Neptune Insurance Holdings Inc.

Neptune Insurance Holdings Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Nature of Business and Basis of Presentation

Neptune Insurance Holdings Inc. (“Neptune Holdings” or the “Company”) was incorporated in Delaware on March 20, 2025, to serve as the holding company for Neptune Flood Incorporated (“Neptune Flood”). Neptune Flood, incorporated in Delaware on February 10, 2017, is an insurance agency engaged in the business of selling residential and commercial insurance policies throughout the United States on behalf of insurance carrier partners.

On April 10, 2025, Neptune Holdings completed a corporate restructuring through a reverse triangular merger (the “Reorganization”) to implement a holding company structure. The Reorganization was accounted for as a combination of entities under common control in accordance with subsections of Accounting Standards Codification (“ASC”) Topic 805-50, Business Combinations (“ASC 805-50”). Consequently, Neptune Flood was contributed to Neptune Holdings and the Reorganization was recorded at historical carrying amounts and the Company’s Consolidated Financial Statements prior to the Reorganization have been adjusted to reflect the retrospective combination of the entities for all periods presented.

Stock Split: On September 9, 2025, the Company effected a ten-for-one stock split of its common stock and redeemable, convertible preferred stock. All share and per share information has been retroactively adjusted to reflect the stock split for all periods presented. The shares of common stock retain a par value of $0.00001 per share.

Initial Public Offering: The following description of the initial public offering (“IPO”) and related transactions have been included herein given their significance, however, given that they occurred subsequent to September 30, 2025, their effects are not reflected in these condensed consolidated financial statements. The following transactions will be reflected in the fourth quarter of 2025.

On October 2, 2025, the Company completed its IPO, in which certain stockholders of the Company sold 21,184,210 shares of its Class A common stock at a public offering price of $20.00 per share. The Company received no proceeds from the sale of Class A common stock by the selling stockholders in the offering. The Company incurred IPO transaction costs for the three and nine months ended September 30, 2025, of $4,966 and $8,440, respectively, excluding the underwriting discount, which were expensed as incurred, as the Company received no proceeds from the IPO. These transaction costs are recorded within IPO transaction costs in the accompanying condensed consolidated statements of income.

In connection with the IPO, all 41,850,000 shares of the Company’s convertible preferred stock converted into 41,850,000 shares of common stock. Additionally, all 138,035,000 shares of common stock (including shares of common stock issued upon the automatic conversion of our outstanding convertible preferred stock) were reclassified into 138,035,000 shares of Class A common stock, of which 43,435,000 shares were then exchanged for Class B common stock on a one-for-one basis, resulting in 94,600,000 shares of Class A common stock and 43,435,000 shares of Class B common stock outstanding. Class A and Class B common stock are identical in their economic rights.

In connection with the IPO, the selling stockholders agreed to reimburse the Company for certain IPO offering costs, in an aggregate amount not to exceed 2% of the gross IPO proceeds to be received by the selling stockholders. As of September 30, 2025, the company recorded a receivable of $8,474 related to this reimbursement, which is included within IPO transaction costs shareholder reimbursement receivable on the condensed consolidated balance sheets. The corresponding amount is presented as contributed capital in the condensed consolidated statements of changes in redeemable, convertible preferred stock and stockholders’ deficit. On October 2, 2025, the Company received the full reimbursement amount due from the selling stockholders.

Basis of Presentation: The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all the information and related notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of recurring accruals, considered necessary for fair presentation have been included. The accompanying balance sheet for the year ended December 31, 2024, was derived from audited financial statements, but does not include all disclosures required by GAAP. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2024. The results reported in these financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The condensed consolidated financial statements are presented in US Dollars. All amounts are presented in thousands, except per share data and where otherwise noted.

Principles of Consolidation: The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany account balances and transactions have been eliminated in the condensed consolidated financial statements.

Use of Estimates: The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. These estimates, judgments, and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. The Company’s most significant estimates and judgments involve the valuation of share-based compensation, including the fair value of common stock, accounting for capitalized internal-use software, including the related estimated useful life, as well as the estimates for policy cancellations.

Note 2. Significant Accounting Policies

Revenue Recognition: The Company recognizes revenue for the transfer of promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those products or services. Under ASCTopic 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when or as the transfer of control of the underlying performance obligations occurs.ASC 606 provides a five-step model for recognizing revenue from contracts with customers as follows:

The Company recognizes revenues underASC 606 and associated costs underASC Topic 340, Incremental Costs to Obtain a Contract. Refer to Note 3 - Revenue to the condensed consolidated financial statements for additional details.

