Get the door closed. Good to see you, guys. All right. Good morning, everybody. We're happy to have Dan Schreiber, the CEO of Lemonade, with us here today. Dan, thank you for taking the time. It's an exciting time to talk about the business. Yes. Good morning. Yeah. If we can get us started, the broader market is seeing a softening trend in personal lines, and the industry is seeing notably slower growth. Your business mix is obviously fairly different from other larger- Yeah. carriers. In fact, this would be your 10th consecutive quarter of accelerating growth. Right? If we think about the business going forward, can you help us think about how you can win in an increasingly challenging market environment? Sure. Good morning. Good to be with you, Rob. Good to be with everyone. We've got some formidable competitors at the best of times, right? We're up against some companies that have been doing this for decades, if not centuries, and have the advantages of scale that we lack. We always approach the challenge in the spirit of your question, which is how can we win against all of this impressive and seasoned business? Our answer to that is a pretty simple formula, which is we don't play the same game that everybody else plays. We are a tech-first company that allows us to do things in our own lane. Our basic hypothesis is that technology can yield a cost advantage. Cost advantage yields price advantage. Price advantage yields strong growth. Yes, you see that now across our P&L. I'll give you a couple of indicators of that is really how we aim to continue to win, which is to say, in the last three and a half years or so, we've seen our business almost triple, our revenue almost tripled. We've added close to 1.5 million customers. Our gross profit has done much better. We're more than 10X the gross profit. Yet our head count is smaller today than it was three or so years ago. You're seeing the kind that drives efficiency like nothing else. There are a lot of metrics within insurance; we might come back to LAE and others that give you an insight into just how efficiently Lemonade is operating. That's when you pass some of those cost advantages on to the customer, you win in good cycles, and you win in bad cycles. In some ways, you win even more in tough cycles, and when people become more price sensitive, and the competition becomes fiercer, your advantage is more pronounced, as the old Warren Buffett about when the tide goes out, you see who's got a swimsuit on. Right. No, that's very helpful. Speaking of price sensitivity, personal auto is probably the hallmark of that, perhaps. Yeah. Going back to your prior Investor Day, you laid out a very ambitious goal of 10X the business going forward. A big part of that is the car business, the personal auto business. This is playing well so far, and if we think about the near-term aspiration for the auto business, can you maybe help us think about what aspect of that business is where you think the opportunity lays for you, and where are the aspects you kind of have to be a little bit more careful about so far? Sure. If I said earlier in broad strokes about our business that the anchor of our strategy is our structural advantage in technology, and that yields the downstream benefits that I described, you see a perfect illustration of that in our auto business, in our car business. The rest of the industry prices people based on things that make people squirm in their chairs a little. Credit score, gender, marital status, and education level. These are the state of the art of the incumbency for how to decide what kind of driver you are. At Lemonade, we use signals. We use telematics. We actually have, through your phone,, usually, we've got incredibly sensitive not only GPS, but accelerometer and a bunch of other sensors driving in your car, monitoring how you're driving. Well over 90% of our customers have that enabled all of the time, we have a continuous stream of data. We've collected over a trillion data points already. Suddenly, we can pierce through all of the proxies that are used. The name of the game in insurance is always about de-averaging, taking groups that look monolithic to your competitors, and you see the nuances within them. Take young drivers as a for instance. Young drivers, on average, are bad drivers, but averages is a curse word in insurance. You want to de-average at every opportunity. Young drivers go to insurance companies, they get a high rate. They come to Lemonade, and it will depend on how they drive. A lot of young drivers who don't have a credit score to speak of yet, and don't have a driving history to speak of yet, and are not of the right age group of the Robinsons to use the Progressive kind of target audience they are disadvantaged profoundly by the traditional methods of underwriting, and Lemonade is able to give them prices that are unmatched by the others. 2/3, but my example was on young drivers, but in zooming out across the age groups, 2/3 of drivers are better risks than average. 