Skip to content
    LMND
    Earnings call· Jun 2026(Q2 FY26)

    Lemonade Q2 FY26 earnings call LMND

    Jul 29, 2026 Source

    Executive summary

    Lemonade Q2 FY26 — Accelerating Growth and Path to Profitability

    Lemonade delivered another strong quarter, marked by accelerating in-force premium growth and significant improvements in profitability metrics, including a record-low LAE ratio. The company is on track for positive adjusted EBITDA by Q4 FY26, driven by sustained LTV to CAC ratios and operational efficiencies. Management is reiterating its full-year guidance for IFP and EBITDA while raising revenue and gross earned premium outlooks, signaling confidence in its growth and profitability trajectory.

    Highlights

    5

    • In-force premium reached $1.43 billion, growing 32.5% year-over-year, extending 11 consecutive quarters of accelerating growth.

    • Revenue grew 79% to $294 million, outpacing IFP growth by nearly 50 percentage points.

    • Gross profit increased 76% year-over-year to a record $113 million.

    • Adjusted EBITDA loss improved 54% to $19 million, keeping the company on track for positive adjusted EBITDA in Q4 FY26.

    • The LAE ratio reached a best-ever 5% in Q2, significantly outperforming the industry average of 9%.

    Concerns

    3

    • The pet insurance gross loss ratio picked up sequentially and year-over-year due to industry-wide vet cost inflation.

    • Annual dollar retention (ADR) remained stable at 85%, continuing to reflect the impact of prior 'clean the book' actions in homeowners.

    • G&A expense increased 85% year-over-year to $48 million, primarily due to a one-time tax refund benefit in the prior year, recent executive equity awards, and growth in interest expense.

    Guidance & targets

    9
    CategoryTargetConfidence
    Adjusted EBITDA
    Positive (approximately $8 million)
    high materiality
    High
    Adjusted EBITDA
    Positive
    high materiality
    High
    In-Force Premium (IFP) growth
    33%
    high materiality
    High
    In-Force Premium (IFP) growth
    33%
    high materiality
    High
    Revenue growth
    Roughly 9%
    medium materiality
    High
    Revenue growth
    65%
    high materiality
    High
    Gross Earned Premium
    Raised guidance
    medium materiality
    High
    Car product availability
    Majority of drivers in the United States
    medium materiality
    Medium
    In-Force Premium (IFP) growth vs. spend growth
    IFP growth to outpace spend growth
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Car
    Strong growth across both new business and cross-selling channels, with record periods for both.
    Sales to existing Lemonade customers: 40%-50% of new car sales
    		—60%——
    Pet
    Impacted by an industry-wide vet cost inflationary trend; company is actively taking rate to offset this impact.
    Loss ratio: picked up sequentially and YoY
    		————

    Operational metrics

    27
    In-force premium (IFP)
    $1.43 billionup 32.5% YoY
    Q2 FY26

    Extended streak of accelerating growth to 11 consecutive quarters.

    Revenue
    $294 millionup 79% YoY
    Q2 FY26

    Grew nearly 50 percentage points faster than IFP due to dynamics related to sustained trend of increased premium retention at reinsurance renewals.

    Gross profit
    $113 millionup 76% YoY
    Q2 FY26

    Record gross profit.

    Adjusted gross profit
    $114 millionup 74% YoY
    Q2 FY26
    Adjusted gross margin
    39%
    Q2 FY26

    Calculated using revenue as the denominator.

    Adjusted gross profit as compared to gross earned premium
    34%up 8 points from 26% in the prior year
    Q2 FY26
    Adjusted EBITDA loss
    $19 millionimproved 54% from prior year
    Q2 FY26

    Compared to a $41 million loss in the prior year.

    Cash and investments
    $1.2 billion
    Q2 FY26
    Customer growth
    23%YoY
    Q2 FY26

    Driver of In-force premium growth.

    New customers added
    166,00012% greater than 148,000 in prior year quarter
    Q2 FY26
    Premium per customer growth
    8%YoY
    Q2 FY26

    Driver of In-force premium growth.

    LAE ratio
    5%best ever result
    Q2 FY26

    Record low across all product lines, driven by AI across claims operations.

    Gross loss ratio
    60%
    Q2 FY26
    Total CAT impact
    3%
    Q2 FY26

    Excluding CAT prior period development.

    Net favorable prior period development
    5 points
    Q2 FY26

    Total $12 million favorable in Q2 and $16 million favorable year-to-date. Driven primarily by homeowners, multi-peril, and car products.

    Annual dollar retention (ADR)
    85%stable sequentially
    Q2 FY26

    Still reflecting the impact of prior 'clean the book' actions within the homeowners product line.

    Operating expenses (excluding loss and LAE)
    $182 millionup $53 million or 41% YoY
    Q2 FY26
    Other insurance expense
    increased by $5 millionup 25% YoY
    Q2 FY26

    Compared to a 32% growth rate of gross earned premium.

    Sales and marketing expense
    increased by $18 millionup 30%
    Q2 FY26

    Primarily due to increased growth spend.

    Growth spend
    $64 millionup 30% or $15 million YoY
    Q2 FY26
    LTV to CAC ratio
    above 3xin line with prior year
    Q2 FY26

    Marketing efficiency levels remained stable and strong.

    Technology development expense
    $30 millionup $8 million or 34% YoY
    Q2 FY26

    Growth driven by SBC impact of recent equity awards, personnel-related expense, and higher software costs supporting AI capabilities.

