Lemonade, Inc. Q1 FY2025 earnings call

• Daniel Schreiber highlighted strong top-line growth for Q1 2025, with six consecutive quarters of accelerating top-line growth. AI is core to Lemonade's culture, differentiation, and strategy, contributing to the P&L. They expect EBITDA breakeven by the end of 2026, reiterate EBITDA guidance for 2025, and modestly raise expectations for gross earned premium and revenue. - Michal Langer discussed Lemonade Car's momentum, including 60% conversion rate jump from day zero telematics, cross-sales improvement, and geographic expansion to Colorado. - Tim Bixby reviewed Q1 financial results, including in force premium, customer count, gross earned premium, revenue, loss ratios, operating expenses, and provided Q2 and full-year 2025 guidance.

In Q1 2025, Lemonade's in force premium grew 27% to just above $1 billion, with customer count increasing by 21% to $2.5 million. Premium per customer increased 4% to $396. Gross earned premium in Q1 increased 24% to $234 million, in line with IFP growth. Revenue in Q1 was $151 million, up 27% year-on-year. The gross loss ratio was 78% for Q1, with ex-CAT gross loss ratio at 59%. Gross profit increased 11% year-on-year, while adjusted gross profit increased 25% year-on-year.

• Reiterate expectation of achieving EBITDA breakeven by the end of 2026. - Reiterate EBITDA guidance for 2025 and modestly raise expectations for gross earned premium and revenue. - Expect positive adjusted free cash flow in 2025 despite California wildfires impact. - Q2 2025 IFP expected between $1.061 billion and $1.064 billion, gross earned premium between $246 million and $248 million, revenue between $157 million and $159 million, and adjusted EBITDA loss between $44 million and $41 million. - Full-year 2025 IFP expected between $1.203 billion and $1.208 billion, gross earned premium between $1.028 billion and $1.031 billion, revenue between $661 million and $663 million, and adjusted EBITDA loss between $140 million and $135 million.

• Impact of California wildfires on Q1 results, contributing 16 percentage points to gross loss ratio. - Evolving tariff environment, particularly on imported auto parts, which could increase loss trends. - Potential impact of inflation resurgence on the business.

Q: About subrogation benefit from the California wildfires.

A: Daniel Schreiber said they sold subrogation rights for the Eaton fire at a healthy ratio and there's potential for additional recoveries from the Palisades fire.

Q: On FAIR plan assessment in California.

A: Daniel Schreiber stated they expect to recoup over time, with a 50% limit and a two-year period to resolve.

Q: On Car business states.

A: Daniel Schreiber mentioned focus on experimentation and growth in Car, but not specific states yet.

Q: On retention ratio.

A: Tim Bixby discussed ADR, noting efforts to improve profitability had an impact, and expected ADR to continue its trajectory over time.