Neptune Insurance Holdings Inc. Class A

Hello everyone, thank you for joining us and welcome to Neptune Insurance Holding third quarter earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand 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. Thank you for joining us. and in our current report on Form 8K that was publicly filed with the SEC on October 20th, 2026. Now, I'd like to turn the call over to Matt.

Thanks, John. It's been a remarkable year for Neptune, and as we mark the first anniversary of our IPO, I want to spend some time today discussing not just the results we're delivering, but what's driving them and what they tell us about the future of the business. One of the things I've come to appreciate about Neptune is that the real strength of our business isn't in any one product, technology or distribution relationship. It's how those elements work together. Our technology allows us to make better underwriting decisions and create better experiences for our distribution partners. That attracts more agents, more business, more capacity and helps us close the protection gap. And as the business grows, we gain greater insight, improve our technology and become more efficient. Each of those advantages reinforces the others. What's particularly exciting today is that we're seeing the benefits of that model become increasingly apparent in our financial and operating results. We're growing revenue substantially faster than our team size. We're making our distribution partners more productive. We're attracting greater demand from risk-taking partners. And we're doing all of that at a time when the broader environment hasn't been helpful. That's important because we're not building a business that depends on favorable market conditions to succeed. The fact that it's a soft insurance market and a slow housing market hasn't impeded our ability to execute or grow. We're building a business with the capabilities to consistently take share, expand the market, and compound our advantages over time. I want to walk through the evidence of that today, including what we're seeing from our investments in AI, the evolution of our distribution network, the strength of our capacity relationships, and the opportunities we see ahead. But first, let me turn to our third quarter results. The third quarter was another record for Neptune. Revenue grew 34% year-over-year to $59.6 million. Adjusted EBITDA grew 38% to $36.8 million at a 62% margin, an improvement of 147 basis points from a year ago. Premium in force reached $450 million, up 32%, and we now have more than 336,000 policies in force, up 29%. October 1st marked the anniversary of our first day of trading on the New York Stock Exchange, and it's worth reflecting on how far we've come in that short period. Our trailing 12-month revenue is now 44% higher than at June 30th, 2025, the figure reported in our S-1. We've achieved that growth while maintaining exceptional profitability, with a roll of 40 of 94. And the growth is broad-based. It's coming from the expansion of our distribution network, increasing productivity among our existing agents, and the continued development of our products and technology. As we get into operations, let me start with distribution, because I know the impact of AI on insurance purchasing is top of mind for many investors. Our view is straightforward. Greater price transparency and easier access to insurance are opportunities for Neptune, not threats. There are more than 100 million buildings in the United States and approximately 25 million face meaningful flood risk. Yet there are only around 4 million flood insurance policies. The biggest obstacle to selling flood insurance isn't price discovery. It's that millions of property owners don't know they need it or mistakenly believe they're already covered. AI has the potential to change that by helping consumers understand their exposure and identify coverage gaps. And Neptune is exceptionally well positioned to serve that demand. Whether a consumer purchases through an insurance agent, directly through NeptuneFlood.com, or eventually through a personal AI assistant, our technology can support the transaction. In the near term, we expect AI to make our existing distribution partners substantially more productive. Over time, as more consumers transact directly, there's also an opportunity to lower our distribution costs, which today represent our largest expense. We're already seeing tangible evidence of the opportunity through Atlas+. During the third quarter, 7,000 agents used Atlas+, exchanging more than 75,000 messages with the platform. And perhaps most importantly, quotes involving Atlas+, abiding at three and a half times the rate of quotes without an Atlas Plus interaction. That is a powerful indication of the value we're delivering. Let me give you an example of what that looks like in practice. We recently held a call with a large group of insurance agents, and during the discussion, one agent told us they'd just sold their first-ever flood insurance policy. They'd come to Neptune, run a quote, and started a conversation with Atlas Plus. The tool gave them a sales script, helped them understand the property's flood exposure, and provided the backgrounds they needed to explain the coverage to the customer. They told us that conversation gave them the confidence to present the policy and ultimately close the sale. Thank you for joining us. and we recently heard from Garrett Mitchell with Rocket Flood, a hub international company, who said, and I quote, Atlas Plus is making a real difference in our business. The chatbot on Neptune's quote page is like having an underwriter alongside us through the entire sales process. And with the new Atlas Plus cards, in