business sales?

Awesome. Thanks for the helpful responses.

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

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

Rob, thank you for the question. Our understanding is that a report from the FEMA Advisory Council is due to President Trump 180 days after their first meeting, which would put us sometime around the end of November or early December. We have no insight into the contents of what that report may be or what the Trump administration plans to do once they receive that report. What I can tell you is that today we sent in a letter to the FEMA Advisory Council updating them on what we saw during this shutdown that may be ending as early as this evening. And in broad strokes, what we saw during this shutdown was a fully functioning insurance market even though the NFIP was closed and Countering that, as Matt talked about in the prepared remarks, the federal banking regulators removed the requirement for flood insurance associated with home loans. But the insurance market did well. The private market was able to perform. Home closings were able to continue as expected, and a large number of new customers were able to discover that private flood exists and can be a fantastic alternative to the NFIP because at Neptune we offer higher limits than the NFIP and optional coverages such as temporary living expense cover that makes our form a more valuable form to the consumer. So we were able to share those early observations from the government shutdown with the FEMA Advisory Council. And we hope that they would take that into account. But we've had a little test of what it would be like without the NFIP.

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

Yeah. Hey Rob. So, you know, we, we've certainly seen a net benefit there in, in, sales since since October 1st and it was nice how the shutdown sort of aligned with the IPO which you know also provided us with some some additional publicity there as Trevor mentioned the the lack of requirement to purchase the insurance that's existed so far this quarter right the effective removal of the mandatory purchase requirement has definitely dampened the impact there but overall a net benefit that we've seen so far. You know, the only sort of additional point that I'd add there is we continue to see this sort of long-term trend in the direction of private insurance, and that's really the benefit that we've seen from the shutdown is additional distribution partners as well as, you know, our current and additional capacity providers. reaching out and saying, hey, we need to be a partner of Neptune now. We need to, you know, work with you to grow the private fund insurance market. And so those trends, you know, remain very, very favorable for us. And so in the long term, you know, as we think about 2026 and beyond, that's really where sort of the shutdown is going to help the model and, you know, continue to drive that financial performance.

Got it. Thanks for the help.

Next question comes from the line of David Mutt-Maden with Evercore ISI. Your line is open.

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

Yeah, thanks for the question. Yeah, you know, you sort of hit the number there, hit the nail on the head. So 80% of the sales, over 80% of the sales during the period were in those non-mandatory circumstances. And when we talk about non-mandatory, that's, you know, sales within a special flood hazard area and, you know, built to a mortgage lien holder, so built for the bank. That trend and that number is sort of on trend for the past 12 and 24 months and as we think about the percentage of sales just outside of special flood hazard areas that's also on trend with you know the numbers that we've provided in the S1 as well so north of 60% they were over the past two years so we continue to see this great spread of the book which is really driven by that you know ease of use and the technology system that we've been able to develop and that broad-based distribution network that we've been able to develop, and continued API integrations, technology integrations with each of those distribution partners. So no significant change in the spread of the book that we saw during Q3. It was sort of more of the same, just more of the same.

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

Yeah, absolutely. You know, Palomar are a great partner and the new program is off to a really strong start here. We continue to expand the capacity provider panel and, you know, it was great to to get such a strong vote of confidence from a partner like Palomar and a sophisticated carrier like Palomar. I'd say there's really been two or three big benefits of the Palomar relationship in addition to the growth and policy count. From a capacity standpoint, it's allowed us to deepen some of the relationships that we already had from a reinsurance standpoint. And it's allowed us to add six new names to that panel. So we now have those 39 capacity providers. And then, as you mentioned, from a distribution standpoint, so there's a number of agency relationships that Palomar had, especially over on the West Coast, that we did not have or we were beginning to develop relationships with. And so I think if we put the Palomar relationship plus the publicity from the IPO plus the NFIP shutdown together, It drives some of that, you know, record number of agencies that we saw binding policies during Q3 and then also, you know, continued growth as we get into Q4. In terms of putting a number on that, I don't have a great number for you today, but as we get into 2026, we'll be able to understand better how that, you know, growth and distribution is actually impacting the policy savings.

