Exzeo Group, Inc. (XZO) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us, and welcome to the Exzeo Group Inc. Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Bill Broomall, VP of Investor Relations. Bill, please proceed.

Thank you, and good afternoon. Welcome to Exzeo Group's Second Quarter 2026 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 and uncertainties develop in 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 would like to turn the call over to Suela Bulku, Exzeo's Chief Financial Officer.

Thank you, Bill. Good evening, everyone, and thank you for joining us for Exzeo's second quarter earnings call. Exzeo continues down the path of strong execution and attractive financial results. Managed premium on the platform remains robust at $1.4 billion, and we delivered another quarter of attractive margins, including a 53% adjusted EBITDA margin in the quarter. Pretax income for the quarter was over $31 million, an increase from over $28 million in the prior year quarter. These results were above the guidance we provided. Earnings per share for the quarter were $0.26 and year-to-date earnings per share were $0.48. For the second quarter, total revenue increased to $58 million, up from $56 million in the prior year quarter, driven by the increase of managed premium on the platform. Excluding outsourcing claim fees, adjusted revenue increased by $4 million year-over-year to more than $56 million. Managed premium in the quarter was $1.4 billion, an increase from $1.2 billion in the prior quarter. Given the seasonality of growth for our clients, managed premiums were in line with expectations. Our adjusted EBITDA margin was over 53% in the quarter, and we believe annualized margins above 50% are achievable for the foreseeable future. A few additional highlights for the quarter. Our annual recurring revenue was $211 million in the second quarter, an increase from $195 million in the prior quarter. Our balance sheet remains exceptionally strong. We ended the quarter with over $333 million of invested assets, which includes cash, cash equivalents and fixed income securities. We remain debt-free and continue to maintain significant financial flexibility. Shareholders' equity increased to $288 million, an increase from $254 million at the end of the year. Next, I want to quickly touch on our guidance expectations. For the third quarter, we expect pretax income to be between $28 million and $31 million, and we expect managed premium to be approximately $1.4 billion. Our guidance for the third quarter is consistent with the anticipated timing of growth across our existing client base. Our full year guidance remains unchanged. Before turning the call over to Kevin, I wanted to quickly touch on recent capital management actions. During the quarter, we repurchased over 726,000 shares of our common stock for approximately $10 million. Subsequent to the quarter, we repurchased an additional 107,000 shares, which brings total repurchases to $12 million, completing the authorized share repurchase program. We continue to have tremendous confidence in the long-term outlook for our business. Given our asset-light model, high margins, debt-free balance sheet, significant cash on hand and the momentum we are seeing across the business, we believe allocating less than one quarter's worth of earnings to repurchase shares at attractive valuations was a compelling use of capital. And with that, I will hand it over to Kevin, President of Exzeo.

Thank you, Suela. The Exzeo platform continues to gain momentum, and we are seeing encouraging customer wins. Let me elaborate on some of these achievements. While we often talk about the insurance companies joining our platform, demand extends well beyond carriers. We are seeing growing interest from independent agents who are proactively reaching out to join the Exzeo platform. The flywheel effect we've discussed in the past is real. As more agents join the platform, it becomes increasingly attractive to insurance companies as more carriers come on board, the value proposition for agents continues to strengthen. That network effect is helping accelerate adoption across our ecosystem. Second, we've seen quote volume more than double since the beginning of the year. Third, last month, we signed our eighth carrier partner. Our new partnership with GEICO brings auto insurance to the platform, marking another meaningful step in expanding our capabilities. Agents can now bundle home and auto. With the addition of auto, the Exzeo platform now offers homeowners, commercial residential, flood and auto insurance. Expanding our product set makes the platform more valuable to agents by enabling them to serve more of their clients' insurance needs through a single platform. In closing, since the beginning of the year, we've made meaningful progress across every dimension of the platform. We've doubled the number of agents. We've more than doubled quote volume, and we've added additional products. And we've grown to 8 carriers on the platform. Now I'll turn the call over to Paresh, Exzeo's Chief Executive Officer.

