NEW YORK, July 29, 2026, 08:05 EDT — Shares in U.S. premarket trade
- The stock declined 13.9% to $53.50 ahead of Wednesday’s market open.
- Revenue rose by 79%, and gross earned premium increased by 32%.
- Net financing contributed $26.8 million to adjusted free cash flow.
Lemonade Inc. NYSE:LMND shares dropped 13.9% in premarket trade following its second-quarter results. The insurance company surpassed prior quarterly outlooks, but maintained its full-year guidance.
Investor unease remains focused on the composition of revenue streams. Gross earned premium increased by 32% to $332.4 million, as total revenue advanced 79% to $294.4 million. Lemonade cited increased premium retention following its shift in reinsurance structure as a factor behind the gap.
Reported data shows revenue accounted for 88.6% of gross earned premium, up from 65.0% in the same period a year ago.
This represents a 23.5-point change. Retaining more premium can boost revenue swiftly. However, it also results in Lemonade taking on greater risk from claims.
Shai Wininger, president and co-founder, described the quarter as running “on all cylinders.” He underlined a 60% gross loss ratio and the lowest-ever 5% loss-adjustment-expense ratio. LinkedIn
The guidance bridge illustrates why the robust quarter did not lead to wider upgrades.
| Metric | Q2 2026 actual | Prior Q2 guidance | Updated full-year 2026 guidance |
|---|---|---|---|
| In-force premium | $1.434 billion | $1.428-$1.433 billion | $1.632-$1.639 billion, no change |
| Gross earned premium | $332.4 million | $328-$331 million | $1.374-$1.378 billion, up $5 million |
| Revenue | $294.4 million | $287-$290 million | $1.214-$1.220 billion, up $17 million |
| Adjusted EBITDA | $(18.7) million | $(23)-$(19) million | $(51)-$(47) million, no change |
The operating outlook strengthened. Gross profit increased by 76% to $113.2 million, while the adjusted EBITDA loss reduced by 54% from $40.9 million.
However, the net loss declined by just $500,000, reaching $43.4 million. Growth-related spending rose almost 30% to $64.4 million. Expenses from executive equity awards amounted to $6.5 million.
Cash conversion declined. Lemonade posted adjusted free cash flow of $18.8 million, a drop from $25 million. This figure incorporated $26.8 million in net borrowings through a financing agreement.
Prior to the financing, free cash flow stood at negative $8 million. Operating cash flow was a negative $3.4 million, compared with a positive $5.5 million in the previous year.
The distinction is significant. Revenue guidance increased, but there was no change to the year-end premium target or the adjusted EBITDA range.
Lemonade projects third-quarter revenue between $323 million and $326 million. The company anticipates an adjusted EBITDA loss ranging from $20 million to $23 million, citing sequential increases in growth-related expenses.
According to management, these ranges suggest adjusted EBITDA could be around $8 million positive in the fourth quarter. This would represent Lemonade’s initial quarter of positive results by this metric.
The updated reinsurance arrangement lowers the quota-share cession to around 18%, down from 20%. It offers as much as $40 million in catastrophe recovery for each event, featuring a $100 million total cap and additional named-storm coverage.
Risks persist. Retaining more premiums increases vulnerability to extreme weather events and potential pricing miscalculations. Achieving the adjusted EBITDA target for the fourth quarter also depends on maintaining cost controls following a planned rise in third-quarter expenses.
Lemonade is scheduled to hold its next significant investor event on November 17 in New York, where the company will provide updates regarding its growth, strategy, and artificial intelligence systems.