Understood. Thank you.

Next question comes from the line of Josh Shankar with Bank of America. Your line is open.

Yeah, thank you for taking my question. Good evening, everybody. I just want to talk a little about the record policy growth. Is policy count a KPI that you're not really interested in us following? Does it matter for the quarter, or how should we think about that?

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

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

Our sense is that it was a mixed bag but still net positive because it really took either banks breaking with the federal guidance and requiring flood, even though technically not required, or consumers acting like good boy or girl scouts and wanting to buy flood insurance because they know that they need it. As the government reopens, though, it's going to be an interesting sort of test to see what happens because what has not been made clear yet is all those people who didn't buy flood insurance that were supposed to, what's the rule going to be for banks? Are they going to have to go back And I'll buy flood insurance now. Will we see an uptick because of that? There hasn't been guidance published yet, and so we don't know what the follow-on effect is going to be in the coming weeks, assuming that the government reopens tomorrow.

And if you'll let me sneak one more quickie in, any better uptake given the closures on the direct consumer product, or is it still a product mostly sold and people aren't coming to the website so much?

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

Thank you. Congratulations on the quarter. Thank you.

Next question comes from the line of Tommy McJoy with KBW. Your line is open.

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

Our 2026 guidance anticipates a sort of the same housing backdrop. I would love for it to be a better backdrop, but we are assuming the same. And it's really total sales that is important. There is no different law between existing or new homes, and so it's really the total that we look at. But we are also interested in things like the number of people paying off their mortgages, because as people pay off their mortgages and now fully own their home for cash, that may be a reason why they are then allowed to drop having flood insurance. And so the percentage of Americans who own their home without a mortgage is also another metric to look at, and it is has been very unfavorable for the past year or so, and we're assuming much the same in our 2026 guidance.

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

I think that's the right way to think about it if you're focused on what our new business sales but obviously the renewal book you know helps to buffer some of that you know impact because so much of the businesses is renewals but from a new business perspective you're exactly correct almost all of the impact of helene and milton was in q4 last year because we have a 10-day waiting period so the last 10 days of september sales all basically show up as new policies in October. So it was really those two storms were really a very large Q4 impact last year. So tough comps from a new business perspective, yes. Not necessarily from a overall business perspective because we hope to retain a large number of those people who we added in. Got it.

Thanks, Trevor.

Next question comes from the line of Yaron Kinnar with Mizuho. Your line is open.

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

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

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

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

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

We don't have that breakdown available, but it's something that we can research. What I can tell you anecdotally is that A lot of agents were very happy to find that there was an option for their consumers during the shutdown. And certainly during the third quarter, we also saw some of the hard work that was done by our distribution team to add new agencies, some of whom came from the new Palomar relationship quite frankly, just discovering Neptune for the first time. We normally see the impact of that from storms when people are then actively shopping for flood insurance rather than being sold flood insurance. The dynamic during the third quarter was much more around agents discovering Neptune, us signing new agents up, either through Palomar or our organic efforts, and them, you know, being new, delighted customers that we hope will continue.

Yeah, let's just add that, Yaron. You know, some of the growth that we saw during Q3 there was really due to this nurturing process that we go through with the distribution partners. So these aren't necessarily... Some of these aren't necessarily brand new agents that signed up during Q3. These are, you know, agents that we'd onboarded previously and they go through this process of training, technology integrations, and then, you know, the beginning combined policies. And so this is really a, you know, long-term effort that we're talking about. It's not just these, you know,

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

Yes, great question. Yeah, so there's definitely sort of different cohorts and different breakdowns of the renewal book that we look at. There is a lower likelihood of retention, you know, year one versus year two, three, four. One thing I'd say is, you know, as we look at 2024, a very, very active storm season, we, as Jim reported, you know, we have 99% of premium that we've been able to retain so far this year today. And that's working under sort of version one of the renewal machine learning model that we have. Version two of that is underway and is really focused on how do we, you know, retain those customers year one that are the marginal sales above the baseline that we expected during the year and so forth. If we think about 2025, those general sales have really come from the shutdown activity as opposed to any hurricane activity. And so that cohort is more mandatory sales and less non-mandatory sales. And so we generally have a higher frequency to pay the renewal. And so the fact that we've been able to retain 99% of premium and that's something we've increased year over year, is a really strong metric for us this year. And then as we look into 2026, we'd hope to be able to continue to grow that way.

