Exzeo Group (XZO) Q2 2026 earnings call transcript

I would now like to hand the conference over to Bill Brumol, VP of Investor Relations. Bill, please proceed. Thank you and good afternoon. Welcome to XEO Group's 2nd Quarter 2026 Earnings Call. To access today's webcast, please visit the Investor Information section of our corporate website at www. xEO. com. Before we begin, I would like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements within the meaning of the private securities litigation reform act of 1995. Words such as anticipate, estimate, expect, intend, plan, and project, and other similar words and expressions are intended to signify forward-looking statements.

Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risk and uncertainties. Some of these risk and uncertainties are identified in the company's filings with the Securities and Exchange Commission. Should any risk and could have a material adverse effect on the company's business, financial condition, and results of operation? XEO Group disclaims all the obligations to update any forward-looking statements.

Now with that, I would like to turn the call over to Suela Volcuk, XEO's Chief Financial Officer. Thank you, Bill. Good evening, everyone, and thank you for joining us on XEO's 2nd Quarter Earnings Call. XEO continues down the path of strong execution and attractive financial results. Managed premium on the platform remains robust at $1.4 and we delivered another quarter of attractive margins, including a 53% adjusted e-bron margin in the quarter. Pretext income for the quarter was over $31 million, an increase from over $28 million in the prior quarter. These results were above the guidance we provided. Earnings per share for the quarter were $0.26, and year-to-date earnings per share were $0.48. For the second quarter, total revenue increased to $58 million, up from $56 million in the prior quarter, driven by the increase of managed premium on the platform.

Excluding outsource and claim fees, adjusted revenue increased by $4 million year over year to more than $56 million. Managed premium in the quarter was $1.4 billion, an increase from $1.2 billion in the prior quarter. Given that its analogy of growth for our clients, managed premiums were in line with expectations. Our adjusted e-bron margin was over 53% in the quarter, and we believe annualized margins above 60% are achievable for the foreseeable future.

A few additional highlights for the quarter. Our annual recurring revenue was $211 million in the second quarter, an increase from $195 million in the prior quarter. Our balance sheet remains exceptionally strong. We ended the quarter with over $333 million of invested assets, which includes cash, cash, equivalent, and fixed income securities. We remain debt-free, and continue to maintain significant financial flexibility. Should hold this equity, increase to $288 million, an increase from $254 million at the end of the year.

Next, I want to quickly touch on our guidance expectations. For the third quarter, we expect protect income to be between $28 and $31 million, and we expect managed premium to be approximately $1.4 billion. Our guidance for the third quarter is consistent with the anticipated timing of growth across our existing client base. Our full deal guidance remains unchanged.

Before turning the call over to Kevin, I wanted to quickly touch on recent capital management actions. During the quarter, we repurchase over 726,000 shares of our common staff for approximately $10 million. Subsequent to the quarter, we already purchased an additional 107,000 shares, which brings dollar repurchases to $12 million, completing the authorized share repurchase program. We continue to have tremendous confidence in the long-term out of our business. Given our asset-like model, high margins, debt-free balance sheet, significant cash on hand, and the momentum we are seeing across the business, we believe allocating less than one quarter's worth of earnings to repurchase shares at attractive valuations was a compelling use of capital.

And with that, I will hand it over to Kevin, President of Exium.

Thank you, Suela. The Exio platform continues to gain momentum, and we are seeing encouraging customer wins. Let me elaborate on some of these achievements. While we often talk about the insurance companies joining our platform, demand extends well beyond carriers. We are seeing growing interest from independent agents who are proactively reaching out to join the Exio platform. The flywheel effect we've discussed in the past is real. As more agents join the platform, it becomes increasingly attractive to insurance companies. As more carriers come on board, the value proposition for agents continues to strengthen. That network effect is helping accelerate adoption across our ecosystem.

Second, we've seen, quote, volume more than double since the beginning of the year. Third, last month, we signed our eighth carrier partner. Our new partnership with Geico brings auto insurance to the platform, marking another meaningful step in expanding our capabilities. Agents can now bundle home and auto. With the addition of auto, the Exio platform now offers homeowners, commercial residential, flood, and auto insurance. Expanding our product set makes the platform more valuable to agents by enabling them to serve more of their client's insurance needs through a single platform.

In closing, since the beginning of the year, we've made meaningful progress across every dimension of the platform. We've doubled the number of agents, we've more than doubled quote volume, and we've added additional products. And we've grown to eight carriers on the platform.

Now I'll turn the call over to Parrish, Exio's chief executive officer. Thanks, Kevin. Soil provided numbers that clearly show how healthy and cash flow positive Exio already is. Kevin highlighted the tremendous momentum in the size and scope of the Exio platform. The continued addition of new carriers, new products, and new capabilities reinforces that our platform is gaining meaningful traction in the marketplace. And while these initiatives don't translate into results overnight, they continue to strengthen our long-term growth opportunity and expand the value we can deliver. Beyond all of this, earlier today, we announced the next new initiative, Exio Ventures. The reason we're launching Exio Ventures is simple.

AI represents a one-centred generation paradigm shift. And most companies think about AI as a tool to make existing processes faster or more efficient. And while that's certainly valuable, we think there is a much bigger opportunity. And the useful analogy might be to look back at the internet, the evolution of the internet. The first wave of the internet brought traditional businesses online, making familiar processes faster and more efficient. But the truly transformative companies were the companies that created entirely new business models that only become possible because of the internet. For example, companies like Uber fundamentally reimagined transportation. And we believe AI has the potential to follow a very similar path.

