NP - NYSE

Thank you for standing by. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the Neptune Insurance Holdings First Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one in your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Mr. Jon Carlon, Director of Corporate Development. You may begin.

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

These measures should be considered only as supplements to their comparable GAAP measures. Additional information, including reconciliations of the non-GAAP measures to their most comparable GAAP measures, can be found in our earnings release at investors.neptuneflood.com and in our current report on Form 8-K that was publicly filed with the SEC on April 22nd, 2026. Now I'd like to turn the call over to Trevor.

Good evening, and thank you for joining us for Neptune's first quarter earnings call. Before we review the quarter, I wanted to talk about how excited I am by this moment in the history of technology. I was an investment banker during the first dot-com boom. I built one of the first technology-first banks, and now am leading one of the first AI-native public companies. What AI has enabled in the last few months has far surpassed anything I've seen before. This is the power of the exponential. The Neptune team has the horse by the reins and is building something very special. People often ask how we think about AI at Neptune. The answer goes back to the very beginning.

In 2018, when we hired our first engineers, I put a sign on the wall that said, "No humans." Not because we don't value people, but because we wanted to build a system where technology could do what humans cannot faster, more consistently, and at scale. What is now being described as AI native, we simply viewed as the right way to build from day one. That mindset continues to guide us today. We don't start with today's constraints and optimize around them. We start with where the world is going and build towards that future. As the technology continues to evolve, the gap between Neptune and traditional insurance platforms is not narrowing, it is widening. AI also creates a significant opportunity to expand the market. Tens of millions of properties in the United States remain uninsured for flood risk.

By using AI to improve risk awareness, simplify the buying process, and support agents with better tools, we believe we can meaningfully grow the insured base over time. That brings me to what we are seeing in the business today. Last quarter, I spoke about turning agents into what we call super agents. We are now seeing that come to life. Following quarter end, we launched in a beta release, Atlas Plus, our agentic assistant for insurance agents. Atlas Plus can answer questions, generate sales materials, and interact directly with quotes in real time. Early feedback has been extremely strong, including examples of policies being sold directly as a result of these interactions. Over time, we expect Atlas Plus to become a core part of the sales workflow. Importantly, these capabilities are built on top of what we believe is one of our most important advantages, our proprietary data.

Our platform has processed tens of millions of quotes and over 1 million policies, generating real-world underwriting, pricing, and behavioral data that continuously improves our models. We believe that data advantage will continue to compound over time and create a structural barrier to entry in an AI-driven market. From a financial perspective, the implications are equally important. In 2025, we operated at a 60% Adjusted EBITDA margin. As AI continues to reduce friction in distribution and automate workflows, we believe our current level is a floor and not a ceiling. Turning to the quarter, the first quarter of 2026 was a record first quarter for Neptune and reflected continued strength across the business. Highlights from Q1 include revenue of $37.8 million, a 29% increase year-over-year, net income of $7.3 million with adjusted net income of $13.4 million. Adjusted EBITDA was $21.6 million. That's growth of 26%.

Written premium was $86.7 million, driving 32% year-over-year premium and force growth. We had record first quarter new business sales. As a reminder, the first quarter is typically our lowest margin quarter due to seasonality, and this year that effect is more pronounced as public company audit and compliance costs are front-end loaded in Q1. As a result, adjusted EBITDA margin in the quarter was approximately 57.1%. Importantly, this is a timing dynamic, not a structural change in the business, and we continue to expect full year margins in the 60%-61% range. Premium in force reached approximately $389 million at quarter end, and we look forward to celebrating our $400 million threshold shortly. As a reminder, Neptune operates as an asset-light MGA and takes no balance sheet risk. This allows us to scale efficiently while maintaining strong profitability.

On a trailing 12-month basis, revenue per employee reached $2.8 million and Adjusted EBITDA per employee reached $1.7 million, both record levels. To put our revenue per employee in context, do this calculation for other companies. This is how you can tell if a company is really AI native. In addition to our earnings results, today we announced that our board has approved a $100 million stock repurchase program. We expect to fund this program through free cash flow over the next two years. This is incremental to our previously announced plan to retire shares associated with RSU tax settlements. We view share repurchases as a high return use of capital given the strength of our cash generation and the scalability of our model.

