Lemonade Q3 Earnings Call Highlights

Key Points

• Growth accelerated: In-force premium rose 34% year over year to $1.55 billion, revenue increased 73% to $336 million, and gross profit climbed 48% to a record $118 million.
• Profitability outlook remained positive: The adjusted EBITDA loss narrowed to $20 million from $26 million a year earlier, and Lemonade forecast $5 million to $9 million of adjusted EBITDA in Q4. The net loss widened to $44 million, partly due to higher stock-based compensation and interest expense.
• Growth came with cost and claims pressures: Lemonade Car in-force premium grew 63%, while higher pet insurance costs and elevated European catastrophe losses weighed on loss ratios. The company reported $27 million of adjusted free cash flow and ended the quarter with about $1.2 billion in cash and investments.

Lemonade NYSE: LMND reported accelerating premium growth and a narrower adjusted EBITDA loss in the third quarter of 2026, while reaffirming its expectation of reaching positive adjusted EBITDA in the fourth quarter.

The insurer’s in-force premium rose 34% year over year to $1.55 billion, marking its 12th consecutive quarter of accelerating growth, CEO and Co-Founder Daniel Schreiber said on the earnings call. Revenue climbed 73% to $336 million, and gross profit increased 48% to a record $118 million.

Adjusted EBITDA loss improved to $20 million from $26 million a year earlier. The net loss widened to $44 million, or $0.56 per share, from $38 million, or $0.51 per share. SVP of Finance Nick Stead said the divergence between the two measures largely reflected higher stock-based compensation and interest expense.

Profitability Outlook and Spending

Lemonade expects fourth-quarter adjusted EBITDA of $5 million to $9 million and reiterated its expectation of positive adjusted EBITDA for full-year 2027. At the high end of its guidance range, the company anticipates 33% in-force premium growth for both the fourth quarter and full year, Stead said. Its outlook also implies roughly 52% fourth-quarter revenue growth and 67% revenue growth for 2026.

CFO Tim Bixby said Lemonade expects to spend more in absolute dollars on growth next year, although the rate of increase in that spending is declining. He said management tends to reinvest additional available funds in growth opportunities, often in Lemonade Car.

Operating expenses, excluding loss and loss adjustment expense, rose $51 million, or 36%, from a year earlier. Sales and marketing expenses increased 44%, driven by higher growth spending, while general and administrative expenses rose 45%, primarily because of higher stock-based compensation and interest expense and the absence of prior-year one-time benefits.

Stead said growth spending is expected to increase at a significantly slower rate beginning in the fourth quarter. He also expects stock-based compensation to stop driving year-over-year expense growth beginning in the second quarter of 2027, when the company laps executive awards made earlier this year.

Adjusted free cash flow was positive for a sixth consecutive quarter at $27 million, while operating cash flow was $7 million. Lemonade ended the quarter with approximately $1.2 billion in cash and investments, including about $350 million required as regulatory surplus, Bixby said.

Car Growth and Cross-Sales

Lemonade Car’s in-force premium grew 63% year over year. President and Co-Founder Shai Wininger said the product is available in 14 states following launches in Missouri, Florida and Pennsylvania, reaching more than half of the U.S. population.

Bixby said Lemonade Car’s calendar-quarter loss ratio was about 63%, including a meaningful benefit from favorable prior-period development. Excluding that effect, the product’s loss ratio was trending in the low- to mid-70s, he said.

The company’s autonomous car product has expanded to six states since launching earlier this year. Wininger said conversion among Tesla owners was roughly 2.2 times the rate seen across Lemonade’s broader car product. He added that Lemonade has active relationships with multiple major carmakers beyond Tesla and expects more brands to become available through the autonomous product over time.

Across the business, sales to existing customers surpassed $100 million year to date and were growing at twice the rate of overall in-force premium, Stead said. Bundled policies accounted for a share of total in-force premium that was approaching 20% at quarter-end.

Wininger also said Lemonade’s renters product had reached nationwide availability. Bixby said that milestone could expand the company’s access to potential partners that require nationwide coverage, including property management businesses.

Loss Ratios and AI Plans

The company reported a gross loss ratio of 65% for the quarter, including about two percentage points of favorable prior-period development, primarily from its car and renters products. Its trailing 12-month loss ratio was 60%, which Stead described as healthy relative to the company’s history and benchmarks.

Stead said rising veterinary costs were putting pressure on the pet insurance loss ratio. Lemonade is taking rate increases to address the trend, but he said those changes would take several quarters to flow through its financial results. He identified the pet loss ratio as the primary reason the company raised its revenue outlook while leaving adjusted EBITDA guidance stable.

In Europe, the quarterly loss ratio was elevated, with catastrophes and large losses accounting for 29 points, Stead said. The company is also pursuing targeted rate increases there. He noted that a shift toward car insurance and competitive pricing in some segments could modestly increase the overall loss ratio over time.

Management also discussed plans to support customers’ personal AI agents through Lemonade OS. Schreiber said the company was not yet seeing significant volumes from personal agents, but believes the technology could change insurance distribution in Lemonade’s favor. The company plans to provide more detail at its Nov. 17 investor day in New York.

About Lemonade (NYSE:LMND)

Lemonade, Inc is a technology-driven insurance company that offers insurance products through digital platforms, including its mobile application and website. The company uses artificial intelligence, automation and data analytics to support policy purchasing, customer service and claims processing.

Lemonade's product offerings include renters, homeowners, car, pet and term life insurance. Coverage and product availability vary by jurisdiction, and some policies are provided through regulated insurance subsidiaries or underwritten in partnership with other insurers.

Founded in 2015 by Daniel Schreiber and Shai Wininger, Lemonade serves customers in the United States and selected European markets, including Germany, the Netherlands, France and the United Kingdom.

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