ROOT - Earnings call transcript Q1 2024

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Operator

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Root, Inc.

First Quarter 2024 Earnings Conference Call. [Operator Instructions]

to Investor conference Relations. like LaMalva, to now of Head would turn over the Matt I Please ahead. go

Matthew LaMalva

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

financial recently a Root issued shareholder results. letter announcing its

you more to items complete will our this reflect discussed we within also document, performance, call XXXX encourage about information quarter for read our first Form financial While that XX-Q.

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

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

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

more most description please a and risk shareholder review our recent factors, For detailed of our letter. XX-Q XX-K,

this will replay website be section. call Investor conference Relations A under of available on the our

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

nearest GAAP disclosures, of on all You at our posted can those financial our find measures which in to of measures ir.joinroot.com. comparable reconciliations historical are the website

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

Alexander Timm

Matt. Thanks,

control minute about results. love you before I'd jump the to more drivers tell and more our little For those a understanding of new insurance. to welcome. believe have their into to I should company bit We take Root, a

they are understand, customers offers through driving, claim built seconds. a we've how car and policy, app can the We where Root to their great that easy this file transparent, prices. see insurance in and So is do manage

technology, where We we vehicle to to embedding product need. are at also sale. This of their in of our to channel moment example, flexible for be do they us science point seamless, create what and the This all where customers partnership at the experiences meet this allows through best customer of we our insurance which our data enabled believe is some prices. includes,

With that, to I'd a quarter. little like about bit talk the

an excellent The was quarter. first quarter of XXXX

and while company's power adjusted we the For written gross the premiums testament and force disciplined offering, first year-over-year. to These are income results doubling in operating time policies generated did We technology. and history, strong the execution in this positive EBITDA. our product our of a

achieving While this from pleased we company. believe performance, far with what a as we can we are

will priced. and data improve predictive the is insurance in Over technology fundamentally we way accuracy we the science pricing the our And term, underwriting believe models. to first the and of significantly quarter, long change continued

to and partnership grow differentiated to to Offering cycle. As grows, our is and partnerships grown core of foundational to our turn, a build access drive purchase to expansion our experience The strategy. long-term with this XX% able leading new pleased growth X-click platform partner customers. virtuous have we prices, better access channel. writings a channel is we which our to channel better us via In customers deliver continuing through to Also continues more our we're set allows retrain customers, models our prices were strategy data our efficiently, to year-over-year. to differentiated grow to to in

to advanced optimize in return learning-based quarter. algorithms the to machine leverage Our also targets. continued direct growth channel our have for impressive We

to is evolving. Our looking competitive the how data constantly see science machine environment is

competition saw and seasonality this anticipated, we such, direct this fluctuates channel due to the As channel dynamics. increase competitive in as quarter. And

to to to ever. profitability to responsive may business smart the path grow the continue looks to environment changing the In over target stronger this unit GAAP in quarter-over-quarter way optimize variabilities. quarter, a it being even We profitably lead though first believe and the economics for long term, than

continue We entire our success of am by in growth and quarter. and for the driving potential our dedication improve excited team be to continuing to additional business adding products. partners, the I by of prices expanding long-term to their proud footprint this our our

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

Megan Binkley

it Alex. further with improvements Overall, metrics. our across financial all excellent XXXX was to Thanks, key start nearly an of

$X an quarter, loss first the million, our year-over-year. XX% improvement For was net

deployment income to improved a $XX metrics $XX continued This investment. first report are positive million and respectively. of and million pleased year-over-year, for of time premium, base responsible by adjusted earned loss the driven million ratio progress $XX million. continues marketing and growth primarily be These operating expense We $X of positive fixed a in to quarterly sustained strong net EBITDA performance,

premiums. defer we of the over the leads acquisition customer, of recognition not expense consistently to we've do majority relative As noted, earned accelerated life customer which our costs to

