Lemonade Q4 2025 Earnings Report

Lemonade EPS Results

• Actual EPS: -$0.29
• Consensus EPS: -$0.41
• Beat/Miss: Beat by +$0.12
• One Year Ago EPS: -$0.42

Lemonade Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $218.07 million
• Beat/Miss: N/A
• YoY Revenue Growth: +53.30%

Lemonade Announcement Details

• Quarter: Q4 2025
• Date: 2/18/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, February 19, 2026
• Conference Call Time: 8:00AM ET

Lemonade (NYSE:LMND) is a technology-driven insurance company that offers digital insurance products through its website and mobile applications. Its platform uses automation, artificial intelligence and behavioral economics to streamline policy applications, claims processing and customer service.

The company provides renters, homeowners, pet, term life and automobile insurance. Product availability varies by location, and Lemonade distributes its offerings through regulated insurance entities and licensed partners. Its services are designed to allow customers to obtain coverage, manage policies and submit claims online.

Lemonade was founded in 2015 by Daniel Schreiber and Shai Wininger and became a publicly traded company in 2020. The company serves customers primarily in the United States and also operates in selected European markets, including Germany, the Netherlands and France. Daniel Schreiber serves as Lemonade’s chief executive officer.

Lemonade Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Company reported strong operating momentum with in‑force premium of $1.24 billion (+31% YoY), revenue +53%, gross profit +73% to $111 million, adjusted EBITDA loss narrowed to $5 million and adjusted free cash flow of $37 million, and management reiterated EBITDA profitability in Q4 2026 and full‑year 2027.
• Positive Sentiment: Launched Lemonade Autonomous Car (initially for Teslas) using telematics that price by mode (park/human/AI); the company says Tesla FSD miles are >50% safer and are currently priced at about 50% of human‑driven miles, which could lower rates and customer acquisition costs over time.
• Neutral Sentiment: Growth spend ramped materially (Q4 growth spend $53 million, +48% YoY; plan for ~$225 million in growth spend for the year) while marketing efficiency stayed strong with an LTV:CAC above 3x, signaling management will continue to trade near‑term investment for faster top‑line expansion.
• Positive Sentiment: Management is investing heavily in AI, a "pricing machine," cross‑sell platform, and a local platform, arguing Lemonade's decade of proprietary data and AI‑first culture provide a durable competitive edge versus legacy incumbents.
• Positive Sentiment: Balance sheet and capital positioning appear supportive of growth with roughly $1.1 billion in cash and investments (about $250 million held as regulatory surplus) and a capital‑light reinsurance/captive structure that management says can support ambitious expansion.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Today's conference call will begin shortly. If you would like to register a question at any time, please press star one on your telephone keypad. Hello, everybody, and welcome to the Lemonade Q4 2025 Earnings Call. My name is Elliot, and I'll be coordinating your call today. If you'd like to register a question during today's event, please press star one on your telephone keypad. And I'd like to hand over to the Lemonade, the Lemonade team. Please go ahead.

[Yael Wissner-Levy, VP of Communications at Lemonade]

Good morning, and welcome to Lemonade's Fourth Quarter 2025 Earnings Call. Joining us on our call today, we have Daniel Schreiber, the CEO and co-founder, Shai Wininger, President and co-founder, and Tim Bixby, Chief Financial Officer. A letter to shareholders covering the company's fourth quarter 2025 financial results is available on our investor relations website at lemonade.com/investor. I would like to remind you that management's remarks made on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent Form 10-K filed with the SEC, and our more recent filings with the SEC.

[Yael Wissner-Levy, VP of Communications at Lemonade]

Any forward-looking statements made on this call represent our views only as of today, and we undertake no obligation to update them. We will be referring to certain non-GAAP financial measures on today's call, including adjusted EBITDA, adjusted free cash flow, and adjusted gross profit, which we believe may be important to investors to assess our operating performance. Reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our letter to shareholders. Our letter to shareholders also includes information about our key performance indicators, including number of customers, in-force premium, premium per customer, annual dollar retention, gross earned premium, gross loss ratio, gross loss ratio ex-CAT, trailing twelve-month loss ratio, and net loss ratio, and a definition of each metric, why each is useful to investors, and how we use each to monitor and manage our business.

