Exzeo Group, Inc.: Form 10-Q for the period ended Sep 30, 2025

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 (the "Quarterly Report"). This section is intended to provide management's perspective on our financial performance, material 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 on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q, other than statements of historical fact, including statements regarding our future results of operations, financial position, market size and opportunity, our business strategy and plans, the factors affecting our performance, and our objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms 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.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those factors discussed or referenced in Part II, Item 1A "Risk Factors" in this Quarterly Report and in other reports we file with the SEC, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements, or could affect our share price. Important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements include, but are not limited to, the following:

• we may not maintain profitability in the future;
• we expect a number of factors to cause our results of operations to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance;
• we may lose our existing customers and/or fail to acquire new customers;
• we expect to continue to rely on a relatively small number of customers, including our existing customers, for a substantial portion of our revenue;
• our success will depend on the continuous development and improvement of our proprietary Insurance-as-a-Service platform of products and services, including the development and implementation of new features and analytical models;
• estimates of market opportunity may prove to be inaccurate;
• we face intense competition in our industry, which could negatively impact our business, results of operations and financial condition and cause our market share to decline;
• natural catastrophes and environmental risks may have significant adverse effects on our customers’ property and casualty insurance businesses, which may prevent us from maintaining or expanding our customer base and increasing our revenue;
• there may be consolidation in the insurance industry, which could reduce the use of our platform, solutions, products, and services and adversely affect our revenues;
• our intellectual property and proprietary rights are valuable, and any inability to obtain, maintain, protect, defend, and enforce them could reduce the value of our products and brand;
• an unauthorized disclosure or loss of customer or employee data or information or other sensitive, confidential, or personal information, including by cyber-attack or other security breach, or a suspected or actual violation of federal or state data privacy or protection laws, regulations, or other obligations, could cause a loss of data or information, give rise to remediation or other expenses, expose us to liability under federal and state laws, and subject us to litigation and investigations, which could have an adverse effect on our business, cash flows, financial condition, and results of operations;
• our information technology systems may fail or be disrupted or subject to errors, bugs, vulnerabilities, or defects, which could adversely affect our business;
• any disruption of our Internet connections, including to any third-party cloud providers that host any of our websites or web-based services, could affect the success of our Insurance-as-a-Service platform of products and services and our business;
• we operate in a highly regulated environment, and any failure to comply with applicable insurance, data privacy, or other regulatory requirements could materially and adversely affect our business, financial condition, and results of operations;
• regulatory scrutiny of delegated authority and claims administration functions may increase our regulatory compliance costs, limit our flexibility, and adversely affect our business;
• we are subject to stringent fiduciary duties with respect to insurance premium funds, and noncompliance could result in regulatory enforcement or reputational harm;
• we are subject to extensive and evolving data privacy and cybersecurity regulation, which could increase our compliance burden and exposure to liability;
• our international operations in India expose us to regulatory risks under Indian law and cross-border compliance obligations;
• HCI controls the direction of our business, and the concentrated ownership of our common stock will prevent you and other shareholders from influencing significant decisions;
• if HCI sells a controlling interest in us to a third party in a private transaction, you may not realize any change-of-control premium on shares of our common stock, and we may become subject to the control of a currently unknown third party;
• HCI’s interests may conflict with our interests and the interests of our other shareholders and conflicts of interest between HCI and us could be resolved in a manner unfavorable to us and our other shareholders;
• our Chief Executive Officer and Chairman of our board of directors may have actual or potential conflicts of interest because of his financial interests in HCI or because of his positions with HCI;
• we have, and expect to continue to have, significant customer concentration, and substantially all of our revenues to date are from customers who are affiliated with our controlling shareholder, HCI; and
• we may be unable to achieve some or all of the anticipated benefits of being a standalone public company.

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 our prospectus included in the Registration Statement on Form S-1 (File No. 333-290500) (the "Registration Statement") relating to our initial public offering, as initially filed with the SEC on November 5, 2025.

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 on Form 10-Q. Any forward-looking statement in this Quarterly Report on Form 10-Q 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 on Form 10-Q.

Company Overview

Exzeo Group, Inc. ("Exzeo"), provides turnkey insurance technology and operations solutions to insurance carriers and their agents (collectively referred to as our "customers") through a proprietary platform of purpose-built software and data analytics applications designed specifically for the property and casualty ("P&C") insurance ecosystem.

Our Insurance-as-a-Service ("IaaS") platform, which we refer to as the Exzeo Platform, currently includes nine highly configurable software and data 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 processing management, data reporting, and financial reporting. As a result, the Exzeo Platform streamlines and automates interactions between insurance carriers and policyholders.