power Note we year-over-year. higher a continued point ratio gross benefit ratio from seasonality first The tax miles We loss premium improvement favorable premium the data refunds. than and XXX% driven first in trend technology. resulting was to in QX and by earned a in We in are XX%, the than winter investment fourfold, while this from X-point compared growth of year-over-year, driven that there accident improvement fewer the period ratio we achieved science season quarter also and as purchasing policies our a gross gross months XX combined of gross a grew more doubled and company's less new writings XX.X%, delivering XXXX. combined and written force, marking gross

of to net and loss quarter, ceded XXXX, a points difference we reflecting of XX reduction our In and the quarter the between premium LAE earned points first the gross our for ratios X year-over-year. and of gross XX% reduced

to improvement the in results. operating reflect priority of sustained our top existing our reinsurance results profitability reaching the capital. management's for for momentum towards continue continued improvements quarter in costs possible with our Our XXXX were Overall, made first

flow. first improved even consecutive consistently the is and quarter the is The operating result high marked net though first performance, positive This growth a cash relative loss, of ratio loss a continued quarter. cash also of quarter third outflow quarter

it we a strategy in Alex to as disciplined to strong his start XXXX. build our in As we continue was remarks, of momentum and XXXX noted maintain upon the the execution achieved

incremental of related we As equity our vesting tax liabilities the value market from appreciates, incur expenses employee awards. will to

typically The the vesting largest equity of per year. proportion second awards quarter encompasses

the cash such, As we to in expenses second to satisfy this expect $XX.X million liability. in quarter approximately incur tax

thoughtful to continue to disciplined customer investing targeted achieved. growth and long on unit as and are acquisition intend Moving forward, we expect in remain as focused economics

first We written to existing capital continues quarter objective. to expect in decrease primary to in Achieving due relative quarter to changes competitive second and seasonality our GAAP net with landscape. levels be premium the the gross income our the profitability

we that well show way. results quarter's This are our on

are our time We and your your for future. excited to Appreciate look forward questions.

Operator

first Our of will KBW. Instructions] with the from McJoynt question Tommy line come [Operator

Thomas Mcjoynt-Griffith

quarter So growth growth here the some policy you've really third having that few in demonstrated count in the robust last really XXXX. over quarters started of the with

past months? retention were policies, most assuming that were of the policies X X-month kind can acquired So that over seeing you're about those the talk you recently on of those

Alexander Timm

early continuing our a we of to were our a cost Big identifying very a us see is early. increases very retention allowed continued, environment, We're Thanks, lot Tommy. we've improve. lot retention early, We're technology. in price. which to driver as of thanks of take changing to And rate

year price last really or so, So as to is stabilized over continuing been seeing the in our we've what has because see improvements of year-over-year. that we're retention

Thomas Mcjoynt-Griffith

really the into that will you as improving some and And that broadly across noted. intensifying you've both competitive landscape visibility given certainly your suggests good competitors, outlook the be

spend over an your absolute the coming do and would sales you So basis most on quarters, helpful. trending marketing how envision be perhaps

Alexander Timm

we've quarter, where the environment year-over-year well first we're with the First, our always our monitoring count customers PIF I'd competitive see more and competitive looking and as we well been And that doubling doubling do revenue. growth environment know the I'd seasonality. say, that we of you auto happy the insurance as are as we've very at shopping. say gotten as with

sales And things to quarter profitability And you saw always one we sort said, looking we And also and expect sure spend to the we so at do at quarters. we profitability. back. and that of relative we of the for that accelerate like first come marketing should then are other competition making that optimizing in Root, are

you diligently driving as see we're us towards return so profitability. company will the And enter pull and you so increase, back see constantly competition that or

think I trends as income evidenced as this and quarter by our that well. operating you saw

