Exzeo Group (NYSE: XZO) amends Q1 2026 report and shows higher profit
Rhea-AI Filing Summary
Exzeo Group, Inc. filed Amendment No. 1 to its Form 10‑Q for the quarter ended March 31, 2026 to correct certain MD&A tables for cost, operating expense and non‑GAAP metrics that were populated incorrectly due to a technical issue. The underlying financial statements and notes remain unchanged.
For the quarter, Exzeo generated revenue of $55,534 thousand, up 6.0% from $52,407 thousand, with gross profit rising to $32,743 thousand and gross margin improving to 59.0%. Net income increased to $20,406 thousand, a 13.7% year‑over‑year increase, while operating income was $25,075 thousand.
Key operating metrics also expanded: managed premium reached $1,429,141 thousand and annual recurring revenue was $216,181 thousand. Adjusted EBITDA was $26,531 thousand with a 49.1% Adjusted EBITDA Margin. Free cash flow totaled $25,145 thousand, and cash and cash equivalents were $231,381 thousand as of March 31, 2026, reflecting deployment into available‑for‑sale investments.
Positive
- None.
Negative
- None.
Key Figures
Key Terms
Net Dollar Retention Rate financial
Adjusted EBITDA financial
Free Cash Flow financial
Emerging growth company regulatory
Insurance-as-a-Service technical
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Amendment No. 1)
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 1, 2026, the registrant had
EXPLANATORY NOTE
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, this Amendment sets forth the complete text of Item 2 as amended. In addition, as required by Rule 12b-15 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by the Company’s principal executive officer and principal financial officer are filed herewith as exhibits to this Amendment, under Item 6 hereof, pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act. Because this Amendment does not include or amend disclosures under Items 307 or 308 of Regulation S-K, paragraphs 4 and 5 of the certifications have been omitted.
Other than as expressly set forth herein, this Amendment does not, and does not purport to, amend, update or restate the information in the Original Filing or reflect any events that have occurred after the Original Filing was made. Information not affected by this Amendment remains unchanged and reflects the disclosures made at the time as of which the Original Filing was made. Accordingly, this Amendment should be read together with the Original Filing and the Company’s other filings with the SEC.
2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC on February 26, 2026 ("2025 Annual Report"). This section is intended to provide management’s perspective on our financial performance, material events, trends, and uncertainties that may affect our business, financial condition, results of operations, and cash flows.
Special Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws. All statements contained in this Quarterly Report, other than statements of historical fact, including statements regarding our future results of operations, financial position, market opportunity, business strategy, plans, objectives, and factors affecting our performance are forward-looking statements. In some cases, forward-looking statements can be identified by words such as "may," "will," "should," "expect," "plan," "anticipate," "could," "intend," "target," "project," "contemplate," "believe," "estimate," "predict," "potential," or "continue" or the negative of these terms or other similar expressions.
These forward-looking statements are based on management's current expectations, assumptions, estimates and projections. While we believe these expectations and assumptions are based on reasonable information, forward-looking statements are inherently predictive in nature and involve known and unknown risks and uncertainties, many of which are beyond our control. Actual results, performance, or achievements may differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including those discussed or referenced in Part II, Item 1A "Risk Factors" in this Quarterly Report and in other reports we file with the SEC.
Factors that could cause actual results or events to differ materially include, among others, our ability to maintain profitability and manage fluctuations in operating results on a quarterly or annual basis; our dependence on a limited number of customers for a substantial portion of our revenue; our ability to retain existing customers and attract new customers; and our continued reliance on affiliated customers. Our future performance also depends on the successful development, enhancement, and scalability of our proprietary IaaS platform, including the introduction of new features, analytical models, and services, as well as the accuracy of estimates regarding market size and growth opportunities.
In addition, we operate in a highly competitive and regulated environment. Competitive pressures, consolidation within the insurance industry, regulatory scrutiny of delegated authority and claims administration functions, and evolving data privacy and cybersecurity requirements could adversely affect our business, financial condition, and results of operations. Natural catastrophes, environmental risks, and climate-related events may significantly impact our customers’ P&C insurance operations, which could in turn affect demand for our products and services. Our business also depends on the reliability and security of our information systems and third-party cloud infrastructure, and any system failures, security breaches, or unauthorized disclosures of sensitive data could result in operational disruptions, regulatory action, litigation or reputational harm.
Our ownership structure further presents additional risks. HCI controls the direction of our business through its ownership interests, and this concentrated ownership limits the ability of other shareholders to influence significant corporate decisions. Potential conflicts of interest may arise between HCI and us, including those involving our executive officers and directors who hold positions or financial interests. In addition, if HCI were to sell a controlling interest of the Company in a private transaction, shareholders may not receive a change-of-control premium and we could become subject to control by an unknown third party. We may also face challenges in realizing the anticipated benefits of operating as a standalone public company, including increased costs, regulatory compliance obligations, and demands on management resources.
For further discussion of certain of these factors, see the risk factors disclosed in the section entitled "Risk Factors" in this Quarterly Report and in the 2025 Annual Report.
You are cautioned not to place undue reliance on such forward-looking statements, which are not guarantees of future performance, and our actual results of operations, financial condition, and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this Quarterly Report. Any forward-looking statement in this Quarterly Report speaks only as of the date of such statement, and except as required by federal securities laws, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report.
