Neptune Insurance Holdings Inc. Class A

Good afternoon, ladies and gentlemen, and thank you for standing by. My name is Calvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Neptune Insurance Holdings fourth quarter earnings call. 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, please press star one again. Thank you. I would now like to turn the call over to John Carlin, Director of Corporate Development. Please go ahead.

Thank you and good afternoon. With me here today is Trevor Burgess, Chairman and CEO, Matt Duffy, President and Chief Risk Officer, and Jim Steiner, CFO and COO. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements, including, among others, statements about our expectations for our future financial performance, growth opportunities, business strategy, market trends, and capital allocation plans. These statements are based on our current views and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. We direct you to our recent SEC filings for a full description of these risks. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. We will also reference certain non-gap financial measures. These measures should be considered only as supplements to their comparable gap measures. Additional information, including reconciliations of the non-gap measures to their most comparable gap 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 February 18th, 2026. And now I'd like to turn the call over to Trevor.

Good evening and thank you for joining us. Let me start with what's on everyone's mind. Last week, our stock sold off seemingly because investors decided AI is coming for insurance. They're right. They just have the direction of the trade completely wrong. Neptune isn't threatened by AI disruption. We are AI disruption. We have been since the day we wrote our first policy. We have no legacy system to rip out. We have no army of manual underwriters to replace. We built this company as an AI powered, API first platform from scratch. Proprietary machine learning models running pricing, underwriting, portfolio management, and distribution across the largest private flood data set in the United States. Let me be specific about what that means. The data mode. Over years of underwriting and servicing hundreds of thousands of policies, we have assembled proprietary flood risk data, behavioral retention data, claims performance insights, and real-time transaction signals that no competitor can replicate by simply plugging in a large language model. In an AI-driven world, the model is a commodity. The data is the moat. We have the data. The results. Our underwriting performance hasn't just been good. It has been so good that capacity providers are fighting to get on our platforms. We grew from 23 to 40 capacity partners this year, a 74% increase, now supporting eight programs. And because those partners have seen hundreds of millions of dollars in underwriting profit flow through Neptune, our average commission rate increased 35 basis points year over year. That's not us negotiating harder, that's the market telling us our AI works. Where we sit, Before I explain why AI is a tailwind for us, it's worth clarifying how Neptune actually reaches the end customer, because I think some of the confusion starts here. We are a managing general agent. We sit between the capacity providers who take the risk and the distribution channel that reach the policyholder. We do not own large captive agency forces. We reach customers two ways. through a network of independent agents and wholesale partners and through direct-to-consumer digital channels. Both flow through the same platform. That distinction matters because when AI reduces the cost of distribution, that savings flows directly to Neptune's bottom line. We are not disrupting ourselves. The distribution upside. Here's the part that I think is most misunderstood. Agent commissions are our single largest expense line. If AI-driven workflows reduce friction in how consumers buy flood insurance, and they will, that is not a threat to Neptune. That is margin expansion for Neptune. We already support both agent-led and fully digital flows on the same platform. If every customer in America decides tomorrow that they want to buy flood insurance through an AI agent instead of a human one, we are ready, and our adjusted EBITDA margin goes from an already exceptional 60% to something significantly higher. The team. I'd like everyone to look at who actually works here, because it tells you what kind of company this is. Over 40% of Neptune's employees are engineers or data scientists. This is not an insurance company experimenting with AI. This is an AI company that happens