ROOT

Image source: The Motley Fool. Wednesday, Aug. 5, 2026 at 5:00 p.m. ET Head of IR and Corporate Development - Matthew LaMalva Co-Founder and Chief Executive Officer - Alexander Timm Chief Financial Officer - Megan Binkley Operator: Greetings, and welcome to the Root's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Matt LaMalva, Head of IR and Corporate Development. Please go ahead. Matthew LaMalva: Good afternoon, and thank you for joining us. Root is hosting this call to discuss its second quarter 2026 earnings results. Participating on today's call is Alex Timm, Co-Founder and Chief Executive Officer; and Megan Binkley, Chief Financial Officer. Earlier today, Root issued a shareholder letter announcing its financial results. We'll focus today on how we're executing against our model and the progress we're delivering across the business. While today's discussion will reflect the shareholder letter, for more complete information about our financial performance, we also encourage you to read our second quarter 2026 Form 10-Q, which was filed with the Securities and Exchange Commission today. Before we begin, I want to remind you that matters discussed on today's call will include forward-looking statements related to our operating performance, 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 are not obligated 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. 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 we talk about Root's performance. You can find reconciliations of these historical measures to the nearest comparable GAAP measures in our financial disclosures, all of which are posted on our website at ir.joinroot.com. I will now turn the call over to Alex. Alexander Timm: Thanks, Matt. Good afternoon, and thank you, everyone, for joining us. I'm happy to report that in the second quarter, Root continued to deliver strong performance while investing in long-term growth. Net income increased 15% year-over-year to $25 million, generating approximately a 31% annualized return on equity. Revenue increased 2% year-over-year to $389 million, and policies in force increased 6% year-over-year, ending the quarter at 484,000 policies. These results demonstrate the strength of our technology and data science capabilities we have built over the past decade. When we founded Root, our core belief was simple, insurance would ultimately be won through superior pricing and automation. Long before artificial intelligence became a mainstream conversation, we built the company around machine learning, quantitative science and a modern technology platform designed to automate insurance from end to end. Today, the pace of AI is rapidly expanding what's possible. It has the potential to reshape nearly every part of insurance from customer acquisition and underwriting to regulatory filings and claims handling and customer service. The advancement of AI has reinforced our conviction in technology and automation. Moreover, we believe it strengthens Root's competitive position when paired with our proprietary data, our modern infrastructure and our operating experience as a regulated insurance carrier. Root's data assets, including over 37 billion miles of driving data and more than 900,000 filed claims are not generic data sets. They are generated from customer behavior, underwriting decisions and claims outcomes. In order to build insurance-specific AI models, massive amounts of insurance data is a prerequisite. We've spent the last decade building these proprietary data sets. The combination of this data and world-class technology is very difficult to replicate. Many large incumbents have scale and data but continue to modernize decades old technology stacks. While many newer technology companies have modern software capabilities but lack the regulatory infrastructure, claims experience, underwriting history and capital foundation required to operate as an insurance carrier at scale. We are building an insurance company for the AI era, one where pricing, underwriting, claims, customer interaction, software development and capital allocation become increasingly intelligent and automated. We believe the insurance industry is entering a generational technology paradigm shift and that Root is uniquely positioned to lead. Turning to growth. The competitive environment in direct remained challenging in the second quarter as carriers increased marketing spend while lowering prices. When these cycles occur, we continue to remain disciplined. We intend to pursue growth only when it meets our target returns. While that decision can constrain near-term growth, we believe it is the right one for building long-term shareholder value through cycles. Over the medium term, we expect geographic expansion, continued growth through independent agents and expanding partnerships to provide durable growth drivers. We recently launched New Jersey, bringing Root to 37 states and covering over 80% of the addressable population. Geographic expansion remains a critical component of our long-term growth strategy, and we are progressing toward a national footprint by the end of 2027. We also announced our partnership with insurance shopping platform, Jerry, further expanding Root's presence across high-intent digital marketplaces and demonstrating our ability to embed Root's technology and insurance experiences inside partner ecosystems. Customers are buying insurance in more ways than ever before, and Root has positioned itself across many of these channels, direct comparison marketplaces, embedded partnerships at the point of vehicle sale, independent agents and increasingly AI-enabled customer experiences. Over the long term, we believe the best growth strategy is to build the best insurance product in the world, and that begins with pricing. Pricing and underwriting remain a foundation of everything we do. Technology is at the heart of who we are and has always been fundamental to how we create value. We built the company on the belief that a modern, fully integrated technology stack, combined with proprietary data and continuously improving predictive models would allow us to price risk more accurately and operate more efficiently than traditional carriers. Our second quarter results demonstrate the strength of that foundation. We delivered a 92.1% net combined ratio, reflecting the continued profitability and underwriting discipline of the business. At the same time, we continue to invest in what comes next. We expect to launch our newest predictive pricing model later this year and early results from research and development are highly encouraging. We continue to see meaningful gains as more underwriting, pricing and behavioral data enter our system and strengthen our models. The opportunity ahead is not simply to develop a better model. It is to create an increasingly intelligent, automated insurance company, one that learns faster, prices more precisely and delivers better customer experiences at a lower cost. That is the company we have always been building and AI only increases the potential of the foundation that we have created. We are excited about the future and the opportunity in front of us. We are expanding our national footprint, deepening our distribution capabilities, advancing our pricing algorithms and building the technology platform we believe will define the next decade of insurance. I'll now pass the call over to Megan to talk about our financial performance. Megan Binkley: Thanks, Alex. We delivered another quarter of strong financial performance while continuing to invest in the long-term opportunities that Alex just discussed. In the second quarter, revenue increased 2% year-over-year to $389 million. Gross written premium declined 2% year-over-year to $340 million, while gross earned premium declined 1% to $368 million. Policies in force increased 6% year-over-year to 484,000. These results reflect our continued discipline in a competitive direct market, where we are prioritizing profitable growth. We saw a sequential decline in direct policies in force, primarily reflecting the normal runoff of our first quarter tax season cohort. This was paired with a more competitive acquisition environment that moderated the pace of new business growth in direct during the quarter. Importantly, our new business mix continues to evolve. Partnership and independent agent channels represented approximately 51% of new writings during the quarter compared to approximately 44% a year ago. We believe these channels provide attractive long-term opportunities to diversify our sources of growth while leveraging the investments we have made in technology and embedded distribution. Our underwriting performance remained strong. Net combined ratio improved 3 percentage points year-over-year to a 92% net combined ratio. The improvement was driven primarily by continued expense discipline with our net expense ratio improving to 26%, while our net loss and LAE ratio remained broadly consistent with the prior year at 66%. During the quarter, we also enhanced the efficiency of our balance sheet. We successfully refinanced our existing $200 million debt facility into a new term loan led by the Huntington National Bank. This facility reduces our cost of debt and increases our financial flexibility. Under our $75 million share repurchase authorization, we repurchased more than $20 million of shares during the quarter. We view repurchases as one component of our broader capital allocation framework alongside organic growth, technology investment, pricing innovation and strategic distribution opportunities. Overall, our financial results demonstrate that we can continue generating meaningful profitability while also investing in the capabilities that support long-term growth. As we look ahead to the second half of the year, we plan to continue investing in key strategic areas, expanding our national footprint, deepening our data science and technology capabilities and diversifying our distribution channels. We expect to invest approximately $10 million in R&D initiatives as we test and expand into new acquisition channels. We believe these investments are foundational to driving long-term growth and scale. In H2, we also expect the normal seasonal pattern of higher loss ratios than H1 to emerge while continuing to invest behind the long-term growth opportunities that we see across the business. Our approach remains unchanged. We intend to continue balancing disciplined underwriting, thoughtful capital allocation and targeted investments in pricing, distribution and technology to maximize long-term shareholder value. With that, to begin the Q&A session, I'll turn it back over to Matt and Alex to answer a few questions we have received through social media and our Investor Relations e-mail. Matthew LaMalva: Alex, I want to close with a few questions we received from individual investors. First, several investors asked about AI, automation and telematics. Root was built around data science from the beginning, but what is different today? And why do you believe these capabilities matter more now? Alexander Timm: Well, first, I think it's really important to understand and to put into context what hasn't changed. And where we've come from and the DNA of the company we've created. And as you said, we really -- when we founded the company, since the very early days, we founded the company on the belief that modern quantitative methods would dramatically change the insurance landscape. And so we built the company based on data science and modern technology. And now as we've seen sort of the fundamental mathematics of predictive sciences change, namely in the form of AI, we are able to accelerate that materially. So we're now able to really apply an intelligence layer over top of everything we do, which is going to allow us now to really expand and compound the existing strategy that we've always had as really a quantitative firm. And what that's going to allow us ultimately to do is to, we believe, create the world's first end-to-end based AI insurance carrier. And we think that's going to be tremendously powerful. We're still in the early stages, but we've invested tremendously. We have real proof of concept. And it's in every part of our business. And importantly, it's in the core areas of our business. It's in pricing, it's in claims. It's not just in onboarding with chatbots or some