[Yael Wissner-Levy, VP of Communications at Lemonade]

With that, I'll turn the call over to Daniel for some opening remarks.

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

Good morning, and thank you for joining us to review Lemonade's results for Q4 2025. By any measure, this was our strongest quarter ever, and it capped a year of excellent financial execution and operating performance. In the fourth quarter, in-force premium grew to $1.24 billion, up 31% year-over-year, and this extended our streak of accelerating growth to nine consecutive quarters. Revenue grew even faster, up 53%, reflecting both growth and improving economics across the business. Indeed, I'm pleased to share that this growth translated directly into profitability metrics. Gross profit increased 73% year-over-year to a record $111 million, and if I zoom out to take in a 3-year perspective, our gross profit has been compounding at an annual compounded growth rate in the triple digits.

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

As a result, adjusted EBITDA loss narrowed to just $5 million in the quarter, placing us on the brink of break-even, and this represented a $19 million improvement year-over-year. Indeed, we generated $37 million in positive adjusted free cash flow in the fourth quarter, capping a strong year of cash generation. 2025 was our second consecutive year where we saw our cash reserves swell. Somewhat unusually, insurance is a business that tends to turn cash flow positive before GAAP accounting positive, though the one almost inevitably follows the other. This then is as good a spot as any to reiterate a long-standing expectation that we will be EBITDA profitable in Q4 of this year and EBITDA positive for the full-year of 2027.

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

We continue to be highly focused on growth and accelerating growth because it's a gift that keeps on giving. Faster growth drives better data and further sharpens our segmentation and pricing capabilities. This powers improving underwriting performance and rapid gross profit growth, and we can swiftly redeploy gross profit, thus generated into profitable growth investments with compelling unit economics, and so the cycle continues. It's energizing to see the flywheel continue to compound even as we scale. What's particularly encouraging is that all this progress is broad-based. Pet, Car, and Europe are all coming into their own as powerful growth drivers, each combining hypergrowth with improving underwriting performance. In our shareholder letter, we highlight critical initiatives we are investing in this year to leverage the latest AI technologies to further enhance our go-to-market operations, pricing, and cross-selling capabilities.

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

We believe that these initiatives can drive durable competitive advantage in pricing and unit economics that support our ability to sustain an industry-leading gross profit growth profile for years to come. One last thing, I wanted to take a moment to draw your attention to our upcoming Investor Day. This event is scheduled to take place in November of this year in New York and online. Specifics will follow, and we certainly hope you'll be able to join us for significant updates on our vision, AI capabilities, and ambitious plans. And with that, I'll hand over to Shai. Shai?

[Shai Wininger, Co-Founder and President at Lemonade]

Thanks, Daniel. A key vector for us is autonomous insurance and specifically Lemonade Autonomous Car, which we announced and launched a few weeks ago, starting with Teslas. As physical objects, such as vehicles, increasingly shift from being controlled by humans to being operated by AI, insurance needs to evolve as well. Historically, the industry has priced auto insurance using proxies, credit scores, marital status, education, and other similar features. We always believe that telematics is a much more precise tool than these blunt proxies, measuring the driving itself rather than something broadly correlated. But when a Car isn't driven by a human, these proxies lose touch with reality altogether. Lemonade Autonomous Car is priced based on three modes: when a Car is parked, when it's driven by a human, and when it's driven by AI.

