Root, Inc. Q1 FY2025 earnings call

• Root continued strong performance into 2025, delivering a profitable quarter with improved gross premiums written, net income, operating income, and adjusted EBITDA.
• The company entered 2025 from a position of strength due to superior technology, strong capitalization, and a scalable fixed expense base.
• Achieved growth in policies in force, strong loss ratios, and continued investments in pricing and underwriting technology while diversifying distribution.
• Direct channel focuses on data-rich lower funnel channels and scales those meeting unit economic targets, supported by a mobile-first telematics product.
• Partnership channel saw quarterly new writings more than double YOY, with over 20 partners and new strategic partnerships with Hyundai Capital America and Experian.
• Geographically, Root is in 35 states, filed in Michigan (pending approval), and has outstanding filings in Washington, New Jersey, and Massachusetts.
• Maintains disciplined underwriting driven by proprietary tech platform and data science algorithms, able to react swiftly to rate changes.

Root saw strong financial performance in Q1 2025. Gross premiums written improved by 24% from Q1 2024. Net income was $18 million, operating income $24 million, and adjusted EBITDA $32 million. The direct channel has found success in data-rich lower funnel channels and is supported by a mobile-first telematics product. The partnership channel saw quarterly new writings more than double year-over-year, with over 20 partners and new partnerships with Hyundai Capital America and Experian. Revenue contribution details weren't explicitly broken down by segment in terms of percentage, but key growth was noted in both channels.

• Seasonality tailwind in Q1 2025 not expected to persist into the rest of 2025.
• Focus on lifetime unit economics, expanding partnerships and distribution channels.
• Run rate interest expense savings realized from the amended debt facility with BlackRock, with opportunities to reduce cost of capital as the business performs.
• Expect partnerships to contribute more to growth going forward, with new partnerships still in early stages.
• Q2 PIF expected to be roughly flat quarter-to-date, with higher churn in early stage cohorts of new writings.

• Forward-looking statements are subject to various risks, uncertainties, and factors that could cause actual results to differ materially from expectations.
• Potential impact of tariffs on loss ratios, though the company believes it has room to absorb tariffs within current loss ratio targets and can react quickly to adjust rates if needed.

Q: Looking at new business mix, partnership mix, and growth spend cadence A: Seasonality drove strong Q1 growth, partnership mix expected to increase going forward, growth spend cadence tied to net present value optimization with Q1 typically the strongest quarter on direct channel Q: Seasonality, tariffs, and profitability A: Tax season amplified Q1 growth, tariffs potentially pulled up demand in partnership channel, Q2 PIF expected to be flat with higher churn in early stage cohorts, loss ratio expected to increase in Q2 and Q3 but company remains opportunistic on marketing Q: Partnership ramp, frequency, severity, and pricing A: New partnerships take time to ramp, trends in frequency and severity were in line with expectations, mix shift in customer segments (lower frequency, higher severity) is accounted for in pricing models, and the company can adjust pricing if needed