2/3. They drive fewer miles, they drive better. Traditional methods can't capture who is average and who is better than average. We're able to give 20%, 30% savings to those 2/3. Then you ask people, is Lemonade better priced or not? It will depend on which third you fall into. There'll be some people who will say, "Those guys gave me such a high rate, I'm sticking with GEICO" and good riddance. The system is working as designed. Then others will find that we're giving them 20%, 30% discounts. Remember that GEICO built a $50 billion business on the promise of saving you 15%. This is such a price- elastic business, such a price- sensitive business. That small cost advantage passed on as a price advantage can deliver very rapid growth. Our car business today is our new sales are growing at over 100% year-on-year. We are seeing that take off in that business. It's certainly an exciting subject to talk about on your next Investor Day later this year. Thanks for the plug. Yes, November in New York. Exactly. Maybe staying on that car topic a little bit. On the Investor Day, at the time, telematics was a competitive advantage you talked about. Yeah. In the auto business. More recently, the conversation feels like it's shifting more towards the autonomous. Yep. Side of things. You started a Tesla autonomous insurance product, then that's been expanding into various states. Can you tell us, maybe about, well, first of all, the thoughts behind the product in terms of how to guardrail the risks? Also, maybe just the need of being a first mover there, then where you're going from the autonomous products for this whole vehicle business going forward. For the benefit of those who aren't familiar, we launched a product that says if you use Tesla FSD in the three states where it's available now, and the list keeps growing, per mile for those miles that you let FSD drive, we will reduce your premiums by half. This is a pretty dramatic saving. I was talking about 15%. This will reduce the cost per mile driven by half. That's really a data-driven conclusion. FSD is a better driver than you or me. It's a safer driver than you or me. The data backs that up, and we're able to do some things that the rest of the industry can't do. We can price per mile. Those kinds of proxies that I spoke about earlier have no idea how many miles you drive. They're looking at your credit score. That's a very crude measure. 4 million people will give you the correct average answer, but it doesn't give you the kind of precision. We are down at the atom of being able to price per driver per mile. Once you've built something at that level of precision and granularity, you can always amalgamate it into all different kinds of products, and one of them is the FSD product we just launched. I think it is an expression of a profound structural advantage in our ability to go to micro pricing of per mile per driver and our ability to see who the driver is through the machinery and not through the legal form that was the contract that was signed at the time they bought the policy. This isn't just about named drivers. This is about AI seeing AI. We see you. We see that FSD has taken over. We see how it drives. We know which version of FSD you have, and whether you updated the firmware, and whether yours is one of the newer Teslas with better, faster machinery because the sensors improved over time or not. To get to that kind of granularity, and if you can do that, I think that just gives you a great test case or an exemplar of just how profoundly different the whole flow downstream from the policy is at Lemonade versus everyone else. Yes, I don't know if I'd say that we had to be first. We are the only ones who are able to do this. It was almost inevitable that we would be first. We have the full stack that allows us to offer this. It's in line with our brand. It's aligned with our technological capabilities. It was natural that we'll be first and to date, the only. Do you feel that competitors will be fast followers, or do you think there's maybe going to take a while for them to even get there? Just curious about your thoughts. My best guess is that you will see some. I don't have any insight. Of course. Purely a speculation. Yeah. Of course. My best guess is that they will scramble to get something that sounds similar. Okay. They might start giving discounts for cars with FSD, but I think getting to the kind of granularity that I described is beyond their systems and will take them a very long time. Basically, from fee per month to fee per mile is really not the easiest thing to do. No, the billing systems don't support it. They don't have the telematics. They haven't integrated their APIs with the OEMs. I think they've got a journey ahead, would be my best guess. Okay. No, really appreciate that. Thank you. Yeah. Maybe on the autonomous, how big do you think this opportunity is for you and for the industry? I think from our perspective, even for some very aggressive assumptions, L3 or better autonomous vehicles will be around, call it 15% of the total cars by 2035. How should we think about the size of the opportunity for Lemonade at this point? I think that's probably right. For a long time, the dominant mode of transportation is not going to be autonomous driving. It is clearly going to be the fastest-growing segment. You're going from zero to 15% of a $350 billion insurance market. That's great for Lemonade. We're small in general; there's a broader point here. If you're the CEO of a $50 billion, $60 billion, $70 billion, $80 billion insurance company, you are massively invested in the status quo. You'd actually don't want telematics. Forget FSD. Telematics is not good for your business because these X-ray glasses that allow you to see that 2/3 of your customers are overpaying is something you'd rather not know. What are you going to do? Reduce prices for 2/3 of your customers? Is that