[Shai Wininger, Co-Founder and President at Lemonade]

By integrating directly with a car's onboard computer, we can tell which mode that car is in at any given moment, distinguishing between various kinds of risk and pricing each accordingly. When the car is driving itself and doing so more safely than a human, the price reflects that. Our system accounts for the vehicle's software version, as well as for the quality and precision of the hardware sensors and computational units. As the car becomes better and safer with software updates or hardware upgrades, our pricing will automatically respond and continue to drop. As of this moment, autonomously driven miles using Tesla's FSD are priced at about 50% of the equivalent human-driven mile, and we expect this to get better over time. We believe this represents a fundamental shift for the industry. As autonomous driving becomes safer and more widely adopted, prices should fall transparently and dynamically.

[Shai Wininger, Co-Founder and President at Lemonade]

With that, I'll hand it off to Tim, who will cover our financial performance and outlook. Tim?

[Tim Bixby, CFO at Lemonade]

Thanks, Shai. Let's start with our Q4 scorecard. In-force premium grew 31% year-on-year to $1.24 billion, driven by customer growth of 23% and premium per customer growth of about 7%. We added about 550,000 new customers in 2025, 35% more than the prior year. Within our reported gross loss ratio of 52%, our favorable prior period development of 9% was driven entirely by non-cat prior period development, primarily from our home and car products. Prior year development, which we report on a net basis, was $11 million favorable in Q4 and about $30 million favorable for the full year.

[Tim Bixby, CFO at Lemonade]

Gross profit increased 73% to $111 million, while adjusted gross profit increased 69% to $112 million, for a gross margin of 48% and an adjusted gross margin of about 49%. These metrics use revenue as their denominator. As a reminder, adjusted gross profit as compared to gross earned premium, was 39% in Q4, up 10 points from 29% in the prior year. Revenue grew 53% to $228 million, while our adjusted EBITDA loss improved to a loss of just $5 million. Notably, revenue grew more than 20 percentage points faster than IFP, a dynamic we expect to continue.

[Tim Bixby, CFO at Lemonade]

Importantly, adjusted free cash flow was positive for the third consecutive quarter at $37 million and has been positive six of the last seven quarters, while operating cash flow was $21 million. We ended the quarter with roughly $1.1 billion in cash and investments, of which about $250 million is required to be held as regulatory surplus. Annual Dollar Retention, or ADR, remains stable as we continued our clean the book efforts in our home business at 85% flat versus the prior quarter. Operating expenses, excluding loss and loss adjustment expense, increased by $30 million or 24% to $154 million in Q4 as compared to the prior year. Let's break those expense lines down a bit.

[Tim Bixby, CFO at Lemonade]

Our other insurance expense grew by just $1 million or 6% in Q4 versus the prior year, as compared with 31% growth rate of our top line IFP. Total sales and marketing expense increased by $17 million or 35%, due primarily to increased growth spend versus the prior year. In Q4, growth spend was $53 million, up 48% as compared to the prior year. Importantly, as we continued to ramp growth spend, our marketing efficiency levels remained stable and strong in the fourth quarter... with an LTV to CAC ratio above 3x in line with prior year. We expect Q1 growth spend to be at a similar level as Q4 and expect a total growth spend of about $225 million for the year.

[Tim Bixby, CFO at Lemonade]

Technology development expense was up 14% year-on-year, $25 million, while G&A expense increased 29% as compared to the prior year to $43 million. The year-on-year increase in G&A expense of roughly $10 million was made up primarily of three items: an increase in non-cash stock compensation expense of about $2 million, an increase in interest expense of roughly $1 million, and an increase in bad debt expense of approximately $5 million. Our headcount increased slightly by about 4% to 1,282 in Q4 as compared to the prior year. Our net loss was $22 million in Q4, or a loss of $0.29 per share, as compared to a net loss of $30 million or $0.42 per share in the prior year.

[Tim Bixby, CFO at Lemonade]

Our adjusted EBITDA loss was $5 million in Q4, dramatically improved versus a $24 million EBITDA loss in the prior year. Our detailed guidance for Q1 and the full-year of 2026 is included in our shareholder letter and represents 32% Q1 and full-year top-line growth year-on-year, roughly 60% full-year revenue growth, and of course, positive full-quarter EBITDA expected in Q4. And with that, I'd like to pass back to Shai to answer some questions from our retail investors. Shai?