We were established in 2012 as the technology and innovation division of HCI Group, Inc. ("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 that are common across the insurance industry. The Exzeo Platform is developed and maintained by Exzeo USA, Inc., a Florida corporation and wholly-owned subsidiary of Exzeo, and Exzeo Software Private Limited, an indirect wholly-owned subsidiary of Exzeo based in India. These subsidiaries license the Exzeo Platform to Exzeo Insurance Services, Inc. ("EIS").

We deliver our solutions to carrier customers principally through EIS, which holds a managing general agency ("MGA") license in the State of Florida and equivalent licenses in other states. EIS enters into MGA or policy administration services agreements with our insurance-industry customers under which it serves as a managing general agent of an insurance carrier or provides services to a carrier's MGA in exchange for fees largely based on a percentage of managed premiums. Under these agreements, EIS utilizes 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.

The Exzeo Platform consists of three core components:

• Advanced Underwriting Solutions – We bring over a decade of expertise in developing and training underwriting data models that, based on results with initial customers, we believe deliver superior results relative to industry peers. These models efficiently process large data sets and produce actionable underwriting insights for carriers. By making precise decisions at the individual risk level, our models help insurers build portfolios focused on profitable risk accumulation.
• Data Analytics Solutions – The Exzeo Platform transforms structured and unstructured data into actionable information that powers our advanced decision-based models and workflow systems. This data-driven decision approach enhances capabilities across a carrier's entire organization, including underwriting, portfolio construction, and claims management.
• Insurance Management Solutions – Through the Exzeo Platform, EIS provides front-end distribution management, underwriting and pricing models, policy administration, and claims management, either individually or as a fully integrated set of solutions that solely utilize our platform. The insurance solutions offered by EIS currently support the operations of managing general agents, attorney-in-fact companies, and insurance/reinsurance carriers and capital providers. The Exzeo Platform includes efficient, automated underwriting that requires minimal information from the insurance agent and uses the extensive internal data repository that we develop and curate. Delivered through a flexible, web-based interface, our suite of applications offers scalable and efficient solutions.

Discontinued Operations

Prior to July 2024, we were also engaged in the P&C insurance business, primarily focused on homeowners' multi-peril policies in the State of Florida, through our subsidiary TypTap Insurance Company ("TTIC"). On July 1, 2024, we transferred all 2,500,000 outstanding shares of TTIC to HCI in exchange for the settlement of promissory notes issued by us.

The sale of TTIC constituted the disposal of a significant component of our business, resulting in a strategic shift in our operations and having a major effect on our financial results. Accordingly, TTIC's results are reflected in our unaudited interim Consolidated Financial Statements as discontinued operations and are presented as assets and liabilities of discontinued operations on the Consolidated Balance Sheets and income from discontinued operations on the Consolidated Statements of Income. Unless otherwise stated, all discussions regarding results for the three and nine months ended September 30, 2025 and 2024 reflect results from our continuing operations.

Because the transaction occurred between entities under common control and did not result in a change in control of TTIC, it was accounted for as a common control transaction and recognized as an equity transaction. The purpose of this transaction was to restructure our organization, allowing us to focus on expanding our technology and insurance solutions services while reducing debt and improving our capital structure and balance sheet. Refer to Note 3. Discontinued Operations in the notes to our unaudited interim Consolidated Financial Statements for additional information about this transaction.

Key Factors and Trends Affecting Results of Operations

We believe our performance and future success depends 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 "Risk Factors."

• Underwriting performance and continued investments in our technology – We leverage data, technology, and proprietary underwriting algorithms to enhance risk management. For instance, we leverage dynamic data sources obtained through various sources and apply advanced statistical methods to model that data into our pricing algorithms. We expect to improve our ability to manage risk 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. These enhancements are expected to lead to better underwriting, lower loss frequency, and lower loss ratios over time, after adjusting for weather-related events. Our success in this area depends on our ability to continuously incorporate new data sources as they become available and effectively apply them to improve our ability to accurately and competitively price risk.
• Intense competition in our market – The market to provide core system software to the P&C insurance industry is highly competitive and fragmented. This market is subject to changing technology, shifting customer needs, and introductions of new products and services. Our competitors vary in size and in the breadth and scope of the products and services offered. The principal competitive factors in our industry include total cost of ownership, product functionality, flexibility and performance, customer references and in-depth knowledge of the P&C insurance industry. We believe that we compete favorably with our competitors on the basis of each of these factors. However, many of our current or potential competitors have greater financial and other resources, greater name recognition, and longer operating histories than we do.
• New customer 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. While we currently have one customer that is not affiliated with HCI, we do not expect

to generate significant revenue from this customer in the current fiscal year. 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 by the amount of managed premium on our platform. We believe that introducing these prospective customers to the advantages of our technology and variable fee structure 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 satisfaction, adoption, and retention.

