Exzeo Group, Inc. Q4 FY2025 earnings call

• Exio delivered strong financial performance in the fourth quarter with revenue, pre-tax income, and earnings per share all showing growth. • Adjusted EBITDA margins were over 54% in both the fourth quarter and full year. • Managed premium at the end of the fourth quarter was ahead of expectations and significantly up from the previous year. • Annual recurring revenue increased in the fourth quarter. • Generated strong free cash flow in 2025 with a high conversion rate. • Balance sheet was strong with significant cash, no debt, and increased stockholders' equity. • Kevin highlighted adding non-HCI clients, Tokyo Marine Highland adding flood insurance product to the platform, and hiring a seasoned software sales executive. • Parrish discussed the impact of AI on the insurance industry and how Exio's platform is well-positioned for the future, focusing on execution to add more clients, products, and premium.

For the fourth quarter, revenue was $53 million, pre-tax income was approximately $29 million, and diluted earnings per share were 25 cents. For the full year, revenue increased to $217 million, pre-tax income was over $110 million, and diluted earnings per share were 99 cents. Adjusted EBITDA margins increased to over 54% in both the fourth quarter and the full year. Managed premium at the end of the fourth quarter was approximately $1.39 billion, ahead of expectations and up significantly from about $580 million last year. Annual recurring revenue was $215 million in the fourth quarter, an increase from about $139 million in the prior year quarter. For the full year 2025, free cash flow was about $97 million with net income of about $83 million, giving a free cash flow conversion rate of 117%. The balance sheet ended the year with $305 million cash and cash equivalents, no debt, and stockholders' equity increased 16-fold to $254 million.

• Expect pre-tax income to be between $23 million and $26 million for the first quarter of 2026. • For the full year 2026, expect pre-tax income to be between $116 million and $125 million. • Expect managed premium to be over $1.4 billion by the end of the first quarter of 2026 and raise the outlook for 2026 to $1.55 billion by year-end.

• The conference call contains forward-looking statements subject to various risks and uncertainties. • Risks and uncertainties identified in the company's SEC filings could develop into actual events that have material adverse effects on the company's business, financial condition, and results of operation. • Exeo Group disclaims obligations to update forward-looking statements.

Q: Terry Tillman asked about the entry into the flood market with Tokyo Marine, the growth of the two newer carriers to $100 million premium by the end of the first quarter, go-to-market activity, and free cash flow conversion.

A: Kevin mentioned Tokyo Marine's credibility and the speed of partnering, Suela said the funnel is developing well and free cash flow conversion is expected to continue over 100% due to growth and positive working capital cycle.

Q: Dylan Becker asked about the evolution of the insurance model facilitated by AI, proprietary data sets, and how premium growth converts to revenue and ARR.

A: Kevin talked about Exio's curated data sets as a competitive advantage, Suela explained revenue recognition with a portion up front and the rest earned over 12 months depending on premium ramp timing.

Q: Matt Carletti asked about the starting point of third-party managed premiums and the first quarter pre-tax income guidance.

A: Suela said third-party managed premiums were modest at the end of Q4 and expected to be $100 million by the end of Q1, and pre-tax income for Q1 is expected to be between $23 million and $26 million.