[Shai Wininger, Co-Founder and President at Lemonade]

Thanks, Tim. We now turn to our shareholders' questions submitted through the Say Platform. There were a couple of questions from Paperbag about our loss ratio and recent Autonomous Car insurance launch. Thanks, Paperbag. As we have explained in, on a few occasions, before, perhaps in more detail during our most recent Investor Day, we don't think of loss ratio as a standalone target, but rather as one metric or lever to optimize our quest for maximizing gross profit. Sometimes maximal gross profit is achieved by lowering loss ratios, sometimes by raising them. Our pricing strategy is solving for maximal gross profit in absolute dollar terms rather than any ratio. Turning to our Autonomous Car product. With our telematics infrastructure, we're able to evaluate and price the risk associated with every driven mile accurately.

[Shai Wininger, Co-Founder and President at Lemonade]

In the case of Tesla FSD, the data we have shows that miles driven with it are more than 50% safer than when driven by a human. This allows us to drop rates and become more attractive to customers versus peers, which is in turn, lowering our customer acquisition costs and helps us win and retain more business. Responding to your question about our 30% growth, I would think about this Autonomous Car insurance launch as a first step of a much broader strategy and direction that will materialize over time. Indeed, it could take years before we see a step change in Autonomous Car and ownership. And with that said, we believe it is critical to begin now with building the best product for that future with the best experience, pricing, underwriting, and coverage.

[Shai Wininger, Co-Founder and President at Lemonade]

In the near term, as we highlighted in our shareholders' letter, our growth drivers are increasingly diversified, such as we are not reliant on any one segment or product line, to drive growth above 30%. Pet and car are both, seeing IFP growth in the 50s and, Europe in the triple digits, for example. In another question, we were asked how soon Car will expand to remaining U.S. states. We launch new states as soon as we can from a regulatory perspective, but only after we are confident that we can competitively and profitably price risk in each state. Our improving car results, both top and bottom line, speak for that discipline. Launching a state requires thoughtful preparation for marketing, pricing, product, tech, legal, and finance perspectives.

[Shai Wininger, Co-Founder and President at Lemonade]

With our local platform and the agentic automations we're constantly layering into it, we're becoming very effective in this process, collapsing stages that used to take months into days. I believe we now have the most advanced regulatory and compliance process in the market, and we're only getting started. That said, states we've already launched represent roughly 50% of the U.S. car insurance market, a TAM measured in $ many tens of billions, and Car is available to about 60% of our existing customers. We've been launching multiple car states since the beginning of 2025 and expect to continue to launch new states with our Autonomous Car product throughout 2026. By 2027, I expect Lemonade Car product to be available to the overwhelming majority of the U.S. population.

[Shai Wininger, Co-Founder and President at Lemonade]

In another question, Charwak asked: With AI simplifying the insurance industry, what will keep Lemonade in an advantage position over incumbents who might be willing and ready to modernize their software stacks? How does Lemonade continue to differentiate and stay ahead? This is a question we get a lot, and I think the answer comes down to structural and cultural differences that are nearly impossible to overcome. Lemonade was built as an AI-first organization 10 years ago. Every team member was hired into that environment. People who didn't thrive in a tech-first, fast-paced culture like ours moved on. Today, I estimate more than 95% of our team operates with an AI-first mindset. Our product and tech organizations are the core of the company, which makes us product-led, customer-centric tech organization. In many ways, the AI explosion is the moment Lemonade was built for.

[Shai Wininger, Co-Founder and President at Lemonade]

We built the data infrastructure from day one. We collect every signal, and we have been doing so for a decade... We have a highly rated app that customers love and actively use, which keeps them connected and allows us to continuously optimize pricing for the safest customers. Now, compare that to traditional insurers. These are companies built on the foundations of people, not technology. They treat tech as a cost center, not their core. They rely on third-party vendors that are themselves built on legacy systems, which leaves insurers with hundreds of disconnected systems they need to run their business. It's very hard for an organization like that to compete with a full stack tech-first company like Lemonade.

