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  • The Fintech Lemonade Inc. (LMND) is making Substantial Progress but Challenges still at Large

    The innovative insurance company capitalizing on artificial intelligence, Lemonade Inc. (LMND) has been on a bumpy ride with shares 87% farther from all-time highs. While many challenges still exist amid the persistent financial net losses and wider tech sell-off, the company has been making substantial progress and growing nicely.

    The latest earnings report from the fintech company brought about both good and bad news causing the stock to run wild with an uptick followed by a downtrend. While investors initially celebrated the beat earnings and revenue along with improvement across most metrics, they later started worrying about its underwriting which is still much farther from the target 75% loss ratio. The earnings proved hard to digest for investors as they remained uncertain whether to be happy about the much progress or concerned about the challenges ahead.

    On May 18, LMND stock was down by 3.69% in the premarket to trade at $20.38 at the time of writing. This downtrend came after the stock surged by 9.41% in the prior trading session which had it valued at $21.16 a share.

    Let’s have a look at the bright and not-so-bright side of the latest earnings report shared on May 9, 2022.

    LMND’s Q1 2022 Performance

    On the Bright Side

    According to the financial results, the fintech company’s business grew impressively in the first quarter with in-force premiums climbing 66% YOY. A 37% increase in the number of customers on top of a 22% increase in premium per customer resulted in in-force premiums of $419.0 million in Q1 2022. Thus, with a customer count of 1,504,197, the premium per customer reached $279 at the end of the quarter. Subsequently, gross earned premiums surged 71% YOY to $96 million.

    Source: The Motley Fool

    Furthermore, marking a stark 88.5% increase in YOY was LMND’s revenue which came at $44.3 million against the prior year’s $23.5 million. The quarterly revenue beat the consensus estimate by 2.43%.

    On the earnings front, the company came out with a loss of $1.21 per share against the expected $1.43 a share. The loss widened from the comparable period’s $0.81 per share but was better than expected.

    The adjusted gross profit soared by 226% YOY while the cash, equivalents, and investments were $1.01 billion at the end of the quarter.

    No-So-Bright Side

    Raising concerns was the company’s underwriting i.e. its loss ratio which demonstrates how much of a policy it pays in claims. While the loss ratio did show some improvement YOY at 90% against 121% last year, it is still very far from its target of 75%.

    Source: Q1 Shareholder Letter

    The metric had been improving sequentially before last year’s Q1 which brought a big challenge to the continued improvement due to the Texas freeze. CEO Dan Schreiber attributed the still vast loss ratio to inflation causing a rise in claim payouts amid the lagging policy rate increase, in the letter to shareholders.

    Moreover, total operating expenses rose 68% YOY to $92.5 million due to higher expenses in general and technology development. Consequently, the adjusted EBITDA loss also widened to reach $57.4 million against the comparable $41.3 million.

    Thus, with the higher loss ratio, and increasing operating and EBITDA losses, LMND will surely run out of cash soon even if the sum is large.

    LMND’s Future Guidance

    Due to the Russia-Ukraine conflict, geopolitical and economic turmoil, and peaking inflation on top of rising interest rates, the company (excluding the Metromile acquisition set for Q2 2022) expects:

    Q2 2022 Fiscal 2022
    In Force Premium $445-$450 million $535-$545 million
    Gross Earned Premium $103-$105 million $426-$430 million
    Adjusted EBITDA $(70)-$(65) million $(280)-$(265) million
    Revenue $46-$48 million $205-$208 million

    Analysts were forecasting $51.35 million in Q2 revenues and $213.48 million for the full year. However, the pending acquisition of Metromile in the ongoing quarter would accelerate Lemonade Car rollout and contribute to its financials which was not included in the company guidance.

    Conclusion

    The AI-powered fintech company while showing promising progress and continuous improvement still lags on certain key metrics. While it expects to bring down the loss ratio to 75%, it is still far off at 90% and the company’s 2022 guidance also came below the expected. Otherwise, the company has been demonstrating high growth and improved performance YOY.  Moreover, with the Metromile acquisition in sight, LMND might just produce better-than-expected financials if it continued to bring down the loss ratio and shrinks net loss.

