Lemonade, Inc.

Hello and welcome everyone to the Lemonade fourth quarter 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 your telephone keypad. I will now hand you over to Natalie Wilson, Director of Communications at Lemonade to begin. Natalie, please go ahead.

Good morning and welcome to Lemonade's fourth quarter 2024 earnings call. Joining us on our call today, we have Daniel Schreiber, CEO and co-founder, Shai Wieninger, president and co-founder, and Tim Bigsby, chief financial officer. A letter to shareholders covering the company's fourth quarter 2024 financial results is available on our investor relations website at 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 Q3 2023 Form 10-Q filed with the SEC on October 31, 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, including adjusted EBITDA, adjusted free cash flow, and adjusted gross profit, which we believe may be important to investors to assess our operating performance. Reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the letter to shareholders. Our letter to shareholders also includes information about our key performance indicators, including customers, in-force premium, premium for customer, annual dollar retention, gross earned premium, gross loss ratio, gross loss ratio ex-CAT, trailing 12-month 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 for some opening remarks. Daniel?

Good morning, and thank you for joining us to discuss Lemonade's results for Q4 2024. Across the full gamut of our KPIs, the fourth quarter was comfortably our best quarter ever. rounding out a very strong 2024, itself a best year so far. Q4 saw continued accelerating growth, ending the year at 26% IFP growth, marking a fifth consecutive quarter of accelerating top line growth. Nor did our top line come at the expense of our bottom line. Besting our own prior guidance and expectations, Q4 delivered a dusted free cash flow of $27 million, our strongest ever. This ensured that 2024 overall was cash flow positive to the tune of $48 million, our first cash flow positive year. This is a key milestone for obvious reasons, and we are thrilled to cross it a full year ahead of expectations. Underpinning this result was our loss ratio. On a TTM or trailing 12-month basis, the more steady and dependable metric, we ended the year at 73% gross loss ratio right where we wanted to be and 12 points improved year over year, powering significant margin expansion. Our results for the quarter at 63% is our best result ever and by some margin. We're obviously pleased with this result, particularly against the backdrop of notably active cat year and inflationary pressures. Accelerating top-line growth and gross margin expansion is an attractive combination, yielding outstanding gross profit growth rates, our gross profits doubled year over year to $167 million, again, a record high for lemonade. Below the gross profit line, we continue to deliver considerable operating leverage with operating expenses, excluding growth spend, declining in inflation-adjusted terms in 2024 as compared to 2023. The upshot of these trends, in Q4, excluding growth spend, we were EBITDA positive for the first time a fact pattern that reinforces our confidence, and I trust yours too, in Lemonade's projected path to profitability. Looking ahead to 2025, we expect more of the same. We'll grow the business while scaling the operation. Our guidance for 2025 contemplates IFP growth of 28%, sustained acceleration towards our target cruising velocity in the 30s expected next year. With our loss ratio now within our target range and a plan to continue delivering operational efficiencies, we expect to see sustained positive adjusted free cash flow and sequential EBITDA improvement for the full year of 2025. These are notable, particularly given our plans to ramp growth spend by approximately 40% year over year, in addition to the expected impact from the devastating California fires. All told, while the California fires took an unbearable toll on the communities of Los Angeles, We are gratified that our people, technologies, and financials all prove themselves true to the moment. To give you more color on these fires, our response to them, and their impact on us, let me hand over to Shai. Shai?