Lemonade's Revenue Surges 35% in Q2 Amid Strong Growth

Lemonade, Inc. reported strong financial results for Q2 2025, with revenue reaching $164.1 million, marking a significant 35% increase compared to Q2 2024. The net loss for the quarter was ($43.9) million, a 23% improvement from the ($57.2) million net loss reported in the same period last year. The reported net loss per share was ($0.60), outperforming the analyst EPS estimate of ($0.81). However, the revenue of $164.1 million missed the analyst estimate of $160.8 million.

Key Performance Drivers

The company saw its In Force Premium (IFP) grow 29% year-over-year to $1.08 billion, marking its seventh consecutive quarter of growth acceleration. Gross Earned Premium (GEP) increased by 26% to $252.3 million. The gross loss ratio improved by 12 points year-over-year to 67% for the second quarter, comfortably within the target range, and the trailing twelve months (TTM) gross loss ratio improved by 3 points sequentially to 70%. Gross profit surged by 109% year-over-year to $64.3 million, with gross margin improving by 14 points to 39%. Operating expenses increased by 21%, primarily due to a 93% increase in growth spend, consistent with the accelerating growth plan. Excluding growth spend, operating expenses decreased by 2%.

Growth Engines: Car and Europe

Lemonade Car delivered another quarter of accelerated growth, with its Q2 IFP result representing 12% sequential growth, outpacing the overall business for the second consecutive quarter. Experiments incorporating telematics insights earlier in the customer lifecycle led to a 60% boost in conversion rates in Q1 2025. The Q2 Car gross loss ratio of 82% was 13 points improved compared to the prior year, marking its lowest since launch. The European business also contributed significantly to growth, with Europe IFP growing over 200% year-over-year to $43 million, contributing over 20% of Lemonade's net new customers. The European gross loss ratio landed in the low 80s, a 15-point improvement year-over-year, demonstrating strong performance across Germany, France, the UK, and the Netherlands.

Strategic Reinsurance and Outlook

Lemonade renewed its reinsurance program, reducing the proportional quota share program from 55% to 20% cession. This strategic decision aims to retain more revenue and gross profit on the company’s books, supported by a consistent track record of improving loss ratios. This change is expected to gradually ramp down ceded earned premium to 20% over the next several quarters. For the full year 2025, the company raised its IFP, GEP, and Revenue guidance while reiterating its Adjusted EBITDA guidance. The company anticipates achieving positive Adjusted Free Cash Flow for FY 2025 and positive Adjusted EBITDA before the end of FY 2026.