ARX — Stock Analysis (March 2026)

The market is reading the wrong line. ARX's headline revenue decelerated from 74% to 30% YoY. Sounds terrible. But commission revenue — the core platform metric — grew 63% YoY. The "deceleration" is investment gains normalising ($15.8M → $2.2M unrealised gains). Strip that noise out and this is a business accelerating its platform transition at 3x run-rate P/S with 44% FCF margins. The governance overhang is real, but the valuation discount is excessive for a profitable, growing exchange platform at <5% TAM penetration.

Thesis: INITIATING — Small position (2-3%). Upgrading from Watchlist.

The Numbers

8 quarters available (IPO July 2025; first public data Q1 FY24).

Revenue & Growth

| | Q1 FY24 | Q2 FY24 | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | | | Mar-24 | Jun-24 | Sep-24 | Dec-24 | Mar-25 | Jun-25 | Sep-25 | Dec-25 | |---|---|---|---|---|---|---|---|---| | Revenue ($m) | 128.1 | 130.1 | 153.7 | 190.7 | 178.0 | 219.1 | 267.4 | 248.4 | | QoQ % | — | +1.6% | +18.1% | +24.1% | -6.7% | +23.1% | +22.0% | -7.1% | | YoY % | — | — | — | — | +38.9% | +68.4% | +74.0% | +30.3% | | Incr Rev ($m) | — | +2.0 | +23.6 | +37.0 | -12.7 | +41.1 | +48.3 | -19.0 |

Q4 QoQ pattern: -7.1% in Q4 FY25 mirrors the -6.7% in Q1 FY25 (same seasonal pattern — Q4 is structurally softer). Not anomalous.

The YoY deceleration is misleading. Revenue includes volatile investment gains. Decomposing Q4 FY25 vs Q4 FY24:

→ Commission revenue grew 63% YoY. This is the platform's core value creation — fees earned on exchange volume. The 30% headline is a mix effect from investment gains normalising. The business is not decelerating.

EBITDA & Profitability [Non-GAAP]

| | Q1 FY24 | Q2 FY24 | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | | | Mar-24 | Jun-24 | Sep-24 | Dec-24 | Mar-25 | Jun-25 | Sep-25 | Dec-25 | |---|---|---|---|---|---|---|---|---| | Adj EBITDA ($m) | 27.5 | 13.0 | 26.1 | 46.4 | 42.8 | 63.5 | 105.0* | 70.5 | | Margin % | 21.5% | 10.0% | 17.0% | 24.3% | 24.0% | 29.0% | 39.3%* | 28.0% | | **Ex-gains EBITDA** | — | — | — | ~$29M | — | — | 66.3M * *|**68.0M | | Ex-gains margin | — | — | — | ~15% | — | — | 24.7% | 27.4% |

*Q3 FY25 includes ~$39M non-recurring investment gains.

→ Underlying EBITDA trajectory is expanding: ex-gains EBITDA went from $66M (Q3) to $68M (Q4) — sequential expansion despite revenue declining $19M QoQ. Operating leverage is emerging.

→ Q4 FY25 ex-gains EBITDA of 68M = +13229M. This is the meaningful comparison.

→ FY2025 ex-gains EBITDA: $241M (+162% YoY). At 26.4% margin on $913M revenue. Real profitability improvement.

Exchange Written Premium (EWP) — The Leading Indicator

| | Q1 FY24 | Q2 FY24 | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | | | Mar-24 | Jun-24 | Sep-24 | Dec-24 | Mar-25 | Jun-25 | Sep-25 | Dec-25 | |---|---|---|---|---|---|---|---|---| | EWP ($m) | 583.8 | 756.8 | 888.4 | 879.4 | 985.2 | 1,072.3 | 1,042.9 | 1,090.4 | | QoQ % | — | +29.6% | +17.4% | -1.0% | +11.9% | +8.8% | -2.7% | +4.6% | | YoY % | — | — | — | — | +68.8% | +41.7% | +17.4% | +24.0% |

EWP = $1.09B — all-time record. Beat guidance midpoint. Grew 24% YoY (32% excluding terminated member).

EWP YoY is decelerating (69% → 42% → 17% → 24%). But:

• Q3 FY24 was a monster comp ($888M)
• The Q4 rebound to 24% from Q3's 17% suggests stabilisation, not continued deceleration
• FY2025 total: $4.19B (+35% YoY)

Members & Platform Scale

→ 280 members = all-time high. 63 added in FY2025 (record year). Consistent cadence of 15-18 per quarter. Independent MGAs — the growth engine — grew 39% YoY through Q3.

NRR — The Bear's Headline

Four consecutive quarters of decline. This looks bad on the surface. But decompose it:

1. Mix shift is the primary driver. As third-party DWP grows (21% → 40% of EWP), revenue per dollar of EWP mechanically declines. ARX earns a fee on third-party premium (~8%) vs revenue from owned underwriting (higher take rate). NRR denominator includes both — so as mix shifts, NRR compresses even though total revenue grows.

2. Terminated member impact. NRR was 131% excluding the terminated member — 5pp of the Q4 print was a single member exiting.

3. My red zone is 120%. At 126% (131% ex-member), we're above the threshold but approaching it. This is the #1 metric to watch in Q1 FY26.

→ NRR decline is structural, not churn-driven. The member base is expanding and EWP is at records. But if NRR drops below 120% next quarter without the terminated-member excuse, that's a thesis problem.