of those things. It's really at the fundamental level, this technology is going to completely change the insurance game, and we are really well positioned because of our founding principles. Matthew LaMalva: Second, Root delivered another profitable quarter, but growth was more muted and PIF was down sequentially. For shareholders who are trying to understand that trade-off, how do you think about growth versus profitability right now? Alexander Timm: That's a good question. One of the things we've learned since starting the company is that this industry is marked by really severe cycles where sometimes we see the market get pretty competitive and sometimes we think that capital isn't really returning and it gets a little irrational, frankly. And then sometimes you see competitors pull out and the market get -- turned the other direction. One thing we've done and that's actually fairly contrarian is we look at that as an opportunity. And so what we do is we capitalize on that by effectively arbitraging that very cycle. And so when people pull out, you see us push in. We grow the business very fast. You saw us do that before. We've almost doubled the size of our business over a 12-month period before in this company's history in recent past. And then on the other side, when you see people push in very heavily, you'll see us pull out. And that's exactly what you saw this quarter. This quarter is very competitive. And these are just episodic interruptions in a longer-term growth plan that I think we've very well demonstrated over the last decade since founding the company. But importantly, having the discipline to operate this way, it's not always easy. But when we look at it, we think over -- through cycles and over the long term, it actually is a competitive advantage that allows us to create much higher returns on invested capital over the long term. And we think that's great for long-term shareholders. Matthew LaMalva: Third, investors also asked about growth outside of direct, including partnerships, agents, embedded insurance and the longer-term opportunity. Looking past the current competitive environment, what gives you confidence you can reaccelerate growth over time? Alexander Timm: Absolutely. And one of the important things is in being as profitable as we are, we are able to, while we're in these periods, continue to invest inside of our core capabilities and a lot of our growth levers. And so some of these growth levers are very obvious, things like national expansion. Today, we're in 80% of the U.S. population. We'll go to 100% where our goal is to be near national by the end of 2027. That's just a mechanical growth driver. There's not a lot of -- you have to believe to see that sort of come through. We're continuing to add agents. As we speak to our platform and as we do that, we're continuing to see growth. I mean you look at the growth in our partnership platform, it's been considerable year-over-year and still is despite the competitive environment. And so we've been investing in really that white space. There's a lot of distribution that we just aren't in today, and we're going after it, and we're continuing to add. And those will always produce returns regardless of where we are in the cycle. And then the third and what's so important is just the quality of our product. That is durable. It doesn't matter what competitors are doing or where the environment is. When you make a better product, you just will grow faster. And for us, that starts with pricing. And every time we ship a new pricing model -- we've seen improved economics, improved LTVs and therefore, improved growth. And we're not seeing that slow down, which is remarkable. And we're planning to launch our next iteration of our model in the fourth quarter of this year. And that model in R&D is already showing remarkable improvements in segmentation. So the science is accelerating, too. And that's so core. That's core to the quality of the product because the #1 reason a customer chooses us is because of price. The #1 reason a customer leaves any insurance carrier is because of price. And so that fundamental advantage in investing in that, we think you combine all of these and over the long term, you'll absolutely continue the long-term growth trajectory that, by the way, we've been on, and we think that, that will continue. Matthew LaMalva: Thanks, Alex. Operator, please open up the line for questions. Operator: [Operator Instructions] Your first question comes from Tommy McJoynt with KBW. Thomas Mcjoynt-Griffith: Alex, you spoke a lot about the competitive environment and that sort of causing you guys to pull back a bit this quarter, especially in the direct channel. As we think about your ability to grow policies in force going forward, is that purely going to depend on what you see in the direct environment? Do you think the sort of the rails you're building on the partnership and through the independent agent side can do enough to offset that where you do actually see PIF accelerate in the rest of the year after it dipped a little bit quarter-over-quarter here in the second quarter? Alexander Timm: Long term, Tommy, we're very confident that PIF acceleration will occur, and that's through state expansion, which we did launch in New Jersey. That actually launched in the third quarter and July was when that first went live, and we're seeing great results there. Our partnerships channel, which even despite a lot of the unexpected increases in competitive dynamics in the second quarter still grew considerably. And then we're actually finding still in our direct channel, new profitable areas to enter into, particularly in new marketing channels. And so when we combine those over the long term, we think absolutely PIF will continue to grow and we don't think that this quarter is just basically an episodic incident versus any -- it doesn't change anything about our long-term beliefs. Megan can talk a little bit about what we're seeing right now maybe and where we're headed for this year. Megan Binkley: Yes. Thanks, Alex. As we sit here today, Tommy, we've maintained PIF relatively flat with second quarter. And then as Alex mentioned, looking ahead, we've got a vast amount of long-term growth opportunities to increase PIF over time. But as we look at the end of 2026, if the current competitive environment persists, we would expect that 2026 PIF growth will be relatively flat on a year-over-year basis. That said, as Alex mentioned, we do continue to believe in the underlying growth algorithm. It's getting stronger. We're continuing to invest in partnership and independent agents. We expect those channels to continue to scale and really become a larger contributor to the overall balance or to the overall business. But our focus remains on building long-term value through expansion of our distribution channels and also state expansion, as Alex mentioned. Thomas Mcjoynt-Griffith: Got it. And then switching over, if we look at the gross accident period loss ratio, that strips out all of the noise from prior periods, that was up on the renewal book about 5 points on a year-over-year basis in the second quarter. Are we back to more normalized levels? I know it had been running a bit better than expectations and a bit better than modeled previously. So do you think this is a good run rate to where you want to see that number go at? Megan Binkley: Yes. Tommy, I can take that one. The new -- the renewal business loss ratio in the period was about 54%. That's primarily the result of normal seasonality. We typically see renewal book loss ratios increase as you move from Q1 to Q2, just given the normal seasonality. But the underlying renewal book continues to perform well and really remains within our overall expectations. Operator: Next question, Elyse Greenspan with Wells Fargo. Elyse Greenspan: My first question, I guess, is following up just on the PIF conversation. So I think you said PIF would most likely be flat, right, year-over-year at the end of the year, which I think backs into perhaps a decline of around 2,000 in the back half. Can you just give us a sense, I guess, when you're thinking about the back half, do you have a sense of what transpired in July? And I guess, is that assuming even trends, I guess, through the Q3 and the Q4 relative to just both quarters, I guess, losing a little bit of policies sequentially? Megan Binkley: Yes, Elyse, thanks for the question. Just to clarify. So as we sit here today, PIF is relatively flat with where we ended Q2. And looking ahead with the environment, the current competitive environment, particularly in the direct channel does persist at the levels that we've seen. We do expect that as we end 2026 that PIF would be relatively flat on a year-over-year basis as you compare it to the end of last year. So it's modestly up from 2025, where we ended at about 482. Elyse Greenspan: Okay. And then you guys were talking about your next-gen pricing model. Can you just give us a sense of how you expect that to impact your overall pricing as the predictive model is rolled out later this year? Alexander Timm: Absolutely. Usually, when we launch these models, and I think you saw this last year in our models, and we disclosed that, that model actually increased our customer LTVs by over 20%, which then did allow us to further grow. It will be a methodical rollout. So this, as I said, would in this year, would launch later in Q4, and it will be a state-by-state rollout as it always is. And so I think you won't see a ton of impact in this year. But then usually, that's a much better driver into next year. And so that's really when we expect to see more of that impact. Elyse Greenspan: And then I think in the Q, you guys called out that there was an impairment loss of $4.4 million on your private equity investments, which took that carrying value down to 0. Why did you guys take that action in the quarter? Megan Binkley: Yes, Elyse, good question. One thing I do want to highlight is the underlying investment income on our cash, cash equivalents and fixed income portfolio was around $10 million. So that's consistent with what you've seen from us in recent quarters. The reported NII for the quarter was $5 million because we did fully impair our private equity investment. So that was around $4.4 million of a full impairment. Only about $600,000 of that impairment represented our original cash investment that we made several years ago. The remaining $3.8 million actually reversed previously recognized unrealized gains. So these investments are very small non-core portion of the overall portfolio. And our primary strategy just remains to continue to generate returns through the high-quality fixed income portfolio. Operator: Next question, Andrew Kligerman with TD Cowen. Andrew Kligerman: So my first question is around pricing. PIF was up 6% year-over-year, gross written premium down. And I know this is not the right math, but maybe help me work through it. Does that imply pricing was down 8%? I know on past calls, you've talked about writing premiums that might be lower values or in different types of customers that don't necessarily reflect on pricing. But maybe you could give a sense of whether directionally I'm right there and where your pricing is in general on a national basis? Alexander Timm: Yes. Thanks, Andrew. That is correct. You did see average premiums come down as you did sort of across the industry. So year-over-year, you saw us take rate down somewhat. When we are looking at our current rate levels nationally, and of course, it varies by state, we're seeing modest positive trend. And we believe that we have an indication, meaning that we're probably a little overpriced of about 3% or so or low single digits. And so somewhere in that range is really where you should anticipate us acting and bringing down rates. Andrew Kligerman: So Alex, just to make sure -- so you have some -- what you're saying is you have flexibility potentially for another 3 points of rate decline. And when you say rates were down so far somewhat, should I frame that in low single digits there as well? Like -- so it's been down low single and then there's an opportunity to take it down another 3% or low single digit again. Am I describing that right? Alexander Timm: Yes, that's right. I mean if you look at our loss ratios versus even some of the largest in the industry, we have