• National expansion strategy / Expansion into new geographies and use cases – We believe national expansion will be a key driver of our long-term growth and success of our business. As of September 30, 2025, we provide services to P&C companies in the states of Connecticut, Florida, Georgia, Massachusetts, Montana, Nevada, New Jersey, New Mexico, North Carolina, Rhode Island, South Carolina, South Dakota and Utah. We expect to apply our highly scalable model nationally, using a tailored approach in each state that reflects its regulatory environment and local market dynamics. We aim to expand rapidly and efficiently across different geographies while maintaining a high level of control over our strategy within each market. State expansion should create a broader base from which to grow premiums and increase the geographic diversity in the policyholder base and risk portfolio that we manage. We believe that broader geographic diversification will also improve our ability to secure favorable terms from reinsurers, improving the overall cost structure and profitability for our customers.
• Regulatory matters – The legal environment for cloud-based technology businesses is evolving in the United States, and we are subject to a variety of laws and regulations that involve matters central to our business. Many of these laws and regulations are still evolving and being tested in courts and could be interpreted in ways that could harm our business. These may involve privacy, data protection and personal information, content, intellectual property, data security, and data retention and deletion. In particular, we are subject to federal and state laws regarding privacy and protection of personal data. U.S. federal and state laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the evolving industry in which we operate, and may be interpreted and applied inconsistently from state to state and inconsistently with our current policies and practices.
• Data privacy – Our customers and their policyholders upload to and store their data in our cloud-based platform. This presents legal challenges to our business and operations, such as consumer privacy rights and intellectual property rights. We must monitor and comply with a wide variety of laws and regulations regarding the data stored and processed on our cloud-based platform as well as in the operation of our business. Non-compliance with these laws could result in penalties or significant legal liability. We have invested, and continue to invest, human and technology resources into our compliance efforts and our data privacy compliance efforts generally.
• Transition to a standalone public company – Following our Initial Public Offering ("IPO") in November 2025, we have become subject to the reporting and compliance obligations of federal and state securities laws, as well as applicable stock exchange requirements. Operating as a standalone public company has required, and we expect will continue to require, that we establish and enhance additional governance structures and corporate functions. These expanded capabilities include external financial reporting, internal audit, treasury, investor relations, board of directors and officer support, and stock administration, which have resulted and are expected to result, in additional costs.

Presentation of Financial Information

Unless otherwise indicated, all dollar amounts presented in this Management's Discussion and Analysis are stated in thousands of dollars. Percentages and ratios are based on the underlying whole dollar amount.

Summary of 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. The following table presents these operational measures:

(amounts in thousands, except percentages and counts)

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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 the state of Florida represented 89.9% and 82.5% of total managed premiums for the nine months ended September 30, 2025 and 2024, 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.

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.

The managed premiums attributable to policyholders active from the end of the prior calendar year used to calculate the gross dollar retention rate were $436,427 and $333,581 as of September 30, 2025 and 2024, respectively.

Net Dollar Retention Rate ("NRR")

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 ("ARR")

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 non-recurring 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 ("SaaS") 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 consists of expenses directly attributable to the delivery of services that generate revenue. These include salaries and benefits of employees engaged in providing underwriting, management, administrative, and claim services. We collect fees inclusive of agent commissions and subsequently pay the applicable commissions to agents. Cost of revenue also includes amortization of software intangible assets used to provide services, information technology expenses that support policy underwriting, administrative functions, and claim handling services, as well as allocated overhead costs from supporting departments. Claim handling costs are comprised of expenses incurred throughout the claims process, including 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 profit after cost of revenue, as defined previously, and is the difference between revenues and cost of revenue. The increase in gross profit in the recent periods presented was primarily driven by growth in our managed premiums, which allows us to leverage our relatively fixed cost structure. As we continue to scale and find 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 stock-based compensation and benefits for our finance, IT, human resources, legal, sales, and general management functions, as well as facilities and professional services.

Research and development

Our research and development costs consist primarily of personnel expenses, including salaries and benefits, bonuses, stock-based compensation and related overhead costs for employees engaged in the design and development of our technology offerings and other internally used 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 equipment and leasehold improvements.

Investment income

Investment income represents interest earned from short-term investments. The principal factors that influence investment income are the size of our investment portfolio and the yield on that portfolio.

Interest expense

Interest expense primarily consists of the allocation of interest from borrowing and funding associated with notes payable and loans to HCI.

Income tax expense (benefit)

Income tax expense (benefit) 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 of operation, regulations or rates, new interpretations of existing laws or regulations, and changes to our overall levels of income before tax.

