Lemonade, Inc.

Hello and welcome to the Lemonade Q3 2024 earnings call. My name is Maxine and I'll be coordinating today's call. If you would like to ask a question, you may do so by pressing star followed by one on this little thank you pad. I will now hand you over to Yael Wisner-Levy, VP of Communications to begin. Please go ahead when you're ready.

Good morning and welcome to Lemonade's third quarter 2024 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, 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 third quarter 2024 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 2023 Form 10-Q filed with the SEC on May 1, 2024, 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 our third quarter results, 2024. Before turning to those, I want to remind you that we'll be holding an investor day on November 19th both in person at our New York headquarters and online. We certainly hope you'll be able to join us. We'll be providing detailed updates of our vision, our AI capabilities, our ambitious plans, and how we hope to realize them. In the meantime, let me turn to our third quarter results, which I'm happy to report continued to demonstrate strong progression across the board. We saw accelerating top line growth with Inforce Premium growing by 24%, and we were cash flow positive. Our net cash flow increased by $48 million, our strongest cash flow quarter inception to date. Free cash flow was $14 million positive. We think that net cash flow better tracks our business than free cash flow does, as it incorporates the impact of our synthetic agents program, which is core to our operating model. The bottom line is that we ended the quarter with $979 million in cash and investments, a growing balance. and one we expect to grow continuously henceforth, excepting next quarter, as we've said before. The third quarter saw elevated cat or catastrophic related losses across the industry, alongside tragic loss of life. Our thoughts and our team's efforts were with those impacted by those events. As has been the case in recent quarters, our business, however, proved highly resilient. Notwithstanding the weather, we delivered a 73% gross loss ratio, a strongest result in four years. This wasn't a one-off. For the fourth consecutive quarter, we saw double-digit improvements in the loss ratio compared to the same quarter one year prior. And our loss ratio is now back where we like to see it, comfortably within our target range. How have we done it? It's the very things we've talked about for several quarters now, diversification of the portfolio and intense and sustained efforts in matching rate to risk across the portfolio and across the US. All these enabled us to deliver notably expanded gross margins in Q3. Taken together, accelerating top line growth and expanding gross margins yielded $37 million in gross profit, which represents a 71% year-over-year growth. Accelerating top line growth, even more dramatic gross profit growth, and our best-ever cash flow quarter all rendered this a fabulous quarter. We look forward to continuing these trends into 2025 and beyond. With that, I'd like to hand over to Shai to tell you more about our recent efficiency improvements unlocked via technology. Shai? Thanks, Daniel.