Shares of Lemonade (NYSE: LMND) were leaving a bitter taste in investors' mouths today after the "insurtech" company posted another disappointing quarterly earnings report, with slowing growth and a wide loss.
As a result, the stock was down 15.9% as of 11:15 a.m. ET.
Image source: Lemonade.
Lemonade is still getting squeezed
Following its pandemic-era boom and bust, Lemonade stock has struggled to convince investors it can build a viable business, and last night's report seemed to add to the skepticism.
Its in-force premium, a measure of the size of the business, rose just 22% in the quarter to $839 million, driven by a 14% increase in customers and 8% in premium per customer. Revenue in the quarter was up 16.6% to $122 million, which essentially matched estimates at $121.8 million.
The company did show improvement in its gross loss ratio, essentially money paid out in claims divided by money received in premiums, which fell from 94% to 79%, but the business still seems to be far from profitability, as its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss narrowed from $52.7 million to $43 million. On the bottom line, it reported a per-share loss of $0.81, an improvement from a per-share loss of $0.97 in the quarter a year ago, and ahead of the consensus at an $0.88 per-share loss.
Despite the sell-off, management called the results "excellent," noting robust top-line growth and relative stability in expenses.
Can Lemonade turn it around?
Lemonade's guidance wasn't particularly inspiring, as the company expects 22% growth in in-force premium to $875 million to $879 million and 10% growth in revenue to $124 million to $126 million, well below the consensus at $134.3 million. It also sees its adjusted EBITDA loss widening from the second quarter to $56 million to $58 million in the third quarter.
With its growth fizzling and losses still significant, the buy case for Lemonade has significantly narrowed.
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Jeremy Bowman has positions in Lemonade. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
