Hello, everyone. Thank you for joining us and welcome to the Lemonade third quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to the Lemonade team. Please go ahead.

Good morning and welcome to Lemonade's third quarter 2026 earnings call. Shai Wininger, President and Co-Founder, Tim Bixby, Chief Financial Officer, Nick Stead, SVP Finance Thank you very much. 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. Our letter to shareholders also includes information about our key performance indicators, including number of customers, in-force premium, premium per customer, annual dollar retention, gross earned premium, gross loss ratio, gross loss ratio XTAT, 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 thanks for joining us to review Lemonade's results for Q3 2026. This was another excellent quarter marked by accelerating growth, healthy underwriting performance and continued progress towards profitability. Infor's premium reached $1.55 billion, growing 34% year-on-year and extending our streak of accelerating growth to 12 consecutive quarters. Revenue grew faster still, increasing 73% to $336 million, while gross profit increased 48% to a record $118 million. Adina Eckstein On the bottom line, adjusted EBITDA loss was $20 million in line with our expectations, and we remain on track to deliver our first positive adjusted EBITDA quarter in the current quarter and reiterate our expectations that 2027 will be EBITDA positive on an annual basis. We first outlined our expectation of reaching positive adjusted EBITDA in Q4 of 2026 back in 2022. Since then, we've navigated considerable macroeconomic volatility and uncertainty, yet our profitability timeline remains unchanged. That is deeply gratifying and indicative of how dependable and predictable our business is. A key driver of this trajectory has been the operating leverage our technology affords us across the business, and I think the clearest illustration of that is our productivity per employee. We ended the quarter with 1,321 employees, fewer than we employed four years ago. Yet over that period, we've nearly tripled our premium base and doubled our customer count. In other words, we're running a business nearly three times the size with slightly fewer people. Thanks, Daniel.

One topic we'll dive into more detail at Invest Today is the emergence of personal AI agents, which I believe will fundamentally reshape insurance distribution. We are extremely excited about this long-awaited opportunity to open LemonadeOS to external agents, letting them serve their users directly, just as our team would. Customers using personal agents to interact with Lemonade will get instant, 24-7 quality service, while we reduce our cost to serve, allowing us to pass more savings back to them. You can read more about our upcoming Lemonade OS update with native support for personal agents at Lemonade.com. I also want to touch on two areas where LemonadeOS supercharged our progress. Geographic expansion and autonomous car. First, geographic expansion. 2026 has been a year of accelerated growth on the map with 25 new product geography combinations launched this year and on. LemonadeOS brings levels of automation and sophistication that transform non-engineering tasks that used to take weeks into hours, allowing our team to launch products and enter new markets with increasing speed and less incremental overhead. And I'm pleased to note that we reached a major milestone earlier this week, nationwide availability for our renter's product, the first in our portfolio to achieve that with more to come. We've also seen faster geographic growth in our car business, following recent launches in Missouri, Florida, and Pennsylvania. Lemonade Car is now available in 14 states, covering more than half of the US population. Our car business is also getting better, with healthier cohorts, more competitive pricing, new features, and exceptional customer service. This is a complex expansion that requires our team to grow and improve the product at the same time. I expect our car expansion to pick up even more speed in the coming quarters. The second area I wanted to highlight is autonomous car, where once again, LemonadeOS is unlocking velocity we couldn't have otherwise achieved. Since launching the product earlier this year, we've already expanded to six states, Early results from our autonomous pricing model continue to be encouraging, with conversion among Tesla owners roughly 2.2 times those we see with our broader car product. And with that, I'll hand it over to Tim, who will take us through the financial performance and outlook in more detail. Tim? Thanks, Shai.