held up remarkably well. And so we have a very strong profitability in the business. And so although we do not set pricing targets really to optimize for growth, we are constantly studying the environment to figure out where we think our pricing level should be. And right now, we think, again, we have that room to bring down rates by somewhere in that low single digits. That also, to remind you, we will also be launching a new pricing model that will change segmentation as well. And so that often changes customer mix and may push us actually more into higher premium segments. And so there's a lot that moves around there. But in general, right now, we're very happy with where our rates are. Again, some modest single-digit rate decreases may be coming through the book. And when you look at our loss ratio, you can see that we're not chasing that growth because it is one of the best. Andrew Kligerman: That makes perfect sense, Alex. And then my follow-up is around the expense ratio. And I was impressed it was down 3 percentage points, not only year-over-year but quarter-over-quarter to 26.1%. So my question is, can you hold it there? Can you get it down to aggressive like 20-ish? Where does that go near and long term? Megan Binkley: Yes. Thanks, Andrew. As you mentioned, we have brought down the expense ratio over time. We do continue to manage the cost basis very prudently. And we've also been investing in areas that support the long-term growth. I do want to highlight one of the primary drivers of the net expense ratio being so low in the quarter, and that really was reflective of a reduction in performance-based equity compensation expense. So as you can see in our Q, our executive team, their equity packages are based on 100% performance stock units. And that compensation is intentionally tied to performance, which closely aligns with shareholder value. And those grants are tied to performance objectives, specifically around growth in policies in force and loss ratio performance. So what you're seeing in the quarter, given where we ended the quarter from a PIF perspective, was lower expense. Importantly, I do want to just highlight that reflects current operating environment does not reflect a change in our long-term growth aspirations by any means. And I would not run rate the 26% net expense ratio. Part of the reduction that we brought down in the G&A line item actually represents a decrease of expense that we had recognized in previous periods. So going forward, share-based comp, I think, is going to be around $8 million to $9 million a quarter. So definitely don't run rate the share-based comp that you saw in Q2. And just to put a finer point on it, as we think about fixed expense in the business, typically, that's running through your G&A line item and your tech and dev. And we expect that, that's going to be between 10% and 11% of gross earned premium in the back half. Andrew Kligerman: Okay. So I'll plug those pieces in. And just to make without having itemized those numbers, where does that put us at a base expense ratio if you normalize it? Megan Binkley: Yes. I would use Q1, Q4 as a more normalized expense ratio. Andrew Kligerman: So the 29-ish. Okay. Operator: Next question, Andrew Andersen with Jefferies. Andrew Andersen: On the $10 million R&D spend that you had discussed, could you talk about maybe more specifically where you're allocating that and how you're thinking about a payback period on that? Alexander Timm: Absolutely. So we have -- historically, when you look at where Root is and where we've invested a lot of our R&D and our marketing, it's really been predominantly in lower funnel search channels, and we are in a minority of really marketing channels. And what we've identified is we've done R&D into actually more upper funnel channels. And so we've actually deployed this into some markets. And we're starting to see really good results that hit or coming close to, provided we can optimize it, our targets. And so we are really excited by that. We're actually -- we're in less than probably 10% of all of the media channels right now in the industry. And so it represents a very significant growth opportunity. And like I said, we're seeing really favorable early results. And so what we want to do is we want to actually continue to double down there because it can clearly, clearly scale the business materially. And so right now, the way that we manage that is when we start and we launch some of those channels, we observe and we collect data. And then from there, we optimize. And over a period of time, we expect to optimize that down to the paybacks and the returns that we manage all of our channels in every single piece of the business with. Because we do have that level of discipline. And we've built a lot of interesting technology and the ability to target and measure these things, which we think is now going to scale and actually generalize to a lot of these new bets. So it's very exciting. We also -- you will see more investment into AI. We are continuing to invest in AI engineering, particularly. We've made huge strides there where actually over 90% of our code base at this point has been touched meaningfully by AI. And so we are really moving quickly on AI. And so you're going to see investment there as well. Andrew Andersen: And within the partnership channel, could you talk about just the growth there? Is that being driven by increased production from some of the larger relationships? Or are you seeing more meaningful contribution from the broader set of partners? Alexander Timm: It's really a broader set of partners. We're certainly seeing some of our very large partners continuing to grow impressively and us continuing to take more share in certain partners as well. But we're also more broadly appointing more independent agents and finding product market fit really across more and more agents. And so we're very early in the agency strategy. It's another material opportunity for us to grow. We're in a small minority of most of the independent agents nationally, and we're continuing to, every single day, launch more agents and get better at that channel, continue to refine our pricing for that channel and our product for that channel. And so as we're doing that, we're just seeing a really long runway in front of us. And so we're excited to continue to get that to scale so that it can continue to be a ballast of growth in the business. And it's grown tremendously over the last few years, and we don't think that's going to change. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time, and we thank you for your participation. 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Trupanion Inc. TRUP posted decent second-quarter 2026 results, with the top and the bottom lines beating the Zacks Consensus Estimate. However, while the top line improved year over year, the bottom line declined. This pet insurer provides insurance for cats and dogs in the United States, Canada, Continental Europe and Australia. It operates in a large but underpenetrated market. Trupanion is well-poised to grow, courtesy of increased focus on pets’ health and well-being, product launches, extended operating boundaries and a solid capital position. Shares of TRUP have gained 14.4% in the past three months, outperforming its industry, sector and the Zacks S&P 500 composite, in the same time frame. Image Source: Zacks Investment Research Shares of Lemonade Inc. LMND, another seller of pet insurance, have lost 5.7% in the past three months while those of Root Inc. ROOT, a technology-oriented insurance company seeking growth through specialized underwriting and digital customer acquisition, have lost 10.4% in the same time frame. TRUP generated $393 million of revenues, up 11% year over year and beat the consensus estimate by 0.8%.Total enrolled pets (including pets from our other business segment) were 1.6 million as of June 30, 2026, a decrease of 2% year over year. Subscription enrolled pets were 1.1 million as of June 30, 2026, an increase of 5% year over year. Subscription business revenues were $276.7 million, up 14% year over year.Total expenses were $58.7 million, up 12% year over year.Adjusted EBITDA was $19.8 million, up from $16.6 million in the second quarter of 2025. The bottom line came in at 16 cents, beating the estimate by 45% but declining 27% year over year.Operating cash flow was $21 million and free cash flow was $19.2 million in the second quarter.In July 2026, the New York Department of Financial Services approved an extraordinary dividend of $44 million to be paid to Trupanion by its wholly-owned subsidiary, American Pet Insurance Company.  The board also approved a $100 million share buyback program. For 2026, TRUP expects total revenues in the range of $1.584 billion to $1.601 billion. Subscription revenues are now expected to be between $1.124 billion and $1.133 billion. The midpoint of the range has increased slightly and continues to represent approximately 14% year-over-year growth. The insurer also narrowed the total adjusted operating income range to be between $176 million and $184 million, or19% year-over-year growth at the midpoint.For the third quarter of 2026, total revenues are expected to be in the range of $399 million to $405 million. Subscription revenues are expected to be between $284 million and $287 million, representing approximately 13% year-over-year growth at the midpoint. Total adjusted operating income is expected to be in the range of $44 million to $47 million. This represents approximately 11% growth year over year at the midpoint. The stock is overvalued compared with its industry. It is currently trading at a price-to-book multiple of 3.11, higher than the industry average of 1.86 but lower than the median of 4.28 over the past three years. It has a Value Score of C. Image Source: Zacks Investment Research TRUP shares are more expensive than ROOT but cheaper than LMND. Trupanion has built a differentiated business model centered on high customer retention, recurring subscription revenues and a proprietary technology platform. A key competitive advantage is its direct-pay software, which allows participating veterinary hospitals to receive claim payments at checkout, enhancing the customer experience and strengthening veterinary relationships.The company continues to benefit from strong monthly retention, a growing base of enrolled pets, and higher average revenue per pet (ARPU), driving consistent mid-teens revenue growth. With veterinary care costs rising faster than consumer discretionary income, effective pricing remains critical to sustaining growth while ensuring pet owners can continue to access quality care.International expansion is another important growth driver. As part of its five-year strategy, Trupanion has expanded its presence in Europe, where pet insurance penetration remains relatively low, creating a significant long-term growth opportunity. A larger subscriber base should also improve operating leverage, supporting margin expansion and stronger free cash flow over time.To broaden its addressable market, the company is expanding its product portfolio with offerings such as Chewy and Aflac, which target lower- and mid-ARPU segments, alongside Firkin, Phi Direct, and products tailored for continental Europe. Trupanion has also introduced a branded offering built on its technology platform and partnered with automation providers in Germany and Switzerland to enhance operational efficiency.Supported by a strong capital position and solid operating performance, Trupanion is well positioned to invest in product innovation and international expansion, reinforcing its competitive moat and long-term growth prospects. The Zacks Consensus Estimate for 2026 revenues and earnings indicates year-over-year improvement of 9.9% and 22.2%, respectively. The consensus estimate for 2027 revenues and earnings indicates year-over-year improvement of 8.1% and 25.2%, respectively. TRUP has a Growth Score of B. Image Source: Zacks Investment Research The consensus estimate for 2026 earnings has moved up 1 cent while that for 2027 has moved down 3 cents in the last 30 days.The consensus estimates for LMND’s 2026 and 2027 earnings have witnessed southbound movement in the last 30 days. The consensus estimates for ROOT’s 2026 and 2027 earnings have witnessed no movement in the last 30 days. TRUP is poised to grow in the fast-growing pet insurance market as pet ownership continues to increase and veterinary care costs rise.  