Third-Party Mix Shift — The Strategic Pivot

Third-party mix doubled in four quarters. This is the central strategic thesis playing out:

• More capital-light (less balance sheet required)
• More scalable (third-party insurers bring their own capital)
• Higher-quality revenue (recurring exchange fees vs volatile underwriting results)
• Hadron share declining: 67% → 47% of third-party DWP in FY25

FY26 guide: ≥$2.2B third-party DWP (≥75% growth) → if achieved, third-party could be 43-45% of EWP by year-end.

Gross Loss Ratio — Underwriting Quality

→ FY2025 full year: 51.3% vs FY2024: 54.3%. Improving 3pp YoY while growing premium 35%. This is the data moat at work — better risk scoring → better loss ratios → attracts more capital → more premium → more data. The flywheel.

Segment Analysis (Q4 FY25)

→ Exchange Services is the business. 67% EBITDA margin, +46% revenue growth. This is where the platform economics live. As third-party mix grows, this segment grows disproportionately.

→ Direct commission income +103% YoY ($27.8M → $56.3M). Third-party insurers paying ARX commissions for sourcing business. Fastest-growing revenue line and purest platform monetisation signal.

Management Assessment

Guidance Credibility — Q4 FY25 Scorecard

FY26 guidance raised on all three metrics from initial Q3 guidance:

• EWP: 5.0B → ≥5.1B (+$100M)
• Third-party DWP: 2.1B → ≥2.2B (+$100M)
• EBITDA: 269M → ≥275M (+$6M)

→ Pattern: underpromise, overdeliver, raise. Management beat every Q4 guide, raised FY26 across the board.

CFO Transition

Jay Green departed March 31 after completing IPO and filing inaugural 10-K. Pre-planned stock sale ($638K, retained $15M) = structured liquidity, not exit.

Linda Huber incoming. Former CFO at FactSet, MSCI, Moody's — all financial data/analytics companies. Deliberate upgrade for public company scale. Market validated with 20.9% one-day pop.

CEO Jeff Radke

Confident, AI-anchored tone on Q4 call. Volunteered specific technology metrics (134M data rows, 58K attributes, 1-minute portfolio analysis). Not defensive. PXRE failure (2005) is historical context — Accelerant deliberately avoids catastrophe concentration.

Governance — The Elephant

Altamont Capital holds 77% voting power on 41% economics. Dual-class super-voting. Hadron (Altamont co-founded) was 47% of third-party DWP at Q4 FY25 — declining from 67% in Q1.

→ #1 reason stock trades at 3x P/S instead of 5-7x. Legitimate institutional barrier. Main reason I'm sizing at 2-3% rather than 5-8%.

Leading Indicator Assessment

Bullish divergence emerging:

Bearish signals:

→ Net assessment: bullish. Commission revenue divergence (+63% vs +30% headline) is the alpha signal.

Pipeline — The Forward Indicator

Pipeline grew 33%+ QoQ. FY26 EWP of ≥$5.1B is achievable — pipeline coverage is strong.

Valuation

→ 3x run-rate P/S at 30%+ growth, 44% FCF margin, profitable. This is cheap.

→ 7.4x P/FCF is objectively cheap. A 30%-growing business with $404M FCF at 7.4x screams mispricing — or governance discount. Both are true.

→ Rule of 40: Revenue growth 30% + EBITDA margin 28% = 58%.

Prior Beliefs / Updated Beliefs

On the revenue condition: The 30.3% headline is misleading — driven by Q4 FY24 having $15.8M unrealised gains that didn't repeat. Commission revenue grew 63%. My condition was poorly calibrated for this revenue mix.

Framework adjustment: For ARX, commission revenue growth and EWP growth are the correct leading indicators, not total revenue.

What Atlas Got Right / Where I Differ

Atlas (Q3 FY25) scored 3.5/5 conviction. I agree on structure: broken IPO, functioning business, platform flywheel intact. Where I add:

1. Commission revenue decomposition — 63% growth resolves the apparent "deceleration"
2. EBITDA ex-gains normalisation — Q4 $68M vs Q3 $66M shows underlying sequential expansion
3. FCF quantification — 7.4x P/FCF is the most compelling valuation metric
4. Governance as sizing, not binary — 2-3% position vs staying on sidelines entirely

Key Risks (Ranked)

1. NRR below 120%. Hard sell trigger if 2 consecutive quarters.
2. Altamont governance. 77/41 voting/economic split — no public shareholder recourse.
3. Hadron concentration. Still 47% of third-party DWP.
4. CFO transition execution. Huber is strong but inherits complexity.
5. GAAP profitability. $0.9M net income on $248M revenue. SBC should normalise.

Key Catalysts

1. Q1 FY26 earnings (May 2026). NRR ≥125% → add to position.
2. Third-party DWP above run-rate. Q1 guide $450-470M.
3. Hadron below 40%. Target mid-2026.
4. Buyback execution. $200M at these prices = 6-7% of float.
5. FY26 EBITDA tracking above $275M guide. Kills the "EBITDA declining" narrative.

Action

INITIATING at 2-3% allocation. 63% commission revenue growth, 44% FCF margins, 7.4x P/FCF, record pipeline, improving underwriting quality, management beating every Q4 guide.

Sizing at 2-3% (not 5%+) because: Altamont governance, NRR approaching red zone, thin public history (8 quarters), CFO transition.

Add trigger: NRR ≥125% in Q1 FY26 + EBITDA above guide → add to 4-5%. Sell trigger: NRR <120% for 2Q, OR miss-and-lower, OR Hadron governance event.

FY26 Monitoring Framework

-wsm

(Initiating ARX, 2-3%)

Sources:

• Investing.com — Q4 2025 Earnings
• BMO Capital — PT Cut to $16.50
• In Practise — Accelerant MGA Platform
• Insurance Business Mag — Hadron Disclosure