LMND Interview

For those who have access, there was a great interview recently from the Motley Fool Stock Adviser Summit Recap with the CEO of LMND. I highly recommend watching it. I have not dug into the financials at this point, but the CEO makes a very compelling case for the business. It was one of the best CEO interviews I have listened to in a long time. I’m not going to try to summarize the content because I would not do it justice.

Here is the link to the video:


I think this will only work if you have a Stock Advisor membership.

This is probably not a “Saul Stock” at this point, but I think it’s worth putting it on your radar at this point.


I was looking into LMND some more this weekend as I had a starter position in it (<1%).

I really did not like what I found.

7.5B Market Cap with annual sales of 97m yoy revenue growth of 22%. Next quarter revenue Q/Q growth was zero percent with Y/Y predicted at 10% Gross margins are 29%.

The good is no debt. But growth to current valuation seems way out of wack to me.

I sold my small position.


I agree with you Retirementdough.
I took a small position in December as many recommended the stock. While the stock performed well, but the fundamentals was not as great as many other stocks discussed here. If I am not wrong, the bull thesis includes:

  1. Lemonade is very appealing to millennials, who wants everything to be quick and simple. >> As one of them, I agree. When I was in college, my roommate and I used Lemonade, and we admired how easy it was.

  2. Big insurance companies are too big and bureaucratic to catch up with Lemonade quickly. >> Possible. Many big traditional companies are slow and seem to dislike changes.

  3. Lemonade may grow its TAM by expanding into other insurance types like car insurances and life insurances. >> To me this is the most important part of the bull thesis and I am not 100% convinced that this will work out as we hope. Housing and pet insurances are not lucrative enough for Lemonade to grow rapidly. It needs to enter more lucrative, high demand market. But I believe these higher demand market will have more regulations and requirement as well. If this market was easily accessible, there should be more companies jumping in there.

I like the company and what it is doing, but I think this is a really long term investment with some uncertainties in its full potential. I will wait until either the company growth rate accelerated or it convinced me that it has resources and capability for expanding its TAM.


“2. Big insurance companies are too big and bureaucratic to catch up with Lemonade quickly. >> Possible. Many big traditional companies are slow and seem to dislike changes.”

I have not looked into Lemonade much but disruption in the insurance industry is very real. It’s slowly trickling over from China (as usual). See, for instance, Ping An and their AI-driven automatic car insurance claims process.

I recently read/listened to two interviews with CEOs from major German insurance companies (one was Allianz, the other one I can’t remember right now, perhaps ERGO) and they were heralding the shift towards semi-automated phone hotline processing as an example of their innovative abilities. This move may cut labour expenses quite a bit over time, but progressive (disruptive) innovation looks different as well are all well aware. That said, with size comes red tape and opposition to change, of course.

In short: Lemonade appears to be well-positioned to drive change further in the US - and possibly abroad. As long as they have high customer retention on the one hand and customer growth on the other, I am not worried about their future.

Can they valuation outpace other discussed SaaS stocks? I’ll let the numbers guys take over.

“Can they valuation outpace other discussed SaaS stocks?”

If I am not wrong, LMND’s forward EV/S with today’s price is close to 60X.
I think that is already high, if not insanely high, for the company projected to grow at 20% next year. Perhaps, as you said, people believe that the disruption in the industry is real, and LMND will be the leader in the transition. Also, it is possible that they will outperform the projected growth by a lot.

However, one of our favorite companies, CRWD is projected to grow around 50% next year, and its forward EV/S is about 40x. As you know, this company’s performance has been stellar this year as well. I know that Saul does not give too much emphasis on PE and EV/S, but looking at this number, I think the “expectation” is already priced in, and I need some signs that the company will significantly outperform this year to justify putting my money in the company.

Regardless, I still believe the company will do well. It’s just that my account does not have enough money to invest in all the good companies.


Lemonade is a very interesting company in a very boring business. I’m not sure it is a Saul Stock in the traditional sense, but it has elements that I find compelling and SaaS-like. For example, they have built all of their tech stack and continue to evolve it rapidly to run their operation selling their own products, but they have also started using it as a platform to sell other people’s products. Their costs for adding those products are trivial because they’ve already built the platform. So that part of the business comes with very high margins. And they could probably add other products or similar products from other vendors, again for pretty trivial costs and with high margins. In the process, they collect a lot of data while they make money, and that in turn feeds their sales operation down the road. It could be a pretty virtuous cycle from a business standpoint. And remember, in the world of insurance companies, they are still tiny with a tiny little share of an enormous market. I don’t see myself jumping in and out of this one as their results fluctuate each quarter, but I did buy some shares that I will tuck away for five to ten years to see what they grow into.

Dorset, Long LMND ~1%


“it has elements that I find compelling and SaaS-like”

I agree. They have potential to be very “SaaSy”.

