レモネードの適時開示・決算・その他

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

現行レポート

セクション13または15に基づいて(d)

1934年の証券取引所法の

報告日（最も古い事象が報告された日）。2022年8月8日

LEMONADE, INC.

(チャーターで指定された登録者の正確な名前)

デラウェア

001-39367

32-0469673

(法人設立の州またはその他の管轄区域)

(Commission File Number)

(I.R.S. Employer Identification No.)

5 クロスビーストリート3階

New York, NY 10013

(最高経営責任者の住所）（郵便番号)

(844) 733-8666

(登録者の電話番号（市外局番を含む)

N/A

(前回の報告書以降に変更があった場合、旧姓または旧住所)

Form 8-Kの提出が、以下のいずれかの条項に基づく登録者の提出義務を同時に満たすことを意図している場合は、以下の該当するボックスにチェックを入れてください。


☐			証券法に基づく規則425に従った書面によるコミュニケーション（17 cfr 230.425)


☐			取引所法の下でのルール14a-12（17 cfr 240.14a-12）に基づく資料の勧誘。)


☐			取引所法の規則14d-2(b)に基づく開始前のコミュニケーション（17 cfr 240.14d-2(b))


☐			証券取引法の規則13e-4(c)に基づく開始前のコミュニケーション（17 cfr 240.13e-4(c))

法第12条(b)項に基づいて登録された証券:

Title of each class

Trading Symbols

登録されている各取引所の名称

普通株式、1株あたりの額面が0.00001ドル

LMND

New York Stock Exchange

登録者が1933年証券法規則405（本章230.405）または1934年証券取引法規則12b-2（本章240.12b-2）に定義される新興成長企業であるかどうかをチェックマークで示す。

Emerging growth company ☐

新興成長企業の場合、登録者が証券取引法第13条(a)に従って提供される新規または改訂された財務会計基準に準拠するための延長移行期間を使用しないことを選択した場合、チェックマークを付けて示してください。☐


Item 2.02			営業成績および財政状態。

当社は、2022年8月8日、株主宛書簡を発行し、2022年6月30日に終了した四半期決算を発表しました。株主宛ての手紙の全文は、本Current Report on Form 8-Kの添付書類99.1として提出されています。

本フォーム 8-K の項目 2.02 に記載された情報（添付の付属書類 99.1 を含む）は、1934 年証券取引所法（以下「取引所法」）第 18 条における「提出」とみなされず、同条の法的責任を問われることもなく、1933 年証券法および同法によるいかなる届出においても、当該届出において特定の参照により明確に規定される場合を除き、参照により組み込まれるものとはみなされないものとします。


Item 9.01			財務諸表および添付資料

(d) Exhibits

以下の展示品は、提供されたものとみなします。



Exhibit No.						Description


99.1						2022年8月8日付の株主向け書簡
104						カバーページインタラクティブデータファイル（inline xbrlドキュメントへの組み込み)

SIGNATURES

1934年米国証券取引法の要件に従い、登録者は、正当に権限を与えられたアンダーソンによって、この報告書に署名させられました。

LEMONADE, INC.

Date: August 8, 2022

By:

/s/ Tim Bixby

Tim Bixby

Chief Financial Officer

EX-99.1 2 shareholderletterq220228.htm EX-99.1 shareholderletterq220228

Shareholder Letter Q2 2022

Dear Shareholders, In Short: • Second quarter was strong: Both top and bottom lines came in ahead of expectations, with IFP at $458m, Net Loss at $68m and Adjusted EBITDA loss at $50m. • Cross-Sells trended up: 23% of sales in Q2 were from cross-sells and upsells. • Loss Ratio trended down: Gross loss ratio improved 10% in two quarters. Leading indicators show profitable loss ratios for recent cohorts. • Path to profitability: Our customers & products continue to season; we expect returns from earlier investments will soon outstrip costs of new ones. Accordingly, peak losses are expected this quarter (Q3 22), and EBITDA is expected to improve thereafter, through to profitability. • Fully funded: We’ve moderated our growth spend and hiring pace, and expect our existing capital to suffice until we’re profitable. • Metromile acquisition closed: In return for approximately $145m in stock, we received a business with over $155m in cash, over $110m in IFP, a second insurance entity with 49 state licenses, and data from half a billion road trips. In Full: As noted above, our top and bottom lines came in ahead of our expectations. This belies the global financial picture, and it is noteworthy that one would struggle to detect the macroeconomic downturn based on our internal dashboards. This is less a credit to Lemonade than a reflection of the fact that we operate in an industry that is largely impervious to recessions, supply chain interruptions, and bear markets - and that we have a diversified portfolio of products and regions that enable us to offset local issues through rebalancing. Our screens are showing strong demand, marketing efficiency 3