Its VGM Score of B instills confidence.Given its premium valuation, muted analyst sentiment and narrowed guidance by management, it is better to adopt a wait-and-see approach for this Zacks Rank #3 (Hold) stock now.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Trupanion, Inc. (TRUP) : Free Stock Analysis Report Lemonade, Inc. (LMND) : Free Stock Analysis Report Root, Inc. (ROOT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Root, Inc.? Here are five stocks we like better. Root reported improved profitability: Q2 net income rose 15% year over year to $25 million, revenue increased 2% to $389 million, and the net combined ratio improved to 92.1%. Policies in force grew 6% to 484,000, despite declines in gross written and earned premiums. Competitive pricing is limiting near-term growth. Increased industry marketing and lower prices led Root to remain selective, and the company expects year-end 2026 policies in force to be roughly flat with 2025 if conditions persist. Root is investing for longer-term expansion through partnerships, independent-agent distribution, a New Jersey launch, AI and a new predictive-pricing model planned for late 2026. It also refinanced $200 million of debt and repurchased more than $20 million in shares. 5 Small Cap Stocks With Explosive Upside Potential Root (NASDAQ:ROOT) reported second-quarter 2026 net income of $25 million, up 15% from a year earlier, as the auto insurer emphasized underwriting discipline and continued investment in technology, distribution and geographic expansion. Revenue rose 2% year over year to $389 million, while policies in force increased 6% to 484,000. Gross written premium declined 2% to $340 million and gross earned premium fell 1% to $368 million. The company reported a 92.1% net combined ratio, reflecting a three-percentage-point year-over-year improvement. → SpaceX’s First Earnings Report Could Decide Whether Shorts or Bulls Have Control 5 Stocks Set to Soar This Summer Chief Executive Officer Alex Timm said the results reflected Root's data science and automation capabilities, while acknowledging a more difficult competitive environment in direct insurance sales. He said carriers increased marketing spending and lowered prices during the quarter, leading Root to remain selective about growth opportunities. “We intend to pursue growth only when it meets our target returns,” Timm said. “While that decision can constrain near-term growth, we believe it is the right one for building long-term shareholder value through cycles.” → 3 Drone Stocks That Should Soar After the Summer Slump 5 Small-Cap Stocks to Watch for Big Speculative Gains Chief Financial Officer Megan Binkley said direct policies in force declined sequentially, primarily because of the normal runoff of customers acquired during the first-quarter tax season and a more competitive environment for new direct business. As of the earnings call, Binkley said policies in force were relatively flat with the second-quarter ending level. If current competitive conditions persist, Root expects policies in force at the end of 2026 to be relatively flat compared with the end of 2025, when the company had about 482,000 policies in force. → The Bitcoin Comeback May Already Be Underway—2 ETFs for Exposure Timm characterized the slowdown as an “episodic interruption” rather than a change in Root's long-term growth outlook. He said the company aims to expand when market conditions produce acceptable returns and pull back when competitors are spending aggressively or pricing more aggressively. Root said average premiums declined year over year, consistent with trends across the insurance industry. Timm said the company believes it may have room for low-single-digit rate reductions, estimating it could be “a little overpriced” by roughly 3%, although pricing varies by state. The company also expects the normal seasonal pattern of higher loss ratios in the second half compared with the first half. Binkley said the renewal-business loss ratio was about 54% in the quarter, primarily due to seasonality, and remained within Root's expectations. Root continued to diversify its customer-acquisition channels. Partnerships and independent agents represented approximately 51% of new writings in the second quarter, compared with about 44% a year earlier. The company recently began operating in New Jersey, which Timm said went live in July. The launch brings Root to 37 states and more than 80% of the addressable U.S. population. Root is targeting a near-national footprint by the end of 2027. Root also announced a partnership with insurance shopping platform Jerry. Timm said the company is seeing growth from both larger existing partners and a broader set of distribution relationships, including newly appointed independent agents. “We're very early in the agency strategy,” Timm said, adding that Root is active with only a small minority of independent agents nationally. The company plans to invest about $10 million during the second half in research and development initiatives and testing new acquisition channels. Timm said Root has historically concentrated marketing investments in lower-funnel search channels but is testing upper-funnel channels, where it has seen favorable early results. He said Root currently participates in fewer than 10% of media channels used across the industry. Timm said Root's technology strategy is rooted in proprietary insurance and driving data, including more than 37 billion miles of driving data and over 900,000 filed claims. He said advances in artificial intelligence could enhance the company’s pricing, claims, underwriting, customer service and software-development processes. Root expects to launch its newest predictive pricing model later in 2026, with a state-by-state rollout beginning in the fourth quarter. Timm said the model is not expected to materially affect 2026 results but could become a stronger driver in 2027. The company said its prior pricing-model launch increased customer lifetime values by more than 20%. Timm also said that more than 90% of Root's code base has been “touched meaningfully” by AI, and the company expects continued investment in AI engineering. During the quarter, Root refinanced its existing $200 million debt facility with a new term loan led by The Huntington National Bank. Binkley said the refinancing reduced the company’s cost of debt and increased financial flexibility. Root repurchased more than $20 million of shares under its $75 million authorization. Binkley said buybacks are part of a broader capital-allocation framework that also includes organic growth, technology investments, pricing innovation and distribution opportunities. The net expense ratio improved to 26% from the prior year, while the net loss and loss-adjustment-expense ratio was broadly unchanged at 66%. However, Binkley cautioned against treating the second-quarter expense ratio as a run rate because it benefited from lower performance-based equity compensation expense. She said investors should view the first and fourth quarters as more normalized periods for expenses and expects fixed expenses to represent 10% to 11% of gross earned premium in the second half. Root, trading on the Nasdaq under the ticker ROOT, is a Columbus, Ohio–based insurance company that leverages mobile technology and data analytics to offer personalized auto insurance policies. Founded in 2015 by Alex Timm and Dan Manges, Root set out to transform traditional underwriting by focusing on individual driving behavior rather than broad demographic factors. The company's core product is usage-based auto insurance, delivered through a smartphone app that monitors driving patterns such as speed, braking and phone usage behind the wheel. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Root Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

This article first appeared on GuruFocus. Revenue: $389 million, up 2% year-over-year. Net Income: $25 million, up 15% year-over-year, generating approximately a 31% annualized return on equity. Gross Written Premium: $340 million, down 2% year-over-year. Gross Earned Premium: $368 million, down 1% year-over-year. Policies in Force: 484,000, up 6% year-over-year. Net Combined Ratio: 92.1%, improved 3 percentage points year-over-year. Net Expense Ratio: 26%, improved year-over-year. Net Loss and LAE Ratio: 66%, broadly consistent with the prior year. New Business Mix: Partnership and independent agent channels represented approximately 51% of new writings during the quarter, compared to approximately 44% a year ago. Share Repurchases: Repurchased more than $20 million of shares during the quarter under the $75 million authorization. R&D Investments: Expect to invest approximately $10 million in R&D initiatives in the second half of the year. Warning! GuruFocus has detected 8 Warning Sign with NWS. Is ROOT fairly valued? Test your thesis with our free DCF calculator. Release Date: August 05, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Net income increased 15% year-over-year to $25 million, generating a 31% annualized return on equity. Net combined ratio improved 3 percentage points year-over-year to 92.1%, reflecting strong underwriting discipline. Partnership and independent agent channels grew to represent 51% of new writings, up from 44% a year ago, diversifying growth sources. Successfully refinanced $200 million debt facility, reducing cost of debt and increasing financial flexibility. Repurchased over $20 million of shares under the $75 million authorization, demonstrating capital allocation commitment. Launched in New Jersey, expanding to 37 states covering over 80% of the U.S. population, with a goal of near-national footprint by end of 2027. Proprietary data assets, including 37 billion miles of driving data and 900,000 filed claims, position Root to leverage AI for competitive advantage. Plans to launch a new predictive pricing model in Q4 2026, with early R&D showing significant improvements in segmentation and customer LTVs. Gross written premium declined 2% year-over-year to $340 million, and gross earned premium declined 1% to $368 million. Policies in force growth was muted at 6% year-over-year, with a sequential decline in direct policies due to competitive pressures and seasonal runoff. The competitive direct market environment led to lower pricing and increased marketing spend by carriers, constraining near-term growth. Renewal book loss ratio increased to 54% in Q2 due to normal seasonality, though still within expectations. Reported net investment income was reduced by a $4.4 million impairment on a private equity investment, though only $600,000 was original cash. Management expects 2026 PIF growth to be relatively flat year-over-year if the competitive environment persists. Average premiums decreased year-over-year, reflecting rate reductions, with potential for further low single-digit rate decreases. The net expense ratio of 26% was favorably impacted by lower performance-based equity compensation, which is not expected to be a run rate. Q: For shareholders trying to understand the trade-off, how do you think about growth versus profitability right now, given that PIF was down sequentially? A: Alex Timm, CEO: The insurance industry is marked by severe competitive cycles. We capitalize on this by arbitraging the cyclewhen competitors pull out, we push in and grow fast; when they push in heavily, we pull out, as seen this quarter. This discipline, while not always easy, creates higher returns on invested capital over the long term, which is great for long-term shareholders. Q: Looking past the current competitive environment, what gives you confidence Root can reaccelerate growth over time? A: Alex Timm, CEO: We have several durable growth levers. National expansion is a mechanical driverwe're in 80% of the US population and aim to be near national by end of 2027. We're adding independent agents and our partnership platform continues to grow considerably despite the environment. Most importantly, the quality of our product is durableevery time we ship a new pricing model, we see improved economics and LTVs. Our next model launches in Q4 and is already showing remarkable improvements in segmentation. Q: Can you give us a sense of how you expect the NextGen pricing