going to do a lot of good for your tenure as CEO of whatever company it is? No, that's going to be quite damaging to it. Then you have to raise prices for a third of your customers and have them churn out. None of this is good for somebody who has to protect a traditional business. We have the advantage of being very small. Car is our most recent product. Earlier products launched and have done very well. Renters, we've grown to a dominant position in the market. Pets launched only four years ago and has grown to half a billion dollars and is growing very fast. Now, the number one researched pet insurance in the United States. Car is behind all of those because it's our most recent product. That same trajectory should allow us to do something very significant in a market that is 20x, 30x bigger than the pet or renters market. I think we'll be able to do this for a very long time. For us, because we're so small, coming back to your question, rapid growth can happen in places that may look small if you're running Progressive today. For us, we will yield that 10X and 10X again very dramatically. If we are dominant in niches, young drivers for the reasons I said, autonomous driving for the reasons I said, and we have other business beyond, that can allow us to continue to grow. We mentioned 10 quarters of accelerating growth, car accelerating faster still. I think we've got a lot of headway ahead of us there. Got it. Even if, let's say, you do the 10X, there's still quite a bit of opportunity for you just simply because the areas you are in is where you really can compete much better than everybody else, essentially. No doubt. When we 10X our business, we will be barely noticeable. State Farm will still loom over us almost 10:1. We could 10X again before we become truly one of the larger players on the field. This is such a huge sector, 11% of GDP. It's got so much headroom, and that is true just in the United States. We're not just in the United States. We are in Germany and Holland and France, and the UK, and we're growing very rapidly in Europe. We're seeing triple- digit growth in Europe as well. The footprint, the TAM that's available to us, means that from our modest beginnings and place today, we consider the market opportunity to be endless, infinite as far as our planning matters or the next few years matter. Very global as well. It is global. Absolutely. Yeah. Actually, that would be a great segue into the other parts of the business, right? When we go back to the 10X business part. The other aspects of that would be fairly robust growth through, let's call it, home, pet, renters. Yeah. European business there as well. Can you maybe help us think about the trajectories in various businesses there? Obviously, renters originally was a very big business for you. Yeah. Still is important. Yeah. Just curious how you think about the various aspects of all the business. Yeah. Definitely. Renters was our original product. It's been overtaken by pet, we're seeing this layering effect as we add more products. One of the things that's worth mentioning as well is that it's not just new products, it's the interrelation between them. I'll come back to that in a second in terms of cross-sell and all that. Pet is very fast-growing, 50%, 60% annual- growth. The market itself is growing; we're growing faster than the market. That's a really great product, and it's a gift that keeps giving. We think there's a lot of legs to run and run- and- run in terms of pet insurance. Just crossed, as I say, half a billion dollars there, that's a fabulous plank of the business. Ultimately, it's a smaller TAM. It's not like home, it's not like car, which is where between them, you've got about $500,000,000,000 in the U.S. alone. Pet and renters are still somewhere around the $10 ± billion mark. Different orders of magnitude, no doubt. That's growing very fast. Europe, again, a relatively recent addition. We launched it significantly after we launched in the United States. It's doing better age-adjusted than America was for us. Growing faster, better profitability. It's got a lot of dynamics. We learnt a lot of lessons from our initial launches here, we're seeing those markets do well. Even within Europe, we're seeing progress. We launched in sequence Germany, Holland, France, the U.K., and how well we're doing in each market tracks the same thing. Germany, not so great. Holland, better. France, better still. U.K. is on fire. We're just seeing very rapid progression as we learn and as our systems get smarter and smarter and smarter. Europe, we're seeing triple-digit growth in Europe now, several years in a row as well. Renters, the dollars are growing, but as the denominator grows for reasons that I touched on in terms of the TAM, we're seeing the percentage growth rates; its ability to swing the entirety of the business becomes harder and harder. We're seeing growth there in the teens. We expect that to continue. Renters is really important. The majority of our customers are still renters, just not the majority of our dollars. It's so important because it's a feeder for the cross-sell of so many products. I don't know if we should come back to that separately, but it serves a strategic role. We've got over 2 million renters, that's hugely powerful for us as we think about other expansion and cross-selling. Maybe, yeah, let's maybe focus on that a little bit, right? Renters, you use that as sort of almost as a hook, so to speak. Yes. For