Skip to content
    LMND
    Earnings call· Mar 2026(Q1 FY26)

    Lemonade Q1 FY26 earnings call LMND

    Apr 29, 2026 Source

    Executive summary

    Lemonade Q1 FY26 — Accelerating Growth and Path to Profitability

    Lemonade delivered another strong quarter, marked by accelerating growth in in-force premium and revenue, coupled with significant improvements in underwriting performance and profitability metrics. The company reiterated its expectation for Q4 FY26 to be EBITDA positive, driven by AI-powered efficiency and strategic growth investments, despite some headwinds from homeowners non-renewals impacting ADR.

    Highlights

    5

    • In-force premium reached $1.33 billion, growing 32% YoY, extending a 10-quarter acceleration streak.

    • Revenue grew 71% YoY to $258 million, boosted by a recent reinsurance transition.

    • Gross profit increased 159% to $100 million, with adjusted gross profit up 119% to $101 million.

    • Adjusted EBITDA loss narrowed 64% YoY to $17 million, reflecting continued progress towards profitability.

    • Adjusted free cash flow was positive $17 million, a $48 million improvement YoY, marking the fourth consecutive positive quarter.

    Concerns

    3

    • Annual dollar retention (ADR) remained stable sequentially at 85%, held back by targeted nonrenewal in homeowners.

    • Stock compensation expense for FY26 is expected to be approximately $95 million, higher than previous guidance.

    • Operating cash flow was negative $1 million, following a common seasonal pattern.

    Guidance & targets

    11
    CategoryTargetConfidence
    Adjusted EBITDA
    Positive
    high materiality
    High
    Adjusted EBITDA
    Positive
    high materiality
    High
    In-force premium growth
    32%
    high materiality
    High
    In-force premium growth
    33%
    high materiality
    High
    Revenue growth
    77%
    high materiality
    High
    Revenue growth
    63%
    high materiality
    High
    Stock compensation expense
    ~$95 million
    medium materiality
    High
    Gross spend (marketing)
    ~$60.5 million
    medium materiality
    High
    Gross spend (marketing)
    ~$235 million
    medium materiality
    High
    Reinsurance ceding rate
    25%
    medium materiality
    High
    Reinsurance ceding rate
    20%
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Pet Insurance
    Pet insurance reached $500 million in IFP, becoming the largest line of business and the first product to reach this milestone in less than 6 years from launch. It is the most searched pet insurance brand in the U.S. and the fourth largest carrier.
    In-force premium: $500 millionSource of IFP from existing customer base: 85%
    		————
    Car Insurance
    The car business grew 60% year-over-year and represented approximately one-third of total sales in the first quarter. Over 90% of car customers have continuous telemetry, enabling differentiated pricing.
    Portion of sales in Q1: ~1/3
    		—60%——

    Operational metrics

    20
    Adjusted EBITDA loss
    $17 millionnarrowed 64% year-over-year
    Q1 FY26

    Reflecting continued progress towards profitability.

    Cash and investments
    $1.1 billion
    Q1 FY26

    Total cash and investments at quarter-end.

    Operating expenses (ex-loss and LAE)
    $159 millionincreased by $32 million or 25% to $159 million in Q1 as compared to the prior year
    Q1 FY26

    Total operating expenses excluding loss and loss adjustment expense.

    Other insurance expense
    decreased by $2 million or 8%vs prior year
    Q1 FY26

    Prior year period included a $7 million California Fare plan expense assessment; absent this fee, the annual increase would have been about 26%.

    Total sales and marketing expense
    increased by $23 million or 53%vs prior year
    Q1 FY26

    Due to increased growth spend.

    Gross spend (marketing)
    $54 millionup 43% as compared to the prior year
    Q1 FY26

    Gross marketing spend in Q1.

    Technology development expense
    $27 millionup 22% year-on-year
    Q1 FY26

    Technology development expense.

    G&A expense
    $42 millionincreased 18% as compared to the prior year
    Q1 FY26

    Improved sequentially, down by about $1 million versus the prior quarter. Driven primarily by an increase in stock compensation and interest expense.

    Net loss
    $36 millionas compared to a net loss of $62 million in the prior year
    Q1 FY26

    Net loss for the quarter.

    Diluted EPS
    $0.47as compared to $0.86 per share in the prior year
    Q1 FY26

    Diluted earnings per share.

    LTV to CAC ratio
    above 3xin line with the prior year
    Q1 FY26

    Maintained despite roughly 200% increase in spend since Q1 2023.

    IFP per employee
    over $1 millionnearly 3x improvement over the past 4 years
    Q1 FY26

    Reflects growing impact of AI and automation tools.

    Headcount
    1,291increased slightly by about 2% as compared to the prior year
    Q1 FY26

    Total headcount.

    Multiline customers
    5%
    Q1 FY26

    Percentage of total customers who are multiline.

    Cross-sold business as % of total IFP
    18%
    Q1 FY26

    Impact of cross-sell showing up in financials.

    Cross-sales growth
    near doublingyear-over-year
    Q1 FY26

    Cross-sales to existing Lemonade customers.

    Institutional ownership (ex-SoftBank)
    increased by more than 50%
    past couple of years

    Reflects successful Investor Relations efforts.