Results of Operations

For the three months ended September 30, 2025 and 2024

The following table presents selected financial information for the three months ended September 30, 2025 and 2024, including amounts expressed as a percentage of total revenue and the year-over-year percentage change:

(Unaudited, amounts in thousands, except percentages)

Revenue

The following table sets forth, for the periods presented, summary information regarding our disaggregated revenue:

(Unaudited, amounts in thousands, except percentages)

Revenue increased by $26,056, or 89.5%, to $55,166 for the three months ended September 30, 2025, compared to $29,110 for the same period in 2024, driven primarily by growth in underwriting and management services from our existing customer base and expansion of the scope of services provided to customers in the beginning of 2025.

Underwriting and management revenue increased by $22,821, or 103.5%, to $44,879, representing 81.4% of total revenue, compared to $22,058, representing 75.8% in 2024. The increase was primarily driven by new management fee arrangements with two additional customers, which together accounted for approximately 66.0% of the total increase. The remainder of the increase was driven by growth in managed premiums from our existing customer base.

Claim services revenue increased by $2,612, or 48.2%, to $8,030, representing 14.6% of total revenue, compared to $5,418, representing 18.6% of total revenue for the same period in 2024. The increase was primarily driven by higher managed premiums from our existing customer base, which increased related claims volume and associated service fees, as well as higher Catastrophe ("CAT") claim service fees and field adjuster service fees following severe weather events from 2024. 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 $623, or 38.1%, to $2,257 for the three months ended September 30, 2025, representing 4.0% of total revenue, compared to $1,634, representing 5.6% of total revenue in 2024. The increase in other technology services was primarily driven by higher CAT software fees, mainly related to Hurricanes Milton and Helene, which began generating significant revenue in 2025, partially offset by lower usage-based non-CAT software solutions. CAT related software activity is event driven and may not occur at similar levels in future periods.

Cost of Revenue

The following table presents a summary of our disaggregated cost of revenue for the periods presented:

(Unaudited, amounts in thousands, except percentages)

Cost of revenue increased $3,404, or 18.9%, to $21,393 for the three months ended September 30, 2025, compared to $17,989 for the same period in 2024. As a percentage of total revenue, cost of revenue declined to 38.8% in 2025 from 61.8% in 2024, reflecting operating leverage from higher revenue volumes.

Policy commission and related expenses increased by $1,315, or 15.0%, to $10,071, representing 18.3% of total revenue, for the three months ended September 30, 2025, compared to $8,756, representing 30.1% of total revenue, for the three months ended September 30, 2024. The increase was driven by growth in managed premiums from our existing customer base for a single carrier with a commission based arrangement, which increased the volume of written premiums subject to commission during the period. This growth was partially offset by a slight decrease in the weighted average commission rate, driven by a shift in business mix. Florida premiums represented 73.2% of total managed premiums for the three month's ended September 30, 2025 compared to 68.5% for the three months ended September 30, 2024 and commission rates are generally lower due to competitive market dynamics.

Outsourced claims fees increased by $1,259, or 81.2%, to $2,809, representing 5.1% of total revenue, for the three months ended September 30, 2025, compared to $1,550, representing 5.3% of total revenue in 2024. The increase was mainly driven by higher current period CAT claims activity related to developments from historical storms as well as litigation and claims related fees from growth in managed policies. These storms resulted in a greater number of reported claims, which required increased use of outsourced claims handling services. The increase in fees was attributable to this higher claim volume rather than changes in the cost per claim. CAT related activity may not recur at similar levels in the future periods.

Direct personnel expense increased by $891, or 21.2%, to $5,086, representing 9.2% of total revenue, for the three months ended September 30, 2025, compared with $4,195, or 14.4% of total revenue in 2024. The increase was mainly attributable to higher compensation-related costs, including salaries and wages, discretionary pay and employee benefits associated with growth in headcount supporting underwriting and claims operations. These increases were partially offset by lower stock-based compensation expense, as most awards had vested earlier in the year.

Other operating expenses decreased by $127, or 4.3%, to $2,805, representing 5.1% of total revenue, compared to $2,932, representing 10.1% of total revenue in 2024. The decrease was driven by lower bank fee charges following a system optimization initiative implemented in 2025 along with lower claims management activity reflecting continued improvements in loss management and claims handling efficiency. These decreases were partially offset by the increase in systems expenses related to investments to strengthen infrastructure and systems to support our growth.

Depreciation and amortization remained relatively consistent year over year at $622, representing 1.1% of total revenue for the three months ended September 30, 2025, compared to $556, representing 1.9% of total revenue in 2024.

Operating Expenses

The following table presents a summary of our disaggregated operating expenses for the periods presented:

(Unaudited, amounts in thousands, except percentages)

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Total operating expenses increased by $2,130, or 48.5%, to $6,521 for the three months ended September 30, 2025, compared to $4,391 for the same period in 2024. As a percentage of total revenue, total operating expenses decreased to 11.8% for the three months ended September 30, 2025, compared to 15.0% in 2024, reflecting operating leverage achieved through higher revenue volume.