the other areas of the business. If we were to think about just the future of the renters' business, from your perspective, is it just a key for cross-selling going forward, or is there a way to say you still have a lot of more room to kind of organically grow that business and then compounding the cross-selling going forward? Well, it's definitely the latter. It's growing very fast among first-time buyers of insurance. This is strategically important, people stepping onto the conveyor belt of life, buying their first policy. There isn't good data. As best I can tell, Lemonade is the number one brand. You stop a 20-year-old in your office and say to them, "What insurance do you have?" The chance of them answering Lemonade is higher than for any other brand out there. I put it to you that nothing is more predictive of future market share than market share among first-time buyers of insurance. It's also very highly differentiated from how the rest of the sector works. You watch television for five minutes, you'll see three different ads all saying, "I switched, and I saved." All of insurance is about moving from one basket to another. We're picking the fruit from the tree. We're out there getting first-time buyers of insurance, onboarding them to Lemonade, then growing with them. I think renters will continue to grow. We will cement and grow our position among first-time buyers of insurance. It's a growth engine. It is a highly profitable product. It is a product where tech advantage, that formula that I said, tech, it gives you cost advantage, it gives you price advantage, it gives you growth advantage, is at its purest. Because the premiums are so small, so much of what you're paying is for the overhead. The risks are so modest. If you're super efficient, that's where you'll see it the most, because there's least denominator to compete with there. We continue to be massively advantaged there. We pay our claims in a matter of seconds. Our cost to settle claims is marginal. The marginal cost drops to almost zero because most of our claims get paid without any human intervention at all. All of our policies are sold that way. It takes you 90 seconds to buy an insurance policy from Lemonade, from the comfort of your pajamas at any time of day or night, anywhere in the world. To get a latte at Starbucks takes about twice as long. You do see that a lot of these dynamics that I'm talking about are manifested most powerfully in renters. Yes, it creates a huge stream of customers to whom you can upsell. It's kind of CAC-less in that sense because they were acquired for very low CAC, which paid for itself very quickly, and you have an install base to which you can upsell the other products. Right. Those renters eventually evolve into homeowners insurance customers. That's right. Maybe just between the renters and the home business, obviously, homeowners are more competitive business than renters, just given the environment. How do you want maybe maintain an underwriting discipline so that you can compete against the other bigger homeowners insurance companies? On the claims point you're pointing out, when you can settle claims very fast, how do you guardrail against fraud and things of that nature? Can you maybe help us with the process itself? I'll start with the guardrails. The way we deploy AI, this has been true for a while; it becomes more and more true with every passing day, but is in places where AI outperforms humans. Your question has a premise nestled in it that we need guardrails that are human in nature. That's fair. I reject the premise. What we're seeing, about 90% of the time that we get a customer complaint, it's about something that a human did, not what an AI did. We only allow AIs to step into places where it outperforms humans, not only in terms of the rigor of its decision-making, but its empathy. We deal with deeply human situations. Oftentimes, it's the worst day of your life. We had to deal with people, many thousands of people, in the L.A. fires. Your most beloved pet, who is a household member, has just been diagnosed with an awful disease. Your house was burgled. Your neighbor is suing you for something that you think might bankrupt you. These are really tough situations that we're handling. There was an assumption that, oh, you need a human in the loop to exude empathy, to handle it. It's just not true. LLMs can understand these nuances and respond with empathy that outperforms humans. If I'm paying your claim in three seconds, you don't bemoan the fact that you didn't have three months of a relationship with a claims adjuster. You're pretty happy. Costs drop, and your satisfaction goes through the roof. Of course, we have guardrails. Of course, we rigorously test all these things. We sandbox every technology before we let it loose. Our experience is that once it passes those internal guardrails, it actually outperforms humans at a fraction of the cost. It's really about thoughtful deployment of AI. 100%. Okay. 100%. On top of that, with a very quick claim settlement, you essentially have very high customer satisfaction that helps you maintain and cross-sell. That's right. It's actually quite interesting because just like in auto, where you advantage younger customers, and then they eventually become renters- That's right. eventually become homeowners. There's quite an interesting flywheel you have here. Exactly right. So. Quite distinct from the way the incumbency thinks about