Makes sense. Thank you.

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

Hey, good afternoon, everyone. Can you hear me okay? Yes, thank you. Good. Just checking that I was having some connection problems earlier. I think for the first question, as I was going through your financial statements, I was interested in the operating cash flow. You know, if you look at, you know, net cash provided by operating activities for the nine months, I think it's up some 10%, you know, which compares with the revenue for the first nine months being up some 30 plus percent and net income being up 44%. So I thought I'd just, you know, inquire what are the moving parts inside the cashflow that are causing that deviation? I presume that that's going to straighten out over time, but just thought I'd give you an opportunity to talk about the operating cashflow results of the company through the first nine months of the year.

So this is Trevor. I'll start out and then I'm going to hand it to Jim to do, you know, clean up. I mean, one of the biggest impacts was we had $8.5 million of IPO expenses. Now, our IPO was on September 30th, but we were reimbursed by the selling stockholders in Q4 at closing on October 2nd. And we used that $8.5 million to then pay down debt in the fourth quarter. So we had this sort of strange thing where that hurt our operating cash flow in Q3. $5 million of the $8.5 million was in Q3. We were then reimbursed in Q4, but that flowed through equity, not through the income statement. And so we'll never get that back as operating cash, but we got the cash anyway. So the short answer is yes, it will normalize over time. And especially now that we've refinanced the facility and have an even lower interest rate. Jim, anything I missed?

I'm just reminding everyone that that's our premium volume grows, our fixed costs do stay largely constant. Technology and capacity costs scale efficiently, so most of the incremental revenue drops right to the bottom line. We're able to leverage and optimize cloud costs, process automation, distribution efficiency, et cetera. As Trevor gave earlier in the guidance, 60% to 60% margins have proven to be sustainable in the age past, and we expect to see things go forward.

Okay, so my net takeaway is that when I look at the cash flow from operating activities next year in 26, when we clear the moving pieces from the third quarter and the fourth quarter this year, we'll get something that looks more normalized. Is that an okay inference to make based on your comments? Yes. Okay, thank you. And then my follow-up question, I know maybe this has been asked before, but I'm going to come at it from a slightly different way. You know, your success and growth in the marketplace has been the talk of the town in the insurance marketplace. And, you know, there's a lot of people that touch the NFIP market. And so I'm just curious, You know, I know you're just out of the box here, but I'm just curious if you've seen any change in the competitive environment. And specifically, I'm just curious if there's been, you know, any new entrant or an existing player in the marketplace that's becoming more aggressive and becoming more competition for you than what you were seeing before.

Well, the biggest change on the competitive front has been that our main competitor has been closed for the past six weeks in the NFIP. But on the private side, the answer is no. We have not noticed any new entrants or existing players acting any differently. And some of that is just because they're beholden to the capacity of They have to make sure that ultimately they're delivering return to their capacity providers. And if you look carefully at the available data, which is limited, but if you look at the NAIC data and compare Neptune's results to that of other private providers in the residential primary space, you'll find that the volatility that Neptune has been able to deliver has been far below that of our competitors, which is of huge value to the capacity providers, which is why we're excited that we're now up to 39 risk-taking partners across seven different programs.

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

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

Got it. Thanks for the additional details.

Next question comes from the line of Pablo Singson with JP Morgan. Your line is open.

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

I don't think that there is any unique set of agents that is doing better or worse in or out of the high-risk flood zones. I think what we really see is the behavior of our best agents is to offer people opportunities flood insurance regardless of their flood zone because they recognize that FEMA's maps are wrong. And you all can look at the Wall Street Journal article of the past couple of days, which just re-highlights the work that the First Street Foundation has done, showing that it's not 9 million people who are in high-risk flood zones, which is the FEMA number. It's really something closer to 25 million. And so the best agents are the ones that are just offering flood insurance every single time. And because Neptune delivers a price that says something about the risk, right, it's a very useful signal to the consumer.

