Core Viewpoint - Lemonade's stock price surged over 30% following the release of its Q2 earnings report, indicating strong market reaction to the company's performance [1] Financial Performance - The company reported a Q2 loss of $0.60 per share, which was better than the market expectation of a loss of $0.81 per share [1] - This loss also improved compared to the same period last year, where the loss was $0.81 per share [1] - Lemonade achieved revenue of $164.1 million in Q2, exceeding analyst expectations and representing a year-over-year growth of approximately 34% from $122 million [1] - The company has consistently outperformed market expectations in both earnings and revenue for the past four consecutive quarters, demonstrating a trend of stability and improvement [1]

Core Viewpoint - Lemonade's stock price surged over 30% following the release of its Q2 earnings report, indicating positive market reaction to the company's performance [1] Financial Performance - The company reported a Q2 loss of $0.60 per share, which was better than the market expectation of a loss of $0.81 per share and also an improvement from the loss of $0.81 per share in the same quarter last year [1] - Revenue for the quarter reached $164.1 million, exceeding analyst expectations and representing a year-over-year growth of approximately 34% from $122 million [1] - Lemonade has consistently outperformed market expectations in both earnings and revenue for the past four consecutive quarters, demonstrating a trend of stability and improvement in its financial performance [1]

Core Insights - Lemonade (LMND) reported $164.1 million in revenue for Q2 2025, a year-over-year increase of 34.5% and a surprise of +1.05% over the Zacks Consensus Estimate of $162.39 million [1] - The company posted an EPS of -$0.60, improving from -$0.81 a year ago, resulting in an EPS surprise of +25.93% [1] Financial Performance Metrics - In force premium at the end of the period was $1.08 billion, slightly above the estimated $1.07 billion [4] - Premium per Customer was reported at $402.00, closely matching the estimate of $402.07 [4] - The number of customers reached 2,693,107, exceeding the estimate of 2,655,423 [4] - The net loss ratio was 69%, better than the estimated 76.4% [4] - The gross loss ratio was reported at 67%, compared to the estimate of 75.4% [4] - Net investment income was $9.4 million, slightly below the estimate of $9.69 million, but representing a year-over-year increase of +16.1% [4] - Ceding commission income was $30.4 million, significantly above the estimate of $25.26 million, reflecting a year-over-year change of +84.2% [4] - Commission and other income reached $11.8 million, surpassing the estimate of $11.3 million, with a year-over-year increase of +45.7% [4] - Net earned premium was reported at $112.5 million, below the estimate of $116.16 million, but still showing a year-over-year increase of +26% [4] Stock Performance - Lemonade's shares have returned -13.2% over the past month, contrasting with the Zacks S&P 500 composite's +1% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Financial Data and Key Metrics Changes - The company reported a 29% year-on-year growth in in-force premium (IFP), reaching just above $1 billion [13][3] - The gross loss ratio improved to 67%, a 12-point improvement compared to Q2 of the previous year, with a trailing twelve-month gross loss ratio of 70% [3][14] - Gross profit increased by over 100% in Q2, with a gross margin of 39%, one of the highest recorded [4][3] - Adjusted free cash flow generation reached $25 million, more than a tenfold increase compared to 2024 [4][17] Business Line Data and Key Metrics Changes - Lemonade Cars saw significant growth, crossing $150 million in IFP, with a gross loss ratio of 82%, marking a 13-point improvement year-on-year [5][6] - The European business concluded Q2 with $43 million in IFP, representing over 200% growth, marking the eighth consecutive quarter of triple-digit growth [9][10] - The gross loss ratio for the European segment improved to 83%, a 15% improvement compared to the previous year [10] Market Data and Key Metrics Changes - The company operates in four key European markets, servicing over 250,000 customers, with a focus on renters and homeowners insurance [8][9] - The U.S. market remains a significant focus, with ongoing efforts to improve profitability through targeted non-renewals [13][67] Company Strategy and Development Direction - The company aims to leverage AI for risk management and profitable growth, with a focus on maintaining a capital-light structure [3][38] - A strategic reduction in the quota share reinsurance program from 55% to 20% reflects confidence in improved loss ratios and capital generation [7][19] - The company plans to continue expanding its geographical footprint