Stepping back, we believe our competitive position is defined by three core advantages, proprietary data and AI-driven underwriting, deep and expanding capacity relationships, and flexible technology-enabled distribution. Together, these create a durable and widening moat. I'll now turn things over to Matt to walk through the business in more detail.

Thank you, Trevor. Q1 was a very strong quarter for our system and our team of 62 exceptional employees. Across our three core pillars, we continued to adapt, innovate, and perform with the results able to speak for themselves. Starting with technology, Trevor touched on the pace of change we're seeing in technology. Inside Neptune, that's showing up in a very tangible way. I'll be honest, it's hard to capture in an earnings call just how fast things are moving internally. Our team is building with tools that didn't exist a matter of months ago, and they're using them to rethink how we build, how we operate, and how we serve our agents and customers. You can see that directly in the pace of product development coming out of the company.

During and immediately following the first quarter, we rolled out three major technology advancements, all of which lay the groundwork for a continued redefinition of how our system is utilized, accessed, and built. The 1st is Atlas Plus, which is the AI layer we're building across the Neptune platform and which we introduced in April through an initial beta experience for a small group of agents. This beta is a conversational interface embedded directly into the quoting workflow. Agents can ask questions, adjust coverage, and move through the quote-to-bind process using natural language. In the first couple of weeks, we've seen thousands of agent interactions, which tells us this fits naturally into how agents already work. This is just the starting point.

Over the coming quarters, we expect Atlas Plus to expand beyond this initial interface and become a core part of how users interact with Neptune across our platform. The 2nd is our Neptune application inside ChatGPT, which gives property owners a new way to interact with our platform. Instead of navigating a traditional quoting flow, users can ask questions about flood risk in plain language and receive a real-time Neptune quote directly within the interface. What's important here is less the interface itself and more what it represents. As conversational AI continues to evolve, we expect experiences like this to play an increasing role in how people access information and make decisions. The 3rd is Proteus, an internally developed AI software developer. The way we think about this is pretty simple.

Our engineers are exceptionally talented, and their highest value comes from problem-solving, system design, and building new capabilities, not from spending time on execution that can be automated. We've built Proteus as a set of agentic tools and skills that can take on that execution work. Proteus writes code, reviews it, completes development tasks, and monitors the system in real time. It allows our engineers to stay focused on the critical thinking and design work that actually moves the platform forward. In March alone, Proteus was responsible for over 30% of the engineering tickets completed. Put differently, that's nearly a 50% increase in the amount of work the team is shipping, and you can feel that inside the company.

Things that used to take weeks are getting done in hours, and ideas we've had for years are now becoming feasible projects. Each of these changes I've discussed is powered by the data running through our system. Tens of millions of quotes, over 1 million bound policies, and constant interaction from tens of thousands of agents. As they evolve, these changes will continue to represent a fundamental shift in how Neptune's platform is accessed, how it's used, and how it's built. Turning to capacity. During the quarter, we renewed one of our eight programs, increasing the size of that program for the 2026, 2027 treaty period, and adding two new reinsurers, bringing our total panel to 42 capacity providers. Program renewals are important milestones for the business. They reflect long-term relationships and a track record of consistent underwriting performance.

In this case, we saw the program grow and terms update in a way that reflect the results we've delivered. That's been a consistent pattern for us. As the platform scales and the data continues to improve, our capacity partners are growing alongside us. Finally, distribution. Our growth continues to be supported by the strength of our agent network, which remains an important part of how we reach and serve property owners across the country. During the first quarter, we delivered record first quarter new business production, driven by strong agent engagement and continued deepening of distribution relationships. One of the clearest indicators of that momentum is user-based activity. Since launching our new user-based login system in December, more than 45,000 individual agents have signed up for direct access to Neptune, and that number continues to grow daily.

To be clear, this is not the total number of agents we work with, but rather the number of individual users who created direct accounts using their email and phone number and verified that access via multi-factor authentication on the platform between December and March. Nearly 11,000 of those users have already bound new business policies in that same timeframe. Those stats show the real scale of how the platform is being used, and the associated data allows us to build better tools and experiences around how agents actually work. We continue to invest heavily in our agents through building tools and products that are driving adoption and helping us to help insurance agents become increasingly effective. I'll summarize with this.

What you're seeing here is a system, an ecosystem that gets better in real-time, faster to build, easier to use, and more valuable to the agents, customers, and capacity providers that are a part of it. That's really how this business can continue to compound over time. As we head into hurricane season, which is typically our busiest period, that level of performance really matters. With that, I'll turn it over to Jim.

