Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lemonade Inc (LMND, Financial) reported a 24% growth in enforced premium, reaching $889 million, and achieved cash flow positivity with a $48 million increase in net cash flow.
- The company delivered a 73% gross loss ratio, marking its strongest result in four years, and a 71% year-over-year growth in gross profit.
- Lemonade Inc (LMND) has been able to improve its IFP per employee for the 11th consecutive quarter, showcasing operational efficiency.
- The company is leveraging technology and automation to drive efficiency, with operating expenses remaining stable despite increased growth spending.
- Lemonade Inc (LMND) plans to expand its auto insurance offering to additional states in 2025, focusing on cross-selling to existing customers and acquiring new ones.
Negative Points
- The company experienced elevated catastrophic-related losses, although it managed to maintain a strong gross loss ratio.
- Annual dollar retention slightly declined to 87% from the previous quarter's 88%, attributed to efforts to reduce less profitable portions of the home insurance book.
- Operating expenses increased by 27% year-over-year, driven by a $27 million increase in growth acquisition spending.
- The net loss for Q3 was $68 million, a 10% decline compared to the third quarter of 2023, primarily due to increased growth spending.
- The gross loss ratio improvement was partly offset by a large loss in the auto business from a pre-acquisition claim, impacting the gross loss ratio by about two points.
Q & A Highlights
Q: What is the expansion plan for Lemonade auto insurance?
A: Shai Wininger, President and Co-Founder, stated that Lemonade plans to roll out auto insurance in several additional states in 2025, prioritizing those with attractive lifetime value dynamics and favorable regulatory environments. The growth will come from cross-selling to existing customers and acquiring new ones.
Q: How do you expect cash flow to improve next year, and when will you be consistently cash flow positive?
A: Daniel Schreiber, CEO, mentioned that Lemonade expects to see net cash flow consistently positive from here on out, with operating cash flow becoming wholly positive by the end of next year. EBITDA is expected to follow suit in 2026.
Q: Can you explain the guidance for the upcoming quarter and why it seems slightly lower despite a strong Q3?
A: Daniel Schreiber explained that Q3 is typically the strongest growth quarter, and while Q4 will see slightly less growth spend, the company remains confident in its second-half outlook. The guidance reflects typical conservative assumptions on loss ratios and growth spend.
Q: Are there any advancements in AI that could impact the business in the next 12 to 18 months?
A: Daniel Schreiber confirmed that Lemonade is harnessing advancements in AI, which have been integral since the company's founding. The company is experiencing operational efficiencies, with top-line growth and reduced operating expenses, and plans to showcase more at their upcoming Investor Day.
Q: How is the cross-selling of auto insurance to renters policyholders progressing?
A: Daniel Schreiber noted that while cross-selling has been stable, improvements in the car loss ratio will allow Lemonade to leverage cross-selling opportunities more effectively. The company plans to share more detailed insights at their Investor Day.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