    G&A expense
    $48 millionup 85% YoY
    Q2 FY26

    Primarily due to a one-time tax refund benefit in the prior year, SBC impact of recent multi-year executive equity awards, and growth in interest expense. Excluding these items, the year-over-year growth rate was 2%.

    Headcount
    1,339up 65 or about 5% YoY
    Q2 FY26

    Attributable to net hiring in product and engineering teams; most of the year's net hiring activity is expected to be behind.

    Net loss
    $43 millioncompared to $44 million in prior year
    Q2 FY26
    Diluted EPS
    $0.56compared to $0.60 in prior year
    Q2 FY26
    Net loss improvement (excluding one-time benefit)
    22%YoY improvement
    Q2 FY26

    Excluding the one-time tax refund benefit from the prior year, the current period net loss result represents a 22% year-over-year improvement.

    Industry KPIs

    6
    MetricValueDetails
    Combined ratio60%%
    Catastrophe losses3%%
    Retention persistency85%%
    Net premiums written earned$1.43 billionUSD
    Statutory regulatory capital$330 millionUSD
    Prior year reserve development5 pointspoints

    Product announcements

    2
    ProductTypeDetails
    Renters product nationwide availabilityexpansion
    Autonomous car productlaunch

    Deals & partnerships

    2
    Reinsurance partnersAnnual reinsurance renewal

    Completed the annual reinsurance renewal with important upgrades.

    Synthetic agentsExtension of synthetic agents program for growth financing$0.25 billionApplies to growth spend in '27 and '28

    Extended the synthetic agents program with important upgrades.

    Risks & headwinds

    3
    Pet insurance loss ratio increaseQ2 FY26

    Picked up sequentially and YoY

    Mitigation: Actively taking rate through the system to offset the impact. The broader pet insurance market's growth continues to outpace other lines despite significant rate increases by the company and competitors.

    Annual dollar retention (ADR) impact from prior 'clean the book' actionsNext couple of quarters

    ADR stable sequentially at 85%

    Mitigation: The portfolio actions are now largely behind the company, and their impact on the reported ADR metric will roll out of the comparison period in the next couple of quarters.

    G&A expense growthQ2 FY26

    Up 85% YoY to $48 million

    Mitigation: Excluding a one-time tax refund benefit in the prior year, the SBC impact of recent executive equity awards, and growth in interest expense, the growth rate was 2%. Sequential growth rates for G&A and tech development are expected to be quite low.

    What to watch in Q3 FY26

    5

    Adjusted EBITDA profitability

    Q4 FY26
    CurrentLoss of $19 million in Q2 FY26
    TargetPositive adjusted EBITDA (approximately $8 million)

    Why it matters

    Achieving positive adjusted EBITDA is a key profitability milestone and a major step towards full-year profitability in FY27.

    we remain on track to deliver our first positive adjusted EBITDA quarter in Q4 this year... implied fourth quarter adjusted EBITDA is approximately $8 million.

    Q&A highlights

    7

    What is the team most excited about, and can gross margins/contribution margins maintain current path with product/geo expansion to support 2027/2028 operating leverage?

    Daniel highlighted the car business's acceleration and the overall 'machine' compounding results. He clarified that the focus is on gross profit growth, not gross margin percentage, as structural advantages (like the 5% LAE ratio) allow for aggressive pricing and market share gains, even if gross margins shrink. Nick added that gross profit should grow materially in line with top-line growth, aided by LAE improvements.

    “The metric that we focus on, and we do encourage our investors to focus on as well is gross profit because there will be times where we can increase our profitability through shrinking gross margins and times when we cannot.”

    asked by Jason Helfstein · answered by Daniel Schreiber

    2 min read5 chapters

    Detailed Narrative

    01

    Operational Efficiency and AI Integration

    Lemonade achieved a best-ever LAE ratio of 5% in Q2, significantly outperforming the industry average of 9%. This efficiency is attributed to the growing use of Lemonade OS technology and AI across claims operations, driving broad-based gains across all product lines. The company emphasizes its model-agnostic approach to AI, continuously benchmarking and rapidly implementing new models to improve automation, reduce human intervention, enhance customer experience, and lower costs.

    02

    Strategic Growth Investments and Efficiency

    The company has consistently maintained an LTV to CAC ratio of approximately 3x despite increasing growth investments. Management clarified that a perceived slowdown in growth spend relative to IFP growth is a 'mathematical artifact' of prior spending adjustments due to inflation and subsequent catch-up📎. They anticipate IFP growth will outpace spend growth from 2027 onwards, driving operating leverage and profitability.

    03

    Product and Geographic Expansion

    Lemonade launched 14 additional state product combinations in the past 100 days, expanding nationwide availability for its renters product and introducing its autonomous car product in Colorado and Indiana. This expansion is facilitated by their proprietary technology platform, which streamlines new product launches and market entry. Further geographical expansion, particularly for the car product, is expected, with availability projected for the majority of US drivers by the end of 2027.

    04

    Car Business Momentum

    The car insurance business demonstrated strong growth, up 60% YoY in Q2, with record periods for both new car business and cross-sells to existing Lemonade customers. Car sales to existing customers typically represent 40% to 50% of new car sales. The autonomous car product, though early, shows positive trends with notably lower frequency numbers, aligning with the company's data-driven projections of 50% savings or greater.

    05

    Financial Leadership Transition

    CFO Tim Bixby will transition to Lemonade's Board of Directors at year-end, with Senior Vice President of Finance Nick Stead assuming the CFO role. This planned transition, years in the making, is expected to be seamless, as most financial functions already report to Nick Stead.

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