Lemonade, Inc.

Hello, everyone, and welcome to the Lemonade fourth quarter 2023 financial results call. And thank you for standing by. My name is Daisy and I'll be coordinating your call today. If you would like to register a question, please press star four by one on your telephone keypad. And I would now like to hand the call over to your host, Yael Wisner-Levy from the BP of Communications from Lemonade to begin. So, Yael, please go ahead.

Good morning, and welcome to Lemonade's fourth quarter 2023 earnings call. My name is Yael Wisner-Levy, and I am the VP Communications here at Lemonade. Joining me today to discuss our results are Daniel Schreiber, CEO and co-founder, Shai Winninger, President and co-founder, and Tim Bixby, our Chief Financial Officer. A letter to shareholders covering the company's fourth 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 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 our Form 10-K filed with the SEC on March 3rd, 2023, our Form 10-Q filed with the SEC on November 3rd, 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 our 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' enforced premium, premium per customer, annual dollar retention, gross earned premium, gross loss ratio, gross loss ratio X cap, and net loss ratio, and the 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 Q4 results and to offer some perspective both on the outgoing year and on the year ahead. As you will have seen, Q4 was an excellent quarter, capping off a year of dramatic progress for Lemonade. Our top line grew 20% to $747 million of in-force premium, while our quarterly loss ratio came in at 77%, down 12 points from Q4 22, and down 19 points from Q4 21. Since Q4 of last year, our adjusted gross profit has nearly doubled while our adjusted EBITDA loss nearly halved. As I say, dramatic progress. Moving from the income statement to the cash flow statement, it's noteworthy that we're ending this quarter with a total of $945 million in cash, cash equivalents, and investments. That is the very same level we reported at the end of the last quarter, and it is up since our report of two quarters ago. While we expect this level to dip somewhat in 2024, We expect our total cash and investments to turn positive again in the first half of 2025, and we expect it to dip by less than 10% before reaching that point. Underpinning our results was a steady stream of improvements in our ability to match rate to risk, as well as in our operational efficiencies, all these mediated by a singular integrated system that improves and is improved by all our customer interactions. In many ways, therefore, 2023 was the year when the plan came together, the year when the thesis of Lemonade transitioned from being a hypothesis to being more evidence-based. This isn't a mission accomplished moment, not by a long shot, but the progress in 2023 was tangible and material, and it increases our confidence that we're on track not only to turn cash flow positive next year with plenty of cash in the bank, but to build a large, enduring, and profitable business thereafter. We hope our latest results boost your confidence alongside our own. 2023's results are all the more noteworthy for the turbulent times in which they materialized. The last couple of years were some of the toughest for both established insurance companies and for up-and-coming tech companies. As dual citizens, we were buffeted by the storms that afflicted both insurance and technology. As we reflect back on this tumultuous period, we find resonance in the famous words of Nietzsche, or Kelly Clarkson if you prefer, that what doesn't kill you makes you stronger. We are quite sure that we are emerging from these shocks the better for having endured them. We are, we believe, leaner and more focused, stronger and more resilient with better unit economics and with fewer competitors than would have been the case had the turbulence never come. As the African proverb says, smooth seas never made a skillful sailor. As we look forward to 2024, there's reason for optimism that the worst of these storms may be behind us. Inflation appears to be receding, cost of capital may have peaked, and rates are finally catching up with risks. If the headwinds indeed become tailwinds in 2024, that will, of course, be good news. That said, piloting with tailwinds comes with its own set of challenges. And to explore these, let me hand over to Shai. Shai?