Lemonade(LMND) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In force premium (IFP) stood at $419 million, reflecting a 66% year-over-year growth [7][23] - Adjusted EBITDA loss for the quarter was $57 million, compared to a loss of $41.3 million in Q1 2021 [7][28] - Revenue increased by 89% year-over-year to $44 million [25] - Gross loss ratio was reported at 90%, an improvement from 96% in the previous quarter [25][28] Business Line Data and Key Metrics Changes - Premiums from single product customers grew at a rate of 61% year-over-year, while premiums for customers with two products grew at 140%, and those with three products jumped 390% [12] - The introduction of the mega bundle of insurance products (renters/home, life, pet, and car) in Illinois and Tennessee led to a 40% increase in bundle rates in Illinois [9][10] Market Data and Key Metrics Changes - The company reported a significant increase in annual dollar retention (ADR) in Illinois, reaching 90% during Q1 [10] - The majority of premium per customer growth was driven by a shift towards higher value homeowner and pet policies [24] Company Strategy and Development Direction - The strategy focuses on growing with customers through predictable life cycle events, which has shown to significantly boost both top and bottom lines [11] - The company aims to achieve a multiyear average loss ratio below 75%, with ongoing efforts to adjust rates in response to inflation [21][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that inflation has impacted loss ratios, with claims adjusting quickly while rates take longer to align [20] - The company expects peak EBITDA losses in 2022, with a forecast for significant growth in in force premium by approximately 70% during the year [32][65] Other Important Information - The company is in the process of closing the Metromile acquisition, which is expected to enhance its product offerings and market presence [47][48] - Changes in the Board of Directors were announced, including the resignation of Caryn Seidman-Becker and Joel Cutler [13][15] Q&A Session Summary Question: Why has there been no or little insider buying despite the drop in market cap? - Management noted that the stock's decline reflects broader macroeconomic trends rather than company-specific issues, emphasizing their long-term conviction in Lemonade's prospects [33][34] Question: What indicators are tracked to analyze AI engine efficacy and how is inflation managed? - Management discussed the use of multiple metrics for AI efficacy and highlighted efforts to adjust rates in response to inflation, including automatic updates to policy assessments [36][38][41] Question: Will Lemonade release loss ratios on a byproduct basis? - Management indicated that while they understand the interest, they must balance transparency with competitive considerations, suggesting an Analyst Day may be held to share more information [43][44][45] Question: Update on the Metromile acquisition and integration? - Management confirmed that most preconditions for closing the Metromile deal have been met, with expectations for completion in Q2 [47][48] Question: Can you provide more color on the split between new and renewal customers? - Management stated that the focus has shifted towards expanding existing customers, with improvements in annual dollar retention noted [70] Question: What is the outlook for expenses post-Metromile acquisition? - Management expects a step-up in expenses upon consolidation but anticipates cost efficiencies as redundant costs are eliminated over time [93][96]