So rather than simply asking how AI can make current businesses more efficient, we are asking a much bigger question. What entirely new products, services, and businesses can AI make possible? And that's the purpose of Exio Ventures. Now, we've been working on these ideas behind the scenes for some time. And we've reached a point where we've seen enough progress and assembled the right team that we're ready to formalize the effort. We're funding Exio Ventures as an internal platform, and its mission is to identify opportunities that only emerge when AI fundamentally changes what's possible. And let me give you one small example amongst the number of initiatives that we are working on. After a major catastrophe event, insurance carriers experience and enormous surge in claims.

The challenge isn't simply receiving those claims. It's having the personnel available to process them. That staffing bottleneck often delays claim handling at exactly the time when policy holders need assistance the most. Simply put, scaling up the human element in a demand surge is challenging. It is difficult to increase human compute at the touch of a dial. However, with AI, you can increase the compute by orders of magnitude immediately. So imagine a carrier that normally processes 200 claims per week, suddenly needing to process 4,000 because of major catastrophe events.

The claim volume has spiked 20-fold, but now with the AI capabilities, processing capacity can increase just as quickly. The result will be faster claims handling, shorter wait times, and a significantly better experience of the policy holders during some of the most difficult times they'll ever face. And this is exactly the type of opportunity that excites us, because it simply wasn't possible before AI. And that's the vision beyond exit ventures. Across underwriting, claims distribution, claims, risk transfer, and many of the areas we believe, AI creates the opportunity for entirely new categories of products and businesses. And with that, I will turn over the call for questions.

And then I had two follow-ups. Yes, Terry, Geico is big. It's huge, right? And there's also been a recent thing about people wanting to bundle home and auto and the benefits of all of that. But the issue becomes, do you bundle with the auto carrier bundling the home or the home carrier bundling the auto or do you let the agent on the platform assemble the bundle? These are all choices that don't result in the same outcome.

The partnership with Geico lets people bundle and sell Geico on the on the Exo platform. So it's a big start. We'll see how it grows into it. But yes, it could be something big early days yet, but we are very excited to partner with Geico.

But could you help us a little bit with another one of these? What would it do? Would it be it drives more carriers or business relationships or it drives more of a take rate with your existing carriers? Is it a managed premium dynamic? And at the same time, by making these investments, would you still be kind of achieving those really high 50% plus EBITDA margins? So I would characterize it this way. What you sort of said about AI helping the Exo platform, that's all going to occur anyway. That isn't what Exo ventures is about. There will be AI on the Exo platform site as well. And that's what everybody else is also looking at. Modernizing your current stack because of AI.

What we're talking about in Exo ventures is doing something that you could not be possible without AI. And that's what we're talking about. Business is, think of, again, in my earlier comments, the example of Uber. Uber is not possible without the internet and GPS and maps and everything else. But it isn't just taking a taxi company and putting it on a web presence. It's reimagining how things get done, how transportation is done.

And we are starting to see there are things that you can do now do with AI, that you just couldn't do without AI. And one simple example of this that we kind of piloted a little bit was this Winform Pro we talked about last quarter. It allowed carriers to process this new requirement that came in. And it would have required a lot of staffing and training and all that kind of stuff. But using AI, we turned it into something that we could share with the whole industry very, very easily. It's stuff like that that we're talking about. It's not retrofitting AI to existing businesses. It's trying to think of new businesses we can do that's only possible because of AI.

And we have a few, we have like four or five in the hopper at the moment. We will obviously discuss them as they all come to more maturity as we go along. So we're in the process of seeding and setting all that up. But exo ventures is not just an incremental thing. It could be something very, very different. That is even beyond insurance if that helps.

Yes. So for fully earlier end, the guidance is 1.55 billion for managed premium. And in terms of, you know, 2, 3 and Q4, the one thing I would say is just a reminder that the AIR and the head converse to revenue, this is a analogy that we have in our business. And that depends on the renewal cycle and the product mix. So for 2026 we have revenue that speaks slightly in Q2. And it's more modest in Q3, more natural in Q3, and then the slide Q4, the slide Q4, step down. So that's very typical for our seasonality.

I would now like to turn the call back over to Parrish Patel, who has a few closing remarks.

Yeah, thanks, Kevin. Yeah, we're seeing some interesting trends definitely this year. What we're finding is agents are looking at being proactive with their clients. A lot of that is utilizing technology. So one of the thing that's really having them gravitate to the XEO platform is just the ease of use. So when you look at that and as the word gets out when everyone's trying to drive more and more efficiency, it's almost like that I talked about in the comments of the flywheel effect. More and more agents come on board and because everyone's looking for that edge and as we bring more carriers onto the platform, then the XEO platform becomes a go-to or a hub if you will to solve multiple different client questions or placements of coverage.

So it's a positive effect and when we look at it, we look at it in a couple of different metrics. One is the number of agents coming on board, but then the utilization of the platform, which is up as well. So it's exciting. And it's our job to bring more and more options on the platform. And that's just going to encourage additional agent adoption and participation.

But as we've seen, the more that come on and see the capabilities, obviously it becomes an easier conversation to go ahead and build that pipeline. So everything we're seeing is pointing in the right direction.

And now I would like to turn the call back over to Parrish Patel for a few closing remarks. Please go ahead.

Thank you. In closing, eggs you as well position for the future. We have a debt-free balance sheet, significant financial flexibility, and a platform that continues to scale as we add new partners products and capabilities. With the launch of Exo Ventures, we're also investing in the opportunity that its AI will create in the future over the coming decade. We believe this combination of financial discipline, platform scale, and continuous innovation provides a compelling foundation for long-term growth. I want to thank everyone who joined the call today, and I also want to thank the Exo team for all of their hard work. Thank you.