Lemonade revenue jumps 79% as path to profitability narrows

Lemonade reported Q2 revenue of $294 million, up 79% year over year, as in-force premium reached $1.43 billion.

"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," Chief Executive Officer and Co-founder Daniel Schreiber said.

The company's gross profit climbed 76% to a record $113 million. Net loss narrowed to $43 million, or 56 cents a share, from $44 million, or 60 cents, a year earlier. Adjusted EBITDA loss shrank to $19 million from $41 million, while adjusted free cash flow turned positive for the fifth consecutive quarter at $19 million.

The results extend Lemonade's streak of accelerating in-force premium growth to 11 consecutive quarters. The company raised its full-year revenue guidance to approximately 65% growth and reiterated its expectation for positive adjusted EBITDA in the fourth quarter.

In-force premium rose 32.5% year over year to $1.43 billion, matching the company's 33% growth guidance for the third quarter and full year. Customer count grew 23% to roughly 166,000 new customers added during the quarter, while premium per customer increased 8%. Annual dollar retention held steady at 85%.

Lemonade's car insurance business expanded 60% year over year, with cross-sales representing 40% to 50% of new car policies. The company launched 14 new state-product combinations in the past 100 days, including its autonomous-car product in Colorado and Indiana.

The gross loss ratio came in at 60%, including 7 percentage points of favorable prior-period development. Catastrophe impact was 3%. On the expense side, the claims-handling expense ratio fell to a record-low 5%, compared with an industry average of about 9%, President and Co-founder Shai Wininger said.

Growth spending totaled $64 million in the quarter, up 30% from a year earlier, while the lifetime-value-to-customer-acquisition-cost ratio remained above 3 times. The company expects growth-spend growth to trail in-force premium growth beginning in 2027, supporting operating leverage.

Lemonade secured $250 million in growth financing at an approximately 9.8% cost, which management said represents more than six percentage points of improvement in its cost of capital. The company ended the quarter with about $1.2 billion in cash and investments, including roughly $330 million required as regulatory surplus.

Chief Financial Officer Tim Bixby will step down at year-end after more than nine years and join the board of directors. Senior Vice President of Finance Nick Stead will succeed him. Schreiber said the transition had been planned over several years.

The guidance raise signals management expects accelerating demand to drive operating leverage. Investors will watch the Q3 earnings report for further progress on the path to positive adjusted EBITDA.

This article is for informational purposes only and does not constitute investment advice.