Core Insights - Root Inc reported fourth-quarter revenue of $326.7 million, exceeding the Street consensus estimate of $291.0 million [1] - The company achieved fourth-quarter earnings per share of $1.62, surpassing the Street consensus estimate of a loss of 44 cents per share [1] Financial Performance - Policies in force grew by 21% year-over-year in the quarter [2] - Gross premiums written increased by 18% year-over-year in the quarter [2] - Gross accident period losses decreased during the quarter [2] - Root reported a positive net income of $31 million for the full fiscal year, an improvement of $178 million from the previous fiscal year [2] Strategic Outlook - The company described 2024 as "a landmark year," attributing this to difficult decisions made in 2022 and 2023 [3] - Root emphasized that its loss ratio is now among the best in the industry, a result of modern quantitative methods [3] - The company continues to invest in infrastructure and growth, expecting strong results as it gains scale [3] Market Reaction - Root's stock rose by 17.52% to $116 in after-hours trading, with a 52-week trading range of $20.22 to $141.23 [4]

Core Insights - Root, Inc. announced its financial results for Q4 and the full year ended December 31, 2024, highlighting its performance and operational updates [1] - The company will host a conference call and earnings webcast to discuss these results and provide further insights into company operations [2] Financial Results - The financial results for the fourth quarter and full year are detailed in the shareholder letter available on Root's investor relations website [1] - An updated investor presentation is also accessible for stakeholders [1] Conference Call Details - The conference call is scheduled for February 26, 2025, at 5:00 p.m. Eastern Time [2][3] - Participants can join via a toll-free dial-in number or through a webcast link provided on the investor relations website [3] Company Overview - Root, Inc. was founded in 2015 and is based in Columbus, Ohio, serving as the parent company of Root Insurance Company [4] - The company utilizes data science and technology to revolutionize the insurance industry, aiming to provide a personalized and fair experience for consumers [4] - The Root app has achieved nearly 15 million downloads and has collected over 30 billion miles of driving data to inform its insurance offerings [4]

Market Risks - The company's primary market risk exposure is to changes in interest rates, which have been near historic lows but have recently increased, potentially affecting net investment income [265]. - The company is exposed to market risks from changes in interest rates, which could adversely affect net investment income and operating results [265]. - The investment portfolio is subject to default risks and impairments, which can significantly impact market valuation and net investment income [266]. - The investment portfolio is subject to risks of default or impairment, which could lead to realized investment losses [266]. - Increased valuation uncertainties in illiquid markets may lead to realized investment losses and affect the carrying amount of securities [267]. Financial Obligations and Debt - The company has an outstanding principal amount of $200 million under the Amended Term Loan, which was initially entered into in January 2022 and amended in October 2024 [299]. - The interest rate on the Amended Term Loan is based on the Secured Overnight Financing Rate (SOFR) with a 1.0% floor, plus an applicable margin ranging from 5.25% to 6.00% [299]. - The company must maintain cash and cash equivalents of at least $50 million outside its insurance subsidiaries and ensure a direct contribution margin of at least 20% at the end of each fiscal quarter [300]. - The Amended Term Loan includes covenants that could restrict the company's operational and financial flexibility, potentially harming liquidity and financial condition [298]. - A breach of covenants in the Amended Term Loan could lead to default, requiring immediate repayment and potentially harming the company's financial condition [301]. Corporate Governance and Shareholder Rights - The dual class structure of common stock concentrates voting control, limiting the influence of other shareholders on corporate matters [273]. - The company does not intend to pay dividends on Class A common stock, with returns limited to stock value appreciation [277]. - The company anticipates retaining future earnings for business development and expansion, with no cash dividends expected in the foreseeable future [277]. - The company is subject to exclusive forum provisions that may limit stockholders' ability to bring claims in favorable jurisdictions, potentially increasing litigation costs [297]. - Provisions in the company's corporate charter may complicate potential acquisitions, affecting stockholder interests and market price [287]. - The company is governed by provisions that could make acquisitions more difficult, potentially limiting stockholder value and depressing the market price of Class A common stock [287]. - The company is subject to Delaware law provisions that may discourage acquisition proposals, impacting stockholder value [288]. Regulatory Compliance and Operational Challenges - Compliance with federal and state regulations as a public company incurs significant costs and demands substantial management time [278]. - Compliance with federal and state laws as a public company has led to increased costs and demands on resources, impacting operational efficiency [278]. - The company must comply with various financial and management controls to meet regulatory requirements, which may necessitate hiring additional staff or consultants [285]. - The company may need to upgrade IT systems and hire additional accounting staff to comply with Sarbanes-Oxley Act requirements, impacting financial resources [285]. - There is no assurance against future material weaknesses in internal control over financial reporting, which could lead to a decline in stock price [284]. - The company must maintain effective internal control over financial reporting to avoid impairments in financial statement accuracy, which could affect investor confidence [282]. Business Operations and Market Conditions - The company's revenue and operational results are expected to fluctuate significantly on a quarterly and annual basis due to various uncontrollable factors, including customer purchasing behavior and industry cyclical trends [307]. - The ability to attract and retain customers in a cost-effective manner is critical, alongside accurately forecasting revenue and managing expenses [309]. - Technological changes, particularly in the automotive sector, could disrupt the company's business model and impact demand for auto insurance products [310]. - The impact of changing technologies, such as autonomous vehicles, could materially affect the demand for auto insurance products [310]. - The COVID-19 pandemic has caused operational disruptions, and future pandemics may lead to increased claims costs and economic slowdowns [311]. - The COVID-19 pandemic has caused operational disruptions and may lead to increased claims costs and customer payment difficulties [311]. Acquisition Risks - The company may face significant costs and challenges related to future acquisitions or investments, which could disrupt operations and harm financial condition [303]. - Future acquisitions may disrupt business and financial condition, with risks including increased competition for targets and integration challenges [303][304]. - Regulatory requirements may complicate potential changes of control, deterring acquisition proposals and delaying transactions [275]. Environmental, Social, and Governance (ESG) Factors - Environmental, social, and governance expectations may impose additional costs and impact the company's reputation and access to capital [279]. - The company faces potential additional costs and risks related to environmental, social, and governance (ESG) expectations from various stakeholders [279].