Thanks, Matt. The first quarter reflects another strong period of execution with a continued growth in revenue, strong retention across the portfolio, and sustained profitability. Revenue for the quarter increased 28.8% year-over-year to $37.8 million, driven by record first quarter new business production and the continued expansion of our premium in force. Adjusted EBITDA increased 26% to $21.6 million, which demonstrates that revenue growth didn't come at the expense of operating discipline. We continue to see strong performance on renewals. Premium retention remains high, reflecting both the value of our product and the consistency of our pricing approach. The Q1 adjusted EBITDA margin was 57.1%, even though substantially all of our public company accounting costs hit the P&L during the first quarter.

Again, this is a timing dynamic, not a structural change in the business, and we continue to expect full year adjusted EBITDA margins in the 60%-61% range. Stepping back, the underlying economics of the model remain very strong. A reminder on the model. We don't carry any of the underwriting risk, the carriers do. What we carry is the technology that decides which risk to bind, who to bind them with, and at what price. That means we grow by adding policies, not by adding capital. We scale by writing more code, not by hiring underwriters. We track our employee metrics as key indicators of our performance. Revenue per employee was $2.8 million on a trailing 12-month basis. Adjusted EBITDA per employee was $1.7 million. Both metrics are up double digits year-over-year. These headcount ratios hold the roof up on the whole margin story.

If we had to add one employee for every few hundred thousand of revenue, we'd look like every other insurance company. These metrics highlight the efficiency and scalability of the platform as we grow. Turning to the balance sheet. During the quarter, we continued to strengthen our capital structure. Last year, we refinanced our existing term debt into a $260 million revolving credit facility, which lowered our cost of capital, removed acquired amortization, and has provided greater flexibility as we manage the business. We ended the quarter at $227 million of total debt outstanding on the revolver, which is 2.2x trailing Adjusted EBITDA. Yesterday, we paid another $5 million down, bringing our current balance to $222 million. Neptune's earnings mean that leverage comes down on its own, and to date, we've repaid debt with excess cash. From a capital allocation perspective, our framework is pretty simple going forward.

The first dollar goes into the platform because that's where the compounding happens. The second dollar shows up in the share buyback program Trevor just announced, and the RSU net settlement program we announced last year. Both of these tools return capital to shareholders. Overall, the financial results of the quarter reinforce the strength of the model. We continue to deliver strong growth, high margins, and increasing operating efficiency while maintaining a disciplined approach to capital management. With that, I'll turn it back to Trevor.

Neptune remains focused on long-term shareholder value creation. Despite the inherent variability of government policy and weather-related activity, the strength of our performance in the first quarter has increased our confidence in the outlook for 2026. Based on that performance, we are increasing our full-year expectations. For the full year 2026, we now expect revenue of $195 million and an adjusted EBITDA margin between 60%-61%. These targets reflect our continued commitment to profitable growth, operational efficiency, and disciplined capital allocation. Where appropriate, we intend to deploy capital to grow the business while returning excess capital to shareholders. To date, that has included a strong emphasis on debt reduction as a straightforward and efficient way to enhance equity value.

As part of this approach, our newly authorized stock repurchase program, together with our ongoing RSU-related stock retirement, gives us multiple levers to return capital in a disciplined and opportunistic way. We view these actions as a natural extension of the strong cash generation and high-margin profile of this business. As we move towards the 2026 hurricane season, there are always unknowns around storm activity and weather patterns. What our customers and agents can count on is that our team shows up when it matters most. We are constantly improving the systems that help people protect their homes and businesses, and we take that responsibility seriously. For our investors, our focus remains the same. We'll continue to push the boundaries of what an AI-native insurance platform can do. Every quarter, we are doubling down on our technological lead, strengthening our distribution network, and deepening our capacity relationships.

We believe the combination of those three things will continue to have a power law effect around this business. We'll now turn things over for questions.

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

Hey, thanks. Good evening. Yeah, just the Atlas sounds very interesting. I was just hoping you could give us some more color around what exactly Atlas is doing, how near-term impactful this is of the three items you mentioned where you've been leveraging AI. Do you expect to see this today and in 2026, or how near-term is this?