model to impact your overall pricing as it's rolled out later this year? A: Alex Timm, CEO: Usually when we launch these models, we see significant improvementslast year's model increased customer LTVs by over 20%. It will be a methodical, state-by-state rollout launching in Q4, so you won't see much impact this year, but it becomes a much better driver into next year. That's when we expect to see more of that impact. Q: Does the decline in gross written premium relative to PIF imply pricing was down 8%? Where is your pricing in general on a national basis? A: Alex Timm, CEO: Yes, you did see average premiums come down year-over-year, as seen across the industry. When looking at current rate levels nationally, we're seeing modest positive trend and believe we have an indication that we're probably overpriced by about 3% or low single-digits. That's where you should anticipate us acting and bringing down rates. Our loss ratios have held up remarkably well versus the largest in the industry, so we're not chasing growth. Q: The expense ratio was down 3 percentage points to 26.1%. Can you hold it there and where does it go near and long-term? A: Megan Binkley, CFO: The low net expense ratio in the quarter primarily reflected a reduction in performance-based equity compensation expense, tied to PIF and loss ratio performance objectives. I would not run-rate the 26%share-based comp going forward will be around $8 million to $9 million a quarter. Fixed expenses through G&A and tech/dev should be between 10% and 11% of gross earned premium in the back half. Use Q1 and Q4 as a more normalized expense ratio. Q: On the $10 million R&D spend, where are you allocating that and how are you thinking about the payback period? A: Alex Timm, CEO: Historically, our R&D and marketing have been predominantly in lower funnel search channelswe're in less than 10% of all media channels. We've deployed R&D into upper funnel channels with really good early results that are hitting or coming close to our targets. We observe, collect data, and optimize down to the paybacks we manage all channels with. We're also investing in AI engineeringover 90% of our code base has been touched meaningfully by AI. Q: Within the partnership channel, is growth driven by increased production from larger relationships or more meaningful contribution from the broader set of partners? A: Alex Timm, CEO: It's really a broader set of partners. While some very large partners continue to grow impressively and we're taking more share, we're also appointing more independent agents and finding product-market fit across more agents. We're in a small minority of independent agents nationally, so there's a long runway. This channel has grown tremendously over the last two years and we don't think that's going to change. Q: The renewal book loss ratio was up about 5 points year-over-year. Are we back to more normalized levels and is this a good run rate? A: Megan Binkley, CFO: The renewal business loss ratio in the period was about 54%, primarily the result of normal seasonality as loss ratios increase from Q1 to Q2. The underlying renewal book continues to perform well and remains within our overall expectations. Q: You called out an impairment loss of $4.4 million on private equity investments, taking the carrying value to zero. Why did you take that action? A: Megan Binkley, CFO: The underlying investment income on our cash equivalents and fixed income portfolio was around $10 million, consistent with recent quarters. The reported NII of $5 million reflects the full impairment of our private equity investmentonly about $600,000 represented our original cash investment, while the remaining $3.8 million reversed previously recognized unrealized gains. These are very small, non-core portions of the portfolio; our primary strategy remains generating returns through the high-quality fixed income portfolio. Q: As we think about PIF growth going forward, can the partnership and independent agent rails offset the direct environment enough to see PIF accelerate in the rest of the year? A: Alex Timm, CEO and Megan Binkley, CFO: Long-term, we're very confident PIF acceleration will occur through state expansion (New Jersey launched in July with great results), partnerships that still grew considerably, and new profitable areas in our direct channel. However, as we sit here today, PIF is relatively flat with Q2. If the current competitive environment persists, we expect 2026 PIF growth to be relatively flat on a year-over-year basis, modestly up from where we ended 2025. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance was driven by a decade-long investment in proprietary data science, resulting in a 92.1% net combined ratio and 31% annualized return on equity. Management attributes the sequential decline in direct policies to a combination of normal tax-season runoff and a disciplined pullback in marketing as competitors increased spend and lowered prices. The company is pivoting toward an 'AI-era' insurance model, leveraging 37 billion miles of driving data and 900,000 claims to automate core functions from pricing to claims handling. Strategic positioning is shifting toward a diversified distribution mix, with partnership and independent agent channels now representing approximately 51% of new writings. Geographic expansion remains a core pillar, with the recent New Jersey launch bringing coverage to over 80% of the addressable U.S. population. Management views market cycles as an arbitrage opportunity, choosing to grow aggressively when competitors retreat and maintain discipline when the market becomes irrational. Full-year 2026 policy in force (PIF) growth is expected to be relatively flat year-over-year if current competitive dynamics in the direct channel persist. A new predictive pricing model is scheduled for a state-by-state rollout in Q4 2026., which management expects will improve segmentation and LTV in 2027. The company plans to invest approximately $10 million in R&D during the second half of the year to test and expand into upper-funnel marketing channels. Management is targeting a near-national footprint by the end of 2027 as a mechanical driver for long-term growth. Second-half results are expected to follow normal seasonal patterns with higher loss ratios compared to the first half of the year. The company fully impaired a private equity investment, resulting in a $4.4 million loss, though only $600,000 represented original cash investment. A new $200 million term loan facility was established to reduce the cost of debt and increase financial flexibility. Share-based compensation expense decreased significantly in Q2 due to performance-based units tied to PIF growth targets that were not fully met. Management identified a potential 3% 'overpricing' indication nationally, suggesting modest single-digit rate decreases may be implemented to maintain competitiveness. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management expressed confidence that partnership and independent agent channels will act as a ballast for growth, even when the direct market is challenging. The partnership channel grew considerably year-over-year despite the environment, and the company is currently in only a small minority of national independent agencies. The 5-point year-over-year increase in renewal loss ratio to 54% was characterized as normal seasonality rather than a deterioration of underlying credit quality. Management confirmed the renewal book continues to perform within expectations and remains highly profitable. The 26% expense ratio in Q2 is not a sustainable run rate; management expects it to return to Q1/Q4 levels (approximately 29%). Future share-based compensation is projected to be between $8 million and $9 million per quarter, as Q2 benefited from a one-time reversal of previously recognized expenses. Investment is targeted at media channels where Root currently has less than 10% presence, specifically moving into 'upper funnel' brand awareness. Alex Timm noted that over 90% of the company's code base has already been meaningfully touched or improved by AI tools.

Digital auto insurance company Root (NASDAQ:ROOT) missed Wall Street’s revenue expectations in Q2 CY2026 as sales only rose 1.6% year on year to $389.2 million. Its GAAP profit of $1.49 per share was 66% above analysts’ consensus estimates. Is now the time to buy Root? Find out in our full research report. Net Premiums Earned: $363.5 million vs analyst estimates of $369.6 million (3% year-on-year growth, 1.7% miss) Revenue: $389.2 million vs analyst estimates of $396.4 million (1.6% year-on-year growth, 1.8% miss) Combined Ratio: 92.1% vs analyst estimates of 96.6% (450 basis point beat) EPS (GAAP): $1.49 vs analyst estimates of $0.90 (66% beat) Market Capitalization: $954 million Pioneering a data-driven approach that rewards good driving habits, Root (NASDAQ:ROOT) is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior. Insurance companies earn revenue from three primary sources: 1) The core insurance business itself, often called underwriting and represented in the income statement as premiums 2) Income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities 3) Fees from various sources such as policy administration, annuities, or other value-added services. Luckily, Root’s revenue grew at an incredible 43.3% compounded annual growth rate over the last five years. Its growth beat the average insurance company and shows its offerings resonate with customers. Note: Quarters not shown were determined to be outliers because they were impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business. Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Root’s annualized revenue growth of 35.5% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. Note: Quarters not shown were determined to be outliers because they were impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business. This quarter, Root’s revenue grew by 1.6% year on year to $389.2 million, falling short of Wall Street’s estimates. Net premiums earned made up 91.6% of the company’s total revenue during the last five years, meaning Root lives and dies by its underwriting activities because non-insurance operations barely move the needle. Net premiums earned command greater market attention due to their reliability and consistency, whereas investment and fee income are often seen as more volatile revenue streams that fluctuate with market conditions. ONE MORE THING: The $21 AI Application Stock Wall Street Forgot. While Wall Street obsesses over who’s building AI, one company is already using it to print money. And nobody’s paying attention. AI chip stocks trade at ridiculous valuations. This company processes a trillion consumer signals monthly using AI and trades at a third of the price. The gap won’t last. The institutions will figure it out. You need to see this first. Read the FREE Report Before They Notice. When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are: Gross premiums - what’s ceded to reinsurers as a risk mitigation and transfer strategy Root’s net premiums earned has grown at a 44.7% annualized rate over the last five years, much better than the broader insurance industry and faster than its total revenue. When analyzing Root’s net premiums earned over the last two years, we can see that growth decelerated to 37.6% annually. Since two-year net premiums earned grew faster than total revenue over this period, it’s implied that other line items such as investment income grew at a slower rate. While these additional streams certainly contribute to the bottom line, their impact can vary. Some firms have shown greater success and long-term consistency in investing their float compared to peers. However, sharp fluctuations in the fixed income and equity markets can significantly affect short-term performance. Root produced $363.5 million of net premiums earned in Q2, up 3% year on year. But this wasn’t enough juice to meet Wall Street Consensus estimates. It was good to see Root beat analysts’ EPS expectations this quarter. On the other hand, its net premiums earned missed and its revenue fell short of Wall Street’s estimates. Overall, this print was mixed. Investors were likely hoping for more, and shares traded down 11.1% to $53.59 immediately after reporting. Big picture, is Root a buy here and now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.