Financial Performance - In 2024, the company achieved a gross combined ratio of 94.7% on $1.3 billion of gross premiums written, generating GAAP net income of $31 million and adjusted EBITDA of $112 million[2][18]. - The company reported a net income of $22 million in Q4 2024, a $46 million improvement year-over-year, and an operating income of $35 million[12][30]. - Net premiums earned for Q4 2024 were $299.7 million, a 70.4% increase from $176.0 million in Q4 2023[61]. - Total revenues for FY 2024 reached $1,176.5 million, up 158.5% from $455.0 million in FY 2023[61]. - Net income for FY 2024 was $30.9 million, compared to a net loss of $147.4 million in FY 2023[64]. - The company reported a gross profit of $337.1 million for FY 2024, compared to a gross profit of $76.1 million in FY 2023[69]. - Adjusted EBITDA for FY 2024 was $111.9 million, a significant improvement from a loss of $42.9 million in FY 2023[69]. - The company achieved a gross profit of $337.1 million for the year ended December 31, 2024, compared to $76.1 million in 2023, marking a substantial improvement[76]. - Adjusted EBITDA for Q4 2024 was $43.1 million, up from $15.1 million in Q4 2023, demonstrating strong operational performance[80]. Growth Metrics - Policies in force increased by 21% to 414,862, while gross premiums written rose by 66% to $1.3 billion[15][31]. - The gross accident period loss ratio improved by 4 points to 59.9%, and the gross combined ratio improved by 22 points to 94.7% for the full year 2024[18][19]. - Total assets increased to $1,495.7 million in 2024 from $1,347.7 million in 2023, representing an increase of 11%[60]. - Policies in force increased to 414,862 in FY 2024, up from 341,764 in FY 2023, representing a 21.4% growth[69]. - Gross premiums written for FY 2024 totaled $1,301.1 million, a 66.3% increase from $783.1 million in FY 2023[69]. - Direct contribution for the year ended December 31, 2024, was $394.0 million, up from $150.7 million in 2023, reflecting a growth of 161.5%[76]. Operational Efficiency - The gross earned premium cession rate improved by 16 points to 11% for the full year 2024[15]. - The company ended the year with $333 million in unencumbered capital and expects to lower interest expense by approximately 50% going into 2025[34]. - The company plans to continue eliminating friction in the purchase experience by moving partners to fully embedded experiences, enhancing customer access[22]. - The company plans to continue expanding its market presence and investing in new technologies to enhance its service offerings and operational efficiency[74]. Market Strategy - The Partnership channel saw new writings increase by 115% year-over-year, driven by a modern technology stack that integrates seamlessly into partner platforms[21]. - The company aims to expand its distribution channels through partnerships, digital media, independent agents, and referrals[53]. - Root, Inc. plans to develop products for embedded insurance and expand into additional insurance lines[55]. - The company anticipates achieving a significant long-term competitive advantage through its partnership with Carvana[53]. - Root, Inc. is active in 35 markets for auto insurance, indicating a broad market presence[51]. Investment and Reserves - Loss and loss adjustment expense reserves rose to $413.2 million in 2024, up from $284.2 million in 2023, an increase of 45%[60]. - Unearned premiums increased to $353.9 million in 2024 from $283.7 million in 2023, a growth of 25%[60]. - Ceded premiums earned for the year ended December 31, 2024, were $160.1 million, down from $235.9 million in 2023, indicating a reduction in reinsurance costs[76]. - The company reported net investment income of $(35.9) million for the year ended December 31, 2024, compared to $(30.2) million in 2023, reflecting ongoing challenges in investment performance[76]. Customer Metrics - Root, Inc. has approximately 15 million app downloads and has collected 30 billion miles of driving data to inform their insurance offerings[49]. - The company expects to improve customer retention rates and enhance its capital and marketing efficiency[53]. - Premiums per policy increased to $1,584 in FY 2024, up from $1,423 in FY 2023, reflecting a 11.3% rise[69].