Selling, general and administrative expenses increased by $1,326, or 51.5%, to $3,900, representing 7.1% of total revenue, for the three months ended September 30, 2025, compared to $2,574, representing 8.8% in 2024. The increase primarily reflects higher employee-related costs, including discretionary compensation and salary and wage expenses resulting from expanded headcount to support business growth. These increases were partially offset by lower employee benefit costs and lower corporate overhead allocations to TTIC. The corporate overhead allocation to TTIC included shared services such as HR, IT, legal, accounting, and lease-related costs. We ceased providing corporate services, and therefore ceased allocating related expenses, to TTIC as of July 1, 2025.

Research and development expenses increased by $766, or 44.3%, to $2,494, representing 4.5% of total revenue, for the three months ended September 30, 2025, compared to $1,728, representing 5.9% of total revenue in 2024. The increase was primarily driven by an increase in the portion of research and development project initiatives, as well as higher personnel-related costs, including salaries, wages, and discretionary pay as we continued to invest in technology development and platform enhancements to support business growth.

Depreciation and amortization remained relatively consistent at $127, representing 0.2% of revenue for the three months ended September 30, 2025 and $89, representing 0.3% of revenue in 2024.

Investment Income

The following table summarizes our investment income for the periods presented:

(Unaudited, amounts in thousands, except percentages)

Investment income was $1,102 for the three months ended September 30, 2025, compared to $197 for the same period in 2024, an increase of $905, or 459%. The increase was primarily attributable to higher average investable cash balances during the 2025 period from higher operating income. Although market interest rates declined compared to the prior year, the significantly larger balances held in money market and deposit accounts generated greater overall interest income.

Interest Expense

The following table summarizes our interest expense for the periods presented:

(Unaudited, amounts in thousands, except percentages)

There was no interest expense recorded for the three months ended September 30, 2025, compared to $15 for the same period in 2024, representing a decrease of 100%.

The decrease reflects the impact of the July 1, 2024 common control transaction with HCI, under which all promissory notes previously issued to HCI were treated as repaid, except for a single note that remained outstanding after the transaction. That remaining note was fully repaid in November 2024, resulting in no interest-bearing obligations during 2025.

Income Tax

The following table summarizes our income tax expense for the periods presented, including total tax expense and effective tax rate:

(Unaudited, amounts in thousands, except percentages)

Income tax expense was $7,203 and $1,655 for the three months ended September 30, 2025, and 2024, respectively. The effective tax rate was 25.4% and 23.9% for the three months ended September 30, 2025, and 2024, respectively.

Our effective tax rate for the three months ended September 30, 2025, was 25.4%, compared with the U.S. federal statutory rate of 21.0%. The difference was primarily driven by state income taxes, net of federal tax benefits, of approximately 4.0% and combination of immaterial permanent differences of 0.4%. We expect our effective tax rate to continue to vary from the statutory rate due to similar permanent differences and state tax obligations.

Our effective tax rate for the three months ended September 30, 2024, was 23.9%, compared with the U.S. federal statutory rate of 21.0%. The difference was primarily driven by state income taxes, net of federal tax benefits, of approximately 4.0% and non-deductible compensation expenses of 1.4%, offset by other permanent adjustments of 2.5% including windfall on restricted stocks vesting. We expect our effective tax rate to continue to vary from the statutory rate due to similar permanent differences and state tax obligations.

For the nine months ended September 30, 2025 and 2024

The following table presents selected financial information for the nine months ended September 30, 2025 and 2024, including amounts expressed as a percentage of total revenue and the year-over-year percentage change:

(Unaudited, amounts in thousands, except percentages)

Revenue

The following table sets forth, for the periods presented, summary information regarding our disaggregated revenue:

(Unaudited, amounts in thousands, except percentages)

Revenue increased by $74,249, or 83.0%, to $163,664 for the nine months ended September 30, 2025, compared to $89,415 for the same period in 2024, driven primarily by growth in underwriting and management services from our existing customer base and expansion of the scope of services provided to customers in the beginning of 2025.

Underwriting and management revenue increased by $66,244, or 98.6%, to $133,424, representing 81.5% of total revenue, compared to $67,180, representing 75.1% of total revenue in 2024. The increase was primarily driven by new management fee arrangements with two additional customers, which together accounted for approximately 61.1% of the total increase. The remainder was driven by growth in managed premiums from our existing customer base.

Claim services revenue increased by $6,134, or 35.4%, to $23,482, representing 14.3% of total revenue, compared to $17,348, representing 19.4% of total revenue in 2024. The increase was primarily driven by higher CAT claim service fees and field adjuster service fees following severe weather events from 2024, along with the increase in managed premiums from our existing customer base. 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 $1,871, or 38.3%, to $6,758 for the nine months ended September 30, 2025, representing 4.2% of total revenue, compared to $4,887, representing 5.5% of total revenue in 2024. The increase was primarily driven by higher CAT software fees, largely related to Hurricanes Milton and Helene, which began generating significant revenue in 2025, partially offset by lower recurring software fees. CAT related software activity is event driven and may not occur at similar levels in future periods.

