Lemonade Inc (LMND) Q1 2025 Earnings Call Highlights: Strong Revenue Growth Amidst Challenges

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Revenue: Increased 27% year-on-year to $151 million in Q1 2025.
In Force Premium (IFP): Grew 27% to just above $1 billion.
Customer Count: Increased by 21% to 2.5 million.
Premium per Customer: Increased 4% to $396.
Annual Retention Rate (ADR): Decreased to 84% from 86% in the prior quarter.
Gross Earned Premium: Increased 24% to $234 million.
Gross Loss Ratio: 78% for Q1, compared to 79% in Q1 2024.
Adjusted Gross Profit: Improved 25% year-on-year.
Net Loss: $62 million, or a loss of $0.86 per share.
Adjusted EBITDA Loss: $47 million in Q1.
Total Cash, Cash Equivalents, and Investments: Approximately $996 million.
Growth Spend: $38 million in Q1, nearly double the prior year quarter.
Technology Development Expense: Increased 5% to $22 million.
General and Administrative (G&A) Expense: Increased 20% to $36 million.
Warning! GuruFocus has detected 3 Warning Signs with LMND.
Release Date: May 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Lemonade Inc (NYSE:LMND) reported a 27% year-on-year growth in Q1 2025, marking the sixth consecutive quarter of accelerating top-line growth.
The company achieved a 25% year-on-year improvement in adjusted gross profit, despite the impact of California wildfires.
Lemonade Car's quarter-over-quarter in-force premium (IFP) growth outpaced the rest of the business for the first time, signaling strong momentum.
The company is on track to achieve EBITDA breakeven by the end of 2026, with expectations of generating positive adjusted free cash flow in 2025.
Lemonade Inc (NYSE:LMND) has successfully leveraged AI to maintain or reduce fixed costs while significantly increasing its book size, demonstrating strong operational efficiency.
The California wildfires had a notable impact on Q1 results, contributing 16 percentage points to the gross loss ratio.
Annual dollar retention (ADR) decreased to 84%, down from 86% in the prior quarter, partly due to efforts to improve profitability in the home insurance book.
The gross loss ratio for Q1 was 78%, slightly higher than the previous year's 79%, indicating ongoing challenges in managing claims costs.
Operating expenses, excluding loss and loss adjustment expense, increased by 29% year-on-year, driven by growth spend and the impact of the FAIR plan assessment.
Net loss for Q1 was $62 million, or $0.86 per share, compared to a net loss of $47 million or $0.67 per share in the prior year, reflecting ongoing financial challenges.
Q: Can you elaborate on the timeline for reaching EBITDA profitability and what levers will drive this? A: Daniel Schreiber, CEO, explained that Lemonade aims to achieve adjusted EBITDA breakeven by the end of 2026, with 2027 being the first full year of positive adjusted EBITDA. The company expects gross profit to grow faster than fixed costs, driven by AI efficiencies, bringing them closer to profitability.
Q: What impact did the California wildfires have on gross profit, and how are tariffs affecting your full-year guidance? A: Tim Bixby, CFO, noted that the California wildfires had a $44 million gross impact, aligning with prior estimates. The tariff impact is expected to be modest, with single-digit percentage effects on claims. Lemonade is comfortable with its full-year guidance, assuming a modest headwind from tariffs.
Q: How is Lemonade's Car business performing, and what are the plans for geographic expansion? A: Daniel Schreiber, CEO, highlighted that Lemonade Car is growing faster than the rest of the business, with a focus on refining the product before expanding geographically. The company is currently available to 40% of the U.S. market and plans to expand further once the product is optimized.
Q: How is AI impacting Lemonade's competitive position in the insurance industry? A: Daniel Schreiber, CEO, emphasized that Lemonade's AI capabilities allow for better data utilization and risk assessment compared to traditional insurers. The company's digital infrastructure enables it to connect data points effectively, providing a competitive advantage in pricing and customer acquisition.
Q: What percentage of new car sales are cross-sales from existing Lemonade customers? A: Tim Bixby, CFO, stated that about half of new car sales are cross-sales from existing customers, up from a third previously. This trend is expected to continue, leveraging Lemonade's existing customer base for more efficient growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.