Earnings call transcript Q1 2023

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Operator

Thank you for standing by, my name is Kayla Baker, and I will be your conference operator today. At this time, I would like to welcome everyone to Root Inc's First Quarter 2023 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Vice President and Corporate Secretary, Jodi Baker.

Jodi Baker

Good morning, and thank you for joining us today. call its this earnings quarter hosting results. is to first discuss XXXX Root call Co-Founder Alex Officer; on are Participating today's Timm, Binkley, Chief and Interim and Financial Officer. Megan Executive Chief

presenters portion the Bonakdarpour, question-and-answer Technology Frank Officer. and Chief Officer; joined the During Chief call, our by will of Matt Insurance Palmer, be

shareholder Last a its results. letter evening, Root financial announcing issued

read Form performance, While complete information more which this document, we encourage with and that also for the call XXXX will evening. Exchange within reflect our you filed was Commission to our XX-Q, items financial QX discussed Securities about last

our Before remind statements management's and of that on of that related undertake discussed no I which note goals, we forward-looking these as operating current of today's call, beliefs our information outlook, reflect this begin, new result on revise financial statements forward-looking performance, as and opinions want this you that based Please a developments obligation we to date the include and to call occur. assumptions. will business may to matters are

that subject and are factors and described other those results cause materially our risks, actual today. uncertainties, statements to to expected various differ Forward-looking could from

our number are addition, to In significantly financial risks and a subject may that impact we business results. of

under discussion replay results risk Relations factors detailed more Form actual ended a be description this these will statements the released you that conference please a materially company's year For from as website A shareholder section. Form could on the and to well of of our factors, Investor available XX-Q differ of our for where our letter last evening. see as QX will call the our cause XX-K review December XXXX, XX,

some call, that like to Root's non-GAAP also performance. will discuss would you during while talking about measures I the remind we

released on website SEC, those filed to at are measures posted our evening our measures GAAP in of nearest our shareholder which find XX-Q with can the the comparable last reconciliations letter and You historical Form ir.joinroot.com.

turn CEO. now Timm, to Co-Founder will call the over Alex Root's and I

Alex Timm

new Thank broad you, decisive ratio XX% Jodi. taken improving the foundation In of reducing while QX basis, to total the by accident and a adjusted in loss resulted XXXX EBITDA on of our we driven was This work which in XX%. actions to reset writings quarter-over-quarter grew by XX% year-over-year XXXX, business. period the

us We channel prove with a finalized on to third are path ratio now profitability. positioned new loss driving than to excited the in writings allowing industry, and better partnership. we differentiation announce the to scale we a embedded Furthermore, to are our continue our

adoption of get are we ever discuss to this take to over quote our to consumers. stack, relevant allowing drives in fully-embedded our launching technology like opportunity key an a create built product. customers our seamless, the experiences increase company in are touching most a This able I'd without as the by to a elements attach to our differentiation. on Xx Having shown flexible that real-time, moments quote-to-bind rates, since keyboard, rates

cost and that's market, to new our scale the increasing to the for differentiated Putting costs decreasing while our Second, time API continues these advance and three allowing value through provide speed our rapidly materially increasing to partners. and adoption things to developments, deployment we to those add partnerships together, us while reducing platform partners.

no Root. for has make meaningful and Third, Telematics differentiation mistake. a been always is

opportunities each are our new of see We partners. create embedded channel. to telematics approaches developing products with to through transformational embedded actively We the incorporate telematics

their for to telematics state-of-the-art customers. unique partners Our allows and platform our develop that solutions us work

decisions in customers better will term, business. making leading a this automation. experiences been advantage for while investment has All long a to better possible for science data our by of systems in allow us competitive this made and We These create our our continued technology. believe pricing and create

to the company the driving capital are have. and we company enduring profitability an with building are We

are customers, our employees, We our investors. and to trajectory continue to writings grateful new are and excited

our more to turn Megan over operating results to in I'll detail. call the now discuss

