Root, Inc.ROOT

Root, Inc. Debt Disclosure

10-KFiled Feb 25, 20262 min read
LONG-TERM DEBT
In January 2022, we entered into a five-year term loan. As part of the loan agreement, we issued warrants to the lender to purchase approximately 0.3 million shares of our Class A common stock at a strike price of $162.00 per share, or Tranche 1 Warrants.
In September 2024, we entered into the first amendment to the term loan, which, among other things, provides greater flexibility for investments in future insurance subsidiaries. In October 2024, we entered into the second amendment to the term loan, or Amended Term Loan, that resulted in extinguishment of $237.1 million of the term loan, modification of $62.9 million of the term loan, and new borrowings of $137.1 million. The resulting principal amount under the Amended Term Loan is $200.0 million and has a maturity date of October 29, 2030. Interest is payable quarterly and is determined on a floating interest rate calculated on Secured Overnight Financing Rate, with a 1.0% floor, plus an applicable margin ranging from 5.25% to 6.00%, based upon the debt-to-capital ratio payable quarterly.
The Amended Term Loan contains debt covenants that require cash and cash equivalents held in entities other than our insurance subsidiaries to be at least $50.0 million at all times, direct contribution margin on a rolling twelve months to be at least 20% at the end of each fiscal quarter and the surplus of our insurance and Cayman subsidiaries to be at least $125.0 million at the end of each fiscal quarter.
Additionally, in connection with the Amended Term Loan, a new expiration date was established for the Tranche 1 Warrants of January 26, 2027.
In connection with the Amended Term Loan, during 2024, we recognized a loss on extinguishment of debt of $5.4 million and we incurred $2.4 million of debt discount and issuance costs related to the new borrowings, which were capitalized and will be amortized over the life of the Amended Term Loan.
The Amended Term Loan can be repaid at any time through the maturity date as long as we provide at least three business days written notice and pay a prepayment premium of 1.00% applicable between October 29, 2025 to October 25, 2026, and no prepayment premium thereafter. The Amended Term Loan is secured by the assets of Root, Inc. and those of our wholly-owned subsidiary loan parties. In addition, we have pledged 100% of the capital stock of our subsidiaries.
The following summarizes the carrying value of long-term debt as of December 31, 2025 and 2024:
20252024
(dollars in millions)
Principal balance
$200.0 $200.0 
Accrued interest payable
3.3 3.8 
Unamortized discount and debt issuance costs
(3.0)(3.7)
Total$200.3 $200.1 

Historical Timeline

Fiscal YearFiled
2025Feb 25, 2026Showing above
2024Feb 26, 2025
2023Feb 21, 2024
2022Feb 22, 2023
2021Feb 23, 2022
2020Mar 4, 2021

About Debt Disclosures

Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.

Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.

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