[Shai Wininger, Co-Founder and President at Lemonade]

In fact, in the history of all tech revolutions, you could probably count on the fingers of one hand the companies that dominated prior to the tech revolution and still were there in a dominant position when the dust settled. It would be naive to expect that incumbents will be in this place forever. Of course, they're already talking about increasing investment in AI and sharing a case study here and there. But by the time they make meaningful progress, we believe we'll always be several steps ahead. In the next question, Cybercat asked: How does Lemonade think about AI reducing uncertainty while creating new risk categories? I have to say, Cybercat, that a shrinking TAM does not keep us up at night. Even if AI compresses pockets of TAM, the resulting market opportunity remains essentially limitless relative to our current size.

[Shai Wininger, Co-Founder and President at Lemonade]

But with that said, I agree with the premise of your question. We are already seeing this in our existing suite of products with the expansion of autonomous driving. I think it's true that AI will continue to redefine the insurance industry with regards to the types of risks and, products that are relevant over time, perhaps in ways that aren't immediately obvious today. With that, I'll pass it over to the moderator, and we'll take some questions from-

[Operator]

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. First question comes from Jason Helfstein with Oppenheimer. Your line is open, please go ahead.

[Jason Helfstein, Equity Research Analyst at Oppenheimer]

Hi, everybody. Thanks for taking the question. So, when we look at the numbers, we can clearly see an improvement in marketing efficiency. You obviously talk about it. We can see it kind of in like a contribution margin. What, when I think about what that kind of implies to 2026, it would like that looks like the EBITDA guide would be particularly conservative unless you plan to make other OpEx investments or essentially kind of like lean into potentially pricing for growth. So maybe talk about how you are thinking about that, i.e., reinvesting marketing efficiency into growth, or just that it's conservative. And maybe tie that you made three points in the earnings letter that you plan to lean more into cross-selling, and you kind of automated pricing and improved pricing accuracy.

[Jason Helfstein, Equity Research Analyst at Oppenheimer]

So maybe just, like, take those three comments, and I don't know if you want to link that back to, like, the first question or, you know, if it's connected. Thank you.

[Tim Bixby, CFO at Lemonade]

So I'll take a shot at a subset of that, Jason, and then maybe my partners will jump in. Daniel's joined me here, and we've also asked Nick Stead, our SVP of Finance, to join us to perhaps answer a few questions. If I kind of think, you know, zoom out and think about 2026 generally from a growth perspective, you know, actually, Q4 was a pretty good proxy for how we're thinking about it. So you saw a couple of things happening, really coming together in Q4. Certainly the underwriting or loss ratio side of the business came in very nicely, but from a growth perspective, which is really the core, the focus right now, which is how do we grow effectively?

[Tim Bixby, CFO at Lemonade]

How do we maintain an LTV to CAC that we are comfortable with, number one, and excited about improving over time, number two, and how do we lean into that over time? And so we, we saw that come together nicely in Q4, where we were able to see free up a little more spending, free up a little more capital to invest because we saw nice underwriting results, and we plowed that back into additional growth. So you see overperformance on the top line versus our guidance. That's because we deployed a little more growth spend than anticipated, and that's a good thing. So that's a backward-looking view.

[Tim Bixby, CFO at Lemonade]

If you take a forward-looking view into 2026, we're guiding to our you know very strong track record of being able to maintain a solid LTV to CAC of three or better. What we do see here and there in certain pockets, in certain channels, in certain products, in certain geos, is overperformance, and that's when we're able to lean in. So I think what you see embedded in the guidance is some of that continued goodness, but we have not changed our philosophy of taking everything good that's happening in the most recent period and extrapolating that forward. So I think you're right. There's probably a similar potential to overperform. We think growing a little bit faster each quarter is important, and we grow at a pace of our own choosing. We're guiding to 30%+.

