Lemonade stock movements ‘interest me very little,’ CEO says

Lemonade CEO Daniel Schreiber joins Yahoo Finance Live to discuss company earnings, the insurance industry, the company's stock movement, and the outlook for growth.

Video Transcript

BRIAN SOZZI: We are tracking shares of Lemonade after the insurer reported a 77% rise in revenue and a 31% jump in its customer base year over year. The company also said it won't need to raise more capital. Joining us now to discuss is Lemonade CEO Daniel Schreiber. Daniel, always nice to see you here. Very important thing, let's start on the no capital raise. You talked about on the earnings release at length. Why won't you need to raise more capital? And what prompted you to make that statement?

DANIEL SCHREIBER: Great to be with you, Brian. The business is doing what it was designed to do. So what we're seeing is that most of the dynamics in the business, be it cross sales, growth, unit economics, operational efficiencies, they're all getting better and better and better as time goes on. And as we've launched new products, we've launched four products in recent years, we make a lot of the investments up front. But as time goes on, you find those products beginning to return on that investment.

So we're seeing the business really transform from being one of overwhelmingly massive investments in a tiny business to one where the denominator is growing naturally at 1.7 million customers now. And therefore, while we continue to invest in new customers and new markets and new products, we find that the original investments are beginning to show a strong return on those initial investments.

BRAD SMITH: Customers have a $290 average premium per customer is what you're seeing right now for Lemonade's side, and that's up 18% year over year. What is the biggest catalyst when you do see a rise like that?

DANIEL SCHREIBER: You know, we've seen a steady rise in our premium per customer. And really, that's happening as a result of two phenomena. One is, we've launched higher premium products. So we launched Lemonade Car just a few months ago. We launched Lemonade pet insurance, health pet insurance, just a year before that. We've been selling a lot more home insurance. About 20% of our condo insurance today is policies that we sold to renters who then graduate with us, no incremental costs to acquire the incremental premium, but they graduate to a policy that is three, four, sometimes 10 times more valuable.

So that's one dynamic. We're just seeing higher grossing products launch and start growing and gaining traction. But the second one is that we're seeing an increasing amount of our business coming from us growing with our customers. So a core plank of our strategy from day one has been to acquire young customers that incumbents really can't reach and don't entirely want, and then grow with them.

One of the fascinating and amazingly powerful drivers of insurance is that the lifetime value of a customer can grow 10 and sometimes 100x, and it's literally a lifetime. It's not a three- or four-year lifetime, it's a 30-, 40-year lifetime. And that is now happening in our business. So a quarter of our sales this last quarter came from existing customers buying a second policy or buying more coverage. Cross sales, upsells has now become a central part of our business in a way that it almost didn't exist just 24 months ago.

BRAD SMITH: Does what you're seeing from the data that you get at Lemonade, and the number of different plans that you have out there for home insurance specifically, does that tell you that the housing market is cooling right now?

DANIEL SCHREIBER: You know, one of the things that's striking about our business, given our scale perhaps, is you look at our internal dashboards, you wouldn't know that anything is happening in the world, with the possible exception of inflation, which we do feel. But we're seeing strong demand. As you said in the introductionary comments, 77% growth on revenue. So we're seeing strong demand on very compelling unit economics. So, no, honestly, our internal dashboards don't give a strong indication of the problems that we're seeing on a macro level.

BRIAN SOZZI: Daniel, how much pressure do you feel to slow hiring and cut expenses in this environment?

DANIEL SCHREIBER: Well, we definitely are slowing. So over the course of the last six months, we grew our headcount very modestly. We did just complete an acquisition of Metromile just a few days ago, two weeks ago, and that will give us a certain spike in our employee base. But we're reaching the point that the technology is doing also what it was designed to do. In the last 12 months, we've actually pushed into production 12,000 software builds. So that machine is going very, very fast.

And what that means is that we're able to do a lot more, including the growth that we just discussed, with a lot less, which means slowing the growth of hiring pretty dramatically. About 45% of our claims are now handled without any human contact at all through automation, the AI, the chat bots, the algorithmic solving of customers' problems. So we're able to scale-- when I spoke before about operational efficiencies, it's really the technology paying dividends on the several years of intensive investment that we've made in really building out this unique, vertically integrated solution that powers Lemonade.

BRIAN SOZZI: And, Daniel, since we last spoke, your stock, whether it's the name or the ticker, has been roped into this meme stock movement. Have you watched this? What do you think about this? And what do you think about more retail investors coming in and investing in a company like yours?

DANIEL SCHREIBER: No, I don't think about Lemonade as a meme stock. I've never been asked that question before. I'll look into that after this chat that we're having. And as odd as this may sound, the happenings and the durations of our stock interests me very little. I'm well aware that we're down year to date. We're also up 50% month to date. So I get the broad strokes. But day to day, I'm about managing the business.

We just announced our ninth quarterly earnings since IPO, and it's been the ninth time that we've hit or exceeded targets. And that's really where our focus is. The fact that notwithstanding those hit or beats and then raises the stock has done what it's done is harder to take personally when the entire industry and, indeed, the entire stock market and global economy has gone through those gyrations.

It's clear to us that whatever is happening to our stock is, by and large, not a signal, it's noise. It's an artifact of what the Fed is doing and what the Russians are doing and bear markets and supply chain issues that are beyond the pale of Lemonade. And therefore, we really focus on, heads down, building the business that we're building. In due course, in the fullness of time, the stock will reflect the value that we're accruing.

BRAD SMITH: Daniel Schreiber, who is the Lemonade CEO, joining us today. Daniel, we appreciate the time.