• Net Income: $23 million, a $69 million improvement year over year.

• Operating Income: $34 million, a $68 million improvement year over year.

• Adjusted EBITDA: $42 million, a $61 million improvement year over year.

• Gross Loss Ratio: 57%, believed to be industry best.

• Gross Combined Ratio: 89%, nearly a 30-point improvement year over year.

• Gross Accident Period Loss Ratio: 58%, a four-point improvement year over year.

• Operating Cash Flow: Nearly $50 million in the quarter.

• Reinsurance Costs: Reduced difference between gross and net loss ratios to one point, a reduction of 10 points year over year.

• Term Loan Refinancing: Reduced facility size from $300 million to $200 million, improved cost of capital by at least 300 basis points.

• Warning! GuruFocus has detected 3 Warning Signs with ROOT.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Root Inc (NASDAQ:ROOT) achieved net income profitability in the third quarter, marking a significant milestone for the company.

• The company reported a $69 million year-over-year improvement in net income, reaching $23 million for the quarter.

• Root Inc (NASDAQ:ROOT) successfully refinanced its term loan with Blackrock, reducing the facility size and improving the cost of capital by at least 300 basis points.

• The partnership channel experienced significant growth, with new writings more than doubling from the prior year.

• Root Inc (NASDAQ:ROOT) reported a gross loss ratio of 57%, which is considered industry-leading, due to strong underwriting and data science capabilities.

Negative Points

• Root Inc (NASDAQ:ROOT) is still in the process of expanding its geographic footprint, currently covering only 75% of the U.S. population.

• The company anticipates modest increases in operating expenses due to reinvestment in growth opportunities.

• Retention rates have been impacted by a hypergrowth period, resulting in a younger policyholder base with higher churn.

• Root Inc (NASDAQ:ROOT) is facing challenges in maintaining competitive pricing while achieving target returns, which may affect market share.

• The company is still working on improving segmentation and telematics models to better align pricing with target loss ratios.

Q & A Highlights

Q: Can you discuss your plans for increased growth spending and its relation to geographic expansion? A: Alex Timm, Co-Founder and CEO, explained that Root plans to reinvest profits into growth, focusing on partnerships and marketing channels. The company is working on state expansion, aiming to cover 100% of the population, which will involve deploying more growth capital into new geographies. Megan Binkley, CFO, added that the focus remains on driving new business at target return levels, with marketing spend dependent on the competitive environment.