ahead of plan, operational efficiencies continuing their ascent, and loss ratios continuing their descent. There are, nevertheless, two areas where the macro impacts our business more directly: inflation and cost of capital. $5 Per Gallon We addressed the inflationary pressures in our previous quarterly letter, and ballooning costs will remain a topic of concern as long as they persist, as they will for any business with regulatory constraints on price changes. We believe we’ve taken appropriate measures to mitigate this threat - including about 100 rate filings in the past 12 months - and indeed are seeing their impact in our moderating loss ratio. Nevertheless, inflation-induced mismatches of rate and risk are liable to recur, and we will continue to be vigilant and responsive. Which brings us to the heightened cost of capital. Our last major capital raise was in January 2021, and in the intervening months we’ve seen our cost of capital increase by about one order of magnitude - a direct corollary of what has happened to ‘growth stocks’ during this period. Fortunately, we were well capitalized entering the downturn, so this heightened cost of capital has not had a first-order impact on our business. In recent months we have made adjustments to our plan, with the goal of ensuring we are never forced to raise capital. In the service of this goal, we have moderated our growth spend and hiring pace, with three notable consequences: 1. Our EBITDA for 2022 will be materially better than previous guidance. We guided to ($280m - $265m) on a standalone basis, and are now guiding to ($245m - $240m) on a consolidated basis. (As a point of reference, Metromile’s EBITDA was approximately ($45m) for H1 22.) 4

2. Our IFP at the end of 2022 will also be materially better than previous guidance, though below what might have been expected on a consolidated basis. We guided to $535-$545m on a standalone basis, and are now guiding to $610-$615m on a consolidated basis. (As a point of reference, Metromile ended H1 22 with IFP of $113m.) 3. We plan to manage our capital to achieve profitability without requiring a further infusion of capital. Three bits of color commentary: The first thing to note is that we’re not changing course - we’re changing pace. We will continue to execute on our strategy, just at a moderated clip. We like to analogize our situation to setting out on a long drive with a full tank of gas. When gas is cheap, you drive the speed limit. That means burning more gas per mile, and probably refueling en route, but you get to where you’re going much sooner. In other words, you optimize for miles per hour (MPH). When gas is at $5 per gallon, on the other hand, you’d do well to slow to 50MPH. You’ll cover the same stretch of road in time, but by taking longer to get there you will expend about 40% less gas, foregoing the need for a pit stop. When gas is dear, you optimize for miles per gallon (MPG). That’s the change we have made: in response to the sharp increase in our ‘gas’ costs, we’ve shifted from optimizing for MPH to MPG, and expect to make the journey without needing to refuel. The second is that we can effectively deploy far more capital than this moderated plan will in fact see us deploy - just not at today’s cost of capital. So while we're changing gears to achieve profitability without further fundraising, that is not the same as committing to never fundraise. Our 5