    LAE ratio
    6%
    Q1 FY26

    Considered best-in-class levels and materially improved over time.

    CAR LAE ratio
    not materially different than 6%
    Q1 FY26

    Notable improvement in recent periods, aligning with overall Lemonade result.

    Autonomous vehicle insurance conversion rate
    almost twice as goodas average conversion rate
    Q1 FY26

    Conversion rate for AV policies in initial markets.

    Industry KPIs

    6
    MetricValueDetails
    Combined ratio138%%
    Catastrophe losses5%%
    Retention persistency85%%
    Net premiums written earned$1.33 billionUSD
    Statutory regulatory capital$290 millionUSD
    Prior year reserve development3%%

    Product announcements

    1
    ProductTypeDetails
    Autonomous Vehicle (AV) Insurancelaunch

    Deals & partnerships

    1
    TeslaPartnership to price per mile and per version of the AI that's driving for Autonomous Vehicle (AV) insurance.

    Lemonade is partnering with Tesla to offer AV insurance, leveraging its technology to price policies based on per-mile usage and the specific AI version driving the vehicle.

    Risks & headwinds

    2
    Headwind from targeted nonrenewal initiative in homeownersLargely wrapped up by the end of 2025; headwind should start to fade as those cohorts roll off the base.

    Annual dollar retention (ADR) remained stable at 85% sequentially, held back by this initiative. Excluding homeowners, ADR improved over 300 basis points year-over-year.

    Mitigation: This deliberate move improved the overall health of the business by reducing cat-exposed business.

    Increased stock compensation expenseFull Year 2026

    Expected stock compensation expense for FY26 is approximately $95 million, higher than previous guidance.

    Mitigation: Primarily due to multiyear equity grants given to founders, which include performance-based and long-term vesting aspects. The effective burn rate or dilution rate over the long term remains on target (1-2%).

    What to watch in Q2 FY26

    5

    Adjusted EBITDA profitability

    Q4 FY26
    CurrentLoss of $17 million (Q1 FY26)
    TargetPositive

    Why it matters

    Achieving positive Adjusted EBITDA is a key milestone for the company's profitability and investment thesis.

    we reiterate our long-standing expectation that Q4 this year will be EBITDA positive as will the full year of 2027.

    Q&A highlights

    8

    When will AV insurance impact financials and what is the initial margin? When will reinsurance transition normalize?

    AV insurance launched in a few places, showing 70% higher conversion, will roll out throughout the year, with modest current financial impact. Reinsurance ceding rate will be 25% in Q2, normalizing to 20% in Q3.

    “Q2, that will ebb further. We'll retain more. The ceding rate will be something like 25%. And then we'll normalize in Q3 at right around that 20% rate that we announced when we renewed last year.”

    asked by Jason Helfstein · answered by Timothy Bixby

    2 min read6 chapters

    Detailed Narrative

    01

    Growth Acceleration & Marketing Efficiency

    Lemonade continues its growth acceleration streak, driven by strong marketing efficiency with an LTV to CAC ratio above 3x, despite a 200% increase in spend since Q1 2023. Proprietary LTV AI dynamically allocates capital across diverse channels, products, and geographies, while increased bundling activity boosts customer lifetime value, enabling sustained growth investments with strong unit economics.

    02

    Operating Leverage & AI Impact

    The company achieved over $1 million of in-force premium per employee, nearly a 3x improvement in four years, demonstrating significant operating leverage. This efficiency is attributed to a decade of investment in AI and automation tools integrated into its vertically integrated system, impacting every line of the P&L and contributing to best-in-class LAE ratios of 6%.

    03

    Pet Insurance Milestone & Cross-Sell Advantage

    Pet insurance has become Lemonade's largest line of business, reaching $500 million in in-force premium within six years of launch. It benefits from a notable cross-sell advantage, with 85% of current pet IFP sourced from over 3 million existing customers, largely acquired with little to no CAC. This, combined with AI-powered claims automation for high-frequency, low-severity claims, drives efficiency and growth.

    04

    Reinsurance Transition & Revenue Boost

    A recent reinsurance transition has significantly boosted revenue growth, which was up 71% YoY, roughly 40 percentage points faster than IFP growth. The ceding rate is expected to decrease further to 25% in Q2 and normalize around 20% in Q3, indicating increased retention of business and a positive impact on the top line.

    05

    Autonomous Vehicle Insurance Launch

    Lemonade launched AV insurance, demonstrating its ability to price per mile and per AI version, a capability unique among incumbents. This offering has shown almost double the average conversion rate (70% increase) in initial markets and will roll out to more states throughout the year. Management expects it to have a more significant financial impact on Lemonade than on larger, more established insurers due to its smaller base and agility.

    06

    Car Business Growth & Differentiation

    The car business has seen rapid acceleration, growing 60% YoY and now representing approximately one-third of total sales in Q1. Lemonade highlights a structural advantage with over 90% of its car customers having continuous telemetry, allowing for precise, individualized pricing based on actual driving behavior and AI usage, rather than broad demographic proxies.

    AI-generated summary of the company’s earnings call. Not investment advice.