Exzeo Group - Earnings Call - Q3 2025

Executive Summary

• Exzeo’s Q3 2025 revenue was $56.27M, up 95% year over year (Q3 2024: $28.79M), with Income before income taxes rising to $28.36M (vs. $5.83M YoY), driven by higher services (“Other”) and investment income, and tightly managed operating expenses.
• Sequentially, revenue was broadly stable (Q2 2025: $56.85M vs. Q3 2025: $56.27M) and pretax income remained strong (Q2 2025: $28.89M; Q3 2025: $28.36M), reflecting persistent margin discipline.
• Exzeo priced and closed its IPO at $21.00 per share (8,000,000 shares; NYSE: XZO), establishing capital market access and a near-term catalyst for investor attention.
• Wall Street consensus estimates were unavailable (S&P Global mapping not yet active), so beats/misses cannot be assessed; Exzeo has not yet released standalone Q3 financial statements and furnished segment data via HCI’s 10-Q (Exhibit 99.1).

What Went Well and What Went Wrong

• What Went Well

  • Revenue nearly doubled YoY to $56.27M, with “Other” (services) rising to $55.17M and investment income of $1.10M, highlighting scale-up of platform-enabled services.
  • Pretax income surged to $28.36M (20% YoY margin expansion), supported by restrained stock-based comp ($0.73M) and low interest expense (nil), underscoring efficient cost control.
  • Strategic positioning reinforced in IPO communications: “Exzeo Group is a leading innovator in technology solutions purpose-built for P&C insurance carriers” and its internal Insurance‑as‑a‑Service platform spans quoting, underwriting, policy administration and claims.

• What Went Wrong

  • Policy acquisition expenses increased YoY to $10.07M from $9.09M, reflecting higher volumes and scaling costs (partly offset by efficiency gains elsewhere).
  • Personnel and other operating expenses grew to $16.35M (vs. $11.73M YoY), consistent with expansion but a watchpoint for maintaining margin leverage.
  • Consensus estimates were unavailable and no earnings call occurred, limiting external triangulation and narrative control for investors.

Transcript

Operator (participant)

Good afternoon, and welcome to the Exzeo Group 3rd quarter 2025 Earnings Call. My name is Mark, and I will be your conference operator. At this time, all participants will be in a listen-only mode. Before we begin today's call, I would like to remind everyone that this conference call is also being broadcast live via webcast and is available for webcast replay approximately four hours after the call through December 10 2026, on the Investor Relations section of Exzeo Group website at www.exzeo.com. I would like to turn the call over to Phil Brummel, Vice President of Investor Relations. Phil, please proceed.

Phil Brummel (VP of Investor Relations)

Thank you, and good afternoon. Welcome to Exzeo Group's 3rd quarter 2025 Earnings Call. To access today's webcast, please visit the Investor Information section of our corporate website at www.exzeo.com. Before we begin, I would like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Words such as anticipate, estimate, expect, intend, plan, and project, and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission.

Should any risks or uncertainties develop into actual events, these developments could have a material adverse effect on the company's business, financial condition, and results of operations. Exzeo Group disclaims all the obligations to update any forward-looking statements. Now, with that, I'd like to turn the call over to Kevin Mitchell, President of Exzeo.

Kevin Mitchell (President and Director)

Thank you, Phil. Good afternoon, everyone, and thank you for joining us for Exzeo's first earnings call as a public company. This is an important milestone, and we appreciate the support of our investors, clients, and dedicated employees. For some on this call, Exzeo might be new, so I'd like to take a minute to quickly summarize who we are. Exzeo is a leading innovator in technology solutions, purpose-built for property and casualty insurance carriers, with a strong focus on the expansive homeowners insurance market.

Through our 100% internally developed insurance-as-a-service platform, Exzeo delivers a comprehensive suite of software tools and operational services that streamline nearly every aspect of the insurance carrier and agent operations. We believe our business model is highly compelling to insurance carriers. Our carrier clients pay fees tied to the amount of premium managed through the Exzeo platform, with minimal upfront costs.