Yeah. Thanks, Rob. We are very excited about Atlas Plus. The original Atlas was launched about a year and a half ago as we looked for ways to use AI available at that time to help educate our independent insurance agents about things like incoming storm activity, or how many claims have there been in a particular neighborhood to give them facts and figures to help them become better at selling flood insurance. What agentic AI has allowed us to do now is to turn every agent into a super agent, and that's what we've really been focused on building with Atlas Plus.

What's currently available is a chat interface that allows an agent to ask things such as, Generate an email script for me that I can send out to a consumer, or, Help me explain why Temporary Living Expense cover is a really important add-on, or, Tell me the three main reasons why this customer should buy flood insurance, or, Go ahead and show me the price at all the different deductibles that are available. Atlas Plus can interact with a quote. We really view this as the very beginning of a long line of upgrades that we will make to the agent experience. We've mentioned for the past eight or nine years as we built this business that our biggest barrier to growth is how do we change agents behavior?

How do we get agents to offer flood insurance every time they're selling a home or a business owner's policy? How do we get them educated to be amazingly knowledgeable about flood insurance, its risks, and why people need to be protected? Agentic AI is allowing us to do that, and we're excited to roll this out. We are already seeing the impact of what is live today, and we're very excited by the things that we'll be shipping in the coming months. I would've said a year or two ago that everything that we're trying to build would take us years to build, but it's now down to weeks or months.

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

Thanks for that answer. That's very helpful and exciting. Yeah, if I could just follow up on the guidance. So revenue guidance is increasing. Just curious if that was due to this quarter, or if you're feeling better about later on in the year. On the margin guidance maintained, I realize this first quarter here, we have some timing related items, but should we be thinking about this as Neptune is trending towards the lower end of the margin range for the year, or is that premature?

Well, 1st let's talk about the revenue side. What we saw in the first quarter was just continued really good trends. We obviously had great revenue in the first quarter, record sales in the first quarter. We get a really good sense because remember, our policies go into effect 10 days. There's a 10-day waiting period. By the 22nd of the month, like we are today, we've got a really good sense of what April looks like and the general momentum that we have so far this year. We're quite bullish on the top line revenue trends, which is why we increased the guidance. This is not some hope and prayer that things get better later on. This is looking at the trajectory that's here and now.

On the margin side, no, we certainly hope to do as well as possible on the margin for the full year. You can look at our first quarter margin. Every single year, it's the lowest, and that's because we have all 62 employees the whole year long, but it only makes up about 18% of our revenue, right? Because of the seasonality in the business. It's just inherently a lower margin quarter, and then you build in 100% of the 2025 audit expense with PwC in the first quarter. Well, that's going to impact that. No, we're feeling quite good about the margin profile of the business and are excited about really 60% being a floor rather than a ceiling to what this business can become.

Your next question comes from the line of Josh Shanker with Bank of America. Your line is now open.

Yeah, thank you everyone. Great quarter. We talked about fourth quarter and into first quarter about the Milton, Helene opportunity back over a year ago and why that was a headwind on comparisons this year. As we enter 2Q, is that done or are there people who six months after Milton and Helene were still nervous and bought in 2Q 2025? Or are the comparisons there not in the numbers going forward?

Yeah, Josh, I don't think that's an impact going forward. That's really whether people renew the next year, and the most extreme example of that is Utah had this amazing snow season a couple of years ago, and the next year it didn't snow, and so people didn't renew their policies. That's the really extreme side of it. In hurricane-prone zones such as Florida, we will see a little bit of lower renewal when people are buying after a really scary storm, but that's now past us. That wouldn't impact the first or second quarter.

Switching gears opportunity, obviously, your data flow continues to increase and get smarter. I don't know if you're any smarter about earthquakes, though, or other events happening in California per se. What is your data learning right now about how Neptune can possibly be a meaningful player in market other than flood?

Well, it's certainly, I will tell you that flood remains our core focus. It is an amazing business with a tremendous opportunity. We have 20 million buildings in America that need flood insurance that don't have it today. We have the NFIP shrinking and 60% of the people within the NFIP who could save money by switching to Neptune. That's about 1.7 million policies. Give us a good housing market, and let's churn those into Neptune policyholders. At the same time, as we announced last quarter, we are running a beta test of earthquake. Earthquake data doesn't come because we haven't had a major earthquake in decades, and so we're obviously not gathering earthquake experience data at this time. What we're doing with earthquake is working with our agents and making sure that we have good product market fit before we actually launch a product into the marketplace.

