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Lemonade’s third-quarter revenue jumped 73% to $336.1 million and the insurer raised its full-year revenue forecast Thursday, but its net loss widened as expenses climbed. The company continued to forecast positive adjusted EBITDA in the fourth quarter, a different measure from a profit under standard accounting rules.
Lemonade shares traded at $42.40, down $3.50, or 7.63%, in regular-session trading Thursday as of 11:45:03 a.m. Eastern, according to Yahoo Finance. That is an intraday snapshot, not a closing price. The decline followed the earnings report, despite the higher full-year revenue outlook.
In its shareholder letter, Lemonade reported an in-force premium base of $1.5508 billion, up 34% from a year earlier. Its customer count rose 23% to 3,520,555, and premium per customer increased 9% to $440. Lemonade sells insurance including home, renters, car and pet coverage.
Why revenue outpaced premiums
The 73% revenue increase was substantially faster than the growth of its premium base. Lemonade attributed revenue growth to higher gross earned premiums and retaining a greater share of premiums because it ceded less business through quota-share reinsurance. In plain terms, less of the premium was passed to reinsurers. The revenue growth rate should therefore not be read as a 73% increase in customers or insured business.
Gross earned premium, which reflects premiums earned during the quarter rather than the annualized premium base at quarter-end, rose 33% to $364.1 million. Gross profit increased 48% to $118.1 million.
Net loss widened while adjusted loss narrowed
The net loss was $43.7 million, compared with $37.5 million a year earlier. Lemonade attributed the increase primarily to higher stock-based compensation and interest expense. Operating expenses, excluding net loss and loss-adjustment expense, rose 36% to $191.9 million.
The company said higher spending on customer acquisition was a major driver. Growth spending and interest expense together increased $28 million from a year earlier, including $24.5 million in additional growth spending. That helps explain how strong revenue growth could coexist with a wider net loss.
Its adjusted EBITDA loss narrowed to $20.4 million from $25.6 million. Adjusted EBITDA is a non-GAAP measure that excludes items included in net income, so the improvement does not mean Lemonade has already become profitable under standard accounting.
Revenue outlook raised, fourth-quarter target unchanged
Lemonade explicitly raised its full-year revenue guidance to $1.231 billion to $1.235 billion. For the fourth quarter, it forecast revenue of $342 million to $346 million and positive adjusted EBITDA of $5 million to $9 million. Those are management forecasts, not completed results or a promise of net income.
The company also said it ended the quarter with 1,321 employees, fewer than four years earlier, while its premium base had grown more than 2.5-fold over that period. Management described AI efficiencies as part of the explanation. The staffing comparison is the company’s claim and does not by itself establish how much of the change AI caused.
For investors, the next test is whether premium growth and gross profit can outpace the cost of acquiring customers enough to deliver the projected adjusted result. For policyholders, an earnings report is not a change in an individual premium or coverage: those depend on the policy’s terms and renewal offers.
JBizNews Desk | New York
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