Megan Binkley

and Thanks, writings. new for underwriting Alex. Results the first expenses, performance, XXXX reflects of increased quarter strengthened reduced

financial full shareholder letter GAAP the evening. results disclosed yesterday are published in Our

for direct current decline was year return million, to an quarter within The based growth next $XXX was have Gross taken, decline. on our written contraction premium million, the year-over-year. opportunity premium in earned Gross and measures, XX% the rate expected our the given of the success our potential we measure embedded in strategy. a is our growth XX% a underwriting anticipate channel to and recent premium offerings. We $XXX stricter

loss first of quarter remain period recognized XX-point financial improve improvement the the We loss accident early. and committed to and trends we foundation the of versus gross loss the XX% ratio to quarter, to XXXX expenses our company. as first a ratio lowering for fiscal and performance was The the responded

consumption, at was million, of loss XXXX. of operating the cash our to a XX% Adjusted ended with million improved capital the million $XX We year. the over with first of end fourth QX, of XX% the approximation compared During prior operating improvement $XXX EBITDA, our quarter $XXX XXXX compared QX unencumbered quarter.

outlook. Turning contraction year-over-year see basis, a expect we in to top-line XXXX. counts and in-force continued On to through policy our

return profitable We prioritize ratio continue laying loss to growth. the improvements and to to foundation

rate and we we achieve improving profitability to and positioning needed. We operating will remain the are trends are on have. believe as company We the closely XXXX, results monitoring with throughout emergent focused take capital

that, With look questions. forward we your to

Operator

question with comes Our Cantor of line Fitzgerald. the first Josh from Siegler Instructions] [Operator

line open. Your is

Josh Siegler

taking Thanks good my Hi, question for today. morning.

the with to your do it targets? still deployment primarily if achieves marketing curious, up marketing you quarter, XQ targeting? in channels profitability expect And this strategic been ramp So, what I'm distribution you have

Alex Timm

XXs, to the that. lot loss you was QX, as us to -- In up tightened pulled When the of the opening we you, that continued new hear loss states lot we you and for states, saw returning really growth is our said returning high we coming ratio with we Good to close to we saw driving underwriting Alex. being really and Josh. what to just QX a a in in right? Thanks to direct and from really This began more was Yes. start open back spiked saw in down targets channel what states. up in ratio okay we really to the business, in really in of

And channels. dollars, allowed our channels us performance a marketing also, primarily so of deploy handful in our to that that and of to really marketing begin was our search states, and marketing small our just some and

positioned QX to We've a environment, into of driven and see market superior actually into this many loss we And our is others new also this writings Part a some by we of where drive QX as well. well some position the -- success we're to aren't. favorable those to in competitors, anticipate R&D that macro period time also see many that direct seeing with mail continue just ratios we our going success to there. done and in are really while of in currently

Josh Siegler

And from Understood. over That's a about channels new of helpful mix percentage color. we're embedded long-term then you. the expect of what the when very versus writings Thank company, term? the to generate direct long you thinking do

Alex Timm

are forward partners we're We're really that very think the and opportunity. looking actually bullish additional by to this those embedded the year excited launching two the we I long signed products. already on over term,

customer meeting We continue that see in to do in believe superior the that embedded believe creates business results channel. their better it We going a the need shift you're of better economics experiences moments that over to and long and into customers in that, term, and outcomes.

a lion's become over do in know to and direct away the long channel share of place. well. to big going see embedded overnight, expect term, Internet drive not our to as And But be to is we to we're also the excited It's we the able the business. so, go profit that

Josh Siegler

Thank it. you, very Got much.

Operator

the Your Tommy next McJoynt with from line KBW. question comes of

is line open. Your

Tommy McJoynt

Hi, for my question. good morning, guys. Thanks taking

bit flows Looking outflow that the the at looks should the throughout quarter, for? it flow cash capital XQ on there trend by it in year? Is driven And and ahead, a do anything cash mostly be working the looking statement, how seasonal like operating expect to we you was lookout first in the the then cash changes. jumped

Megan Binkley

Tommy. cash primarily to for an it's in Thanks, cash is you're reflected of seeing I'm because Megan. have important sheet. question the in our what to a statement opportunity glad change flows is This and you GAAP that asked burn, the describe really us balance

change liabilities and So our primarily of quarter-over-quarter, our significant the in in reserves. really been driven that's by loss really reflective that's a reduction

unencumbered And I to on which relevant $XXX would balance was say at that QX. in million a QX to our And metric burn, cash. we was cash more the $XXX of that our end is million, compared truly focus understand

the we true $XX quarter-over-quarter million and a reflective to it's of of consider burn. cash be So, change what really

in lower expect that consistent our we're to material is with expecting XXXX, cash XXXX that's to that burn significantly the really and the results. operating We compared be improvement going in do

I the yes, than about was can our feel in you In terms be expect the position. terms is for in and lower of trend, run mean we But very that to of confident quarterly today. QX. of we where it rest going XXXX feel again, capital burn And rate we're good at