Let's start with Q3 results, which were excellent. In-force premium grew 34% year-on-year to $1.55 billion. Driven by customer growth of 23% and premium per customer growth of 9%, we added roughly 212,000 new customers in Q3, 20% greater than the roughly 177,000 customers added in the prior year quarter. Within our reported gross loss ratio of 65%, our favorable prior period development of about 2% was driven primarily by our car and renter's products. On a net basis, we also saw two points of favorable prior period development. The vast majority of development was not CAT related, both on a gross and net basis. Prior year development, which we report on a net basis, was $4 million favorable in Q3 and about $20 million favorable year to date. Gross profit increased 48% to $118 million, while adjusted gross profit increased 49% to $121 million. Thank you for joining us. Thank you for joining us. of which about $350 million is required to be held as regulatory surplus. Annual dollar retention or ADR increased by one percentage point sequentially to 86%. Operating expenses excluding loss and loss adjustment expense increased by $51 million or 36% in Q3 as compared to the prior year and by $10 million sequentially compared to Q2. Minus the increase in growth spend and interest expense, expenses were up about 16%. One additional logistical note, we currently have a standard S3 registration on file known as a shelf registration, which has a fairly typical three-year expiration date or term. Ours expires next week, so we plan to renew that shelf with an updated S3 filing shortly. Thanks, Tim. I wanted to first highlight a notable growth driver in Q3.

Sales to existing lemonade customers, known as cross-sales, are becoming an increasingly significant contributor to our overall growth. Year-to-date, we surpassed $100 million in cross-sales, which are growing at twice our IFP growth rate. And we see significant opportunity to drive further IFP growth from our existing customer base over time. Thank you for watching. From Q2 to Q3, operating expenses increased by $10 million, and that was attributable to increases in growth spend, related interest expense, and other insurance expense. Stock-based compensation was down slightly sequentially, and headcount also modestly declined, down by 18 to 1,321. Year over year, operating expenses grew by 36%. That was driven by a handful of identifiable factors, most of which we expect to moderate going forward. Let me briefly unpack the drivers and individual line items. Other insurance expense grew $5 million, or 21%, compared to 33% growth in gross earned premium. Recall that this line item is largely variable in nature, and it is generally expected to grow at rates not materially different from the top line. Sales and marketing grew by $25 million, or 44%, and that was driven by increased growth spend. Alongside that increase, we maintained strong LTV to CAC ratios above 3 to 1. Technology development expense grew 18%, primarily due to increased stock-based compensation expense. And G&A grew by 45%, primarily due to increased stock-based compensation, interest expense, and the absence of prior year one-time benefits in the current quarter. I want to share some thoughts on how we expect these expense growth drivers to impact future results. First, growth spend. We touched on this in last quarter's shareholder letter, but the growth rate of growth spend is expected to slow significantly in Q4 2026 and onwards. Second, stock-based compensation expense. We don't expect this to be a driver of year-over-year expense growth beginning in Q2 2027 once we lap those executive awards from earlier this year. Thank you for watching. Turning to the bottom line, net loss was $44 million, or 56 cents per share, compared to $38 million, or 51 cents per share, last year. Adjusted EBITDA loss improved to a loss of $20 million from $26 million last year. The divergence in year over year performance between the two measures largely reflects the increases in stock based compensation and interest expense. Let's now look ahead to our guidance for Q4 and full year 2026. We include this in our shareholder letter, and our current view represents 33% Q4 and full year IFP growth at the high end of our guidance range, roughly 52% Q4 revenue growth, and 67% full year 2026 revenue growth. and positive adjusted EBITDA of $5-9 million in the fourth quarter. With that, I would like to pass it over to Shai to answer some questions from our retail investors.

Thanks, Nick. We now turn to our shareholders' questions. There were a number of questions around the pace of geo-expansion and whether we expect to see the pace of car state rollout accelerate, similar to the surge of renters launches in the past few months. So a few thoughts on this. As a reminder, we launched three new car states in the past 90 days, Florida, Missouri, and Pennsylvania. So far in 2026, our launch pace across the business is about seven times faster than in prior years. So we're really seeing the Lemonade OS acceleration take effect. Also, we're not facing a TAM constraint. The states we're live in represent more than half the market. Adina Eckstein We got questions about our autonomous product, specifically whether we're working with any autonomous driving or fleet partner in addition to Tesla. I'm unable to share much about this right now, but I will say that we have multiple active relationships with major car makers beyond Tesla and expect to see more brands become available in the Lemonade autonomous car product over time. Lastly, we've gotten some questions about AI in our industry, specifically how our AI native architecture becomes a durable advantage and not just efficiency gains that competitors can copy. I actually think our advantage is growing in the agentic era. There is a common misconception here. As individuals, you can install cloud or chat to PT in minutes, and having that kind of intelligence in your pocket, the value is obvious. Scroll through X, and it looks like everyone's building swarms of agents to run their businesses. But inside large organizations, it's very, very different. Most incumbents run on layers of legacy systems. Many of them were designed before the Internet. They don't build their own core systems. They rely on vendors to innovate for them. And most of their policies aren't sold digitally. So they don't have the data or the signals or the context that AI needs to be truly useful. And driving this kind of change takes a culture and a team that were built for it from day one. And that's what Lemonade and Lemonade OS is all about. It was designed from the ground up for autonomous operation. AI agents doing the work, not AI bolted on top of systems built for humans. And everything runs on top of deep context. Every quote, every policy, every claim, every customer interaction has been digital from day one. So our agents don't just see a task, they see the full picture. Who the customer is, their history, their risk profile, and how every part of the business connects. That context is what makes autonomy actually work. And it compounds. Better claims data leads to more accurate pricing. Better pricing helps us grow profitably. And that growth gives us more data and even deeper context. And because it's one system that we build and we own, we can open it up directly to personal AI agents. Thank you for joining us. Thank you. Thank you.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question, and if you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jason Helfstein from Oppenheimer. Please go ahead.

