Root Inc (NASDAQ:ROOT) shares surged as much as 45% after the auto insurance technology company reported a surprise profit for the third quarter, marking a significant turnaround from last year's losses.
Root posted net income of $23 million, or $1.35 per share, for the third quarter, a dramatic improvement from a loss of $46 million, or -$0.87 per share, in the same period last year. The result handily beat analyst expectations for a loss of $0.87 per share.
Revenue jumped to $305.7 million, surpassing the consensus estimate of $275.33 million and nearly doubling from the prior year.
Root Co-Founder&CEO Alex Timm said that the company "performed well beyond outside expectations."
"We're excited to keep doing that," Timm told Investing.com
“We're incredibly proud to have reached this profitability milestone as it allows us to reinvest in the business to accelerate our growth trajectory.”
“This is obviously a great milestone for Root. It's important to note that we recognize this as a milestone, not the finish line.”
The company's strong performance was driven by a 57% YoY increase in policies in force to 407,313, while gross premiums written rose 48% to $332 million. Root's gross combined ratio, a key measure of underwriting profitability, improved to 89%.
Root also reported adjusted EBITDA of $42 million, a $61 million improvement YoY. The company's unencumbered capital at the quarter's end stood at $439 million, reflecting minimal quarterly cash consumption of $8 million.
The insurer's improved financial position has allowed it to refinance its term loan, reducing the principal amount by $100 million to $200 million and lowering the interest rate by at least 300 basis points.
