Lemonade, Inc.

Thank you for your patience, ladies and gentlemen. The Lemonade Q2022 earnings call is due to begin shortly. If you would like to ask a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. Thank you. © transcript Emily Beynon ladies and gentlemen hello and welcome to the lemonade q3 2022 earnings call my name is maxine and i'll be coordinating the call today if you would like to ask a question during the presentation you may do so by pressing star followed by one on your telephone keypad i will now hand you to yael wisner levy vp communications at lemonade to begin please go ahead when you're ready

Good morning and welcome to Lemonade's third quarter 2022 earnings call. My name is Yael Wissner-Levy and I'm the VP Communications at Lemonade. Joining me today to discuss our results are Daniel Schreiber, co-CEO and co-founder, Shai Winninger, co-CEO and co-founder, and Tim Bixby, Chief Financial Officer. A letter to shareholders covering the company's third quarter 2022 financial results is available on our Investor Relations website. investor.lemonade.com. Before we begin, I would like to remind you that management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors section of Reform 10-K filed with the SEC on March 1, 2022, and their other filings with the SEC. Any forward-looking statements made on this call represent our views only as of today, and we undertake no obligation to update them. We will be referring to certain non-GAAP financial measures on today's call, such as adjusted EBITDA and adjusted gross profit, which we believe may be important to investors to assess their operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our letter to shareholders. Our letter to shareholders also includes information about our key operating metrics, including in-force premium, premium per customer, gross loss ratio, and net loss ratio, and a definition of each metric, why each is useful to investors, and how we use each to monitor and manage our business. With that, I'll turn the call over to Daniel, who will begin with a few opening remarks. Daniel?

Good morning, and thanks for joining us to review our Q3 results and the outlook for the remainder of 2022. I'm happy to share that we had a strong quarter with our top and bottom lines coming in better than expected. Year on year, our IFP or in-force premium grew 76%. Our premium per customer grew 35% and at 65 million adjusted EBITDA loss, our bottom line also bested our expectations. Our loss ratio has been coming down in recent quarters and Q3 saw a reversal in that welcome trend. The spike in loss ratio, however, was not unexpected. We had cautioned that the Metro Mile deal would have an adverse effect on loss ratios in the short term, and Hurricane Ian added several points of loss ratio too. With that said, we do anticipate the overarching downward trend to continue in the coming quarters, notwithstanding the occasional bumps. Q3 is moving season and usually our most efficient time to acquire customers. COVID played a little havoc with seasonal patterns in recent years, but this year the familiar seasonality was back and on full display. Accordingly, we pulled in some of our marketing spend from Q4 to Q3. This helped boost our Q3 top line, but will come at the expense of growth in Q4. All told, we expect our second half of the year to be as guided, although the allocation between the quarters has been jiggered to optimize our spend. Much else has happened since the last call, but two highlights are a deal we announced with Chewy and a launch in the United Kingdom. Starting with Chewy, Chewy is the foremost destination for pet parents in the US, and in the spring they will start selling Lemonade Pet to their 20 million customers. Chewy's revenue share compensation consists of a few components, but will be paid out primarily in the form of Lemonade Equity. We're thrilled Chewy chose Lemonade, and we're thrilled they chose Lemonade stock. In addition to amounting to a huge vote of confidence in what we're building, this structure aligns our interests with Chewy incentivised to drive sales of Lemonade Pet and deliver long-term growth at an extraordinarily low cash burn for Lemonade. As for our launch in the UK, at the risk of sounding too sappy, this is a meaningful step for us. Insurance as we know it hails from the UK and on a personal note, so do I. So both professionally and personally, bringing Lemonade to the UK is a homecoming of sorts. Beyond the sentimentality of it all, the UK is the largest insurance market in Europe and so represents a material addition to our total available market. Finally, we're looking forward to next week's Investor Day, where myself and others on the leadership team will go deeper into our strategy, metrics, path to profitability, and how we're running the business. We'll be sharing more about our AI lines of business and our financial modeling than we've ever done before. And we very much look forward to seeing you there. If you haven't registered yet, please head over to our investor.lemonade.com site and sign up under the news section. And with that, let me hand over to Tim. Tim, over to you.