Company Overview
Exzeo provides turnkey insurance technology and operations solutions to insurance carriers and their agents (collectively referred to as Exzeo's "customers") through a proprietary platform of internally developed software and data analytics applications designed specifically for the P&C insurance market.
3
Our Insurance-as-a-Service platform, referred to as the Exzeo Platform, includes nine highly configurable software and analytics applications that are purpose-built to serve the insurance value chain. The Exzeo Platform provides technology-based solutions for operational and administrative activities and functions performed by insurance carriers and their agents, including quoting and underwriting, policy management, claims management, data reporting, and financial reporting. Through these capabilities, the Exzeo Platform streamlines and automates insurance operational workflows across carriers, agents and policyholders.
The Exzeo business was established in 2012 as the technology and innovation division of HCI, a leading underwriter of homeowners insurance in Florida that now writes policies in 12 additional states. Since inception, we have been led by experienced technology and insurance professionals with deep domain expertise focused on developing advanced data analytics algorithms and software tools that enable carriers to maximize system efficiency, optimize underwriting outcomes, and serve their customers more effectively.
The Exzeo Platform is a proprietary suite of software, analytics, and visualization tools capable of supporting, enhancing, or replacing legacy operational systems commonly used in the insurance industry. We enter into MGA or policy administration services agreements with our insurance-industry customers under which we serve as an MGA of an insurance carrier or provide services to a carrier's MGA in exchange for fees largely based on a percentage of managed premiums. Under these agreements, we utilize the Exzeo Platform to provide policy issuance and renewal services, as well as management services such as soliciting and negotiating reinsurance for authorized programs, managing and maintaining policy administration, and providing claims management.
Key Factors and Trends Affecting Results of Operations
We believe our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section entitled Item 1A. Risk Factors, included in our 2025 Annual Report.
4
Presentation of Financial Information
Unless otherwise indicated, all dollar amounts presented in this Management's Discussion and Analysis of Financial Condition and Results of Operations are stated in thousands. Percentages, ratios, and per policy figures are based on the underlying whole dollar amount.
Key Performance Metrics
We review a number of key operating metrics, which we use as we make strategic decisions, measure our performance, evaluate our business, and identify trends in our business. These operational measures are presented as follows:
|
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Three Months Ended March 31, |
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|||||
(in thousands, except percentages, counts and per policy figures) |
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2026 |
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2025 |
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||
Managed Premium |
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$ |
1,429,141 |
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$ |
1,244,408 |
|
Managed Policies |
|
|
327,233 |
|
|
|
278,382 |
|
Premium Per Policy |
|
$ |
4,367 |
|
|
$ |
4,470 |
|
Gross Dollar Retention Rate |
|
|
91.4 |
% |
|
|
92.8 |
% |
Net Dollar Retention Rate |
|
|
114.8 |
% |
|
|
264.2 |
% |
Annual Recurring Revenue |
|
$ |
216,181 |
|
|
$ |
198,742 |
|
Managed Premium
Managed premium is defined as the aggregate gross dollar value of in-force premiums that are processed, managed, or administered by our software solutions as of the period end date. This excludes any applicable policy fee income associated with managed policies. Premium pricing may vary by state due to a combination of factors including regulatory requirements; however, the majority of the policies are written in the state of Florida. Revenue is primarily derived from usage-based pricing models, which are structured based on the amount of managed premiums processed, in most cases. We view this as an important metric because it is an indicator of the overall size of our platform. However, managed premium is an operational metric and should not be considered a substitute for revenue or other financial results.
Managed premiums attributable to insurance policies written in Florida represented 91.7% and 90.1% of total managed premiums for the three months ended March 31, 2026 and 2025, respectively.
Managed Policies
Managed policies are defined as the number of currently active policies managed by us on our platform as of the period end date. We consider managed policies a key metric for evaluating our financial performance, as growth in the number of managed policies not only drives revenue growth, but we also believe that an increase in managed policies may reflect broader brand awareness and deeper market penetration of our Exzeo Platform.
5
Premium Per Policy
Premium per policy is defined as the managed premium divided by managed policies. We view premium per policy as an important metric which provides information as to the average size of our customers' policyholder relationships. Growth in the metric can be indicative of increased coverages offered to our customers.
Gross Dollar Retention Rate
Gross dollar retention rate measures the percentage of managed premium retained from our customers' existing policyholders. We calculate gross dollar retention rate by measuring the managed premium attributable to policyholders who remained active as of the end of the current period and dividing this amount by the managed premium attributable to those same policyholders as of the end of the corresponding prior-year period (i.e., twelve months earlier). We believe the gross dollar retention rate is a valuable indicator of platform engagement among existing policyholders and provides insight into our ability to retain and sustain premium volume over time through our services.
As of March 31, 2026 and 2025, managed premiums attributable to policyholders active from the end of the prior-year period used in the gross dollar retention rate calculation were $1,137,161 and $437,095, respectively.
Net Dollar Retention Rate
We use NRR as a key performance metric to measure the success of our carrier customer relationships and the growth of our revenue from new and existing carrier customers. To calculate NRR, we divide the amount of managed premium from new and existing policyholders of our customers at the end of the current period, by the amount of managed premium attributable to the policyholders active as of the respective prior-year period (i.e., twelve months earlier).