[Tim Bixby, CFO at Lemonade]

Obviously, we, the market will enable us to do more. It's essentially an endless market. But I think for at this point of the year, we're six weeks in, we like what we're seeing in January and February to date, and so that guidance reflects real optimism about being able to spend more, significantly more in 2026 than in 2025. That's a continuing trend, and to potentially see that growth rate accelerate.

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

... Yeah, I agree with everything. The only thing I'd say, Jason, hi, thanks for your question. There isn't designed buffer or conservatism built into the number. We're guiding as best we can, as we always do. We do always look for opportunities to surprise ourselves and you and everybody, but our guiding strategy is to go into pretty much what we have line of sight to. What I think may be making the difference that you're kind of pointing to is captured in some of the things you referenced, which is we are investing in quite a lot of R&D work this year. So we highlighted three areas of investment. There are others that we didn't detail, and even those we just touched on in passing. But we are undergoing very significant investments, really, that compound one another.

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

We, we see 2026 as a year of multiple engineering efforts, quite aside from the fact that the kind of ground beneath our feet is moving because the models keep getting better and better every day. We wake up to a more powerful brain at the very core of what we're doing. But beyond that, Shai mentioned the local platform that is gonna look very different by the end of 2026 than it is at the beginning of the year. Then we spoke about our cross-selling platform, our pricing machine, as we're calling it, and our revenue machine, all big initiatives that should collapse time, increase precision, and ultimately lower expenses. But perhaps some of the delta that you're pointing to and that you're assuming is conservatism is actually gonna be spent on those initiatives.

[Nicholas Stead, SVP of Finance at Lemonade]

Jason, hey, Jason, it's Nick. I just wanted to jump in. On your question around expenses in 2026, you can think about operating expenses as being broken into two chunks. There's growth spend, and then the remainder of operating expenses. Growth spend will continue to increase in 2026, as it has in 2025 and 2024. The remainder of the expense base should generally remain stable or closer to stable, growing into single digits as compared to the top line, which is growing above 30%.

[Operator]

We now turn to John Barnidge with Piper Sandler. Your line is open. Please go ahead.

[John Barnidge, Managing Director and Senior Research Analyst at Piper Sandler]

Thank you very much. I appreciate the opportunity. My question is about Adjusted EBITDA profitable in 2027. How do you think about the target for premiums to surplus at that time? And do you think you can operate at greater leverage given some of the operational scale you see on balance sheet? Thank you.

[Tim Bixby, CFO at Lemonade]

Yeah. So, from an EBITDA perspective, maybe two, two questions in there, perhaps. From an EBITDA perspective, we do expect Q4 this year, 2026, to be fully positive, as well as the full-year of 2027, which would be, which would be the first full year of EBITDA positivity. While we've not indicated growth rates beyond 2026, we have been consistent in our communication that a 30%+ growth rate is our goal, and an accelerating growth rate each quarter is, is also our goal. And so I would expect that ambition to continue into 2027 and beyond, given the immense size of the market that we're in and the markets that we can potentially be in.

[Tim Bixby, CFO at Lemonade]

From a surplus leverage perspective, we noted that we have about $250 million currently that's held as required for surplus. That's relatively quite capital light. We take advantage of a captive structure, and we have reinsurance in place, and other structures that in combination enable us to keep that surplus satisfactory for all regulatory requirements, but also to a minimum, so that we can deploy capital in all the ways we choose to grow the business. We expect that to continue. All of our forecast modeling tells us that we have more than ample surplus to support very ambitious growth rates, even beyond our current growth rate, and with ample cushion left over. And I think you can take real confidence.

[Tim Bixby, CFO at Lemonade]

Our forecasted break-even points for EBITDA has essentially been unchanged for almost four years at this point. And so our visibility is quite good. Our leverage enables us to continue to be capital light, and we are more than sufficiently capitalized to grow at really ambitious paces through 2027 and beyond.