Megan Binkley

results in our we've our And I and right? Tommy, PIF doubled model Alex in mean, mean I history, to more working, company just And could, than on GWP, is look point strong the year-over-year, QX year-over-year if what when delivered GEP best We've our proof our you count reiterate that stated. basis. is a just another right? QX I

are if profitability moderate continue prudent reaching right? sure for sacrificing we will But we're we very unit can not growth. disciplined. that forward to and will not it's continue that our capital growth returns, We're So make I that grow. position want growth to the confident to going our economic clear Our unprofitable be

and and our be our So we'll bidding less based we're respect optimizing channels existing to and will opportunistic quarters while both to marketing be within on marketing focused expect new with we subsequent testing that spend, continue marketing seasonality, on sales channels. strategy, do in actively also direct

and we our we're would some be we point, XX distribution. And ample growth believe to levers differentiated invest we're national states. pull. in we've only Currently, like can continuing to in that got We at that

partnership onboard It's grow. So new and does our growing. partners. channel continuing launch We're continue to to been

profitable So market we're consistently focused gaining share. on

Operator

Our line TD come Andrew next Kligerman with the of will Securities. from question

Andrew Kligerman

I to quarter. as percent is Congrats on premium of another XX%. renewal first premium a gross declining great my question guess around

about be new happens writing cover, new we the most and for thinking that companies more lot penalty. should we -- think we As you're business a business, of a

gross so, percentage could. So accident maybe a could we terrific rise thinking XX%, points? few you if little period a And bit, should that a guidance, that loss ratio up be of if

Alexander Timm

in and see very very pricing have penalty things, loss Yes. I'd new loss first with in diligent where -- pleased say months similar is. been business. X is that ratio think the our on than where business. we a we ratio absolutely business renewal it business is and We're And higher there we've new term we

about been And so that pretty again, ratio we've is. quarters. growing loss where significantly for now many good feel And we

really new lot that of that results. business loss quarterly that you're already penalty So ratio seeing in our current a

Andrew Kligerman

the expect in And the then probably later sense give premium second gross us quarter, little with the the dip it you decrease sequentially so sense and written would and a as up quarter? cited first month of what regard quarter? added saw quarter. growth to that might Any the shaped second the that you it's in far on earlier call Could last you in then with in the competitive premium we the environment, first how a compare of of how might Megan the

Alexander Timm

quarter from new writings dynamics premium more Yes, still channels, to first year-over-year then seasonality in seasonality with growth the going both material very lead our see and I higher in generally you in amount PIF, in -- said, quarter. a the strong quarter obviously, That think second -- will growth. written earned definitely from in you're growth than you And our will from these of quarter. a first second see premium that in and written competitive than to will both the

is Retention good. strong as feel we well. so And

that with good to quarter, cause will should seasonality first be are, sort competitive returns, where which where some was particularly some it so now, than of So in we feel but I with we written always the second think, in be impacts, there are we quarter quarter. premium expect second lower you the

Andrew Kligerman

dramatic sound though, it? should doesn't into Is Alex. what that it But read I right,

Megan Binkley

this and -- term. at spend. we're long not opportunistic I to protecting continuing we're And be mean, point. business look, at we direct in laser-focused a terms this deploy on the putting Andrew, quantification how on profitability marketing of we're it

a And we to So position where we're for the sake and this policies is of really the lose smart business long to the think over a drive way growth. going fluctuations. to grow quarter-over-quarter not not we're write term in focus

Operator

Kinar Your with line next question of Yaron comes from Jefferies. the

Charlie Rodgers

step $XX on to were change. quarter, is on thinking Yaron. conceptually quarter. should there This adjusted a guys we for achieve for this expect I positive potential which and for this to going in curious anticipate you EBITDA we just the Congrats the forward? quarter-over-quarter Charlie be negative should able EBITDA or if here million to was Or be

