The company published on Tuesday its results for the second quarter of 2022 and stated that "in the third quarter, our losses will reach a peak, but from there they will start to decrease until we reach profitability." However, Lemonade did not specify at this stage the date at which it will become profitable.
According to the current rate of losses and the level of income, it is clear that this is a process that will take years and not quarters. In the second quarter the loss still showed a rapid increase and reached $68 million, but it was a lower loss than expected.
In the second quarter, Lemonade maintained a rapid growth rate that amounted to 77% compared to the corresponding quarter and brought its revenues to $50 million. However, operating expenses were still significantly higher than the revenue line and reached $86.9 million compared to $68.1 million in the corresponding period.
The sharp increase is mainly due to investment in advertising and an increase in salary costs for employees. Lemonade's workforce now numbers 1,200 employees and upon completion of the acquisition of Metromile, it will integrate another 230 employees, after laying off 20% of the acquired company's employees. About a month ago, Lemonade also laid off about 50 employees who were employed in its U.S. call center, but currently it intends to increase its workforce, albeit at a slower pace than before.
The company's updated annual forecast speaks of an EBITDA loss of "only" $240-245 million, compared to the previous forecast for a loss of $265-280 million.
"We have slowed down our growth and the pace of hiring employees, so we expect that our existing capital will be enough for us until we reach profitability," Lemonade wrote in the report.
Lemonade points out that the increase in inflation is a challenge for all insurance companies, since despite the increase in expenses and payments to customers, who for example pay more at garages for repairs, American law does not allow raising the premium without the approval of the regulator. Lemonade has already submitted requests in the states where it operates to raise premiums.
Among the positive parameters at Lemonade, we can mention the continuous increase in the premium per customer which rose by 18% to $290 and the number of customers jumped by 31% to 1.5 million. Lemonade stated that the improvement is due to the fact that it sells several policies to the same customer, expanding over the past couple of years from building and contents insurance to also include pet and car insurance.
The second quarter reports do not yet include the activities of Metromile, the American insurtech company that sells car insurance policies. Metromile sells policies at an annual rate of $115 million and has hardly grown in recent times. Lemonade is not counting on this activity as a growth engine in the near future, but mainly expects to receive Metromile's insurance licenses in the various U.S. states.