This structure aligns our incentives directly with theirs. Exzeo grows in lockstep as our carrier partners expand their premium base. With our IPO now complete, our focus shifts to expanding the managed premium on our platform and continuing to deliver exceptional margins and growth. As we laid out during the IPO process, Exzeo signed up a new client in the 3rd quarter. We've since added another client in the 4th quarter. These two new clients bring the total carriers on the Exzeo platform to six. We remain on schedule for these two new clients to begin adding revenue to our platform in the 4th quarter of this year. The revenue contribution will be modest initially, but we look forward to supporting these carriers as they grow in the future.

As we successfully add new carriers, we believe this further validates the strength of our technology platform, and we are well-positioned to build on this momentum as we move into next year. We recognize that adding managed premium to our platform will be an important metric for investors to track and measure our performance, and I am very pleased that our strategies to fuel that growth are well underway. Now I'll turn the call over to Suela, Exzeo's Chief Financial Officer, to provide more detail on our financial results.

Suela Bulku (CFO)

Thank you, Kevin. Exzeo delivered strong financial performance for the 3rd quarter. Pretax income in the quarter was just over $28 million, and diluted earnings per share were $0.25. Year-to-date, pretax income was $81 million, and diluted earnings per share were $0.73. For the 3rd quarter, revenue increased 90% year-over-year to $55 million, reflecting growth in managed premium and the completion of onboarding of all HCI-related insurance carriers to our platform at the beginning of this year. To add a little more detail around the growth, for those new to the Exzeo story, we have three primary revenue categories: underwriting and management services, claim services, and other technology services. Each category made a positive contribution to the $26 million increase in total revenue this quarter over the same period last year.

With that said, underwriting and management revenue was the largest contributor to the strong growth and accounted for over 85% of the increase in the 3rd quarter. This is important because underwriting and management revenue scales efficiently and supports our continued margin expansion. Our Adjusted EBITDA margin increased to about 55% from 32% in the prior year quarter. This is a result of the efficiency of our business model because we can add managed premium with very little incremental expense. We believe there is room for further improvement in our margins as we add additional managed premium to our platform. Going forward, we plan to disclose several KPI metrics each Quarter. I want to take a moment to highlight a few metrics that we think are important as investors track our progress.

Managed premium at the end of the third quarter was approximately $1.2 billion, an increase from about $500 million in the prior year quarter. The primary driver of this increase was the completion of the onboarding of all HCI-related insurance carriers to our platform at the start of the year. The other KPI metric that I wanted to highlight was our annual recurring revenue, which was $192 million in the third quarter, an increase from about $118 million in the prior year quarter. This level of cumulative recurring revenue reflects the visibility and the durability of our business model. Moving to the balance sheet, we ended the quarter with $140 million of cash and cash equivalents, an increase of over $86 million, all generated organically through our operations, and we continue to have no debt.

Net proceeds from our IPO of about $155 million will add to our current cash position. As a new public company, there will be interest in better understanding Exzeo's future financial performance. Before going into our guidance, we want to quickly point out for those new to Exzeo that historically, we have seen some quarterly seasonality in managed premium, reflecting the growth patterns of our current client mix and their strategic timing decisions. As a result, the fourth quarter has historically delivered the largest increase in managed premium, followed sequentially by the first, second, and third quarters. Now, we would like to provide guidance on what we're currently expecting for Q4 2025 and full year 2026. Starting with managed premium, Exzeo ended the third quarter with $1.2 billion of managed premium on the platform.

We currently expect managed premium to be at least $1.32 billion at the end of 2025 and $1.5 billion by the end of 2026. Next, we expect pretax income to be between $22 and $25 million for the 4th quarter of 2025 and between $115 and $125 million for the full year 2026. In closing, Exzeo delivered a strong quarter with significant growth in managed premium, substantial expansion in margins, and a strengthened debt-free balance sheet with a sizable cash position. With that, I will hand it over to Paresh.

Paresh Patel (Chairman and CEO)

Thanks, Suela. We successfully completed our IPO, which is an important milestone that reflects the strength of our business, the value of our technology, and most importantly, the commitment of our incredible team. With this foundation in place, we are now focused on executing our growth initiatives and expanding the reach of our platform. We see significant opportunity ahead as more insurers recognize the new approach that the Exzeo Platform represents.