Fiduciary Cash and Fiduciary Receivable: In its capacity as a managing general agency (“MGA”), the Company typically collects premiums from insureds and, after deducting the authorized commissions, remits the net premiums to the appropriate insurance company or companies. Accordingly, premiums receivable from insureds are reported as fiduciary receivable and premiums payable to insurance companies are reported as insurance company payables in the accompanying condensed consolidated balance sheets. Unremitted net insurance premiums are held in a fiduciary capacity until the Company disburses them. Net insurance premiums payable to insurance companies together with premium deposits received from customers are held as fiduciary cash on the accompanying condensed consolidated balance sheets. Insurance company payables together with premium deposits are considered fiduciary liabilities. Cash and cash equivalents held in excess of the amount required to meet the Company’s fiduciary obligations are recognized as cash and cash equivalents on the condensed consolidated balance sheets.

Commissions and Fees Receivable: Commissions receivable reflect commissions due from insurance carrier partners. Fees receivable represent fees due from policyholders.

The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for expected credit losses, the Company considers historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also considers customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. The allowance for expected credit losses is not material as of September 30, 2025, and December 31, 2024. Non-payments are accrued for as part of the Company’s estimate for policy cancellations.

Redeemable, Convertible Preferred Stock: The Company appliesASC Topic 480, Distinguishing Liabilities from Equity, when determining the classification of preferred stock. The Company classifies instruments that are conditionally redeemable for cash or other assets outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer.

The Company classifies redeemable, convertible preferred stock (“Redeemable Preferred Stock”) as temporary equity on the accompanying consolidated balance sheets as it is redeemable solely on the passage of time or upon an event outside the control of the Company. The Company accretes the changes in the redemption value over the period from the original issuance date until the earliest probable redemption date using the interest method. Changes in the redemption value are considered to be changes in accounting estimates. On October 2, 2025, all shares of Redeemable Preferred Stock were converted into shares of common stock. Refer to “Initial Public Offering” above.

Earnings Per Share: Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. The Company’s Redeemable Preferred Stock is classified as temporary equity and is considered probable of becoming redeemable. Additionally, Redeemable Preferred Stock represents participating securities, as holders of the Preferred Stock participate in dividends with holders of common stock on a pro rata basis. Accordingly, the Company used the two-class method of computing basic and diluted earnings per share for common stock. Under this method, net income applicable to holders of common stock is first reduced by the amount of accretion adjustment to the Redeemable Preferred Stock in the current period, and remaining undistributed earnings is then allocated on a pro rata basis to the holders of common stock and Redeemable Preferred Stock to the extent that each class may share income for the period; whereas undistributed net loss is allocated to common stock only because holders of Redeemable Preferred Stock are not contractually obligated to share the loss.

The Company takes a two-step approach to compute the diluted earnings per share, by first applying the treasury stock method and if-converted method, and then the two-class method. The dilutive earnings per share are computed using the more dilutive approach. See Note 10 — Earnings (Loss) Per Share for additional information about per share data.

Recent Accounting Pronouncements:

The Company has not adopted any new accounting pronouncements since the audited consolidated financial statements for the year ended December 31, 2024. See Note 2 — Significant Accounting Policies, in the consolidated financial statements included in the Final Prospectus, dated as of September 30, 2025, for information pertaining to the effects of recently adopted and other recent accounting pronouncements.

Note 3. Revenue

The Company’s revenue is derived from the sale of insurance policies and is primarily comprised of commission income and fee income.

Commission Income

The largest component of the Company’s revenue is commission income from the placement of insurance contracts between insurance carriers and the policyholders who acquire property insurance policies. These commissions are established by the carrier agreement between the Company and the insurance carrier partner and are calculated as a negotiated percentage of premiums for the underlying insurance contract. Commission rates and terms vary across insurance carriers. The Company’s performance obligation under its agreements with insurance carrier partners is selecting, pricing, and placing policyholders’ insurance contracts on their behalf. Each underlying insurance contract is a separate and distinct contract between the policyholder and the insurance carrier partner. The Company collects the full premium for the policy from the policyholder at inception, then remits that premium, net of the commission owed to the Company, to the insurance carrier partner. Commission income is recognized at a point in time upon the effective date of bound insurance coverage, at which point the performance obligation has been met as no performance obligation exists after coverage is bound.