Hey, thanks, everybody. Don't want to steal your thunder before the upcoming analyst day, but appreciate the kind of color on how to think about expenses. I mean, look, I think there's a big question on we're at an inflection point with profitability for the business. Kind of given your comment about slowing marketing, can you give us some hints of how we should think about maybe EBITDA pacing as we move into next year and how you're thinking about balancing kind of EBITDA relative to what are obviously some of these exciting growth drivers around car and other areas? Thank you.

Sure. Take that, Jason. I think a couple of ways to think about it. History is always a good guide for the future for lemonade. So I think that trend will continue. There's a couple of things that typically drive the balance between growth and profitability and also over the course of quarters and how that flows. And so I think for a few years now, including this year, you'll see a pattern where there's a pretty consistent theme of in the bottom line trajectory in the first three quarters of the year and then a really nice and notable step change in Q4. And that's a common theme. We expect to see it this year. It's likely to continue going forward. And so when we come in February and give guidance for next year, it's pretty likely you'll see a similar pattern. And so when we indicate that we expect to be EBITDA positive in Q4, as we do, and EBITDA positive for the full year next year, that pattern will likely be consistent. and our growth spend will likely follow that. We've got a real benefit embedded in the business now where we can grow at a quite healthy rate with significantly slowing growth rate in growth spend. So we're spending more growth dollars for sure, but that growth rate is declining quite rapidly. And so we'll see absolute dollars in terms of growth spend increase next year. We are keeping a close eye and a balance with growth and profitability. It's been four years now when we've been talking about this Q4 EBITDA positive coming. And with that kind of visibility, I would expect that team to continue into next year. Our bias is always growth. When an extra dollar or a million or five becomes apparent in the forward model, We tend to invest that in high ROI, high LTV to CAT growth more often than not at the moment that is CAR. And you saw that in the CAR growth rate year on year. You've seen that for a number of quarters. So I would expect all those themes to continue.

Your next question comes from the line of Daniel Lee from Morgan Stanley. Please go ahead.

Hi, good morning. Thanks for taking my question. For guidance, you guys raised the full year revenue range by $16 million, but kept the full year adjusted EBITDA range unchanged. Could you talk about The drivers behind your five to nine million EBITDA guide for 4Q, are you guys expecting maybe incrementally higher growth spend or other operating expenses in the fourth quarter? Thank you.

Thanks, Daniel. Happy to take that one. Yes, you're right. Revenue guidance is up and adjusted EBITDA guide for the fourth quarter and full year is stable. And the primary driver of that is related to our pet loss ratio. We're seeing a modest headwind, and you can see that in the sequential pacing of the pet loss ratio. And I'd note the pet loss ratio is largely under control. We're taking rate through the system to offset the dynamics that we're seeing, and that will flow through the financials in upcoming periods. And as a result, that loss ratio is expected to moderate over time. But that's the primary reason I'd note for that dynamic where you're seeing revenue up, but the adjusted EBITDA guide roughly stable. Now, I also wanted to say, notwithstanding that pet loss ratio factor, we continue to deliver a guidance of 33% ISP growth and positive adjusted EBITDA guidance. And so pet is 40% of our business, not 100% of our business, and that paints the picture of the resilience of our growth due to benefits of diversification.

