• Revenue: Increased 29% year-over-year to $149 million in Q4 2024.
• Gross Profit: Doubled year-over-year to $167 million in 2024.
• Adjusted Free Cash Flow: $27 million in Q4 2024, $48 million for the full year.
• Gross Loss Ratio: 63% in Q4 2024, improved from 77% in Q4 2023.
• Net Loss: $30 million in Q4 2024, or $0.42 per share.
• Adjusted EBITDA Loss: $24 million in Q4 2024.
• Enforced Premium: Grew 26% to $944 million in Q4 2024.
• Customer Count: Increased by 20% to 2.4 million.
• Premium per Customer: Increased 5% to $388.
• Annual Dollar Retention: 86%, down 1% point year-over-year.
• Gross Earned Premium: Increased 25% to $226 million in Q4 2024.
• Total Cash Equivalents and Investments: Approximately $1 billion at the end of Q4 2024.

• Warning! GuruFocus has detected 4 Warning Signs with LMND.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lemonade Inc (NYSE:LMND) achieved its first cash flow positive year in 2024, a year ahead of expectations, with a positive free cash flow of $48 million.
• The company reported a significant improvement in its gross loss ratio, ending the year at 73%, which is 12 points better year-over-year.
• Lemonade Inc (NYSE:LMND) experienced a 26% growth in enforced premium (IFP) and a 20% increase in customer count, reaching 2.4 million customers.
• Gross profits doubled year-over-year to $167 million, marking a record high for the company.
• The company plans to ramp up growth spending by approximately 40% year-over-year, indicating a strong commitment to future growth.

Negative Points

• The California wildfires had a significant impact, with an expected $20 million hit to the company's financials.
• Annual dollar retention (ADR) decreased by 1% point year-over-year, partly due to efforts to reduce less profitable portions of the home insurance book.
• Operating expenses, excluding loss and loss adjustment expenses, increased by 38% to $124 million in Q4, driven by increased growth spending.
• The company reported a net loss of $30 million in Q4, although this was an improvement from the previous year.
• Lemonade Inc (NYSE:LMND) is still in the process of expanding its car insurance product, which is currently only available in eight states, limiting its immediate growth potential in this segment.

Q & A Highlights

Q: Can you discuss Lemonade's path to GAAP net income profitability and how the guidance for 2025 fits into this? A: Daniel Schreiber, CEO, explained that Lemonade's path to profitability involves a shift in product mix, particularly with car insurance. The company aims to be EBITDA positive by the end of 2026, with GAAP profitability expected roughly a year thereafter. The mix of products can shift without fundamentally changing cash flow dynamics, providing confidence in these projections.

Q: How does Lemonade plan to manage growth spend in 2025 and beyond? A: Daniel Schreiber, CEO, stated that growth spend will continue to increase in absolute terms but at a declining growth rate percentage-wise. This approach balances growth with achieving EBITDA break-even. The company can adjust growth spend based on improvements in LTV/CAC and other positive impacts.

Q: What is Lemonade's strategy for expanding its car insurance business, and how does it plan to compete with incumbents? A: Daniel Schreiber, CEO, emphasized that Lemonade will not compete directly with major insurers on ad spend. Instead, the company will leverage its existing customer base and telematics technology to offer competitive pricing. Lemonade is conducting experiments to optimize its approach before scaling up significantly.

Q: How is Lemonade addressing the impact of the California wildfires on its financials? A: Daniel Schreiber, CEO, noted that the California wildfires resulted in approximately $45 million in gross losses, primarily from homeowners' policies. However, reinsurance mitigated the net impact to about $20 million. The company has a conservative underwriting strategy and strong reinsurance programs to manage such events.

Q: What are the expectations for Lemonade's growth in enforced premium (IFP) and rate adequacy in 2025? A: Daniel Schreiber, CEO, mentioned that Lemonade expects IFP growth of 28% in 2025, slightly below the 30% target for 2026 and beyond. The company is balancing growth with long-term profitability and is on track with its strategic goals. Rate adequacy is being achieved across most of the portfolio, supporting future growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.