Lemonade (NYSE:LMND) executives said the company delivered its “strongest quarter ever” in the fourth quarter of 2025, highlighting accelerating growth, record gross profit, and further progress toward profitability and cash generation. Management also discussed a new product launch tied to autonomous driving and outlined continued investment in AI-driven initiatives spanning pricing, cross-selling, and go-to-market execution.
Q4 and full-year highlights
CEO and co-founder Daniel Schreiber said fourth-quarter performance capped “a year of excellent financial execution and operating performance.” In-force premium (IFP) rose to $1.24 billion, up 31% year-over-year, marking the company’s ninth consecutive quarter of accelerating growth. Schreiber said revenue grew faster than IFP, increasing 53%, which he attributed to “improving economics across the business.”
He also emphasized cash generation, stating Lemonade produced $37 million of positive adjusted free cash flow in Q4 and that 2025 was the second consecutive year the company’s cash reserves increased. Schreiber reiterated long-standing targets: EBITDA profitability in Q4 2026 and EBITDA positive for the full year 2027.
Autonomous Car launch and pricing approach
President and co-founder Shai Wininger described the launch of “Lemonade Autonomous Car,” which the company announced and launched “a few weeks ago,” starting with Teslas. Wininger said the product is designed for a shift in vehicles from human operation to AI operation, arguing that traditional auto insurance pricing proxies (such as credit scores, marital status, and education) become less relevant as autonomy increases.
According to Wininger, Lemonade’s autonomous auto insurance pricing is based on three modes: parked, driven by a human, and driven by AI. By integrating with the car’s onboard computer, Lemonade said it can determine the mode in real time and price accordingly. He added that pricing takes into account software version and the quality of hardware sensors and computing units, with rates adjusting as software updates or hardware upgrades improve safety.
Wininger said that, at present, autonomously driven miles using Tesla’s Full Self-Driving (FSD) are priced at “about 50% of the equivalent human-driven mile,” and he expects that to improve over time. In the Q&A, management said it views the launch as a first step in a strategy that could take years to materially reshape the market, but said the company believes it is important to start building “the best product for that future” now.
Financial performance details and guidance framework
CFO Tim Bixby said Q4 IFP growth was driven by 23% customer growth and roughly 7% growth in premium per customer. He said Lemonade added about 550,000 new customers in 2025, representing 35% more than the prior year.
Bixby reported a gross loss ratio of 52% in Q4, including favorable prior period development of 9%, “driven entirely by non-cat prior period development,” primarily from home and car products. Prior year development was $11 million favorable in Q4 and about $30 million favorable for the full year, he said.
Revenue rose 53% to $228 million, and adjusted gross profit increased 69% to $112 million. Bixby said gross margin was 48% and adjusted gross margin was about 49% (both using revenue as the denominator). He also noted that adjusted gross profit as a percentage of gross earned premium was 39% in Q4, up from 29% in the prior-year quarter.
Adjusted free cash flow was positive for the third consecutive quarter at $37 million, while operating cash flow was $21 million. Lemonade ended the quarter with roughly $1.1 billion in cash and investments, of which about $250 million is required to be held as regulatory surplus, Bixby said.
On customer metrics, Bixby said Annual Dollar Retention remained stable at 85% versus the prior quarter as the company continued “clean the book” efforts in its home business.
Operating expenses excluding loss and loss adjustment expense increased by $30 million, or 24%, to $154 million. Bixby attributed the increases primarily to higher sales and marketing, including “growth spend.” He said:
- Other insurance expense rose $1 million, or 6%, versus the prior year.
- Sales and marketing expense increased $17 million, or 35%, due primarily to higher growth spend.
- Growth spend was $53 million in Q4, up 48% year-over-year; marketing efficiency remained “stable and strong” with an LTV-to-CAC ratio above 3x.
- Technology development expense increased 14% to $25 million.
- G&A expense increased 29% to $43 million, with the year-over-year increase driven primarily by higher stock-based compensation, interest expense, and bad debt expense.
Net loss was $22 million, or $0.29 per share, compared with a net loss of $30 million, or $0.42 per share, in the prior-year quarter. Headcount rose about 4% year-over-year to 1,282, Bixby said.
While the company referenced detailed Q1 and full-year 2026 guidance in its shareholder letter, Bixby said it represents 32% year-over-year top-line growth for Q1 and for the full year, roughly 60% full-year revenue growth, and positive adjusted EBITDA expected in Q4 2026.
Investment priorities: AI, cross-sell, and operating leverage
Management repeatedly emphasized AI-driven initiatives as key priorities. Schreiber said Lemonade is investing in “critical initiatives” in 2026 to leverage AI across go-to-market operations, pricing, and cross-selling, with the goal of strengthening durable competitive advantages in pricing and unit economics.
In response to questions about guidance conservatism and expense trends, executives said the company intends to continue leaning into growth spend while maintaining marketing efficiency thresholds. Bixby said the company’s top-line outperformance in Q4 versus its own guidance reflected deploying “a little more growth spend than anticipated” amid strong underwriting results. He added that management prefers to guide based on what it has “line of sight” to, rather than extrapolating recent performance.
Schreiber said 2026 includes “very significant investments” in multiple engineering efforts, referencing initiatives such as a revamped local platform, a cross-selling platform, a “pricing machine,” and a “revenue machine.” SVP of Finance Nick Stead added that Lemonade views operating expenses as two parts: growth spend and the remainder of the expense base, which he said should remain relatively stable, growing in the single digits while top-line grows above 30%.
On cross-selling, Bixby said more than 5% of customers have multiple policies, but those customers represent almost 20% of IFP, framing cross-sell as an efficient growth lever.
Management also addressed capital and surplus leverage. In response to a question about premiums-to-surplus at the time the company reaches full-year EBITDA profitability, Bixby said Lemonade’s captive structure and reinsurance arrangements help keep required surplus “to a minimum” while meeting regulatory requirements. He said internal models indicate the company has ample surplus to support ambitious growth through 2027 and beyond.
Other Q&A themes and upcoming Investor Day
Executives said Lemonade is not currently offering a ChatGPT-based interface for customers to bind policies, though Schreiber said it is not something the company would “never” do and that Lemonade generally prefers its own AI experience through “Maya.” On auto pricing models, management said it expects a mix of fixed and variable (including per-mile) pricing approaches over time, emphasizing that Lemonade’s differentiation is its ability to estimate cost per mile with “tremendous precision.”
Schreiber also highlighted an upcoming Investor Day scheduled for November in New York and online, where Lemonade plans to share updates on its vision, AI capabilities, and plans.
About Lemonade (NYSE:LMND)
Lemonade, Inc (NYSE: LMND) is a New York–based technology-driven insurance carrier that leverages artificial intelligence and behavioral economics to streamline the purchase and management of policies. Founded in 2015, the company offers renters, homeowners, pet, term life and car insurance products tailored for digitally savvy consumers. By automating underwriting and claims processing through chatbots and machine learning, Lemonade aims to deliver a more transparent and user-friendly experience than traditional insurers.
The company’s product suite includes standalone policies for renters and homeowners, customizable pet insurance plans, and term life coverage with simple online applications.