Cost of Revenue

The following table presents a summary of our disaggregated cost of revenue for the periods presented:

(Unaudited, amounts in thousands, except percentages)

Cost of revenue increased by $12,607, or 23.0%, to $67,515 for the nine months ended September 30, 2025, compared to $54,908 for the same period in 2024. As a percentage of total revenue, cost of revenue declined to 41.2% in 2025 from 61.4% in 2024, reflecting improved operating leverage from higher revenue volumes.

Policy commission and related expenses increased by $5,346 or 19.5%, to $32,812, representing 20.0% of total revenue, for the nine months ended September 30, 2025, compared to $27,466, representing 30.7% of total revenue, for the same period in 2024. The increase was driven by growth in managed premiums from the existing customer base for the single carrier with which we have a commission based arrangement, which increased commission activity during the 2025 period. However, the weighted average commission rate declined from 9.3% in 2024 to 8.9% in 2025 as Florida premiums increased from 66.8% of total managed premiums for the nine months ended September 30, 2024 to 73.5% for the nine months ended September 30, 2025, and commission rates in Florida are generally lower due to competitive market dynamics. As a result, the overall commission rate as a percentage of premium declined despite higher managed premiums.

Outsourced claims fees increased by $3,454, or 63.5%, to $8,895, representing 5.4% of total revenue, for the nine months ended September 30, 2025, compared to $5,441, representing 6.1% of total revenue in 2024. The increase was mainly driven by higher current period CAT claims activity related to developments from historical storm events as well as litigation and claims related fees from growth in managed policies. These storms resulted in a greater number of reported claims, which required increased use of outsourced claims handling services. The increase in fees was attributable to this higher claim volume rather than changes in the cost per claim. CAT related activity may not recur at similar levels in the future periods.

Direct personnel expense increased by $3,968, or 35.4%, to $15,165, representing 9.3% of total revenue, for the nine months ended September 30, 2025, compared with $11,197, or 12.5% of total revenue in 2024. The increase was mainly attributable to higher compensation-related costs including salaries and wages, discretionary pay and employee benefits associated with growth in headcount supporting underwriting and claims operations. These increases were partially offset by lower stock-based compensation expense, as most awards had vested at the time of TTIC's disposal.

Other operating expenses decreased by $330, or 3.6%, to $8,816, representing 5.4% of total revenue, compared to $9,146, representing 10.2% of total revenue in 2024. The decrease was driven by lower claims management activity along with lower bank fee charges following a system optimization initiative implemented in 2025. These decreases were partially offset by the increase in systems expenses related to investments to strengthen infrastructure and systems to support our growth.

Depreciation and amortization remained relatively consistent year over year at $1,827, representing 1.1% of total revenue for the nine months ended September 30, 2025 compared to $1,658, representing 1.9% of total revenue in 2024.

Operating Expenses

The following table presents a summary of our disaggregated operating expenses for the periods presented:

(Unaudited, amounts in thousands, except percentages)

Total operating expenses increased by $4,904, or 40.6%, to $16,973 for the nine months ended September 30, 2025, compared to $12,069 for the same period in 2024. As a percentage of total revenue, total operating expenses decreased to 10.3% for the nine months ended September 30, 2025, compared to 13.5% in 2024, reflecting operating leverage gained through revenue growth.

Selling, general and administrative expenses increased $2,760, or 40.6%, to $9,566, representing 5.8% of total revenue, for the nine months ended September 30, 2025, compared to $6,806, representing 7.6% of total revenue, for the same period in 2024. The increase primarily reflects higher employee-related costs, including discretionary compensation tied to improved performance and salary and wage expenses resulting from higher headcount to support business growth. The remaining increase reflects higher corporate allocations and other administrative costs associated with scaling operations, partially offset by lower overhead allocations to TTIC. The corporate overhead allocation to TTIC included shared services such as HR, IT, legal, accounting, and lease-related costs. Allocations were based on departmental inputs and applied consistently using methodologies appropriate to each cost type. We ceased providing corporate services, and therefore ceased allocating related expenses, to TTIC as of July 1, 2025.

Research and development expenses increased $2,051, or 40.9%, to $7,069, representing 4.3% of total revenue, for the nine months ended September 30, 2025, compared to $5,018, representing 5.6% of total revenue, in 2024. The increase was primarily driven by an increase in the portion of internal software development costs expensed as incurred due to project timing, as well as higher personnel-related costs, including salaries, wages, and discretionary pay as we continued to invest in technology development and platform enhancements to support business growth.