Our NRR is influenced by both the growth of existing carrier customers on the platform as well as the addition of new carrier customers. We believe that maintaining a high NRR is critical to achieving sustained long-term growth and reflects the strength of our value proposition to existing as well as future customers.
Annual Recurring Revenue
We use ARR as a key operational metric to assess the scale of our recurring revenue generated from managed premium. ARR is defined as the sum of each customer's managed premiums, multiplied by their respective contractual fee rates, plus any applicable policy fee income associated with managed policies as of the period end date. ARR excludes revenue from nonrecurring sources, such as catastrophe services.
Components of Operating Results
Revenue
We generate revenue from three primary sources: underwriting and management services, claim services, and other technology services. Underwriting and management services include policy issuance and renewal, reinsurance placement, and administrative support, with fees tied to a percentage of premiums written or assumed, plus related policy fees. Claim services involve investigating, adjusting, and settling claims, including catastrophe-related claims, with pricing based on percentage of premiums written or assumed, per-claim fees and/or a percentage of indemnification costs. Other technology services are primarily derived from proprietary software solutions offered through Software-as-a-Service service agreements, with fees based on a combination of policy or claim volumes, fixed charges, or percentages of claims handled.
Cost of Revenue
Our cost of revenue includes expenses directly attributable to delivering our services that generate revenue, such as salaries and benefits for employees supporting underwriting, management, administrative, and claim services. For specific customers, we collect fees that include agent commissions and remit those commissions to agents. Cost of revenue also includes amortization of capitalized internal-use-software and other intangible assets used to provide services, information technology expenses supporting policy underwriting, administrative functions, and claim handling services, and allocated overhead. Claim handling costs include adjustment, investigation, defense, recording, and payment functions. Allocated expenses from departments supporting these functions are also included in cost of revenue.
Gross Profit
Gross profit represents revenue less cost of revenue. The increase in gross profit in recent periods was primarily driven by growth in managed premium, which allows us to leverage our relatively fixed cost structure. As we continue to scale and achieve operational efficiencies, we expect gross margins to improve over time.
Selling, General and Administrative expenses
Selling, general and administrative expenses represent costs associated with supporting operations and primarily consist of employee compensation, including share-based compensation and benefits for our finance, IT, human resources, legal, sales, and general management functions, as well as facilities and professional services.
6
Research and Development
Our research and development costs consist primarily of personnel expenses, including salaries and benefits, bonuses, share-based compensation, facilities, and related overhead costs for employees engaged in the design and development of our technology offerings and other internally developed systems and applications.
Depreciation and Amortization
Depreciation and amortization costs reflect expenses associated with the ongoing use of our tangible long-lived assets, including computer hardware, office furniture and equipment, and leasehold improvements.
Investment Income
Investment income represents interest and returns earned from both short‑term and long‑term investments. The principal factors that influence investment income include the size and composition of our investment portfolio, the mix of short‑ and long‑duration assets, prevailing market conditions, and the yields generated over time.
Income Tax Expense
Income tax expense primarily consists of domestic corporate federal and state income taxes related to the sale of our services. The effective tax rate can be affected by many factors, including changes in tax laws, states in which we operate, regulations or rates, new interpretations of existing laws or regulations, and changes to our overall levels of income before tax.
Results of Operations
Three Months Ended March 31, 2026 and 2025
Selected financial information for the three months ended March 31, 2026, and 2025, including amounts expressed as a percentage of total revenue and the year-over-year change, is presented as follows:
|
|
Three Months Ended March 31, |
|
|
Percentage of Revenue |
|
|
Increase |
|
|||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
|||||
Revenue |
|
$ |
55,534 |
|
|
$ |
52,407 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
6.0 |
% |
Cost of revenue |
|
|
22,791 |
|
|
|
23,582 |
|
|
|
41.0 |
% |
|
|
45.0 |
% |
|
|
(3.4 |
)% |
Gross profit |
|
|
32,743 |
|
|
|
28,825 |
|
|
|
59.0 |
% |
|
|
55.0 |
% |
|
|
13.6 |
% |
Selling, general and administrative |
|
|
5,216 |
|
|
|
2,706 |
|
|
|
9.4 |
% |
|
|
5.2 |
% |
|
|
92.8 |
% |
Research and development |
|
|
2,306 |
|
|
|
2,221 |
|
|
|
4.2 |
% |
|
|
4.2 |
% |
|
|
3.8 |
% |
Depreciation and amortization |
|
|
146 |
|
|
|
101 |
|
|
|
0.3 |
% |
|
|
0.2 |
% |
|
|
44.6 |
% |
Total operating expenses |
|
|
7,668 |
|
|
|
5,028 |
|
|
|
13.9 |
% |
|
|
9.6 |
% |
|
|
52.5 |
% |
Operating income |
|
|
25,075 |
|
|
|
23,797 |
|
|
|
45.2 |
% |
|
|
45.4 |
% |
|
|
5.4 |
% |
Investment income |
|
|
2,512 |
|
|
|
398 |
|
|
|
4.5 |
% |
|
|
0.8 |
% |
|
|
531.2 |
% |
Income before income taxes |
|
$ |
27,587 |
|
|
$ |
24,195 |
|
|
|
49.7 |
% |
|
|
46.2 |
% |
|
|
14.0 |
% |
Income tax expense |
|
|
7,181 |
|
|
|
6,244 |
|
|
|
12.9 |
% |
|
|
11.9 |
% |
|
|
15.0 |
% |
Net income |
|
$ |
20,406 |
|
|
$ |
17,951 |
|
|
|
36.8 |
% |
|
|
34.3 |
% |
|
|
13.7 |
% |
Comparison of the Three Months Ended March 31, 2026 and 2025
Revenue
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Underwriting and management |
|
$ |
45,928 |
|
|
$ |
43,250 |
|
|
|
2,678 |
|
|
|
6.2 |
% |
Claim services (1) |
|
|
6,891 |
|
|
|
6,829 |
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|
|
62 |
|
|
|
0.9 |
% |
Other technology services |
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2,715 |
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|
2,328 |
|
|
|
387 |
|
|
|
16.6 |
% |
Total revenue |
|
$ |
55,534 |
|
|
$ |
52,407 |
|
|
|
3,127 |
|
|
|
6.0 |
% |
Revenue increased by $3,127, or 6.0%, to $55,534 for the three months ended March 31, 2026, compared to $52,407 for the same period in 2025, driven primarily by new customers along with growth in underwriting and management services from our existing customer base.