I would expect that you know, beta test would continue for the next three or four months, and we would then make a decision around what we're going to launch in California.

Thank you for all the answers. Appreciate it.

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

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

Yeah, thank you. I really think that this is a power law business where the more data and the more size you have, the better that business is going to do. If you think about investing in social media companies, there were lots of competitors to Facebook, but if you didn't invest in Facebook, you didn't make any money. To get very specific about flood insurance competitors, we had a record first quarter sales. It was the best first quarter sales we've ever had. We are not seeing any meaningful impact from any competitor except for the NFIP, who remains the dominant force in flood insurance with approximately 85% of the business that's out there. We, of course, pay attention to all potential competitors, and we have seen many competitors come and go over the years. It is a very difficult peril to underwrite.

We had no landfall hurricanes last year. That has given people a lot of confidence that they can successfully underwrite flood insurance. Neptune, you'll remember, has been through 21 landfall hurricanes. Some of these new startups, when faced with a meaningful hurricane in a major metropolitan area where they've sold a lot of policies, at least historically, have not fared very well, and this led to many of them going out of business as quickly as they've gone into business. It is important for us always to pay attention to potential competitors and to look at the marketplace. If we are Uber, we want to be paying attention to who could potentially be the Lyft. I just don't see that yet. We continue to look very carefully. I would say as of today, we don't believe it's impacting our business.

Fair enough. In your investor presentation, when in the revenue section, you highlight a couple of positives, the larger renewal portfolio, increased commission. In the negatives or the headwind section, you cited the residual slowdown in sales due to less active storm season, which you just addressed in the previous question. You also talk about the ongoing slow real estate market. I'm just interested in your perspective on if there's a change in the real estate market outlook sometime down the road that might become a tailwind, or how do you size up that headwind versus a tailwind?

Hey, Greg. Yeah, thanks for the question. We've talked about this for a number of years now while we've been experiencing this slow housing market, and the most important number to remember there is the one that Trevor just mentioned. The market as it exists today has something like 4 million policies, the flood insurance market, and about 3.5 million of those exist with the NFIP. Today, about 1.7 million or 1.8 million of those policyholders with the NFIP would save money by switching to Neptune. They have not done so because there's been no turnover in the housing market, and so there's not been the ability to shop that policy into the private market to see what that pricing looks like.

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

Thanks for the answers.

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

Hey, thanks. Good evening. I had a question just on policy retention, if you could talk a little bit about how that trended in the quarter. I see on slide nine that revenue retention ticked down a little bit. Still at a strong level, it's at 90% over the last 12 months, but it did tick down from 92% in 2025. Just hoping you can unpack some of the trends there, please.

I think the first thing to mention, then I'll turn it over to Matt for some more details, but the first thing to mention is, we're one of the only companies in the P&C space to still be taking positive rate. Last year, our average price increase on renewals was about 13%, and so far this year it is still positive. It just happens to be positive mid to high single digits. That explains most of the difference in the revenue retention is just the change in the increase of pricing. I'm really happy that we have our business as opposed to ones that are down 30%, right? To still be up 7% is amazing. We're very happy that we've picked the market that we're in.

Just have to remember that the NFIP prices on a statutory basis, not based upon whether or not it's a hard or soft reinsurance market. Matt, what would you add to that?

Yeah, I think that's all right. The only thing I would add is the machine learning models that are operating on the renewal book are optimizing for lifetime value of the customer as opposed to any single year retention rate. The more units that we're able to keep around, the higher the lifetime value of that unit and of the portfolio in general. We're able to take a long-term view because we have a very, very long-term view of this business as owner-operators. We will always prioritize ensuring that we keep customers around for the long term, and that we have a great product and a great pricing strategy that provides value to those customers over the long term as well.

Got it. Thanks. It sounds like the policy retention is pretty stable there. I think it was 86%. That's helpful there. My follow-up is just on how you guys are thinking about the FEMA Advisory Council process, any sort of updates you have in terms of the possibility of a Citizens-style depopulation, and how you guys might react to something like that?

The first thing I would say is that we have no added information. We've heard nothing. We've had no communication. Other than what we've all read in the press about the timeframe being extended, we are not aware of any additional details. What I can tell you though is from a capacity standpoint, we have taken very specific actions to make sure that we're ready in case something does happen. We are entirely prepared to flex, and bring on as many customers as we need to help make sure that Americans are protected for this peril in case the U.S. government decides to reduce their exposure or get out of the business. Our job, we feel, is to increase the role of private flood insurance and make sure that we're a viable alternative. We absolutely are prepared to do that and have the capacity backing to do that.