to be in insurance. And that composition shows up in the numbers. In 2025, trailing 12-month revenue per employee increased 15% to $2.7 million. And adjusted EBITDA per employee increased 14% to $1.6 million. For context, our revenue per employee puts us between Apple and NVIDIA. These are not insurance company metrics. Those are elite technology platform metrics made possible because of AI. I want to be honest about something. Nobody knows exactly how AI will reshape this industry. We could be wrong about the pace, the path, or the specifics. But if the question is who is best positioned to adapt, we like our answer. We are already building with the latest tools, We are already operating at the cutting edge, and our entire infrastructure was designed to evolve. If the future belongs to AI, and we believe it does, we would rather be the company that was built for it than the one trying to catch up. Technology, capacity, distribution. Those are the three modes around this company, and we expect every one of them to get deeper as AI adoption accelerates. Now, let me talk you through the quarter. The fourth quarter was an outstanding finish to a record year for Neptune. It showcased the stability of our platform, the strength of our execution, and the durability of our business model. During the quarter, we successfully launched new capacity programs, delivered record new business sales, and scaled our technology seamlessly to meet elevated demand, all while maintaining strong margins in operational disciplines. Our first full quarter as a public company built directly on the momentum that brought us here and capped an exceptional year. A few highlights from the quarter include revenue of 43.8 million, a 39% increase year over year, net income of 4.3 million at a 10% margin, down 63% from the fourth quarter of 2024, with adjusted net income of 15.3 million, up 25% from the fourth quarter of 2024. adjusted EBITDA of $25.9 million, up 34% year-over-year at a 59% margin, written premium of $100.3 million, driving 33% year-over-year premium and forced growth, and record new business sales posted during the quarter. The strength of the fourth quarter kept an exciting and record-setting year. For the full year 2025, Neptune delivered revenue of $159.6 million, up 34% from 2024, net income of $37.4 million at a 23% margin of 8% from 2024, and adjusted net income of $56.9 million, up 38%. full year adjusted EBITDA of $95 million, up 32% year over year at a 60% margin, giving us a rule of 40 of 93. Year-end premium in force was approximately $370 million, reflecting over $90 million of net growth during the year. And as a reminder, because this is central to understanding the business, Neptune takes no balance sheet insurance risk, We are an asset-like platform that earns commissions and fees on every policy written and renewed. That model is what allows us to scale at 60% EBITDA margins without taking catastrophe exposure onto our books. Now, profitability and technology get a lot of the attention, and they should. But I wanted to spend a moment on something that doesn't always show up in the model, how we performed when it mattered most. During the fourth quarter, the federal government shut down and the National Flood Insurance Program, or NFIP, went dark. That is the primary source of flood insurance for most Americans, and it was unavailable. While the NFIP was shut down, our platform kept quoting, kept finding, and kept onboarding new agents who needed somewhere to send their customers. We made targeted, disciplined decisions to support our agent partners during the disruption, including incentives that contributed to record new business sales with minimal impact margins. That is the kind of moment that cements relationships. Agents remember who showed up. I also want to highlight a structural advantage of our market that I think is underappreciated. Flood insurance pricing is not subject to the reinsurance cycle volatility that whipsaws other property and casualty lines. The NFIP sets its rates statutorily, and as the dominant market alternative, that creates a stable pricing environment around which we can underwrite with confidence. In 2025, we retain 98% of premium. That retention rate tells you two things. Our pricing is competitive, and our policyholders are staying. The results we delivered this year reflect a model that is working. Technology, data, capacity, distribution, and execution all compounding together. We enter 2026 with real momentum and confidence in our ability to continue building value long-term. I'll now turn things over to Matt Duffy, our President and Chief Risk Officer, to discuss business updates.