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

What I can tell you is that currently many right grounds are partners of Neptune and have asked their technology providers to display the Neptune price alongside the NFIP price. They do that because they want to be the best solution for their customers. They know that if the only option that they're presenting is the NFIP, that opens the door for that consumer to either go direct to Neptune or to talk to a different insurance agent to get that Neptune quote. And so Neptune, as now the largest and clear alternative to the NFIP, is becoming a must-have option for write-your-owns to make sure that they don't lose competitors to some other platform or some other agent system.

All right. Thanks, Trevor.

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

Hey, thanks. Good evening. First question is on the revenue run rate and the guide. You know, clearly exceeded expectations in Q3. Not much change to the revenue guide in 26. So I guess what am I missing? You guys, you all don't seem to be too clear on whether the government shutdown is providing a lift to the 4Q. Or what are we missing about that discrepancy?

So I'm not sure there is a discrepancy. What I would say is that we haven't provided guidance for Q4 because we think that the... First of all, we're a newly public company. We want to make sure that we are providing some guidance, which is why we have provided 2026. 2026, we don't anticipate we'll have a government shutdown, and we don't anticipate it will have a change to the NFIP's operating model. So we have to make assumptions around renewal rates for next year, premium growth, you know, and we have become more optimistic than we were at the start of the third quarter by the end of the third quarter. And so we are feeling more excited about 2026 than we were before. And I think that's reflected in the guidance that we gave to be able to retain a 60 to 61% EBITDA margin while incorporating all public company costs is a pretty amazing feat for year one out of the gate.

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

I have no insight into those comments and was not aware of them. But what I can tell you is that we're all aware here in Florida that the NFIP has been, you know, shut down for the past six weeks and has not been a government, there hasn't been a government, you know, option. And so he needs to have private options as an alternative. Thankfully, Neptune is headquartered in the state of Florida. Florida is our largest state. And we have been able to help a lot of Floridians in the past six weeks. I think the other thing that he often talks to, and this may be related, is just the affordability. And we know that for new policies, Neptune is less expensive than the NFIP approximately 60% of the time. So if 60% of consumers can save money by buying a Neptune policy, that's obviously going to help affordability in the state and help control costs for homeowners.

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

I'm not aware of any data that would suggest policies moving from private back to the NFIP. The NFIP has been in long-term decline, peaking at about 5 million and is now down to 3.6 million contracts. So we've been in long-term structural decline. We're obviously, during that time period, Neptune's grown from zero to 260,000. We have not seen those trends at Neptune. Now, there have been a number, a large number of private flood insurers, competitors of ours who have tried to enter this business. It's a very complicated and dangerous peril, and their results have been unsatisfactory, and they have exited the marketplace. And so for those particular insurers, insurers who have failed, their policies may then have somewhat flowed back to the NFIP, but not enough to make up for the overall structural decline in the NFIP.

Yeah, Mike, I'd just add there for some context, you know, Trevor and I spent a week in Bermuda and New York at the end of October here meeting with over half of our capacity provider panel. I would just say that the appetite from that panel to grow within the private flood insurance market has never been greater than it is today. So if we think about the risk-taking panel that sits behind Neptune, there's certainly no desire to shrink the size of their portfolio. In fact, they would love to have many more of the exposure that they have today.

Thanks so much.

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

Thank you. I just want to take a moment once again to thank the team at Neptune for their tremendous work. Nearly half of our team are engineers or data scientists who are focused on building the best AI models to deliver the results for us. consumers, agents, and our capacity providers. And I want to thank our frontline staff who are interacting with our agents every day and our consumers every day to help them protect themselves from this most dangerous peril. We are trying to do important work here of protecting many, many more Americans than are protected today from the risk of flooding. Thank you all for your time today.

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