ROOT - Earnings call transcript Q2 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to Root, Inc.

Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Matt LaMalva, Head of Investor Relations. Mr. you, Thank begin may LaMalva, now. you

Matthew LaMalva

Alex Thank you a Binkley, this Participating Chief Root Chief shareholder are hosting Financial Officer. Root announcing us to joining on Officer; discuss issued Megan call results. letter today. call earnings its is XXXX its and results. today, for second and Co-Founder Timm, Earlier today's Executive quarter financial

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

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

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

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

about risk we the talking measures under also during the more this website that conference of section. some replay please will Root's For be XX-K, description review performance. on to discuss non-GAAP shareholder Relations our our like a A letter. XX-Q you I factors, call of detailed our call, and while remind most recent Investor available would will

call posted the which to of GAAP Alex Root's those comparable financial in and our turn I at Co-Founder Timm, You can ir.joinroot.com. are website disclosures, the measures now nearest will all reconciliations CEO. measures over our historical to of on find

Alexander Timm

Thanks, Matt.

in make to strong progress the continue quarter. We

science powerful testament culture and talent EBITDA. dedication For team. consecutive income and adjusted and positive the our operating second to of the discipline generated data A and technology, our quarter, we of our

of we've our From easy advance price. that providing to at X, is profitability. achieving drivers near-term day and continue understand to great We a to target with car transparent, insurance committed

while lower Our to allows technology algorithm the experience, best customer prices a to offer proprietary drivers. us our delightful empowers

Our stringent allowed laser-focused underwriting mindset to disciplined grow business. foundation management a and has to on strong us expense our build significantly

are smartly growing Importantly, profitably. we and

We the the for are of in the We're of it ratios best growth chasing sake growth. industry. doing while achieving loss not some

product consumers price. quarter came our great a the insurance a during with we writings primarily at through great target New channel, direct where

the the Our machine as data monitors elevated science constantly we've noted competitive competition. saw we during environment. And quarter, before,

we our at science adapt Leveraging our estimated and were data proprietary deliver to return machine, quickly new targets. able business

channel. growing additional direct We invest Should in remain our XXXX back see the grow opportunistic opportunity unit material expect marketing to while and profitable faster competitive half data-rich drive the to to expand We are of opportunities believe we maintaining more will growth. channels. there to our advantage we to an through economics,

disciplined, rigorous a and [indiscernible] results. with on experiments will manner these in based explore do these grow we As quickly we channels everything, or

Additionally, at a relevant contextually we progress within continue to our such as where the partnership purchasing make we meet times, car. channel excellent consumers of

Compared are we a believe channel partners we of more partnership channel well additional opportunities, in grew writings a continue integration a the seamless experience provides by our and into we as new year, QX Our channel. purchasing XXX%. to drive robust insurance little in platforms as technology to partners a creates in clicks. existing to poised With pipeline growth dozen and simple last this their than X in

and best lower right our advantages, machine automation. of can through learning and become We to working the pricing for customers. we always engineering the that the are We prices believe world in

approach be flexible, gross another ratio us quarter, Our successful We fast to of delivered XX.X%. a and loss sophisticated. achieving allows

models, sustainable will retrain our we to continue advantage. believe we growth, and we a competitive [indiscernible] grow continue data and to sets As our fuel improve additional prices

As to at footprint expand we customers. are excited more and better deliver to continue add prices to our forward, better partners, we look products our nationally

work Our results discuss and the to United squarely more the turn believe over most detail. become in team's to and is in States profitable carrier their on the stronger I'll personal determination now profitability. to path Megan our to largest lines operating the we ever, than us call hard keeps

Megan Binkley

quarter Thanks, Alex. part large strong advantages underwriting. to We delivered data in another disciplined our and

in industry. ratios are the that We among the loss continue to best drive

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

For positive million, of improvements the million, basis $XX adjusted and income on second and was Operating EBITDA. $X $XX consecutive quarter, income year-over-year $XX adjusted respectively. and EBITDA million we was a generated million operating

continues our ratio performance, of to managed growth progress by primarily premium, driven loss Our closely net expense our earned investments. consistently be in base and deployment strong responsible marketing fixed