Got it. Thank you. For my follow-up, I wanted to – I know you'll probably – you guys will probably provide more details on personal agents during Investor Day, but I'm curious, are you guys seeing any volume from personal agents like Muse today? And maybe could you talk a little bit – I know it's early, but could you talk a little bit about the net impact from Agentic for eliminating spoke of business over the next few years?

Hey, Daniel. Yes, it is something. It's the other Daniel here. It is something that we're going to discuss at our investor day. And Shai referenced it in his earlier answers as well. We're not seeing it yet in the volumes, but we are seeing it in significant ways. And we actually think this is something of a game changer for the industry and in a way that is very favorable to Lemonade. I'll touch on a couple of things that I'll develop in our meeting in 10 days' time, but it starts with the fact that Lemonade has managed to automate so much. We've had our AI Maya for 10 years now selling policies and AI Jim paying claims, and we've been working with a framework of a centralized system. Adina Eckstein and for us, that's a very, very big deal. It means that we can move at paces that were not possible hitherto. And it also means that the kind of behaviors that we're seeing from personal agents, they file much more rigorous and lengthy documents and they can really produce something of a tsunami of well-reasoned legalistic and kind of appeals. It's the kind of stuff that we handle very comfortably because we've got our agents talking to your agents. But I think that's going to become an increasing, is becoming an increasing issue for incumbents who are used to a more human to human contact. But honestly, beyond all of that tactical stuff, strategically, this is a big shift. The entire industry is predicated on Adina Eckstein all of their impact the second you're talking to a personal agent. They've got nice muses, a nice furry icon, but these are rational agents that are just oblivious to the very moat upon which the entire industry has built itself. So I think there are strategic shifts here of tremendous importance, and I'll develop that theme a bit more in the invest today. Thank you so much.

Your next question comes from the line of Tommy McJoint from KBW. Please go ahead.

Hey, good morning. A question on the renter's business there. Now that you're in all 50 states, you talked about the possibility of potentially unlocking partnerships now that you are nationwide. What would be an example of that? Is that with property management companies? Would that be embedded in a referral system where you would pay a commission or a referral fee to the partners resourcing that business? What did you mean by that partnership comment? Thanks.

Yeah, so I would think of that as more of the same, but even more so. And what I mean is there are a tier of folks are potential great partners who have broad reach, are a really nice fit for an effective renter's product, that just have a nationwide requirement. And so there's a bit of a ceiling that we've dealt with for a very long time. We've had a great number of excellent partners all along the way. Our bias, of course, is direct consumer, but we've always had a really nice stable of effective partners in probably four or five different verticals and property management is certainly near the top of the list. But this kind of opens up a broader world of more established players with perhaps a more rigorous requirement that we would be nationwide. So I would think of it as not so much a light switch shift but a consistent improvement and expansion over time and our ability to reach into these great partners. So we're the head of our renters team and the company that is really focused on that. So you'll see that in the coming quarters.

Okay, got it. And then you had some interesting comments on your cross-sale growth trends that you're seeing. What portion of your incremental cross-sales are because you now have a new product live in a state, like, for instance, expanding CAR into more states? Is that driving the majority of cross sales or are there still cross sales happening where people are coming around to getting a pet policy where they've already had a renter's policy but it's already been available in that state for a number of years?

Tommy, I think I'd note it's really coming from both places and cross sales in particular are performing very well. The growth rate of cross-sales currently is roughly double that of total in-force premium, and we expect that to continue to be an increasingly significant driver of growth over time. And I'd really call out both of those dynamics. We're continuing to expand penetration within our existing cohorts, but then certainly when we launch a new state, we do see a spike in cross-sales as a result of that.

Thanks. And just actually last quick one. What's the percentage of your IFP or number of customers that have more than one product? And I guess should I think of all of those as part of your cross-sale definition?

The percentage of total in-force premium that is bundled at the end of the quarter is fast approaching 20% and has been improving steadily over time. The percentage of customers who have more than one policy is also interesting, but for us, there's a dynamic where we have over 2 million renters' customers, and for a meaningful portion of those customers, a bundle isn't an immediate need. And so I instead point to those dollars, which I think are a more helpful measure. You've got, like I said, approaching 20% of total enforced premium, and when you look at the dollars contributed by cross-sales, really growing rapidly.