Let me walk through how we scaled our three corpulas during the fourth quarter. Our technology platform handled elevated volume without strain during the federal government shutdown. Increased activity drove strong growth in sign-ups, quotes, and bound policies. Performance, reliability, and service levels remained constant throughout, highlighting the best-in-class, fully digital nature of our platform. We also launched a beta version of our indemnity earthquake product, Because our underwriting and distribution infrastructure is entirely digital and API-driven, adding adjacent perils requires minimal incremental cost. We can expand into new lines without adding complexity or sacrificing margin. The company was built this way by design. At the same time, ongoing enhancements to our machine learning models continue to improve performance across both new business and renewals, demonstrating the compounding nature of our data advantage. We are seeing real productivity gains across our engineering organization from AI assisted development tools. Engineers are shipping code faster, iterating models more quickly, and accelerating testing and documentation cycles while maintaining strict quality and security standards. Nearly half of our workforce is our engineering and data science team. When development velocity increases, innovation accelerates, And importantly, operating leverage improves. That advantage compounds over time. Our platform was built from inception for real-time digital insurance transactions. If conversational or AI-driven interfaces increasingly become the entry point for insurance purchases, we are ready and integrated. We do not need to retrofit legacy systems or rebuild workflows. If more volume ultimately shifts towards direct-to-consumer channels, our economics benefit. At the same time, we continue investing in tools that make agents more productive. We are channel flexible by design. Onto capacity. Our capacity relationships are a direct validation of eight years of underwriting performance. It's important to clarify something that is often misunderstood. Neptune does not file rates like admitted insurers. Our pricing algorithms and risk selection models are proprietary. We also do not retain insurance risk on our balance sheet. That means we scale without catastrophe loss volatility or capital strength. Our revenue is driven by recurring premium retention and operating leverage, not by loss ratio swings. That structure allows us to grow capacity efficiently, as shown during the fourth quarter when we launched our seventh capacity program with Palomar, which contributed immediately to financial results. We also executed our eighth program with Summers Re, which went live on January 1. That program was designed to deploy additional capacity quickly as opportunities arrived. Q4 also saw us expand an existing capacity relationship to support the beta launch of our indemnity earthquake program. We now partner with 40 risk-taking providers, up 74% year over year. Capacity expansion is earned. It reflects underwriting performance, disciplined portfolio management, and transparent reporting. Our partners continue to expand alongside us because the results support it. Subsequent to quarter end, we completed the renewal of another significant capacity agreement. The continued renewal and expansion of these capacity relationships reinforce our ability to scale efficiently across varying market conditions while maintaining underwriting discipline. And distribution. The strength of our distribution platform was particularly evident in the fourth quarter. We delivered record-breaking new business sales despite the absence of storm-driven demand, underscoring the point that our growth is driven by execution and market expansion rather than a venture of an activity. Production associated with the Palomar relationship contributed incremental volume on top of an already record-setting quarter. We launched a new user-based login process during the quarter, and more than 30,000 insurance agents registered within the first 30 days. This significantly improves how agents interact with our platform and is already deepening the behavioral data set that delivers better tools, insights, and feedback through our data science and AI models. For the full year, premium retention reached 98%, up to 90 basis points year over year, supporting record written premium of $367 million. Those figures reflect the durability of our agent relationships and the consistency of our value proposition. Across technology, capacity, and distribution, the progress achieved in the fourth quarter strengthens our operating leverage, reinforces our competitive moat, and compounds our data advantage. We enter 2026 with significant momentum. With that, I'll pass it on to Jim.

