Lemonade NYSE: LMND reported what executives described as an “excellent quarter” for the first quarter of 2026, pointing to accelerating growth, improving underwriting results, and narrowing losses as the insurtech continues to scale its portfolio and retain more premium following a reinsurance transition.
Growth acceleration and higher premium retention
CEO and co-founder Daniel Schreiber said in-force premium (IFP) reached $1.33 billion, up 32% year-over-year, extending what he called Lemonade’s “streak of accelerating growth to 10 consecutive quarters.” He added that revenue increased 71%, aided by a “recent reinsurance transition and the resultant higher premium retention.”
CFO Tim Bixby said the 32% IFP growth was driven by 23% customer growth and 7% growth in premium per customer. Lemonade added 158,000 new customers in Q1, up 37% from roughly 115,000 a year earlier, according to Bixby.
Schreiber also emphasized marketing efficiency, saying that since Q1 2023 the company has increased growth spend by roughly 200% while keeping its lifetime value (LTV) to customer acquisition cost (CAC) ratio above 3x, which he attributed to Lemonade’s “proprietary LTV AI” and increased bundling activity.
Profitability metrics improve; cash flow trends remain a focus
Lemonade reported gross profit of $100 million, up 159%, while adjusted gross profit rose 119% to $101 million. Bixby said both gross margin and adjusted gross margin were 39% in Q1, using revenue as the denominator. On an adjusted gross profit basis compared to gross earned premium, the metric was 33% in Q1, up from 20% in the prior year.
Bixby noted that the prior-year quarter included “the impact of significant California wildfires as well as a California FAIR Plan assessment,” recorded in Q1 last year.
Adjusted EBITDA loss improved to $17 million, compared with a $47 million loss in the prior-year period. Net loss narrowed to $36 million, or $0.47 per share, from a $62 million loss, or $0.86 per share, a year ago.
Schreiber reiterated management’s expectation that Q4 2026 will be EBITDA positive, and that the full year 2027 will also be EBITDA positive.
On cash flow, Bixby said adjusted free cash flow was positive for the fourth consecutive quarter at $17 million and has been positive in seven of the last eight quarters. Operating cash flow was negative $1 million, which he described as a common seasonal pattern. The company ended Q1 with about $1.1 billion in cash and investments, and Bixby said roughly $290 million is required to be held as regulatory surplus.
Pet reaches $500 million IFP milestone; bundling and retention commentary
President and co-founder Shai Wininger said pet insurance became Lemonade’s largest line of business and surpassed $500 million of IFP, becoming the first product in the company’s portfolio to reach that milestone. Wininger said that in less than six years from launch, Lemonade has become “the most searched pet insurance brand in the U.S.” and “the fourth largest carrier.”
Wininger cited several growth drivers for pet, including cross-sell opportunities to Lemonade’s existing customer base. He said $85 million of current pet IFP was sourced from existing customers and described it as “CAC free.” He also pointed to diversified distribution across direct-to-consumer channels and partnerships, alongside what he called a “structural expense advantage” from AI-driven automation in claims management, noting pet is a “high frequency, low severity product” that fits end-to-end automation.
Addressing shareholder questions, Wininger explained that annual dollar retention (ADR) remains pressured by a targeted homeowners non-renewal initiative intended to reduce CAT-exposed business. He said the effort “has largely wrapped up by the end of 2025,” and that the headwind should fade as affected cohorts roll off the ADR calculation. Excluding homeowners, he said ADR improved more than 300 basis points year-over-year.
On multi-line customers, Wininger said about 5% of customers have multiple lines, but he highlighted a larger impact when measured in dollars: “As of the end of Q1, 18% of total IFP is bundle.” He said cross-sold business is often acquired with little to no CAC, supporting profitability and giving Lemonade more flexibility to invest in growth while maintaining the LTV-to-CAC ratio.