7
Underwriting and management revenue increased by $2,678, or 6.2%, to $45,928 for the three months ended March 31, 2026, compared to $43,250 for the same period in 2025, representing 82.7% and 82.5% of total revenue, respectively. The increase was primarily driven by higher managed premiums from two new customers onboarded at the end of 2025, along with growth in underwriting and management services from our existing customer base. As a percentage of revenue, underwriting and management services remained generally consistent year-over-year.
Claim services revenue remained relatively flat at $6,891 for the three months ended March 31, 2026, compared to $6,829 for the same period in 2025, representing 12.4% and 13.0% of total revenue, respectively. Claim services revenue in future periods will continue to be influenced by the level of managed premiums and the timing and severity of weather events.
Other technology services revenue increased by $387, or 16.6%, to $2,715 for the three months ended March 31, 2026, compared to $2,328 for the same period in 2025, representing 4.9% and 4.5% of total revenue, respectively. The slight increase was primarily driven by higher catastrophe software service revenue due to the stage of completion of certain catastrophic events (i.e., Hurricane Ian) in the current period. As these contracts progress, the estimation uncertainty declined, which contributed to higher revenue recognition. Because catastrophe-related software activity is event driven, revenue from these services may vary period to period.
Cost of Revenue
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Policy commission and related expenses |
|
$ |
12,174 |
|
|
$ |
12,667 |
|
|
$ |
(493 |
) |
|
|
(3.9 |
)% |
Outsourced claims fees |
|
|
1,529 |
|
|
|
2,255 |
|
|
|
(726 |
) |
|
|
(32.2 |
)% |
Direct personnel expense |
|
|
4,984 |
|
|
|
5,016 |
|
|
|
(32 |
) |
|
|
(0.6 |
)% |
Other operating expenses |
|
|
3,534 |
|
|
|
3,047 |
|
|
|
487 |
|
|
|
16.0 |
% |
Depreciation and amortization |
|
|
570 |
|
|
|
597 |
|
|
|
(27 |
) |
|
|
(4.5 |
)% |
Total cost of revenue |
|
$ |
22,791 |
|
|
$ |
23,582 |
|
|
$ |
(791 |
) |
|
|
(3.4 |
)% |
Cost of revenue decreased by $791, or 3.4%, to $22,791 for the three months ended March 31, 2026, compared to $23,582 for the same period in 2025, representing 41.1% and 45.0% of total revenue, respectively. The decrease in the cost of revenue as a percentage of revenue was primarily driven by improved operating leverage from higher revenue volumes.
Policy commission and related expenses decreased by $493, or 3.9%, to $12,174 for the three months ended March 31, 2026, compared to $12,667 for the same period in 2025, representing 21.9% and 24.2% of total revenue, respectively. The decrease was primarily due to lower written premiums by the single carrier with policy commission services. The weighted average commission rate was relatively consistent at 9.0% for 2026 and 2025.
Outsourced claims fees decreased by $726, or 32.2%, to $1,529 for the three months ended March 31, 2026, compared to $2,255 for the same period in 2025, representing 2.8% and 4.3% of total revenue, respectively. The decrease was primarily due to lower catastrophe claims development and reduced litigation related activity in 2026 compared with 2025, when claims development and related litigation costs were elevated due to claims arising from storms that occurred in late 2024. Catastrophe related activity is inherently volatile and may not recur at similar levels in future periods.
Direct personnel expense remained relatively flat at $4,984 for the three months ended March 31, 2026, compared to $5,016 for the same period in 2025, representing 9.0% and 9.6% of total revenue, respectively. As a percentage of revenue, the direct personnel expense decreased due to improved operational leverage.