Thanks, Kevin. Suela provided numbers that clearly show how healthy and cash flow positive Exzeo already is. Kevin highlighted the tremendous momentum in expanding the size and scope of the Exzeo platform. The continued addition of new carriers, new products and new capabilities reinforces that our platform is gaining meaningful traction in the marketplace. And while these initiatives don't translate into results overnight, they continue to strengthen our long-term growth opportunity and expand the value we can deliver. Beyond all of this, earlier today, we announced the next new initiative, Exzeo Ventures. The reason we're launching Exzeo Ventures is simple. AI represents a once-in-a-generation paradigm shift. And most companies think about AI as a tool to make existing processes faster or more efficient. And while that's certainly valuable, we think there is a much bigger opportunity. And a useful analogy might be to look back at the Internet, the evolution of the Internet. The first wave of Internet brought traditional businesses online, making familiar processes faster and more efficient. But the truly transformative companies were the companies that created entirely new business models that only become possible because of the Internet. For example, companies like Uber fundamentally reimagined transportation. And we believe AI has the potential to follow a very similar path. So rather than simply asking how AI can make current businesses more efficient, we are asking a much bigger question. What entirely new products, services and businesses can AI make possible, and that's the purpose of Exzeo Ventures. Now we've been working on these ideas behind the scenes for some time, and we've reached a point where we've seen enough progress and assembled the right team that we're ready to formalize the effort. We're funding Exzeo Ventures as an internal platform and its mission is to identify opportunities that only emerge when AI fundamentally changes what's possible. And let me give you one small example amongst a number of initiatives that we are working on. After a major catastrophe event, insurance carriers experienced an enormous surge in claims. The challenge isn't simply receiving those claims, it's having the personnel available to process them. That staffing bottleneck often delays claim handling at accelerate time when policyholders need assistance the most. Simply put, scaling up the human element in a demand surge is challenging. It is difficult to increase human compute at the touch of a dial. However, with AI, you can increase the compute by orders of magnitude immediately. So imagine a carrier that normally processes 200 claims per week, suddenly needing to process 4,000 because of major catastrophe events. The claim volume has spiked 20-fold, but now with the AI capabilities, processing capacity can increase just as quickly. The result will be faster claims handling, shorter wait times and a significantly better experience for the policyholders during some of the most difficult times they will ever face. And this is exactly the type of opportunity that excites us because it simply wasn't possible before AI. And that's the vision behind Exzeo Ventures across underwriting, claims distribution, claims, risk transfer and many other areas, we believe AI creates the opportunity for entirely new categories of products and businesses. And with that, I will turn over the call for questions.

[Operator Instructions] Your first question comes from the line of Terry Tillman with Truist.

I have 3 questions, but they will be really quick, I promise. First, on GEICO, I think they're relatively large. I think they're the third largest auto insurer in the U.S. I mean, is there any way to kind of ring-fence this or give us a sense on how sizable this could be and kind of timing and when this could start to hit the model? And then I had 2 follow-ups.

Yes, Terry. GEICO is big. It's huge, right? And there's also been a recent thing about people wanting to bundle home and auto and the benefits of all of that. But the issue becomes do you benefit -- do you bundle with the auto carrier, bundling the home or the home carrier bundling the auto? Or do you let the agent on the platform assemble the bundle? These are all choices that will result in the same outcome. The partnership with GEICO lets people bundle and sell GEICO on the Exzeo platform. So it's a big start. We'll see how it grows into it. But yes, it could be something big, Early days yet, but we are very excited to partner with GEICO.

Understood. I appreciate that. And maybe the second question, and I'm assuming some of those might want to also double-click on this. Exzeo Ventures sounds very interesting. But could you help us a little bit with another one of these, what would it do? Would it be -- it drives more carriers or business relationships or it drives more of a take rate with your existing carriers? Is it a managed premium dynamic? And at the same time, by making these investments, would you still be kind of achieving those really high 50% plus EBITDA margins?

So I would characterize it this way. What you sort of said about AI helping the Exzeo platform, that's all going to occur anyway. That isn't what Exzeo Ventures is about. There will be AI on the Exzeo platform side as well. And that's what everybody else is also looking at. That's modernizing your current stack because of AI. What we're talking about in Exzeo Ventures is doing something that you could not be possible without AI, right? And that's what we're talking about. Businesses think of, again, in my earlier comments, the example of Uber. Uber is not possible without the Internet and GPS and maps and everything else, right? But it isn't just taking a taxi company and putting it on a web presence. It's reimagining how things get done, how transportation is done. And we are starting to see there are things that you can now do with AI that you just couldn't do without AI. And one simple example of this that we kind of piloted a little bit was this WindForm Pro we talked about last quarter. It allowed carriers to process this new requirement that came in, and it would require a lot of staffing and training and all that kinds of stuff. But using AI, we turned it into something that we could share with the whole industry very, very easily. It's stuff like that, that we're talking about, right? It's -- it's not retrofitting AI to existing businesses. It's trying to think of new businesses we can do that's only possible because of AI. And we have a few -- we have like 4 or 5 in the hopper at the moment. We will obviously discuss them as they all come to more maturity as we go along. So we're in the process of seeding and setting all that up. But Exzeo Ventures is not -- and it is not just an incremental thing. It could be something very, very different that is even beyond insurance, if that helps.