Q2 FY2026
Filed Jul 28, 2026Revenue grew 79% to $294.4 million and Adjusted EBITDA loss improved to ($18.7) million as In Force Premium reached $1.43 billion.
IFP, revenue and gross profit posted strong year-over-year growth, while Adjusted EBITDA loss improved materially and the company reaffirmed its expectation of positive Adjusted EBITDA in Q4 2026.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| In Force Premium (IFP)other | $1.43 billion | – | 32% |
| Customers (end of period)other | 3,308,666 | – | 23% |
| Premium per customerother | $433 | – | 8% |
| Annual Dollar Retention (ADR)other | 85% | flat | a 1 percentage point increase |
| Gross earned premiumother | $332.4 million | – | $80.1 million or 32% |
| RevenueGAAP | $294.4 million | – | $130.3 million or 79% |
| Gross profitGAAP | $113.2 million | – | $48.9 million or 76% |
| Trailing twelve-month gross profitGAAP | $404 million | – | 98% |
| Adjusted gross profitnon-GAAP | $114.4 million | – | $48.8 million or 74% |
| Total operating expense, excluding net loss and loss adjustment expenseGAAP | $182.2 million | – | $53.0 million or 41% |
| Growth spend for customer acquisitionother | $64.4 million | – | – |
| Stock-based compensation expense related to multi-year equity grants made in the first quarter of 2026 to the executive leadership teamGAAP | $6.5 million | – | – |
| Net lossGAAP | ($43.4) million | – | – |
| Net loss per shareGAAP | ($0.56) per share | – | – |
| Adjusted EBITDA lossnon-GAAP | ($18.7) million | – | 54% |
| Adjusted free cash flownon-GAAP | $18.8 million | – | – |
| LAE ratioother | 5% | – | – |
| Car LAE ratioother | 7% | – | – |
Q3 2026 and Full Year 2026 outlook
- RevenueQ3 2026: $323-$326; Full Year 2026: $1,214-$1,220
- NoteIn force premium (IFP), Q3 2026: $1,537-$1,540; Full Year 2026: $1,632-$1,639
- NoteGross earned premium (GEP), Q3 2026: $356-$359; Full Year 2026: $1,374-$1,378
- NoteAdjusted EBITDA loss, Q3 2026: ($23)-($20); Full Year 2026: ($51)-($47)
- NoteStock-based compensation expense, Q3 2026: $24; Full Year 2026: $95
- NoteWeighted avg. common shares, Q3 2026: 77; Full Year 2026: 78
- NotePositive Adj. EBITDA in the fourth quarter of this year
- NoteQ3 and full year guidance implying fourth quarter Adj. EBITDA of approximately $8 million
What drove it
- Revenue growth was primarily driven by growth in gross earned premium and a higher premium retention rate due to reduced quota share cession rates that became effective in the third quarter of 2025.
- Gross profit growth was primarily due to the 79% increase in revenue.
- Adjusted EBITDA improvement was primarily attributable to revenue growth and improved underwriting results, partially offset by increased growth spend.
- The renewed 12-month reinsurance program, effective July 1, reduces the effective quota share cession rate from ~20% to ~18%.
- The renewed reinsurance program provides up to $40 million recovery per event, subject to a $100 million aggregate limit, and introduces protection against named storms.
- The LAE ratio declined to a record low 5%, supported by advances in AI and automation, higher instant claim rates in Pet and Renters, and expanded AI-assisted workflows.
- Management expects IFP growth to outpace spend growth in 2027 and beyond.
Concerns
- Net loss remained ($43.4) million.
- Total operating expense increased $53.0 million or 41%, primarily driven by higher growth spend for customer acquisition.
- Growth spend is currently expected to increase sequentially in Q3 as the company increases investment behind Car and seeks to capitalize on seasonal strength in Renters.
- Adjusted free cash flow declined to $18.8 million from $25.0 million in the second quarter of 2025.