Megan Binkley

That's a question. Thanks, Charlie. good

business the mean, I QX sit milestone us making, positive for operating adjusted relentless material on today, really loss EBITDA a $XX We've and pricing So in look, in the improvements was of here years and been as and a really million ratio. income to we for both to several that's print this our had has right? material underwriting, quarter. in led And the positive focus

to prudent loss we as ratio to forward. a disciplined manner. and how will spot, opportunities continue to been we driving that I we profitably, share grow mentioned terms in focus has to earlier, And see And Our investment continue marketing opportunistic on continue very going we're to going profitable healthy growth. do deploy in a of as mean, we and we'll remain

we've XXXX, continue modest driving that on advancing to expense. and On to spend. the investments over unit that economics. expense been we the last and and months the certain very of in side, support to scale We'll in areas seen growth profitable diligent XX we've in making are product continue the our rightsizing both fixed And business

So I opening path we answer already near that make changes. in due question, guess One we keep due to there mind QX. confident are that your be to term. remarks, softer things noted in we we've more expect sure in remain the GAAP QX landscape X we towards to growth competitive directly profitability in mean in But right, you QX and our covered, really I as want versus to seasonality our to for

we So in the quarter. to and are be that sales means second lower expense marketing expecting

do QX. ratio, more driving mean, be ratio up I the that's months. QX's the really as a that's see expect mean get every driven as on I summer loss spring will really to Secondly, are QX, the loss rate compared seasonality. we elevated we year, in we and by ratio loss expected, into tick that because and people bit

that the tax liability of then you high-quality price expense because related of cash we to April, we vesting of the $XX.X our of beginning RSUs lastly, stock incurred incurred around informed appreciation, at and PSUs. a And of whereby we million

of the So month the P&L besting annual through April remaining or of basis. highest tax around line that we the an going to liability and that on your T&D. bulk will is item run the is G&A on have that XX% -- XX% And hit

be some remain GAAP the included of our of information XX-Q to the users really our we've the magnitude financial of in year, income the but what So in remainder the profitability what that help in disclosures net statements really could more towards understand do near confident for the term. trajectory we

Charlie Rodgers

line And the Great. thanks on vesting item for breaking there. that out by expense

another So question.

X that had How have think, XX% You XX%. and have guys about we kind below that now forward? quarters where think of been I should going watermark, discussions consecutive XX%

Megan Binkley

excellent Thanks, question. Charlie. -- Good

long focus the We on strategy continue term. to over our reinsurance

we see protect per-risk to opportunistic reinsurance I something right? markets, mind will think we giving today, want advantage but XX% that to continued than optionality, improve. sit our structure to of constantly looking right? we're we intend see GDP, really the business we I important we we as continuing talk we to we to volatility. in have are that the if look results any here of reinsurance, time that, don't do We think about from it's ourselves anticipate purchase more to our optimize our forward, make as want to and the cat-reinsurance keep But covers As and in -- to capital take sure

either multiple depending increase our on So or the for decrease reinsurance and points we've environment. got external appetite year both sessions, decision throughout the to our

options. our our really maintain all is capital goal of across to structure So flexibility

Charlie Rodgers

could just I in. sneak last one, And it one if

like think It that but about seeing how you of levels. So this pre-IPO relative question improvement are guys we off Tommy's is on should kind to looks year-over-year, of retention. building

Alexander Timm

improve, it's say I would continued that to actually.

time think as are up. of right, obviously, history come That's significant had about saw when improved channel. that customer it's sort and down come rate errors if about seen to we of reason back So say our significantly. by normalized period. going retaining term, towards you partnership the We're we then seeing occur, the a driven And we you models pricing that is And lot that went segment. through, since for we take company longer when more the that mix the modestly a would think that inflation I levels. caused improved again, And also higher to shifting retention then actually our we've both of then

And so you actually retention pre-IPO. expect modestly should than even better

Operator

Wells Your Fargo. next question ] line will with Gonzalez the come of [ Christian from

Unknown Analyst

the kind side, is be -- I there a a bit directly some more waiting competition maybe more incentivize kind Does to kind of like little channel, there's the extra through it, potentially but like direct had in of sort to just -- the guessing kind build on channel I the does quicker the it's on of partnership that so mean, for guess kind kind like And partners? that clear economics I'm a for versus guess, I little up like of I of of marketing really that question not the just that on given part, from of the you most you the to a few of channel their aggressive competition? for all unit channel. just kind of kind incentivize direct looking guys