The transaction price is the total commission the Company expects to receive from the insurance carrier partner for the current term of the policy. The transaction date is determined by the effective date of the insurance policy. Policies may be cancelled in accordance with permitted reasons under applicable law and the policy terms. In the event of a permitted cancellation, the Company’s commission is limited to the period that the policy was in effect. The Company estimates any expected variable consideration, or cancellations, based on historical information, and records a corresponding deduction in revenue at the time revenue is recognized. The Company bases its estimates on historical cancellation experience by policy type and tenure and adjusts for any known trends or events. The estimation period typically covers the allowable cancellation period. This variable consideration is recognized to the extent that it is probable there will not be a significant reversal of revenue.

The Company also earns small amounts of contingent income from insurance carrier partners in the form of a profit-sharing commission, which is highly variable and based on underwriting results. The Company assesses whether the underlying book of business has attained the profitability criteria set by carriers and whether enough time has passed to minimize the risk that sufficient losses will become realized that would negate the profit share. The Company closely monitors the calculations to identify if a profit-sharing commission would be earned and recognizes the profit-sharing commission as the underlying policies are placed, net of a constraint.

Contingent profit-sharing commissions represent a form of variable consideration associated with the placement and profitability of coverage, for which the Company earns base commissions. In connection withASC 606, contingent profit-sharing commissions are estimated with a constraint applied and accrued relative to the recognition of the corresponding base commissions for the period over which the contract applies. As contingent commissions are earned in relation to policies placed by the Company with the insurance carrier partner, the timing of recognizing contingent commissions follows a similar pattern as the base commissions on premium described above, with any adjustments recognized when payments are received or as additional information that affects the estimate becomes available.

Fee Income

In addition to commissions on premium, the Company earns fee income. These fees are established by the carrier agreement between the Company and the insurance carrier partner and represent a flat charge on each underlying insurance contract. The Company’s performance obligation under its agreements with insurance carrier partners is selecting, pricing, and placing policyholders’ insurance contracts on their behalf. This fee compensates the Company for the administrative and operational costs associated with the Company’s placement of the policy for the insured. The Company is entitled to the full fee for the policy year, even in the event of cancellation. At each annual renewal, the policyholder is re-assessed a flat, non-refundable policy fee, which the Company is entitled to retain.

Fees can vary by product type, underlying risk, and location of the insured property. The fee is non-refundable should the policy be canceled due to home sale or any other type of acceptable mid-term cancelation reason, therefore, fee income is treated as fully earned once a policy has become effective and is recognized as revenue at that time. Similar to the base commissions on premium described above, fees are recognized at a point in time upon the effective date of bound insurance coverage, at which point the performance obligation has been met as no performance obligation exists after coverage is bound.

The Company excludes from revenue any amounts collected from policyholders that are assessed by governmental authorities, such as sales and premium taxes, when the Company acts solely as a collecting agent.

Contract Costs

ASC Topic 340-40, Other Assets and Deferred Costs — Contracts with Customers requires the Company to review certain costs to obtain customer contracts primarily as they relate to agency commission arrangements. The Company pays agent commissions to its distribution partners, such as independent agents, brokers, or referral partners, for selling policies on behalf of the Company. The Company’s agency commission arrangements are the same for both new and renewal business. The Company has elected the practical expedient to expense these costs as incurred since the amortization period related to the resulting asset would be one year or less. The Company has no significant instances of contracts that would be amortized for a period greater than a year and therefore has no contract costs deferred for such arrangements.

Costs to fulfill — Due to the relatively short time period between the information gathering phase and binding insurance coverage, the Company has determined that costs to fulfill contracts are not significant. Therefore, costs to fulfill a contract are expensed as incurred.

Disaggregation of Revenue

The following table disaggregates revenue by source for the:

Contract Asset and Premium Deposits

The timing of revenue recognition may not align with the right to invoice the customer. The Company records accounts receivable when it has the unconditional right to issue an invoice and receive payment, regardless of whether revenue has been recognized. Policyholder payments received in advance of commencement of the performance obligation are recorded as premium deposits. No revenue is recognized on these deposits until the performance obligation is complete.

The following table provides information about receivables and premium deposits as of:

During the three and nine months ended September 30, 2025, the Company recognized revenue of $0.6 and $3,417, respectively related to the premium deposits balance at December 31, 2024.

