Neptune Insurance Holdings Inc.

Neptune Insurance Holdings Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Nature of the Business and Basis of Presentation

Neptune Insurance Holdings Inc. (“Neptune Holdings”, “Neptune”, “the Company”, “we”, “us”, or “our”) 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 flood insurance policies on behalf of insurance carrier partners throughout the United States. In April 2025, the Company implemented a holding company structure through a corporate restructuring that was accounted for as a common control transaction under ASC 805-50. As a result, Neptune Flood was contributed to Neptune Holdings, and the consolidated financial statements reflect the entities on a retrospective basis at historical carrying amounts for all periods presented.

Basis of Presentation: The consolidated financial statements of Neptune Holdings, including the consolidated balance sheet as of June 30, 2026, the consolidated statements of income, the consolidated statements of changes in redeemable, convertible preferred stock and stockholders’ deficit, and the consolidated statements of cash flows for the six months ended June 30, 2026 and 2025, as well as other information disclosed in the accompanying notes, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Commission regarding interim financial reporting and are unaudited. The consolidated balance sheet as of December 31, 2025, was derived from the audited consolidated financial statements as of that date, but does not include all disclosures required by GAAP. The interim consolidated financial statements and the accompanying notes should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2025.

The interim consolidated financial statements and the accompanying notes have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal and recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The consolidated results of operations for any interim period are not necessarily indicative of the results expected for the full year or for any future years or interim periods. The condensed consolidated financial statements are presented in U.S. 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

There have been no material changes to the Company’s significant accounting policies from those disclosed in Note 2, "Significant Accounting Policies," in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. Please refer to that report for a full description of those policies.

Recent Accounting Pronouncements:

The Company has not adopted any new accounting pronouncements since the audited consolidated financial statements for the year ended December 31, 2025. Refer to Note 2, "Significant Accounting Policies," in the Company's Annual Report on Form 10-K for the year ended December 31, 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. The Company's revenue recognition accounting policies for those sources of income and related contract costs are described in Note 3, "Revenue," of the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to these policies during the three and six months ended June 30, 2026. The disclosures below should be read in conjunction with that note.

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 six months ended June 30, 2026, the Company recognized revenue of $2 and $5,797 related to the premium deposits balance at December 31, 2025.

Note 4. Revolving Credit Facility

The Company has a $260,000 revolving credit facility (the “Amended 2025 Revolver”) with a lender syndicate, which matures on November 10, 2030. At the Company's option, the interest rate on the Amended 2025 Revolver may be based on either ABR plus an applicable margin ranging from 0.75% to 2.00% or Term SOFR ranging from 1.75% to 3.00%, depending on the Company's total net leverage ratio of the prior fiscal quarter. As of June 30, 2026, the applicable interest rate was 5.9%. The Amended 2025 Revolver is secured by substantially all of the assets of the Company and its subsidiaries. The Company was in compliance with all financial covenants under the Amended 2025 Revolver as of June 30, 2026.

The following table summarizes the activity under the Amended 2025 Revolver for the six months ended June 30, 2026:

As of June 30, 2026, the Company had $20,000 of available borrowing capacity under the Amended 2025 Revolver. For the three and six months ended June 30, 2026, the weighted average interest rate on borrowings outstanding was 6.2% and 6.0%, respectively and the average outstanding balance was $233.5 million and $233.3 million, respectively. There have been no material changes to the terms of the Amended 2025 Revolver from those described in Note 5, 'Debt,' of the Company's Annual Report on Form 10-K for the year ended December 31, 2025.

Note 5. Stockholders’ Deficit

The total number of shares of all classes of stock that the Company has the authority to issue is 500,000,000, consisting of 480,000,000 shares of common stock, par value $0.00001 per share (the “Common Stock”),428,422,036 shares of which are designated as Class A common stock, par value $0.00001 per share and 51,577,964 shares of which are designated as Class B common stock, par value $0.00001 per share, and 20,000,000 shares of Preferred Stock, par value $0.00001 per share. There wereno shares of preferred stock issued or outstanding at June 30, 2026, and December 31, 2025.