Other operating expenses increased by $487, or 16.0%, to $3,534 for the three months ended March 31, 2026, compared to $3,047 for the same period in 2025, representing 6.4% and 5.8% of total revenue, respectively. The increase was driven by higher claims management activity along with higher postage and related fees due to significantly higher policy volumes in 2026. These increases were partially offset by the bank fee charges following a system optimization initiative implemented in mid 2025.
Depreciation and amortization remained relatively flat at $570 for the three months ended March 31, 2026, compared to $597 for the same period in 2025, representing 1.0% and 1.1% of total revenue, respectively. Depreciation and amortization were relatively unchanged year-over-year and did not materially affect our cost structure.
Operating Expenses
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Selling, general and administrative |
|
$ |
5,216 |
|
|
$ |
2,706 |
|
|
$ |
2,510 |
|
|
|
92.8 |
% |
Research and development |
|
|
2,306 |
|
|
|
2,221 |
|
|
|
85 |
|
|
|
3.8 |
% |
Depreciation and amortization |
|
|
146 |
|
|
|
101 |
|
|
|
45 |
|
|
|
44.6 |
% |
Total operating expenses |
|
$ |
7,668 |
|
|
$ |
5,028 |
|
|
$ |
2,640 |
|
|
|
52.5 |
% |
8
Operating expenses increased by $2,640, or 52.5%, to $7,668 for the three months ended March 31, 2026, compared to $5,028 for the same period in 2025, representing 13.8% and 9.6% of total revenue, respectively. The increase was primarily driven by higher selling, general and administrative expenses.
Selling, general and administrative expenses increased by $2,510, or 92.8%, to $5,216 for the three months ended March 31, 2026, compared to $2,706 for the same period in 2025, representing 9.4% and 5.2% of total revenue, respectively. Employee-related costs accounted for approximately half of the increase, primarily due to a higher portion of discretionary compensation costs being reflected in selling, general and administrative expenses rather than in cost of revenue as accruals were finalized, along with salary and wage expenses resulting from higher headcount to support continued business growth. In addition, the increase reflects lower overhead allocations to TTIC following the sale of TTIC to HCI in July 2024. The corporate overhead allocation to TTIC included shared services such as HR, IT, legal, accounting, and lease-related costs which were allocated using methodologies appropriate to each cost type and applied consistently for all periods presented. We ceased providing corporate services, and therefore ceased allocating related expenses, to TTIC as of July 1, 2025. The remaining increase reflects higher operating costs associated with being a publicly traded Company.
Research and development expenses remained relatively flat at $2,306 for the three months ended March 31, 2026, compared to $2,221 for the same period in 2025, representing 4.2% of total revenue in both periods. Research and development was relatively unchanged year-over-year and did not materially affect our cost structure.
Depreciation and amortization remained relatively flat at $146, for the three months ended March 31, 2026, compared to $101 for the same period in 2025, representing 0.3% and 0.2% of total revenue, respectively. Depreciation and amortization were relatively unchanged year-over-year and did not materially affect our cost structure.
Investment Income
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Investment income |
|
$ |
2,512 |
|
|
$ |
398 |
|
|
$ |
2,114 |
|
|
|
531.2 |
% |
Investment income increased by $2,114, or 531.2%, to $2,512 for the three months ended March 31, 2026, compared to $398 for the same period in 2025, primarily due to higher average investable cash balances following our IPO in late 2025 and strategic deployment of capital into interest-bearing cash equivalents and available-for-sale securities. While market interest rates and yields were lower compared to the prior year, the significantly larger balances held in money market and deposit accounts more than offset the lower yield environment. Investment income may fluctuate in future periods based on cash levels, timing of proceeds deployment, and market conditions.
Income Tax
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Income before income taxes |
|
$ |
27,587 |
|
|
$ |
24,195 |
|
|
$ |
3,392 |
|
|
|
14.0 |
% |
Income tax expense |
|
$ |
7,181 |
|
|
$ |
6,244 |
|
|
$ |
937 |
|
|
|
15.0 |
% |
Effective tax rate |
|
|
26.0 |
% |
|
|
25.8 |
% |
|
|
|
|
|
|
||
Income tax expense increased by $937, or 15.0%, to $7,181 for the three months ended March 31, 2026, compared to $6,244 for the same period in 2025. Our effective tax rate was 26.0% for the three months ended March 31, 2026, compared to 25.8% for the same period in 2025.
Our effective tax rate for both periods differed from the U.S. federal statutory rate of 21.0% primarily driven by state income taxes, net of federal tax benefits, and other immaterial nondeductible expenses. The year-over-year change in the effective tax rate was not material for the periods presented. We expect our effective tax rate to continue to vary from the statutory rate due to similar permanent differences and state tax obligations. There were no material changes in our income tax estimation methodologies for the periods presented. The year-over-year increase in the income tax expense was primarily driven by higher income before income taxes.
Non-GAAP Financial Measures
In addition to results determined in accordance with GAAP, we use certain non-GAAP financial measures to evaluate our operating performance and make strategic decisions. These non-GAAP financial measures include Adjusted EBITDA, Adjusted Revenue, Adjusted EBITDA Margin, and Free Cash Flow. Management believes these measures provide useful supplemental information for investors by facilitating comparisons of performance across reporting periods and with other companies in the industry, many of which use similar non-GAAP financial measures.