just three weeks, we've found dozens of endorsements and renewals, generating tens of thousands of dollars of premium. Garrett's comments show that we're not simply making our partners more efficient. We're also helping drive demand for those partners so they can grow their business. More than 65,000 insurance professionals have now created verified Neptune accounts, and over 43,000 of them were active during the quarter, compared to 39,000 in Q2. We're not just adding distribution partners. We're making each relationship more productive and giving agents more reasons to do business with Neptune. The same productivity gains are happening inside our organization. During Q3, our engineering team delivered two and a half times the amount of work it delivered in the same quarter last year, with broadly the same number of people. And our service organization operated an average of one human representative for every 30,000 policies in force, a 50% productivity improvement year over year, while improving response times and customer satisfaction. These are meaningful improvements and they demonstrate how we're growing the capabilities of the business considerably faster than its headcount, all while continuing to invest in new products, technology and underlying infrastructure. I've spent a considerable amount of time with capacity partners over the last several months, and the quality of those conversations reflects how far the business has come. These are sophisticated counterparties with their own models, their own views of risk and many choices about where to deploy capital. They understand our portfolio, they monitor its performance, and increasingly they want to participate in its growth. During the quarter, we renewed another capacity program on improved terms, and with that renewal, effective December 1st, none of our active capacity programs will include contingent commissions. When existing partners want to grow alongside Neptune, and new partners want to access the business, that's meaningful external validation of what we've built. Let me turn to the external environment and the broader opportunity ahead. The housing market remains weak and we've now gone through two consecutive years without a major hurricane creating a substantial demand event for flood insurance. Both of those factors have historically supported new business demand and their absence has created a headwind. Despite that, our premium in force has grown at 32% year-over-year and our new business premium during Q3 was up 51% year-over-year. That's an important indicator of the underlying strength of the business. We're growing our distribution, taking market share and expanding the insured base without relying on an improvement in those external conditions. A recovery in the housing activity would certainly be beneficial. but it isn't required to deliver on our growth expectations. We're also monitoring the potential impact of a strong El Nino this winter. We don't expect it to have a material impact on either overall demands or the underwriting performance of our portfolio but increased awareness of flood risk is good for the industry. Significant weather events create opportunities to remind property owners of their exposure and of the importance of having flood insurance. will continue working closely with our fantastic distribution partners, particularly on the West Coast and in Hawaii, to translate that awareness into greater insurance adoption and helping to close the protection gap. We are often asked about potential changes at FEMA around the NFIP. While we have no additional information and don't expect significant changes in the immediate term, our latest research highlights the opportunity for growth, showing that nearly half of NFIP policies are still priced below their full risk level, representing approximately $2.6 billion in annual subsidies that will continue to burn off in the coming years. Meaningful reform would accelerate that opportunity, but it isn't a prerequisite for our success. We're also continuing to expand our addressable market through new products. Our indemnity earthquake product is progressing through beta testing and we anticipate a formal launch in Q4. Let me finish with our outlook. Shortly after our IPO last year, we introduced initial 2026 revenue guidance of $186 to $189 million. Today, we're raising that guidance for the fourth time to $204 million, which if achieved, will result in approximately 28% year-over-year growth with an adjusted EBITDA margin above 61%. We're also announcing initial guidance for the full year 2027. We expect approximately $238 million in revenue at an adjusted EBITDA margin of approximately 61%. That outlook assumes neither a recovery in the housing market nor an above average hurricane season. It also excludes any inorganic growth and any substantial contribution from new product lines. In other words, we expect to continue delivering strong, highly profitable growth without needing the external environment to improve. And that brings me back to where I started. The strength of Neptune isn't any single product, technology or distribution relationship. It's how those advantages work together and become more powerful as the business grows. One year after our IPO, Neptune is materially larger, more productive and more capable. Our distribution network is expanding. Our technology is improving productivity across the business. Our capacity relationships are stronger than ever. We're serving 336,000 customers nationwide. And we've demonstrated that those advantages translate into sustained growth and exceptional profitability. That's what gives us confidence in our outlook and in the significant opportunity still ahead of us. With that, I'll hand it over to Jim.