Exzeo Profit Rises as Revenue Growth Slows
Gross margin widened to about 63.7% as cost of revenue declined.
Exzeo Group (XZO), the insurance-technology provider, reported higher second-quarter profit as revenue growth slowed sharply from the pace recorded over the previous three quarters.
Revenue rose 3.0% from a year earlier to $57.8 million, easing from 6.0% growth in the first quarter and 20% in the fourth quarter. Revenue increased 4.1% sequentially. Net income climbed 7.4% to $23.3 million, while earnings were unchanged at $0.26 a share and rose from $0.22 a share in the first quarter.
Lower outsourced claims fees helped adjusted revenue rise 7.7% to $56.3 million, outpacing the increase in reported revenue. Gross profit grew 9.8% to $36.8 million as cost of revenue fell 7.1%, lifting gross margin from 59.8% a year earlier and about 59.0% in the first quarter.
The improvement did not flow fully into operations. Operating income edged up 1.2% to $28.5 million as operating expenses increased 54.4%, including a near doubling of selling, general and administrative expense to $5.8 million. Investment income rose to $3.0 million from $0.8 million, helping pre-tax income increase 8.8%.
Adjusted EBITDA increased 1.3% from a year earlier to $29.9 million, while its margin narrowed 3.3 percentage points to 53.2% as Exzeo expanded its workforce and operating infrastructure. Sequentially, adjusted EBITDA rose about 13% and the margin recovered from 49%, though it remained below the fourth quarter's 55%.
Two operating measures softened from the first quarter. Managed Premium slipped 2.1% sequentially to $1.40 billion, while Annual Recurring Revenue declined 2.5% to $210.7 million. Both remained higher than a year earlier, increasing 14.8% and 7.9%, respectively.
Cash generation weakened more sharply, with second-quarter operating cash flow falling 59.2% to $15.4 million and Free Cash Flow declining at the same rate to $15.2 million. The first-half decline in cash flow was due to the timing of collections tied to growth.
Exzeo repurchased about $10.0 million of shares during the quarter and completed its $12.0 million program in July. The company also introduced Exzeo Ventures, a division focused on developing AI-native products, services and businesses, extending its investment in growth as recurring revenue and cash flow eased sequentially.