Neptune Insurance Holdings Inc. (NP) Earnings

Management highlights

### Overall Business Momentum & Growth Drivers - This was the strongest quarter in Neptune's history, with growth across nearly all core metrics, driven by three primary factors: strong momentum across the distribution network, increased industry attention on National Flood Insurance Program (NFIP) long-term sustainability from the FEMA Review Council report pushing adoption of private flood insurance, and exceptional cross-functional team execution. - 50% of Neptune's current sales are already outside FEMA's mandatory flood insurance purchase zones, so even modest map modernization would expand the overall addressable market significantly. ### Technology & AI Strategy - AI is integrated across workflows to empower, not replace, insurance agents, and to boost internal productivity without proportional headcount growth. The upcoming Atlas Plus rollout will provide agents with a ranked list of the highest-value tasks and automates much of the work to complete them, turning agents into "super agents" at scale. - AI now supports software engineers across the full development cycle (writing, reviewing, testing code, investigating issues), allowing the same-sized engineering team to deliver more than twice the output of Q4 2025 and 50% more output than Q1 2026. Similar productivity gains are seen in customer success, where each representative manages 25% more policies year-over-year while reducing customer wait times and improving response quality. ### Product & Underwriting Updates - The quarter saw multiple new product launches, including commercial and condominium earthquake coverage, expanded flood coverage, and increased building coverage limits to $15 million across all property types. A full redesign of the agent portal and quoting experience was also completed, alongside a new machine learning underwriting model and major underwriting infrastructure upgrades. - Neptune's proprietary underwriting platform Triton has delivered a 19.5% lifetime loss ratio through 8 storm seasons and 21 landfall hurricanes, demonstrating exceptional underwriting discipline for flood peril. ### Distribution & Capacity - More than 55,000 verified insurance agents have created individual user accounts on Neptune's platform as of Q2, driving steady growth in new business. The core opportunity remains expanding coverage to properties that have never carried flood insurance before to close the U.S. flood protection gap. - Neptune's two largest reinsurance capacity programs were renewed in Q2 on improved economic terms, and total capacity providers on the panel expanded to 45. Improved terms reflect capacity partners' confidence in Neptune's underwriting performance. ### Capital Deployment - Neptune carries no direct underwriting risk (all risk is held by capacity partners), so growth does not require proportional capital or headcount increases, allowing margins to expand as revenue grows. Q2 2026 saw continued deleveraging, with a closing drawn balance of $240 million on the $260 million revolver (~2.1x trailing adjusted EBITDA); $7 million was repaid after quarter-end, bringing the current balance to $233 million. - The company returned $32 million of capital to shareholders in Q2: $26 million in share repurchases during a secondary offering from private equity shareholders, and an additional $6 million in open market repurchases. $94 million remains available under the $100 million share repurchase authorization approved in April 2026. The company prioritizes reinvestment in the platform first, followed by returning excess capital to shareholders.

Guidance

- Management raised full-year 2026 guidance, updating the revenue expectation to $199 million, representing 25% year-over-year top-line growth, with an expected adjusted EBITDA margin of 60% to 61%. - The updated guidance does not assume any future policy changes from FEMA or NFIP reform, nor does it assume any demand acceleration from major hurricane activity; it incorporates the current NOAA projection of a below-average 2026 Atlantic hurricane season, making the baseline outlook conservative with respect to storm-driven demand.

Segment performance

Neptune Insurance Holdings does not break out separate product segment financial performance or revenue contribution percentages in this call. Overall company-level Q2 2026 results are: total revenue of $55.9 million, up ~33% year-over-year; adjusted EBITDA of $34.5 million, up 36% year-over-year, with a 61.7% adjusted EBITDA margin (up 165 basis points year-over-year); premium in force reached $419 million, up 32% year-over-year; total policies in force hit over 316,000, up 29% year-over-year; policy retention rate improved to 86% year-over-year; lifetime written loss ratio fell to 19.5%, down 500 basis points from a year prior. Trailing 12-month revenue per employee and adjusted EBITDA per employee reached record highs of $3 million and $1.8 million respectively.

Risks & headwinds

- The timing and implementation of FEMA flood map modernization (a major potential addressable market expansion opportunity) is uncertain, as it depends on FEMA resource prioritization amid significantly reduced staffing at the agency, even though no congressional action is required to move forward. - Larger NFIP reforms, including depopulation and changes to the "write your own" compensation scheme, would require congressional action, and the appetite and timeline for these changes remains unclear. - Hurricane activity and storm severity are entirely outside management control, and can have material impacts on annual results, both through loss exposure and demand stimulation. - Large distribution partner API integration projects depend on the partner's internal development prioritization timelines, which can take multiple years to complete, delaying potential volume growth from these partnerships. - Proposed AI regulatory requirements (such as the recent Texas DOI bulletin) could create future compliance requirements if regulatory rules are expanded to the algorithmic pricing models Neptune uses.

Analyst Q&A

• Q: How much incremental near-term demand is the FEMA Review Council report driving right now, and what impact do the improved capacity terms have on 2026 results?

  A: The FEMA report has increased agent engagement to all-time highs, building on momentum that started after the 2025 government shutdown, when many long-time NFIP agents switched to Neptune and stayed after the shutdown ended. The improved capacity terms only had a small 0.5 percentage point economic impact in Q2, with most of the benefit coming in the back half of 2026 and beyond; management prioritizes long-term mutually beneficial terms over short-term maximum margins.

• Q: What is the potential market expansion from FEMA flood map modernization, and what is the timeline for this change?

  A: Modernization would move ~5 million additional properties into mandatory flood purchase zones, which is a larger potential expansion than most other NFIP reforms that require congressional action. Map updates are already happening incrementally county-by-county, but management is pushing for FEMA to complete a full nationwide update all at once. The timeline is uncertain: it requires no congressional action or midterm policy changes, but depends on FEMA prioritization amid staffing cuts.

• Q: How does AI create optionality for further margin improvements going forward?

  A: Neptune's current headcount is 59 employees, down from a prior peak of 62, as AI tools allow the business to grow without adding headcount. Management prioritizes using AI to drive top-line growth by empowering agents to sell more, rather than just cutting costs. Any incremental revenue that comes in with largely fixed expenses drops straight to the bottom line at a ~70% EBITDA margin, pulling the overall company margin higher over time.

• Q: What is the opportunity for growth from the new $15 million maximum coverage limit, particularly for multifamily properties?

  A: The higher limit opens a large new addressable market for multifamily properties (condominiums and apartment buildings), where NFIP only offers a $500,000 limit with no loss of rents coverage. Neptune's offering of $15 million building coverage plus $1 million loss of rents coverage creates a large product differential over NFIP. Early take-up on the new higher limits for new business is healthy, and the company is also reaching out to existing customers to offer coverage increases at renewal.

• Q: Could the recent Texas AI regulatory bulletin require Neptune to add costly compliance oversight for AI-driven pricing?

  A: The Texas bulletin only applies to generative AI tools for consequential consumer decisions, which is not what Neptune uses for pricing. All of Neptune's pricing AI is algorithmic and can be reduced to fixed mathematical rules, so the new guidance does not apply to its current operations.