capital deployment plan is responsive to the cost of capital, and should the latter become more favorable, we will adjust the former accordingly. The third thing to note is that we still anticipate solid double digit growth for as far as the eye can see. As with actual MPG optimization, so too with our business: going too slow is as inefficient as going too fast. Insurance is a business that thrives at scale, and so even as we optimize for cash rather than growth, we will continue to see growth too. Metromile Speaking of miles and driving, we’re thrilled to have closed our acquisition of Metromile 12 days ago. We spent approximately $145m-worth of stock on this acquisition, and in return we’ve received nearly 100,000 new customers, over $110m of additional IFP, over $155m in cash and cash equivalents, a second insurance entity with 49 state licenses, and precision data from about half a billion road trips. Downturns have their upsides. We explained the strategic impact of these at the time the deal was announced, adding that beyond collapsing time and flattening risk, this deal also “makes for significant efficiencies… the combined entity can provide more and perform better with fewer resources than the two companies would on a standalone basis.” Accordingly, Lemonade has onboarded about 80% of Metromile’s staff, in recognition of the synergies the deal offers. The closing of the Metromile transaction changes our product mix significantly. Renters now comprise about a third of our book, down from almost a half, while Car jumped from 1% to 20% overnight. In the coming months we have our work cut out for us. A few of our big rock items are: • Integrating the Metromile team • Transitioning the Metromile data and tech stack • Harnessing Metromile’s data to leapfrog Car pricing, LTV predictions, and underwriting accuracy 6

During this transitional time, and until we can offer a unified Lemonade Car experience, we expect to expend little-to-no marketing dollars on acquiring new customers to Metromile. Accordingly, we anticipate Car to represent a somewhat declining portion of our book in H2, given the natural churn inherent in the business. Cross-sells & Upsells The closing of the Metromile transaction opens seven more markets in which we can soon bundle Car & Home, and further launches are in the works. While these developments will take several quarters to fully hit their stride, their value-unlock may prove significant in time. The growing impact of cross-sells and upsells, however, is by no means limited to markets with Lemonade Car. In Q2, 21% of non-Car sales were cross-sells or upsells, and the trend line is of a strong up-and-to-the-right progression: The continued rollout of Car, though, promises to spike these numbers. In Illinois, where we've been selling Lemonade Car for a few quarters, 36% of all Lemonade sales in Q2 were cross or upsells, and Annual Dollar Retention (ADR) was 93%. 7

Path to Profitability We are fast approaching the tipping point where the return on our earlier investments outstrips the costs of new investments. It's not just that more and more of our sales are zero-cost cross-sells or upsells, it's also that more and more of our book consists of seasoned products and customers. The upshot is that even as we continue to launch new products in new territories to new customers, we have turned a corner. We expect our losses to peak this quarter (Q3), and to continue to shrink thereafter, charting a clear path to profitability. Importantly, this phase-change, from growing losses to shrinking losses, is occurring naturally. It as an outgrowth of sticking to our strategy through the years where our book was small and new, and our investments were disproportionately high. The business, in other words, is doing what it was designed to do. We plan to hold an Investor Day in November 2022 during which we will more fully unpack our path to profitability, and show the leading indicators we use to run our business on a day-by-day, product-by-product basis. These are driven by our machine learning models, that lay bare the dynamics underlying our business, and offer helpful (and promising) predictions for its future. For a preview of how we use machine learning models, let's consider our loss ratio. 8

Lifetime Loss Ratio At 86%, our Q2 gross loss ratio still shows the strains of inflation, though it also shows a trajectory of steady improvement (Q4 21' was 96%, Q1 22' down to 90%). We expect this favorable trend to continue across our pre- Metromile product lines in the coming quarters. Along with much of the auto insurance industry, Metromile has experienced a few quarters of elevated loss ratios. As Metromile now represents about 20% of our book, we estimate this mix shift will add about 3-5% of loss ratio to our total book in the coming quarters. Two things to note. The first is that given extant rate filings and non-rate actions, we expect the loss ratio of our expanded Car book to follow a downward trajectory similar to the rest of our business. The second is that, as our guidance attests, we don't expect Metromile's heightened loss ratio to delay our peak losses, nor to materially slow our improving EBITDA. So much for our statutory loss ratio. Going deeper, the second quarter saw the launch of our 6th generation Lifetime Value machine learning model ("LTV6"). This is our most advanced, credible, nuanced and precise LTV prediction model to date (a synthesis of several models, to be precise). For each customer we on board, LTV6 offers a prediction of their likelihood to churn, claim, and cross sell - and from these it derives a predicted lifetime value. This is the projected net stream of dollars, discounted for the time value of money, from each customer (i.e., all premiums, minus all claims, adjusted for net present value). Once they reach statistical significance, each product, each market, and each campaign is likewise scored using LTV6. After adding the customer acquisition cost (CAC) into the formula, the resultant LTV/CAC, together with the CAC Payback Period, determine which product, market, and campaign receives the incremental dollar spend. 9

