XZO 10-K & 10-Q changes, risk factors and insider trading

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,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, in our 2025 Annual 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,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,condition and results of operations. Natural catastrophes, environmental risks,risks and climate-related eventsevents, such as hurricanes and other severe weather, may significantly impact our customers’ P&C insurance operations, particularly in Florida where a substantial majority of our managed premiums are concentrated, 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,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 premiumpremium, 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,obligations and demands on management resources.

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,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 federalapplicable 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.

Exzeo providesGroup, Inc., and its subsidiaries, a majority owned subsidiary of HCI, provide 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.

Our Insurance-as-a-Service platform, referred to as the Exzeo Platform, includesis ninean highlyintegrated suite of configurable software and analyticsinsurance applications that are purpose-built to servesupport the insuranceentire P&C value chain. The Exzeo Platform providesdelivers technology-basedintegrated technology solutions forthat streamline operational and administrative activities and functions performed byfor insurance carrierscarriers, MGAs, reciprocal exchanges, program administrators, and their agents,distribution includingpartners, enabling organizations to modernize operations, improve efficiency, and scale through a single configurable platform which includes quoting and underwriting, policy management,administration, 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,HCI Group, Inc., a leading underwriter of homeowners insurance in Florida that now writes policies in 12 additional states. In 2020, Exzeo became an independent business entity and completed its initial public offering on November 5, 2025. Since inception, weExzeo havehas 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 P&C 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.

UnderwritingTechnology-driven performanceunderwriting support and continued investments in our technology.platform. We leverage data, technology, and proprietary underwriting algorithms to enhancesupport our customers’ underwriting and risk management.management Forprocesses. example,This weincludes incorporateincorporating additional dynamic external data sources and applyapplying advanced statistical methods to modelinform thatpricing informationand intorisk selection decisions. Underwriting decisions and ultimate risk outcomes, including loss experience, remain the responsibility of our pricingcarrier algorithms.customers. We expect that continued enhancements to improve our abilityplatform towill manage and price risk accurately over time as we incorporate new external data sources and utilize the experience gained over time with HCI's policyholder base and other carrier programs. These enhancements are expected to lead to betterimprove underwriting, lower loss frequency, and lower loss ratios over time,time for policies on our platform, after adjusting for weather-related events. Our successability into thisdeliver areavalue depends on oursuccessfully ability to continually integrateintegrating new data sources and applyrefining themour effectivelyanalytical capabilities to improvesupport more informed decision making by our ability to accurately and competitively price risk.customers.

New customer acquisition, success and retention. We have relied and expect to continue to rely on customer relationships with a relatively small number of carriers in the P&C insurance industry for a substantial portion of our revenue, and the loss of any of these customers or a reduction in revenue from any of these customers would significantly harm our business, results of operations, and financial condition. As part of our growth strategy, we are focused on expanding our customer base by developing new partnerships with additional carriers and their agents. Our future operating results will depend, in part, on the rate at which we acquire new customers that are not affiliates of HCI and maintain our relationships with existing customers as measured byincrease the amount of managed premium ongenerated ourthrough platform.those relationships. We believe that introducing these prospective customers todemonstrating the advantages of our technology platform and variable fee structure to prospective carriers will be critical to diversifying our revenue and reducing customer concentration over time. Our ability to support this expansion depends on the continued performance of our customer success and support teams, which are critical to ensuring high customer adoption, satisfaction, adoption, and retention.

Managed premiums attributable to insurance policies written in Florida represented 91.7% and 90.1%90.0% of total managed premiums foras theof threeJune months ended March 31,30, 2026 and 2025, respectively.

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-yearprior 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 MarchJune 31,30, 2026 and 2025, managed premiums attributable to policyholders active from the end of the prior-yearprior year period used in the gross dollar retention rate calculation were $1,137,161$1,087,674 and $437,095,$446,209, respectively.

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-yearprior year period (i.e., twelve months earlier).

Our cost of revenue includes expenses directly attributable to deliveringproviding our servicesservices, that generate revenue, such asincluding salaries and benefits for employees supporting underwriting, management, administrative,administrative and claim services. For specificcertain customers, we collectare feesresponsible thatfor includecompensating agents supporting underwriting services and recognize related agent commissionscommission and remit those commissions to agents.expenses. Cost of revenue also includes amortization of capitalized internal-use-softwareinternal-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 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.time, although there can be no assurance that we will achieve these improvements.

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, sales and marketing, human resources, legal, sales,legal and general management functions, as well as facilities and professional services.

Depreciation and amortization costsexpense reflectreflects the expenses associated with the ongoing use of our tangible long-lived assets, including computer hardware, office furniture and equipment, and leasehold improvements.

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‑long-term duration assets, prevailing market conditions, and the yields generated over time.

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 toin our overall levels of income before tax.income taxes.