For the fourth quarter of 2025, Neptune delivered another strong financial performance, tapping off a very successful year. Quarterly revenue increased 39% year-over-year to $43.8 million, driven by record new business sales and strong retention across the portfolio. For the full year, revenue increased 34% to $159.6 million, reflecting continued growth in premium in force and consistent execution across the business. We've continued to focus on renewal acceptance as a key driver of revenue retention. For the full year ended December 31st, 2025, we retained 98% of premium and 86% of eligible policies, 0.9 and 1.8 percentage points, respectively, compared to 2024. Our asset-like technology-first model continues to deliver operating efficiency and strong margins, even as we incur incremental costs associated with being a public company. where the three months ended December 31st, 2025, net income was 4.3 million, down 63% over the prior year quarter, while adjusted EBITDA rose 34% to 25.9 million. Net income included 4.6 million of IPO-related expenses incurred during the quarter. This resulted in a 9.9% net income margin and a 59% adjusted EBITDA margin for the quarter. Well, the full year of 2025, Net income increased 8.2% year-over-year to $37.4 million, representing a 23% net income margin, while adjusted EBITDA increased 32% to $95 million, representing a 60% adjusted EBITDA margin. 2025 adjusted EBITDA primarily excludes IPO expenses and share-based compensation. On a per-employee basis, we generated $2.7 million of revenue per employee and $1.6 million in adjusted EBITDA per employee for the full year, increases of 15% and 14% respectively compared to the prior year. The continued improvement in these metrics underscores the scalability of our model as we grow. Turning to the balance sheet, our growth and strong operating cash flow allowed us to further strengthen our capital structure. During the quarter, we refinanced our existing term debt into a $260 million revolving credit facility, which lowered our interest rate, eliminated required amortization, and provides greater flexibility to manage capital efficiently. We ended the quarter with $240 million of total debt outstanding, approximately 2.5 times net leverage on a trailing 12-month adjusted EBITDA basis. Subsequent to quarter end, we paid down an additional $9 million of debt during January and February, bringing our current outstanding balance to $231 million. Our priority remains continued debt reduction while maintaining flexibility to invest in growth. IPO-related expenses total approximately $8.9 million for the full year, including $0.5 million incurred during the fourth quarter. These costs were reimbursed following the completion of the IPO on October 2nd, and that reimbursement was reflected as an equity contribution in our Q4 financials. the proceeds from reimbursement were used to further reduce outstanding debt. Share-based compensation totaled $11.4 million for the year, with $11.1 million recognized during the fourth quarter. This increase was driven by two IPO-related items. First, upon completion of the IPO, outstanding unvested employee stock options became subject to accelerated vesting, resulting in a one-time non-cash compensation expense of $4.1 million. Second, as part of the IPO, Neptune issued restricted stock units to all employees. These RSUs vest annually in equal installments over three years. On a go-forward basis, we expect approximately $6.9 million of RSU-related expense quarterly. Based on Neptune's year-end stock price and calculated using the treasury stock method, we had 149,401,852 diluted shares outstanding. the net share settlement to satisfy tax withholding obligations or reduce that total share count by approximately 500,000 shares at 35 basis points. Upon investing, the net settled RSUs will have a 64 basis point dilutive effect on the account for basic shares outstanding. With that, I'll turn things back to Trevor for closing remarks.

Neptune remains focused on long-term shareholder value creation. The inherent variability of government policy and weather-related activity make short-term forecasting challenging, and as a result, we generally do not update guidance unless there has been a meaningful change in the underlying trajectory of the business. The strength of our performance in the fourth quarter and across full-year 2025 has increased our confidence in the outlook for 2026. Based on that performance, we are increasing our full-year expectations. For full year 2026, we now expect revenue of approximately 193 million and adjusted EBITDA margin between 60 and 61%. These targets reflect our continued commitment to profitable growth, operational efficiency, and disciplined capital allocation. Where appropriate, we intend to deploy capital to grow the business while returning excess capital to shareholders. To date, that has included a strong emphasis on debt reduction as a straightforward and efficient way to enhance equity value. Before we open the line for questions, I want to bring it back to what matters. This quarter capped a record year. Revenue grew 39%, adjusted EBITDA grew 34%, and we did it at a 59% adjusted EBITDA margin while investing for growth. Those are the numbers of a company that is AI. I want to be direct about what we're building because I think the market narrative has drifted from the reality. Neptune is not just a successful flood NGA. We are building the technology and data infrastructure for flood insurance in an AI-driven world. That is a much larger opportunity, and we have a meaningful head start. Our data sets get stronger every day. Every policy quoted, every renewal decision, every claim resolved feeds back into our models. That flywheel has been compounding for years. You cannot shortcut it with a foundation model and a press release. Data at our scale and our domain is a structural barrier to entry, and we believe it widens with time. Our underwriting results have made that case to the people who matter most, the capacity providers putting real capital behind our models. We went from 23 to 40 partners this year. Commission economics improved. That is not momentum you can hand wave away. That is sophisticated risk capital voting with its balance sheet at Neptune Works. And our distribution infrastructure is built for wherever the market goes next. agents, embedded digital, AI-native workflows. We don't need to guess which channel wins. We capture all of them on the same platform. But I want to be clear about something. We are not rooting against human agents. There are roughly 25 million buildings in the United States at meaningful risk of flooding, and only about 4 million flood insurance policies in force. That is a massive protection gap. AI doesn't close the gap alone. Agents do, armed with better tools, better data, and a faster quoting experience. Our job is to make agents more productive, not to replace them. When we do that well, the addressable market gets dramatically larger for everyone. And if parts of the market do shift towards fully automated buying, our margins expand because our largest cost line compresses. Either way, Neptune wins. So here's how I frame it simply. We have the technology, we have the data, we have the capacity relationships, we have the distribution flexibility, and we just posted a record year proving all four work together. question is not whether AI disrupts insurance. The question is, who is best positioned when it does? We believe, and our results demonstrate, that answer is Neptune. Thank you to our employees, our over 30,000 totally awesome human insurance agents, our capacity partners, and our shareholders. We'll now open the line for questions.