these things. Yeah. For sure. Yeah. Maybe on that cross-selling point, when we think about from renter, pets to home and cars, how do you think about bundling? There's obviously another competitive point. Yeah. That lot of your competitors, the bigger competitors. Yeah. Will use bundling to their advantage, right? Also, at the same time, there's quite a bit of synergy in the business products you just described. Yeah. Is there a way to think about bundling, or how do you think about that process going forward, versus competition as well? First of all, you're absolutely right. This is an area of focus. I'll give you some numbers, but about a third of our policies are sold to existing customers. Right. If we just sold a pet or a renters policy, or a home policy, the chances are one in three that it's CAC-less and going to an existing customer. We're already seeing quite a lot of that. In car, it's been higher. It's been about half of our policies are being sold to existing customers. That's a stunning competitive advantage because Progressive, GEICO, these incredible companies, they're all car- first. They bear the full CAC, and it's an expensive acquisition cost. The most expensive Google AdWords are around car insurance. You're spending a lot of money up front. If we can get half of our customers CAC-less, that's a structural advantage, and we pass those savings onto our customers, and that feeds the machine that I spoke about earlier. Yet, even though it's about a third already, if you look at our total IFP, almost 20% of our IFP is bundled IFP premiums. It's getting there, and yet we're behind. We're behind, and the incumbents are better placed to do bundling, particularly of home and car. Car insurance for us is still unavailable to most Americans. We're approaching 50%, but we're still in our rollout, and it doesn't perfectly map where we have homeowners available, which is also being rolled out. I think a lot of headroom for us to grow as we do more and more of our rollout, as we get better overlap of all of our products' availability. There are some states where all of our products are available, and we see that impact. Most states, we're not there yet. I think a lot of place for us to grow. Essentially in that flywheel, because your car is really now the starting point, your LTV to CAC should be notably higher. Then, as bundling expanded, that should be a very healthy LTV to CAC going forward. Absolutely. Okay, perfect. Really appreciate that. Maybe that actually segued nicely into how we think about financial targets, right? Obviously, I presume you're going to talk about it at the 2026 Investor Day. On the prior Investor Day, you laid out a roadmap to profitability, right? You're looking at net income positive exiting 2027. Yep. Based on where we are today, I think the way for the math to work, I think it's fair to say that we'll have to look for notable expense management, right, from G&A, sales, and marketing, and such. Can you maybe help us think about that path currently going into GAAP income profitable in 2027? How should we think about just that process from here on to, call it, the next year and a half? If you look at our financials to date and the projections that we gave at our last Investor Day in 2024, the Investor Day before that in 2022. Generally, look at all the guidance. We've given guidance over 20 times since our IPO. It is with notable precision. We've yet to miss guidance. We're well ahead of what we told investors in 2022. We're also ahead of what we told investors only 18 months ago. I do think that our ability to predict our business is surprising, given how young and fast-growing our business is. There is something almost mechanical. We've built a machine that is cranking, and it's cranking in ways that are reasonably predictable. Maybe one of the most clean ways of looking at that is if you look at our EBITDA margin. You'll see a really, just not quite straight, but almost straight line up and to the right, which intersects at zero in Q4 of this year, which is why we've guided already four years ago that in Q4 of this year, we'll be EBITDA positive. You see all of the breadcrumbs along the way. It just happens to intersect there, and then it continues on. If you draw that line forward about a year later, I don't know where exactly, but about a year later, you'll find that we cross over the elements that EBITDA is missing, which is stock-based compensation and interest payments, and then you get to net profitability. I don't want to present it as an inevitability, but it is fairly predictable, fairly mechanical. We've already hit, and we are actually a year ahead of when we said we would, cash flow positive. This is our third year of being cash flow positive. Somewhat unusually, insurance is cash flow positive before EBITDA is positive. Sure. I feel reasonably confident, as much as one can be in a given set of circumstances, that the predictions or guidance that we gave, including getting to net profit sometime around late 2027, maybe early 2028, roughly a year after EBITDA positive, is on course. Right. I think part of that, I kind of want to emphasize, you've been consistently outperforming your guidance as well. It's been a very strong trajectory so far. Thank you. One thing I think you touched on earlier is really about the AI capabilities, and obviously, you're a technology-first- Yes. Company. As we think about the evolution of AI going forward, do you see competitors kind of catching up? What are the areas where you think you have the best long-term potential, where maybe competitors probably just can't catch up? Everybody, every session that everybody will hear today, AI will be sprinkled all over the place. It wouldn't be a financial conference without it. Yes. Which wasn't true just a few years ago, but yes. You've been following us long enough to know that we've been talking about this 10 years ago as well. It's not something we discovered in November of 2023. 