Depreciation and amortization remained relatively flat at $338, representing 0.2% of revenue for the nine months ended September 30, 2025 and 0.3% of revenue for the nine months ended September 30, 2024.

Investment Income

The following table summarizes our investment income for the periods presented:

(Unaudited, amounts in thousands, except percentages)

Investment income was $2,263 for the nine months ended September 30, 2025, compared to $339 for the same period in 2024, an increase of $1,924, or 568%. The increase was primarily attributable to higher average investable cash balances during the 2025 period driven from higher income from operations. Although market interest rates declined compared to the prior year, the significantly larger balances held in money market and deposit accounts generated greater overall interest income.

Interest Expense

The following table summarizes our interest expense for the periods presented:

(Unaudited, amounts in thousands, except percentages)

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There was no interest expense recorded for the nine months ended September 30, 2025, compared to $3,321 for the same period in 2024, representing a decrease of 100%.

The decrease reflects the impact of the July 1, 2024 common control transaction with HCI, under which all promissory notes previously issued to HCI were treated as repaid, except for a single note that remained outstanding after the transaction. That remaining note was fully repaid in November 2024, resulting in no interest-bearing obligations during 2025.

Income Tax

The following table summarizes our income tax expense for the periods presented, including total tax expense and effective tax rate:

(Unaudited, amounts in thousands, except percentages)

Income tax expense was $20,674 and $5,088 for the nine months ended September 30, 2025, and 2024, respectively. The effective tax rate was 25.4% and 26.2% for the nine months ended September 30, 2025, and 2024, respectively.

Our effective tax rate for the nine months ended September 30, 2025, was 25.4%, compared with the U.S. federal statutory rate of 21.0%. The difference was primarily driven by state income taxes, net of federal tax benefits, of approximately 4.0% and combination of immaterial permanent differences of 0.4%. We expect our effective tax rate to continue to vary from the statutory rate due to similar permanent differences and state tax obligations.

Our effective tax rate for the nine months ended September 30, 2024, was 26.2%, compared with the U.S. federal statutory rate of 21.0%. The difference was primarily driven by state income taxes, net of federal tax benefits, of approximately 4.0%, and non-deductible compensation expenses, of an additional 1.6% offset by a combination of immaterial permanent differences of 0.4%. We expect our effective tax rate to continue to vary from the statutory rate due to similar permanent differences and state tax obligations.

Non-GAAP Financial Measures

In addition to results determined in accordance with accounting principles generally accepted in the United States ("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 and Adjusted Revenue. 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 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 stock-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. However, 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 following table presents a reconciliation of net income to Adjusted EBITDA for the periods presented:

(Unaudited, amounts in thousands)

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Adjusted Revenue

We define Adjusted Revenue as the portion of total GAAP revenue earned through services delivered directly via our proprietary platform technology, without being outsourced to other service providers. 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, 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 clarifies the underlying revenue contribution from internally delivered operations. This metric also assists management and investors in evaluating period-over-period trends in technology-driven revenue streams, 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 following table presents the calculation of the Adjusted Revenue for the periods presented:

(Unaudited, amounts in thousands)

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 following table presents the calculation of Adjusted EBITDA Margin for the periods presented:

(Unaudited, amounts in thousands, except percentages)

Liquidity and Capital Resources

Overview

Our principal sources of liquidity are as follows:

(amounts in thousands)

The increase in cash and working capital primarily reflects cash flows generated from operations, driven by overall growth in our managed premium base and increased contract liabilities.

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.

Sources of Liquidity

Our capital requirements will depend on many factors, including the volume of insurance policy issuance 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.

Our principal sources of liquidity currently include our existing cash and cash equivalents and any future 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. We cannot assure that such funds will be available on favorable terms, or at all.

Cash Flow Summary

The following table presents our cash flows from operating activities, investing activities and financing activities from continuing operations for the periods presented:

(Unaudited, amounts in thousands)

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2025, was $89,017, an increase of $59,669 from $29,348 for the nine months ended September 30, 2024. The improvement was primarily driven by higher operating income of $46,397 and favorable changes in net working capital. Higher up-front cash collections on services provided to an expanded customer base contributed significantly to operating cash inflows. In addition, cash outflows were favorably impacted by the timing of compensation-related accruals. These benefits were partially offset by higher receivables from related parties due to timing of collections along with increased cash requirements in contract fulfillment activities driven by greater volume of managed premiums.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2025 was $(2,441), compared to $(2,686) for the nine months ended September 30, 2024, a slight decrease of $245. Cash outflows in both periods primarily reflect capital investments in software development and infrastructure, consistent with our strategy to support and enhance core operations. A portion of these expenditures also related to property and equipment, representing maintenance-level investments consistent with prior periods.