defer reduced not net technology. X and XXXX, compared difference was gross growth The continued life XX%, of to We in year-over-year, driven our approximately customer by a loss year-over-year. the XX% leads to earned investment quarter, force, to LAE and delivering new gross second the do we acquisition gross period ceded the our our we growth accident a premiums which reflecting and costs ratios less a science while data written second ratio quarter than improvement over noted, X-point In XX gross between of quarter reduction premiums for XX-point loss recognition customers, accelerated this improvement of in of premium expense premium. to and consistently majority the doubled we've year-over-year. gross and points of our achieved ratio combined XXX%, We the policies points earned XXXX. relative As the an earned writing, of of

were stood million as reinsurance in improvement compared $XXX XX XX. in improvements June March results. Unencumbered underwriting as Our million capital possible to continued costs our of through at made $XXX of

of and book written in value contributions, million included insurance the domestic unencumbered our which $XX were subsidiaries. growth net fund quarter to capital Our increased capital premiums used during in consumption

Additionally, equity high-quality April. of awards to as our recoding approximately cost on appreciated. is early that as we a in we paid obligations tax our means it the $XX in prior has vesting call, noted million value market related This

to improvements once over pleased driven cash operating positive loss the ratio and quarter, time. in loss our flow by was reducing again net consecutive for report fourth I'm significantly our

We to the through future. time our targeted we our towards proceed on and deploy economics forward and as We disciplined focused manner are to unit achieved. expense the to Appreciate marketing excited investments XXXX, progress in continue Overall, rigor. underwriting long As our your priority GAAP existing of remain strong and back we look for your capital. a continue make remain of steady as half plan reaching direct to maintaining top profitability growing we questions. with and

Operator

you. Thank

We question-and-answer a be Instructions] KBW. McJoynt of will with session. Tommy [Operator line The now comes the first conducting question from

Thomas Mcjoynt-Griffith

channels. over market-by-market like seeing your various marketing the competitive to carriers you It basis. is only any coming adequacy rate increase on competition years? get reach called the You competition more intensify in is landscape perhaps a seems out to going Do going of think easier sort as

you strategy for an time acquisition your do competitive remain think period here? go-to-market customer how extended of given pretty that So about could

Alexander Timm

Alex. is This Tommy. Thanks,

continue if And reacted going As as see we've our continue in And we'll to we we increase see of quarter. increase, of holding see are we roughly we're we exactly to we're to that. chasing growth competition for the going quarter, we growth's the growth we actually continue and competition drive economics will sort target we continue deploy deploying not environment. in guided be really and profitability. and this rational marketing sake, again, did or competitive And more as result been back -- steady, capital. monitoring that, said do unit of towards design. quarter. to to the as disciplined machine hit to pull a last we And our opportunity and We Quarter-to-date, approach if to and our a marketers, constantly pockets

access opportunities term, the we year-over-year. grow to actually very has believe differentiated material and and and partners we partnerships to growth XXX% grew build onboarding well scaling foremost customers, as new new we're Over pipeline writings First new channel a that where and have we continued robust as so for rides partners, continuing existing long have that to

further to national And scale. a invest growth. XX state There's states, in we Right states national. expansion. work we're XX to to as shouldn't we're continuing in plan now, naturally about are those on be addressable model Those add but XX% population. we no drive the Second, states, represent going reason our of we

built you we're technology the data-driven And to channels the very virtually a in corner no actually to channels. have today then those performance opportunities in our we're that out of into of marketing marketing universe current different all And all into we're to approach you look marketing the channels the new bring in. channels, will And there. machine we've at continue rich investing leverage in our see going channels. many we third, these learning new presence still that And small of that and really and when R&D

that for and But I term. competitive that's certainly, we towards profitability And appropriately. saw the there's in the us us exactly ample what's near to we're this And growth. react from exactly term, in and discipline quarter, so think environment term, think long opportunity the you pushing what it's is going monitor near

Thomas Mcjoynt-Griffith

you correctly. sure that. appreciate I make it. Got And heard just to I

quarter in PIF could over that you've date I steady said in too. the, would or turnover You the guess, of of remained the terms guess, perhaps comments even second and business, be the like share third seen then then anything of it'd sort and of rates some quarter you be retention maybe helpful, quarter-to-date on quarter your inverse, what if book I in

