Lemonade — Q3 2026 Earnings Summary

Financial Performance:

• Revenue increased 73% year-over-year to $336.1 million in Q3 2026, compared to $194.5 million in Q3 2025.
• In Force Premium (IFP) grew 34% year-over-year to $1.55 billion, marking the 12th consecutive quarter of acceleration.
• Gross profit increased 48% year-over-year to a record $118.1 million, compared to $79.9 million in Q3 2025.
• Adjusted gross profit rose 49% year-over-year to $120.5 million, compared to $80.9 million in Q3 2025.
• Net loss was $43.7 million ($0.56 per share), compared to a net loss of $37.5 million ($0.51 per share) in Q3 2025.
• Adjusted EBITDA loss narrowed to $20.4 million in Q3 2026, compared to a loss of $25.6 million in Q3 2025.
• Adjusted free cash flow improved to $27.0 million in Q3 2026, an increase of $9 million from $18.1 million in Q3 2025.
• Cash flow from operating activities was $7.3 million in Q3 2026, up $3 million from $4.5 million in Q3 2025.
• Gross profit margin was 35% in Q3 2026, down from 41% in Q3 2025.
• Adjusted gross profit margin was 36% in Q3 2026, down from 42% in Q3 2025.
• The ratio of adjusted gross profit to gross earned premium was 33% in Q3 2026, up from 29% in Q3 2025.
• Gross loss ratio was 65% in Q3 2026, compared to 62% in Q3 2025.
• Net loss ratio was 64% in Q3 2026, consistent with 64% in Q3 2025.
• Cash, cash equivalents, and investments totaled approximately $1.2 billion as of September 30, 2026.
• Borrowings under financing agreement increased to $231.6 million as of September 30, 2026, from $158.1 million as of December 31, 2025.

Guidance and Future Outlook:

• Reiterated expectation to generate positive Adjusted EBITDA for the first time in Q4 2026.
• Expects to achieve the first full year of positive Adjusted EBITDA in FY 2027.
• Q4 2026 Guidance (in millions):
  • In Force Premium: $1,632–$1,639.
  • Gross Earned Premium: $379–$383.
  • Revenue: $342–$346.
  • Adjusted EBITDA: $5–$9.
  • Stock-based compensation expense: $24.
  • Weighted average common shares: 78 million.
• FY 2026 Guidance (in millions):
  • In Force Premium: $1,632–$1,639.
  • Gross Earned Premium: $1,382–$1,386.
  • Revenue: $1,231–$1,235.
  • Adjusted EBITDA: ($51)–($47).
  • Stock-based compensation expense: $93.
  • Weighted average common shares: 77 million.
• Guidance raised for GEP and Revenue compared to prior expectations.
• Expects the growth rate of IFP to notably outpace growth spend from Q4 2026 onward.
• Does not expect stock-based compensation to be a material driver of year-over-year expense growth beginning in Q2 2027.

Business Segments and Product Lines:

• Customer count increased 23% year-over-year to 3,520,555 in Q3 2026.
• Premium per customer increased 9% year-over-year to $440 in Q3 2026.
• Annual dollar retention (ADR) was 86% in Q3 2026, a 1 percentage point increase from Q3 2025.
• 25 new product-geography combinations were launched in 2026.
• Nationwide Renters availability was achieved, a first across the product portfolio.
• Car product is now available in 14 states, covering more than 50% of the U.S. population.
• Lemonade Autonomous Car expanded to six states.
• Eligibility for Lemonade Autonomous Car broadened to include Tesla vehicles with HW3 hardware, offering a 30% lower rate on miles driven with FSD (supervised) engaged.
• Autonomous Car conversion rates are greater than 2x those of the broader Car product.
• In Force Premium breakdown by product (Q3 2026): Homeowners multi-peril ($573M), Pet ($603M), Car ($265M), Europe ($83M), Other ($27M).
• In Force Premium breakdown by product (Q3 2025): Homeowners multi-peril ($530M), Pet ($439M), Car ($187M), Europe ($60M), Other ($21M).
• Gross loss ratios by product (Q3 2026): Homeowners multi-peril (50%), Pet (75%), Car (63%), Europe (104%).
• Gross loss ratios by product (Q3 2025): Homeowners multi-peril (39%), Pet (71%), Car (40%), Europe (64%).

Market and Competitive Landscape:

• The emergence of personal AI agents is viewed as a transformative shift in insurance distribution, potentially shifting competition toward price, coverage, and service quality.
• Lemonade is building capabilities specifically for an agentic insurance experience.
• Growth spend increased by $28.0 million year-over-year, driven by strong marketing efficiency and a decision to lean into customer acquisition.
• Operating expense excluding loss and loss adjustment expense increased 36% year-over-year to $191.9 million.
• The company operates with 1,321 employees as of Q3 2026, down 1% from Q2 2026, despite growing the premium base by >2.5x and doubling customer count over the last four years.

Risks and Challenges:

• Forward-looking statements involve risks including the potential failure to achieve or maintain profitability.
• Risks include the denial of claims, failure to accurately pay claims, and the ability to retain and expand the customer base.
• Potential risks include the failure of proprietary AI algorithms, inability to maintain risk-based capital levels, and reliance on third-party service providers.
• Risks related to pricing models, particularly for Full Self Driving (Supervised) and reliance on direct vehicle telemetry.
• Risks associated with data security, privacy laws, and the protection of customer information.
• Risks include the inability to predict the impacts of severe weather events and catastrophes, and potential losses exceeding reserves.
• Risks related to the "Lemonade" brand awareness and potential regulatory compliance issues.
• The "Customer Investment Agreement" may have an adverse impact.
• Actual results may differ materially from forward-looking statements due to known and unknown risks.

Management Commentary and Tone:

• Management described third-quarter results as "excellent," characterized by accelerating topline growth and healthy underwriting performance.
• Management expressed confidence in the predictability and resilience of the business model, citing a track record of delivering against financial ambitions amid macroeconomic volatility.
• Management highlighted the company's decade of investment in AI-native infrastructure as a key strength for the transition to agentic insurance.
• Management noted that operating leverage is visible in the efficiency of the team, with fewer employees managing a significantly larger premium base.
• Management expects growth spend growth rate to moderate materially going forward, with IFP growth outpacing it from Q4 2026 onward.
• Management stated that stock-based compensation growth is expected to moderate, with no material year-over-year expense growth expected from this line item starting Q2 2027.
• An investor day is scheduled for November 17, 2026, in NYC, to provide updates on strategy, growth aspirations, and AI capabilities.

Analyst Questions and Answers:

• No specific analyst questions and answers are included in the provided text.

Other Key Points:

• The company is a Certified B-Corp and donates to nonprofits selected by its community during its annual Giveback.
• Lemonade offers renters, homeowners, pet, car, and life insurance in the US, UK, Germany, the Netherlands, and France.
• In force placed premium currently reflects approximately 4% of total In Force Premium.
• The company has a history of losses and has not yet achieved full-year profitability, though it is on track for positive Adjusted EBITDA in Q4 2026.
• Stock-based compensation expense for the nine months ended September 30, 2026, was $68.9 million, compared to $42.8 million in the same period in 2025.
• The company recorded a $5.2 million impact from canceled unvested warrant shares related to the termination of the Warrant Agreement with Chewy in Q1 2025.
• A $6.9 million California FAIR Plan assessment related to January 2025 wildfires was recorded in Q1 2025.
• A $1.7 million recovery related to a pre-acquisition Metromile extra-contractual claim was recorded in Q1 2026.
• The company holds approximately $350 million of regulatory surplus at its insurance subsidiaries as of September 30, 2026.