and product offerings, particularly in the European market [10][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive EBITDA by the end of next year, with a focus on maintaining low loss ratios and capital efficiency [12][19] - The company anticipates that revenue growth rates will outpace IFP growth rates during the transition period of the reinsurance program [20][19] - Management acknowledged potential headwinds in the second half of the year but remains optimistic about maintaining growth momentum [66][67] Other Important Information - The company reported a net loss of $44 million in Q2, an improvement from a net loss of $57 million in the prior year [17] - A one-time tax refund of approximately $12 million contributed to the financial results, but this is not expected to recur [91] Q&A Session Summary Question: What is your plan with synthetic agents going forward? - The synthetic agent program has been effective in driving growth and will continue to be utilized in 2026 with an expected $200 million of capital available [22] Question: What is the largest impediment to releasing CAR to more states? - The company is currently live in 10 states and plans to increase coverage, with new state launches requiring strategic management of loss ratios [24][25] Question: Does the team believe they are ahead of other AI-first companies? - Management believes they have a significant data edge and a fully integrated AI system that enhances operational efficiency [26][27] Question: Can you discuss the reinsurance change and its impact? - The reduction in quota share reinsurance is primarily a capital management decision, allowing the company to retain more profit while maintaining risk management policies [34][38] Question: What is the outlook for car loss ratios? - The company is seeing a notable improvement in loss ratios from renewal policies compared to initial policies, indicating effective risk selection [61][62] Question: Why has the EBITDA guidance remained unchanged? - The unchanged EBITDA guidance reflects the dynamics of growth spending and its impact on the bottom line, with a focus on long-term profitability [80][82]

Financial Data and Key Metrics Changes - The company reported a 29% year-on-year growth in in-force premium (IFP), reaching just above $1 billion [12][3] - The gross loss ratio improved to 67%, a 12-point decrease from the previous year, with a trailing twelve-month gross loss ratio of 70% [3][13] - Gross profit increased by over 100% in Q2, with a gross margin of 39%, one of the highest recorded [4][3] - Adjusted free cash flow generation was $25 million, more than a tenfold increase compared to 2024 [4] Business Line Data and Key Metrics Changes - Lemonade Cars saw significant growth, crossing $150 million in IFP, with a gross loss ratio of 82%, marking a 13-point improvement from last year [5][6] - The European business concluded Q2 with $43 million in IFP, representing over 200% growth, and an 83% gross loss ratio, which is 15% better than the previous year [8][9] Market Data and Key Metrics Changes - The company operates in four key European markets, servicing over 250,000 customers, with a focus on renters and homeowners insurance [7] - The European market is seen as a diversification benefit with lower catastrophe exposure and a flexible regulatory environment [8] Company Strategy and Development Direction - The company aims to leverage AI for risk management and profitable growth, with a focus on maintaining a low cost structure while expanding [3][4] - A strategic reduction in the quota share reinsurance program from 55% to 20% reflects confidence in improved loss ratios and capital efficiency [6][20] - The company plans to continue expanding its geographical footprint and product offerings, particularly in the car insurance sector [9][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive EBITDA by the end of 2026, with expectations for continued top-line growth despite some headwinds [11][82] - The company anticipates that revenue growth rates will outpace IFP growth rates during the transition period of the reinsurance program [20][39] - Management highlighted the importance of balancing growth and profitability, particularly in the home insurance segment [68] Other Important Information - The company reported a net loss of $44 million in Q2, an improvement from a net loss of $57 million in the prior year [17] - Total cash, cash equivalents, and investments at the end of the quarter were approximately $1.03 billion, up $11 million from the end of 2024 [18] Q&A Session Summary Question: What is the plan with synthetic agents going forward? - The synthetic agent program has been effective in driving growth and will continue to be utilized in 2026, with a significant increase in growth spend expected [22][23] Question: What is