Ladies and gentlemen, we will now begin the question and answer session. As we enter Q&A, we ask that you please limit your input to one question and one follow-up. As a reminder, to ask a question, please press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. One moment, please, for your first question. Your first question comes from the line of John Barnage of Piper Sandler. Please go ahead.

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

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

Thank you for that answer. my uh other question if i may looks like there was a letter elizabeth warren put out shortly before the close today attempting to connect blood insurance with private 20.5 can you maybe talk about your response to that and maybe build trevor on how you are the ai disruption as opposed to being disrupted thank you you know if this were polymarket and you had given

I was giving out odds of the likelihood that the Trump administration would invite me to the White House and I would get a letter from Elizabeth Warren. I'd say it's something like 10,000 to one. But I think that it's a tremendous opportunity for us to continue to talk with important stakeholders about the role of private flood insurance. We're entering our 10th year here in business. We are the largest private flood insurer in the United States, and we want to make sure that all stakeholders understand the role that private flood insurance can play to close the huge flood insurance gap that exists in the country. We have talked with everyone who is interested in talking with us, from senators, staffs, to the White House, to the FEMA Advisory Council, to our local congressperson. This is a bipartisan concern to make sure that people can be properly protected. And we look forward to talking to Senator Warren's staff to make sure she understands role that private flood insurance can play. Listen, when it comes to... I'm sorry?

Sorry, I didn't realize you were continuing.

Yeah. No, I was just going to answer your second question about sort of where we fit in the AI ecosystem. Really, I think the most important thing to understand is that Neptune's platform was built from the beginning using old-fashioned AI, so non-large language model developed AI, really the automation of human tasks. So we've been built from the beginning able to work in digital workflows. We've been able to work in agent-led workflows, direct-to-consumer. If all Americans decide tomorrow they're going to use chat GPT to buy flood insurance, We're ready for that, and that would be good for us because it would expand our margins, but I don't think that's actually going to happen. Agents play an incredibly important role here at expanding the marketplace. So there are about 25 million buildings in America that are at moderate to severe risk of flooding, and there are only about 4 million flood insurance policies that exist today. We need agents to be beating the drums educating their customers that they need to add flood insurance to their coverage universe thanks a lot for the answers your next question comes from the line of andrew kriegerman of td cohen please go ahead hey good evening um i

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

Yeah, thank you for that question. We've been paying down debt because it's the easiest thing to do. And obviously, as a revolver, that just gives us availability under that revolver to, you know, utilize that in the future if need be. We find great ways to grow the business or invest or ultimately, if the board decides that stock repurchases are the right thing to do, we're going to have the dry powder to be able to do that. And obviously, we produce significant free cash flow, which will just grow that amount over time. Um, as I mentioned on our last call, we now have three things available to us. We can pay down debt, we can buy back shares and, uh, we can potentially someday pay dividends. Uh, I think our board is going to be interested in, uh, the first two, uh, for this year because it gives us, gives us the most, uh, you know, flexibility. And, um, uh, We will have to see what the ultimate reaction is to our earnings and helping educate the market about our stock. But we too were surprised that year to date we're down more than the traditional brokers, which is confusing to us.