However, these non-GAAP financial measures are not prepared in accordance with GAAP, are not based on a standardized methodology, and may not be comparable to similarly titled measures used by other companies. They should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. These measures exclude items that may be significant to an understanding of our financial condition and results of operations under GAAP. The use of non-GAAP financial measures involves management judgment regarding which items to exclude or include. Accordingly, these measures have limitations and should be viewed
9
as a supplement to, not a replacement for, our GAAP results. Management urges investors to review the reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures included in this report and not to rely on any single financial measure to evaluate our business.
Adjusted EBITDA
We define Adjusted EBITDA as net income adjusted to exclude income tax expense, interest expense, investment income, depreciation and amortization, and share-based compensation expense. Management uses Adjusted EBITDA as a key measure of operating performance and to assess the results of the business excluding certain items that are not considered indicative of core operating results. Adjusted EBITDA should not be viewed in isolation or as a substitute for net income calculated in accordance with GAAP, and other companies may define Adjusted EBITDA differently.
The reconciliation of net income to Adjusted EBITDA for the periods presented is as follows:
|
|
Three Months Ended March 31, |
|
|||||
(Unaudited, in thousands) |
|
2026 |
|
|
2025 |
|
||
Net income |
|
$ |
20,406 |
|
|
$ |
17,951 |
|
Income tax expense |
|
|
7,181 |
|
|
|
6,244 |
|
Investment income |
|
|
(2,512 |
) |
|
|
(398 |
) |
Depreciation and amortization |
|
|
716 |
|
|
|
698 |
|
Share-based compensation |
|
|
740 |
|
|
|
723 |
|
Adjusted EBITDA (1) |
|
$ |
26,531 |
|
|
$ |
25,218 |
|
Adjusted Revenue
We define Adjusted Revenue as the portion of revenue earned through services delivered directly via our proprietary platform technology. This metric excludes revenue associated with services primarily within claims management that are outsourced to a subsidiary of HCI. Although this revenue is recognized on a gross basis under GAAP because we are considered the principal in the transaction, the economics are largely neutral, as the related costs incurred from outsourced service providers closely match the revenue recognized. Management believes Adjusted Revenue provides investors with useful insight into the performance and scalability of our core platform services and reflects the revenue generated from internally delivered operations, excluding variability associated with outsourced service arrangements. This non-GAAP measure should not be considered in isolation or as a substitute for total revenue or any other performance measure calculated in accordance with GAAP.
The reconciliation of the Adjusted Revenue for the periods presented is as follows:
|
|
Three Months Ended March 31, |
|
|||||
(Unaudited, in thousands) |
|
2026 |
|
|
2025 |
|
||
Revenue |
|
$ |
55,534 |
|
|
$ |
52,407 |
|
Less: Outsourced claims fees |
|
|
1,529 |
|
|
|
2,255 |
|
Adjusted Revenue |
|
$ |
54,005 |
|
|
$ |
50,152 |
|
Adjusted EBITDA Margin
We define Adjusted EBITDA Margin as Adjusted EBITDA expressed as a percentage of Adjusted Revenue. This non-GAAP measure provides management and investors with additional insight into the Company's operating efficiency and the scalability of our business model, as it reflects our progress toward long-term profitability. The most directly comparable GAAP measure is net income margin, which is calculated as net income divided by GAAP revenue.
The calculation of Adjusted EBITDA Margin for the periods presented is as follows:
|
|
Three Months Ended March 31, |
|
|||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
||
Numerator: Adjusted EBITDA |
|
$ |
26,531 |
|
|
$ |
25,218 |
|
Denominator: Adjusted Revenue |
|
|
54,005 |
|
|
|
50,152 |
|
Adjusted EBITDA Margin (1) |
|
|
49.1 |
% |
|
|
50.3 |
% |
10
Free Cash Flow
We define Free Cash Flow as net cash provided by operating activities less capital expenditures during the period. We believe information regarding Free Cash Flow provides useful information to management and investors because it is an indicator of strength and performance of our business operations after funding capital expenditures. Capital expenditures consist of capitalized software development costs and costs relating to property and equipment, such as computer hardware, office furniture and equipment, and leasehold improvements. Free Cash Flow should not be considered an alternative to net cash provided by operating activities, which is the most directly comparable GAAP measure, or as a measure of liquidity prepared in accordance with GAAP and may not be comparable to similar measures used by other companies.
The reconciliation of Free Cash Flow for the periods presented is as follows:
|
|
Three Months Ended March 31, |
|
|||||
(Unaudited, in thousands) |
|
2026 |
|
|
2025 |
|
||
Cash provided by operating activities |
|
$ |
25,472 |
|
|
$ |
19,772 |
|
Less: Capital expenditures |
|
|
327 |
|
|
|
769 |
|
Free Cash Flow |
|
$ |
25,145 |
|
|
$ |
19,003 |
|
Liquidity and Capital Resources
General
Our principal sources of liquidity, consisting of cash and cash equivalents and cash generated from operations, are presented as follows:
|
|
March 31, |
|
|
December 31, |
|
||
(Unaudited, in thousands) |
|
2026 |
|
|
2025 |
|
||
Cash and cash equivalents |
|
$ |
231,381 |
|
|
$ |
305,372 |
|
Working capital |
|
$ |
162,353 |
|
|
$ |
241,432 |
|
Cash and cash equivalents decreased during the three months ending March 31, 2026, primarily due to purchases of fixed-maturity securities classified as available-for-sale, partially offset by cash generated from operating activities. Working capital also decreased during the period, primarily reflecting the same investment activity; as the available-for-sale fixed-maturity securities were classified as non-current based on management's intent not to use the investments for current operating purposes.