Tommy McJoynt

the been a been over my in that approval guys geographies? taking then incorporating still Are have or year at increases guys rate for over And second year? actively here, those getting certain And lot Thanks. so. past past seeking you and the magnitude you've rate obviously question you the of are same

Alex Timm

same the magnitude. in not Yes,

do -- see still see we So, trends. single-digit high

seeking of So, target at consistently states even disclose, we premium. are throughout XX% year, are we're We our I where that increases did at think because are in we about about we rate target trend. this in expecting

we fewer more still are And trends, than think they last are were than so, states but do do single-digit that year. that there need some those

at the the year. but magnitude take So, we rate still last we did not that expect same

Operator

comes Evercore. the of Peter Your from next line Phipson with question

line Your open. is

Peter Phipson

frequency, you percentage it Good Hi, helping My XXs. mix benefit the a for seen guys in guys. high of from question. my like question renewal reduce of a now have new as sort your is Thanks morning. looks and first stabilized big has taking

continues updated can So, as you on expectation have see I stabilize? if you do still frequency negative guess, any this to

Alex Timm

Yes.

we I'd frequencies I report. tenure first, adjust we say that the think, do

So new the a to we're mix, is significant take and as year-over-year that renewal we due into improvements as believe that made that account does the both seeing well in of then we've improvement segmentation. and frequency versus underwriting that lot

rate models. XX base last months, to of were the deploying increase not our throughout new really rates. They our almost did also XX all filings So just segmentation

to from to material ability improvement led models, a preferred more we respect profile, has fairly in those with frequency. so, And our segment risk, particularly which saw a to

Peter Phipson

half first Okay. commentary the that within or maybe year you're an a earlier, I the 'XX? potentially sort and I might elaborate what And how the of on. Great. of to Could said within back misheard, something year. this turn that you're in you in magnitude opportunity just Is about the you growth anticipate quickly return on think have talk but to And expecting? maybe expecting of growth you

Alex Timm

Peter. Yes. Thanks,

we because see work last that's ratio [ph] such ratio material the just of continuing think those more these improved is in and of very marketing our and good given we your we really loss something a LAE actuals, to continue come excited we to dollars while states very And especially happy showing see I favorable we're quarter-over-quarter have are. the where has of and states, with, think to year through I dollars. actually profitability that XX% a many as continued question, to of lot a of writing Growing deploy we're environment. loss did reduction,

so, new the And excited trajectory. writings we're by

more We're embedded that provide new if also by will excited, the have new substantial that partners not think we writings. two equally, we

business. to launch are get coming in into that partners to excellent the significant all faith want take market, the have those those the time will for months. that scale the It those we in provide but Now products world we two will

expecting, In QX. we're we're what in said terms of our we guidance reiterating and what

Operator

[Operator Instructions] the from question Charlie Your with line Lederer next comes Citibank. of

open. line Your is

Charlie Lederer

get my different Thanks. around question. embedded some about telematics three how that channel. partners? Thanks it on Or the the guess add can you comments that? Great. Does by the do And for I differ in does the friction? made efforts taking you you expand

Alex Timm

Thanks by. It's Yes. Charlie. for really question, something that that we're excited

even allows whether the to whether before in it's think car do, opportunity insurance. really financial applications, closer to it incredibly being consumer interesting unique collect or embedded is because ways. in data to That vehicles different could it telematics purchasing I what being be through embedded it's us actually a well allows us considers

really many And really unique companies data process, ways. effortlessly us consumers seamlessly in more always and so, a sources. many in and to telematics experience get allows very this for in which us build allows product collection insights difficult It has to part been that and other also

provides versus data, using data there. So, but pulling smartphone We still like opportunities vehicle example, it smartphone data. for directly additional

And does so, reduce us because purchase use is And the think because we nature partner friction. is think different friction where has increases and it allows each partners' important actually We our customer And you've flexible and telematics and in the it custom tailored of embedded really it different embedding. differentiates it got of case what base. partner experiences don't experience a each the actually embedded these to to to we're we for of a control, which telematics different system have each there which that you a is telematics create platform us Root, thing that fully do, that allows customers. very to

Charlie Lederer

that the channel? Are reserve break the development down Great. able you That's by color on helpful. to in Any quarter?

Frank Palmer

Yes. This is Frank.

by breaking in are that down It's coverages. the We damage mostly channel. not

Operator

And will call. conclude time. at conference there today's are no That this further questions

disconnect. may now You

Root (ROOT) 4 May 232023 Q1 Earnings call transcript