Neptune Insurance Holdings Inc.NP
Neptune Insurance Holdings Inc. Stock Compensation Disclosure
Share-Based Compensation Plan
In 2019, the stockholders of the Company approved the Neptune Flood Incorporated 2019 Stock Plan (the “Pre-Existing Plan”), that provides for the granting of restricted stock or options to employees and consultants contingent on performance-based and/or time-based criteria and was subsequently amended and restated in May and November of 2023. On April 10, 2025, the Company adopted the Amended and Restated 2025 Stock Plan (the “Pre-IPO Plan”), which amended and restated the Pre-Existing Plan. Pursuant to an Agreement and Plan of Merger dated April 10, 2025 by and among the Company, Neptune Flood, and Neptune Insurance Merger Sub Inc., the Company assumed the Pre-Existing Plan and all awards previously granted thereunder.
The principal purpose of the Pre-IPO Plan was to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, and to promote the success of the Company’s business. The maximum contractual term of the stock options issued under the Pre-IPO Plan was 10 years. The number of shares of stock reserved for issuance under the stock plan was 12,800,000 shares. No awards could be granted under the Pre-IPO Plan if such awards could result in the issuance of more than 11,760,000 shares pursuant to awards granted after May 8, 2023. In connection with the adoption of the 2025 Plan, the Pre-IPO Plan was terminated and no additional awards may be granted thereunder; however, awards previously granted under the Pre-IPO Plan remain outstanding in accordance with their terms.
In connection with the IPO, the Company adopted the 2025 Equity Incentive Plan (the “2025 Plan”), which became effective on September 30, 2025. The 2025 Plan provides for the grant of equity-based awards, including stock options, restricted stock, restricted stock units, stock appreciation rights, and other share-based awards. The principal purpose of the 2025 Plan is to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, and to promote the success of the Company’s business. The maximum contractual term of the stock options issued under the 2025 Plan is 10 years. The maximum aggregate number of shares of common stock authorized for issuance under the 2025 Plan is 6,123,333 shares. In addition, the number of shares available for issuance under the 2025 Plan will automatically increase on the first day of each fiscal year beginning in fiscal year 2027 through fiscal year 2036 by an amount equal to the lesser of (i) 2% of the outstanding shares of the Company’s common stock (including both Class A and Class B common stock) on the last day of the immediately preceding fiscal year, calculated on a fully diluted and as-converted basis, (ii) 6,123,333 shares, or (iii) such smaller number of shares as determined by the Company’s board of directors. Shares subject to awards under the 2025 Plan that expire, terminate, are forfeited, or are settled without issuance of shares generally become available for future issuance under the 2025 Plan, subject to the terms of the plan.
Stock Options
Stock options issued under the Pre-IPO Plan in 2025 and 2024 consist of two tranches: Time-Based Options and Performance-Based Options. Time-Based Options contain only service conditions and cliff vest on the 5th 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 Option will immediately vest and become exercisable. All Time-Based Options have an exercise price of $5.50 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 (as defined in the Plan (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 $5.50 per share. If a liquidity event does not occur before the 5th 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.
Upon the completion of the IPO on October 2, 2025, the liquidity event performance condition was satisfied. As a result, the exercise price applicable to the vested Performance-Based Options was $5.50 per share.
A summary of stock option activity for the year ended December 31, 2025, is presented below:
| Time Based | Performance Based | ||||||||||||||||||||||||||||||||||
Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | ||||||||||||||||||||||||||||||
| Outstanding as of December 31, 2024 | 5,472,500 | $ | 5.50 | 8.9 | 5,472,500 | $ | 8.24 | 8.9 | |||||||||||||||||||||||||||
Granted | 462,000 | $ | 8.35 | 462,000 | $ | 8.35 | |||||||||||||||||||||||||||||
Exercised or converted | (1,528,570) | $ | 5.50 | (1,453,045) | $ | 5.50 | |||||||||||||||||||||||||||||
Forfeited | (54,500) | $ | 5.50 | (54,500) | $ | 5.50 | |||||||||||||||||||||||||||||
Expired | |||||||||||||||||||||||||||||||||||
| Outstanding as of December 31, 2025 | 4,351,430 | $ | 5.80 | 8.2 | 4,426,955 | $ | 5.79 | 8.3 | |||||||||||||||||||||||||||
| Exercisable as of December 31, 2025 | 4,351,430 | - | 4,426,955 | - | |||||||||||||||||||||||||||||||
The weighted average grant-date fair value of the Time-Based Options issued in 2025 and 2024 is $2.96 and $0.42, respectively. During the years ended December 31, 2025, and 2024, the Company recognized approximately $2,572 and $296, respectively, in compensation expense related to Time-Based Options which is included in employee compensation and benefits expenses in the consolidated statements of income. There was no unrecognized compensation expenses for Time-Based Options as of December 31, 2025.
