ROOT - Earnings call transcript Q3 2024

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Operator

Ladies and gentlemen, greetings, and welcome to the Root Inc. 3Q '24 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt LaMalva. Please go ahead.

Matthew LaMalva

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

announcing Earlier issued today, results. a letter Root its shareholder financial

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

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

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

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

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

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

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

Alexander Timm

Matt. Thanks,

quarter performance was quarter third landmark for Our Root. a

validation that customer delivered technology This firm been said top Root consistently our we a in And reach to business the experience. have and and is pivotal a it. delightful third of for model, quarter, has moment profitability. priority We our

hard steadfast team, of not a success I could is prouder. result work be and entire of Our the direct our

we upon partner, this significantly indirect, amended in our the in this quarter, moving build the With growth, long-standing we business in growth R&D that takes achieved, loan in engines test With and more support quarters have improved to reinvest term opportunity marketing, funnel, expect details we future to forward. the And of continue Megan and new our to more our To channel. during marketing expand our results. continued both investing profits direct ahead, time now cost areas we profitability capital with of the success our partnerships to and in provide investing will includes shortly. the which into into particularly to the typically and and ahead. quarters the produce more BlackRock,

force policies accelerate the term. we in growth long these our expect With to investments, over

came reminder, a our a weighted following typically period retention of book in results first toward in we dynamic rapid this As in near term policyholders. the lower which hypergrowth the year, out quarter growth. This newer of

contributions from force We policies period. the a and to result, to more renewals a expect hypergrowth are as now in we past see therefore, X return gradual And quarters growth.

Looking there expand advantage believe opportunities competitive to data-rich additional material ahead, to we our channels. are

these jettison will we always, channels a rigorous quickly on or explore results. and manner in As experiments disciplined, grow these based

at channel We the we contextually in times. in quarter, partnerships our also where fantastic customers made relevant progress meet

success enabled channel is given technology our it we doubled a new efficiently, to a year, provides. more Insurance, continued and partnership access The the a thereby the several providing clients from differentiated at to with long-term their price. the great New agents launched and Notably, customers our launched partnerships. has prior a with faster great where than experience quote key partnership to more writings channel in Goosehead exciting we

believe we and robust, strong remains opportunities beyond. partnership in and well channel we poised are XXXX growth in drive to of this pipeline Our

by Our Thanks to mindset led to to strong science and underwriting, we our platform reduce the returns. an consistently select technology what while algorithms ratio. on we have XX% data driven our industry rates proprietary our disciplined opportunity states loss target not best underwriting, in gross laser-focused compromising believe is

While gain for we prices certainly rates share. improve growth, further market best believe goal primary not lower drivers do with the set can we a to

effectively acumen price Our high goal accurately prices allow us science is rates our our data returns. adoption target and and to and set realize telematics to

sets As models, our we our business. moat build our even we retrain grow to data around continue an and stronger

us. by growth to are look of we the XXXX, front opportunities in As excited we

additional We partners, prices expect better geographic deliver products even and new footprint to better our customers. to drive add profitable expand growth, at

become to of lines believe that translates discipline which stronger journey, for and innovation, yet insurance income determination to our stakeholders. and culture the maintain is United carrier of and personal on achieving profitable we an in largest the net does is all team's Our our We ever than most important long-term profitability here. a not value stop States milestone momentum

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

Megan Binkley

good We operating be Alex, everyone. not evening, could and results. Thanks, our happier with

focus on the net basis, our on we expense achieved For and to testament a income advantages, underwriting data is a disciplined year-to-date and management. quarter profitability. third This unwavering

$XX $XX net year-over-year operating adjusted Along EBITDA and and we of a For with income million million $XX the of delivered income million, year-over-year. improvements generated million, million respectively. $XX $XX third $XX achievement, this quarter, of milestone we improvement of million,

earned be ratio results net driven marketing managed outstanding responsible by base closely loss our primarily performance, Our growth in to expense investment. the continue of and premium, deployment

We X-point of writings, of The a and gross improvement a XX%, expense by the defer compared premium delivering to XX-point a we ratio loss our acquisition growth combined technology. premium. earned policies We increases significant driven the period which in continued of accelerated noted, ratio XXXX. consistently costs saw data year-over-year, recognition this we've gross in customer achieved As new leads gross nearly force, customer, not third improvement relative to science earned over written quarter was life to premium majority in our the gross XX%, of do while year-over-year. accident investment and