Share Repurchase Program

On April 21, 2026, the Company's Board of Directors (the “Board”) approved a stock repurchase program (the “Repurchase Program”) authorizing the Company to repurchase, in the open market or through accelerated share repurchase, negotiated, or block transactions, up to $100.0 million of shares of the Company's Class A common stock. Shares may be repurchased through open market purchases or privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the“Exchange Act”), and, to the extent applicable, in accordance with the timing, price, and volume guidelines of Rule 10b-18. The timing and actual number of shares repurchased depend on a variety of factors, including price, general business and market conditions, and other investment opportunities, and repurchases may be funded through cash from operations or borrowings under the Company's revolving credit facility. The Repurchase Program has no expiration date, will continue until suspended, terminated, or modified by the Board, and does not obligate the Company to repurchase any specific number or dollar amount of shares.

During the three months ended June 30, 2026, the Company repurchased 235,000 shares of Class A common stock under the Repurchase Program in open market transactions, consisting of 115,000 shares on June 2, 2026, at an average price of $25.49 per share and 120,000 shares on June 3, 2026, at an average price of $24.64 per share, for an aggregate purchase price of $5.9 million, excluding commissions, at a weighted average price of $25.05 per share. As of June 30, 2026, approximately $94.1 million remained available for repurchases under the Repurchase Program.

Repurchase Concurrent with the May 2026 Secondary Offering

In May 2026, the Company completed an underwritten registered secondary offering pursuant to which certain selling stockholders of the Company sold shares of the Company's Class A common stock. The Company did not sell any shares in, and did not receive any proceeds from, the offering. Concurrently with the offering, pursuant to a separate authorization of the Board of Directors dated May 13, 2026, the Company repurchased 984,140 shares of Class A common stock from the underwriters at a price of $26.40 per share, equal to the price at which the underwriters purchased the shares from the selling stockholders (the public offering price less the underwriting discount), for an aggregate purchase price of $26.0 million. The repurchase settled on May 15, 2026. This repurchase was authorized separately from, and did not reduce the amount available under, the Repurchase Program.

Retirement of Repurchased Shares

All shares repurchased during the three months ended June 30, 2026, were retired promptly upon settlement and resumed the status of authorized but unissued shares of Class A common stock. The Company accounts for repurchases of its Class A common stock as constructive retirements, and accordingly no treasury stock is reported. The par value of the retired shares is charged to Class A common stock, and the Company has elected to charge the entire excess of the repurchase cost over par value to additional paid-in capital. During the three months ended June 30, 2026, the Company repurchased and retired a total of 1,219,140 shares of Class A common stock for aggregate consideration of $31.9 million, excluding commissions paid relating to open market repurchases, substantially all of which was charged to additional paid-in capital. No repurchases occurred during the three months ended March 31, 2026. The repurchase and retirement of shares is a capital transaction, and no gain or loss was recognized.

The following table summarizes the Company's repurchases of Class A common stock during the three months ended June 30, 2026:

Amounts in the table exclude commissions of $4.7 million on the June 2026 open market repurchases. Average prices are presented exclusive of commissions.

Excise Tax

The Inflation Reduction Act of 2022 imposes a nondeductible 1% excise tax on the fair market value of net repurchases of stock by covered corporations after December 31, 2022. Any excise tax incurred on share repurchases is recognized as a direct cost of the repurchase and recorded as a reduction of additional paid-in capital. As of June 30, 2026, the Company had not recorded a liability for the excise tax because qualifying issuances of Class A common stock during the taxable year to date exceeded the fair market value of shares repurchased.

The following table presents a rollforward of the Company's Common Stock issued and outstanding as of June 30, 2026:

(1) Net of income tax withholding by the Company on behalf of the employee.

Class A Common Stock

Holders of the Company's Class A common stock are entitled toone vote per share on all matters submitted to a vote of stockholders. Holders of Class A common stock vote together with holders of Class B common stock as a single class, except as otherwise required by law. Holders of Class A common stock are entitled to receive dividends when and if declared by the Board out of legally available funds, on a ratable per share basis. Upon liquidation, dissolution, or winding up of the Company, and subject to the rights of any preferred stock outstanding, holders of Class A common stock are entitled to share ratably in the Company's remaining assets available for distribution.

