This is especially notable as Lemonade noted that Metromile's first half 2022 adjusted EBITDA loss was -$45 million.
35 minute itimer update#
Lemonade guidance update (Lemonade Q2 shareholder letter)
The company is now expecting $610-$615 million of in-force premium at the end of the year (versus $535-$545 million previously), $236-$239 million of revenue (versus $205-$208 million previously), and most notably: a shrunken adjusted EBITDA loss projection of -$245 to -$240 million, versus a prior -$280 to -$265 million forecast. Guidance update and valuation checkĪlongside its Q2 earnings print, Lemonade also updated its full-year 2022 guidance to include the recently-closed acquisition of Metromile. This is especially true now, as Lemonade intends to slow down marketing spend and customer acquisition: more of its "installed" customer base will skew towards longer tenures, and hence better profitability. Over time, as Lemonade ages as a service and as a product, more of its policyholder base will mature and shift its loss ratios downward. Right now, more than 70% of Lemonade's premiums come from customers who have tenures of under two years - which is the opposite of most incumbent insurance players, most of whom have had clients for years and decades. Lemonade loss ratio over time (Lemonade Q2 shareholder letter) The chart below shows how a customer cohort's loss ratios get better with each quarter they are on the platform:
More to the latter point: it's important to understand that customer loss ratios improve over time. Once these are in place, the company's loss ratios will move closer in line with its long-term targets. Lemonade filed for ~100 rate changes that are pending approval. Perhaps in no other industry is diversification more vital than in insurance, so Lemonade's ability to continue growing into other insurance streams will be critical to its success. Now, the company is also offering bundles with pet insurance and car insurance as well (the latter through its acquisition of Metromile). When it started out, Lemonade just offered home and renters insurance. As the new generation of tech-savvy millennials and younger cohorts dominate the consumer base, insurtech vendors like Lemonade will gain market share versus their legacy counterparts. Gone are old-school insurance agencies and insurance agents nowadays, just like everything else, we buy insurance online.
Again, I'll reinforce that for most of Lemonade's earlier life as a public company when the stock was trading at egregious levels above $100, I recommended that investors steer clear. In my view, the beginnings of a long rebound rally in Lemonade is here:ĭata by YCharts A vibrant bull case for Lemonade After posting strong Q2 results in which Lemonade also committed to improving its profitability, shares of Lemonade rallied sharply in August (while most tech stocks went the other way). Recently, however, the market's tune seems to be starting to change.
35 minute itimer drivers#
The key drivers here are decelerating growth, waning confidence in the profitability of Lemonade's business model, and uncertainty over the fate of its Metromile acquisition. Year to date, the stock is down 40%, and over the trailing twelve months, Lemonade has lost 65% of its value. Lemonade ( NYSE: NYSE: LMND), in particular, has seen a scary correction from peaks over the past year. Oulaphone Sonesouphap/iStock via Getty Imagesĭuring hyper-volatile markets, it's very scary to buy into small-cap growth stocks that may seem like falling knives.
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