Three Months Ended MarchJune 31,30, 2026 and 2025

Selected financial information for the three months ended MarchJune 31,30, 2026, and 2025, including amounts expressed as a percentage of total revenue and the year-over-year change, is presented as follows:

Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025

Revenue increased by $3,127,$1,696, or 6.0%,3.0%, to $55,534$57,787 for the three months ended MarchJune 31,30, 2026, compared to $52,407$56,091 for the same period in 2025,2025. drivenThe increase was primarily byattributable new customers along withto growth in underwriting and management servicesservices, fromoffset ourby existinglower customerclaim base.services.

Underwriting and management services revenue increased by $2,678,$3,047, or 6.2%,6.7%, to $45,928$48,342 for the three months ended MarchJune 31,30, 2026, compared to $43,250$45,295 for the same period in 2025, representing 82.7%83.7% and 82.5%80.8% of total revenue, respectively. The increase was primarily driven by higher managed premiums from two new customers that were onboarded at the end of 2025, along with growth in underwriting and management services from our existing customer base. AsThe fee rate charged as a percentage of revenue,premium underwritingmanaged andwas managementmodestly serviceslower remainedin generally2026 consistentcompared year-over-year.to 2025, reflecting changes in service mix.

Claim services revenue remaineddecreased relativelyby flat$1,879, ator $6,89121.8%, to $6,744 for the three months ended MarchJune 31,30, 2026, compared to $6,829$8,623 for the same period in 2025, representing 12.4%11.7% and 13.0%15.4% of total revenue, respectively. The decrease was primarily due to lower catastrophe-related claim activity, associated with services delivered through our outsourced claims arrangement, in the current period compared to the same period in 2025. 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,$528, or 16.6%,24.3%, to $2,715$2,701 for the three months ended MarchJune 31,30, 2026, compared to $2,328$2,173 for the same period in 2025, representing 4.9%4.7% and 4.5%3.9% of total revenue, respectively. The slight increase was primarily driven by higher catastrophe software service revenue dueassociated towith the stage of completionprogression of certain catastrophiccatastrophe eventsevents, (i.e.,including Hurricane Ian)Ian, in the current period. AsThe thesecurrent contractsperiod progress,results reflect the estimationimpact uncertaintyof declined, which contributed to higheradditional revenue recognition.recognized as a result of refined claims estimates in the prior year. Because catastrophe-related software activity is event driven, revenue from these services may vary periodbetween to period.periods.

Cost of revenue decreased by $791,$1,591, or 3.4%,7.1%, to $22,791$20,949 for the three months ended MarchJune 31,30, 2026, compared to $23,582$22,540 for the same period in 2025, representing 41.1%36.3% and 45.0%40.2% of total revenue, respectively. The decrease in the cost of revenue as a percentage of revenue was primarily driven by improveda significant reduction in outsourced claim fees, partially offset by higher other operating leverageexpenses fromand higherdirect revenuepersonnel volumes.expense.

DepreciationPolicy commission and amortizationrelated expenses remained relatively flat at $570$10,038 for the three months ended MarchJune 31,30, 2026, compared to $597$10,074 for the same period in 2025, representing 1.0%17.4% and 1.1%18.0% of total revenue, respectively. DepreciationPolicy commission services and amortizationrelated wereexpenses remained relatively unchanged year-over-year and did not materially affectimpact ourthe change in cost structure.of revenue.

Operating expenses increased by $2,640,$2,951, or 52.5%,54.4%, to $7,668$8,375 for the three months ended MarchJune 31,30, 2026, compared to $5,028$5,424 for the same period in 2025, representing 13.8%14.5% and 9.6%9.7% 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,$2,828, or 92.8%,95.5%, to $5,216$5,788 for the three months ended MarchJune 31,30, 2026, compared to $2,706$2,960 for the same period in 2025, representing 9.4%10.0% and 5.2%5.3% 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 higher salary and wage expenses resulting from higherincreased 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.Company and as a result of continued business growth.

Research and development expenses remained relatively flat at $2,306$2,440 for the three months ended MarchJune 31,30, 2026, compared to $2,221$2,354 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,$147, for the three months ended MarchJune 31,30, 2026, compared to $101$110 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.

Income tax expense increased by $937,$930, or 15.0%,12.9%, to $7,181$8,157 for the three months ended MarchJune 31,30, 2026, compared to $6,244$7,227 for the same period in 2025. Our effective tax rate was 26.0% for the three months ended MarchJune 31,30, 2026, compared to 25.8%25.0% 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 drivendue byto state income taxes, net of federal tax benefits, and other immaterial nondeductible expenses. The year-over-year changeincrease in theour effective tax rate was notprimarily materialdriven forby thepermanent periodsdifferences presented.related to nondeductible executive compensation. We expect our effective tax rate to continue to vary from the statutory rate dueprincipally toas similara result of state income taxes, permanent differencesdifferences, 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 drivendue byto higher income before income taxes.taxes and, to a lesser extent, the increase in our effective tax rate.