Alexander Timm

is have I'd quote that to ability technology that partnerships base We say really channel we're that's adding you're differentiated. channel. know we from and And continue to embedded seen XX% the that believe very our like we we way than smaller That's a and a about our we going And think offer it through grow year-over-year. channel. that build seamless direct. to

been of consistency. We we really channel very that's harder continue into consistent a that sort it's of to like that to sometimes future. but because that anticipate growth, see, the So little and

business have always to that the and any price constantly competitive sure making a sure hitting intelligent never On models science seasonality, right we're are and to paying way is targets. but and we're most sort our customer in that always data changes our think you constantly that direct, that that's making whether look of the manage at dynamics, for overpaying return we

And But term, fluctuations think I be to we term. quarterly more to growing little thing right long the we so no very long these bit about the may of think are mistake, the continue term a and accept business. passionate exposed just of those that's both will channels to because but long it make fluctuations, grow for do direct we

Unknown Analyst

And within then build the my PIF of question, kind know X, certain couple have Has has more the like X the age quarters, certain shifted there over I portfolio second if anything with or for in states to I demographic quarters, last growth terms guess, your the last of huge of little in the you given significant dramatic exposure over just bit been shift as, any count don't a outsized group. growth? the

Alexander Timm

I'd pricing. on say iterate and underwriting we've continued to

when And be more higher credit. what so look retaining, but it's slightly towards the subtle, higher it's classically a at you defined would slightly probably customer segment, I preferred mix would as shift, say

would demographic as we But to of iterate segment. I continue starting that the models, up and are to big of changes, more Sort that's say, on in pricing really the more mix. we our pick customer

Unknown Analyst

quick And clarification one. one just more

saw growth, looking you still some the growth QX to you of in like maybe there, guys XX% some understand see last half QX. not year, discount, I in the growth in back terms the I'm versus are guessing expecting slow for still of the right? will So to are guys we but the But XX%

Alexander Timm

long and believe we can continue business guidance. are to doing. that going the term And year-to-date. that's to with keep will flat, be evolves. to And thing environment But quarterly the of happy we monitor We PIF to it grow again, be at really what growth We're the going we're to we're that. constantly is business not sort PIF our if right to to providing look for look that certainly the do how going

Unknown Analyst

the on Congrats quarter.

Alexander Timm

Thanks.

Operator

of Instructions] [Operator Carletti Matt the line next comes with JMP. And question from your Citizens

Matthew Carletti

and the look a line. on X, premium, it's at grown done the X on quarters, our nicely And same, past of to becoming bit really fee percentage multiples. going bigger over right, I of if [indiscernible] kind percentage kind bigger you just had the question It's a just happening income and us and forward? of premiums. go a of you there what's kind expect what we tell little of the might back Can

Alexander Timm

really you weren't of sure. year fees. started had that a we was. market when go were we we ago, really lots of or the in terms There's and charging market say our fees that I'd -- at back our the to look we forms so when relook Yes, off at just -- filings,

we And that. so a premium beneficial introduce we that, really that. towards revenue revenue fee And out benefits we and on lot we premium more began to those. that's There's move cetera, there's et that, of as lower tax, because as think of do to

we've So largely I done of all think filings. those

we're at to you're up movements new premium think at think as going So where But I this a think don't do largely item. I roughly that see a big I other line any is in there's stay. percentage normal. us of

Operator

I'll to remarks. back that, call closing hand With any for Alex the

Alexander Timm

joining company. Thank talk of you, to look continue to future to it. everybody, execute today. appreciate about to I forward continue the guys and our to you We for

Operator

all joining. for conclude Thank you will meeting. That today's

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Root (ROOT) 30 Apr 242024 Q1 Earnings call transcript