LTV6 marks a significant improvement over LTV5. It comprises machine learning and deep learning models using almost a million parameters, incorporates state-of-the-art CAT (natural catastrophes) models, and it was trained on Lemonade's ballooning, proprietary, and highly textured data. The release of a new LTV model is a significant event within our company. With each generational improvement, we feel like we're taking possession of the latest NASA telescope, allowing us to see further, and with greater fidelity than anyone has ever been able to before. The applications of these insights can be immediate and, often, far reaching. For example, LTV6 flagged that many homeowner policies in California, that LTV5 scored favorably and appeared to enjoy compelling marketing efficiency, would actually prove loss making over time. Conversely, LTV6 showed that much of our Pet business promises to be more profitable than LTV5 assessed. Accordingly, in Q2 we dramatically slowed our California homeowners business in several locals, while accelerating our Pet book across most states. Where does that show up in our Q2 GAAP metrics? Nowhere. Lagging indicators can only expose such mismatches after the damage is done. It is machine learning predictions that offer the leading indicators needed to identify issues before they materialize. The systems we have in place both capture the data needed to train our neural networks, and are architected to act on their outputs in real time. We're not aware of any other insurer who has these capabilities, and they are difficult to graft onto a company that wasn't built with this as a core design principle. Anecdotes like the Home vs. Pet rebalancing are now daily fare at Lemonade, and they happen at a much finer resolution and higher velocity than any one case study suggests. This example, though, suffices to illustrate two points: The first is that being multi-product/multi-market/multi-channel affords us strategic optionality. We have the flexibility to adapt quickly, shifting 10

resources from one product or market to another, and from one marketing campaign or channel to the next. The second is that for a fast growing and developing business like Lemonade, lagging indicators and leading indicators often commend opposing actions, and the leading indicators are almost always right. Coming back to loss ratios. One of the component models of LTV6 predicts the lifetime loss ratio of each customer. As the term suggests, this anticipates how much each customer will pay in premiums, and how much they will cost in claims, dividing the one by the other. As you'd expect from a probabilistic model, the outputs can be hit-or-miss for any individual customer, but when you total them all up they become highly predictive. It is this predicted loss ratio, rather than the rear view mirror kind, that we use in managing our business. Why the preference for a prognostic lifetime loss ratios over the traditional kind? Simply put, our company is evolving too fast to rely primarily on a feedback loop that lags as much as statutory loss ratios do. To put some dimensionality around this: it was only one year ago, in June 2021, that our AI models were credible enough to be allowed into production. That model - LTV4 - was trained on data from the almost four years we'd been in business at that point. Yet, in the 12 months since then, we have handled twice as many claims as we did in those first 4 years combined. During those same 12 months, we also pushed 12,000 software builds into production. When the flywheel spins this fast, whatever snapshot a statutory loss ratio reveals, it is of a state of affairs that no longer exists. As Wayne Gretzky taught, we must "skate to where the puck is going to be, not where it has been." And conventional loss ratios don't merely lag, they also paper over another important artifact of our fast growing books. 11

Customers' loss ratios tend to be highest early on. In our experience, it takes two years, on average, for a customer's actual loss ratio to intersects their lifetime loss ratio. Thereafter, their losses tend to be lower than their lifetime loss ratio. So far, so unremarkable. What is remarkable, though, is that 73% of Lemonade's premiums in Q2 were from customers who have been with us less than 24 months. For incumbents it's the other way around: the overwhelming majority of their customer are comfortably beyond their second anniversary. A health check that fails to account for this, will yield an unduly grim prognosis. It follows that, for companies like Lemonade, traditional loss ratios can send a distorted signal, an outdated one, or both. To be clear, that's not an argument for dismissing loss ratios, but rather for understanding them more deeply. That’s where our machine learning comes in. By using big data and machine learning to predict lifetime loss ratios, we time- shift a 'lifetime' of future data into the present, allowing us to optimize our current business for the longtime. This is in stark contrast to traditional loss ratios. These also time-shift data to the present, but they do so from the past rather than from the future. That’s a material difference. 12

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