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our liquidity, capital resources, or financial condition.
We believe that our existing cash and cash equivalents, together with expected operating cash flows, will be sufficient to meet working capital, capital expenditures, and other liquidity requirements for at least the next 12 months. We have no material long-term contractual obligations other than standard vendor agreements and lease commitments.
Our primary cash requirements include employee compensation and outsourced fees, cloud hosting and infrastructure costs, and ongoing investment in product development. At current operating levels, these requirements are expected to be supported by operating cash flows.
Based on our current financial position, we also believe that our liquidity sources will be adequate to meet our long-term needs beyond the next twelve months. Over the longer term, our liquidity will depend primarily on our ability to generate cash from operations as our managed premium base scales and we continue to expand our technology and service offerings.
Investments
The main objective of our investment policy is to maximize our after-tax investment income with a reasonable level of risk given the current financial market. Our excess cash is invested primarily in money market accounts and available-for-sale fixed-maturity securities.
As of March 31, 2026, we had $98,516 of available-for-sale fixed-maturity investments, which are carried at fair value. Changes in the general interest rate environment affect the returns available on new available-for-sale fixed-maturity investments. While a rising interest rate environment enhances the returns available on new investments, it reduces the market value of existing available-for-sale fixed-maturity investments and thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new available-for-sale fixed-maturity investments but increases the market value of existing available-for-sale fixed-maturity investments, creating the opportunity for realized investment gains on disposition.
Sources of Liquidity
Our capital requirements depend on several factors, including the volume of insurance policies managed on our platform, the level of claims related services we provide, operating expenses, investments in information technology systems, and the expansion of sales and marketing activities.
11
Our current liquidity sources consist primarily of existing cash and cash equivalents and cash generated from operations. In the future, we may raise additional funds through the issuance of debt or equity securities or the borrowing of money. There can be no assurance that such financing would be available on favorable terms, or at all.
Cash Flow Summary
A summary of cash flows is as follows:
|
|
Three Months Ended March 31, |
|
|||||
(Unaudited, in thousands) |
|
2026 |
|
|
2025 |
|
||
Net cash provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
25,472 |
|
|
$ |
19,772 |
|
Investing activities |
|
$ |
(99,321 |
) |
|
$ |
(769 |
) |
Financing activities |
|
$ |
(57 |
) |
|
$ |
— |
|
Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2026 was $25,472, an increase of $5,700 from $19,772 for the same period in 2025. The increase is primarily driven by higher net income along with favorable working capital changes, including lower cash paid for income taxes due to the timing of payments during the current period. These favorable impacts were partially offset by an increase in accounts receivable, primarily due to business expansion and the timing of customer billings as well as other working capital movements. Operating cash flows may vary based on the timing of customer receipts and vendor payments.
Investing Activities
Net cash used in investing activities for the three months ended March 31, 2026 was $99,321, compared to $769 for the same period in 2025, an increase in cash used of $98,552. The increase was primarily due to purchases of available-for-sale fixed-maturity securities during the 2026 period. Capital expenditures also continued in support of software development and infrastructure, consistent with our strategy to support and enhance core operations.
Financing Activities
Net cash used in financing for the three months ended March 31, 2026 was $57, compared to $0 for the same period in 2025. The financing cash outflow in the first quarter of 2026 reflects the payment associated with the Company's IPO in 2025. Certain cash payments for these costs occurred in the first quarter of 2026 due to the timing of invoice receipt and settlement.
Critical Accounting Policies and Estimates
The preparation of our unaudited interim Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. These estimates are inherently uncertain and require significant judgment, particularly in areas that involve complex or subjective assumptions and often involve matters that are inherently unpredictable.
We regularly evaluate these estimates based on historical experience, current business conditions, and other relevant factors, including inputs from third-party specialists where applicable. Our estimates are subject to change as new events occur, additional information becomes available, or operating environments evolve. Actual results could differ materially from those estimates, and such differences may have a material impact on our financial condition or results of operations.
We believe the following accounting policies involve significant judgment and estimates and are critical to an understanding of our financial condition and results of operations: Revenue recognition, Share-based compensation, Income taxes.
The above and other accounting estimates and their related risks that we consider to be our critical accounting estimates are discussed further in our 2025 Annual Report, filed with the SEC on February 26, 2026. For the three months ended March 31, 2026, there have been no other material changes with respect of any of our critical accounting policies.
Revenue Recognition
We recognize revenue from contracts with customers in accordance with ASC 606. We determine the appropriate amount of revenue to be recognized by applying the five-step model: (i) identifying the contract with customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations, and (v) recognizing revenue when, or as, the performance obligations are satisfied. Our revenue is primarily usage-based and derived from fees calculated as a percentage of premiums written by our insurance customers. The nature of our usage based arrangements and related judgments did not change materially during the periods presented.