Alexander Timm

the underwriting returns And in We've a partnerships our to it writings of profiles. base. again, competitive as favorable despite retention continue more model hit business a moderating continued -- our we higher different an profitably channel. across retention that's model sorts we can a that we've And quarter, all grow grow profile is building from that and built grows, the continue and environment. PIF and retaining price target in customer And new the really that to to Yes. see

And so feel about We we we good. very are. where good feel

Operator

from with question line the Kinar comes Next of Jefferies. Yaron

Yaron Kinar

I I guess I a thought guess the spend, at the tech question, there. my leverage may it and little operating more development looking first G&A see just

premiums would that have a direct better. more those bit additional seeing right products, some earned now versus mentioned bit love Can developing about that? items maybe the think understand that you line of something tech you're to a but talk spend Alex, I significantly. new undergoing ratio down you And little you're coming maybe about So may as

Megan Binkley

it's Yaron, question. Excellent Megan.

over make I results. another quarter in the as expense past pleased been years also it strategically has rightsize into base. that mean, call, our pivotal areas. entered we've continued strong we second As to we've with we of really we're And on headcount fixed the the expanding quarter, quarter, our prior second finished And few really mentioned we're as to progress

terms tech increased G&A our So we've the and product what and of made due investment you're our dev in primarily seeing modest to in in the that's increases quarter, that and in people.

That particularly the amortization in growth line also recognized the of cost item, that we've in $X.X make And headcount includes assets. developed teams accelerated product this quarter. advance to that on support continuing second our really seen certain and was our tech the sure in internally to product million tremendous about and we're dev business, saw we to delivery investment the software of all

These to going core were believe We said, to don't is and expect there. acceleration continue assets our That future. technology expect that product and unrelated into forward. that see improvement the tech were do I that, in our people auto the really our invest our to scalable we and expense to ratios operating continued as expense should going base our you stack, even continue in is that

Yaron Kinar

the quarter as Tommy's line? maybe seeing helpful. can as the start are into meaningfully the more PIF the second develop quarter, you the question, of course PIF And of following talk the then maybe you That's up about namely, kind of And did well? straight on growth my the a Or quarter over more that slowing Okay. how of kind see question, you developed? was third cadence it

Alexander Timm

again, seasonality, the obviously, like QX, And Yes. and we any that. happy company been with that the near-term we're And in see growth every We towards been still year-to-date. versus we're know seasonality, there's that our QX. PIF PIF strong that changes very had We've driving means so our study. the we're and right But for saw steady, year, you been part the holding usually and making sure quarter-to-date, profit. really of really which competitive monitoring really, typical the the We writings making was new towards the and get holding new writings making we're decisions say environment, company anticipated. have particularly QX front I we that QX sure wouldn't more to material lower

Yaron Kinar

Got one in one it. sneak I marketing could costs. on last If the

that can So one about the you your guys see. their yesterday, expectation it indeed. attractive talked would like far it hosted marketing being progresses said, still cost That of they year call I was your know very and as or this costs repeatedly go did competitors talking have as up as they large sounds unit very, marketing cost about

maybe even back So becomes competitive? cycle relatively your the here cost? it pull Or marketing of you for where more hear as to thoughts we still attractive? be to in yourself overall I curious it is kind more would do on needing unit see And are

Alexander Timm

seen as environment has customer the increase, of more everybody increase a I'd year the say, get we've environment spend, a certainly certainly, competitive made lot was it which expensive a ago market. out of in today seen, marketing than seen when was you've today to the you've

we return and profitably our continue customers we That hit have targets. expected continue seen so said, And to acquire we that. to

we opportunity other we ample even the many again grow there do and continue there's to in. so there's aren't out channels believe we that to think that business marketing And also

in minority channels are marketing We a of the today. vast

we continue our you see If those built does us not to there's to expand competitive as our channels additional and that. channels advantage And no so through now to believe of see we apply you much reason you've we've technology will it. or should that in sort put back. aggressive get here too industry us and the of of start generating some too see mentioned If sort these channels see into to they competitors pull money returns, aren't where

actually to actually drive of in will that. to be key that and longer-term our real we superior one advantages value. to enterprise to a and measure the you're that's be is us and that is true see ability competitive disciplined, why and -- We believe And nimble time way going stay

