Lemonade, Inc.

Hello and welcome everyone to the Lemonade Q1 2025 earnings call. My name is Maxine and I'll be coordinating the call today. 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 the Lemonade team to begin. Please go ahead.

Good morning and welcome to Lemonade's first quarter 2025 earnings call. Joining us on our call today, we have Daniel Schreiber, CEO and co-founder, Michal Unger, chief product officer and leader of our car business, and Tim Bixby, chief financial officer. A letter to shareholders covering the company's first quarter 2025 financial results is available on our investor relations website at lemonade.com backslash investor. I would like to remind you that management's remarks made 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 February 26, 2025, 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 our letter to shareholders. The 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 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.

Good morning, and thank you for joining us to discuss Lemonade's results for Q1 2025. It's a pleasure to report that across all of our key metrics, our financial performance in the first quarter was strong and that everything in the business is progressing very much to plan. At 27% year-on-year growth, Q1 was a sixth consecutive quarter of accelerating top-line growth. Perhaps more notably, with the exception of our growth spend, we've seen no material corresponding rise in our expense base. Quite the contrary, In real terms, excluding growth spend, in the past 10 quarters, we have seen a decline in our expenses while the book has increased by more than 65%. When you see a top line surging by two-thirds, even as fixed costs stay flat or fall, what you're seeing is AI hard at work. For us, AI was never a fashionable acronym to roll out on earning calls. It's always been core to our culture, to our differentiation, and to our strategy, and its power is increasingly apparent in our P&L. We expect this dynamic to persist, with the growth of our gross profit far outpacing the growth of our fixed costs. This is why we're comfortable reiterating our expectation of achieving EBITDA breakeven by the end of next year, now just a few quarters away. We are also reiterating our EBITDA guidance for this year and modestly raising our expectations for gross and premium and revenue. We also reiterate our expectation of generating positive adjusted free cash flow in 2025, despite the unfavorable impact of the California wildfires in the first quarter. Speaking of the California wildfires, their impact on our Q1 results was notable, contributing 16 percentage points to our gross loss ratio. Even with that impact, our trailing 12-month gross loss ratio remains stable and in line with our target range at 73%, while adjusted gross profit actually improved 25% year-on-year. That, I think, speaks volumes to the quality of our book and resilience of our business. We're closely monitoring the evolving tariff environment, particularly for imported auto parts. A headline 25% tariff on auto parts, should it endure, would likely increase loss trends in that category by single-digit percentage points, which we would endeavor to reflect in our rates as soon as possible in order to maintain stable loss ratios. Finally, you may have noticed that we changed the timing of our shareholder letter to align more closely with common practice. We've also refreshed our investor website, so pop over to investor.lemonade.com or lemonade.com slash investor and check it out. In the same vein, we're also going to mix things up a little on the call and try to bring in a wider array of voices from the management team. And to kick this off, as Shai is taking a well-earned vacation with his family, he has asked Michal Langer to update you on our car business. Michal is both our chief product officer and the executive leading our car business, and so her contribution and perspective is central to everything that we do at Lemonade. Michal?