The way the CEO described it in the interview is that they use AI bots to handle signing up new people and for evaluating/approving/paying claims. This is infinitely scalable for minimal cost. They offer insurance for 50% less because they don’t have to pay salaries for tens of thousands of insurance agents and adjusters.
They sell a product that is used by almost every family unit in the US. It is a recurring revenue model.
Much of the risk is taken on by other “suppliers” of the actual insurance (“risk-light” similar to “asset-light”).
They will have multiple different types of products they can sell to the same customer (like “modules” for CRWD or DDOG).

The one limiting factor is that they cap their profit at a specific % and anything over that they commit to give to a charity of the client’s choosing. I think this will help them grow revenue faster, but will limit the upside on profit.

I also agree - it’s not a Saul stock (yet), but one to have on the radar. My prediction is for accelerating revenue growth, but only time will tell. For now I’ll enjoy what is probably a bit of a temporary short squeeze.


I’ve been reading their past few call transcripts and I’m struggling to get my head around the financial updates and terminology.

"In-force premium grew 99% in Q3 as compared to Q3 in the prior year to $188.9 million. "

So in the insurance world, are we saying this doesn’t actually count as revenue growth and its more like a GMV?

Their updates seems a little odd, the CFO doesn’t actually call out revenue growth for the quarter at all, only in the financial outlook part where he mentions GAAP revenue…

I agree with the Tom Gardner double down approach. I had a sense this was coming as he seems to be all over these guys and likes what he sees. But I’m in agreement, this is a 5 year buy and hold at the least.

Apologies for my ignorance!

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They offer insurance for 50% less because they don’t have to pay salaries for tens of thousands of insurance agents and adjusters.

I got a renter’s insurance quote from them late last year for NYC and it was higher than what I’m paying with AllState.


“I got a renter’s insurance quote from them late last year for NYC and it was higher than what I’m paying with AllState.”

I can’t comment on your specific experience - I’m just going off what I think I heard the CEO say in the interview.

I did a quick search and found the following:

“While Lemonade provides limited discounts, it makes up for it by offering extremely low renters insurance rates when compared to the rates offered by its competitors. For a renters insurance policy with a $10,000 personal property coverage limit, we found that Lemonade offered rates that were half or more than half of what its competitors offered. Based on our study, you’re unlikely to find better renters insurance rates through another company, regardless of the policy limits that you’re searching for.”


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I think I was mistaken in something I said earlier. I stated that the LMND AI bots handled all the new sign ups and claims. That was not accurate. I saw this today:

“In 2017: $LMND AI bots (Jim & Maya) handled 6% of inquiries. Today 32%”

This was from a few months ago. I tried to find up-to-date info on this, but was not able to find anything quickly and don’t have time to dig further right now.

So, the bots are improving, and the wager is that they will continue to be able to handle more and more in the future.


Thanks AnalogKid!

I like the company a lot and wish they can re-structure the industry. They are simplifying all the complicated and time consuming procedures for us young millennials hate the most :slight_smile: My personal experience with LMND was great as well.

I actually recommended the stocks to my younger brothers: one is still in college and one is in elementary school :slight_smile: They have massive potential TAM and story sounds great.

No wonder why MF is very bullish about this company. It hits all the criteria they look for.

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So in the insurance world, are we saying this doesn’t actually count as revenue growth and its more like a GMV?

They explained this in


page 3 and 4: it seems as a public company they can’t book reinsured revenue as revenue.

The questions I have about the business:

The company had an accumulated deficit of around USD 300M at the end of Q3 2020. Gross Profit in Q3 2020 was around USD 7.3M, so around USD 30M annualized. A ratio of 10 between these numbers indicates a rather expensive growth so far, more typical for an early stage startup. As a comparison, more mature companies such as DOCU or CRWD have a ratio close to 1. So yes, the company grows its customer base rapidly, but at what price?

Gross Profit increased by around USD 3M QoQ in Q3 2020, so USD 12M annualized but at the cost of a net loss of around USD 30M. Same picture as above, typical for an early hyper aggressive growth company.

Can LMND at some point get their cash outflows under control and still grow aggressively?

Bull case (Fool, some Youtubers) seems to be LMND can aquire young customers better than competitors and upsell them additional insurance during the customer lifetime. They have cracked the route to the customer by mobile experience, similar to direct insurance companies did a generation ago (“AMZN for insurance”).

Bear case seems (ARK) seems to they just have a fancy frontend, are not really disruptive, lack of moats (other companys can copy them easily) and grow market share by selling products at a loss (“GRPN for insurance”).

Have added LMND to my watchlist, will be interesting to see how the company evolves in the long term.


LMND just announced a secondary offering yesterday after close. Shares are down in pre-market today on that news.

I sold 2/3 of my shares yesterday as I felt like the stock price had run to far to fast (it went from $65 to $180 in about 5 weeks). There is also a lot of noise and uncertainty at the moment (short report), so I decided to scale back. I now have a 1.7% position. I need to dig in a little more before adding back to it.