Operator

Thank Greenspan comes you Wells from -- question line next Elyse Fargo. of with the

Elyse Greenspan

at -- the trending XXs period in ratio, that do here? My in first loss guys How the the on question low from quarter. the right, accident you looking see

Alexander Timm

the say second I'd weather in think is in did most particularly, Colorado the see probably some I we storms, quarter, we there. had where

in typically had some weather or Texas. loss you the think in couple also events that's I typical a some of we where hurricane period exposure. There's and you so And for points pretty of And storms of probably ratio. would that's so QX, that see more accident QX watching are weather

And so loss But with comfortable seasonality where quarter-over-quarter general, and we're with some is. happy there. typical that ratio our rate be there we're very very We're our might adequacy. watching in

rate we're point. changes so major anticipating And not at any this

Elyse Greenspan

Or rate I from expecting, second, rate what declines? you a guess, not changes? expecting there do you perspective foresee Are here? expecting the guys from staying for any you're you Are

Alexander Timm

Yes.

or states, some handful a in see moderate may some of declines changes. you think small I and decreases

market-by-market so that to look a going continue on level. we're And at to

rates very our are some states. declines are see you with happy may We some and in where

Elyse Greenspan

And you then you talk maintaining evaluate capital can that our our right, now cost about as a levels. There's of in capital capital how improve, results Q, or and guys. the to sentence regulatory appropriate structure our optimize we

you're that optimize a you I you, from what guys you are say continuing perspective when capital structure. the to look considering So guess, to

Megan Binkley

our asked mean, aspect glad will be and strategy capital really it's moving critical has of looking at forward. Elyse, just our I a just Megan. efficiency been and overall you capital I'm that cost question. of

material posted at second our past our improvement second our are results. that we seen look operating underlying business consecutive financing believe of few ultimately, the over And income. you've of we underlying In just So business quarter, quarter we years. costs a as our results, derivative

in our in improvement and debt expect translate on So of we do terms future. capital capital near the to a results expect specifically, lower the will to business better cost that get more our we

actively penalty materially costs, options to at as our July. looking our here we financing on expense. in goal And prepayment reduce to expired interest we debt today, sit current our facility and are reduce The is our

means will We the market appropriate. on that details business the what for with additional as provide

Operator

with Instructions] line Ward of next Michael [Operator question the Citi. from comes

Michael Ward

I coverage terms to give was of providing a you comprehensive coverage. how mix industry maybe wondering if could of gaps especially your sense of have us where the saw some quarter, in compares the We concentration. in Colorado, in some you

customers or wondering losses are your buying trying you we're if see to you're not comprehensive? if hail if So saw

Alexander Timm

Colorado we The We saw losses I of biggest of Colorado us. were couple event certainly points get weather actually, so hail a quarter in weather. for think, hailstorms the in the and and probably did

certainly we that. so saw And

think would customer say, got industry, to in our to you've base other terms I basically of the compare, carriers. direct I

So auto. we are we online, online an are

They really a that so XX look more the between customer. of that's grow savvy, to the so they're we And with we be tend customer target. tech bit that age to and and younger, XX,

we we customer and but appropriate So think we good mix it's some same coverages, that a for at see we base. did weather saw of exposure, think time, our the

Michael Ward

And if of the had you all. data talking root customers. using wondering some all the some industry, sense app customers card. it's in many have But the guess, it's percentage if just of the then at and about you the a and download for telematics, guess, I I that right, younger How your of, ID others, curious

Alexander Timm

or of of our customers and our have download direct On some data. majority app receive business, root we share form form telematics Yes. do vast the the some

data. a weeks of share of customers couple Some

and high whether very is platform Some ingest And for a data, customers the use loss future we technology then the that to it and create of week be X of what special months data, one that's to leverage, fidelity of data. and are X X believe weeks things data, ability the our might ability to predict of technology months of prediction of that it's X share to our going about costs actually customer.

And highest one telematics if adoption so high, maybe we a highest, rate, in we of in believe the our particularly industry, the have the not maybe channel. particularly very direct

vast would I say it's so And the majority.

Operator

at There teleconference. today's time. This further concludes you. questions no are Thank this

lines You at you for Thank may your your disconnect time. participation. this

Root (ROOT) 7 Aug 242024 Q2 Earnings call transcript