Lemonade, Inc. Q4 FY2024 earnings call

• Fourth quarter was the best ever across key performance indicators, featuring 26% IFP growth, marking the fifth consecutive quarter of accelerating top-line growth. - 2024 was cash flow positive at $48 million, representing the first cash flow positive year. - Loss ratio improved significantly, with the TTM loss ratio ending at 73% and Q4's loss ratio at 63%. - The Lemonade team handled California wildfires effectively, using AI platform and reinsurance programs, with an expected ~$20 million EBITDA impact from the fires. - Growth spend in 2024 more than doubled, reaching $122 million, with Q4 growth spend at $36 million.

In-force premium grew 26% to $944 million, with customer count increasing by 20% to $2.4 million. Premium per customer increased 5% to $388. Gross earned premium in Q4 increased 25% to $226 million. Revenue in Q4 increased 29% to $149 million. Gross profit doubled year-over-year to $167 million. Adjusted free cash flow was $27 million in Q4, and 2024 overall was cash flow positive to the tune of $48 million. The gross loss ratio for Trailing Twelve Month (TTM) ended at 73%, with Q4's gross loss ratio at 63%.

• 2025 IFP growth is expected at 28%. - For the first quarter of 2025, in-force premium is expected between $997 million and $1 billion, gross earned premium between $229 million and $231 million, revenue between $143 million and $145 million, and adjusted EBITDA loss between $49 million and $46 million (including ~$20 million impact from California fires). - Full year 2025 in-force premium is expected between $1.203 billion and $1.208 billion, gross earned premium between $1.025 billion and $1.028 billion, revenue between $655 million and $657 million, and adjusted EBITDA loss between $140 million and $135 million (including ~$20 million impact from California fires).

• Risks detailed in SEC filings, including those in the Q3 2023 Form 10-Q. - Impact of California wildfires on EBITDA, with an expected ~$20 million impact.

Q: On the auto market and path to profitability, how is the path to GAAP net income profit going forward?

A: Shai Wininger mentioned the path from product mix shift, being on track to be EBITDA positive exiting 2026, with GAAP profitability expected within a year thereafter.

Q: On business mix shift and LTV to CAC, how does business mix shift affect LTV to CAC?

A: Shai Wininger stated historically mix change hasn't significantly altered LTV to CAC, with a 3:1 ratio being reliable and continuing to spend where LTV to CAC remains in the target range.

Q: Besides California fires, any other developments since Analyst Day?

A: Daniel Schreiber said everything is on track with the Investor Day, with Q4 coming nicely, CAC experience rounding to 0, and strong trends in European customers, pet business, etc.

Q: On growth spend in 2025 and beyond, is growth spend likely to stay same in absolute terms?

A: Daniel Schreiber said growth spend will continue to grow in absolute terms, but the growth rate will decline.

Q: On auto waitlist, 700,000, how to think about it?

A: Daniel Schreiber said the car product has pent-up demand, is live in states comprising ~25% of US population, and will add states and accelerate in 2026.

Q: On IFP guide 28% vs 30% goal, what's keeping IFP growth from hitting 30%?

A: Shai Wininger said balancing short-term and long-term growth, tracking to breakeven and profitability, with growth on track with the Investor Day.

Q: Changes in car market since Investor Day?

A: Daniel Schreiber said there's continued progress in trials, with things moving along as hoped or slightly ahead.

Q: On car gross loss ratio improvement, durability?

A: Daniel Schreiber said structure, process, and automation for filings have improved, expecting continued improvement