Financing Activities

Net cash provided by (used in) financing activities for the nine months ended September 30, 2025 was $0, compared to $(3,404) for the nine months ended September 30, 2024, reflecting a $3,400 reduction in cash outflows from financing activities. The change was primarily due to the absence of dividend payments. In 2024, financing outflows included the redemption of preferred stock and related dividend payments, partially offset by proceeds from the issuance of notes payable to a related party. No comparable transactions occurred in 2025, resulting in no net cash inflows or outflows from financing activities during the period.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, or cash flows.

Contractual Obligations and Commitments

There have been no material changes to our contractual obligations and commitments during the nine months ended September 30, 2025. Our contractual obligations and commitments remain consistent with those disclosed in our registration statement on Form S-1, as amended (File No. 333-290500).

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 judgments and estimates that are critical to understanding our financial condition and results of operations:

• Revenue Recognition;
• Stock-Based Compensation; and
• Income Taxes.

These estimates are discussed further in Note 2. Summary of Significant Accounting Policies included in our audited Consolidated Financial Statements contained in the Registration Statement on Form S-1, as amended (File No. 333-290500).

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.

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 allocated consideration in new or renewal of current contracts and thus result in the impact of the amount and timing of revenue recognized for each performance obligation.

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 polices can be cancelled by policy holders 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 assumption 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.

Stock-Based Compensation

We account for stock-based compensation awards under our shareholder-approved incentive plans in accordance with the fair value recognition provisions of GAAP, which require the measurement, and recognition of compensation for all stock-based awards made to employees and non-employee directors, including stock options and restricted stock awards, based on estimated fair values. Our stock-based awards primarily consist of restricted stock awards and stock options granted in prior years. Restricted stock awards are granted with either time-based vesting conditions or market conditions tied to our stock price (e.g., share price thresholds sustained over a defined period). These awards are expensed over the requisite service period based on grant-date fair value. For restricted stock awards with market 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 IRC 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 its standalone results, which may differ from statutory rates due to business mix or transaction-related effects.

JOBS Act

We are an emerging growth company ("EGC") as defined under the Jumpstart Our Business Startups Act (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 emerging growth company 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 emerging growth company 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 $1.0 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 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.

We are exposed to limited market risks in the ordinary course of our business, primarily related to interest-rate movements, inflationary cost pressures, and credit concentrations arising from cash deposits and customer receivables. We maintain a conservative capital structure with no significant outstanding debt, and we do not engage in trading or speculative investment activities. Because our revenues are derived primarily from fixed-fee service arrangements rather than market-sensitive instruments, our direct exposure to changes in market prices, interest rates, or foreign-currency exchange rates is not material at this time.

Interest Rate Risk

To date, we have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates. Our primary interest-sensitive instruments consist of cash and cash equivalents, and we have no material variable-rate borrowings outstanding. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our unaudited interim Consolidated Financial Statements.

Inflationary Risk

Inflationary pressures, such as increases in costs of revenues and operating expenses, may adversely affect our operating results. Although we do not believe inflation has had a material impact on our financial condition, results of operations or cash flows to date, a sustained high rate of inflation in the future could adversely affect our ability to maintain or increase our gross margin or decrease our operating expenses as a percentage of our revenues if the selling prices of our products do not increase as much, or more than, our costs.

Credit and Liquidity-Risk Concentrations

Our cash is held in deposit demand accounts at a large financial institution in amounts that exceed the Federal Deposit Insurance Corporation ("FDIC") insurance coverage limit of $250,000 per depositor, per FDIC-insured bank, per ownership category. We monitor the credit ratings and financial condition of these counterparties on an ongoing basis and have not experienced any losses on such deposits. We believe the credit risk associated with these institutions is not material.

Financial arrangements that potentially subject us to concentrations of credit risk principally consist of accounts receivable and notes receivable. We limit our exposure by performing credit evaluations when deemed necessary but do not require collateral to secure amounts owed by customers. Refer to Note 6. Concentrations of Credit Risk for additional information.

Foreign Currency Risk

We conduct certain operations through a subsidiary in India that provides software development and support services. Because the subsidiary's functional currency is the U.S. dollar, we are not exposed to material foreign-currency translation risk. We may experience minor transaction gains or losses on Indian-rupee-denominated expenses or payables, but such amounts have not been material. We do not currently use hedging instruments and believe our exposure to foreign-currency fluctuations is not material.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the "Exchange Act"), under the supervision and with the participation of our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer), our management evaluated the effectiveness of our disclosure controls and procedures ( as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of that date.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Management recognizes that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The design of a control system must reflect the fact that there are resource constraints, and the benefits must be considered relative to their associated costs.

Our risk factors are described in the prospectus included in the Registration Statement relating to our initial public offering, filed October 16, 2025. As of the date of this Quarterly Report, there have been no material changes to those risk factors.