Lemonade Inc. LMND posted decent second-quarter 2026 results, with both the top and bottom lines improving year over year. Though the top line beat the Zacks Consensus Estimate, the bottom line matched the same. The company witnessed improved in-force premiums and loss ratio.Lemonade offers renters, homeowners, pet, car and life insurance, backed by artificial intelligence and behavioral economics. It operates through full-stack insurance carriers in the United States, the United Kingdom and Europe. Its primary competitive advantage lies in its fully digital operating model.Shares of Lemonade have lost 6.5% in the past three months, outperforming the industry, its sector, as well as the Zacks S&P 500 composite in the same time frame.  LMND shares are trading at a discount to their 52-week high. Image Source: Zacks Investment Research Shares of Root Inc. ROOT and Hippo Holdings HIPO, some other multiline insurers, have rallied 5.6% and 17.7% in the past three months, respectively. Revenues of $294.4 million increased 79% year over year, driven by growth in gross earned premium and higher premium retention rate. In-force premium (IFP) increased 32% year over year to $1.43 billion. Gross earned premium of $332.4 million increased 32% year over year primarily due to an increase in IFP.Total operating expense, excluding net loss and loss adjustment expense, of $182.2 million increased 41% year over year.Adjusted EBITDA loss was $18.7 million, narrower than a loss of $40.9 million in the second quarter of 2025. This improvement was primarily attributable to revenue growth and improved underwriting results, partially offset by the increase in growth spend. Net loss ratio improved 800 basis points to 61%.The bottom line came in at a loss of 56 cents per share, narrower than a loss of 60 cents per share incurred in the year-ago quarter. Adjusted free cash flow was $18.8 million, lower than $25 million in the year-ago quarter. Lemonade expects revenues to be $323-$326 million in the third quarter and $1.214-$1.220 billion in 2026. In-force premium is expected between $1,537 and $1,540 million in the third quarter and $1,632-$1,639 million in 2026.Adjusted EBITDA loss is estimated to be $20 to $23 million in the third quarter and $47 to $51 million in 2026. The stock is overvalued compared with its industry. It is currently trading at a price-to-book multiple of 7.87, higher than the industry average of 3.03 and the median of 4.13 over the past three years. It has a Value Score of F. Image Source: Zacks Investment Research LMND shares are more expensive than ROOT and HIPO. Lemonade is a technology-focused insurer that leverages artificial intelligence, data analytics and automation to improve efficiency and support a scalable, low-cost operating model. Initially concentrated on renters and homeowners insurance, the company has expanded into auto, pet and life coverage, aided by the Metromile acquisition. This broader product portfolio has diversified revenues and reduced dependence on any single insurance line.Its multi-product approach supports cross-selling, strengthens customer lifetime value and creates recurring revenues. Strong retention and customer engagement continue to drive growth, with management projecting revenue increases of 32% for the second quarter and 33% for full-year 2026. Auto insurance remains a key growth engine, supported by additional state launches and higher brand investment.In-force premium reached $1.43 billion in the second quarter, representing the 11th consecutive quarter of accelerating growth. Lemonade’s AI- and automation-led platform enables the company to scale efficiently, supporting management’s long-term target of $10 billion in IFP. From 2027 onward, IFP growth is expected to exceed spending growth, creating meaningful operating leverage.Geographic expansion, particularly for auto insurance, should broaden Lemonade’s addressable market. Following several planned state launches, management expects its auto product to be available to most U.S. drivers by the end of 2027.Lemonade’s reinsurance program transfers a significant share of claims exposure to partners, helping limit earnings volatility. Meanwhile, proprietary AI tools, including AI Maya and AI Jim, streamline underwriting and claims handling, improving efficiency and keeping loss-adjustment expenses relatively low.Profitability is challenged, but the outlook is improving. Margins are expanding, free cash flow has turned positive, and management expects to achieve adjusted EBITDA profitability in the fourth quarter of 2026 and in 2027. The Zacks Consensus Estimate for 2026 and 2027 earnings and revenues indicate year-over-year improvements. LMND has a Growth Score of A. Image Source: Zacks Investment Research However, the consensus estimate for 2026 and 2027 earnings has moved 5 cents and 8 cents south, respectively, in the last seven days. Image Source: Zacks Investment Research The consensus estimates for ROOT’s and HIPO’s 2026 and 2027 earnings witnessed no movement in the last seven days. Lemonade is poised for long-term growth, banking on a combination of technology, automation and expanding product offerings.However, given its premium valuation and muted analyst sentiment, it is better to hold on to this Zacks Rank #3 (Hold) stock now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lemonade, Inc. (LMND) : Free Stock Analysis Report Root, Inc. (ROOT) : Free Stock Analysis Report Hippo Holdings Inc. (HIPO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Wednesday, May 6, 2026 at 5 p.m. ET Chief Executive Officer — Alexander Timm Chief Financial Officer — Megan Binkley Director of Investor Relations — Matthew LaMalva Need a quote from a Motley Fool analyst? Email [email protected] Matthew LaMalva: Good afternoon and thank you for joining us. Root is hosting this call to discuss its first quarter 2026 earnings results. Participating on today's call is Alex Timm, Co-Founder and Chief Executive Officer; and Megan Binkley, Chief Financial Officer. Earlier today, Root issued a shareholder letter announcing its financial results. We'll focus today on how we're executing against our model and the progress we're delivering across the business. While today's discussion will reflect the shareholder letter for more complete information about our financial performance, we also encourage you to read our first quarter 2026 Form 10-Q, which was filed with the Securities and Exchange Commission today. Before we begin, I want to remind you that matters discussed on today's call will include forward-looking statements related to our operating performance, 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 are not obligated 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. 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 Root's performance. You can find reconciliations of these historical measures to the nearest comparable GAAP measures in our financial disclosures, all of which are posted on our website at ir.joinroot.com. I will now turn the call over to Alex. Alexander Timm: Thanks, Matt. Good afternoon, and thank you, everyone, for joining us. We kicked off 2026 with the most profitable quarter in the company's history, generating an annualized ROE of 47%. The team has worked hard to deliver these fantastic results, and we're all grateful for their hard work. These results reflect a structurally stronger model driven by improvements in pricing, underwriting and capital allocation. On growth, we grew policies in force over 9% in the quarter year-over-year with gross premiums written of $389 million. Recall that last year's growth temporarily increased on news of impending tariffs, making year-over-year comparisons difficult. As a reminder, we continue to be focused on our 5-part growth strategy: one, create the lowest prices for customers; two, launch our product in every state; three, expand into the independent agency channel; four, scale our embedded insurance products; and five, leverage our AI expertise to grow our automated marketing machine. Some highlights from the quarter. On distribution, we're continuing to build a platform that is both diversified and scalable, which is very important to our long-term growth trajectory. Our overall partnerships grew new writings 30% year-over-year. On independent agents, we now partner with more than 15,000 agents across 5,000 agencies nationwide. In the first quarter, we launched our partnership with Freeway Insurance, the largest personal lines insurance distributor in the country. We're very excited by the prospects of continuing to scale in this channel, bringing products that are easier for agents and more affordable for customers to an over $100 billion market. As our models have continued to learn in this space, we were able to materially improve our pricing for this segment of our business in the first quarter as well. We also continue to scale our embedded insurance offering with Carvana now surpassing 200,000 policies sold. This channel allows us to present nearly frictionless insurance at the point of need, creating a great experience for customers. In addition, this allows for the potential to create new pricing models distinct to each partner, leveraging their unique data, including connected vehicle data, which is critical to our long-term AV strategy. In direct, we saw a difficult growth environment that intensified throughout the quarter. These cycles are common in our industry, and we are well positioned to manage them prudently, only deploying your capital when we see meaningful opportunities to exceed our hurdle rate. When conditions are attractive, we invest aggressively. When they are not, we remain disciplined and patient. This creates some fluctuations in our quarterly growth. But over the long term, we believe it creates much better outcomes for our shareholders. We believe a key source of value is our ability and willingness to act differently from the crowd and maintain our long-term orientation. Regardless of the cycle, we always invest in our technology and customer experiences that makes Root special. And right now, we are living in one of the most exciting times in technology that we've seen in our lifetimes. Since our inception, our founding principles lie at the heart of AI. We were born out of the forces of mathematical invention. And now the advancements of this technology have perfectly situated our strategy for acceleration. We are actively working to build a completely automated insurance company that will be the first of its kind. This allows us to create a closed loop tying customer acquisition, onboarding, pricing, underwriting and claims, together in one technical system. We believe this structural advantage will create meaningful operating leverage and most importantly, allow us to price and manage risk at a fidelity never before seen. Insurance is fundamentally a prediction problem and AI is fundamentally an advancement in predictive sciences. And we've built moats around this advantage. This future belongs to a technology company and requires loads of claims data, insurance licensing and a complete insurance technology stack built entirely in-house. We have invested tremendously in these hard-won assets, and this puts Root in the ideal position for this future. We're very, very excited by this future and what we can achieve. We are well on our way to fulfilling our mission. I'll now pass the call over to Megan to talk about financial performance. Megan Binkley: Thanks, Alex. We delivered record net income of $36 million in the quarter, up $18 million year-over-year. Operating income was $41 million and adjusted EBITDA was $57 million, increasing $17 million and $25 million year-over-year, respectively. We grew policies in force 9% on a year-over-year basis. We continue to diversify our business, growing our partnership and independent agent new writings by more than 30% year-over-year. Related to premiums, Q1 gross premiums written were $389 million, a moderation of 5% year-over-year. As Alex reiterated, this was largely driven by early 2025 tariff-related demand. Q1 gross premiums earned were $370 million, growth of 8% year-over-year. These results reflect continued improvement in our unit economics, driven by pricing, underwriting and acquisition efficiency. Our record profitability reflects how we manage the business, including focusing on high-return growth and market expansion opportunities, maintaining flexibility across underwriting cycles and continuing to invest in product and technology innovation. On capital, I'm pleased to announce that we refinanced our $200 million debt facility with the Huntington National Bank on May 4, lowering our annual run rate interest expense by roughly $5 million. The new facility enhances our financial flexibility, allowing us to allocate