Class B Common Stock

Holders of the Company's Class B common stock are entitled toten votes per share on all matters submitted to a vote of stockholders. Holders of Class B common stock vote together with holders of Class A common stock as a single class, except as otherwise required by law.

Holders of Class B common stock are entitled to receive dividends when and if declared by the Board out of legally available funds on the same basis as holders of Class A common stock. Upon liquidation, dissolution, or winding up of the Company, and subject to the rights of any preferred stock outstanding, holders of Class B common stock are entitled to share ratably in the Company's remaining assets available for distribution.

Each share of Class B common stock is convertible at any time, at the option of the holder, intoone share of Class A common stock. In addition, each share of Class B common stock will automatically convert intoone share of Class A common stock upon the occurrence of certain transfer events, other than permitted transfers, or upon the occurrence of a final conversion date, as defined in the Company's governing documents. Following the final conversion date, Class B common stock may no longer be reissued, and any outstanding shares will be retired or cancelled.

Note 6. Share-Based Compensation Plan

The Company's accounting policies for share-based compensation are described in Note 7, 'Share-Based Compensation,' of the Company's Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to these policies during the three and six months ended June 30, 2026. The disclosures below should be read in conjunction with that note.

Stock Options

During the three and six months ended June 30, 2026, the Company didnot grant stock option awards andno stock option awards were forfeited. As of June 30, 2026, no unrecognized compensation remains for Time-Based and Performance Based stock options as they are fully vested.

A summary of stock option activity during the three and six months ended June 30, 2026, is presented below:

Restricted Stock Units (“RSUs”)

During the three and six months ended June 30, 2026,1,104 RSUs were forfeited. No RSU grants or vesting occurred during the three and six months ended June 30, 2026. As of June 30, 2026, there were 4,176,384 RSUs outstanding with a weighted-average grant-date fair value of 20.04 per unit and a weighted-average remaining service period of 2.25 years. No RSUs were issued during the three and six months ended June 30, 2026.

During the three and six months ended June 30, 2026, the Company recognized $6,947 and $13,824 of share-based compensation expense related to RSUs, which is included in employee compensation and benefits expense in the condensed consolidated statements of income. As of June 30, 2026, unrecognized compensation cost related to unvested RSUs was $62,900, which is expected to be recognized over a weighted-average period of 2.25 years.

Note 7. Income Taxes

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 three and six months ended June 30, 2026 was 31.9% and 30.4%, respectively, and differed from the U.S. federal statutory rate primarily due to limitations on deductions for officer compensation and state income taxes, partially offset by the excess benefits of stock compensation. The Company's effective tax rate for the three and six months ended June 30, 2025 was 25.8% and 25.8%, respectively, and differed from the U.S. federal statutory rate primarily due to state income taxes.

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 $72, respectively, for the three and six months ended June 30, 2026 and $36 and $72, respectively for the three and six months ended June 30, 2025, 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 Managing General Agent that offers 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 consolidated basis asone 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.

For the three and six months ended June 30, 2026 and the three and six months ended June 30, 2025, respectively, the Company did not have revenue from any one customer that was 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:

(1)Represents the accretion of the redeemable preferred stock to its redemption value and includes both the effect of cumulative undeclared dividends and the accretion of issuance costs for the applicable periods.

(2)Net income (loss) available to common stockholders for the three and six months ended June 30, 2025, included $2.9 million and $3.5 million of IPO transaction costs that were reimbursed to the Company by the selling stockholders on October 2, 2025.

(3)The Time Vesting Options were excluded from the calculation of diluted earnings per share for the three and six months ended June 30, 2025, as their inclusion would have been anti-dilutive.

(4)Performance Vesting Options have a performance condition. For the three and six months ended June 30, 2025, the performance condition was not met and therefore, these options were excluded from the dilutive earnings per share computation.

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

On July 16, 2026, the Company repaid an additional $7.0 million under the Amended 2025 Revolver, reducing the outstanding balance to $233.0 million as of the date these financial statements were issued.