The weighted average grant-date fair value of the Performance-Based Options issued in December 31, 2025 and 2024 is $1.70 and $0.17, respectively. During the year ended December 31, 2025, the Company recognized $1,866 of share-based compensation expense related to Performance-Based Options, representing the acceleration of previously unrecognized compensation cost as a result of the completion of the IPO. During the year ended December 31, 2024, No compensation expense was recognized for Performance-Based Options because the performance condition was not considered probable to be met. There was no unrecognized compensation expenses for Performance-Based Options as of December 31, 2025.
As of December 31, 2025, there were 1,945,845 shares of common stock available for future issuance under the 2025 Plan.
Prior to the IPO, there was no public market for the Company’s Common Stock. The estimated fair value of its Common Stock was determined by the Company’s board of directors as of the date of each equity award, with input from management, considering the Company’s most recently available third-party valuations of its Common Stock, and the board of director's assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. The fair value of the Company’s Common Stock in 2025 and 2024 was estimated using a combination of income and market approach based on the most recent transaction that provided an observable market value. A discount for lack of marketability of the Common Stock is then applied to arrive at an indication of value for the Common Stock.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted in the table below. Expected volatility for the Company’s Common Stock was determined based on an average of the historical volatility of a peer group of similar public companies. The expected term of options granted was calculated using the simplified method, which represents the average of the contractual term of the option and the weighted average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. The risk-free
rate is based upon the U.S. Treasury yield curve in effect at the time of grant for the period equivalent to the expected term of the option.
Below is a summary of the weighted average assumptions used for the Black-Scholes model valuation of stock options during the years ended December 31:
| Time-Based | ||||||||
| 2025 | 2024 | |||||||
| Expected term in years | 7.3 | 6.8 | ||||||
| Expected stock price volatility | 36.0% | 37.0% | ||||||
| Dividend yield | 0% | 0% | ||||||
| Risk-free interest rate | 4.2 | % | 4.6% | |||||
| Fair value of the underlying share | $ | 7.7 | $ | 2.0 | ||||
| Performance-Based | ||||||||
| 2025 | 2024 | |||||||
| Expected term in years | 5.5 | 5.9 | ||||||
| Expected stock price volatility | 35.1% | 37.0% | ||||||
| Dividend yield | 0% | 0% | ||||||
| Risk-free interest rate | 3.9 | % | 4.1 | % | ||||
| Fair value of the underlying share | $ | 7.7 | $ | 2.0 | ||||
Restricted Stock Units
Restricted stock units (“RSUs”) represent the right to receive shares of the Company’s Class A common stock upon vesting. Each RSU grant vests ratably in three equal installments on each of the first, second, and third anniversaries of the vesting commencement date, subject to the employee’s continued service. The grant date fair value of RSUs is based on the closing market price of the Company’s Class A common stock on the grant date. The aggregate grant date fair value of RSUs issued during the year ended December 31, 2025 was $83,728. No RSUs were issued or outstanding for the year ended December 31, 2024. During the year ended December 31, 2025, the Company recognized $6,982 of share-based compensation expense related to RSUs, which is included in employee compensation and benefits expense in the consolidated statements of income. As of December 31, 2025, unrecognized compensation cost related to unvested RSUs was $76,746, which is expected to be recognized over a weighted-average period of 2.8 years.
A summary of restricted stock unit activity for the year ended December 31, 2025, is presented below:
| Restricted Stock Units | |||||||||||||||||
Number of Units | Weighted Average Grant Date Fair Value | Weighted Average Remaining Service Period | |||||||||||||||
| Outstanding as of December 31, 2024 | — | $ | — | — | |||||||||||||
Granted | 4,177,488 | 20.0 | 2.8 | ||||||||||||||
Vested | — | — | — | ||||||||||||||
Forfeited | — | — | — | ||||||||||||||
| Outstanding as of December 31, 2025 | 4,177,488 | $ | 20.0 | 2.8 | |||||||||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.