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

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

Your next question comes from the line of Bob Long of Morgan Stanley. Please go ahead.

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

I think there are a couple of things here. One is there's a massive TAM here, right? There are a hundred million buildings in America. 80% of the sales that Neptune has ever done are non-mandatory, right? So there's a very big market here. Number two, we have a big data moat, right? The data that we have collected and we continue to collect and analyze gives us, you know, tremendous value. advantage i don't think without that data it's going to be easy even with a future where large language models know everything about humans they they know everything that they have you know, read on the internet and that data doesn't exist on the internet. Right. So, um, you know, but, but I'm open to the possibility that, you know, advancements could be made there, but there are two other important, you know, modes. And one is the capacity relationship. Someone needs to take that risk. And we've made hundreds of millions of dollars for our risk-taking partners over the last eight or nine years. This is a relationship business. We worked very hard to cultivate those relationships, and we continue to grow those relationships quite profitably for them. We work with 11 of the 12 largest reinsurers in the world. They would have to be making a decision to leave us and the money that we have made them over time to go for a new startup. I'm not saying that's impossible. I'm just saying it seems unlikely. And then the last area is distribution. We've worked for years to build the distribution network that we have with amazing agents across this country. And it took years and years to build all of the API connections and et cetera. So I just think there are, there's not one, there's not two, there are three meaningful, you know, modes here that are just going to be hard to replicate.

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

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

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

Hi. Thanks. Good afternoon. Just a question around... any updates on the task force that was created by the president, and if you all have seen any plans, timeline, et cetera, around that initiative. Thanks.

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

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

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

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

I think the promotions were more one time or December expense for, you know, agents return to normal levels as they have in, you know, January and so far in February, but we do do promotions from, you know, time to time and, we thought the shutdown was a good opportunity to lean in and take very minor impact on margin to introduce a lot of new agents to Neptune who had heretofore largely only used the NFIP. So we were excited about onboarding them. When we last spoke in the middle of November, which I think was on the day that the major shutdown ended, I likened the impact to a medium-sized storm. Maybe with the after effects of agents discovering Neptune for the first time and sticking with us because they liked it, maybe it was a medium to large-sized storm. But still... not as large as we would see from a major category four or five hurricane impacting a major metropolitan area. But the shutdown did have the very positive effect of introducing a large number of agents to us for the first time. And that's part of why the added enthusiasm and trend led us to increase our guidance.

Next question comes from the line of Tommy McJoy of KBW. Please go ahead.

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

It's something like 75 or 80 percent net new uh very few people are actually switching from the nfip to neptune and that's because there's still about half of all policies are receiving subsidies and their risk rating 2.0 price has not yet been achieved as you remember the nfip is increasing prices on consumers' homes by 18% a year until they reach their actuarially accurate rate at the NFIP. So with the ongoing subsidization, there really hasn't even been the opportunity for people to think about private alternatives. So that I think will change over time as those subsidizations burn off in the coming three, four, five years. But for now, the vast majority has been net new. New home purchases, people discovering from their agents that their homeowner's policy doesn't cover the risk of flooding and the need to protect themselves from this most dangerous peril. The housing market has not done us any favors, right? The housing market continues to be quite slow. When people buy houses is when they normally shop for insurance. So a return to a healthy housing market would definitely, you know, help our business as well, because a lot of those people may have NFIP policies, they sell their home. Now that's a new opportunity for someone to shop.