stopping Lemonade from releasing CAR to more states? - The company is currently live in 10 states and plans to increase coverage, with new state launches requiring careful management of loss ratios [25][26] Question: Does the team believe they are ahead of other AI-first companies? - Management believes they have a significant data edge and a fully integrated AI system that enhances efficiency and effectiveness compared to competitors [27][28] Question: Can you discuss the reinsurance change and its implications? - The reduction in quota share reinsurance is primarily a capital management decision, allowing the company to retain more profit and reduce dependency on external capital [39][40] Question: What are the drivers of improvement in car loss ratios? - The company is seeing a notable difference in loss ratios between new and renewal policies, with overall improvements in both segments [62][64] Question: Why has the EBITDA guidance remained unchanged? - The guidance reflects the dynamics of growth spending and its impact on the bottom line, with expectations for continued top-line growth without immediate bottom-line improvements [81][84]

Company Performance - Lemonade reported a quarterly loss of $0.6 per share, better than the Zacks Consensus Estimate of a loss of $0.81, and improved from a loss of $0.81 per share a year ago, representing an earnings surprise of +25.93% [1] - The company posted revenues of $164.1 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.05%, and up from $122 million in the same quarter last year [2] - Over the last four quarters, Lemonade has exceeded consensus EPS estimates four times and has also topped consensus revenue estimates four times [2] Future Outlook - The sustainability of Lemonade's stock price movement will depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - The current consensus EPS estimate for the upcoming quarter is -$0.74 on revenues of $180.86 million, and for the current fiscal year, it is -$2.77 on revenues of $694.36 million [7] - The estimate revisions trend for Lemonade was favorable ahead of the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Insurance - Multi line industry, to which Lemonade belongs, is currently in the top 38% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Group 1 - The largest insurance companies in the USA were established nearly a century ago, indicating the industry's long-standing presence and significance [1] - The insurance industry generates trillions of dollars in annual premiums in the USA, highlighting its scale and economic impact [1] - The focus is on identifying and investing in small to mid-cap growth companies in the Canadian and U.S. markets, particularly those in the "new economy" sectors such as software, AI, clean technology, and renewable energy [1] Group 2 - The investment strategy emphasizes long-term investments in high-quality companies that are profitable and cash-generating, especially those in early growth stages [1] - The analyst has over 8 years of active investing experience, primarily in the technology sector, and holds a CFA Charter [1] - The goal is to share top investment ideas through in-depth analyses, focusing on stocks that are undervalued or mispriced relative to their growth potential [1]

[Executive Summary & Q2 2025 Highlights](index=2&type=section&id=Executive%20Summary%20%26%20Q2%202025%20Highlights) [Q2 2025 Performance Overview](index=3&type=section&id=Q2%202025%20Performance%20Overview) Lemonade reported strong Q2 2025 results with accelerating growth, healthy underwriting, and effective expense management, raising full-year guidance - Lemonade achieved its **seventh consecutive quarter of IFP growth acceleration**, alongside **significant improvements** in **gross loss ratio** and **gross profit**[7](index=7&type=chunk)[9](index=9&type=chunk) Q2 2025 Key Financial & Operational Highlights | Metric | Q2 2025 Value | YoY Change | | :----------------------- | :-------------- | :--------- | | In Force Premium (IFP) | $1.08 billion | +29% | | Revenue | $164.1 million | +35% | | TTM Gross Loss Ratio | 70% | -3 points (sequential) | | Q2 Gross Loss Ratio | 67% | -12 points | | Gross Profit | $64.3 million | +109% | | Gross Margin | 39% | +14 points | | Operating Expenses (excl. growth spend) | Declined $1 million | -2% | | Adjusted EBITDA Loss | ($41) million | +5% improvement | | Net Loss | ($44) million | +23% improvement | | Adjusted Free Cash Flow | $25 million | +$23 million | | Cash Flow from Operations | $6 million | +$17 million | [Key Metrics Snapshot](index=2&type=section&id=Key%20Metrics%20Snapshot) Key metrics for Q2 2025 demonstrate significant year-over-year growth in customers and In Force Premium, alongside improved profitability Q2 2025 Key Metrics (in millions) | Metric | Q2 2025 | YoY Change | | :-------------------- | :-------- | :--------- | | Total Customers | 2,693,107 | +24% | | In Force Premium (IFP) | $1,083 | +29% | | Premium Per Customer | $402 | +4% | | Adjusted EBITDA Net Loss | ($41) | Improved from ($43) | | Gross Earned Premium (GEP) | $252 | Increased from $200 | | Adjusted Gross Profit | $64 | Increased from $33 | | Adjusted Free Cash Flow | $25 | Increased from $2 | [Business Performance & Strategic Initiatives](index=4&type=section&id=Business%20Performance%20%26%20Strategic%20Initiatives) [Overall Growth and Operating Leverage](index=4&type=section&id=Overall%20Growth%20and%20Operating%20Leverage) Lemonade achieved accelerating IFP growth and improved loss ratios for seven consecutive quarters, demonstrating operating leverage and nearly tripling gross profit - Lemonade has demonstrated sustained operating leverage through AI and automation, leading to a **significant increase in gross profit** alongside accelerating IFP growth and improving loss ratios[9](index=9&type=chunk) IFP Growth and TTM Gross Loss Ratio Trends | Quarter | IFP YoY Growth Rate | TTM Gross Loss Ratio | | :------ | :------------------ | :------------------- | | Q3 23 | 20% | 88% | | Q4 23 | 22% | 85% | | Q1 24 | 22% | 83% | | Q2 24 | 24% | 79% | | Q3 24 | 26% | 77% | | Q4 24 | 27% | 73% | | Q1 25 | 29% | 73% | | Q2 25 | 29% | 70% | [Lemonade Car Update](index=5&type=section&id=Lemonade%20Car%20Update) Lemonade Car accelerated its growth in Q2 2025 with 12% sequential IFP growth and a 13-point YoY improvement in gross loss ratio to 82%, driven by telematics and expansion - Lemonade Car achieved **12% sequential IFP growth**, outpacing the overall business, driven by successful telematics integration and geographic expansion[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk) - The Car segment's gross loss ratio improved significantly to **82% (13 points YoY)**, the lowest since launch, due to precise risk evaluation enabled by telematics[13](index=13&type=chunk) Lemonade Car IFP and Gross Loss Ratio Trends | Quarter | IFP ($m) | Gross Loss Ratio (GLR) | | :------ | :------- | :--------------------- | | Q1 24 | $117 | 95% | | Q2 24 | $123 | 95% | | Q3 24 | $132 | 92% | | Q4 24 | $122 | 83% | | Q1 25 | $134 | 88% | | Q2 25 | $150 | 82% | [Spotlight: Lemonade Europe](index=6&type=section&id=Spotlight%3A%20Lemonade%20Europe) Lemonade's European business is a significant growth engine, with over 200% YoY IFP growth to $43 million in Q2, contributing over 20% of new customers and demonstrating superior efficiency - European operations provide growth diversification, lower catastrophe exposure, and a regulatory environment that accelerates AI model refinement and pricing accuracy[16](index=16&type=chunk) - Europe's IFP grew **over 200% YoY to $43 million** in Q2, contributing **over 20% of net new customers**, with a **15-point YoY improvement in gross loss ratio** to the low 80s[17](index=17&type=chunk) - The European business exhibits **better gross loss ratios (20 points better)** and **double the new business per growth spend dollar** compared to the U.S. at a similar IFP level[19](index=19&type=chunk) Europe IFP Growth Rate | Quarter | IFP ($m) | Growth Rate | | :------ | :------- | :---------- | | Q1 24 | $12 | 50% (approx) | | Q2 24 | $14 | 100% (approx) | | Q3 24 | $19 | 150% (approx) | | Q4 24 | $24 | 200% (approx) | | Q1 25 | $33 | 200% (approx) | | Q2 25 | $43 | >200% | [Reinsurance Program Renewal](index=7&type=section&id=Reinsurance%20Program%20Renewal) Lemonade renewed its reinsurance program, reducing the proportional quota share from 55% to 20% to retain more revenue and gross profit, with revenue growth expected to outpace IFP during the transition - Lemonade reduced its proportional quota share reinsurance cession from **55% to 20%** for the year starting July 1, 2025, aiming to retain more revenue and gross profit[20](index=20&type=chunk) - The reduction in quota share was made possible by consistent improvements in loss ratios and predictable underwriting performance, with no material change to the capital plan due to improved loss ratios and expanded use of Lemonade Re[21](index=21&type=chunk)[23](index=23&type=chunk) - A lower quota share cession will cause revenue growth rates to outpace IFP growth rates during the gradual transition period, as ceded earned premium ramps down from 55% to 20% over several quarters[23](index=23&type=chunk) [Financial Guidance](index=8&type=section&id=Financial%20Guidance) Lemonade raised its full-year 2025 guidance for IFP, GEP, and Revenue, while reiterating Adjusted EBITDA guidance and expecting positive Adjusted Free Cash Flow for FY 2025 - Lemonade raised its FY 2025 guidance for **IFP, GEP, and Revenue**, while maintaining its FY Adjusted EBITDA guidance[24](index=24&type=chunk) - The company expects to achieve **positive