We allocate the transaction price to performance obligations based on their relative standalone selling prices. For most performance obligations, we estimate standalone selling prices using an expected cost-plus-margin approach, which requires significant judgment regarding forecasted fulfillment costs and appropriate market-based margins. Changes in these estimates, including changes in product or service mix, or revisions to our assessment of the market-based margins, could affect the standalone selling prices used to allocate consideration in new or renewal of existing contracts and thus result in the impact of the amount and timing of revenue recognized for
12
each performance obligation. Our approach to determining standalone selling prices, including the underlying assumptions regarding fulfillment costs forecasts and margin estimates, remained consistent and did not change materially over the periods presented.
Because our fees are generally usage-based and tied to the underlying insurance policies written by our customers, the transaction price often includes variable consideration. While our customer contracts typically span multiple years, the underlying insurance policies can be cancelled by policyholders without penalty. As a result, the uncertainty related to underlying policy volume, not termination of the MGA or customer agreement itself, drives our application of the ASC 606 constraint. We therefore constrain variable consideration to the amounts that are not probable of significant reversal. This assessment requires judgment and involves assumptions about policyholder behavior, seasonality, expected policy retention, and inherent volatility of premiums written. We update these estimates quarterly based on the most recent available information. The assumptions used to evaluate and constrain variable consideration, including expected volume and retention behavior, were applied consistently and did not change materially during the periods presented.
Share-Based Compensation
We account for share-based compensation awards under our shareholder-approved incentive plans in accordance with the fair value recognition provisions of GAAP, recognizing expense based on grant-date fair value over the requisite service period. Our share-based awards primarily consist of restricted stock awards and stock options with service-based or market-based vesting conditions. Restricted stock awards are granted with either time-based or market-based vesting conditions tied to our stock price (e.g., share price thresholds sustained over a defined period) and are expensed over the requisite service period based on grant-date fair value. For awards with market-based vesting conditions, the grant-date fair value incorporates the probability of achieving the market condition and is not subsequently adjusted.
For stock options, we determine grant-date fair value using a Monte Carlo simulation technique and other option pricing models. These methods estimate the fair value of the option by modeling a range of potential future stock prices and associated outcomes and rely on assumptions such as expected volatility, risk-free interest rates, expected term, and dividend yield. These assumptions require significant judgment and can materially impact recognized compensation expense.
For awards granted while we were a private company, we determined the fair value of our common stock using third-party valuations under Internal Revenue Code Section 409A. These valuations incorporated assumptions regarding future performance, market conditions, and comparable company data. Inputs such as estimated stock price and expected price volatility used in these valuation methods were derived from analyses of public peer companies with similar characteristics. For awards granted after our IPO, the grant-date fair value of our common stock is based on the quoted market price of our common stock on the date of grant.
Income Taxes
We account for income taxes in accordance with GAAP, resulting in two components of income tax expense (benefit): current and deferred. The current income tax expense (benefit) reflects taxes payable or refundable for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues.
The realizability of deferred tax assets is evaluated quarterly, and judgment is required in assessing both positive and negative evidence, including recent financial performance, forecasted future earnings, and relevant tax planning strategies.
As a member of a consolidated U.S. federal income tax return with HCI, we are subject to the group's tax-sharing arrangements. Our estimate of tax expense is sensitive to changes in the effective rate applied to our standalone results, which may differ from statutory rates due to business mix or transaction-related effects.
JOBS Act
We are an EGC as defined under the JOBS Act. As an EGC, we may delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to not take advantage of the extended transition period that allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies, which means that the financial statements included in this Quarterly Report on Form 10-Q, as well as financial statements we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. Our election not to take advantage of the extended transition period is irrevocable.
We will remain an EGC until the earliest to occur of the following: (i) the last day of the fiscal year in which our total annual gross revenues first meet or exceed at least $1.235 billion (as adjusted for inflation), (ii) the date on which we have, during the prior three-year period, issued more than $1.00 billion in non-convertible debt, (iii) the last day of the fiscal year in which we (a) have an aggregate worldwide market value of common stock held by non-affiliates of $700.0 million or more (measured at the end of each fiscal year) as of the last business day of our most recently completed second fiscal quarter and (b) have been a reporting company under the Exchange Act for at least one year (and have filed at least one annual report under the Exchange Act), or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act.
New Accounting Guidance
Refer to Note 2. Summary of Significant Accounting Policies to the Consolidated Financial Statements for a discussion of new accounting standards.
13
Item 6. Exhibits.
Exhibit |
|
|
|
Number |
|
Description of Exhibit |
|
31.1* |
|
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
31.2* |
|
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
32.1** |
|
Certification of the Chief Executive Officer Pursuant to 18 U.S.C.ss 1350 |
|
32.2** |
|
Certification of the Chief Financial Officer Pursuant to 18 U.S.C.ss 1350 |
|
104* |
|
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
|
* |
Filed herewith |
** |
Furnished herewith |
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Exzeo Group, Inc. |
|
|
|
|
Date: May 15, 2026 |
By: |
/s/ Paresh Patel |
|
|
Paresh Patel |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
Date: May 15, 2026 |
By: |
/s/ Suela Bulku |
|
|
Suela Bulku |
|
|
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
15