[John Barnidge, Managing Director and Senior Research Analyst at Piper Sandler]

Thank you.

[Operator]

We now turn to Tommy McJoynt with KBW. Your line is open. Please go ahead.

[Tommy McJoynt, Managing Director of Equity Research at KBW]

Hey, guys. Good morning. Thanks for taking our questions. The first one here is obviously there's been a lot of headlines around some advancements in ChatGPT and sort of the integration of carriers with that distribution model. Do you guys have any plans to allow, you know, tools like ChatGPT to actually bind policies for Lemonade, or would the preferred route be to use ChatGPT as a search tool that ultimately leads to Lemonade, where they could bind a policy?

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

I was talking on mute all this time. I'm sorry.

[Operator]

Daniel, please continue.

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

I am so sorry. I am so sorry. Tommy, let me start over. Can you hear me okay now?

[Tommy McJoynt, Managing Director of Equity Research at KBW]

All good.

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

Yeah. Okay. I gave you a wonderful answer, but it was all lost because I was on mute. What I was saying was that we use AI in many aspects of our marketing. At the moment, not on the most front-end aspect of our marketing, but everything other than the skin-deep kind of chat interface, where ChatGPT has integrated with some players. Obviously, from the skin on in, it's all AI. When it comes to that kind of outermost layer, we generally love our own AI for that. Maya does and has done a great job chatting with customers, offering them an incredible experience.

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

That isn't to say that we would never use something like a ChatGPT interface, but it's not something we've launched yet, and if we decide to do that, you'll be the first to know.

[Tommy McJoynt, Managing Director of Equity Research at KBW]

Okay, understood. And then switching gears, as you guys have rolled out, this autonomous vehicle, insurance product on the car side, that's obviously introduces a variable level of, of premium that's charged, to customers on either a, a six-month basis or a monthly basis. Is it your vision that over the long term, most, car insurance will move to a variable, level of pricing rather than, you know, a fixed six-month term premium?

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

Yes and no. We today have both models. We have models where you can pay per mile, and we have others where it's fixed, and it's kind of customer's choice. We don't have all of the options in all the markets right now, but that is where we see this going, and several states are there already. And this is really a choice, a style choice. You know, do you want... You can remember the early days of mobile, where you could pay by minute or by plan and family plans and other things, where you bought buckets and roll over months and all that kind of stuff. We think there's plenty of ways to do pricing around it. The big difference between what we're doing and everybody else is that we know the cost per mile. We are making predictions.

[Daniel Schreiber, Co-Founder and CEO at Lemonade]

Shai spoke about this in his comments earlier. We are making predictions based on a plethora of data that come to us in real time at very high granularity from really high-fidelity machinery, that allows us to know that when you're driving, where you drive, how much you drive, how you drive, and if it's you driving or the car. All of that means that we can price per mile with tremendous precision. If you then prefer to buy a bulk and have a fixed price, that's fine. We can use all of that information in order to price it for you as a fixed price, which we'll correct episodically, and other people prefer to pay per mile, and we offer that as well. Both of them are fueled by the same AI engine and data set underneath.

[Tommy McJoynt, Managing Director of Equity Research at KBW]

Thank you.

[Operator]

As another reminder, if you'd like to ask a question, please press star one on your telephone keypad now. We now turn to Jack Matten with BMO. Your line is open. Please go ahead.

[Jack Matten, Equity Research Analyst at BMO]

Hey, good morning. Just to follow up on the strategic initiatives, and you talked about it in the letter, including the enhanced cross-sell platform. Just wondering if you could unpack that a little bit more. I know it references cross-sell of car and home, and over the past year or so, I think you've de-emphasized home insurance growth a little bit. So just wondering how you view that line of business and as part of Lemonade's overall mix longer term?