As Kevin highlighted in his comments, we've already added two new clients, and we're encouraged by the continued expansion of the sales pipeline. Ultimately, our goal is to deliver strong, sustainable returns for our shareholders. By expanding our client base, investing in our technology, and maintaining strict operational discipline, we believe we are well-positioned to generate long-term growth and meaningful value. These are not just words.

Because of the large and growing opportunity I see in front of us, I want to increase my ownership stake in Exzeo. After consideration of several options to acquire shares, I have begun the process to initiate a Rule 10b5-1 pre-arranged purchase plan. Any shares acquired under this plan will be purchased in the open market in accordance with the SEC's rules relating to such plans. Under this plan, I expect to buy an additional $2 million worth of Exzeo stock in calendar year 2026. With that, I will turn the call over for questions.

Operator (participant)

Thank you. Our first question will come from Terry Tillman with Truist Securities. Terry, please go ahead.

Terry Tillman (Managing Director, Equity Research)

Yeah, thanks. Hopefully, y'all can hear me okay. Hi, Paresh, Kevin, Suela, and Phil. Congrats on the IPO and the results in the third quarter. I had maybe more than two questions, actually, so that's a heads-up there. First question is, in terms of new customers, you've added one in 3Q and 4Q, I think you all mentioned. Was there any commonality in terms of why they came onto the platform? And then how do you see those two specific customers contributing to the model as we move into 2026? Then I had two others. Thanks.

Kevin Mitchell (President and Director)

Sure. Yeah, I think the commonality with the two new customers is they had a technology need, and they saw the efficiency that we could provide and the improved risk selection in the platform we've built. I think that was echoed by their comments and their excitement to join the Exzeo Platform. As far as the pipeline, as we see it today, it continues to grow. Since the IPO, the pipeline has tripled with the number of prospects, and you got to factor in that's just about five weeks' time. So we're pleased with the pipeline, happy with the progress. We feel good on the outlook for 2026.

Paresh Patel (Chairman and CEO)

Thanks for that, Kevin. I guess maybe just on go-to-market activities, it seems like it's a big opportunity for insurance-as-a-service technology platforms, whether it's direct investments and people going out and calling on people, whether it's brokers or just the broader insurance ecosystem. Just how do you feel about the build-out of your go-to-market muscle at this point? Then I had one follow-up question.

Kevin Mitchell (President and Director)

Sure, sure. So just talking about the sales channels, since the IPO, the sales channels continue to refer potential clients to Exzeo. We're receiving referrals from reinsurance brokers, consultants, advisors, and also through some of our direct outreach. As the weeks go on, we continue to add additional brokers and advisors to this sales channel.

A lot of it is just communicating the benefits and the value of the Exzeo platform and them working their networks and making that introduction to Exzeo. When we look at building out that sales team, we're making progress. We have several targets. It's important to us that we focus on finding the right cultural fit and someone that these folks have to have a solid understanding of, one, the insurance industry, but also technology. Onboarding should take place after the end of the year.

Terry Tillman (Managing Director, Equity Research)

Got it. Thanks for that. I guess, Hi, Suela. Maybe a question in terms of you laid out some of the seasonality dynamics, and it was helpful on 4Q and even next year. What I'm curious about is, obviously, the managed premium expansion will be strong in 4Q, but how do we look at cash flow dynamics in 4Q and as we move into next year in terms of maybe you could just help us in terms of how seasonality would look for free cash flow? Thank you.

Suela Bulku (CFO)

Yeah. So, well, yeah, in terms of the managed premium, one thing I would say that the additional managed premium that will be joined in the platform in Q4 will technically convert to revenue will be a 2026 item, and the free cash flow is expected to be as strong as you've seen before. We have a free cash flow margin of 50-something percent, and we convert net income at a rate of 140% as we saw in Q3, so, yeah, we expect it to continue. Just the one thing that I would caution is that the additional managed premium coming in the platform in Q4 will become revenue in 2026.

Terry Tillman (Managing Director, Equity Research)

All right. Thank you. Good luck.

Suela Bulku (CFO)

Thank you.

Operator (participant)

Your next question will come from Dylan Becker with William Blair. Dylan, please proceed.