Note 4. Debt

Debt consists of the following as of:

Amended and Restated Credit Agreement

On May 8, 2023, the Company amended and restated its prior credit agreement entered into during 2021 (“Amended and Restated Credit Agreement”) in its entirety with its existing lender, increasing its borrowing base on the term loan to $190,000 (“2023 Term Loan”) and providing access to incremental loans and a revolving line of credit of $10,000. During the nine months ended September 30, 2024, and prior to the refinancing on June 13, 2024, the Company made aggregate principal repayments of $4,475.

2024 Credit Agreement

On June 13, 2024, the Company entered into a credit agreement (“2024 Credit Agreement”) comprised of a $171,000 term loan (“2024 Term Loan”) and a revolving line of credit commitment of $10,000 (“2024 Revolver”) as well as access to incremental loans. The Company used the proceeds from the 2024 Term Loan in part to pay down the remaining balance of the 2023 Term Loan under the Amended and Restated Credit Agreement. A loss on extinguishment of debt of $5,426 was recognized in the consolidated statements of income during the nine months ended September 30, 2024, related to the pay down of the 2023 Term Loan, consisting of the prepayment penalty of $1,821 and the write-off of unamortized deferred financing fees of $3,348 and deferred financing asset of $257.

During the nine months ended September 30, 2025, and prior to the refinancing on April 10, 2025, the Company made aggregate principal repayments of $4,000. During the nine months ended September 30, 2024, the Company made aggregate principal repayments of $18,000. The Company recorded amortization expense of $0 and $276 for the three months ended September 30, 2025 and 2024, respectively, and $0 and $306 for the nine months ended September 30, 2025 and 2024, respectively. Interest expense related to the 2024 Credit Agreement was $0 and $3,763 for the three months ended September 30, 2025 and 2024, respectively, and $2,631 and $4,528 for the nine months ended September 30, 2025 and 2024, respectively.

2025 Credit Agreement

On April 10, 2025, the Company amended and restated its 2024 Credit Agreement (the “2025 Amended and Restated Credit Agreement”) with its existing lenders to, among other things, increase its borrowing base on the term loan to $301,000 (the “2025 Term Loan”) and extend the maturity date to April 30, 2030. The proceeds of the 2025 Term Loan were used to repay in full all outstanding obligations under the 2024 Term Loan and to finance a dividend. The revolving loan commitment remains at $10,000 (“2025 Revolver”) and its maturity date was also extended to April 30, 2030. The Company applied modification accounting to the 2024 Credit Agreement and capitalized $477 of deferred financing fees, $36 of deferred financing asset, and recognized interest expense of $0 and $518 for third party fees related to the 2025 Amended and Restated Credit Agreement during the three and nine months ended September 30, 2025. Unamortized deferred financing fees of $1,238 related to the 2024 Term Loan continue to be amortized over the term of the 2025 Term Loan.

As of September 30, 2025, the 2025 Term Loan was a Term SOFR loan with a margin of 3.0%, resulting in an interest rate of approximately 7.2%. During the nine month period ended September 30, 2025, the Company made aggregate principal repayments of $37,000. During the three and nine month periods ended September 30, 2025, the Company recorded $246 and $365 of amortization expense, respectively, resulting in unamortized deferred financing fees of $1,361 as of September 30, 2025. Interest expense related to the 2025 Amended and Restated Credit Agreement was $5,546 and $11,118 for the three and nine month periods ended September 30, 2025. The Company’s effective interest rate for the nine months ended September 30, 2025, was 7.4%. The Company was in compliance with all debt covenants as of September 30, 2025.

Interest expense was $5,518 and $3,771 for the three months ended September 30, 2025 and 2024, respectively, of which $240 and $271 was attributable to the amortization of the debt issuance costs, respectively, and $6 and $6 was attributable to the amortization of the deferred financing asset, respectively. Interest expense was $13,787 and $14,403 for the nine months ended September 30, 2025 and 2024, respectively, of which $464 and $613 was attributable to the amortization of the debt issuance costs, respectively, and $18 and $28 was attributable to the amortization of the deferred financing asset, respectively. Accrued interest associated with the outstanding debt is included within accrued expenses on the condensed consolidated balance sheets. As of September 30, 2025 and December 31, 2024, the Company had $795 and $452, respectively, of accrued interest associated with the debt.