Great. Thank you.

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

Hi, good evening. I don't think you gave the updated lifetime to date loss ratio for your capacity providers, but I suspect it is in the teens at this point. While some of that may be fortunate weather and some is surely your risk modeling expertise, at some point, does that translate into pressure to actually reduce pricing on an absolute basis?

The 1st thing is, I will let you know that we plan on announcing that once a year. We will announce that at the end of the second quarter. The last time that we announced that was the end of the second quarter of last year, and so we will update that annually so that just people have a very clear non-seasonally affected view of that. Expect that at a data point at the end of the second quarter. The 2nd thing I would say is that it really just creates an opportunity for us, and this is a discussion that we've had with all of our capacity providers. Would they be interested in higher volume in exchange for a slightly higher model loss ratio?

Given our track record and given the exacting specificity of our underwriting platform, we are able to make changes like that driven by our data science team. We have those models live in the system at this point, and we're excited by the revenue growth and the policy growth that we're seeing as a result of those models being deployed. I think success creates an opportunity to lower prices and get more people insured, is really the summary. Please know that this is being done with an incredible system led by an incredible team of engineers and data scientists who are focused on just that optimization of this flood insurance conundrum that the United States faces.

Thanks for that. Switching over to the ChatGPT product that you've rolled out, is there any compensation owed to a counterparty when flood policies in Neptune are placed through that app? If not, does that just imply the incremental margins on any of those policies are very strong, similar to your direct-to-consumer channel?

At this point, there are no monies owed to any counterparty. ChatGPT is not charging for that. To be clear, they don't allow binds to take place on their platform, so it's very similar to the way you think about Google, right? If you Google Neptune, you can find it, and even if we didn't pay for Google search, right, if we were the top ranked, we would show up, as we do, and someone could come to us, and we wouldn't owe anybody. Now, we do do some Google Ads, just to make sure we're always at the top of the paid search also. But it's very similar to just a Google search engine at this point. Now, that may change in the future. We're excited to have launched that product because it's a great showcase for the technology prowess that Neptune and its engineers have.

It is something that we think will have limited utility until consumers make the decision that they want to buy via chatbots, which is not something that has happened yet. Consumers really like the advice of their insurance agent in America, and that's why we are really focused on building Atlas Plus to help turn our agents into super agents.

Thank you.

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

Hey, thank you and good evening. Just to quickly follow up on the FEMA question, if I understand it right, a Congressional vote would come in either September or sooner, but nothing is clear at this stage. Is that the right read?

I'm not sure about that. The leaked FEMA memo that was published by Bloomberg seemed to suggest that the administration was looking at things that they could do without Congress's involvement. The Biden administration put forward 14 proposals during their administration, proposals to Congress. Congress did not act on any of those proposals, but those proposals all would've been pro-private flood insurance. This is really a bipartisan issue. How do we get more Americans insured? I have not heard anything about proposed legislation being given to Congress for them to consider in a September or October timeframe. There's been a variety of Congressional-led proposals that some of which are quite positive. Senator Scott has one to allow people to deduct the costs from their taxes, their flood insurance costs from their taxes.

There are a number of very positive suggestions coming out of Congress, but I haven't heard of any specific legislation.

Got it. That was very helpful. Yesterday, we saw the approval, Glenn, for Boleron, a Bulgaria-based broker, to distribute policies directly inside of ChatGPT, Trevor. Could we see this happening in the U.S. as well, or do you see AI as more of a funnel into traditional direct channels on Neptune's website?

Currently, ChatGPT does not allow direct binding within the app itself. If they change that, we will be able to meet that immediately. I think this is more about consumer behavior than necessarily the technological availability of something. We've had direct-to-consumer available since the very beginning of Neptune. It's always made up 2% of our business. It was 2% of a very small amount nine years ago, and it's 2% of a much larger amount now, but it's still 2%. This is really about are consumers now going to utilize chatbots to buy home-related insurance. I think that's a much larger question than is it possible?

Got it. Thanks very much.