Dylan Becker (Senior Equity Research Analyst)

Hey, everybody. I appreciate the question, and I'll have my congrats as well here. Maybe, Kevin, starting with you, as we think about kind of the additional non-HCI-oriented customers kind of coming on board, how should we think about kind of that premium ramp? What does it typically look like? If it's an existing carrier, how do they think about kind of the cadence of converting their premium dollars over to Exzeo? And then maybe on the pipeline piece as well, too, with you guys not opting for Citizens' policy renewals in 4Q, how that's contributing to some of the pipeline strength, just given how solid of a funnel that's been for the core HCI business as well. Thanks.

Kevin Mitchell (President and Director)

Sure, sure. This is Kevin. So on new clients, it's a mix, right? It depends whether it's a startup and they're ramping, or it's someone with an existing business. For the folks that are new, it's going to ramp based on the growth and opportunity they see through maybe organic or inorganic opportunities. For the established customers that we bring onto the platform, what we are seeing is once we make that, they make that switch and sign up with Exzeo, it's going to move on to the platform at renewal.

In regards to your question on Citizens, and I think we saw it with the current clients in Q4, there was an opportunity in Q4. So a lot of our current clients decided to accelerate their growth in Q4, something that they might have thought they would grow in Q1 of 2026, but they accelerated their growth in Q4 just based on the opportunity set they saw here in the state of Florida.

Dylan Becker (Senior Equity Research Analyst)

Okay. Great. That's very helpful. Thank you. Then maybe for Suela as well, too, obviously an incredibly impressive margin profile. We're talking about kind of investing to capitalize on a very sizable opportunity ahead. How should we think about kind of the trade-off, if there is any, in the business, right, as you're kind of building out that go-to-market muscle that we've talked about, thinking through kind of some of the incremental investment, but obviously the incremental leverage you called out as well, too, with high incremental margins coming from kind of the underwriting base of the business?

Suela Bulku (CFO)

Yeah, that's actually a really good question. So one thing I would say is that we expect the new managed premium to be coming in at a higher incremental margin than existing business. You see that very clearly in Q3. So even as we contemplate the expenses that Kevin mentioned, we still believe that there is room for growth in our margins. At the end of the day, we will be adding revenue with very minimal incremental expense, and our margins will grow even as we include the expenses to support the growth.

Dylan Becker (Senior Equity Research Analyst)

Fantastic. Thank you all. Congrats again.

Suela Bulku (CFO)

Thank you.

Operator (participant)

If you would like to ask a question, just press star, followed by the number one on your telephone keypad, and our next question will come from Matt Carletti with Citizens. Matt, please go ahead.

Hi, this is David on for Matt. Just had one quick question, kind of a follow-up. Are you able to provide any color on the current pipeline? I know the last two that signed on were kind of startups in Florida, but if there's any further complexion you can provide on what the pipeline looks like, that would be great.

Paresh Patel (Chairman and CEO)

Hi, David. It's Paresh. Let me take this one. When Kevin said the pipeline has grown substantially since the IPO, that is true both in terms of the number of prospects, but more importantly, the prospects have come from more channels, right? So not just reinsurance brokers, but also from investment bankers, from direct contacts. So it's come through multiple channels, which is wonderful to see that diversification.

Even more importantly, what has also occurred is we've seen diversification, that some of the prospects are Florida-oriented, but there's a number of prospects that are non-Florida-oriented. So you are seeing that broadening out of the pipeline, which is extremely encouraging, and that's why I'm taking the actions that I'm taking. That's the most basic way of saying how well things are going, yeah?

Absolutely. Yeah. Thank you, and congrats on a great quarter.

Thank you.

Operator (participant)

At this time, this concludes our question and answer session. I would like to turn the call back over to Paresh Patel who has a few closing remarks.

Paresh Patel (Chairman and CEO)

Thank you. As always, it's been a journey for this company, and we really appreciate the IPO being closed. I wanted to thank everyone who joined the call today, but I also want to thank the Exzeo team for all their hard work, which got us to where we are today. Before we wrap up, I want to reiterate a few of my earlier comments.

We made tremendous progress over the past several years, scaling to more than $1.2 billion of premium on our platform at the end of Q3 and establishing a growing profitable business with strong margins and a rock-solid balance sheet. Momentum is building, and we're only at the beginning of what we believe is a much bigger opportunity. Again, in closing, I want to thank everyone for their time today. Stay tuned.

Operator (participant)

This concludes today's call. You may now disconnect.