Note 5. Redeemable, Convertible Preferred Stock, and Stockholders’ Deficit

The total number of shares of all classes of capital stock which the Company has the authority to issue is 196,150,000, consisting of 41,850,000 shares of Redeemable Preferred Stock $0.00001 par value per share and 154,300,000 shares of common stock $0.00001 par value per share (“Common Stock”).

Common Stock

On April 10, 2025, the Company’s Board approved a cash dividend in the aggregate amount of $175,000, payable to holders of Common Stock and Redeemable Preferred Stock of record as of April 10, 2025.

Redeemable, Convertible Preferred Stock

On May 10, 2023 (the “Original Issuance Date”), the Company issued 41,850,000 shares of Redeemable Preferred Stock to a single investor for cash consideration of $229,985 (“Original Issue Price”). The Company paid $10,921 in fees to complete the financing. On October 2, 2025, all shares of redeemable, convertible preferred stock were converted into shares of common stock. Refer to Note 1 - Nature of Business and Basis of Presentation for further information.

Dividends: Each share of Redeemable Preferred Stock shall be entitled to receive cumulative dividends of 5% per annum accrued daily and compounded quarterly commencing on the Original Issuance Date through the earlier of the eighth anniversary of the Original Issuance Date or the date on which the holder of Redeemable Preferred Stock achieves a multiple on invested capital equal to or exceeding three. The Redeemable Preferred Stock is entitled to participate ratably with the holders of Common Stock on all dividends paid on the shares of Common Stock. Cumulative undeclared dividends totaled $29,042 and $19,567 as of September 30, 2025, and December 31, 2024, respectively.

Liquidation: Upon a change of control or any voluntary or involuntary liquidation, dissolution, or winding up of the Company (“Liquidation”), the Redeemable Preferred Stock shall be paid in preference and prior to any payment made to the holders of Common Stock and any other securities that do not expressly rank senior to the Redeemable Preferred Stock (“Junior Securities”).

In the event of a Liquidation, including a change of control, holders of Redeemable Preferred Stock are entitled to receive accrued but unpaid dividends and either 1) receive a Liquidation preference in priority to holders of Common Stock and Junior Securities for an amount equal to the Original Issue Price based or 2) legally convert their shares to Common Stock based on what would result in the greatest return to the holders.

Conversion: The holders of Redeemable Preferred Stock shall have the right at any time to convert all or a portion of such shares into an equal number of shares of Common Stock. Upon the consummation of an initial public offering or transaction with a special purpose acquisition company that results in a certain amount of aggregate proceeds and an offering price above a certain threshold (“Qualified IPO”) or on the affirmative vote a majority of the holders of Redeemable Preferred Stock, the Redeemable Preferred Stock shall be automatically converted into such number of shares of Common Stock having a value per share equal to the amount that would have been distributed with respect to such share had the Company been sold for cash in a Liquidation for the value of the Company in a Qualified IPO implied by the price per share of Common Stock at which shares are sold to the public in a Qualified IPO.

No fractional shares of Common Stock shall be issued upon conversion of any shares of Redeemable Preferred Stock. If more than one share of Redeemable Preferred Stock subject to conversion is held by the same holder, such shares shall be aggregated for purposes of conversion. If the conversion of any share or shares of Redeemable Preferred Stock results in a fractional share of Common Stock issuable (after aggregating all shares of Redeemable Preferred Stock held by each holder), the Company shall pay a cash amount in lieu of issuing such fractional share in an amount equal to the fair market value of such fractional interest.

On October 2, 2025, the Company completed a Qualified IPO which resulted in the conversion of all the Redeemable Convertible Preferred Stock into an equal number of Common Stock. Refer to Note 1 - Nature of Business and Basis of Presentation.

Redemption: The Redeemable Preferred Stock is classified as temporary equity on the accompanying condensed consolidated balance sheets as it is redeemable solely on the passage of time or upon an event outside the control of the Company. As of the Original Issuance Date, the Redeemable Preferred Stock was probable of becoming redeemable as potential future redemption is dependent solely on the passage of time. The Company elected to accrete the changes in the redemption value over the period from the Original Issuance Date until the earliest probable redemption date using the interest method. Changes in the redemption value are considered to be changes in accounting estimates. The carrying value of Redeemable Preferred Stock totaled $250,877 and $240,473 as of September 30, 2025, and December 31, 2024, respectively. For the three months ended September 30, 2025, and 2024, the Company recognized accretion of $3,555 and $3,360, respectively, and $10,404 and $9,867 for the nine months ended September 30, 2025 and 2024, respectively, as an adjustment between Redeemable Preferred Stock and Accumulated Deficit.

