Q3 2024 Root Inc Earnings Call
The New Year's Eve,
Ladies and gentlemen greetings and welcome to the routine 3Q-24 earnings conference call. At this time all parents and the listeners know me more, a brief question and answer session will follow the formal presentation.
Financial goals and business outlook, which are based on management's current beliefs and assumptions.
Please note that these forward looking statements reflect our opinions as of the date of this call and we undertake no obligation to revise this information as a result of new developments that may occur.
Forward looking statements are subject to various risks uncertainties and other factors that could cause our actual results to differ materially from those expected and described today. In addition, we are subject to a number of risks that may significantly impact our business and financial results.
For a more detailed description of our risk factors. Please review our most recent 10-K 10-Q and shareholder letter.
A replay of this conference call will be available on our website under the Investor Relations section.
I would also like to remind you that during the call. We will discuss some non-GAAP measures while talking about routes performance.
You can find reconciliations of those historical measures to the nearest comparable GAAP measures in our financial disclosures all of which are posted on our website at IR Dot joined route Dot Com I will now turn the call over to Alex Tim routes co founder and CEO.
Alex Tim: Thanks, Matt.
Our third quarter performance was a landmark quarter for route.
Alex Tim: We have consistently said that our top priority has been to reach profitability and in the third quarter, we delivered it.
This is a pivotal moment for route and a firm validation of our business model technology and delightful customer experience. Our success is a direct result of the steadfast hard work of our entire team and I could not be prouder.
Alex Tim: To build upon the success and to support future growth, we amended our term loan with our longstanding partner Blackrock and significantly improved our cost of capital moving forward Mega will provide more detail shortly.
Operating results for the third quarter and on a year to date basis. We achieved net income profitability. This is a testament to our data advantages disciplined underwriting and unwavering focus on expense management.
For the third quarter, we delivered net income of $23 million, a $69 million improvement year over year.
Alex Tim: Along with this milestone achievement, we generated an operating income of $34 million and adjusted EBITDA of $42 million year over year improvements of $68 million and $61 million respectively.
Our outstanding results continue to be driven primarily by growth in our net earned premium.
Alex Tim: Loss ratio performance closely manage the expense base and a responsible deployment of marketing investment.
As we've consistently noted we do not defer the majority of customer acquisition costs over the life of our customer which leads to accelerated expense recognition relative to earned premium.
We saw significant increases in new writings policies in force gross written premium and gross earned premium compared to the third quarter of 2023.
We achieved this growth while delivering a gross combined ratio of 89% and nearly 30 point improvement year over year.
Alex Tim: The gross accident period loss ratio was 58% a four point improvement year over year, driven by our continued investment in data science and technology.
In the third quarter of 'twenty 'twenty four we ceded approximately 12% of our gross earned premium.
Alex Tim: We've reduced the difference between our gross and net loss and LAE ratios to just one point.
We believe that this quarter is really proof that our model is working so we're going to continue our disciplined and opportunistic approach to performance marketing and we're going to continue investing in and the partnership channels.
As it relates to sales and marketing expectations, you know what I'll say is our focus remains on driving new business at at our target return levels. So we expect to invest as we continue to identify and source profitable growth opportunities.
And what we spend in sales and marketing and in a given quarter is heavily dependent on the competitive environment and and we expect that our direct marketing machine will will react as it always does to ensure that we're continuing to hit our target unit economics.
Alex Tim: So we're going to continue monitoring the efficiency of the spend overall I would say, we're not really in a position where we're going to give a specific target on on marketing investment for for Q4 or really into 'twenty to 'twenty five but we're going to continue the same approach that we've had in the past on driving profitable.
New business.
Thanks for those comments and you may have touched on it a little bit there, but can you give us an update on how you guys are seeing the retention rates of your of your book of business go, especially the perhaps policies that you put on over the last 12 months and then when you think about the potential.
To reduce rates in certain markets do you anticipate that that will help your retention rates further.
Speaker Change: Got it thanks for that question Tommy.
Yeah, I think the first thing to notice and to note is as I said in my prepared remarks.
Speaker Change: Thank you for your participation.
Speaker Change: Okay.