  • Q4 2021 Financial Results: Lemonade Inc. (LMND) stock Took a Harsh Hit After Hours

    On February 23, Lemonade Inc. (LMND) declared its Q4 2021 financial results along with guidance for 2022. Resultantly, the stock took a harsh hit in the after-hours session on Wednesday.

    During the regular session, the stock varied between a high of $25.04 and a low of $22.91. At 3.73 million shares, 173% of the average volume, LMND stock closed the session at $22.95. The stock suffered a loss of 6.40% during the regular session. LMND continued to lose in the after-hours when the results were announced. The stock lost a further 19.04% in the after-hours to reach an $18.58 per share value. It was only during the regular trading that the stock had reached a new 52-week low, but it went further down to break the low in the after hours. Hence, currently, LMND has reached down to the latest 52-week low of $18.58.

    The insurance services provider, Lemonade Inc. is a holding company founded in 2015. Currently, its 61.64 million outstanding shares trade at a market capitalization of $1.51 billion. With a year-to-date loss of 45.50%, LMND stock has declined by 26.56% in the past five days alone.

    LMND’s Q4 2021 Financials

    In Q4 2021, the company had revenue of $41.0 million with a 100% increase YOY.

    Moreover, the company incurred a net loss of $70.3 million in Q4 2021, against $33.9 million in the year-ago quarter. Thus, the net loss per share was $1.14 and $0.60 in Q4 of 2021 and 2020, respectively.

    Furthermore, the adjusted EBITDA loss was $51.2 million in Q4 2021 with an increase of $21.5 million from the year-ago quarter.

    LMND ended the quarter with cash, cash equivalents, and investments of $1.1 billion.

    Additionally, the In Force Premium and Gross Premium increased by 78% and 79% YOY, respectively.

    2022 Outlook

    For fiscal 2022, the company expects revenue between $202 and $205 million with an adjusted EBITDA loss of $290-$275 million.

    In addition, for Q1 2022, LMND expects revenue between $41 and $43 million with an adjusted EBITDA loss of $70-$65 million.

    LMND’s Metromile Acquisition

    Previously, in November 2021, the company had announced a definitive agreement for the acquisition of Metromile in an all-stock transaction. Metromile is a data science company with a focus on auto insurance.

    On February 01, Metromile announced that its stockholders have approved the merger agreement with LMND in its Special Meeting of Stockholders.

    Presently, the transaction is expected to close in the second quarter of 2022.

  • How Much Does It Cost To Buy Shares Of Lemonade?

    How Much Does It Cost To Buy Shares Of Lemonade?

    The equilibrium price of the Lemonade Inc. (LMND) is 30 percent cheaper than the present market price

    Online insurer Lemonade, which this year held one of the most profitable IPOs on the US market, ended its listing with a decline of 14%. The company’s shares fell sharply on the NYSE and proceeded to decline on Tuesday, losing even more than 5 percent, following the outcome of the last session on Monday before the end of the lock-up time. The decrease was attributed to the anticipation of high sales from the original placement applicants, who were obligated to retain their role in this stock according to the arrangement with the underwriter until Tuesday 29 December. In total, 44 million shares worth about $4.5 billion were held by Lemonade IPO members.

    The news is noteworthy because, in the middle of a pandemic, Lemonade becomes the first corporation of the year to threaten an IPO. When it went on the stock market in July, the shares exceeded the initial valuation by 300 percent. The stocks cost $16 for the IPO members, increased to $81 each during the first week, fell below $47 by November, but they were granted $135 in December, that is, 8.4 times more than on the placement itself. The current drawdown does not, however, contradict the fact that the IPO has been over-successful.

    The Lemonade scenario does not ensure that the same dynamics will be replicated for all businesses joining the industry after 2020, but this situation can also be called a reference point. If an insurer has a stable client base and years of honed technologies (Lemonade has a smartphone chatbot insurance and artificial intelligence that assesses the risks and costs of the policy), so in contrast to classic firms, the market offers a decent premium and holds that premium for several months.

    This would lead to a boost in sales from the present $300 million a year to $50-100 billion, even though Lemonade will only eat up 5-10 percent of the insurance industry in the United States. The company’s valuation will rise several times in the long run. Around the same time, the stock could also decline in price on the horizon for the next year, including due to a lack of profit. The Lemonade equilibrium price is 30 percent cheaper than the current market price-approximately $75 per share. At a level closer to these values, the stock is worth keeping in your portfolio.