Note 6. Share-Based Compensation Plan

During the three months ended September 30, 2025, the Company issued 201,000 stock options. Stock options issued consisted of two tranches:100,500 time-based options and 100,500 performance-based options. The weighted average grant date fair value of the options was $7.01 per share. During the nine months ended September 30, 2025, the Company issued 924,000 stock options. Stock options issued consisted of two tranches:462,000 time-based options and 462,000 performance-based options. The weighted average grant date fair value of the options was $2.32 per share.

Time-based options contain only service conditions and cliff vest on the 5 th anniversary date of the grant date. Upon an optionee’s death or disability, or the consummation of a liquidity event by the Company, all of the time-based options will immediately vest and become exercisable. The time-based options have an exercise price of $5.495 – $19.00 per share. Performance-based options contain service, performance, and market conditions. Subject to the optionee’s continuous service through a liquidity event, performance-based options will vest upon the occurrence of a liquidity event; provided that if the return on the invested capital of preferred stockholders is less than a multiple of 3.0 (referred to herein as the “Preferred Return Multiple”), the exercise price for the vested options will be $10.99 per share; and if the return on the invested capital of preferred stockholders equals or is more than the Preferred Return Multiple, the exercise price for the vested options will be $5.495 per share. If a liquidity event does not occur before the 5 th anniversary date of the grant date, the service condition is considered to be met once a grantee has provided continuous service for 5 years; however, the performance condition is still required to be met for the performance-based options to vest. The maximum contractual term of the stock options issued under the Neptune Flood Incorporated Amended and Restated 2019 Stock Plan is 10 years.

On September 30, 2025, the Company approved grants of 4,155,678 restricted stock units to certain employees and directors of the Company, pursuant to the 2025 Equity Incentive Plan (“2025 Plan”), which became effective on September 30, 2025, along with the filing of Form S-8 to register the shares subject to the 2025 Plan. Each restricted stock unit grant will vest ratably in three installments on each of the first, second and third anniversaries of the vesting commencement date. The grant date fair value of the units was $20. The aggregate grant date fair value of the units was $83,114.

Share-based compensation expense was $112 and $75 for the three months ended September 30, 2025 and 2024, respectively, and $299 and $217 for the nine months ended September 30, 2025 and 2024, respectively.

On August 25, 2025, the Company’s board of directors approved an administrative amendment to the time-based options and the performance-based options to allow such options to be early exercisable. On August 28 and 29, 2025, the Company received total proceeds of $15,578 from the early exercise of 2,835,000 unvested stock options by existing option holders. The Company recorded a deposit liability equal to the proceeds received from the unvested options. These amounts will be reclassified to common stock and additional paid-in capital as the underlying shares vest. On September 8, 2025, of such total proceeds received, $15,000 was used to pay down the Company’s existing debt, reducing the outstanding balance under the Company’s 2025 Term Loan.

Note 7. Income Taxes

Neptune Flood has historically filed standalone United States federal and state income tax returns. As a result of the Reorganization and formation of Neptune Holdings, starting with its 2025 tax return, the Company will begin filing a consolidated federal income tax return and some consolidated state income tax returns where required or allowed.

The Company’s quarterly income tax provision is measured using an estimate of its consolidated annual effective tax rate adjusted for discrete items. The Company’s effective tax rate for the nine months ended September 30, 2025 and 2024 was 25.7% and 25.6%. The Company’s effective tax rate for the three months ended September 30, 2025 and 2024 was 25.6% and 25.8%. In both periods, the effective tax rate differed from the US federal statutory rate primarily due to state income taxes.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions, including immediate expensing for domestic research expenditures. Additionally, the OBBBA allows accelerated tax deductions for qualified property. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company has evaluated the impact of the OBBBA on its consolidated financial statements and determined that the only material impact is to advance approximately $12,000 of deductions for domestic research expenditures and has recorded this impact on its balance sheet as of September 30, 2025.

