Lemonade, Inc.

Hello everyone and welcome to the Lemonade Q3 2023 earnings call. We will begin shortly. If you'd like to register a question ready for the Q&A, please press star followed by one on your telephone keypad. Hello everyone and welcome to the Lemonade Q3 2023 earnings call. My name is Charlie and I'll be coordinating the call today. You'll have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypad. I'll now hand over to our host, Yael Wisner-Levy, the VP of Communications at Lemonade to begin. Yael, please go ahead.

Good morning and welcome to Lemonade's third quarter 2023 earnings call. My name is Yael Wisner-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, our chief financial officer. A letter to shareholders covering the company's third quarter 2023 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 meanings 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 our Form 10-K filed with the SEC on March 3rd, 2023, our Form 10-Q filed with the SEC on August 4th, 2023, and our 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 performance indicators, including customers, in-force premium, premium per customer, annual dollar retention, gross earned premium, Gross Loss Ratio, Gross Loss Ratio XCAT, 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 for some opening remarks. Daniel?

Good morning, and thank you for joining us to discuss Lemonade's Q3 results and our updated outlook for the full year. We are very pleased by this quarter's results. top line, bottom line, and the intervening lines. Starting at the top, we saw continued growth, with Inforce Premium growing 18% year-on-year, boosted by strong marketing efficiencies and rising prices. At the same time, we also saw our gross loss ratio improve 11 percentage points, both quarter-on-quarter and year-on-year, to 83%, continuing the trend we had seen in recent quarters and which was so rudely interrupted in Q2. Our operating expense similarly declined by 11%, since our third quarter last year. As a result of all this, our gross profit increased 170% year-on-year and our adjusted EBITDA loss contracted by 39%. We are, as I say, pleased with the results this quarter. In other news, this month we expect to pass the 2 million customer mark. The comparison of our business today to our business when we hit the 1 million customer mark is instructive. Today, with double the number of customers, we have three and a half times as much gross earned premium as our premium per customer jumped by 70% in the intervening years. At the same time, net loss as a percentage of gross earned premium roughly halved. Taken together, these improvements show strong progression of the business in recent years, and they sketch a robust path to profitability. This month, we also mark the anniversary of our first investor day. In our shareholder letter, you'll find significant updates to the projections and models we shared a year ago, and I do encourage you to peruse it. One notable highlight, we expect to become cash flow positive by end of year 2025 and to reach that point with hundreds of millions of unencumbered dollars in the bank. We expect to become adjusted EBITDA positive by year end 2026. Towards that end, we anticipate accelerating our pace of growth considerably in 2024. We previously communicated the reasons for our slowdown this year, and as inflation subsides and rates come online, we can see our path clear to re-engaging our clusters in 2024. In our investor day, we spoke of 25% compounded annual growth rate as our target growth rate, and we anticipate our growth rates in 2024 will be at or around this target. Continuous and strong growth are key to fully harnessing the benefits of automation, and indeed the combined impact of both automation and growth are key to our profitability. To expand on our generative AI efforts and their contribution to our automation, let me hand over to Shai. Shai?