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

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

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

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

The answer is no, it wasn't bots. Sorry, Greg. Thank you for that question. The answer is no, it wasn't bots. This is all human-based and this is multi-factor authentication, so the requirement to properly authenticate into the system. This is just a reflection of how many users we have actually using Triton, the Quoting platform and Poseidon, the policy management platform, on a monthly basis. And so this is agents who are coming in to quote policies, to bind policies, and then also agents who are coming in to service existing policies as well. So we had a great uptake, but this is a big benefit and a big new data set that we have going into 2026 that provides us much more granular behavioral data at the agent level. that allow us to really help the agents as they go through this process, help them with, you know, ways that they can sell policies, you know, how can they improve the sort of penetration within their book of flood insurance purchases, and also be able to reward agents for the behavior and for the quoting and binding that they're doing through the Neptune system.

OK, well thanks for that answer. I guess a follow up question. Just relates back to comments you were talking about where you said you now have eight programs and 40 capacity providers. And can you just remind me you know what the difference is between program number one versus program number eight or program number four versus program number seven? Just give me a. Just try not visualize what the difference is in the programs.

The programs are all actually the same. They've all signed up to Neptune and to Triton to allocate individual policies to them. And we were actually awarded a patent last year on our disaggregation system that does that allocation. And it's assigning... individual policies to the carrier where it's going to have the least impact on their probable maximum loss. So it's a very sophisticated program. You can think about it pretty simply as saying, We don't want one carrier to have all the policies in Miami, right? We want to spread that out amongst the eight different programs, and we want to make sure that if a big storm happens, no one carrier is disproportionately damaged because of that storm. And doing that in a highly sophisticated way to manage their risk capital is a big part of the value add of Neptune to these carrier partners. But they're all exactly the same rule set. They are not setting any pricing. There's no different guidelines. They're signing up to Neptune and they're basically giving us a premium that they're looking for during the year. Maybe said a different way. They put in a premium request and then we're letting them know what we think we're going to be able to allocate them in terms of premium during the year. But to be super clear, we call a capacity provider, either an insurer or a reinsurer, the eight programs. are our eight insurers on whose paper we place the individual policies. And then we have 32 reinsurers who sit behind those eight insurance companies for a total of 40 total capacity providers.

Your next question comes from the line of David Milkmaiden of Evercore. Please go ahead.

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

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

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

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

The next question comes from the line of Josh Shanker, Bank of America. Please go ahead.

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

So Neptune has had a direct-to-consumer channel from the very beginning. And it's always been about 2% of our business every year. Even as we grow, it remains about 2% of our business. Consumers like talking with humans, agents around the risk that they're taking on in their life and getting good advice. Can I foresee a dystopian future where AI agents are creating better than humans at convincing us as to our risk and better at selling to us? Maybe. I'm not sure that's a great world, but I can, you know, futurize and think of that kind of outcome. And that's really what I think the market was jumping to was that kind of outcome where AI agents are just better at humans at doing the job of convincing humans what to do and providing them advice. Our point is, if that happens, Neptune's margins improve because When we sell direct to consumer, we don't have to pay an agent, right? That is, it's just our technology, you know, directly linked in. We may have had to pay Google AdWords. We may have to pay OpenAI. We may have to pay, you know, Anthropic. We may have to pay our new AI overlords. I'm clear. But those costs generally would need to be lower than, we would have to pay an agent for it to make sense for us to dedicate that money. So I think it is possible to envision that kind of dystopian future, but I don't think that it is a near-term concern. I spent last weekend upgrading my parents' phones, and I installed ChatGPT for them, and they were playing around with it. And I asked my mother this week, have they been using it much? And they said, no, it scared them too much. I'm 53, and I can use it, and it makes sense. But I think there's going to be a long road to convince large swaths of Americans to stop taking advice from their friend at the Kiwanis Club and to start listening to an AI.

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

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

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