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

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

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

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

It's extremely positive for us when agents want to add on ancillary products, right? Flood is the most obvious ancillary product to the home or to the business policy since it's excluded by carriers. We view that trend as a very positive trend for Neptune. There are amazing agents such as Goosehead and others who have done a great job at really thinking about policies per relationship and how do they always offer flood insurance every time they're selling a homeowner's policy. That increases stickiness and increases the quality of the advice being given to the consumer. Because as we've talked about many times, the main problem that we have in the US with flood insurance is that people don't have it. There's 20 million people who are at risk of flooding who don't have the coverage.

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

Thank you.

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

Thank you. Good afternoon or good evening. My first question relates to the $195 million revenue target for the year. I'm starting to see some early indications of the North Atlantic hurricane season potentially being a bit lower just because of El Niño. Is that contemplated in that number or are you still assuming kind of a normal season and whatever that may mean?

Yeah. Thank you. We're very aware and we track very closely the predictions around the storm season. There are a couple of dynamics happening. One is the phenomenon that you've mentioned, and the other equally impactful phenomenon is the sea temperature in the Gulf. The Gulf temperature is extremely high, which means that the Gulf systems being able to spin up very quickly and gain steam very quickly, like Hurricane Michael did, that hit Florida with amazing power remain quite possible during the season. I would say the 195 assumes that there is some storm activity but does not assume a very active storm season.

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

Yeah, we think about that as 1.8 landfall hurricanes.

Got it. Okay. Thank you.

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

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

Yeah. Remember that we had also announced the RSU net tax settlement, which at today's stock price, would use something like $12 million of cash or something. The employees will surrender the shares, we'll rip those up, and then we'll pay the taxes to the IRS with company cash. If you think about that this September and next September as two chunks plus the $100 million, it starts to give you a sense of where we would use the cash.

Got it. Thank you.

Yeah. We can work with you as you model out the free cash flow. We have a little higher expectations than you've noted.

Your next question comes from the line of Cave Montazeri with Deutsche Bank. Your line is now open.

Thank you. You keep paying down debt. At the same time, your EBITDA is growing. It looks like it could be at 2x debt to EBITDA by the end of next quarter. I'm just trying to understand, what's your mental framework when it comes to how much debt you want to keep? Did you have a target debt to EBITDA ratio in mind for the medium to long term?

Yeah. We generally would like to stay below 2.5x. There may be opportunistic times to utilize the stock repurchase. As we saw in the last quarter, if there was an event like that again, we would obviously take advantage of that to buy back shares opportunistically and utilize the revolver availability to do so. Absent that, we have to date at least continued to pay down debt. As long as we're below 2.5x-3x levered, we feel very comfortable that we can, given the certainty of how this business operates, that we can begin returning cash to shareholders, and we think stock buybacks are the best way to do that.

Okay. In terms of the technology, how much of it is built in-house versus purchased from third-party vendors? I guess of the technology that you're using from third-party vendors, do you now have the ability to maybe build it in-house and make it more bespoke versus some of the more standardized software that you could buy externally?

This is a really interesting debate that we often have. Now you have to think about Neptune as a rather unique company because we have 62 employees, and our entire expense base is less than 10% of our revenue. We're already about as lean a company as can exist, right? If I think about how do I deploy our engineers and data scientists, I wanted to deploy them on things that can generate more revenue. Saving, no longer using a third-party piece of software like Microsoft Word. Could we rebuild Microsoft Word now? Yes. Does it make sense to do that and maintain the system, et cetera? No. It makes much more sense just to pay Microsoft whatever it costs, $5,000 a year to have it, right?

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

Yeah. Cave, I'd just add that all of the core functionality that exists in our systems today in Triton and Poseidon and Atlas and Proteus, in all of the systems that we've mentioned, is built entirely in-house. Trevor's comments are 100% true for ancillary software that may be helpful from a customer service standpoint,

Cool. That's helpful. Thank you.

That concludes our question and answer session. I will now turn the conference back over to Mr. Trevor Burgess for closing remarks.

I'll end the way I started, by just talking about this moment in history. I've never been more excited about being an entrepreneur than I am right now. Our entire team is giddy to be working at Neptune on this challenge, on this problem, using the tools that are now available to us. We are live watching the updates from Anthropic, from ChatGPT, from Google, from X, about what tools are available to us, and how can that allow us to move more quickly to help get these 20 million Americans insured for this peril that they're not protected for right now. It is a great time to be an entrepreneur. It's a great time to be at Neptune, and thank you for joining us today.