Your next question comes from the line of Andrew Anderson from Jefferies. Please go ahead.

Hey, good morning. When you describe the newer car cohorts as healthier, which metrics are improving and how do their loss ratios and retention compare with prior cohorts at a similar maturity?

When I look at the overall car underwriting performance, let me break that down a bit perhaps. The calendar quarter loss ratio was around a 63, and we did see a meaningful benefit from prior period development within our car line of business. Outside of that effect, the car loss ratio is trending in the low to mid-70s range. Thank you.

Maybe just on expenses, even after adjusting for some items like stock comp and one-timers and interest expense, GC interest expense, it does still look like underlying G&A is increasing at a teens or high teens rate despite the lower headcount. So could you maybe just break down what is driving that underlying increase a bit more and how we should think about the underlying run rate increase into 27?

Within G&A, the primary drivers of expense growth from a year-over-year perspective are interest expense, stock-based compensation expense, and a couple of one-timers in the prior year quarter. You're right that it's not perfectly flat outside of those dynamics, but if I point to the sequential change, the growth is notably lower. If I look ahead, I might point to Q227 as an interesting point in time where we lap the impact of the executive awards from earlier in the year. And so the stock-based compensation driver is no longer contributing to year-over-year growth. And from that point onwards, I would expect to see significantly moderating year-over-year growth in G&A. Thank you.

Your next question comes from the line of Alejandro Zumbato from BMO. Please go ahead.

Hey, thanks. I'm Mike Sremski filling in for Alejandro. Just back quickly to the conversation on the pet insurance loss ratio. Maybe you could just kind of give a little bit more color on on what's driving that a bit higher and what actions you're going to take. And then maybe you could also just touch on the European gross loss ratio as well and what's any color there.

Yeah, thanks, Mike. I can take those. So within our pet line of business, we're impacted by an inflationary macro dynamic that's impacting the entire industry. with increasing vet costs. And we're actively taking right through the system to address that. And so like I think we mentioned earlier, we do expect that pet loss ratio trend to moderate and normalize in the upcoming several quarters. I'll note it takes a few quarters for that to flow through the financials. And maybe hitting Europe for a moment, the loss ratio was elevated in the current quarter. That type of volatility is not entirely unexpected with a book of our size and scale. And I'll note 29 points within the current quarter results were driven by catastrophes and large losses. Now, with that said, in Europe as well, we are pursuing some targeted rate actions to drive improved underwriting margins on an attritional basis. Now, maybe I wanted to... while we're on the topic of loss ratio. Those are excellent questions and hopefully I answered your question on the drivers. On a trailing 12 months basis, our loss ratio is 60% overall and we view that as a very healthy level relative to our own history and relative to benchmarks. And from here, There are certain drivers across the business, for example, mixed shift to car and certain segments where we may lean into competitive pricing. And those drivers may modestly increase the loss ratio over time. We're not solving for loss ratio in isolation, however. We're solving for total gross profit dollar generation. And so I encourage you to continue to focus primarily on gross profit and its growth rate as we continue to grow.

Perhaps importantly on loss ratio, these are not surprises to us. While it can often feel better when the number goes down and feel a little worse when the number goes up, that's really not how we view it. We have a view into loss ratio as it develops almost on a real-time basis. We're looking at each month at minimum as we go. And so while reporting a full quarter is interesting because that's the checkpoint, These are not big surprises to us. They've been factored into our guidance. They factor into our forward models. And in some ways, these modest volatilities and loss ratio and other key KPIs up and down is really the positive factor that indicates that we're growing effectively. We're shifting mix. We're expanding newer products. We're growing CAR. Europe has gone from a rounding error to a really large and dynamic business. These are the kinds of things that you see in the metrics as you go, but if you back up and look at a couple of quarters or a year, these are right on track with our expectations.

Understood. Good color. And just as a quick follow-up on the exciting news about kind of increasing cross-sell, if we were to kind of seek to model that into our models, I think you gave some color earlier, but is it correct there's not really much incremental customer acquisition cost spend on whatever product is being cross-sold?

Yes, that is a correct assumption. And if you're looking ahead, we remain bullish on our ability to continue to drive cross-sales growth that is notably higher than the overall growth of the top lines. Thank you.

At this time there are no further questions. This concludes today's call. Thank you for attending. You may now disconnect.