[Tim Bixby, CFO at Lemonade]

Sure. So, that was a good tidbit that we put in the shareholder letter to give a feel for the kinds of things, not in a year when we are really continuing to focus on growth, on Autonomous Car, on really nice financial results. We're also continuing to invest in farther-reaching capabilities that we think over time will continue to not only help us maintain our advantages, whether AI-enabled or otherwise, but actually to expand those advantages versus incumbents. And those three areas we noted are really the core of what is a lot of interesting activity going on in terms of investment in future stuff. Cross-selling continues to be important. More than 5% of our customers have multiple policies at this point. That's a really important metric.

[Tim Bixby, CFO at Lemonade]

Almost 20% of our in-force premium, however, is coming from customers with multiple policies. So cross-sell, our ability to cross-sell, which is a really efficient way to increase IFP and accelerate growth without quite as much of a growth spend investment, is important. And then the other two pieces-

[Tim Bixby, CFO at Lemonade]

... really pillars of our underwriting capability, which is pricing, constantly focusing on being able to de-average pricing, price on a car's driver's behavior and not on their credit score, and also to optimize how we allocate growth spend. So those are really three of the real key areas we're continuing to invest, both with current resources and actually we'll grow those resources to some extent over 2026. All of that's embedded in the guidance. All of that we expect to deliver significant future ROI. Yet, when you peel it all apart, our overhead expense, even with those incremental investments, is growing very modestly in the low single digits, from an operating expense standpoint, and almost our entire growth and expense is on growth expense to acquire new customers.

[Tim Bixby, CFO at Lemonade]

That's a theme you've seen now for several years running, and that'll continue, we expect, well into 2026, 2027 and beyond.

[Jack Matten, Equity Research Analyst at BMO]

Got it. Thanks. And just one on the Tesla FSD initiative, and appreciate the color you gave earlier on this. But just wondering if you could unpack the opportunity you see for Lemonade and how much you think it could eventually contribute to the share of your business. And then just given Tesla also has its own insurance offering, can you just talk about how Lemonade's positioning, you know, its offering from a competitive standpoint?

[Tim Bixby, CFO at Lemonade]

We love talking about Lemonade, but we will shy away a bit from talking about Tesla and their plans and their goals. They're a terrific partner and setting a standard in so many ways, but we'll let them speak for their goals and aspirations. From our view, we want to be where our customers are and where our customers are going. We've had a pay-per-mile product in place for years. It's not right for every customer, but it enables us to do what we're best at, which is take deep levels of granular data and use that to price a customer most effectively. And often that's to give the customer a better price. An autonomous vehicle, autonomous driving, falls into that category without question.

[Tim Bixby, CFO at Lemonade]

Pricing the driver of the car, and therefore that driver is a human driver or an AI driver or no driver at all, the risk is still there, and we are best placed in the market to be a, I think, we think to be a partner to Tesla, but also to be a, to kind of lay the groundwork as this part of the car market evolves. We think it helps us accelerate things that change more quickly, play to our best strength, which is agility, and a data-driven platform, and so we're really optimistic about it. We don't... A little premature for us to say what the impact on the financial and forecast model is, and as Daniel said, when it's the right time, we will certainly do that, and you'll be the first to know.

[Jack Matten, Equity Research Analyst at BMO]

Thank you.

[Operator]

Ladies and gentlemen, we have no further questions, so this concludes our Q&A and today's conference call. We'd like to thank you for your participation. You may now disconnect your lines.

Participants

Executives

• Daniel Schreiber, Co-Founder and CEO
• Nicholas Stead, SVP of Finance
• Shai Wininger, Co-Founder and President
• Tim Bixby, CFO
• Yael Wissner-Levy, VP of Communications

Analysts

• Jack Matten, Equity Research Analyst at BMO
• Jason Helfstein, Equity Research Analyst at Oppenheimer
• John Barnidge, Managing Director and Senior Research Analyst at Piper Sandler
• Tommy McJoynt, Managing Director of Equity Research at KBW