2022. This was the founding thesis of Lemonade. The reason is because even before LLMs, insurance is an extraordinary sector because it's one of the only truly ephemeral products. There is nothing physical that's being manufactured. It's a statistics, it's probability theory that is being monetized. It's the ability to ingest data and use it to make predictions about the future that lies at the very core of what insurance is about. That is what you're monetizing: the ability to look at past patterns and predict future patterns as a result of that. Up until the modern era, insurance companies were the best in the world at that. They were home to the best statisticians. They had the best data sets. In the last 20 years, clearly, it's Google, it's Silicon Valley, it's high-tech companies that were engineered with modern big data infrastructures and machine learning capabilities. Lemonade was engineered that way. We are an engineering-based company founded by two tech founders, and we are really bringing Silicon Valley into insurance. That is a structural advantage that today manifests, I think, in every line in our P&L. We touch on some of the ways in which it's manifesting. Had we believed then that instead of that, we could just transform existing behemoths, that would've been a much more profitable thing to do. If you take $100 billion of business instead of starting from scratch and eking out your growth, and you just transform $100 billion of business using technology, that will produce a much better return on investment. We didn't believe it's possible. The structural difficulty, the innovator's dilemma that beguiles and befuddles traditional insurance companies, is well-studied, well-understood, and very real. Allianz, one of the largest insurance companies in the world, spends about $3 billion a year on IT. The industry as a whole spends absolutely staggering amounts of. Since our founding, I think the industry has spent something close to $1 trillion on IT. We've spent less than half a billion, and yet our technology is far superior to what those $1 trillion have generated over that intervening time. I don't expect a turnaround anytime soon. In fact, what's happening now, the acceleration that we're seeing with AI means that the frontier is moving so fast that if you're not riding that wave, if you're not at the frontier, no matter what press releases you issue and what efforts you spin up, you're getting further from the frontier rather than closing the gap. I think there's no question that today and for the foreseeable future, the incumbents will be moving faster than the frontier is moving. Actually, the frontier is moving away from them rather than closing the gap. That's my best assessment based on what we're seeing so far. That's pretty interesting. We'll see what happens, right? Yeah. Maybe we're close to time. If anybody has any questions. If not, I can keep going. I do have one last one. Obviously, a big part of the personal line business is distribution, right? One thing we talk about all the time is technology and the evolution of AI. Do you foresee an environment where, in the future, maybe personal line distribution will be significantly changed by AI to the point where maybe the distribution side of it is perhaps much less relevant, or carriers will just directly go to customers, or what have you? Just curious if you have any thoughts on the distribution side and how that could evolve because of AI? It's quite possible. We are seeing very early innings of people buying through agents, and when you say insurance, you have to explain what kind of agents you mean. I don't mean the- Yeah. Traditional broker. I'm talking about AI agents. At Lemonade, we talk about ogents and agents. Right. We're seeing early innings of that. You can imagine a machine- to- machine purchase in that situation. We're fine with that. The cost advantage that we spoke about earlier means that already today, if you ask an LLM about your different insurance needs, Lemonade will be featured in a way that is disproportionate to our size. Some markets, like in the U.K., which are price comparison driven, we're already seeing a much more algo trading style environment where the human contact is far less important and the machine-to-machine is driving a lot of it, and we're doing very well. I mentioned earlier the U.K., one of our fastest-growing markets. I think we're well prepared for that eventuality. I don't know how fast we'll move into that future. People have been able to buy insurance on a website for a long time, and yet a lot of them still go to the high street agent. We'll see how fast human behavior adapts, but the capabilities surely are there. Just given your AI native architecture, you'll be there regardless of whether or not the industry is there. That's safe to bet. Yeah. Perfect. Really appreciate your time. We're at the time, so thank you. Thank you. Thanks, Phil. Really appreciate it. Thank you.