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

costs strong driven Our were through million made improvements possible in $XX was growth performance. continued continued underwriting and net loss our the reinsurance improvement in primarily income, flow cash Operating quarter, nearly results. ratio in by

maintaining our capital from refinanced In growth loan quarter, from the cost successfully of reduced million capital. while with We fourth million of the the of $XXX the we size available least million, enhance our We BlackRock. by $XXX run points. an improved $XXX investment moving to as basis further rate facility operating And and enable result, a our growth. expect This will to facility XXX in at see in our forward. performance our expense original reduction interest term we approximate XX%

are income the quarter. in net we at reaching profitability Overall, thrilled

far long-term in is focused modestly business on for investments over. that We present quarter print. high and our the from These progress Our expenses channels potential. expanding and return profitable from our remain investing growth, footprint opportunities prioritizing distribution third increase operating geographic will

and to it's right believe we decision However, drive shareholder long-term success value. the

and Alex questions. and are for your With We look continued we future, appreciate to I forward that, our support. excited your

Operator

with Tommy question is The KBW. McJoynt from Instructions] first [Operator

Thomas Mcjoynt-Griffith

could said like us of to Is talk forward. with you where from about think, your then that spend modestly and marketing about the that? sales spend you Could And going go geographic of are that spend sort expecting magnitude could sounded appetite growth you're levels? looking for expansion? any to It help you you way consistent increase, where I think XQ

Alexander Timm

Yes. Thanks, Tommy.

there's much partnerships, we continue proud We and the milestone milestone. a generated to we're to at and continue going larger, opportunity of a to And very can the our profitable, us of is profit -- we still that. when think marketing our for still we the becoming that look not build hit we've business. of the footprint more we company, lot reinvest meaningful growth in continue is Obviously, that It we're current finish into do it line. to but a

our to to planning channel, be expense. in is some acquisition That's and And in so through continue what growth going we're that to you our see come to expand of do will partnerships investments.

independent automotive to funnel then upper And new and So bringing spaces. on services financial partnerships well mid- and as in channels. marketing as the agency

the still marketing of that minority We a channels in use. in industry most are

And think we so opportunity there. there's that a lot of

in We're in In expansion. and terms only shouldn't working actively we state in of the population, we're there's XXX%. be geography, of XX% no reason

going those new So I what comment expecting see the more Megan drive a think deploy near profitable the growth long geographies that geographies, we into term. us capital we're to and magnitude term. growth you're expand more over can on when also bit to

Megan Binkley

of this results mean, I started. continue that to looking key of reinvesting our proof what getting business. Thanks, really Yes. quarter, believe that are the proud said, And just We're working. We the reiterate and in Alex. is areas is we're to model really just we this quarter Alex

we're our and to continue marketing, to performance investing and So we're to partnership going going opportunistic continue in approach channels. the disciplined

say to at target focus remains I'll As it what new and is our marketing driving our expectations, levels. business relates on sales return

we're always unit ensure we invest source sales that in So expect And competitive react direct and on continuing dependent continue spend expect to our we a hit does quarter target as to marketing machine economics. and and in marketing the it given our profitable heavily we is environment, will growth opportunities. as identify to that what we to

going going new specific driving really we're the that to on a monitoring where QX spend. continue marketing continue Overall, we're but would or position past to I to we're the not give So going target we're on the had same of really efficiency approach for investment the business. profitable we've XXXX, in in into say a

Thomas Mcjoynt-Griffith

us anticipate your but on months? over perhaps retention may And are XX rates especially about last certain markets, the how then of seeing that bit little reduce in that on to touched on the, rates put think the book you you an your it help policies you the you you rates do potential update retention of when further? will can a give guys business And you there, go, have

Alexander Timm

in notice question, -- that's is basis. have when doubled year-over-year think as on done the Yes. resulted size thing Thanks for is, said in I what lot a I first to brand-new hypergrowth a my that And remarks, of Tommy. note business of PIF. real we've that doubled in we the to and that Yes, nearly and period, prepared the we've

And normalized we're little than through levels that to older as seen continue yet. seen so what young quarter. had that age and And we've to come to abate continued has We is PIF PIF don't think seen And we've young churn at PIF our PIF. churn tends down. we this a very faster a we've

bit more has So that it's nice continue. PIF And allowed of we in in tailwind grow little created quarter-to-date. gradually think part to where to that's business a the this a us going

So we on are seeing those churn. PIF trends favorable

also In retention will retention. reductions, And will absolutely we your and with that terms higher rates. see rate rates reductions, rates. of we those better should expect experience are, help The you rate conversion lower

And the will so we those be X of things think both business. good news for --

Thomas Mcjoynt-Griffith

I one that do of versus businesses, one they the The And differ side on one of direct-to-consumer, rates forgot retention quick to the actually, those ask, channel just the partnership element retention that. materially?