capital more dynamically. Consistent with our strategy, we are investing in our technology, organic growth, partnerships and shareholder returns. As part of this approach, our Board of Directors authorized a $75 million share repurchase program, reflecting both the strength of our capital position and our confidence in the intrinsic value of the business. Overall, the financial profile of the business continues to strengthen, and we are energized by the progress we've made. We remain focused on the long-term opportunities in front of us, supported by massive growth prospects across our 5 levers and advancements in our data science, technology and distribution capabilities. We will continue to stay nimble and believe we are well positioned to continue strengthening profitability while maintaining flexibility to invest in growth. With that, to begin the Q&A session, I'll turn it back over to Matt and Alex to answer a few questions we've received through social media and our Investor Relations e-mail. Matthew LaMalva: Thanks, Megan. As we continue to engage more directly with our shareholders, we wanted to address a few of the most common themes we've seen this quarter. Alex, the first question is, what is Root's approach to the growth versus profitability trade-off? Alexander Timm: Yes, that's a great question, and it's actually unique at Root because we don't see those 2 things as trade-offs actually. We think the best way to grow our company through cycles is to continue to invest growth dollars provided that we continue to exceed our cost of capital. And by doing that, we're basically, we're essentially directly solving for increasing the intrinsic value of the shares and of the company. We don't have calendar period targets because if you try to optimize for growth in a calendar period at a certain profit constraint or anything like that, you actually run the risk of making decisions and actually destroy intrinsic value that are not good for the company. And we didn't invent it. This is, we learned this in college and finance classes and things like that, that we should just optimize to continue to build the largest discounted cash flow, future cash flow of the company. And so what you see from us is when we have high returns and high opportunities in the market, we invest aggressively, we grow aggressively. That might, by the way, in that calendar period, reduce short-term earnings. And then you see when times, when there's not as many opportunities in the market, we're totally fine being patient with the capital, and you'll see us be very, very profitable. And we think that, that's just absolutely the best, most disciplined patient way to manage our shareholders' capital. And really, so there's really not an implicit trade-off in our business decisions between growth and profit. Matthew LaMalva: Great. The second question is, which part of Roof Advantage compounds the fastest over time, data, pricing models or distribution? Alexander Timm: Well, the interesting thing is data, pricing models and distribution all actually have this nice mutually symbiotic relationship with one another. As you get more data, you get better at pricing; as you get better at pricing, your distribution grows; as your distribution goes, you then get more data. And that flywheel is something we started a while ago, and we've actually built a lot of technology to continue that flywheel going very, very fast. I think the part that probably compounds the fastest and that maybe is the hardest to understand from the outside, is just how fast and to what magnitude our pricing can improve as our data science continues to advance because those algorithms are incredibly powerful and our ability to consistently retrain and understand the signal and deploy modern quantitative capabilities, that's really, really important. So I believe that, that compounds really materially over time. Matthew LaMalva: Next question is, how did Root become the profitable insurtech? Alexander Timm: Focus. We picked one of the hardest and largest though, lines of business in the country. And then we picked one of the hardest problems, which is getting really, really good at pricing and underwriting it. Now why do we do that? Well, price, one, if you want to be serious about disruption in personal lines insurance, you got to be serious about auto insurance because it's the #1 product most consumers actually purchase. It's, again, the largest line of business in the country. And then two, the biggest thing that matters is price, and that is fundamentally a data science game. And it's not an easy problem to solve. And, but we stuck with it. And by sticking with it, we got very good at it. And that focus has allowed us to drive material earnings now because, again, now we've become experts at what I think is probably one of the most important problems right now for consumers in insurance. Matthew LaMalva: Great. And finally, which part of the company is most misunderstood by investors? Alexander Timm: Well, that's a great question. We get it sometimes. I'd say it's always very difficult to understand the platforms that we are building and the systems that we are building truly in like what I would say is like the guts of the company, whether that's pricing or claims. And so these aren't, it's much easier to understand some consumer-facing features. It's easier to understand marketing. It's very difficult to see and understand and appreciate the value of a 10x platform in insurance, whether that's our data science platform, our telematics platform or our claims platform or most importantly, the fact they're all a single platform and integrated inside one company. That is incredibly difficult to sort of see clearly from the outside. But from the inside, that is our most valuable asset. Matthew LaMalva: Thanks, Alex. Operator, we'll now open the line for questions. Operator: [Operator Instructions] Our first question comes from Tommy McJoynt with KBW. Thomas Mcjoynt-Griffith: The first question here is about what you guys are doing on the rate side and how you think about that competitively. I think last quarter, you had talked about the expectation that with rate, your average premium per policy might decrease a little bit in the first quarter, but then normalize after that for the rest of the year. Is that still the case? And can you just give us an update on how you view your rate adequacy across your book? Alexander Timm: Yes. Thanks, Tommy. First, I want to just remind everybody, we do not price to try to hit growth targets. We do not price to try to hit a calendar period loss ratio or combined ratio target. We price to optimize the lifetime value of the customer. And in doing that, that's how we always sort of optimize our net present value. In the quarter, we did improve pricing. We actually improved the LTV of our customers by roughly 15%. A lot of that was through some of the independent agency channel updates that we had as well as with returning customers. What I think you, and have seen in our numbers is that as we've improved segmentation, there has been a bit of a mix shift to some lower premium segments that we've identified that are really good risks. And you can see that because although these average premiums decreased, our loss ratio was still rock solid, which is really proof of the power of the model. As we look forward, I think you might see from some of those improvements in segmentation that we shipped this quarter, you might see some mild decreases in average premiums continue as we continue to unlock more affordable insurance for a lot of our customers, but it shouldn't be anything massive or material. Thomas Mcjoynt-Griffith: Got it. And then switching over to your appetite for direct channel. It seems that the sales and marketing expense in the first quarter was a bit less than we expected, and it sounded like some of your commentary pointed to expectations for the challenging growth environment to persist for the remainder of the year. Do you have an expectation for how much you'd expect to spend on the direct marketing channel in the coming quarters as we think about modeling? Alexander Timm: Yes. I mean, first, we grew PIF 9% in the quarter, and our partnerships channel grew 30% year-over-year. And so that was actually despite what was a very difficult macro backdrop and challenging growth environment. And we are, we saw that environment actually intensify throughout the quarter. And so we were fine being patient and not deploying as much capital as we would have otherwise knowing that the returns probably weren't there. And so that's what also why you saw us be very profitable in the quarter, one of the reasons you saw us be very profitable in the quarter. And we think that's really disciplined. We aren't expecting the macro environment to totally change quickly here. And so I think you can probably expect more of what you saw in Q1 for now. But long term, we've seen these cycles happen before. We know how to manage the cycles. And we think our technology can also respond very, very quickly if that cycle changes. And so you should expect if the competitive environment does change for us to change very aggressively and quickly into a growth position as well as we're continuing to appoint new independent agents. We're continuing to add partners to our platform. We're continuing to refine pricing, and we're continuing to expand nationwide. So there's also some really nice long-term growth opportunities that we're pursuing regardless of the macro backdrop. Megan Binkley: Yes. And Tommy, if I could just layer on in terms of expectations on spend. Just to reiterate what Alex mentioned, as it relates in particular to the direct channel, our focus is going to remain on meeting our return thresholds and really leveraging our direct marketing machine to make quick and distinct decisions as the environment evolves. I mean I think that, that's a really significant differentiator for us. So we'll continue to invest in direct marketing as long as we're meeting our return hurdles across our distribution channels. A couple of other things to note. We continue to be very excited by our partnership and independent agent channels. You can expect that we'll continue to spend through the other insurance or other insurance expense line item as we continue to expand our partnerships and independent agent footprint. And then also, we are continuing to invest in many of the direct R&D channels. You saw that from us in 2025. And we'll continue to invest in many of these mid- to upper funnel channels that we're not in today. Operator: Our next question comes from Andrew Andersen with Jefferies LLC. Andrew Andersen: Given commentary for a challenging growth environment and recognizing the 1Q comp was more challenging, just how should we think about PIF growth trending relative to guidance you had given last quarter of full year PIF acceleration? Alexander Timm: Yes. We're, if the environment stays currently where it is, our expectations are probably something similar to what you saw in Q1. Again, we're really well positioned to pivot and to push direct growth if we see that as prudent in that quarter. And we have those other growth engines that are outside of direct, whether it's independent agents, partnerships or continuing to expand nationally. Andrew Andersen: Got it. And if PIF growth sees some moderation here while, or premium growth sees some moderation while PIF does continue to expand, how do you think about the OpEx leverage, specifically on G&A and tech spend, so not looking at the marketing and other expense line item. Megan Binkley: Yes, Andrew, good question. As we think about OpEx leverage for the rest of the year outside of our acquisition investments, we expect that, that will remain relatively stable as a percentage of gross earned premium. So that's been around 10% to 11% of gross earned premium. Most of our fixed expense run through that tech and dev and G&A line item. And we expect that as a percentage of premium that's going to remain stable throughout the rest of the year. Operator: Our next question comes from Andrew Kligerman with TD Securities. Andrew Kligerman: My first question is around the gross accident period loss ratio and the gross loss ratio with gross accident being 58.8%, gross loss ratio at 54.5%. So that's about 4.3 points of favorable development. And I'm curious as to where you're seeing that from, what accident years? Any color you could share would be great on that. Megan Binkley: Andrew, I can add some color to that. So firstly, I'll just say our reserves have been very stable over the past few years. On a quarter-over-quarter basis over the last few years, we continue to have confidence in our loss reserve estimates. The book overall is relatively short tailed. And it is