- The second quarter of 2025 included an $11.7 million one-time benefit from the Employee Retention Credit tax refund.
What to watch
- Execution toward positive Adj. EBITDA in Q4 2026.
- Q3 performance against IFP guidance of $1,537-$1,540, GEP guidance of $356-$359, revenue guidance of $323-$326, and Adjusted EBITDA loss guidance of ($23)-($20).
- The impact of lower quota-share cession and higher premium retention on revenue and profitability.
- The pace of growth spend, particularly investment behind Car and Renters.
- Continuation of underwriting and claims-handling efficiency, including the LAE ratio.
Balance sheet and cash flow
- Cash, cash equivalents, and investments totaled approximately $1.2 billion at June 30, 2026.
- Required regulatory surplus at insurance subsidiaries was approximately $330 million as of June 30, 2026.
- Adjusted free cash flow was $18.8 million, as compared to $25.0 million in the second quarter of 2025.
- A new financing agreement with Hannover Re, effective January 2027, provides up to $250 million of outstanding capital to support future growth spend at a ~9.8% cost of capital.
Analysis
Lemonade reported a strong second quarter marked by accelerating top-line expansion. In Force Premium increased 32% to $1.43 billion, customer count increased 23% to 3,308,666, and premium per customer rose 8% to $433. Gross earned premium increased $80.1 million or 32% to $332.4 million, while revenue increased $130.3 million or 79% to $294.4 million. The company attributed revenue growth to gross earned premium growth and higher premium retention following reduced quota-share cession rates that became effective in the third quarter of 2025.
Profitability indicators improved sharply. Gross profit increased $48.9 million or 76% to $113.2 million, and adjusted gross profit increased $48.8 million or 74% to $114.4 million. Adjusted EBITDA loss narrowed to ($18.7) million from ($40.9) million, with management citing revenue growth and improved underwriting results, partly offset by higher growth spend. Net loss was ($43.4) million, compared with ($43.9) million in the second quarter of 2025, although the prior-year result included an $11.7 million one-time Employee Retention Credit tax refund.
Operating investment remained elevated. Total operating expense, excluding net loss and loss adjustment expense, increased $53.0 million or 41% to $182.2 million. Growth spend for customer acquisition was $64.4 million versus $49.7 million in the second quarter of 2025, and the company expects growth spend to increase sequentially in Q3. At the same time, claims operations showed progress: the LAE ratio declined to 5%, and the Car LAE ratio was 7%. Management linked these results to AI and automation, higher instant claim rates, and expanded AI-assisted workflows.
The company renewed its reinsurance program effective July 1, reducing its effective quota-share cession rate from ~20% to ~18% and adding catastrophe and named-storm protection. The program provides up to $40 million recovery per event, subject to a $100 million aggregate limit. Separately, a financing agreement with Hannover Re effective January 2027 provides up to $250 million of outstanding capital to support future growth spend at a ~9.8% cost of capital.
Guidance calls for Q3 revenue of $323-$326 and full-year revenue of $1,214-$1,220, alongside Q3 Adjusted EBITDA loss of ($23)-($20) and full-year Adjusted EBITDA loss of ($51)-($47). Management continues to expect positive Adj. EBITDA in Q4 2026, with Q3 and full-year guidance implying fourth-quarter Adj. EBITDA of approximately $8 million. Cash, cash equivalents, and investments totaled approximately $1.2 billion at June 30, 2026, while required regulatory surplus was approximately $330 million.
Not in the filing
stated, not guessed- Prior-quarter figures for reported operating and financial metrics
- GAAP operating income or loss
- Gross margin
- Adjusted EBITDA margin
- Non-GAAP EPS
- Cash flow from operating activities
- GAAP free cash flow
- Debt balance
- Share repurchases
- Dividends
- Income tax rate
- Revenue segments or product-line revenue
- Prior guidance for comparison
- Named executive quotations
- Complete financial-statement tables, which are truncated in the provided filing text
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.