Lemonade shares fall on Q2 results, 2024 forecast
Lemonade shares fall on Q2 results, 2024 forecast
The insurtech company showed some positive progress in its latest earnings report, but its shares dropped after missing expectations.
The Israeli insurtech company Lemonade is once again disappointing investors, though its second-quarter 2024 reports contain some positive signals. The most notable is the company's first positive cash flow from operations, totaling $4 million, compared to a negative cash flow of $51 million in the corresponding quarter last year. Lemonade promises to maintain this trend, except for the final quarter of 2024.
Currently, the company holds cash reserves of $931 million and estimates that these funds will shrink by another 1%-2% before beginning to grow consistently. Another positive sign is a decrease in the loss ratio, which reached 79%, marking a continuous decline over the past year from levels exceeding 90%, which were typical for Lemonade in the past. This improvement is attributed to Lemonade's geographic expansion and its entry into additional insurance sectors, such as auto and pet insurance, beyond its traditional focus on home and contents insurance. The loss ratio, which measures the ratio between premium collections and claim payments, is particularly influenced by weather-related damages to buildings.
Despite these positive developments, investors focused on the company's slight miss of revenue forecasts, leading to a 13% drop in early trading. Lemonade's revenues reached $122 million, a 17% increase compared to the corresponding period. While losses decreased compared to the same quarter last year, they actually grew compared to the last two quarters. The second-quarter loss amounted to $57.2 million, down from $67.2 million in the same period last year, but up from a loss of less than $50 million in the first quarter of 2024 and the last quarter of 2023.
The increased loss is due to a $12 million, or 13%, rise in operating expenses, primarily for what Lemonade describes as "growth initiatives," mainly marketing and sales. The forecast for the third quarter is also weak, with expected revenue of $124-$126 million, indicating almost no growth compared to the second quarter and only a 10% increase compared to the third quarter of 2023.
For the full year, Lemonade expects revenues of $511-$515 million, representing a 20% growth compared to 2023. While this is a respectable double-digit growth rate, expectations for Lemonade are higher, especially given the high losses and the fact that it acquired the American car insurance company Metromile for half a billion dollars two years ago.