important to highlight that we do perform a full month, a full reserve analysis on a monthly basis. So, you're not seeing a lag when we're reporting reserves on a quarterly basis. It's all as of the current period. But to more specifically answer your question, the prior period development that we saw in Q1 around 2.5 points of that was related to the accident year 2025, and that was really spread across most of our major coverages, so bodily injury, collision, comp and PD. We also had an additional about 1.5 points of prior period favorable development that was related to additional subrogation opportunities that we actually identified through model enhancements in the quarter. And so that, from a combination of 2025 accident periods flowing through in Q1 of 2026 as well as a small amount of additional subrogation opportunities, that's going to really bridge your gross accident period and your gross loss ratio in the quarter. But overall, I think our volatility has been minimal overall. Andrew Kligerman: That's really terrific. And as I think about it, too, even if I were to use the accident period loss ratio of 58.8%, Root targets, I think, 60% to 65% and you're looking toward a combined ratio in order to just kind of build a book, you're willing to go in that 60% to 65% zone. I would even think you might even go a little bit higher and hit a combined of about 99% or 100%. It's been really good. So is this a sign that maybe Root would want to lean in a little more? I know the prior question, you answered that PIF growth would remain the same. But given these metrics that we're seeing, why wouldn't you just lean in a little bit more? Alexander Timm: Yes, I think that's a great question. When we make decisions based on whether it's pricing or deploying our capital, we're always looking at the value of a customer and optimizing that value. And so, and making sure that we're not deploying capital at a rate that is lower than our cost of capital. And so we really study incrementality. And that's why, and by the way, we've instrumented this directly into our system. And so we are very good at predicting lifetime value of customers, retention of customers, how they will behave throughout their lifetime. And we're very good then at optimizing how we actually achieve our target returns. So we don't set our loss ratio targets based on trying to hit a calendar period combined ratio or loss ratio because you can leave a lot of money on the table or make the wrong business decisions that way for investors in the long term. And so what we do is we stay very committed to our framework and our philosophy of making sure that we're constantly looking to optimize basically the net present value of the business. And that's how we operate. And so sometimes that leads to some periods like you saw in Q1, where we are very, very profitable and some periods where we grow very, very fast. And although that might fluctuate quarter-to-quarter, what we believe is continuing to manage the business according to that really principled economic approach and foundation and fundamentals, you end up building a much stronger business long term. And this is enforced culturally here. This is embedded directly into our system. So, it's automated. These beliefs are automated at this point to a large degree in how we operate. And so that's really important for us. And so you won't see us say, well, we could hit a higher combined ratio, let's go lower rates. We just don't think that way. Megan Binkley: Yes. And Andrew, if I could layer on too, and you've seen this from us historically as well, but there is a bit of seasonality favorability in the Q1 loss ratio. So Q1 typically is our lowest loss ratio from a seasonality perspective, and this quarter was certainly no exception to that trend. When we think about our loss ratio targets between 60% and 65%, we do expect that our accident period loss ratios will remain within that target as we persist throughout the rest of the year, even with modest seasonal and macro pressures. So, as a reminder, Q4 loss ratios tend to have the highest level of seasonality impacts, and that's largely driven by animal collisions. And so, we would expect that Q4 is typically at the top end of that 60% to 65% range, whereas in Q2 and Q3, the seasonal patterns are typically more in that 60% to 62% range. Andrew Kligerman: Safer time for the animals, another good quarter for Root. Thank You. Operator: Our next question comes from Elyse Greenspan with Wells Fargo. Elyse Greenspan: I guess one question, just following up on, I guess this goes back to loss ratios a little bit, right? We're starting to think about higher gas prices and then there potentially could also be supply chain impact, right, from what's going on in Iran. So, I was just wondering, as you guys think about these factors, what are you thinking could potentially happen to frequency and severity from here? And are you assuming any impacts when you say you'll stay in kind of the 60% to 65% range this year and the low end, right, in the second and third quarters? Alexander Timm: Yes. So that's a great question, Elyse. Right now, we have not seen, we have seen mileage slightly down, not massively down. However, we have not seen frequency drop tremendously. So a lot of those miles are discretionary miles that consumers are driving that are generally low-frequency miles in the first place. And so we certainly haven't seen that sort of impact the numbers immediately. And it's the same thing with inflation. We think that we are in a reasonable low single-digit type trend environment right now. And we're watching that every day. We're always measuring it. We have a lot of cutting-edge claims models that look at that actually on a daily basis to try to predict exactly what we think is happening in the market so that we are very well positioned if trend does change to quickly take, to quickly detect it and then quickly take rate through a lot of our automated actuarial systems. And so we're always looking at that data. So right now, our expectation and when we talk about our loss ratio expectations, they do include our expectation of the macro as well. Elyse Greenspan: And then I know you guys highlighted, right, that the direct environment, right, competition there got more difficult, during the quarter. As we just think about, it seems like in the market today, right, most players at target margins and a lot less rate taking, if anything, right, negative rates across the personal auto industry. As you guys, with that backdrop, I guess, would your assumption be, I guess, that competition on the direct side just continues to intensify from here when we think about the rest of 2026? Alexander Timm: It's certainly a macro prediction. So take it for what it's worth. But we're not predicting that the soft market or that a lot of the irrationality of massively increasing marketing budgets with limited incremental growth that, that necessarily goes away at our competitors overnight. And so we're always monitoring it. You never know when it's going to change. But right now, our base case is that it stays roughly where it is or maybe gets a little bit hotter as those margins stay where they are until, and maybe rates come down a little bit as well. And that's what we're prepared for. But again, we're not guessing because we're measuring it every day. And thanks to our technology, we can actually just react to it every day. And so it's, we don't really guess a lot. We just measure it. Elyse Greenspan: And then you guys put in place, right, a $75 million repurchase program. is the expectation that you guys will start buying back your shares? Or is this just to give you flexibility at some point if you decide you want to? Megan Binkley: Thanks, Elyse. It's a great question. And before I answer that question, I think I'd be remiss not to just highlight that we're incredibly pleased with the new debt structure with Huntington. Huntington has been a long-standing banking partner for us, and we're really thrilled to continue the partnership with them in this manner. The refinancing of that debt is beneficial in a couple of ways. One, we're unlocking significant interest expense savings for the company. And then two, the new facility gives us the optionality as it relates to deploying capital or deploying excess capital. So you hear Alex and I say it consistently, our objective here is really to maximize the long-term value of the company. And we believe we can do that through disciplined and dynamic capital allocation based on relative returns. So one thing I just want to reiterate is that we are continuing to invest in organic growth and continuing to invest in our technology and our product innovation in the business. These are really non-negotiables for us, and we're going to continue investing here. As it relates to the $75 million share repurchase authorization, a couple of things to really keep in mind. One, it comes down to the flexibility that we now have with our new debt facility. Secondly, we have a really strong excess capital position. And then third, we've got confidence in the long-term opportunities in the business. And we now have the flexibility to repurchase our stock when we believe that it's trading at a discount relative to our intrinsic value. We believe this is a great and indirect way to return capital to shareholders. So in terms of the mechanisms that we'll use, like many of our investments, we'll be opportunistic in our approach to share repurchases. Again, I just want to reiterate that we're going to continue to invest in the business at the same time that we plan to deploy capital for share repurchases. We've got confidence that we can do both, and we've got the flexibility now under our new capital stack. Operator: Our next question comes from Brian Meredith with UBS. Unknown Analyst: This is actually Leandro on behalf of Brian. My question is related to the investment space. If I remember correctly, last quarter, you said that we would eventually see the net income lower in '26 full year, but this quarter was actually pretty strong at $36 million. So my question is, is there any implied acceleration in investment base going forward related to new channels, technology and R&D? Megan Binkley: Yes. Great question. Just to start off, I mean, and you mentioned this in your question. But given the record net income that we posted in Q1, as we sit here today, we do expect to deliver more net income in 2026 than we did in 2025. And that really just comes down to the strength of our model and our agility and opportunity to move quickly as it relates to direct marketing investment. So with the intensity that we've seen in the competitive environment, you did see us scale back on direct marketing expense in March, which we believe is the right decision for the business long term. So we're going to continue to be opportunistic in terms of how much investment we deploy throughout the remainder of the year. So really, the way I'd think about acquisition expense is it's really variable and based on the returns that we see in the direct. But we are going to continue to invest in R&D, direct marketing. And we're really excited to continue growing our partnership and independent agent channels. So you will expect to see other insurance expense increase throughout the back half of the year. And then earlier, I mentioned some of the seasonality trends on loss ratio. So again, keep in mind, Q1 is our strongest loss ratio quarter from a seasonality perspective. We do expect that loss ratios will increase mildly throughout the rest of the year but still remain within our long-term target of 60% to 65%. So all that to say, if the environment persists, we definitely expect that 2026 net income will be stronger than what you saw in 2025. Unknown Analyst: That's helpful. And my follow-up question is actually related to the sales and marketing expense line. So this quarter was lower year-over-year and also quarter-over-quarter. I think you've kind of responded that, but how should we think about sales and marketing going forward, I guess, more back-end loaded? Megan Binkley: Yes. So as we think about sales and marketing, it really comes down to the competitive environment. And as I mentioned, we're going to remain very opportunistic in that channel. We're only going to spend to the extent that we're hitting our return targets. So if the environment is irrational, then you're going to see us be patient and not lean in spend in a given quarter. Operator: Does that answer your question, Brian? Unknown Analyst: Yes. Thank You. Operator: Ladies and gentlemen, that was the last question for today. The conference call of Root, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines. 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