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1][2]. Company Analysis: Root, Inc. (ROOT) - Root, Inc. currently holds a Momentum Style Score of A, indicating strong momentum characteristics [3]. - The company has a Zacks Rank of 1 (Strong Buy), which historically outperforms the market when combined with a Style Score of A or B [4]. - Over the past week, ROOT shares increased by 15.45%, significantly outperforming the Zacks Insurance - Property and Casualty industry, which rose by only 0.01% [6]. - In a longer timeframe, ROOT's shares have increased by 12.28% over the past quarter and an impressive 736.95% over the last year, while the S&P 500 only moved 3.73% and 24.43% respectively [7]. - The average 20-day trading volume for ROOT is 393,219 shares, indicating a bullish trend when combined with rising stock prices [8]. Earnings Outlook - Recent earnings estimate revisions for ROOT show one upward revision for the full year, raising the consensus estimate from -$1.21 to -$0.08 over the past 60 days [10]. - For the next fiscal year, there has been one upward revision with no downward revisions, suggesting positive sentiment around the company's earnings potential [10]. Conclusion - Given the strong momentum indicators and positive earnings outlook, ROOT is positioned as a promising investment opportunity with a Momentum Score of A and a Zacks Rank of 1 (Strong Buy) [12].

Michael (Mike) Dion is an FP&A, Corporate Finance, and Small Business expert who spent the last 12 years working in the Fortune 100, building a startup's finance and accounting department, advising small businesses, and guiding non-profit organizations as a board member. He has finance experience across multiple industries, including Telecom, Media and Entertainment, Hospitality, and Construction. He founded F9 Finance, a website that helps Finance professionals accelerate their careers; and simplifies Fina ...

Have you been paying attention to shares of Root, Inc. (ROOT) ? Shares have been on the move with the stock up 56.7% over the past month. The stock hit a new 52-week high of $141.23 in the previous session. Root, Inc. has gained 90.6% since the start of the year compared to the 5.6% move for the Zacks Finance sector and the 5% return for the Zacks Insurance - Property and Casualty industry.What's Driving the Outperformance?The stock has a great record of positive earnings surprises, as it hasn't missed our ...

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Investors might want to bet on Root, Inc. (ROOT) , as it has been recently upgraded to a Zacks Rank #1 (Strong Buy). This upgrade is essentially a reflection of an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.The sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked by the syste ...

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.Even ...