Lemonade Q2 Earnings Call Highlights

Key Points

• Lemonade reported strong Q2 growth: In-force premium rose 32.5% year over year to $1.43 billion, while revenue increased 79% to $294 million and gross profit climbed 76% to a record $113 million.
• Profitability remains on schedule: The adjusted EBITDA loss narrowed to $19 million, adjusted free cash flow was positive for the fifth consecutive quarter, and management reaffirmed its expectation for positive adjusted EBITDA in Q4 2026 and for full-year 2027.
• Expansion and efficiency continued: Lemonade launched 14 new state-product combinations, car insurance grew 60%, and its claims-handling expense ratio fell to a record-low 5%; the company also secured $250 million in growth financing at an approximately 9.8% cost.

Lemonade NYSE: LMND reported second-quarter results marked by accelerating in-force premium growth, higher revenue and gross profit, and a narrower adjusted EBITDA loss, while reaffirming its expectation to reach positive adjusted EBITDA in the fourth quarter of 2026.

Chief Executive Officer and Co-founder Daniel Schreiber said in-force premium reached $1.43 billion, up about 32.5% from a year earlier. The result extended the company’s streak of accelerating growth to 11 consecutive quarters. Revenue rose 79% to $294 million, while gross profit increased 76% to a record $113 million.

“We remain on track to deliver our first positive adjusted EBITDA quarter in Q4 of this year, followed by a positive adjusted EBITDA full year 2027,” Schreiber said.

Guidance and financing developments

The company reiterated its guidance for in-force premium and adjusted EBITDA, while raising guidance for gross earned premium and revenue. Management said its updated outlook calls for 33% in-force premium growth in both the third quarter and full year, approximately 69% revenue growth in the third quarter and 65% revenue growth for the full year.

Lemonade also maintained its expectation for a positive adjusted EBITDA result in the fourth quarter. Chief Financial Officer Tim Bixby said the company’s third-quarter and full-year guidance implies fourth-quarter adjusted EBITDA of approximately $8 million.

Schreiber said Lemonade completed its annual reinsurance renewal, which modestly increased the portion of premiums retained by the company while strengthening catastrophe coverage. The updated structure includes named-storm protection that was largely absent under the prior arrangement, he said.

The company also extended its synthetic agents program, securing $250 million in growth financing for spending in 2027 and 2028 at an approximately 9.8% cost. Schreiber said the financing represents more than six percentage points of improvement in the company’s cost of capital and is expected to reduce future interest expense.

Growth spending and operating leverage

Schreiber addressed investor questions about the relationship between growth spending and in-force premium, saying the differing growth rates do not indicate deteriorating marketing efficiency. He said the company has maintained an approximately 3x lifetime-value-to-customer-acquisition-cost ratio while increasing growth investments.

According to Schreiber, growth spending is expensed annually, while the premiums generated by acquired customer cohorts remain on the books and accumulate over time. He said the company expects in-force premium growth to exceed growth-spend growth beginning in 2027, supporting operating leverage and profitability.

Senior Vice President of Finance Nick Stead said growth spend totaled $64 million in the second quarter, up 30%, or $15 million, from a year earlier. Sales and marketing expense rose 30% to reflect the higher spending, while the LTV-to-CAC ratio remained above 3x.

Stead said Lemonade expects growth-spend growth to continue declining below the rate of in-force premium growth in 2027 and beyond. He also said general and administrative expense and technology-development expense should provide more significant operating leverage, though year-over-year comparisons in upcoming quarters could be affected by executive equity awards.

Loss ratio, claims efficiency and expansion

Lemonade reported a gross loss ratio of 60% in the quarter, including 7 percentage points of favorable prior-period development, primarily related to its homeowners multi-peril and car products. Catastrophe impact was 3%, excluding catastrophe prior-period development.

On a net basis, the company recorded five percentage points of favorable prior-period development, including two points related to catastrophe. Bixby said favorable prior-year development totaled $12 million for the quarter and $16 million year to date.

President and Co-founder Shai Wininger highlighted the company’s 5% loss-adjustment-expense ratio, which measures the cost of handling claims. Wininger described it as Lemonade’s best result to date and said it reflected wider use of the company’s technology and artificial intelligence in claims operations. He said the result was a record low across each of Lemonade’s product lines.

“Our competitors spend almost twice as much as we do on handling claims,” Wininger said, referring to an industry average LAE ratio of around 9%.

The company launched 14 additional state-product combinations during the past 100 days, including a push toward nationwide renters-insurance availability and the launch of its autonomous-car product in Colorado and Indiana. Wininger said Lemonade expects further car-insurance state launches and believes the product will be available to a majority of U.S. drivers before the end of 2027.

Car insurance grew 60% year over year in the second quarter, according to management. Cross-sales represented between 40% and 50% of new-to-Lemonade car sales in recent periods.

Profitability, cash flow and leadership transition

Adjusted EBITDA loss narrowed to $19 million from $41 million in the prior-year quarter. Net loss was $43 million, or $0.56 per share, compared with a $44 million loss, or $0.60 per share, a year earlier. Excluding a prior-year one-time tax refund benefit, Stead said the current-quarter net loss represented a 22% year-over-year improvement.

Adjusted free cash flow was positive $19 million, marking the fifth consecutive positive quarter and the eighth positive quarter in the last nine. Operating cash flow was negative $3 million, which Bixby said followed a common seasonal pattern. Lemonade ended the quarter with approximately $1.2 billion in cash and investments, including about $330 million required as regulatory surplus.

Customer count grew 23% year over year, and the company added approximately 166,000 customers during the quarter, compared with roughly 148,000 in the year-earlier period. Premium per customer increased 8%, while annual dollar retention remained sequentially stable at 85%.

At year-end, Bixby will step down as CFO after more than nine years and join Lemonade’s board of directors. Stead, currently the company’s SVP of Finance, will succeed him as CFO. Schreiber said the transition had been planned over several years and that most financial functions already report to Stead.

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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