Reinsurance transition, expenses, and stock-based compensation
Bixby detailed expense trends, saying operating expenses excluding loss and loss adjustment expense rose $32 million, or 25%, to $159 million. Other insurance expense declined $2 million, or 8%, year-over-year; Bixby said the prior-year period included a $7 million California FAIR Plan assessment. Sales and marketing expense increased about $23 million, or 53%, reflecting higher growth spend. Growth spend was $54 million, up 43% year-over-year, and Bixby said marketing efficiency remained stable with an LTV-to-CAC ratio above 3x.
He said Lemonade expects Q2 growth spend to rise about 12% versus Q1, and expects total growth spend of about $235 million for full-year 2026.
Technology development expense increased 22% to $27 million, while G&A rose 18% to $42 million. Bixby said the year-over-year increase in G&A was primarily due to higher stock-based compensation and interest expense, while noting G&A improved sequentially and was down about $1 million from the prior quarter.
Bixby said expected stock-based compensation expense for the year is approximately $95 million, higher than previous guidance primarily due to multi-year equity grants awarded to the two founders. In response to an analyst question, Bixby described the increase as “a step up” that becomes a new base level, while calling the founder grants “unique” and multi-year in nature, with an eight-year view and some performance-based vesting components over the next two years.
On the reinsurance transition, Bixby said the company’s ceding rate has moved in Lemonade’s favor since its July renewal. He said Q1’s cede rate was around 30%, down from a peak of 55% last year; he expects it to move to roughly 25% in Q2 and normalize around 20% in Q3, consistent with what the company previously announced. Looking ahead to the next renewal, Bixby said Lemonade has “optionalities” and that it is “unlikely” the company would cede at a higher rate, but final terms had not yet been determined.
Car insurance momentum and autonomous vehicle underwriting
Schreiber fielded multiple questions on Lemonade’s car insurance business and an autonomous vehicle-related initiative. He said Lemonade’s new approach, which recognizes AI as a driver and prices policies accordingly, has been “very well received.” He added that conversion rates for those policies are nearly twice the company’s average, describing it as about a 70% increase for such customers. Schreiber said the rollout has launched in two places and will expand throughout the year, but that the impact on reported financials is still modest.
On the broader car business, Schreiber said growth has accelerated sharply, citing car growing around 60% in the quarter, compared with much lower growth rates a year earlier. He said car is still a modest portion of IFP, but “something like a third” of sales in the last quarter came from car. Schreiber also emphasized Lemonade’s competitive positioning, stating that more than 90% of its customers have continuous telemetry enabled, which he said allows more precise pricing than traditional proxy variables.
Asked about operating leverage from automation, Bixby described expenses as falling into variable, fixed, and discretionary buckets, with growth spend as the clearest discretionary lever. Schreiber pointed to claims handling as a key area where AI automation is showing up, citing a loss adjustment expense (LAE) ratio of 6%, which he called “best in class.” In a later exchange, Bixby and SVP of Finance Nick Stead said LAE improvements are not driven by claims denial rates, and Stead added that claims without payment “generally don’t have cost attached to them.”
For outlook, Bixby said updated Q2 and full-year 2026 guidance was provided in the shareholder letter, with a 32% top-line growth rate implied for Q2 and 33% for the full year. He said the guidance implies roughly 77% revenue growth in Q2 and roughly 63% revenue growth for the full year, while reiterating the company expects a positive full quarter of EBITDA in Q4 2026.
About Lemonade NYSE: LMND
Lemonade, Inc NYSE: LMND is a New York–based technology-driven insurance carrier that leverages artificial intelligence and behavioral economics to streamline the purchase and management of policies. Founded in 2015, the company offers renters, homeowners, pet, term life and car insurance products tailored for digitally savvy consumers. By automating underwriting and claims processing through chatbots and machine learning, Lemonade aims to deliver a more transparent and user-friendly experience than traditional insurers.
The company's product suite includes standalone policies for renters and homeowners, customizable pet insurance plans, and term life coverage with simple online applications.
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