Note 8. Related-Party Transactions

Rent Expense

In February 2021, the Company entered into a month-to-month operating lease agreement for office space for management and administrative services at a rate of $12 per month from an affiliate of the Company’s executive and principal stockholder. Rent expense was $36 and $36 for the three months ended September 30, 2025 and 2024, respectively, and $108 and $108 for each of the nine months ended September 30, 2025, and 2024, respectively, which were included in general and administrative expense in the condensed consolidated statements of income.

Software Development

In 2022, the Company engaged with a contractor for software development and data analytics that was an affiliate of the Company’s executive and principal stockholder. Payments made to the contractor were $0 for the three months ended September 30, 2025 and 2024, respectively, and $0 and $373 for the nine months ended September 30, 2025 and 2024, respectively, which were included in general and administrative expense in the condensed consolidated statements of income.

Note 9. Segment Reporting

The Company hasone operating segment and thereforeone reportable segment relating to its business as a MGA that offers accessible residential and commercial insurance products, including primary and excess flood insurance and parametric earthquake insurance, primarily through a nationwide agency network in the United States. The Company’s chief operating decision maker (“CODM”), the CEO, manages the Company’s operations on a condensed consolidated basis as one operating segment for the purpose of evaluating financial performance and allocating resources.

The accounting policies of the Company’s segment are the same as those described in the summary of significant accounting policies. The CODM uses net income, as reported on the condensed consolidated statements of income, to assess performance and allocate resources. The significant segment expense categories regularly provided to the CODM are the same as those included on the condensed consolidated statements of income. The measure of segment assets is total assets as reported on the condensed consolidated balance sheets.

The CODM uses net income to assess performance by examining period-over-period trends, benchmarking to the Company’s competitors, and monitoring budget versus actual results. The CODM uses net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the segment or into other parts of the entity.

The Company does not have revenue from any one customer that is greater than 10% of condensed consolidated revenue.

Note 10. Earnings (Loss) Per Share

The following table sets forth the computation of basic and dilutive earnings (loss) per share for the:

The potential shares of common stock that were excluded from the computation of diluted earnings (loss) per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive are as follows:

Note 11. Commitments and Contingencies

The Company is, from time to time, party to various legal actions and is subject to various claims arising in the ordinary course of business from time to time. Management believes that the resolution of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

Note 12. Subsequent events

The Company did not identify any material subsequent events that required recognition or additional disclosure in these unaudited condensed consolidated financial statements except for the following:

Initial Public Offering

On October 2, 2025, the Company completed its IPO which resulted in the conversion of all 41,850,000 outstanding shares of the Company’s Redeemable, Convertible Preferred Stock into shares of the Company’s common stock. Prior to the conversion, the Company had 96,185,000 shares of common stock outstanding. Following the conversion, the Company had 138,035,000 shares of common stock outstanding, which were reclassified into 138,035,000 shares of Class A common stock in connection with the IPO, of which 43,435,000 shares were exchanged for Class B common stock on a one-for-one basis, resulting in 94,600,000 shares of Class A common stock and 43,435,000 shares of Class B common stock outstanding. Refer to Note 1 – Nature of Business and Basis of Presentation.

On October 2, 2025, the Company received total reimbursement of $9,346 from the selling stockholders, which included the payment on the $8,474 receivable previously recorded as of September 30, 2025, as well as additional IPO transaction costs incurred subsequent to September 30, 2025. These additional costs primarily related to a contingent advisory fee under an advisory agreement that became payable upon the successful completion of the IPO. The full reimbursement, excluding the contingent advisory fee, has been recorded as a capital contribution.

On October 2, 2025, in connection with the consummation of the Company’s IPO, a total of 11,760,000 stock options, comprised of 5,880,000 time-based options and 5,880,000 performance-based options, vested in full pursuant to the accelerated vesting provisions in the respective award agreements. The triggering event was the completion of the IPO, which satisfied the conditions for acceleration. As a result, the Company expects to recognize approximately $5,000 in additional share-based compensation expense in October 2025.

Refinancing of Term Loan

On November 10, 2025, Neptune Flood entered into a new $260,000 revolving credit facility, replacing its existing 2025 Term Loan. The refinancing was executed to enhance financial flexibility and liquidity at more favorable terms.

The revolving credit facility matures on November 10, 2030, and includes customary covenants and conditions. The Company intends to use the proceeds for general corporate purposes, including working capital, strategic initiatives, and repayment of existing indebtedness. The Company does not expect the refinancing to have any material impact on its consolidated results.

As of November 10, 2025, the total amount outstanding under the revolving credit facility was $251,000.