Adjusted Free Cash Flow for FY 2025** and **positive Adjusted EBITDA before the end of FY 2026**[25](index=25&type=chunk) Q3 and Full Year 2025 Guidance | Metric (in millions) | Q3 2025 (Low - High) | Full Year 2025 (Low - High) | | :------------------- | :------------------- | :-------------------------- | | In force premium (IFP) | $1,144 - $1,147 | $1,213 - $1,218 | | Gross earned premium (GEP) | $267 - $269 | $1,036 - $1,039 | | Revenue | $183 - $186 | $710 - $715 | | Adjusted EBITDA loss | ($37) - ($34) | ($140) - ($135) | | Stock-based compensation expense | $17 | $61 | | Weighted avg. common shares | 74 | 74 | [Q2 2025 Detailed Financial Results & KPIs](index=9&type=section&id=Q2%202025%20Detailed%20Financial%20Results%20%26%20KPIs) [Key Operating Metrics](index=9&type=section&id=Key%20Operating%20Metrics) In Q2 2025, IFP grew 29% to $1,083.4 million, customer count increased 24%, and revenue rose 35% to $164.1 million, reflecting strong top-line expansion Q2 2025 Key Operating Metrics | Metric | Q2 2025 Value | YoY Change | | :-------------------------- | :-------------- | :--------- | | In Force Premium (IFP) | $1,083.4 million | +29% | | Customers | 2,693,107 | +24% | | Premium per Customer | $402 | +4% | | Annual Dollar Retention (ADR) | 84% | -4 points | | Gross Earned Premium (

Core Insights - Lemonade Inc. (LMND) is anticipated to show revenue growth in Q2 2025, with expected revenues of $162.4 million, reflecting a 33.1% increase year-over-year [1][9] - The company's earnings are projected to remain flat, with a consensus estimate of a loss of 81 cents, which has widened by 2 cents in the past week [2] Revenue and Earnings Estimates - The Zacks Consensus Estimate for LMND's second-quarter revenues is $162.4 million, indicating a 33.1% increase from the previous year [1][9] - The expected loss per share is pegged at 81 cents, with a narrower estimate of 79 cents indicating a positive Earnings ESP of +2.40% [2][5] Earnings Surprise History - LMND has a strong earnings surprise history, having beaten the Zacks Consensus Estimate in the last four quarters with an average surprise of 12.52% [3] Factors Influencing Q2 Results - The in-force premium is expected to improve, projected between $1.061 billion and $1.064 billion, driven by customer growth and the Metromile acquisition [6][9] - Premium per customer is likely to increase to $402 million due to rate hikes, and gross written premium is expected to rise from successful digital advertising and partnerships [7] - Investment income is anticipated to benefit from a diversified portfolio, with a consensus estimate of $9.7 million [7] Expense Expectations - Sales and marketing expenses are expected to rise due to increased brand and performance advertising [8] - General and administrative expenses are likely to increase due to higher interest expenses from financing agreements [10]

Core Insights - Lemonade's AI-driven insurance model has gained over 2.5 million customers, reflecting a growing trend in customer preference for efficient insurance solutions [1][2][7] - The company aims to increase its in-force premium (IFP) tenfold to $10 billion over the next decade, indicating ambitious growth plans [3][19] - Lemonade's upcoming financial results for Q2 2025 are anticipated to provide further insights into its growth trajectory and could positively impact stock performance [4][16] Business Model and Customer Experience - Lemonade operates in various insurance markets, including renters, homeowners, life, pet, and car insurance, utilizing AI chatbots for quick quotes and claims processing [6][7] - The company has achieved a record 2.5 million policyholders, marking a 21% year-over-year increase, and its IFP surpassed $1 billion for the first time [7][11] - AI models are employed to enhance customer experience and operational efficiency, predicting policyholder behavior and optimizing marketing resources [8][9][10] Financial Performance and Projections - Lemonade's revenue for Q1 was $151.2 million, exceeding guidance, leading to an increased full-year revenue forecast for 2025 to $662 million [12][13] - The gross loss ratio was 73%, below the target of 75%, indicating effective risk management [11] - Adjusted EBITDA losses increased by 38% year-over-year to $47 million in Q1, primarily due to one-off effects from California wildfires [14][15] Valuation and Investment Potential - Lemonade's stock has risen 32% since the Q1 report, with expectations for further gains if Q2 results are strong [16][19] - The stock is currently trading at a price-to-sales (P/S) ratio of 5.2, near its lowest since going public, suggesting potential for further appreciation [17] - Management projects a compound annual growth rate of 30% for IFP over the next decade, making it an attractive long-term investment opportunity [19]