Alexander Timm

retaining has Yes. higher The much channel partnerships business.

across we so really that most of And our partnerships. see

customer. you So where allows a ease for differentiated or your when is the and -- buying providing, is customers stickier experience of of a what creates access you're building that particularly it see, the that the much does that customers do customer technology to of are sort lot

And so per just premium, policy. we that more seen fatter also vehicles are those that. higher have policies, average We've seen policies

so also really been as helpful well. And that's

Operator

the [Operator Instructions] The Jefferies. with from next Yaron of line question is Kinar

Yaron Kinar

X example. a and I the better same, ago of And we the year like? just cohorts, up at years look the most and the follow year use the true from were is other churn I year namely guess, to churn on seeing for we to as cohort than Maybe improving, there are recent the If a first first churn if be year, year an retention questions. cohorts. will some first have you cohort and ago

Alexander Timm

years, to those retention, basis, we Yes, what for it's control see last of are we have I'd you churn if have got that. those Yes, partnership cohorts. seen cohorts look do going the the to look -- on it that's when of and you -- at in you've a you've that seen those as longer higher from because, seen new stabilize, environment as retaining Yaron. the over definitely, good blended question, equal definitely say else at a they're Because because we've writings all again, coming couple improved rates. retention channel the new rate

think I improvement modest, in we it's that So cohort-based but retention. are seeing

Yaron Kinar

remain cohort to And just of would cohort? it. that modest Got you a or by improvement kind expect accelerate

Alexander Timm

will couple don't expansion see that I has One of which as channel a -- XXX% writings. year-over-year, might things of the think there's percent that distribution continued it. channel is partnership for we new that a us That the and down. is slowing of grown certainly accelerate tremendous, our

think that's definitely to to that. I So continue improve going

The as do just funnel some continue that. you see marketing we business more necessarily business of mix a lower second our preferred other to stickier is preferred expand aren't more marketing a you when that into bit customers tend to channels channels, more and

And that with be the we easier to for makes also long think making to some some stay Root do there to product so anticipate customers We're we the improvements. it term. for changes

retention. want take actions that of improve And to we so to lot have certainly we continue a to

Yaron Kinar

saying question a here lower the loss you're bit just where Okay. And a given just appreciate pricing. to looking is. ratio I little maybe then you that on rates

how data, that something that last X much where is we if you'd quarters, few for sure willing ratio to about? but I haven't look not coming think I guess the -- And maybe the is? at little loss loss how aggressive be in this is yet, running well we ratio given be talk the weeks. target a about willing be below now bit recent I'm with well, seen you to of would why the only this, last

Alexander Timm

hitting handful market and should the And that our always we're looking rates always we're us states the efficient enough be operating those ratios. in, low. we're gain that. been we that most not when to each high That targets we share. reduce the What loss we hit those We to rates think ability, targets. We're of rates, our too we're don't place but to of is we're on have credible tell we going have observe do we too operate business. making at set loss to best necessarily doing our that is not really market, lowering always There a that to just we'll target to where not are, be And looking really sure reduced data we're target and we that ratios way.

And allows very rate looking benefit rates, we the the new lowering we one to telematics think new loss that we're And just fastest we're respond constantly notice is models at of improving react. also also to iterating on loss I actively and we're with comes on see us the believe we're base pace our and But in that segmentation and industry, anticipate you important just improve not we're other innovating should not -- base our and decreases. rates, real segmentation. to that in think what thing we're as then through, then the fast it's as we through be constantly models ratio. to well to that, you as

Operator

are there as further today's gentlemen, teleconference. and no concludes Ladies Instructions] [Operator questions, this

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

Root (ROOT) 30 Oct 242024 Q3 Earnings call transcript